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Shareholders' Equity
 12 Months Ended
Dec. 29, 2012
Shareholders' Equity  
Shareholders' Equity

Note 10. 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 December 29, 2012 is presented below:

 

(In thousands)

 

2012

 

2011

 

2010

 

Beginning balance

 

278,873

 

275,739

 

272,272

 

Exercise of stock options

 

1,159

 

177

 

336

 

Issued to Textron Savings Plan

 

2,159

 

2,686

 

2,682

 

Stock repurchases

 

(11,103)

 

—

 

—

 

Other

 

175

 

271

 

449

 

Ending balance

 

271,263

 

278,873

 

275,739

 

 

Reserved Shares of Common Stock

At the end of 2012, common stock reserved for the conversion of convertible notes, the exercise of outstanding stock options and warrants, and the issuance of shares upon vesting of outstanding restricted stock units totaled 63 million shares.  See the “Convertible Senior Notes and Related Transactions” section in Note 8 for information on our convertible debt.

 

Income per Common Share

We calculate basic and diluted earnings per share (EPS) based on net income, which approximates income available to common shareholders for each period.  Basic EPS is calculated using the two-class method, which includes the weighted-average number of common shares outstanding during the period and restricted stock units to be paid in stock that are deemed participating securities as they provide nonforfeitable rights to dividends.  Diluted EPS considers the dilutive effect of all potential future common stock, including stock options, restricted stock units and the shares that could be issued upon the conversion of our convertible notes, as discussed below, and upon the exercise of the related warrants.  The convertible note call options purchased in connection with the issuance of the convertible notes and the capped call transaction entered into in 2011 are excluded from the calculation of diluted EPS as their impact is always anti-dilutive.  Upon conversion of our convertible notes, as described in Note 8, the principal amount would be settled in cash, and the excess of the conversion value, as defined, over the principal amount may be settled in cash and/or shares of our common stock.  Therefore, only the shares of our common stock potentially issuable with respect to the excess of the notes’ conversion value over the principal amount, if any, are considered as dilutive potential common shares for purposes of calculating diluted EPS.

 

The weighted-average shares outstanding for basic and diluted EPS are as follows:

 

 

 

 

 

 

 

 

 

(In thousands)

 

2012

 

2011

 

2010

 

Basic weighted-average shares outstanding

 

280,182

 

277,684

 

274,452

 

Dilutive effect of:

 

 

 

 

 

 

 

Convertible notes and warrants

 

14,053

 

28,869

 

27,450

 

Stock options and restricted stock units

 

428

 

702

 

653

 

Diluted weighted-average shares outstanding

 

294,663

 

307,255

 

302,555

 

 

In 2012, 2011 and 2010, stock options to purchase 7 million, 5 million and 7 million shares, respectively, of common stock outstanding are excluded from our calculation of diluted weighted-average shares outstanding as the exercise prices were greater than the average market price of our common stock for those periods.  These securities could potentially dilute EPS in the future.

 

Other Comprehensive Income (Loss)

The before and after-tax components of other comprehensive income (loss) are presented below:

 

(In millions)

 

Pre-Tax
Amount

 

Tax (Expense)
Benefit

 

After-Tax
Amount

 

2012

 

 

 

 

 

 

 

Pension adjustments:

 

 

 

 

 

 

 

Recognition of prior service cost

 

     $

2

 

     $

(1)

 

    $

1

 

Unrealized losses

 

(417)

 

186

 

(231

)

Amortization of prior service cost/unrealized losses included in net periodic pension cost

 

129

 

(45)

 

84

 

Pension adjustments, net

 

(286)

 

140

 

(146

)

Deferred gains/losses on hedge contracts:

 

 

 

 

 

 

 

Current deferrals

 

14

 

(3)

 

11

 

Reclassification adjustments included in net income

 

(15)

 

3

 

(12

)

Deferred gains/losses on hedge contracts, net

 

(1)

 

—

 

(1

)

Foreign currency translation adjustment

 

(6)

 

8

 

2

 

Total

 

     $

(293)

 

     $

148

 

    $

(145

)

2011

 

 

 

 

 

 

 

Pension adjustments:

 

 

 

 

 

 

 

Recognition of prior service cost

 

     $

15

 

     $

(5)

 

    $

10

 

Unrealized losses

 

(542)

 

182

 

(360

)

Amortization of prior service cost/unrealized losses included in net periodic pension cost

 

97

 

(33)

 

64

 

Pension adjustments, net

 

(430)

 

144

 

(286

)

Deferred gains/losses on hedge contracts:

 

 

 

 

 

 

 

Current deferrals

 

(7)

 

2

 

(5

)

Reclassification adjustments included in net income

 

(22)

 

7

 

(15

)

Deferred gains/losses on hedge contracts, net

 

(29)

 

9

 

(20

)

Foreign currency translation adjustment

 

(1)

 

(2)

 

(3

)

Total

 

     $

(460)

 

     $

151

 

    $

(309

)

2010

 

 

 

 

 

 

 

Pension adjustments:

 

 

 

 

 

 

 

Recognition of prior service cost

 

     $

11

 

     $

(4)

 

    $

7

 

Unrealized losses

 

(197)

 

78

 

(119

)

Amortization of prior service cost/unrealized losses included in net periodic pension cost

 

63

 

(22)

 

41

 

Pension adjustments, net

 

(123)

 

52

 

(71

)

Deferred gains on hedge contracts

 

 

 

 

 

 

 

Current deferrals

 

17

 

(3)

 

14

 

Reclassification adjustments included in net income

 

(14)

 

4

 

(10

)

Deferred gains/losses on hedge contracts, net

 

3

 

1

 

4

 

Recognition of foreign currency translation loss (see Note 11)

 

91

 

(17)

 

74

 

Foreign currency translation adjustment

 

44

 

(46)

 

(2

)

Total

 

     $

15

 

     $

(10)

 

    $

5

 

 

Components of Accumulated Other Comprehensive Loss

 

(In millions)

 

Foreign
Currency
Translation
Adjustment

 

Pension and Post
Retirement
Benefit
Adjustments

 

Deferred Gains
(Losses) on
Hedge
Contracts

 

Accumulated
Other
Comprehensive
Loss

 

Balance at January 1, 2011

 

      $

82

 

    $

(1,425)

 

     $

27

 

    $

(1,316)

 

Current period other comprehensive loss

 

(3

)

(286)

 

(20)

 

(309)

 

Balance at December 31, 2011

 

79

 

(1,711)

 

7

 

(1,625)

 

Current period other comprehensive income (loss)

 

2

 

(146)

 

(1)

 

(145)

 

Balance at December 29, 2012

 

      $

81

 

    $

(1,857)

 

     $

6

 

    $

(1,770)