[X]
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QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15 (d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended July 4, 2009
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OR
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[ ]
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TRANSITION REPORT PURSUANT TO SECTION 13 OR 15 (d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the transition period from __________ to _________
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Delaware
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05-0315468
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(State or other jurisdiction of
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(I.R.S. Employer
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incorporation or organization)
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Identification No.)
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40 Westminster Street, Providence, RI
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02903
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(Address of principal executive offices)
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(zip code)
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Page
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||||
PART I.
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FINANCIAL INFORMATION
|
|||
Item 1.
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Financial Statements
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|||
3
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||||
4
|
||||
5
|
||||
Notes to the Consolidated Financial Statements (Unaudited)
|
||||
7
|
||||
7
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||||
9
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||||
10
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||||
10
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||||
10
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11
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13
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14
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15
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15
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||||
16
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19
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||||
21
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||||
21
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Item 1A.
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23
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Item 2.
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24
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Item 3.
|
42
|
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Item 4.
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42
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PART II.
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OTHER INFORMATION
|
|||
Item 2.
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42
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|||
Item 4.
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43
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Item 6.
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43
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|||
44
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Three Months Ended | Six Months Ended | |||||||||||||||
July 4,
2009
|
June 28,
2008
|
July 4,
2009
|
June 28,
2008
|
|||||||||||||
Revenues
|
||||||||||||||||
Manufacturing revenues
|
$ | 2,526 | $ | 3,507 | $ | 4,930 | $ | 6,599 | ||||||||
Finance revenues
|
86 | 177 | 208 | 391 | ||||||||||||
Total revenues
|
2,612 | 3,684 | 5,138 | 6,990 | ||||||||||||
Costs, expenses and other
|
||||||||||||||||
Cost of sales
|
2,101 | 2,775 | 4,100 | 5,209 | ||||||||||||
Selling and administrative
|
340 | 393 | 686 | 784 | ||||||||||||
Interest expense, net
|
75 | 101 | 157 | 216 | ||||||||||||
Provision for losses on finance receivables
|
87 | 40 | 163 | 67 | ||||||||||||
Gain on sale of assets
|
— | — | (50 | ) | — | |||||||||||
Special charges
|
129 | — | 161 | — | ||||||||||||
Total costs, expenses and other
|
2,732 | 3,309 | 5,217 | 6,276 | ||||||||||||
Income (loss) from continuing operations before income taxes
|
(120 | ) | 375 | (79 | ) | 714 | ||||||||||
Income tax expense (benefit)
|
(58 | ) | 125 | (60 | ) | 239 | ||||||||||
Income (loss) from continuing operations
|
(62 | ) | 250 | (19 | ) | 475 | ||||||||||
Income from discontinued operations, net of income taxes
|
4 | 8 | 47 | 14 | ||||||||||||
Net income (loss)
|
$ | (58 | ) | $ | 258 | $ | 28 | $ | 489 | |||||||
Basic earnings per share
|
||||||||||||||||
Continuing operations
|
$ | (0.23 | ) | $ | 1.00 | $ | (0.07 | ) | $ | 1.90 | ||||||
Discontinued operations
|
0.01 | 0.03 | 0.18 | 0.06 | ||||||||||||
Basic earnings per share
|
$ | (0.22 | ) | $ | 1.03 | $ | 0.11 | $ | 1.96 | |||||||
Diluted earnings per share
|
||||||||||||||||
Continuing operations
|
$ | (0.23 | ) | $ | 0.98 | $ | (0.07 | ) | $ | 1.87 | ||||||
Discontinued operations
|
0.01 | 0.03 | 0.18 | 0.05 | ||||||||||||
Diluted earnings per share
|
$ | (0.22 | ) | $ | 1.01 | $ | 0.11 | $ | 1.92 | |||||||
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
|
$ | 0.02 | $ | 0.23 | $ | 0.04 | $ | 0.46 |
July 4,
2009
|
January 3,
2009
|
|||||||
Assets
|
||||||||
Manufacturing group
|
||||||||
Cash and cash equivalents
|
$ | 1,396 | $ | 531 | ||||
Accounts receivable, net
|
839 | 894 | ||||||
Inventories
|
3,001 | 3,093 | ||||||
Other current assets
|
471 | 584 | ||||||
Assets of discontinued operations
|
58 | 334 | ||||||
Total current assets
|
5,765 | 5,436 | ||||||
Property, plant and equipment, less accumulated
depreciation and amortization of $2,574 and $2,436
|
2,005 | 2,088 | ||||||
Goodwill
|
1,697 | 1,698 | ||||||
Other assets
|
1,858 | 1,465 | ||||||
Total Manufacturing group assets
|
11,325 | 10,687 | ||||||
Finance group
|
||||||||
Cash and cash equivalents
|
489 | 16 | ||||||
Finance receivables held for investment, net
|
6,553 | 6,724 | ||||||
Finance receivables held for sale
|
613 | 1,658 | ||||||
Other assets
|
864 | 946 | ||||||
Total Finance group assets
|
8,519 | 9,344 | ||||||
Total assets
|
$ | 19,844 | $ | 20,031 | ||||
Liabilities and shareholders’ equity
|
||||||||
Liabilities
|
||||||||
Manufacturing group
|
||||||||
Current portion of long-term debt and short-term debt
|
$ | 6 | $ | 876 | ||||
Accounts payable
|
721 | 1,101 | ||||||
Accrued liabilities
|
2,193 | 2,609 | ||||||
Liabilities of discontinued operations
