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Annual Report 2005
Growing Opportunity
Textron 2005 Annual Report

Table of contents

  • Page 1
    Growing Opportunity Annual Report 2005

  • Page 2
    Reaching beyond today, Textron is...

  • Page 3
    ... of talent within the enterprise. We're developing an aptitude for excellence and an attitude that drives continuous improvement. Growing Knowledge... Textron University, instituted in 2005, will bring virtual learning and professional development programs to our employees around the globe. 1

  • Page 4
    We're building strong, lasting bonds with customers. We understand their businesses and make achieving their goals our priority. And we share their pride as Textron products and services fuel our mutual success. Growing Relationships... A reflection of the new Citation Service Center, the largest ...

  • Page 5
    We're bringing new value to the industries we serve. We identify and act on the most critical drivers of success. Our focused, world-class processes increase our capacity to generate relevant and effective products, more proficiently than ever before. Growing Capability... The unique spherical ...

  • Page 6
    ... our portfolio. We balance rigorous research and development with diligent execution in every part of the enterprise. Growing Performance... In 2005, Bell was selected to provide the U.S. Army's high-performance Armed Reconnaissance Helicopter, continuing a relationship of more than 50 years...

  • Page 7
    ... we do right now. Our transformation strategy has proven to be both value-creating and enduring, as we delivered 19 percent organic growth in 2005, and - for the first time since we embarked on our transformation journey - we exceeded our targeted rate of return on invested capital. Our investments...

  • Page 8
    ... also trained 3,000 Green Belts. Overall, Textron's Six Sigma efforts generated more than 40 percent of our favorable cost performance this year. In 2005, we also accelerated the development and implementation of Lean - a key element of Textron Six Sigma. One early yet powerful example of Lean in...

  • Page 9
    ...tools, we were able to reduce the time to fill open positions by 15 percent in 2005 alone. Portfolio Management In 2005, we made notable progress in the management of our portfolio. In addition to further cultivating ... can be found on the inside back cover of this annual report. (1) $ $ $ $ 7

  • Page 10
    ... Our team is focused on action and goes beyond the expected in service to our customers. Bell's 429 Light Twin, introduced at the 2005 HAI convention, features exciting technology advances and will begin service in 2007. • Bell's Training Academy (BTA) provides a hands-on opportunity to heighten...

  • Page 11
    ... Bell has expanded the frontiers of flight. Our persistent dedication was rewarded when full rate production of the V-22 Osprey was approved in 2005. The V-22 was engineered to further any armed services mission with game-changing range, flexibility and speed. We designed the commercial 429 Light...

  • Page 12
    ... corner of the globe. Cessna's CJ2+ flies 45 percent faster than comparably priced turboprops. • Cessna's newest Citation Service Center opened in January 2005. The 443,000 square-foot facility in Wichita, Kansas is the largest general aviation facility ever built. The facility was designed for...

  • Page 13
    ... of our new Mustang, deliveries are likely to be even higher in 2008. Placing First Cessna won first place Customer Support honors in 2005 from Pro Pilot magazine and Aviation International News, a tribute to our intense dedication to customer satisfaction. We created consistent value for customers...

  • Page 14
    Industrial Textron's Industrial businesses span a wide field of play. Our interests are richly diverse, but we define success by shared standards. We meet challenges and strive to excel in our industries with focused determination. We are unified by a common ground of excellence. Pebble Beach Golf ...

  • Page 15
    ... broad product offerings. Greenlee recognizes growth opportunities and acts on them to provide comprehensive product lines to our customers. Our 2005 joint venture with Rothenberger, a global leader in plumbing tools, stimulates expansion in the plumbing and electrical channels. Through our alliance...

  • Page 16
    Finance What becomes possible with support from Textron Financial? A supply of motorcycles is delivered to a dealership opening. A modular home is well appointed to attract prospective buyers. Wherever dreams and business plans unite, Textron Financial is there to make them reality. Textron ...

