10-Q

UNITED STATES
SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

Form 10-Q

(Mark One)

þ QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15 (d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the quarterly period ended July 2, 2011

OR

o TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the transition period from                      to                     .

Commission File Number 1-5480

Textron Inc.

(Exact name of registrant as specified in its charter)

Delaware	05-0315468
(State or other jurisdiction of incorporation or organization)	(I.R.S. Employer Identification No.)

40 Westminster Street, Providence, RI	02903
(Address of principal executive offices)	(Zip code)

(401) 421-2800
(Registrant’s telephone number, including area code)

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes þ   No o

Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files). Yes þ   No o

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or a smaller reporting company. See definitions of “large accelerated filer,” “accelerated filer” and “smaller reporting company” in Rule 12b-2 of the Exchange Act (Check one):

Large accelerated filer þ Accelerated filer o 
Non-accelerated filer o
(Do not check if a smaller reporting company) Smaller reporting company o

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Act). Yes o   No þ

As of July 15, 2011, there were 277,332,707 shares of common stock outstanding.

TEXTRON INC.

INDEX

		Page
PART I.	FINANCIAL INFORMATION
Item 1.	Financial Statements
	Consolidated Statements of Operations (Unaudited)		3
	Consolidated Balance Sheets (Unaudited)		4
	Consolidated Statements of Cash Flows (Unaudited)		5
	Notes to the Consolidated Financial Statements (Unaudited)
	Note 1: Basis of Presentation		7
	Note 2: Special Charges		7
	Note 3: Retirement Plans		8
	Note 4: Comprehensive Income		8
	Note 5: Earnings Per Share		8
	Note 6: Accounts Receivable and Finance Receivables		9
	Note 7: Inventories		13
	Note 8: Debt		13
	Note 9: Accrued Liabilities		14
	Note 10: Commitments and Contingencies		14
	Note 11: Derivative Instruments and Fair Value Measurements		14
	Note 12: Income Tax Expense		17
	Note 13: Segment Information		17
Item 2.	Management’s Discussion and Analysis of Financial Condition and Results of Operations		19
Item 3.	Quantitative and Qualitative Disclosures about Market Risk		31
Item 4.	Controls and Procedures		31
PART II.	OTHER INFORMATION
Item 1A.	Risk Factors		31
Item 6.	Exhibits		32
	Signatures		32
EX-12.1
EX-12.2
EX-31.1
EX-31.2
EX-32.1
EX-32.2
EX-101 INSTANCE DOCUMENT
EX-101 SCHEMA DOCUMENT
EX-101 CALCULATION LINKBASE DOCUMENT
EX-101 LABELS LINKBASE DOCUMENT
EX-101 PRESENTATION LINKBASE DOCUMENT
EX-101 DEFINITION LINKBASE DOCUMENT

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PART I. FINANCIAL INFORMATION

Item 1. FINANCIAL STATEMENTS

TEXTRON INC.
Consolidated Statements of Operations (Unaudited)

	Three Months Ended					Six Months Ended
	July 2,			July 3,		July 2,			July 3,
(In millions, except per share amounts)	2011			2010		2011			2010
Revenues
Manufacturing revenues	$	2,695		$	2,653	$	5,148		$	4,787
Finance revenues		33			56		59			132
Total revenues		2,728			2,709		5,207			4,919
Costs, expenses and other
Cost of sales		2,225			2,188		4,280			3,963
Selling and administrative expense		295			299		599			585
Provision for losses on finance receivables		12			44		24			99
Interest expense		61			69		123			140
Special charges		—			10		—			22
Total costs, expenses and other		2,593			2,610		5,026			4,809
Income from continuing operations before income taxes		135			99		181			110
Income tax expense		43			18		58			33
Income from continuing operations		92			81		123			77
Income (loss) from discontinued operations, net of income taxes		(2	)		1		(4	)		(3	)
Net income	$	90		$	82	$	119		$	74
Basic earnings per share
Continuing operations	$	0.33		$	0.30	$	0.44		$	0.28
Discontinued operations		(0.01	)		—		(0.01	)		(0.01	)
Basic earnings per share	$	0.32		$	0.30	$	0.43		$	0.27
Diluted earnings per share
Continuing operations	$	0.29		$	0.27	$	0.39		$	0.26
Discontinued operations		—			—		(0.01	)		(0.01	)
Diluted earnings per share	$	0.29		$	0.27	$	0.38		$	0.25
Dividends per share
Common stock	$	0.02		$	0.02	$	0.04		$	0.04

See Notes to the consolidated financial statements.