|
119 | 195 | ||||||
Total current liabilities
|
3,039 | 4,781 | ||||||
Other liabilities
|
2,892 | 2,926 | ||||||
Long-term debt
|
3,354 | 1,693 | ||||||
Total Manufacturing group liabilities
|
9,285 | 9,400 | ||||||
Finance group
|
||||||||
Other liabilities
|
376 | 540 | ||||||
Deferred income taxes
|
206 | 337 | ||||||
Debt
|
7,057 | 7,388 | ||||||
Total Finance group liabilities
|
7,639 | 8,265 | ||||||
Total liabilities
|
16,924 | 17,665 | ||||||
Shareholders’ equity
|
||||||||
Preferred stock
|
2 | 2 | ||||||
Common stock
|
35 | 32 | ||||||
Capital surplus
|
1,406 | 1,229 | ||||||
Retained earnings
|
3,043 | 3,025 | ||||||
Accumulated other comprehensive loss
|
(1,258 | ) | (1,422 | ) | ||||
3,228 | 2,866 | |||||||
Less cost of treasury shares
|
308 | 500 | ||||||
Total shareholders’ equity
|
2,920 | 2,366 | ||||||
Total liabilities and shareholders’ equity
|
$ | 19,844 | $ | 20,031 | ||||
Common shares outstanding
(in thousands)
|
270,051 | 242,041 |
Consolidated
|
||||||||
2009
|
2008
|
|||||||
Cash flows from operating activities:
|
||||||||
Net income
|
$ | 28 | $ | 489 | ||||
Income from discontinued operations
|
47 | 14 | ||||||
Income (loss) from continuing operations
|
(19 | ) | 475 | |||||
Adjustments to reconcile income (loss) from continuing operations to net cash
|
||||||||
provided by (used in) operating activities:
|
||||||||
Dividends received from the Finance group
|
— | — | ||||||
Capital contribution paid to Finance group
|
— | — | ||||||
Non-cash items:
|
||||||||
Depreciation and amortization
|
197 | 199 | ||||||
Provision for losses on finance receivables held for investment
|
163 | 67 | ||||||
Portfolio losses on finance receivables
|
60 | — | ||||||
Asset impairment charges
|
52 | — | ||||||
Gains on extinguishment of debt
|
(39 | ) | — | |||||
Share-based compensation
|
18 | 27 | ||||||
Amortization of interest expense on convertible notes
|
5 | — | ||||||
Deferred income taxes
|
(126 | ) | (33 | ) | ||||
Changes in assets and liabilities:
|
||||||||
Accounts receivable, net
|
70 | (90 | ) | |||||
Inventories
|
75 | (644 | ) | |||||
Other assets
|
(12 | ) | 103 | |||||
Accounts payable
|
(382 | ) | 229 | |||||
Accrued and other liabilities
|
(193 | ) | 19 | |||||
Captive finance receivables, net
|
84 | 23 | ||||||
Other operating activities, net
|
55 | 19 | ||||||
Net cash provided by (used in) operating activities of continuing operations
|
8 | 394 | ||||||
Net cash used in operating activities of discontinued operations
|
(12 | ) | (31 | ) | ||||
Net cash provided by (used in) operating activities
|
(4 | ) | 363 | |||||
Cash flows from investing activities:
|
||||||||
Finance receivables originated or purchased
|
(1,950 | ) | (5,818 | ) | ||||
Finance receivables repaid
|
2,505 | 5,257 | ||||||
Proceeds on receivables sales, including securitizations
|
184 | 507 | ||||||
Net cash used in acquisitions
|
— | (100 | ) | |||||
Capital expenditures
|
(113 | ) | (194 | ) | ||||
Proceeds from sale of property, plant and equipment
|
2 | 1 | ||||||
Proceeds from sale of repossessed assets and properties
|
127 | 9 | ||||||
Purchase of marketable securities
|
— | (100 | ) | |||||
Other investing activities, net
|
64 | (1 | ) | |||||
Net cash provided by (used in) investing activities of continuing operations
|
819 | (439 | ) | |||||
Net cash provided by (used in) investing activities of discontinued operations
|
261 | (6 | ) | |||||
Net cash provided by (used in) investing activities
|
1,080 | (445 | ) | |||||
Cash flows from financing activities:
|
||||||||
Increase (decrease) in short-term debt
|
(1,628 | ) | 34 | |||||
Proceeds from long-term lines of credit
|
2,970 | — | ||||||
Payments on long-term lines of credit
|
(28 | ) | — | |||||
Proceeds from issuance of long-term debt
|
16 | 1,122 | ||||||
Principal payments on long-term debt
|
(1,435 | ) | (933 | ) | ||||
Payments on borrowings against officers life insurance policies
|
(410 | ) | — | |||||
Intergroup financing
|
— | — | ||||||
Proceeds from issuance of convertible notes, net of fees paid
|
582 | — | ||||||
Purchase of convertible note hedge
|
(140 | ) | — | |||||
Proceeds from issuance of common stock and warrants
|
333 | — | ||||||
Proceeds from option exercises
|
— | 38 | ||||||
Purchases of Textron common stock
|
— | (134 | ) | |||||
Capital contributions paid to Finance group | — | — | ||||||
Dividends paid
|
(10 | ) | (106 | ) | ||||
Net cash provided by financing activities of continuing operations
|
250 | 21 | ||||||
Net cash used in financing activities of discontinued operations
|
— | (2 | ) | |||||
Net cash provided by financing activities
|
250 | 19 | ||||||
Effect of exchange rate changes on cash and cash equivalents
|
12 | 12 | ||||||
Net increase (decrease) in cash and cash equivalents
|
1,338 | (51 | ) | |||||
Cash and cash equivalents at beginning of period
|
547 | 531 | ||||||
Cash and cash equivalents at end of period
|
$ | 1,885 | $ | 480 |
Manufacturing Group
|
Finance Group
|
|||||||||||||||
2009
|
2008
|
2009
|
2008
|
|||||||||||||
Cash flows from operating activities:
|
||||||||||||||||
Net income (loss)
|
$ | 146 | $ | 454 | $ | (118 | ) | $ | 35 | |||||||
Income from discontinued operations
|
47 | 14 | — | — | ||||||||||||
Income (loss) from continuing operations
|
99 | 440 | (118 | ) | 35 | |||||||||||
Adjustments to reconcile income (loss) from continuing operations to net cash
|
||||||||||||||||
provided by (used in) operating activities:
|
||||||||||||||||
Dividends received from the Finance group
|
184 | 142 | — | — | ||||||||||||
Capital contribution paid to Finance group
|
(88 | ) | — | — | — | |||||||||||
Non-cash items:
|
||||||||||||||||
Depreciation and amortization
|
178 | 180 | 19 | 19 | ||||||||||||
Provision for losses on finance receivables held for investment
|
— | — | 163 | 67 | ||||||||||||
Portfolio losses on finance receivables
|
— | — | 60 | — | ||||||||||||
Asset impairment charges
|
52 | — | — | — | ||||||||||||
Gains on extinguishment of debt
|
— | — | (39 | ) | — | |||||||||||
Share-based compensation
|
18 | 27 | — | — | ||||||||||||
Amortization of interest expense on convertible notes
|
5 | — | — | — | ||||||||||||
Deferred income taxes
|
(3 | ) | 8 | (123 | ) | (41 | ) | |||||||||
Changes in assets and liabilities:
|
||||||||||||||||
Accounts receivable, net
|
70 | (90 | ) | — | — | |||||||||||
Inventories
|
81 | (632 | ) | — | — | |||||||||||
Other assets
|
(44 | ) | 76 | 26 | 20 | |||||||||||
Accounts payable
|
(382 | ) | 229 | — | — | |||||||||||
Accrued and other liabilities
|
(256 | ) | 27 | 63 | (8 | ) | ||||||||||
Captive finance receivables, net
|
— | — | — | — | ||||||||||||
Other operating activities, net