  • Page 17
    ... and leverage existing platforms. Textron Financial welcomed every opportunity to apply Textron Six Sigma Lean resources in our offices to manage 2005 growth efficiently. Further, we collaborated with peers at Bell Helicopter, Cessna, E-Z-GO and Jacobsen to streamline their financing procedures to...

  • Page 18
    First row, left to right: Campbell, Arnelle, Bader, Clark, Evans, Fish. Second row, left to right: Ford, Gagné, Hancock, Powell, Rowe, Wheeler. First row, left to right: Campbell*, Bohlen, Butler*, Carter, Ellis, French*. Second row, left to right: Garrison, Grief, Hall, Howell*, Mayers, Millman. ...

  • Page 19
    Board of Directors Lewis B. Campbell (1) R. Kerry Clark (2, 4) Joe T. Ford (3) Brian H. Rowe (1,2,4) Chairman, President and Chief Executive Officer Textron Inc. H. Jesse Arnelle (3,4) Retired Senior Partner of Womble, Carlyle, Sandridge & Rice Kathleen M. Bader (2,3) Vice Chairman of the ...

  • Page 20
    UNITED STATES SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549 Form 10-K [X] ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the fiscal year ended December 31, 2005 Commission File Number 1-5480 Textron Inc. (Exact name of registrant as specified...

  • Page 21
    ...of the Consolidated Financial Statements on pages 74 through 75 of this Annual Report on Form 10-K. We also continue to operate in the Fastening .... The V-22 Operational Evaluation ("OPEVAL") was successfully completed in 2005, which led to an Acquisition Decision Memorandum that authorized full-rate...

  • Page 22
    ...Currently, the entry-level Citation Mustang is under development. First customer deliveries of the Citation CJ1+, an upgrade to the CJ1, commenced in December 2005, and customer deliveries of the Citation CJ2+, an upgrade to the CJ2, are scheduled to commence in 2006. The first Mustang that will be...

  • Page 23
    ... upgrade of the Citation Encore, are scheduled to commence in 2007. The Cessna Caravan is the world's best selling utility turboprop. Through the end of 2005, more than 1,565 Caravans have been sold by Cessna since the first Caravan was delivered in 1985. Caravans are offered in three models: the...

  • Page 24
    ... and industrial uses. Revenues of Kautex accounted for approximately 15%, 19% and 18% of our total revenues from continuing operations in 2005, 2004 and 2003, respectively. Kautex has a number of competitors worldwide, some of whom are owned by the automotive original equipment manufacturers...

  • Page 25
    ..."), in its entirety. This plan was approved by our Board of Directors on December 7, 2005, and the results of operations for TFS are now reported as discontinued operations for financial reporting purposes. See Note 2 to the Consolidated Financial Statements for more information. TFS offers a full...

  • Page 26
    ...a definitive purchase order and receipt of required deposits. The 2005 year-end backlog with the major fractional jet customer was approximately ... trademarks, trade names and service marks are used in this Annual Report on Form 10-K and other reports, including: 429; AB Benzlers; AH-1Z; APCO; BA609...

  • Page 27
    ... regarding environmental matters is contained in Note 17 to the Consolidated Financial Statements on page 71 of this Annual Report on Form 10-K. Employees At December 31, 2005, we had approximately 37,000 employees in our continuing operations and approximately 9,000 employees in the discontinued...

  • Page 28
    Textron Inc. result in the extension or termination of programs. Our business is also highly sensitive to changes in national and international priorities and U.S. Government budgets. U.S. Government contracts may be terminated at any time and may contain other unfavorable provisions. The U.S. ...

  • Page 29
    ... other labor issues. Approximately 18,500 of our employees are unionized, which represented approximately 40% of our employees at December 31, 2005, including employees of the discontinued business of Textron Fastening Systems. As a result, we may experience work stoppages, which could negatively...