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TEXTRON INC.
Consolidated Balance Sheets (Unaudited)

	July 2,			January 1,
(Dollars in millions)	2011			2011
Assets
Manufacturing group
Cash and equivalents	$	610		$	898
Accounts receivable, net		874			892
Inventories		2,562			2,277
Other current assets		1,395			980
Total current assets		5,441			5,047
Property, plant and equipment, less accumulated depreciation and amortization of $3,040 and $2,869		1,964			1,932
Goodwill		1,651			1,632
Other assets		1,692			1,722
Total Manufacturing group assets		10,748			10,333
Finance group
Cash and equivalents		41			33
Finance receivables held for investment, net		3,345			3,871
Finance receivables held for sale		180			413
Other assets		525			632
Total Finance group assets		4,091			4,949
Total assets	$	14,839		$	15,282
Liabilities and shareholders’ equity
Liabilities
Manufacturing group
Short-term and current portion of long-term debt	$	351		$	19
Accounts payable		742			622
Accrued liabilities		1,915			2,016
Total current liabilities		3,008			2,657
Other liabilities		2,865			2,993
Long-term debt		2,192			2,283
Total Manufacturing group liabilities		8,065			7,933
Finance group
Other liabilities		379			391
Due to Manufacturing group		722			326
Debt		2,499			3,660
Total Finance group liabilities		3,600			4,377
Total liabilities		11,665			12,310
Shareholders’ equity
Common stock		35			35
Capital surplus		1,278			1,301
Retained earnings		3,145			3,037
Accumulated other comprehensive loss		(1,260	)		(1,316	)
		3,198			3,057
Less cost of treasury shares		24			85
Total shareholders’ equity		3,174			2,972
Total liabilities and shareholders’ equity	$	14,839		$	15,282
Common shares outstanding (in thousands)		277,224			275,739

See Notes to the consolidated financial statements.

4

TEXTRON INC.
Consolidated Statements of Cash Flows (Unaudited)
For the Six Months Ended July 2, 2011 and July 3, 2010, respectively

	Consolidated
(In millions)	2011			2010
Cash flows from operating activities:
Net income	$	119		$	74
Less: Income (loss) from discontinued operations		(4	)		(3	)
Income from continuing operations		123			77
Adjustments to reconcile income from continuing operations to net cash provided by (used in) operating activities:
Non-cash items:
Depreciation and amortization		195			187
Provision for losses on finance receivables held for investment		24			99
Portfolio losses on finance receivables		44			50
Deferred income taxes		57			11
Other, net		79			55
Changes in assets and liabilities:
Accounts receivable, net		36			(94	)
Inventories		(276	)		(217	)
Other assets		(51	)		56
Accounts payable		110			152
Accrued and other liabilities		(230	)		(285	)
Captive finance receivables, net		106			159
Other operating activities, net		2			—
Net cash provided by operating activities of continuing operations		219			250
Net cash used in operating activities of discontinued operations		(2	)		(3	)
Net cash provided by operating activities		217			247
Cash flows from investing activities:
Finance receivables originated or purchased		(110	)		(270	)
Finance receivables repaid		422			990
Proceeds on receivable sales		257			343
Capital expenditures		(169	)		(83	)
Net cash used in acquisitions		(3	)		(43	)
Proceeds from sale of repossessed assets and properties		72			66
Other investing activities, net		32			36
Net cash provided by investing activities		501			1,039
Cash flows from financing activities:
Payments on long-term lines of credit		(940	)		(502	)
Increase in short-term debt		189			—
Principal payments on long-term debt		(511	)		(1,491	)
Proceeds from issuance of long-term debt		265			28
Proceeds from option exercises		4			2
Dividends paid		(11	)		(11	)
Other financing activities, net		(5	)		—
Net cash used in financing activities		(1,009	)		(1,974	)
Effect of exchange rate changes on cash and equivalents		11			(13	)
Net decrease in cash and equivalents		(280	)		(701	)
Cash and equivalents at beginning of period		931			1,892
Cash and equivalents at end of period	$	651		$	1,191

See Notes to the consolidated financial statements

5

TEXTRON INC.
Consolidated Statements of Cash Flows (Unaudited) (Continued)
For the Six Months Ended July 2, 2011 and July 3, 2010, respectively