|
34 | 28 | 21 | (9 | ) | |||||||||||
Net cash provided by (used in) operating activities of continuing operations
|
(52 | ) | 435 | 72 | 83 | |||||||||||
Net cash used in operating activities of discontinued operations
|
(12 | ) | (31 | ) | — | — | ||||||||||
Net cash provided by (used in) operating activities
|
(64 | ) | 404 | 72 | 83 | |||||||||||
Cash flows from investing activities:
|
||||||||||||||||
Finance receivables originated or purchased
|
— | — | (2,234 | ) | (6,338 | ) | ||||||||||
Finance receivables repaid
|
— | — | 2,873 | 5,690 | ||||||||||||
Proceeds on receivables sales, including securitizations
|
— | — | 184 | 617 | ||||||||||||
Net cash used in acquisitions
|
— | (100 | ) | — | — | |||||||||||
Capital expenditures
|
(113 | ) | (188 | ) | — | (6 | ) | |||||||||
Proceeds from sale of property, plant and equipment
|
2 | 1 | — | — | ||||||||||||
Proceeds from sale of repossessed assets and properties
|
— | — | 127 | 9 | ||||||||||||
Purchase of marketable securities
|
— | — | — | (100 | ) | |||||||||||
Other investing activities, net
|
(18 | ) | — | 61 | (6 | ) | ||||||||||
Net cash provided by (used in) investing activities of continuing operations
|
(129 | ) | (287 | ) | 1,011 | (134 | ) | |||||||||
Net cash provided by (used in) investing activities of discontinued operations
|
261 | (6 | ) | — | — | |||||||||||
Net cash provided by (used in) investing activities
|
132 | (293 | ) | 1,011 | (134 | ) | ||||||||||
Cash flows from financing activities:
|
||||||||||||||||
Increase (decrease) in short-term debt
|
(869 | ) | 82 | (759 | ) | (48 | ) | |||||||||
Proceeds from long-term lines of credit
|
1,230 | — | 1,740 | — | ||||||||||||
Payments on long-term lines of credit
|
(28 | ) | — | — | — | |||||||||||
Proceeds from issuance of long-term debt
|
— | — | 16 | 1,122 | ||||||||||||
Principal payments on long-term debt
|
(30 | ) | (47 | ) | (1,405 | ) | (886 | ) | ||||||||
Payments on borrowings against officers life insurance policies
|
(410 | ) | — | — | — | |||||||||||
Intergroup financing
|
133 | — | (112 | ) | — | |||||||||||
Proceeds from issuance of convertible notes, net of fees paid
|
582 | — | — | — | ||||||||||||
Purchase of convertible note hedge
|
(140 | ) | — | — | — | |||||||||||
Proceeds from issuance of common stock and warrants
|
333 | — | — | — | ||||||||||||
Proceeds from option exercises
|
— | 38 | — | — | ||||||||||||
Purchases of Textron common stock
|
— | (134 | ) | — | — | |||||||||||
Capital contributions paid to Finance group
|
— | — | 88 | — | ||||||||||||
Dividends paid
|
(10 | ) | (106 | ) | (184 | ) | (142 | ) | ||||||||
Net cash provided by (used in) financing activities of continuing operations
|
791 | (167 | ) | (616 | ) | 46 | ||||||||||
Net cash used in financing activities of discontinued operations
|
— | (2 | ) | — | — | |||||||||||
Net cash provided by (used in) financing activities
|
791 | (169 | ) | (616 | ) | 46 | ||||||||||
Effect of exchange rate changes on cash and cash equivalents
|
6 | 11 | 6 | 1 | ||||||||||||
Net increase (decrease) in cash and cash equivalents
|
865 | (47 | ) | 473 | (4 | ) | ||||||||||
Cash and cash equivalents at beginning of period
|
531 | 471 | 16 | 60 | ||||||||||||
Cash and cash equivalents at end of period
|
$ | 1,396 | $ | 424 | $ | 489 | $ | 56 |
(In millions)
|
Severance
Costs
|
Curtailment Charges, Net
|
Contract
Terminations
|
Asset Impairments
|
Total
Restructuring
|
|||||||||||||||
Three Months Ended July 4, 2009
|
||||||||||||||||||||
Cessna
|
$ | 38 | $ | 26 | $ | 1 | $ | 52 | $ | 117 | ||||||||||
Industrial
|
4 | (4 | ) | 1 | — | 1 | ||||||||||||||
Finance
|
4 | 1 | — | — | 5 | |||||||||||||||
Corporate
|
3 | — | — | — | 3 | |||||||||||||||
Textron Systems
|
1 | 2 | — | — | 3 | |||||||||||||||
$ | 50 | $ | 25 | $ | 2 | $ | 52 | $ | 129 | |||||||||||
Six Months Ended July 4, 2009
|
||||||||||||||||||||
Cessna
|
$ | 64 | $ | 26 | $ | 1 | $ | 52 | $ | 143 | ||||||||||
Industrial
|
5 | (4 | ) | 1 | — | 2 | ||||||||||||||
Finance
|
6 | 1 | 1 | — | 8 | |||||||||||||||
Corporate
|
5 | — | — | — | 5 | |||||||||||||||
Textron Systems
|
1 | 2 | — | — | 3 | |||||||||||||||
$ | 81 | $ | 25 | $ | 3 | $ | 52 | $ | 161 |
(In millions)
|
Severance
Costs
|
Curtailment Charges, Net
|
Contract
Terminations
|
Asset Impairment
|
Total
|
|||||||||||||||
Balance at January 3, 2009
|
$ | 36 | $ | — | $ | 1 | $ | — | $ | 37 | ||||||||||
Provisions
|
81 | 25 | 3 | 52 | 161 | |||||||||||||||
Non-cash settlement
|
— | (25 | ) | — | (52 | ) | (77 | ) | ||||||||||||
Cash paid
|
(65 | ) | — | (1 | ) | — | (66 | ) | ||||||||||||
Balance at July 4, 2009
|
$ | 52 | $ | — | $ | 3 | $ | — | $ | 55 |
Pension Benefits
|
Postretirement Benefits
Other Than Pensions
|
|||||||||||||||
(In millions)
|
July 4, 2009
|
June 28, 2008
|
July 4, 2009
|
June 28, 2008
|
||||||||||||
Three Months Ended
|
||||||||||||||||
Service cost
|
$ | 30 | $ | 35 | $ | 2 | $ | 3 | ||||||||
Interest cost
|
79 | 76 | 10 | 10 | ||||||||||||
Expected return on plan assets
|
(98 | ) | (101 | ) | — | — | ||||||||||
Amortization of prior service cost (credit)
|
4 | 5 | (2 | ) | (2 | ) | ||||||||||
Amortization of net loss
|
2 | 5 | 2 | 4 | ||||||||||||
Net periodic benefit cost
|
$ | 17 | $ | 20 | $ | 12 | $ | 15 | ||||||||
Six Months Ended
|
||||||||||||||||
Service cost
|
$ | 63 | $ | 71 | $ | 4 | $ | 5 | ||||||||
Interest cost
|
155 | 152 | 19 | 21 | ||||||||||||
Expected return on plan assets
|
(195 | ) | (203 | ) | — | — | ||||||||||
Amortization of prior service cost (credit)
|
9 | 10 | (3 | ) | (3 | ) | ||||||||||
Amortization of net loss
|
8 | 9 | 4 | 8 | ||||||||||||
Net periodic benefit cost
|
$ | 40 | $ | 39 | $ | 24 | $ | 31 |
Three Months Ended
|
Six Months Ended
|
|||||||||||||||
(In millions)
|
July 4,
2009
|
June 28,
2008
|
July 4,
2009
|
June 28,
2008
|
||||||||||||
Revenue
|
$ | — | $ | 236 | $ | 48 | $ | 447 | ||||||||
Income (loss) from discontinued operations before income taxes
|
$ | — | $ | 14 | $ | (1 | ) | $ | 25 | |||||||
Income tax expense (benefit)
|
(4 | ) | 6 | (41 | ) | 11 | ||||||||||
4 | 8 | 40 | 14 | |||||||||||||
Gain on sale, net of income taxes
|
— | — | 7 | — | ||||||||||||
Income from discontinued operations, net of
income taxes
|
$ | 4 | $ | 8 | $ | 47 | $ | 14 |
Three Months Ended
|
Six Months Ended
|
|||||||||||||||
(In millions)
|
July 4,
2009
|
June 28,
2008
|
July 4,
2009
|
June 28,
2008
|
||||||||||||
Net income (loss)
|
$ | (58 | ) | $ | 258 | $ | 28 | $ | 489 | |||||||
Other comprehensive income, net of income taxes:
|
||||||||||||||||
Unrealized gain on pension, net of income taxes of $48
|
82 | — | 82 | — | ||||||||||||
Pension curtailment, net of income taxes of $10
|