  • Page 30
    ... authorized the divestiture of the Textron Fastening Systems business as discussed in Note 2 to the Consolidated Financial Statements. As of December 31, 2005, the Fastening Systems business included 19 plants located throughout the United States and 20 plants outside of the United States. Of the...

  • Page 31
    ... all claims against one of the individual defendants should be dismissed. The District Court certified the class of shareholders on May 11, 2005. All claims in the litigation were subsequently settled for a cash amount to be paid by Textron's insurer. The settlement was preliminarily approved by...

  • Page 32
    ... a Vote of Security Holders No matters were submitted to a vote of our security holders during the last quarter of the period covered by this Annual Report on Form 10-K. Executive Officers of the Registrant The following table sets forth certain information concerning our executive officers as of...

  • Page 33
    ... stock is traded on the New York, Chicago and Pacific Stock Exchanges. At December 31, 2005, there were approximately 17,000 holders of Textron common stock. The high and low common stock prices per share as reported on the New York Stock Exchange, and the dividends paid per share, in each case...

  • Page 34
    Item 6. Selected Financial Data (Dollars in millions, except per share amounts and where otherwise noted) 2005 $ 2,881 3,480 3,054 628 $ 10,043 $ 368 457 150 171 1,146 (118) 1,028 - - (199) (90) (223 516 3.86 3.78 1.40 25.10 80.05 65....

  • Page 35
    .... The global economy continued to grow in most of our major markets in 2005, despite early weakness in some regions, including parts of Europe. The U.S. ...industry. While we were impacted by inï¬,ation and higher pension costs in 2005, we were able to absorb the impact of these factors primarily as a ...

  • Page 36
    ... operations, representing approximately 19% of its global workforce since the program was first announced, and has closed 85 facilities. As of December 31, 2005, Textron had incurred total program costs of $306 million, which is composed of $164 million in severance costs, $44 million in contract...

  • Page 37
    ...Textron recorded certain items that affected the comparability of operating results in the last three years which are summarized in the table below: (In millions) 2005 $ 118 - 118 (41) $ 77 $ $ 2004 59 - 59 (19) 40 $ $ 2003 77 (15) 62 (16) 46 Special charges Gain on sale of businesses Income tax...

  • Page 38
    .... In 2003, the loss from discontinued operations includes a $30 million goodwill and intangible asset impairment charge related to the OmniQuip business. In 2005, Textron recorded a net $46 million gain on disposal, primarily related to a tax benefit recorded upon the sale of InteSys. There was no...

  • Page 39
    ... meet these deliveries in spite of the disruptions caused by Hurricane Katrina. Bell Revenues U.S. Government Business U.S. Government revenues increased $491 million in 2005 primarily due to higher revenue of $288 million from the V-22 program, higher ASV volume of $61 million, the benefit of $36...

  • Page 40
    ... Bell's revenues are expected to increase in 2006, while margins are expected to drop slightly due to the certain nonrecurring items that benefited the 2005 results. The U.S. Government business is expected to benefit from an increase in ASV volume as well as higher revenues from the ARH and VH-71...

  • Page 41
    ... business revenue jet deliveries were 179 in 2004, compared with 194 jets in 2003. Cessna Segment Profit Segment profit increased $190 million in 2005, compared with 2004, largely due to the $229 million impact of higher volume across all product lines and $82 million of higher pricing, partially...

  • Page 42
    ... forecasted decrease in revenues reï¬,ects a decline at Kautex, primarily as a result of model changeovers and the divestiture of a product line in 2005, which is expected to be partially offset by growth at Greenlee and, to a lesser extent, increases for the remaining businesses. Finance (Dollars...

  • Page 43
    ... which interest has been suspended, and repossessed assets. Nonperforming assets for each of the last three year-ends by business are as follows: (In millions) 2005 $ 31 14 13 6 2 45 111 $ 2004 53 12 26 7 5 37 140 $ 2003 55 26 22 6 11 42 162 Resort finance Aircraft finance Golf finance Asset...