	Manufacturing Group						Finance Group
(In millions)	2011			2010			2011			2010
Cash flows from operating activities:
Net income (loss)	$	171		$	152		$	(52	)	$	(78	)
Less: Income (loss) from discontinued operations		(4	)		(3	)		—			—
Income from continuing operations		175			155			(52	)		(78	)
Adjustments to reconcile income (loss) from continuing operations to net cash provided by (used in) operating activities:
Dividends received from TFC		179			215			—			—
Capital contribution paid to TFC under Support Agreement		(112	)		(146	)		—			—
Non-cash items:
Depreciation and amortization		180			170			15			17
Provision for losses on finance receivables held for investment		—			—			24			99
Portfolio losses on finance receivables		—			—			44			50
Deferred income taxes		50			32			7			(21	)
Other, net		66			55			13			—
Changes in assets and liabilities:
Accounts receivable, net		36			(94	)		—			—
Inventories		(279	)		(217	)		—			—
Other assets		(51	)		51			(3	)		1
Accounts payable		110			152			—			—
Accrued and other liabilities		(210	)		(206	)		(20	)		(79	)
Other operating activities, net		2			(1	)		—			—
Net cash provided by (used in) operating activities of continuing operations		146			166			28			(11	)
Net cash used in operating activities of discontinued operations		(2	)		(3	)		—			—
Net cash provided by (used in) operating activities		144			163			28			(11	)
Cash flows from investing activities:
Finance receivables originated or purchased		—			—			(244	)		(471	)
Finance receivables repaid		—			—			662			1,350
Proceeds on receivable sales		—			—			257			343
Capital expenditures		(169	)		(83	)		—			—
Net cash used in acquisitions		(3	)		(43	)		—			—
Proceeds from sale of repossessed assets and properties		—			—			72			66
Other investing activities, net		(39	)		(17	)		37			38
Net cash provided by (used in) investing activities		(211	)		(143	)		784			1,326
Cash flows from financing activities:
Payments on long-term lines of credit		—			(502	)		(940	)		—
Increase in short-term debt		189			—			—			—
Intergroup financing		(395	)		(212	)		395			212
Principal payments on long-term debt		(13	)		(11	)		(498	)		(1,480	)
Proceeds from issuance of long-term debt		—			—			265			28
Proceeds from option exercises		4			2			—			—
Capital contributions paid to TFC under Support Agreement		—			—			112			146
Other capital contributions paid to Finance group		—			—			40			20
Dividends paid		(11	)		(11	)		(179	)		(215	)
Other financing activities, net		(5	)		—			—			—
Net cash used in financing activities		(231	)		(734	)		(805	)		(1,289	)
Effect of exchange rate changes on cash and equivalents		10			(13	)		1			—
Net increase (decrease) in cash and equivalents		(288	)		(727	)		8			26
Cash and equivalents at beginning of period		898			1,748			33			144
Cash and equivalents at end of period	$	610		$	1,021		$	41		$	170

See Notes to the consolidated financial statements.

6

TEXTRON INC.
Notes to the Consolidated Financial Statements (Unaudited)

Note 1: Basis of Presentation

Our consolidated financial statements include the accounts of Textron Inc. and its majority-owned subsidiaries. We have prepared these unaudited consolidated financial statements in accordance with accounting principles generally accepted in the U.S. for interim financial information. Accordingly, these interim financial statements do not include all of the information and footnotes required by accounting principles generally accepted in the U.S. for complete financial statements. The consolidated interim financial statements included in this quarterly report should be read in conjunction with the consolidated financial statements included in our Annual Report on Form 10-K for the year ended January 1, 2011. In the opinion of management, the interim financial statements reflect all adjustments (consisting only of normal recurring adjustments) that are necessary for the fair presentation of our consolidated financial position, results of operations and cash flows for the interim periods presented. The results of operations for the interim periods are not necessarily indicative of the results to be expected for the full year. Certain prior period amounts have been reclassified to conform with the current year presentation.

Our financings are conducted through two separate borrowing groups. The Manufacturing group consists of Textron Inc. consolidated with its majority-owned subsidiaries that operate in the Cessna, Bell, Textron Systems and Industrial segments. The Finance group, which also is the Finance segment, consists of Textron Financial Corporation, its consolidated subsidiaries and three other finance subsidiaries owned by Textron Inc. We designed this framework to enhance our borrowing power by separating the Finance group. Our Manufacturing group operations include the development, production and delivery of tangible goods and services, while our Finance group provides financial services. Due to the fundamental differences between each borrowing group’s activities, investors, rating agencies and analysts use different measures to evaluate each group’s performance. To support those evaluations, we present balance sheet and cash flow information for each borrowing group within the consolidated financial statements. All significant intercompany transactions are eliminated from the consolidated financial statements, including retail and wholesale financing activities for inventory sold by our Manufacturing group and financed by our Finance group.

Note 2: Special Charges

In 2010, special charges included restructuring costs incurred under a restructuring program that was completed at the end of 2010. There were no special charges in the first half of 2011.