15 | — | 15 | — | ||||||||||||
Recognition of prior service cost and unrealized losses on pension and postretirement benefits
|
5 | 10 | 12 | 20 | ||||||||||||
Deferred gains (losses) on hedge contracts
|
38 | — | 30 | (17 | ) | |||||||||||
Net deferred loss on retained interests
|
(7 | ) | (1 | ) | (9 | ) | — | |||||||||
Foreign currency translation and other
|
32 | 13 | 34 | (5 | ) | |||||||||||
Comprehensive income
|
$ | 107 | $ | 280 | $ | 192 | $ | 487 |
Three Months Ended
|
Six Months Ended
|
|||||||||||||||
(In thousands)
|
July 4,
2009
|
June 28,
2008
|
July 4,
2009
|
June 28,
2008
|
||||||||||||
Basic weighted-average shares outstanding
|
264,091 | 250,039 | 255,261 | 249,674 | ||||||||||||
Dilutive effect of convertible preferred shares, stock options and restricted stock units
|
― | 4,541 | ― | 4,917 | ||||||||||||
Diluted weighted-average shares outstanding
|
264,091 | 254,580 | 255,261 | 254,591 |
(In millions)
|
July 4,
2009
|
January 3,
2009
|
||||||
Accounts receivable - Commercial
|
$ | 474 | $ | 496 | ||||
Accounts receivable - U.S. Government contracts
|
391 | 422 | ||||||
865 | 918 | |||||||
Allowance for doubtful accounts
|
(26 | ) | (24 | ) | ||||
$ | 839 | $ | 894 |
(In millions)
|
July 4,
2009
|
January 3,
2009
|
||||||
Total managed and serviced finance receivables
|
$ | 9,868 | $ | 12,173 | ||||
Less: Nonrecourse participations sold to independent investors
|
(793 | ) | (820 | ) | ||||
Less: Third-party portfolio servicing
|
(430 | ) | (532 | ) | ||||
Total managed finance receivables
|
8,645 | 10,821 | ||||||
Less: Securitized receivables
|
(1,195 | ) | (2,248 | ) | ||||
Owned finance receivables
|
7,450 | 8,573 | ||||||
Less: Finance receivables held for sale
|
(613 | ) | (1,658 | ) | ||||
Finance receivables held for investment
|
6,837 | 6,915 | ||||||
Allowance for loan losses
|
(284 | ) | (191 | ) | ||||
Finance receivables held for investment, net
|
$ | 6,553 | $ | 6,724 |
(In millions)
|
July 4,
2009
|
January 3,
2009
|
||||||
Impaired nonaccrual loans
|
$ | 629 | $ | 234 | ||||
Impaired accrual loans
|
96 | 19 | ||||||
Total impaired loans
|
$ | 725 | $ | 253 |
(In millions)
|
July 4,
2009
|
January 3,
2009
|
||||||
Finished goods
|
$ | 1,281 | $ | 1,081 | ||||
Work in process
|
1,850 | 1,866 | ||||||
Raw materials
|
623 | 765 | ||||||
3,754 | 3,712 | |||||||
Progress/milestone payments
|
(753 | ) | (619 | ) | ||||
$ | 3,001 | $ | 3,093 |
Six Months Ended
|
||||||||
(In millions)
|
July 4,
2009
|
June 28,
2008
|
||||||
Accrual at the beginning of period
|
$ | 278 | $ | 312 | ||||
Provision
|
81 | 95 | ||||||
Settlements
|
(117 | ) | (96 | ) | ||||
Adjustments to prior accrual estimates
|
1 | (8 | ) | |||||
Other adjustments
|
— | (3 | ) | |||||
Accrual at the end of period
|
$ | 243 | $ | 300 |
July 4, 2009 | January 3, 2009 | |||||||||||||||||||||||
(In millions)
|
(Level 1)
|
(Level 2)
|
(Level 3)
|
(Level 1)
|
(Level 2)
|
(Level 3)
|
||||||||||||||||||
Assets
|
||||||||||||||||||||||||
Manufacturing group
|
||||||||||||||||||||||||
Foreign currency exchange contracts
|
$ | — | $ | 25 | $ | — | $ | — | $ | 2 | $ | — | ||||||||||||
Finance group
|
||||||||||||||||||||||||
Derivative financial instruments, net
|
— | 60 | — | — | 112 | — | ||||||||||||||||||
Interest-only securities
|
— | — | 3 | — | — | 12 | ||||||||||||||||||
Total assets
|
$ | — | $ | 85 | $ | 3 | $ | — | $ | 114 | $ | 12 | ||||||||||||
Liabilities
|
||||||||||||||||||||||||
Manufacturing group
|
||||||||||||||||||||||||
Forward contracts for Textron Inc. stock
|
$ | 7 | $ | — | $ | — | $ | 98 | $ | — | $ | — | ||||||||||||
Foreign currency exchange contracts
|
— | 8 | — | — | 84 | — | ||||||||||||||||||
Total liabilities
|
$ | 7 | $ | 8 | $ | — | $ | 98 | $ | 84 | $ | — |
Three
Months Ended
|
Six
Months Ended
|
|||||||||||||||
(In millions)
|
July 4,
2009
|
June 28,
2008
|
July 4,
2009
|
June 28,
2008
|
||||||||||||
Balance, beginning of period
|
$ | 3 | $ | 52 | $ | 12 | $ | 43 | ||||||||
Net gains for the period:
|
||||||||||||||||
Increase due to securitization gains on sale of finance receivables
|
— | 21 | — | 42 | ||||||||||||
Change in value recognized in Finance revenues
|
— | — | — | 1 | ||||||||||||
Change in value recognized in other comprehensive income
|
2 | (2 | ) | (1 | ) | — | ||||||||||
Impairments recognized in earnings
|
(2 | ) | — | (8 | ) | — | ||||||||||
Collections
|
— | (18 | ) | — | (33 | ) | ||||||||||
Balance, end of period
|
$ | 3 | $ | 53 | $ | 3 | $ | 53 |
(In millions)
|
||||
Finance group
|
||||
Finance receivables held for sale
|
$ | 613 | ||
Impaired loans
|
451 | |||
Retained interests in securitizations, excluding interest-only securities
|
110 | |||
Other assets
|
75 |
July 4, 2009
|
January 3, 2009
|
|||||||||||||||
(In millions)
|
Carrying
Value
|
Estimated
Fair Value
|
Carrying
Value
|
Estimated
Fair Value
|
||||||||||||
Manufacturing group
|
||||||||||||||||
Debt
|
$ | (3,265 | ) | $ | (2,954 | ) | $ | (2,438 | ) | $ | (2,074 | ) | ||||
Finance group
|
||||||||||||||||
Finance receivables held for investment
|
5,615 | 4,747 | 5,665 | 4,828 | ||||||||||||
Retained interest in securitizations, excluding interest only securities
|
6 | 6 | 188 | 178 | ||||||||||||
Investment in other marketable securities
|
80 | 60 | 95 | 78 | ||||||||||||
Debt
|
(7,057 | ) | (6,087 | ) | (7,388 | ) | (6,507 | ) |
Assets
|
Liabilities | |||||||||||||||
(In millions)
|
July 4,
2009
|
January 3,
2009
|
July 4,
2009
|
January 3,
2009
|
||||||||||||
Derivatives designated as hedging instruments
|
||||||||||||||||
Fair value hedges
|
||||||||||||||||
Finance group
|
||||||||||||||||
Interest rate exchange contracts
|
$ | 65 | $ | 112 | $ | (12 | ) | $ | (7 | ) | ||||||
Total fair value hedges
|
65 | 112 | (12 | ) | (7 | ) | ||||||||||
Cash flow hedges
|
||||||||||||||||
Manufacturing group
|
||||||||||||||||
Foreign currency exchange contracts
|
18 | 2 | (8 | ) | (41 | ) | ||||||||||
Forward contracts for Textron Inc. stock
|
— | — | (7 | ) | (98 | ) | ||||||||||
Finance group
|
||||||||||||||||
Cross-currency interest rate exchange contracts
|
12 | 21 | (1 | ) | (1 | ) | ||||||||||
Total cash flow hedges
|
30 | 23 | (16 | ) | (140 | ) | ||||||||||
Total derivatives designated as hedging instruments
|
$ | 95 | $ | 135 | $ | (28 | ) | $ | (147 | ) | ||||||
Derivatives not designated as hedging instruments
|
||||||||||||||||
Manufacturing group
|
||||||||||||||||
Foreign currency exchange contracts
|
$ | 7 | $ | — | $ | — | $ | (43 | ) | |||||||
Finance group
|
||||||||||||||||
Foreign currency exchange contracts
|
— | — | (7 | ) | — | |||||||||||
Interest rate exchange contracts
|
— | — | — | (13 | ) | |||||||||||
Total derivatives not designated as hedging instruments