  • Page 44
    .... Textron's financial position continued to be strong at the end of 2005 and included aggregate cash and cash equivalents of $796 million, compared with ...$697 million at the end of 2004. During 2005, cash ï¬,ows from operations were the primary source of funds for ...

  • Page 45
    ... respectively, while in 2003, cash ï¬,ows were decreased by $86 million. Excluding these net changes from Textron Manufacturing's cash ï¬,ows, the increase in 2005 is largely due to increased income from operations, while the increase in 2004 is largely due to increased customer deposits in the Bell...

  • Page 46
    .... Dividends Textron's Board of Directors approved dividends of $1.40 per common share in 2005. On January 26, 2006, the Board of Directors authorized a $0.15 per share increase in Textron's annualized common stock dividend to $1.55 per share and, accordingly, a quarterly dividend of $0.3875...

  • Page 47
    ... following table summarizes Textron Manufacturing's known contractual obligations to make future payments or other consideration pursuant to certain contracts as of December 31, 2005, as well as an estimate of the timing in which these obligations are expected to be satisfied: Payment Due by Period...

  • Page 48
    ...Manufacturing has contractual obligations related to certain businesses reported as discontinued operations, primarily related to purchase... finance receivables. The contractual payments and receipts as of December 31, 2005 are detailed below: Payments/Receipts Due by Period (In millions) Less than...

  • Page 49
    ... sale of equipment lease rents in 2003 and 2001. The maximum liability at December 31, 2005 was $42 million. Textron Finance has valued this contingent liability based on assumptions for annual credit losses and prepayment rates of 0.25% and 7.50%, respectively. An instantaneous 20% adverse change...

  • Page 50
    ... our annual impairment test in the fourth quarter of 2005 using ...the estimates from our long-term strategic plans. No adjustment was required to the carrying value of our goodwill based on the analysis performed. Goodwill is considered to be impaired when the net book value of a reporting...

  • Page 51
    ...conditions, and the profit margin assumptions are projected by each reporting unit based on the current cost structure and anticipated net cost ... discount rate was 5.75% for 2005. A 50-basispoint decrease in this discount rate would result in a $32 million annual increase in pension expense for our ...

  • Page 52
    ... liabilities are determined based on temporary differences between the financial reporting and tax bases of assets and liabilities, applying enacted tax rates... beginning with the first interim or annual period after June 15, 2005. In April 2005, the Securities and Exchange Commission delayed the...

  • Page 53
    ... SFAS No. 123-R requires that the excess tax benefits received related to stock option exercises be presented as financing cash inï¬,ows. For 2005, $14 million of these excess tax benefits have been presented as cash provided by financing activities in the Consolidated Statement of Cash Flows...

  • Page 54
    Textron Inc. (In millions) Carrying Value* 2005 Sensitivity of Fair Value Fair to a 10% Value* change 2004 ...) 10 10 (13) 31 31 (14) Forward-Looking Information Certain statements in this Annual Report on Form 10-K and other oral and written statements made by Textron from time to ...

  • Page 55
    ...Annual Report on Form 10-K on the page indicated below. Page Report of Management Report of Independent Registered Public Accounting Firm on Internal Control over Financial Reporting Report... 31, 2005 Consolidated Balance Sheets as of December 31, 2005 and January 1, 2005 Consolidated Statements...

  • Page 56
    ... and objectivity of the financial data presented in this Annual Report on Form 10-K. The Consolidated Financial Statements have been ...all material respects, effective internal control over financial reporting as of December 31, 2005. The independent registered public accounting firm, Ernst &...

  • Page 57
    ... on the COSO criteria. Also, in our opinion, Textron Inc. maintained, in all material respects, effective internal control over financial reporting as of December 31, 2005, based on the COSO criteria. We also have audited, in accordance with the standards of the Public Company Accounting Oversight...