Restructuring costs by segment and type for the three and six months ended July 3, 2010 are as follows:

	Severance			Contract
(In millions)	Costs			Terminations		Total
Three Months Ended July 3, 2010
Cessna	$	6		$	—	$	6
Textron Systems		1			—		1
Finance		2			1		3
	$	9		$	1	$	10
Six Months Ended July 3, 2010
Cessna	$	14		$	2	$	16
Bell		1			—		1
Textron Systems		1			—		1
Finance		5			1		6
Corporate		(2	)		—		(2	)
	$	19		$	3	$	22

An analysis of our restructuring reserve activity is summarized below:

	Severance			Contract
(In millions)	Costs			Terminations			Total
Balance at January 1, 2011	$	57		$	5		$	62
Cash paid		(33	)		(1	)		(34	)
Balance at July 2, 2011	$	24		$	4		$	28

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Note 3: Retirement Plans

We provide defined benefit pension plans and other postretirement benefits to eligible employees. The components of net periodic benefit cost for these plans are as follows:

							Postretirement Benefits
	Pension Benefits						Other Than Pensions
	July 2,			July 3,			July 2,			July 3,
(In millions)	2011			2010			2011			2010
Three Months Ended
Service cost	$	32		$	31		$	2		$	2
Interest cost		82			79			8			8
Expected return on plan assets		(98	)		(92	)		—			—
Amortization of prior service cost (credit)		4			4			(2	)		(1	)
Amortization of net loss		19			9			3			3
Net periodic benefit cost	$	39		$	31		$	11		$	12
Six Months Ended
Service cost	$	64		$	62		$	4		$	4
Interest cost		164			158			16			16
Expected return on plan assets		(196	)		(184	)		—			—
Amortization of prior service cost (credit)		8			8			(3	)		(2	)
Amortization of net loss		38			18			6			6
Net periodic benefit cost	$	78		$	62		$	23		$	24

Note 4: Comprehensive Income

Our comprehensive income, net of taxes, is provided below:

	Three Months Ended					Six Months Ended
	July 2,		July 3,			July 2,		July 3,
(In millions)	2011		2010			2011		2010
Net income	$	90	$	82		$	119	$	74
Other comprehensive income (loss):
Recognition of prior service cost and unrealized losses on pension and postretirement benefits		15		10			33		20
Deferred gains on hedge contracts		2		—			8		7
Foreign currency translation and other		3		(32	)		15		(41	)
Comprehensive income	$	110	$	60		$	175	$	60

Note 5: Earnings Per 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 earnings per share 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 earnings per share 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 and upon the exercise of the related warrants. The convertible note call options purchased in connection with the issuance of the convertible notes 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.

8

The weighted-average shares outstanding for basic and diluted earnings per share are as follows:

	Three Months Ended				Six Months Ended
	July 2,		July 3,		July 2,		July 3,
(In thousands)	2011		2010		2011		2010
Basic weighted-average shares outstanding		277,406		274,098		276,882		273,636
Dilutive effect of convertible notes, warrants, stock options and restricted stock units		37,802		28,299		40,379		28,133
Diluted weighted-average shares outstanding		315,208		302,397		317,261		301,769

Stock options to purchase 3 million shares of common stock outstanding are excluded from our calculation of diluted weighted-average shares outstanding for both the three- and six-month periods ended July 2, 2011 as the exercise prices were greater than the average market price of our common stock for the periods. Stock options to purchase 6 million shares of common stock outstanding are excluded from our calculation of diluted weighted-average shares outstanding for both the three- and six-month periods ended July 3, 2010 as the exercise prices were greater than the average market price of our common stock for the periods. These securities could potentially dilute earnings per share in the future.

Note 6: Accounts Receivable and Finance Receivables

Accounts Receivable

Accounts receivable is composed of the following:

	July 2,			January 1,
(In millions)	2011			2011
Commercial	$	572		$	496
U.S. Government contracts		320			416
		892			912
Allowance for doubtful accounts		(18	)		(20	)
	$	874		$	892

We have unbillable receivables on U.S. Government contracts that arise when the revenues we have appropriately recognized based on performance cannot be billed yet under terms of the contract. Unbillable receivables within accounts receivable totaled $165 million at July 2, 2011 and $195 million at January 1, 2011.

Finance Receivables

Finance receivables by product line, which includes both finance receivables held for investment and finance receivables held for sale, are presented in the following table:

(Dollars in millions)	July 2, 2011				January 1, 2011
Aviation	$	1,985	52	%	$	2,120	46	%
Golf equipment		167	4			212	5
Golf mortgage		746	20			876	19
Timeshare		543	14			894	19
Structured capital		281	7			317	7
Other liquidating		102	3			207	4
Total finance receivables		3,824	100	%		4,626	100	%
Less: Allowance for losses		299				342
Less: Finance receivables held for sale		180				413
Total finance receivables held for investment, net	$	3,345			$	3,871

Credit Quality Indicators and Nonaccrual Finance Receivables

We internally assess the quality of our finance receivables held for investment portfolio based on a number of key credit quality indicators and statistics such as delinquency, loan balance to collateral value, the liquidity position of individual borrowers and guarantors, debt service coverage in the golf mortgage product line and default rates of our notes receivable collateral in the timeshare product line. Because many of these indicators are difficult to apply across an entire class of receivables, we evaluate individual loans on a quarterly basis and classify these loans into three categories based on the key credit quality indicators for the individual loan. These three categories are performing, watchlist and nonaccrual.