|
$ | 7 | $ | — | $ | (7 | ) | $ | (56 | ) |
Three Months Ended
|
Six Months Ended
|
||||||||||||||||
(In millions)
|
Gain (Loss) Location
|
July 4,
2009
|
June 28,
2008
|
July 4,
2009
|
June 28,
2008
|
||||||||||||
Finance group
|
|||||||||||||||||
Interest rate exchange contracts
|
Interest expense, net
|
$ | (19 | ) | $ | (37 | ) | $ | (15 | ) | $ | 13 | |||||
Interest rate exchange contracts
|
Finance charges
|
8 | 1 | 6 | (1 | ) |
Three Months Ended
|
Six Months Ended
|
||||||||||||||||
(In millions)
|
Gain (Loss) Location
|
July 4, 2009
|
June 28, 2008
|
July 4, 2009
|
June 28, 2008
|
||||||||||||
Manufacturing group
|
|||||||||||||||||
Foreign currency exchange contracts
|
Cost of sales
|
$ | (4 | ) | $ | 1 | $ | (9 | ) | $ | 4 | ||||||
Forward contracts for Textron Inc. stock
|
Selling and administrative
|
(2 | ) | 2 | (4 | ) | 6 |
(In millions)
|
July 4,
2009
|
June 28,
2008
|
||||||
Manufacturing group
|
||||||||
Foreign currency exchange contracts
|
$ | 8 | $ | 21 | ||||
Forward contracts for Textron Inc. stock
|
(4 | ) | — |
Three Months Ended
|
Six Months Ended
|
|||||||||||||||
(In millions)
|
July 4,
2009
|
June 28,
2008
|
July 4,
2009
|
June 28,
2008
|
||||||||||||
REVENUES
|
||||||||||||||||
MANUFACTURING:
|
||||||||||||||||
Cessna
|
$ | 871 | $ | 1,501 | $ | 1,640 | $ | 2,747 | ||||||||
Bell
|
670 | 698 | 1,412 | 1,272 | ||||||||||||
Textron Systems
|
477 | 467 | 895 | 986 | ||||||||||||
Industrial
|
508 | 841 | 983 | 1,594 | ||||||||||||
2,526 | 3,507 | 4,930 | 6,599 | |||||||||||||
FINANCE
|
86 | 177 | 208 | 391 | ||||||||||||
Total revenues
|
$ | 2,612 | $ | 3,684 | $ | 5,138 | $ | 6,990 | ||||||||
SEGMENT OPERATING PROFIT
|
||||||||||||||||
MANUFACTURING:
|
||||||||||||||||
Cessna
(a)
|
$ | 48 | $ | 262 | $ | 138 | $ | 469 | ||||||||
Bell
|
72 | 68 | 141 | 121 | ||||||||||||
Textron Systems
|
55 | 60 | 107 | 127 | ||||||||||||
Industrial
|
12 | 44 | 3 | 85 | ||||||||||||
187 | 434 | 389 | 802 | |||||||||||||
FINANCE
|
(99 | ) | 13 | (165 | ) | 55 | ||||||||||
Segment profit
|
88 | 447 | 224 | 857 | ||||||||||||
Special charges
|
(129 | ) | — | (161 | ) | — | ||||||||||
Corporate expenses and other, net
|
(45 | ) | (43 | ) | (80 | ) | (84 | ) | ||||||||
Interest expense, net for Manufacturing group
|
(34 | ) | (29 | ) | (62 | ) | (59 | ) | ||||||||
Income (loss) from continuing operations before income taxes
|
$ | (120 | ) | $ | 375 | $ | (79 | ) | $ | 714 |
(a)
|
During the first quarter of 2009, we sold the assets of CESCOM, Cessna’s aircraft maintenance tracking service line, resulting in a pre-tax gain of $50 million.
|
Item 1A.
|
(In millions)
|
Severance
Costs
|
Curtailment Charges, Net
|
Contract
Terminations
|
Asset Impairments
|
Total
Restructuring
|
|||||||||||||||
Three Months Ended July 4, 2009
|
||||||||||||||||||||
Cessna
|
$ | 38 | $ | 26 | $ | 1 | $ | 52 | $ | 117 | ||||||||||
Industrial
|
4 | (4 | ) | 1 | — | 1 | ||||||||||||||
Finance
|
4 | 1 | — | — | 5 | |||||||||||||||
Corporate
|
3 | — | — | — | 3 | |||||||||||||||
Textron Systems
|
1 | 2 | — | — | 3 | |||||||||||||||
$ | 50 | $ | 25 | $ | 2 | $ | 52 | $ | 129 | |||||||||||
Six Months Ended July 4, 2009
|
||||||||||||||||||||
Cessna
|
$ | 64 | $ | 26 | $ | 1 | $ | 52 | $ | 143 | ||||||||||
Industrial
|
5 | (4 | ) | 1 | — | 2 | ||||||||||||||
Finance
|
6 | 1 | 1 | — | 8 | |||||||||||||||
Corporate
|
5 | — | — | — | 5 | |||||||||||||||
Textron Systems
|
1 | 2 | — | — | 3 | |||||||||||||||
$ | 81 | $ | 25 | $ | 3 | $ | 52 | $ | 161 |
Three Months Ended
|
Six Months Ended
|
|||||||||||||||
July 4,
2009
|
June 28,
2008
|
July 4,
2009
|
June 28,
2008
|
|||||||||||||
Federal statutory income tax rate (benefit)
|
(35.0 | )% | 35.0 | % | (35.0 | )% | 35.0 | % | ||||||||
Increase (decrease) in taxes resulting from:
|
||||||||||||||||
State income taxes
|
4.0 | 0.3 | 4.5 | 1.2 | ||||||||||||
Valuation allowance on contingent receipts
|
— | — | (8.5 | ) | — | |||||||||||
Foreign tax rate differential
|
(3.2 | ) | (4.4 | ) | (12.1 | ) | (5.1 | ) | ||||||||
Manufacturing deduction
|
(1.4 | ) | (1.4 | ) | (2.1 | ) | (1.4 | ) | ||||||||
Equity hedge expense (income)
|
(0.2 | ) | 1.1 | 5.1 | 2.2 | |||||||||||
Tax contingencies and related interest
|
(2.0 | ) | 3.8 | (12.1 | ) | 2.6 | ||||||||||
Research credit
|
(7.4 | ) | — | (11.2 | ) | — | ||||||||||
Other, net
|
(3.1 | ) | (1.1 | ) | (4.5 | ) | (1.0 | ) | ||||||||
Effective income tax rate
|
(48.3 | )% | 33.3 | % | (75.9 | )% | 33.5 | % |
(In millions)
|
July 4,
2009
|
January 3,
2009
|
||||||
Bell
|
$ | 5,887 | $ | 6,192 | ||||
Textron Systems
|
1,975 | 2,192 | ||||||
Cessna
|
8,167 | 14,530 |
Three Months Ended
|
Six Months Ended
|
|||||||||||||||
(In millions)
|
July 4,
2009
|
June 28,
2008
|
July 4,
2009
|
June 28,
2008
|
||||||||||||
Revenue
|
$ | — | $ | 236 | $ | 48 | $ | 447 | ||||||||
Income (loss) from discontinued operations before income taxes
|
$ | — | $ | 14 | $ | (1 | ) | $ | 25 | |||||||
Income tax expense (benefit)
|
(4 | ) | 6 | (41 | ) | 11 | ||||||||||
4 | 8 | 40 | 14 | |||||||||||||
Gain on sale, net of income taxes
|
— | — | 7 | — | ||||||||||||
Income from discontinued operations, net of
income taxes
|
$ | 4 | $ | 8 | $ | 47 | $ | 14 |
Three Months Ended
|
Six Months Ended
|
|||||||||||||||
(In millions)
|
July 4,
2009
|
June 28,
2008
|
July 4,
2009
|
June 28,
2008
|
||||||||||||
Revenues
|
$ | 871 | $ | 1,501 | $ | 1,640 | $ | 2,747 | ||||||||
Segment profit
|
48 | 262 | 138 | 469 |
Bell
|
||||||||||||||||
Three Months Ended
|
Six Months Ended
|
|||||||||||||||
(In millions)
|
July 4,
2009
|
June 28,
2008
|
July 4,
2009
|
June 28,
2008
|
||||||||||||
Revenues
|
$ | 670 | $ | 698 | $ | 1,412 | $ | 1,272 | ||||||||
Segment profit
|
72 | 68 | 141 | 121 |
Textron Systems
|
||||||||||||||||
Three Months Ended
|
Six Months Ended
|
|||||||||||||||
(In millions)
|
July 4,
2009
|
June 28,
2008
|
July 4,
2009
|
June 28,
2008
|
||||||||||||
Revenues
|
$ | 477 | $ | 467 | $ | 895 | $ | 986 | ||||||||
Segment profit
|
55 | 60 | 107 | 127 |
Industrial
|
||||||||||||||||
Three Months Ended
|
Six Months Ended
|
|||||||||||||||
(In millions)
|
July 4,
2009
|
June 28,
2008
|
July 4,
2009
|
June 28,
2008
|
||||||||||||
Revenues
|
$ | 508 | $ | 841 | $ | 983 | $ | 1,594 | ||||||||
Segment profit
|
12 | 44 | 3 | 85 |
Finance
|
||||||||||||||||
Three Months Ended
|
Six Months Ended
|
|||||||||||||||
(In millions)
|
July 4,
2009
|
June 28,
2008
|
July 4,
2009
|
June 28,
2008
|
||||||||||||
Revenues
|
$ | 86 | $ | 177 | $ | 208 | $ | 391 | ||||||||
Segment profit (loss)
|
(99 | ) | 13 | (165 | ) | 55 |
(In millions)
|
Revenue
|
Segment
Profit
|
||||||
Portfolio losses
|
$ | (47 | ) | $ | (47 | ) | ||