  • Page 58
    ... the Public Company Accounting Oversight Board (United States), the effectiveness of Textron Inc.'s internal control over financial reporting as of December 31, 2005, based on criteria established in Internal Control - Integrated Framework issued by the Committee of Sponsoring Organizations of the...

  • Page 59
    Consolidated Statements of Operations For each of the years in the three-year period ended December 31, 2005 (In millions, except per share amounts) 2005 $ 9,415 628 10,043 7,464 1,403 290 29 118 - 9,304 739 (223) - 516 (313) $ 203 $ $ 2004 7,773 545 8,318 6,206 1,209 246 58 59 - 7,778 ...

  • Page 60
    Consolidated Balance Sheets As of December 31, 2005 and January 1, 2005 (Dollars in millions, except share data) 2005 2004 Assets Textron Manufacturing Cash and cash equivalents Accounts receivable, net Inventories Other current assets Assets of discontinued operations Total current assets $...

  • Page 61
    ... Statements of Changes in Shareholders' Equity Shares Outstanding* For each of the years in the three-year period ended December 31, 2005 Dollars (In millions) (In thousands) 2005 $2.08 Preferred stock 2004 112 (7) 105 52 (2) 50 137,238 (6,534) 4,351 41 277 135,373 2003 120 (8) 112 56 (4) 52...

  • Page 62
    Consolidated Statements of Cash Flows For each of the years in the three-year period ended December 31, 2005 Consolidated 2005 (In millions) 2004 (Revised - See Note 1) 2003 (Revised - See Note 1) Cash ï¬,ows from operating activities: Net income Loss (income) from discontinued operations ...

  • Page 63
    ... (334) 277 403 (417) 106 (597) (189) - 14 - (403) (1) (404) (27) 216 570 $ 786 $ 15 $ 2004 (Revised - See Note 1) 2003 (Revised - See Note 1) 2005 $ 111 3 114 - 34 12 29 - - 2 7 - - 14 - 35 - - 247 (3) 244 (10,940) 9,560 383 - - (9) - - 56 (950) - (950) (106) 1,554 (761) - - - (100) - - 587 - 587...

  • Page 64
    ..., are eliminated from the Consolidated Financial Statements. In 2005, Textron has separately disclosed the operating, investing and ...cash ï¬,ows attributable to its discontinued operations, which in prior periods were reported on a combined basis as a single amount. Prior periods have been...

  • Page 65
    ... and postretirement plans, estimates of future cash ï¬,ows associated with goodwill and long-lived assets, environmental and warranty reserves, and amounts reported under long-term contracts. Management's estimates are based on the facts and circumstances available at the time estimates are made...

  • Page 66
    Textron Inc. during the initial development phase in relation to total contract volume. The production releases on the first six production lots include separately contracted modifications to meet the additional requirements of the U.S. Government's Blue Ribbon Panel. Beginning in 2003, the ...

  • Page 67
    ...fic prospects of the investee, and investment analyst reports, if available. If a decline in the ... in Other Assets. In addition, at January 1, 2005, distributions from one of the joint ventures exceeded Textron...Management evaluates the recoverability of goodwill annually or more frequently if events ...

  • Page 68
    ...consistent with Textron's contract accounting policy. Income Taxes Deferred tax assets and liabilities are determined based on temporary differences between the financial reporting and tax bases of assets and liabilities, applying enacted tax rates expected to be in effect for the year in which the...

  • Page 69
    ... for reporting purposes is excluded from amounts reported as discontinued operations. Textron Fastening Systems - During 2005, the...reimburse the purchaser for 50% of losses incurred on the portfolio above a 4% annual level. Due to the nature of the loss-sharing agreement, there is no maximum...

  • Page 70
    ... prospectively as of June 30, 2004. Additional cash consideration may also be payable to TAG based on CitationShares' future operating results. In 2005, Textron increased its ownership interest to 82.2% through additional capital contributions of $26 million.TAG has the right to sell its remaining...