We classify finance receivables held for investment as nonaccrual if credit quality indicators suggest full collection is doubtful. In addition, we automatically classify accounts as nonaccrual that are contractually delinquent by more than three

9

months unless collection is not doubtful. Cash payments on nonaccrual accounts, including finance charges, generally are applied to reduce the net investment balance. We resume the accrual of interest when the loan becomes contractually current through payment according to the original terms of the loan or, if a loan has been modified, following a period of performance under the terms of the modification, provided we conclude that collection of all principal and interest is no longer doubtful. Previously suspended interest income is recognized at that time.

Accounts are classified as watchlist when credit quality indicators have deteriorated as compared with typical underwriting criteria, and we believe collection of full principal and interest is probable but not certain. All other finance receivables held for investment that do not meet the watchlist or nonaccrual categories are classified as performing.

A summary of finance receivables held for investment categorized based on the internally assigned credit quality indicators discussed above is as follows:

	July 2, 2011											January 1, 2011
(In millions)	Performing			Watchlist			Nonaccrual			Total		Performing			Watchlist			Nonaccrual			Total
Aviation	$	1,640		$	203		$	142		$	1,985	$	1,713		$	238		$	169		$	2,120
Golf equipment		110			42			15			167		138			51			23			212
Golf mortgage		192			201			226			619		163			303			219			685
Timeshare		206			27			277			510		222			77			382			681
Structured capital		255			26			—			281		290			27			—			317
Other liquidating		44			2			36			82		130			11			57			198
Total	$	2,447		$	501		$	696		$	3,644	$	2,656		$	707		$	850		$	4,213
% of Total		67.2	%		13.7	%		19.1	%				63.0	%		16.8	%		20.2	%

We measure delinquency based on the contractual payment terms of our loans and leases. In determining the delinquency aging category of an account, any/all principal and interest received is applied to the most past-due principal and/or interest amounts due. If a significant portion of the contractually due payment is delinquent, the entire finance receivable balance is reported in accordance with the most past-due delinquency aging category.

Finance receivables held for investment by delinquency aging category is summarized in the tables below:

	Less Than						Greater Than
	31 Days		31-60 Days		61-90 Days		90 Days
(In millions)	Past Due		Past Due		Past Due		Past Due		Total
July 2, 2011
Aviation	$	1,842	$	44	$	38	$	61	$	1,985
Golf equipment		144		11		3		9		167
Golf mortgage		522		12		—		85		619
Timeshare		425		—		—		85		510
Structured capital		281		—		—		—		281
Other liquidating		59		2		1		20		82
Total	$	3,273	$	69	$	42	$	260	$	3,644
January 1, 2011
Aviation	$	1,964	$	67	$	41	$	48	$	2,120
Golf equipment		171		13		9		19		212
Golf mortgage		543		12		7		123		685
Timeshare		533		14		6		128		681
Structured capital		317		—		—		—		317
Other liquidating		166		2		1		29		198
Total	$	3,694	$	108	$	64	$	347	$	4,213

At July 2, 2011, accrual status loans that were 90 days past due totaled $7 million. We had no accrual status loans that were 90 days past due at January 1, 2011. At July 2, 2011, the 60+ days contractual delinquency as a percentage of finance receivables held for investment was 8.29%, compared with 9.77% at January 1, 2011.

Impaired Loans

We evaluate individual finance receivables held for investment in non-homogeneous portfolios and larger accounts in homogeneous loan portfolios for impairment on a quarterly basis. Finance receivables classified as held for sale are reflected at the lower of cost or fair value and are excluded from these evaluations. A finance receivable is considered impaired when

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it is probable that we will be unable to collect all amounts due according to the contractual terms of the loan agreement based on our review of the credit quality indicators discussed above. Impaired finance receivables include both nonaccrual accounts and accounts for which full collection of principal and interest remains probable, but the account’s original terms have been, or are expected to be, significantly modified. If the modification specifies an interest rate equal to or greater than a market rate for a finance receivable with comparable risk, the account is not considered impaired in years subsequent to the modification. There was no significant interest income recognized on impaired loans in the first half of 2011 or 2010.