Increase in provision for loan losses
|
— | (47 | ) | |||||
Lower market interest rates
|
(23 | ) | 5 | |||||
Higher impairments of retained interests in securitization
|
(20 | ) | (20 | ) | ||||
Lower securitization gains
|
(20 | ) | (20 | ) | ||||
Lower other income
|
(17 | ) | (17 | ) | ||||
Revenue impact of lower average finance receivables of $588 million
|
(10 | ) | (10 | ) | ||||
Gains on debt extinguishment
|
37 | 37 | ||||||
Benefit from variable-rate receivable interest rate floors
|
12 | 12 |
(In millions)
|
Revenue
|
Segment
Profit
|
||||||
Portfolio losses
|
$ | (62 | ) | $ | (62 | ) | ||
Lower market interest rates
|
(62 | ) | 10 | |||||
Increase in provision for loan losses
|
— | (96 | ) | |||||
Higher impairments of retained interests in securitization
|
(26 | ) | (26 | ) | ||||
Lower securitization gains
|
(41 | ) | (41 | ) | ||||
Lower other income
|
(28 | ) | (28 | ) | ||||
Revenue impact of lower average finance receivables of $488 million
|
(17 | ) | (17 | ) | ||||
Gains on debt extinguishment
|
39 | 39 | ||||||
Benefit from variable-rate receivable interest rate floors
|
28 | 28 |
(Dollars in millions)
|
July 4,
2009
|
January 3,
2009
|
||||||
Nonaccrual finance receivables
|
$ | 683 | $ | 277 | ||||
Allowance for losses
|
$ | 284 | $ | 191 | ||||
Ratio of nonaccrual finance receivables to finance receivables held for investment
|
10.04 | % | 4.01 | % | ||||
Ratio of allowance for losses on finance receivables to nonaccrual finance receivables held for investment
|
41.58 | % | 68.90 | % | ||||
Ratio of allowance for losses on finance receivables to finance receivables held for investment
|
4.18 | % | 2.76 | % | ||||
60+ days contractual delinquency as a percentage of finance receivables
|
6.62 | % | 2.59 | % | ||||
Repossessed assets and properties
|
$ | 75 | $ | 70 | ||||
Operating assets received in satisfaction of troubled finance receivables
|
$ | 192 | $ | 84 |
·
|
Liquidation of finance receivables, including selected sales of finance receivables held for sale by our Finance group, in accordance with our plan to exit our non-captive commercial finance business;
|
·
|
Realignment of production in our commercial manufacturing businesses to match lower expected demand;
|
·
|
Cost reduction activities, including reducing our workforce, freezing salaries and furloughs, plant/facility closures, curtailing most discretionary spending, and reducing most areas of discretionary capital spending;
|
·
|
Realignment of executive compensation targets to focus on cash efficiency; and
|
·
|
Reduction of working capital with a focus on inventory management.
|
Payments/Receipts Due by Period
|
||||||||||||||||||||||||||||
(In millions)
|
Less
than
1 year
|
1-2
Years
|
2-3
Years
|
3-4
Years
|
4-5
Years
|
More
than
5 years
|
Total
|
|||||||||||||||||||||
Payments due: (1)
|
||||||||||||||||||||||||||||
Multi-year bank lines of credit
|
$ | — | $ | — | $ | 1,740 | $ | — | $ | — | $ | — | $ | 1,740 | ||||||||||||||
Other short-term debt
|
9 | — | — | — | — | — | 9 | |||||||||||||||||||||
Term debt
|
2,253 | 1,382 | 53 | 578 | 31 | 159 | 4,456 | |||||||||||||||||||||
Securitized on-balance sheet debt (2)
|
68 | 66 | 96 | 76 | 71 | 107 | 484 | |||||||||||||||||||||
Subordinated debt
|
— | — | — | — | — | 300 | 300 | |||||||||||||||||||||
Securitized off-balance sheet debt (2)
|
1,161 | 5 | — | — | — | 31 | 1,197 | |||||||||||||||||||||
Interest on borrowings (3)
|
132 | 82 | 61 | 41 | 29 | 78 | 423 | |||||||||||||||||||||
Loan commitments
|
16 | 6 | 2 | — | — | 5 | 29 | |||||||||||||||||||||
Operating lease rental payments
|
5 | 4 | 3 | 1 | 1 | — | 14 | |||||||||||||||||||||
Total payments due
|
3,644 | 1,545 | 1,955 | 696 | 132 | 680 | 8,652 | |||||||||||||||||||||
Cash and contractual receipts: (1)(4)
|
||||||||||||||||||||||||||||
Finance receivable held for investment
|
1,625 | 1,302 | 1,121 | 828 | 491 | 1,582 | 6,949 | |||||||||||||||||||||
Finance receivable held for sale
|
198 | 211 | 109 | 118 | 18 | 51 | 705 | |||||||||||||||||||||
Securitized off-balance sheet finance receivables and cash receipts (2)
|
1,302 | 5 | — | — | — | 31 | 1,338 | |||||||||||||||||||||
Interest receipts on finance receivables (3)
|
442 | 328 | 233 | 166 | 118 | 214 | 1,501 | |||||||||||||||||||||
Operating lease rental receipts
|
27 | 22 | 18 | 13 | 7 | 16 | 103 | |||||||||||||||||||||
Total contractual receipts
|
3,594 | 1,868 | 1,481 | 1,125 | 634 | 1,894 | 10,596 | |||||||||||||||||||||
Cash
|
521 | — | — | — | — | — | 521 | |||||||||||||||||||||
Total cash and contractual receipts
|
4,115 | 1,868 | 1,481 | 1,125 | 634 | 1,894 | 11,117 | |||||||||||||||||||||
Net cash and contractual receipts (payments)
|
$ | 471 | $ | 323 | $ | (474 | ) | $ | 429 | $ | 502 | $ | 1,214 | $ | 2,465 | |||||||||||||
Cumulative net cash and contractual receipts (payments)
|
$ | 471 | $ | 794 | $ | 320 | $ | 749 | $ | 1,251 | $ | 2,465 |
(1)
|
Excludes cash which may be generated by the disposal of operating lease residual assets and other assets in addition to cash which may be used to pay future income taxes, accrued interest and other liabilities.
|
(2)
|
Securitized on-balance sheet and securitized off-balance sheet debt payments are based on the contractual receipts of the underlying receivables, which are remitted into the securitization structure when and as they are received. These payments do not represent contractual obligations of the Finance group, and we do not provide legal
recourse to investors that purchase interests in the securitizations beyond the credit enhancement inherent in the retained subordinate interests.
|
(3)
|
Interest payments and receipts reflect the current interest rate paid or received on the related debt and finance receivables. They do not include anticipated changes in either market interest rates or changes in borrower performance, which could have an impact on the interest rate according to the terms of the related debt
or finance receivable contract. The future receipt of interest we charge borrowers on finance receivables and payments of interest charged on debt obligations are excluded from this liquidity profile.
|
(4)
|
Finance receivable receipts are based on contractual cash flows only and do not reflect any reserves for uncollectible amounts. These receipts could differ due to sales, prepayments, charge-offs and other factors, including the inability of borrowers to repay the balance of the loan at the contractual maturity date. Finance receivable
receipts on the held for sale portfolio represent the contractual balance of the finance receivables and therefore exclude the potential negative impact from selling the portfolio at the estimated fair value.