  • Page 71
    ... 303 96 160 71 850 $ 2009 146 3 211 66 121 37 584 $ 2010 125 117 123 47 158 (4) 566 Thereafter $ 513 - 115 59 242 469 2005 $ 1,374 1,654 1,633 513 1,020 569 6,763 96 $ 6,667 2004 $ 1,455 1,026 1,402 410 1,005 539 5,837 99 $ 5,738 51 Installment contracts Distribution finance Revolving...

  • Page 72
    ... 2007, $67 million in 2008, $37 million in 2009 and $11 million in 2010. The net investment in leveraged leases was as follows: (In millions) 2005 $ 520 311 831 (262) 569 (349) $ 220 $ $ 2004 545 286 831 (292) 539 (358) 181 Rental receivable, net of nonrecourse debt Estimated residual values on...

  • Page 73
    ... for the loans on a consolidated basis. At the end of 2005 and 2004, past-due loans guaranteed by Textron Manufacturing totaled $8 ...in securitizations, net Weighted-average life (years) Prepayment speed (annual rate) Expected credit losses (annual rate) Residual cash ï¬,ows discount rate $ 82 2.3 ...

  • Page 74
    ... valued primarily by the FIFO method. Inventories related to long-term contracts, net of progress/milestone payments were $350 million at the end of 2005 and $259 million at the end of 2004. Note 7. Property, Plant and Equipment, net Property, plant and equipment, net for Textron Manufacturing is...

  • Page 75
    ... of long-term debt Total short-term debt Long-term senior debt: Medium-term notes due 2010 to 2011 (average rate of 9.85%) 5.625% due 2005 6.375% due 2008 4.50% due 2010 6.50% due 2012 3.875% due 2013 6.625% due 2020 Other long-term debt (average rate of 6.2% and 5.8%, respectively) Current...

  • Page 76
    ... coverage ratio (no less than 125%). The following table shows required payments during the next five years on debt outstanding at the end of 2005. The payment schedule excludes amounts that are payable under or supported by the primary revolving credit facilities or revolving lines of credit: (In...

  • Page 77
    ..., inventory purchases and overhead expenses. The fair value of these instruments at December 31, 2005 was a $23 million receivable. At year-end 2005, a $21 million after-tax gain was reported in Accumulated Other Comprehensive Loss from qualifying cash ï¬,ow hedges. This gain is generally expected...

  • Page 78
    ... convertible into 3.6 shares of common stock and can be redeemed by Textron for $45 per share. Reserved Shares of Common Stock At the end of 2005, common stock reserved for the subsequent conversion of preferred stock and shares reserved for the exercise of stock options were 2,596,000 and 8,146,000...

  • Page 79
    ... stock options, at fair value and expense such compensation over the service period beginning with the first interim or annual period after June 15, 2005. In April 2005, the Securities and Exchange Commission delayed the transition date for companies to the first fiscal year beginning after June...

  • Page 80
    ...net income of approximately $1 million in the first quarter of 2005, which is not considered to be material and is recorded in...91 1.80 1.89 1.78 Net income, as reported Add back: Share-based employee compensation expense included in reported net income* Deduct: Total share-based employee ...

  • Page 81
    ...value of options granted per share was $20, $14 and $10 for 2005, 2004 and 2003, respectively. The fair values of options granted are estimated...53.02 Options that were outstanding and exercisable as of December 31, 2005 are as follows: WeightedAverage Remaining Contractual Life (In years) Number of...

  • Page 82
    ...dividends are not paid or accrued until vested, and is remeasured at each reporting period date. Share-Based Compensation Awards The value of the share-based ... of the defined contribution plans amounted to approximately $45 million in 2005, $23 million in 2004 and $15 million in 2003. The increase...