The average recorded investment in impaired loans for the first half of 2011 and 2010 is provided below:

			Golf		Golf				Other
(In millions)	Aviation		Equipment		Mortgage		Timeshare		Liquidating		Total
For the six months ended July 2, 2011
Impaired loans with a related allowance for losses recorded	$	136	$	4	$	193	$	309	$	18	$	660
Impaired loans with no related allowance for losses recorded		20		—		92		48		18		178
Total	$	156	$	4	$	285	$	357	$	36	$	838
For the six months ended July 3, 2010
Impaired loans with a related allowance for losses recorded	$	210	$	4	$	183	$	357	$	24	$	778
Impaired loans with no related allowance for losses recorded		12		2		116		63		69		262
Total	$	222	$	6	$	299	$	420	$	93	$	1,040

A summary of impaired finance receivables, excluding leveraged leases, and related allowance for losses is provided below:

			Golf		Golf				Other
(In millions)	Aviation		Equipment		Mortgage		Timeshare		Liquidating		Total
July 2, 2011
Impaired loans with a related allowance for losses recorded:
Recorded investment	$	118	$	3	$	198	$	245	$	18	$	582
Unpaid principal balance		120		3		208		281		24		636
Related allowance		43		1		44		86		9		183
Impaired loans with no related allowance for losses recorded:
Recorded investment		22		—		96		77		10		205
Unpaid principal balance		22		—		102		77		51		252
Total impaired loans:
Recorded investment		140		3		294		322		28		787
Unpaid principal balance		142		3		310		358		75		888
Related allowance		43		1		44		86		9		183
January 1, 2011
Impaired loans with a related allowance for losses recorded:
Recorded investment	$	147	$	4	$	175	$	355	$	16	$	697
Unpaid principal balance		144		5		178		385		15		727
Related allowance		45		2		39		102		3		191
Impaired loans with no related allowance for losses recorded:
Recorded investment		17		—		138		69		30		254
Unpaid principal balance		21		—		146		74		89		330
Total impaired loans:
Recorded investment		164		4		313		424		46		951
Unpaid principal balance		165		5		324		459		104		1,057
Related allowance		45		2		39		102		3		191

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Allowance for Losses
We maintain the allowance for losses on finance receivables held for investment at a level considered adequate to cover inherent losses in the portfolio based on management’s evaluation and analysis by product line. For larger balance accounts specifically identified as impaired, including large accounts in homogeneous portfolios, a reserve is established based on comparing the carrying value with either a) the expected future cash flows, discounted at the finance receivable’s effective interest rate; or b) the fair value, if the finance receivable is collateral dependent. The expected future cash flows consider collateral value; financial performance and liquidity of our borrower; existence and financial strength of guarantors; estimated recovery costs, including legal expenses; and costs associated with the repossession/foreclosure and eventual disposal of collateral. When there is a range of potential outcomes, we perform multiple discounted cash flow analyses and weight the potential outcomes based on their relative likelihood of occurrence using the probability-weighted approach.

The evaluation of our portfolios is inherently subjective as it requires estimates. These estimates include the amount and timing of future cash flows expected to be received on impaired finance receivables and the underlying collateral, which may differ from actual results. While our analysis is specific to each individual account, the most critical factors included in this analysis vary by product line. For the aviation product line, these factors include industry valuation guides, physical condition of the aircraft, payment history, and existence and financial strength of guarantors. For the golf equipment line, the critical factors are the age and condition of the collateral, while the factors for the golf mortgage line include historical golf course, hotel or marina cash flow performance; estimates of golf rounds and price per round or occupancy and room rates; market discount and capitalization rates; and existence and financial strength of guarantors. For the timeshare product line, the critical factors are the historical performance of consumer notes receivable collateral, real estate valuations, operating expenses of the borrower, the impact of bankruptcy court rulings on the value of the collateral, legal and other professional expenses and borrower’s access to capital.

We also establish an allowance for losses by product line to cover probable but specifically unknown losses existing in the portfolio. For homogeneous portfolios, including the aviation and golf equipment product lines, the allowance is established as a percentage of non-recourse finance receivables, which have not been identified as requiring specific reserves. The percentage is based on a combination of factors, including historical loss experience, current delinquency and default trends, collateral values, and both general economic and specific industry trends. For non-homogeneous portfolios, including the golf mortgage and timeshare product lines, the allowance is established as a percentage of watchlist balances, as defined on page 10, which represents a combination of assumed default likelihood and loss severity based on historical experience, industry trends and collateral values. In establishing our allowance for losses to cover accounts not specifically identified, the most critical factors for the aviation product line include the collateral value of the portfolio, historical default experience and delinquency trends; for golf equipment, factors considered include historical loss experience and delinquency trends; and for golf mortgage, factors include an evaluation of individual loan credit quality indicators such as delinquency, loan balance to collateral value, debt service coverage, existence and financial strength of guarantors, historical progression from watchlist to nonaccrual status and historical loss severity. For the timeshare product line, we evaluate individual loan credit quality indicators such as borrowing base shortfalls for revolving notes receivable facilities, default rates of our notes receivable collateral, borrower’s access to capital, historical progression from watchlist to nonaccrual status and estimates of loss severity based on analysis of impaired loans in the product line.

