UNITED
STATES
SECURITIES
AND EXCHANGE COMMISSION
Washington,
D.C. 20549
FORM
8-K
CURRENT
REPORT
Pursuant
to Section 13 or 15(d) of the Securities Exchange Act of 1934
Date of
Report (Date of earliest event reported): December 22,
2008
TEXTRON
INC.
(Exact
name of Registrant as specified in its charter)
|
Delaware
|
|
I-5480
|
|
05-0315468
|
|
(State
of
|
|
(Commission
File Number)
|
|
(IRS
Employer
|
|
Incorporation)
|
|
|
|
Identification
Number)
|
40
Westminster Street, Providence, Rhode Island 02903
(Address
of principal executive offices)
Registrant’s
telephone number, including area code: (401) 421-2800
Check the
appropriate box below if the Form 8-K filing is intended to simultaneously
satisfy the filing obligation of the registrant under any of the following
provisions (see General Instructions A.2. below):
[ ]
Written communications pursuant to Rule 425 under the Securities Act (17 CFR
230.425)
[ ]
Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17 CFR
240.14a-12)
[ ]
Pre-commencement communications pursuant to Rule 14d-2(b) under the Exchange Act
(17 CFR 240.14d-2(b))
[ ]
Pre-commencement communications pursuant to Rule 13e-4(c)) under the Exchange
Act (17 CFR 240.13e-4(c))
On
December 22, 2008, the Board of Directors of Textron Inc.
(“Textron”) approved a plan to exit all of the commercial finance
business of Textron’s finance segment, Textron Financial Corporation and its
subsidiaries (“TFC”), other than that portion of the business supporting the
financing of customer purchases of Textron-manufactured
products. Textron made the decision to exit this business due to
continued weakness in the economy and in order to enhance Textron’s long-term
liquidity position in light of continuing disruption and instability in the
capital markets.
Textron
had previously indicated that TFC would be exiting its Asset Based Lending and
Structured Capital segments, as well as several additional product lines,
representing about $2.0 billion in managed receivables. The revised exit plan
now applies to approximately $7.9 billion of TFC’s $11.4 billion managed
receivable portfolio. The exit plan will be effected through a
combination of orderly liquidation and selected sales and is expected to be
substantially complete over the next two to four years.
Approximately
$3.5 billion of the liquidating receivables are now designated for sale or
transfer, of which about $1.3 billion are securitized receivables managed by TFC
and $2.2 billion are owned assets classified as held for
sale. Accordingly, as a result of the exit plan, in the fourth
quarter, Textron will record an approximate $250 - $300 million
pre-tax mark-to-market adjustment against owned assets held for sale.
Also, due to this change in investment status relative to TFC’s Canadian
subsidiary, Textron will recognize non-cash tax charges of about $31 million.
These adjustments are in addition to the previously reported $169 million
non-cash, pre-tax impairment charge to eliminate TFC’s goodwill.
In
addition to the actions at TFC, on December 22, 2008, the Textron Board of
Directors also approved an expansion of Textron’s previously announced overhead
cost reduction and productivity improvement plan for estimated cost savings of
approximately $100 million in 2009. The program, along with other
volume-related reductions in workforce, eliminates approximately 2,200 positions
worldwide.
Textron
now expects to record pre-tax restructuring costs of about $65 million in the
fourth quarter of 2008 related to the TFC exit plan and the restructuring
program, inclusive of the restructuring charges previously
reported. In addition, Textron anticipates that it will likely have
additional restructuring costs in 2009 and later, as a result of further
headcount reductions and other actions in its various business units, including
TFC, however, an estimate of these charges cannot be made at this
time.
Textron
estimates that approximately $45 million of the cumulative $65 million in
pre-tax costs will result in future cash outlays, primarily from employee
separation expense. Approximately $20 million of the cumulative pre-tax costs
are non-cash, relating primarily to asset impairment charges for facilities to
be closed.
Textron
previously reported that the charge for goodwill impairment at TFC would result
in a fixed charge coverage ratio, at the end of 2008, of less than the 1.25
times required under the Support Agreement, dated as of May 25, 1994, between
Textron and TFC, resulting in a required capital contribution by Textron to TFC
in an approximate amount of $200 million. Due to the actions at TFC
discussed above, a larger capital contribution from Textron to TFC is necessary
to maintain the fixed charge coverage ratio required by the Support Agreement
and to maintain the leverage ratio required by TFC’s credit
facility. Therefore, Textron is now required to make a capital
contribution to TFC in an amount estimated at approximately $600 million;
Textron plans to make this contribution by the end of 2008. The
contribution will not result in any increase in the consolidated amount of
Textron and TFC debt outstanding.