|
|
Fitch Ratings
|
Moody’s
|
Standard & Poor’s
|
||||||
Long-term ratings:
|
|||||||||
Manufacturing
|
BB+
|
Baa3
|
BBB-
|
||||||
Finance
|
BB+
|
Baa3
|
BB+
|
||||||
Short-term ratings:
|
|||||||||
Manufacturing
|
B | P3 | A3 | ||||||
Finance
|
B | P3 | B | ||||||
Outlook:
|
|||||||||
Manufacturing
|
Negative
|
Negative
|
Negative
|
||||||
Finance
|
Negative
|
Negative
|
Developing
|
Six Months Ended
|
||||||||
(In millions)
|
July 4,
2009
|
June 28,
2008
|
||||||
Operating activities
|
$ | (52 | ) | $ | 435 | |||
Investing activities
|
(129 | ) | (287 | ) | ||||
Financing activities
|
791 | (167 | ) |
Six Months Ended
|
||||||||
(In millions)
|
July 4,
2009
|
June 28,
2008
|
||||||
Operating activities
|
$ | 72 | $ | 83 | ||||
Investing activities
|
1,011 | (134 | ) | |||||
Financing activities
|
(616 | ) | 46 |
Six Months Ended
|
||||||||
(In millions)
|
July 4,
2009
|
June 28,
2008
|
||||||
Operating activities
|
$ | 8 | $ | 394 | ||||
Investing activities
|
819 | (439 | ) | |||||
Financing activities
|
250 | 21 |
Six Months Ended
|
||||||||
(In millions)
|
July 4,
2009
|
June 28,
2008
|
||||||
Reclassifications from investing activities:
|
||||||||
Finance receivable originations for Manufacturing group inventory sales
|
$ | (284 | ) | $ | (520 | ) | ||
Cash received from customers, sale of receivables and securitizations
|
368 | 543 | ||||||
Other
|
(21 | ) | (5 | ) | ||||
Total reclassifications from investing activities
|
63 | 18 | ||||||
Dividends paid by Finance group to Manufacturing group, net of capital contributions to the Finance group
|
(96 | ) | (142 | ) | ||||
Other
|
21 | — | ||||||
Total reclassifications and adjustments to operating activities
|
$ | (12 | ) | $ | (124 | ) |
Six Months Ended
|
||||||||
(In millions)
|
July 4,
2009
|
June 28,
2008
|
||||||
Operating activities
|
$ | (12 | ) | $ | (31 | ) | ||
Investing activities
|
261 | (6 | ) | |||||
Financing activities
|
— | (2 | ) |
Item 3.
|
QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
|
Item 4.
|
CONTROLS AND PROCEDURES
|
UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS
|
Item 4. | SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS | |||||
At Textron's annual meeting of shareholders held on April 22, 2009, the following items were voted upon: | ||||||
1.
|
The following persons were elected to serve as directors in Class I for three year terms expiring in 2012 and received the votes listed.
|
|||||
Name | For | Against | Abstain | Broker Non-Votes | ||
Lewis B. Campbell | 168,607,290 | 4,408,651 | 1,698,027 | 15 | ||
Lawrence K. Fish
|
146,970,941
|
65,665,048 | 2,077,975 | 19 | ||
Joe T. Ford
|
144,970,275
|
67,577,783 | 2,165,904 | 21 | ||
The following directors have terms of office which continued after the meeting: Class II expiring in 2010: Kathleen M. Bader, R. Kerry Clark, Ivor J. Evans, Lord Powell of Bayswater KCMG and James L. Ziemer; Class III expiring in 2011: Paul E. Gagne, Dain M. Hancock, Lloyd G. Trotter and Thomas B. Wheeler.
|
||||||
2. |
The appointment of Ernst & Young LLP by the Audit Committee as Textron's independent registered public accounting firm for 2009 was ratified by the following vote:
|
|||||
For | Against | Abstain | Broker Non-Votes | |||
205,098,971
|
7,629,090
|
1,985,916
|
6
|
Item 6. | EXHIBITS |
10.1 | Agreement between Textron and Scott C. Donnelly, dated May 1, 2009, related to Mr. Donnelly’s personal use of a portion of hangar space at T.F. Green Airport which is leased by Textron |
10.2 | Form of Performance Cash Unit Grant Agreement |
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. 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. 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002
|
101 |
The following materials from Textron Inc.’s Quarterly Report on Form 10-Q for the quarterly period ended July 4, 2009, formatted in XBRL (eXtensible Business Reporting Language): (i) the Consolidated Statements of Operations, (ii) the Consolidated Balance Sheets, (iii) the Consolidated Statements of Cash Flows and (iv) Notes to the Consolidated Financial Statements, tagged as blocks of text
|
TEXTRON INC.
|
|||
Date:
|
July 31, 2009
|
s/Richard L. Yates
|
|
Richard L. Yates
Senior Vice President, Corporate Controller and
Acting Chief Financial Officer
(principal financial officer and principal accounting officer)
|
10.1
|
Agreement between Textron and Scott C. Donnelly, dated May 1, 2009, related to Mr. Donnelly’s personal use of a portion of hangar space at T.F. Green Airport which is leased by Textron
|
10.2 | Form of Performance Cash Unit Grant Agree ment |
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
|
101
|
The following materials from Textron Inc.’s Quarterly Report on Form 10-Q for the quarterly period ended July 4, 2009, formatted in XBRL (eXtensible Business Reporting Language): (i) the Consolidated Statements of Operations, (ii) the Consolidated Balance Sheets, (iii) the Consolidated Statements of Cash Flows and (iv) Notes to the
Consolidated Financial Statements, tagged as blocks of text.
|
Name:
Address:
City, State ZIP:
Country:
|
PCU No.:
Plan: 2007
ID:
Location:
|
Component
|
Weighting
|
Units
|
[]
|
[]%
|
###,###
|
[]
|
[]%
|
###,###
|
Earnings per Share
|
Cash Efficiency
|
|||
Actual vs. Target
|
Percent Earned
|
Actual vs. Target
|
Percent Earned
|
|
[]% of Target
|
[]%
|
[]% of Target
|
[]%
|
|
100% of Target
|
100%
|
100% of Target
|
100%
|
|
[] Performance
|
150% (maximum)
|
[]% of Target
|
150% (maximum)
|
Textron’s 3-Year Total Shareholder Return
Percentile Rank Against the S&P 500
|
Award
Adjustment
|
Greater than 74th
|
0%
|
69th
|
-6.4%
|
63rd
|
-12%
|
56th
|
-16%
|
50th
|
-20%
|
44th
|
-24%
|
37th
|
-28%
|
31st
|
-33.6%
|
Below 25th
|
-40%
|
·
|
The Committee may make a discretionary reduction in the Performance Cash Units (PCUs) earned based on total shareholder return performance for the Performance Period. The Committee expects to reduce the PCUs using the table shown above; but the Committee has discretion to make a larger or smaller downward adjustment.
|
·
|
Intermediate performance between the minimum and maximum levels specified earns a corresponding percentage of Performance Cash Units (PCUs) for each component.
|
·
|
PCUs earned for the fiscal year equal one third of the units granted times the percentage earned based on performance and targets identified above.
|
·
|
PCUs earned for the fiscal year are subject to adjustment up or down based on annual performance for each fiscal year in the Performance Period.
|
·
|
All PCUs are paid in cash, to the extent earned, following the end of the Performance Period, before March 15. Accordingly, PCUs earned (subject to adjustment) in the first or second year of the Performance Period will not be paid until the 2½ month period following the third year of the Performance Period.
|
·
|
Each PCU earned has a value of one US dollar.