Finance receivables held for investment are written down to the fair value (less estimated costs to sell) of the related collateral at the earlier of the date when the collateral is repossessed or when no payment has been received for six months unless management deems the receivable collectable. Finance receivables are charged off when the remaining balance is deemed to be uncollectible.

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A rollforward of the allowance for losses on finance receivables held for investment and a summary of its composition, based on how the underlying finance receivables are evaluated for impairment, is presented below. The finance receivables reported in the following table specifically exclude $281 million of leveraged leases at both July 2, 2011 and July 3, 2010, in accordance with authoritative accounting standards:

													Structured
													Capital and
				Golf			Golf						Other
(In millions)	Aviation			Equipment			Mortgage			Timeshare			Liquidating			Total
For the six months ended July 2, 2011
Allowance for losses
Beginning balance	$	107		$	16		$	79		$	106		$	34		$	342
Provision for losses		16			(2	)		(1	)		10			1			24
Net charge-offs and transfers		(17	)		(3	)		(4	)		(28	)		(15	)		(67	)
Ending balance	$	106		$	11		$	74		$	88		$	20		$	299
Ending balance based on individual evaluations		43			1			44			86			9			183
Ending balance based on collective evaluation		63			10			30			2			11			116
Finance receivables
Individually evaluated for impairment	$	140		$	3		$	294		$	322		$	28		$	787
Collectively evaluated for impairment		1,845			164			325			188			54			2,576
Balance at end of period	$	1,985		$	167		$	619		$	510		$	82		$	3,363
For the six months ended July 3, 2010
Allowance for losses
Beginning balance	$	114		$	9		$	65		$	79		$	74		$	341
Provision for losses		16			7			51			32			(7	)		99
Net charge-offs		(30	)		(3	)		(41	)		(1	)		(13	)		(88	)
Ending balance	$	100		$	13		$	75		$	110		$	54		$	352
Ending balance based on individual evaluations		39			1			40			99			2			181
Ending balance based on collective evaluation		61			12			35			11			52			171
Finance receivables
Individually evaluated for impairment	$	163		$	7		$	304		$	448		$	85		$	1,007
Collectively evaluated for impairment		2,081			227			484			634			363			3,789
Balance at end of period	$	2,244		$	234		$	788		$	1,082		$	448		$	4,796

Note 7: Inventories

	July 2,			January 1,
(In millions)	2011			2011
Finished goods	$	989		$	784
Work in process		2,309			2,125
Raw materials		418			506
		3,716			3,415
Progress/milestone payments		(1,154	)		(1,138	)
	$	2,562		$	2,277

Note 8: Debt

On May 5, 2009, we issued $600 million of convertible notes with a maturity date of May 1, 2013 and concurrently purchased call options to acquire our common stock and sold warrants to purchase our common stock for the purpose of reducing the potential dilutive effect to our shareholders and/or our cash outflow upon the conversion of the convertible notes. For more information on these transactions, see Note 8 to the Consolidated Financial Statements in Textron’s 2010 Annual Report on Form 10-K. For at least 20 trading days during the 30 consecutive trading days ended June 30, 2011, our common stock price exceeded the $17.06 per share conversion threshold price set forth for these convertible notes. Accordingly, the notes are convertible at the holder’s option through September 30, 2011. We may deliver shares of common stock, cash or a combination of cash and shares of common stock in satisfaction of our obligations upon conversion of the convertible notes. We intend to settle the face value of the convertible notes in cash. Based on a July 2, 2011 stock price of $23.94, the “if converted value” exceeds the face amount of the notes by $494 million; however, after giving effect to the exercise of the call options and warrants, the incremental cash or share settlement in excess of the face amount would

13

result in either a 15.6 million net share issuance or a cash payment of $374 million, or a combination of cash and stock, at our option. We have continued to classify these convertible notes as long-term based on our intent and ability to maintain the debt outstanding for at least one year through the use of various funding sources available to us.