Certain
statements in this Current Report on Form 8-K and other oral and written
statements made by us from time to time are forward-looking statements,
including those that discuss strategies, goals, outlook or other non-historical
matters, or project revenues, income, returns or other financial measures. These
forward-looking statements speak only as of the date on which they are made, and
we undertake no obligation to update or revise any forward-looking statements.
These forward-looking statements are subject to risks and uncertainties that may
cause actual results to differ materially from those contained in the
statements, including the risk factors contained in our most recent Quarterly
Report on Form 10-Q and the following: (a) changes in worldwide economic and
political conditions that impact demand for our products, interest rates and
foreign exchange rates; (b) the interruption of production at our facilities or
our customers or suppliers; (c) performance issues with key suppliers,
subcontractors and business partners; (d) our ability to perform as anticipated
and to control costs under contracts with the U.S. Government; (e) the U.S.
Government’s ability to unilaterally modify or terminate its contracts with us
for the U.S. Government’s convenience or for our failure to perform, to change
applicable procurement and accounting policies, and, under certain
circumstances, to suspend or debar us as a contractor eligible to receive future
contract awards; (f) changing priorities or reductions in the U.S. Government
defense budget, including those related to Operation Iraqi Freedom, Operation
Enduring Freedom and the Global War on Terrorism; (g) changes in national or
international funding priorities, U.S. and foreign military budget constraints
and determinations, and government policies on the export and import of military
and commercial products; (h) legislative or regulatory actions impacting defense
operations; (i) the ability to control costs and successful implementation of
various cost-reduction programs, including the enterprise-wide restructuring
program; (j) the timing of new product launches and certifications of new
aircraft products; (k) the occurrence of slowdowns or downturns in customer
markets in which our products are sold or supplied or where Textron Financial
Corporation (TFC) offers financing; (l) changes in aircraft delivery schedules
or cancellation of orders; (m) the impact of changes in tax legislation; (n) the
extent to which we are able to pass raw material price increases through to
customers or offset such price increases by reducing other costs; (o) our
ability to offset, through cost reductions, pricing pressure brought by original
equipment manufacturer customers; (p) our ability to realize full value of
receivables; (q) the availability and cost of insurance; (r) increases in
pension expenses and other postretirement employee costs; (s) TFC’s ability to
maintain portfolio credit quality and certain minimum levels of financial
performance required under its committed credit facilities and under Textron’s
support agreement with TFC; (t) TFC’s access to financing, including
securitizations, at competitive rates; (u) our ability to successfully exit from
TFC’s commercial finance business, other than the captive finance business,
including effecting an orderly liquidation or sale of certain TFC portfolios and
businesses; (v) uncertainty in estimating market value of TFC’s receivables held
for sale and reserves for TFC’s receivables to be retained; (w) uncertainty in
estimating contingent liabilities and establishing reserves to address such
contingencies; (x) risks and uncertainties related to acquisitions and
dispositions, including difficulties or unanticipated expenses in connection
with the consummation of acquisitions or dispositions, the disruption of current
plans and operations, or the failure to achieve anticipated synergies and
opportunities; (y) the efficacy of research and development investments to
develop new products; (z) the launching of significant new products or programs
which could result in unanticipated expenses; (aa) bankruptcy or other financial
problems at major suppliers or customers that could cause disruptions in our
supply chain or difficulty in collecting amounts owed by such customers; and
(bb) continued volatility and further deterioration of the capital
markets.
SIGNATURES
Pursuant to the requirements of the
Securities Exchange Act of 1934, the registrant has duly caused this report to
be signed on its behalf by the undersigned hereunto duly
authorized.
|
|
TEXTRON
INC.
|
|
|
(Registrant)
|
|
|
|
|
Date: December
22, 2008
|
By:
|
/s/
Richard L. Yates
|
|
|
|
Richard
L. Yates
|
|
|
|
Senior
Vice President and Corporate
Controller
|