|
·
|
Pursuant to the 2007 Long-Term Incentive Plan (the “Plan”), Textron has awarded to executive the number of Performance Cash Units (PCUs) set forth on the applicable Notice of Grant signed by Textron and Grantee on the terms and conditions herein set forth. Each Performance Cash Unit constitutes the right to receive cash equal to $1.00 for each
Performance Cash Unit earned by the executive, as determined in accordance with the Plan, the Notice of Grant, the Performance Cash Unit Non-Competition Agreement (2/2009), and these Performance Cash Unit Terms and Conditions (2/2009). Performance Cash Units earned for the Performance Period are based on annual performance for each fiscal year in the Performance Period and may be reduced based on performance for the entire Performance Period.. The earned Performance Cash Units payable to the executive
in accordance with the provisions of this agreement shall be paid solely in cash.
|
·
|
When the applicable Performance Period ends, Textron will issue to the executive cash equal to the aggregate value of the Performance Cash Units earned by the executive, reduced by the amount needed to satisfy required statutory minimum withholding taxes. The cash payment shall be made following the end of the Performance Period, before March
15.
|
·
|
If the executive’s employment with Textron shall terminate for “Cause,” all Performance Cash Units awarded to the executive for which the applicable Performance Period has not ended shall be forfeited (including, but not limited to, Performance Cash Units that have already been earned based on annual performance during a fiscal year in
the Performance Period).
|
·
|
Except as otherwise provided herein, the executive shall forfeit outstanding Performance Cash Units (including, but not limited to, Performance Cash Units that have already been earned based on annual performance during a fiscal year in the Performance Period) if the executive’s employment with Textron ends for any reason prior to the end of the
Performance Period applicable to such Performance Cash Units, provided that if the executive’s employment ends (other than for Cause) prior to such date because of “Disability,” death or after the executive has become eligible for “Early or Normal Retirement,” and if the executive has been employed by Textron for at least one year after the beginning of the Performance Period, the executive or the executive’s estate will receive a cash payment (subject to tax withholding) at
the end of the Performance Period for (1) the Performance Cash Units actually earned for any fiscal year that is completed before the executive’s employment ends, and (2) a “Pro-Rata Portion” of the Performance Cash Units for the fiscal year in which the executive’s employment ends (to the extent that the financial performance goals applicable to the Performance Cash Units have been achieved upon the completion of such fiscal year), subject to a discretionary reduction, in each case, based
on total shareholder return in relation to the S&P 500 for all three fiscal years in the Performance Period.
|
·
|
If the executives employment with Textron ends for any reason not mentioned above, and if the executive has been employed by Textron for at least one year after the beginning of the Performance Period, the executive will receive a cash payment (subject to tax withholding) at the end of the Performance Period for the Performance Cash Units actually
earned for any fiscal year that is completed before the executive’s employment ends, subject to a discretionary reduction, in each case, based on total shareholder return in relation to the S&P 500 for all three fiscal years in the Performance Period: and the executive shall forfeit any outstanding Performance Cash Units for any fiscal year during which or following which the executive’s employment ends.
|
·
|
Notwithstanding the above, the applicable Performance Period for the Performance Cash Units which may be paid pursuant to this Award shall end immediately upon a “Change in Control” of Textron, as defined in the Plan. In such instance, Textron shall pay to the executive (or to the executive’s estate in the event of the executive’s
death prior to payment), subject to tax withholding, (1) the full value of any Performance Cash Units actually earned for any fiscal year that has already ended, and (2) the full value of the unearned Performance Cash Units outstanding for any fiscal year that has not yet ended, without adjustment in either case for total shareholder return in relation to the S&P 500 during the Performance Period. The payment shall be made within 30 days after the Change in Control, provided that the accelerated
payment does not violate Section 409A of the Internal Revenue Code. If the accelerated payment of the Award would violate Section 409A of the Internal Revenue Code, the payment shall be made on the date when the Performance Cash Unit would have been paid if no Change in Control had occurred. Note: Sale of a business unit usually does not constitute a Change in Control as defined in the Plan.
|
·
|
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 Performance Cash Units shall not be assignable or transferable by the executive.
|
·
|
The Performance Cash Units shall be subject to the terms and conditions of the Plan in all respects.
|
1.
|
Forfeiture of PCUs and required repayment if you engage in certain competitive activities
|
|
If at any time during the Performance Period (as defined in the Notice of Grant of Performance Cash Unit and Performance Cash Unit Agreement) 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;
|
|
then your right to receive all Performance Cash Units shall be forfeited effective the date you enter into such activity, and you will be required to repay Textron an amount equal to the value of any PCU earned and paid to you from and after the date beginning 180 days prior to the earlier of (a) your termination of employment or (b) the date you engage in such activity, or at any time after such date. You will be in violation of Paragraph 1 if you engage in any or all of the activities discussed in this Paragraph directly as an individual or indirectly as an employee, representative, consultant or in any other capacity on behalf of any firm, corporation or other entity. |
2.
|
Company’s business
– Defined for the purpose of this Agreement:
|
(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.
|
3.
|
Restricted Territory
– Defined for the purpose of Paragraph 1, the Restricted Territory shall be defined as and limited to:
|
(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 PCUs and required repayment if you engage in certain solicitation activities
|
|
If you directly or indirectly solicit or induce or attempt to solicit or induce any employee(s), sales representative(s), agent(s) or consultant(s) of the Company to terminate their employment, representation or other association with the Company, then your right to receive all PCUs shall be forfeited effective the date you enter into such activity and you will be required to repay Textron an amount equal to the
value of any PCU earned and paid to you from and after the date beginning 180 days prior to the earlier of (a) your termination of employment or (b) the date you engage in such activity, or at any time after such date.
|
5.
|
Forfeiture of PCUs and required repayment if you disclose confidential information
|
|
You specifically acknowledge that any trade secrets or confidential business and technical information of the Company or its suppliers or customers, whether reduced to writing, maintained on any form of electronic media, or maintained in your mind or memory and whether compiled by you or the Company, derives independent economic value from not being readily known to or ascertainable by proper means by others who
can obtain economic value from its disclosure or use; that reasonable efforts have been made by the Company to maintain the secrecy of such information; that such information is the sole property of the Company or its suppliers or customers and that any retention, use or disclosure of such information by you during your employment (except in the course of performing your duties and obligations of employment with the Company) or after termination thereof, shall constitute a misappropriation of the trade secrets
of the Company or its suppliers or customers. If you directly or indirectly misappropriate any such trade secrets, then your right to receive all PCUs shall be forfeited effective the date you enter into such activity and
|
|
you will be required to repay Textron an amount equal to the value of any PCU earned and paid to you from and after the date beginning 180 days prior to the earlier of (a) your termination of employment or (b) the date you engage in such activity, or at any time after such date.
|
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.
|
Six Months
Ended
July 4, 2009
|
||||
Fixed charges:
|
||||
Interest expense
|
$ | 64 | ||
Estimated interest portion of rents
|
16 | |||
Total fixed charges
|
$ | 80 | ||
Income:
|
||||
Loss from continuing operations before income taxes
|
$ | (79 | ) | |
Fixed charges
|
80 | |||
Dividends received from Finance group
|
184 | |||
Eliminate pretax loss of Finance group
|
173 | |||
Adjusted income
|
$ | 358 | ||
Ratio of income to fixed charges
|
4.48 |
Six Months
Ended
July 4, 2009
|
||||
Fixed charges:
|
||||
Interest expense
|
$ | 159 | ||
Estimated interest portion of rents
|
18 | |||
Total fixed charges
|
$ | 177 | ||
Income:
|
||||
Loss from continuing operations before income taxes
|
$ | (79 | ) | |
Fixed charges
|
177 | |||
Adjusted income
|
$ | 98 | ||
Ratio of income to fixed charges
|
0.55 |
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 31, 2009
|
/s/ Lewis B. Campbell
|
|
Lewis B. Campbell
Chairman 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 31, 2009
|
/s/ Richard L. Yates
|
|
Richard L. Yates
Senior Vice President, Corporate Controller and
Acting 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 31, 2009
|
/s/ Lewis B. Campbell
|
||
Lewis B. Campbell
Chairman 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:
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July 31, 2009
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/s/ Richard L. Yates
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Richard L. Yates
Senior Vice President, Corporate Controller and
Acting Chief Financial Officer
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