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income to the extent they are effective as cash flow hedges. Currency effects on the effective portion of these hedges, which are
reflected in the foreign currency translation adjustments within Accumulated other comprehensive loss, were not significant in the
periods presented.
Assets Recorded at Fair Value on a Nonrecurring Basis
During the years ended January 3, 2015 and December 28, 2013, the Finance group’s impaired nonaccrual finance receivable of
$49 million and $45 million, respectively, were measured at fair value on a nonrecurring basis using significant unobservable
inputs (Level 3). Impaired nonaccrual finance receivables represent assets recorded at fair value on a nonrecurring basis since the
measurement of required reserves on our impaired finance receivables is significantly dependent on the fair value of the underlying
collateral. For impaired nonaccrual finance receivables secured by aviation assets, the fair values of collateral are determined
primarily based on the use of industry pricing guides. Fair value measurements recorded on impaired finance receivables resulted
in charges to provision for loan losses totaling $18 million and $7 million for 2014 and 2013, respectively.
Assets and Liabilities Not Recorded at Fair Value
The carrying value and estimated fair values of our financial instruments that are not reflected in the financial statements at fair
value are as follows:
January 3, 2015
December 28, 2013
(In millions)
Carrying
Value
Estimated
Fair Value
Carrying
Value
Estimated
Fair Value
Manufacturing group
Long-term debt, excluding leases
$ (2,742)
$ (2,944)
$ (1,854)
$ (2,027)
Finance group
Finance receivables, excluding leases
1,004
1,021
1,231
1,290
Debt
(1,063)
(1,051)
(1,256)
(1,244)
Fair value for the Manufacturing group debt is determined using market observable data for similar transactions (Level 2). At
January 3, 2015 and December 28, 2013, approximately 75% and 70%, respectively, of the fair value of term debt for the Finance
group was determined based on discounted cash flow analyses using observable market inputs from debt with similar duration,
subordination and credit default expectations (Level 2). The remaining Finance group debt was determined based on observable
market transactions (Level 1). Fair value estimates for finance receivables held for investment were determined based on internally
developed discounted cash flow models primarily utilizing significant unobservable inputs (Level 3), which include estimates of
the rate of return, financing cost, capital structure and/or discount rate expectations of current market participants combined with
estimated loan cash flows based on credit losses, payment rates and expectations of borrowers’ ability to make payments on a
timely basis.
Note 9. Shareholders’ Equity
Capital Stock
We have authorization for 15 million shares of preferred stock with a par value of $0.01 and 500 million shares of common stock
with a par value of $0.125. Outstanding common stock activity for the three years ended January 3, 2015 is presented below:
(In thousands)
2014
2013
2012
Beginning balance
282,059
271,263
278,873
Exercise of stock options
1,910
1,333
1,159
Issued to Textron Savings Plan
1,490
1,921
2,159
Stock repurchases
(8,921)
—
(11,103)
Exercise of warrants
—
7,435
—
Issued upon vesting of restricted stock units
44
107
175
Ending balance
276,582
282,059
271,263
Earnings per Share
In February 2014, we entered into an Accelerated Share Repurchase agreement (ASR) with a counterparty and repurchased 4.3
million shares of our outstanding common stock. The initial delivery of shares under the ASR resulted in an immediate reduction
of the outstanding shares used to calculate the weighted average common shares for basic and diluted earnings per share. We
settled the ASR in December 2014 for a final purchase price of $167 million.
59 Textron Inc. Annual Report • 2014