  • Page 83
    ...$ 129 271 (387) 1 18 35 67 $ 2004 106 265 (400) 1 16 7 (5) $ 2003 93 259 (403) (6) 15 2 (40) $ 2005 9 37 - - (6) 13 53 $ 2004 8 37 - - (9) 9 45 $ 2003 6 39 - - (8) 5 42 Service cost Interest cost Expected return on plan assets Amortization of unrecognized transition asset Amortization of ...

  • Page 84
    ...790 2004 $ 4,373 106 265 1 3 408 (273) 48 - $ 4,931 $ 4,246 490 34 3 (273) 37 $ 4,537 $ (394) 1,105 136 1 848 811 (281) 59 259 848 $ 2005 658 9 37 1 5 108 (73) (1) - 744 744) 253 (24) - (515) - (515) - - (515) $ 2004 654 8 37 3 6 24 (74) 1 (1) 658 658) 161 (30) - (527) - (527) - - (527) Change...

  • Page 85
    ... Other Total Postretirement Benefits Other than Pensions For measurement purposes, Textron has assumed an annual medical and prescription drug healthcare cost trend rate of 11% for covered healthcare benefits in 2005. The medical rate is assumed to decrease to 5% by 2009 and remain at that level...

  • Page 86
    ... on preferred securities of subsidiary trusts is as follows: (In millions) 2005 $ $ 574 165 739 $ $ 2004 333 207 540 $ $...United States Foreign Total Income tax expense for continuing operations is summarized as follows: (In millions) 2005 $ 128 64 10 21 223 $ 2004 49 59 11 46 165 $ 2003 48 10 13...

  • Page 87
    .... If not utilized, the federal and state tax credit carryforwards will begin to expire in 2015. A valuation allowance at December 31, 2005 and January 1, 2005 of $116 million and $125 million, respectively, has been recognized to offset the related deferred tax assets due to the uncertainty of...

  • Page 88
    ...) million in 2004 and $(120) million in 2003. Cash payments for taxes, net of tax refunds, for Textron Finance totaled $22 million in 2005, $61 million in 2004 and $(6) million in 2003. Note 16. Special Charges Special charges are summarized below for the applicable segments: Restructuring Expense...

  • Page 89
    ...preferred shares for an aggregate price of $20 million. Textron recorded a pre-tax impairment charge of approximately $52 million in the first quarter of 2005 to write down the preferred shares to fair market value based on the value determined by the agreement and other market considerations. With...

  • Page 90
    ... reserve of $10 million was recorded in the fourth quarter to cover the expected cost of this planned retirement program. As of December 31, 2005, reserves to cover costs directly related to crankshafts provided by the former supplier totaled $23 million. In connection with the recall, the former...

  • Page 91
    ...Lockheed Martin for the System Development and Demonstration phase of the U.S. Marine Corps Marine 1 Helicopter Squadron (VH-71) Program. On March 11, 2005, Bell Helicopter guaranteed to Lockheed Martin the due and prompt performance by AWB LLC of all its obligations under this subcontract, provided...

  • Page 92
    ... sale of equipment lease rental streams in 2003 and 2001. The maximum liability at December 31, 2005 was $42 million. Textron Finance has valued this recourse liability based on assumptions for annual credit losses and prepayment rates of 0.25% and 7.50%, respectively. In connection with the sale of...

  • Page 93
    ... entity since it relies on its partners to fund the development and provide services for substantially all of the ventures' operations. On December 20, 2005, Bell Helicopter and Agusta entered into a realignment of BAAC, which included the sale by Bell Helicopter of its 25% profit interest in the...

  • Page 94
    ...-funded research and development costs are as follows: (In millions) $ $ $ 2005 $ $ 326 366 692 $ $ 2004 291 283 574 $ $ 2003 241...Textron on pages 1 through 5 for products, of the segments. Textron's reportable segments are strategically aligned based on the manner in which Textron manages its ...

  • Page 95
    ... by geographic area: Revenues* (In millions) Property, Plant and Equipment, net** 2005 $ 6,390 323 533 1,737 617 443 $10,043 2004 $ 5,260 247... 404 1,696 547 164 $ 8,318 2003 $ 5,335 265 392 1,428 368 267 $ 8,055 2005 $ 1,211 68 23 237 62 6 $ 1,607 2004 $ 1,093 61 30 311 52 7 $ 1,554 ...

  • Page 96
    Textron Inc. Quarterly Data (Unaudited) 2005 Q4 Q3 Q2 Q1 Q4 Q3 2004 Q2 Q1 (Dollars in millions, except per share amounts) Revenues Bell Cessna Industrial Finance Total revenues Segment profit ...

  • Page 97
    ...end of year Textron Manufacturing's Reserves for Recourse Liability to Textron Finance (In millions) $ $ $ 2005 $ 48 1 - - (13) 36 $ 2004 64 10 (14) - (12) 48 ...") as of the end of the fiscal year covered by this report. Based upon that evaluation, our CEO and CFO concluded that our disclosure...

  • Page 98
    ...Textron's information technology infrastructure. During the fourth quarter of 2005, Textron continued its transfer of operational control and day...by reference into this Annual Report on Form 10-K. Information regarding our executive officers is contained in Part I of this Annual Report on Form 10-K....

  • Page 99
    ... on Form 10-K for the fiscal year ended January 3, 2004. Supplemental Retirement Plan for Textron Key Executives. Incorporated by reference to Exhibit 10.4 to Textron's Annual Report on Form 10-K for the fiscal year ended January 3, 2004. 79 4.2 4.3 NOTE: NOTE: 10.1A 10.1B 10.1C 10.2 10.3 10.4

  • Page 100
    ... 10.2 to Textron's Quarterly Report on Form 10-Q for the fiscal quarter ended April 2, 2005. Performance Factors for Executive Of...Employee Directors. Incorporated by reference to Exhibit 10.1 to Textron's Annual Report on Form 10K for the fiscal year ended December 28, 2002. Employment Agreement...

  • Page 101
    ...ended December 28, 2002. CitationShares Director's Evaluation Program. Incorporated by reference to Exhibit 10.17 to Textron's Annual Report on Form 10-K for the fiscal year ended January 1, 2005. Amendment to 13 plans to comply with the American Jobs Creation Act of 2004. Incorporated by reference...

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    ...treatment has been requested for portions of this agreement. Incorporated by reference to Exhibit 10.26 to Textron's Annual Report on Form 10-K for the fiscal year ended January 1, 2005. Computation of ratio of income to combined fixed charges and preferred stock dividends of Textron Manufacturing...

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    ... and Schedules Signatures Pursuant to the requirement of Section 13 or 15(d) of the Securities Exchange Act of 1934, the registrant has duly caused this Annual Report on Form 10-K to be signed on its behalf by the undersigned, thereunto duly authorized on this 24th day of February 2006. TEXTRON INC...

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    Textron Inc. Pursuant to the requirements of the Securities and Exchange Act of 1934, this Annual Report on Form 10-K has been signed below on this 24th day of February 2006, by the following persons on behalf of the registrant and in ...

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    ...NY 10038 (800) 829-8432 www.amstock.com Textron has included as Exhibits 31.1, 31.2, 32.1 and 32.2 to its Annual Report on Form 10-K for the fiscal year ended December 31, 2005, filed with the Securities and Exchange Commission, certificates of its Chief Executive Officer and Chief Financial Of...

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    ...disposition of significant business units. (3) Free cash flow in 2005 includes Textron Manufacturing's net cash flow from operations of $...golf holes are trademarks, service marks and trade dress of Pebble Beach Company. Used by permission. 2005 $ 203 112 (30) (13) 313 (12) 2 58 633 $ 2004 365 59 -...

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    Textron Inc. 40 Westminster Street Providence, Rhode Island 02903 (401) 421-2800 www.textron.com