Note 9: Accrued Liabilities

We provide limited warranty and product maintenance programs, including parts and labor, for certain products for periods ranging from one to five years. Changes in our warranty and product maintenance liabilities are as follows:

	Six Months Ended
	July 2,			July 3,
(In millions)	2011			2010
Accrual at the beginning of period	$	242		$	263
Provision		111			83
Settlements		(116	)		(113	)
Adjustments to prior accrual estimates		(7	)		—
Accrual at the end of period	$	230		$	233

Note 10: Commitments and Contingencies

We are subject to legal proceedings and other claims arising out of the conduct of our business, including proceedings and claims relating to commercial and financial transactions; government contracts; compliance with applicable laws and regulations; production partners; product liability; employment; and environmental, safety and health matters. Some of these legal proceedings and claims seek damages, fines or penalties in substantial amounts or remediation of environmental contamination. As a government contractor, we are subject to audits, reviews and investigations to determine whether our operations are being conducted in accordance with applicable regulatory requirements. Under federal government procurement regulations, certain claims brought by the U.S. Government could result in our being suspended or debarred from U.S. Government contracting for a period of time. On the basis of information presently available, we do not believe that existing proceedings and claims will have a material effect on our financial position or results of operations.

Note 11. Derivative Instruments and Fair Value Measurements

We measure fair value at the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date. We prioritize the assumptions that market participants would use in pricing the asset or liability into a three-tier fair value hierarchy. This fair value hierarchy gives the highest priority (Level 1) to quoted prices in active markets for identical assets or liabilities and the lowest priority (Level 3) to unobservable inputs in which little or no market data exist, requiring companies to develop their own assumptions. Observable inputs that do not meet the criteria of Level 1, and include quoted prices for similar assets or liabilities in active markets or quoted prices for identical assets and liabilities in markets that are not active are categorized as Level 2. Level 3 inputs are those that reflect our estimates about the assumptions market participants would use in pricing the asset or liability based on the best information available in the circumstances. Valuation techniques for assets and liabilities measured using Level 3 inputs may include methodologies such as the market approach, the income approach or the cost approach and may use unobservable inputs such as projections, estimates and management’s interpretation of current market data. These unobservable inputs are utilized only to the extent that observable inputs are not available or cost-effective to obtain.

Assets and Liabilities Recorded at Fair Value on a Recurring Basis

The assets and liabilities that are recorded at fair value on a recurring basis consist primarily of our derivative financial instruments, which are categorized as Level 2 in the fair value hierarchy. The fair value amounts of these instruments that are designated as hedging instruments are provided below:

			Asset (Liability)
			July 2,			January 1,
(In millions)	Borrowing Group	Balance Sheet Location	2011			2011
Assets
Interest rate exchange contracts*	Finance	Other assets	$	29		$	34
Foreign currency exchange contracts	Manufacturing	Other current assets		42			39
Total			$	71		$	73
Liabilities
Interest rate exchange contracts*	Finance	Other liabilities	$	(5	)	$	(6	)
Foreign currency exchange contracts	Manufacturing	Accrued liabilities		(9	)		(2	)
Total			$	(14	)	$	(8	)

* Interest rate exchange contracts represent fair value hedges.

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The Finance group’s interest rate exchange contracts are not exchange traded and are measured at fair value utilizing widely accepted, third-party developed valuation models. The actual terms of each individual contract are entered into a valuation model, along with interest rate and foreign exchange rate data, which is based on readily observable market data published by third-party leading financial news and data providers. Credit risk is factored into the fair value of these assets and liabilities based on the differential between both our credit default swap spread for liabilities and the counterparty’s credit default swap spread for assets as compared with a standard AA-rated counterparty; however, this had no significant impact on the valuation at July 2, 2011. At July 2, 2011 and January 1, 2011, we had interest rate exchange contracts with notional amounts of $0.9 billion and $1.1 billion, respectively.

Foreign currency exchange contracts are measured at fair value using the market method valuation technique. The inputs to this technique utilize current foreign currency exchange forward market rates published by third-party leading financial news and data providers. These are observable data that represent the rates that the financial institution uses for contracts entered into at that date; however, they are not based on actual transactions so they are classified as Level 2. At July 2, 2011 and January 1, 2011, we had foreign currency exchange contracts with notional amounts of $713 million and $635 million, respectively.

The Finance group also has investments in other marketable securities totaling $23 million and $51 million at July 2, 2011 and January 1, 2011, respectively, that are classified as available for sale. These investments are classified as Level 2 as the fair value for these notes was determined based on observable market inputs for similar securitization interests in markets that are relatively inactive compared with the market environment in which they were originally issued and based on bids received from prospective purchasers.

Fair Value Hedges

Our Finance group enters into interest rate exchange contracts to mitigate exposure to changes in the fair value of its fixed-rate receivables and debt due to fluctuations in interest rates. By using these contracts, we are able to convert our fixed-rate cash flows to floating-rate cash flows. The amount of ineffectiveness on our fair value hedges and the gain (loss) recorded in the Consolidated Statements of Operations were both insignificant in the first half of 2011 and 2010.

Cash Flow Hedges

We manufacture and sell our products in a number of countries throughout the world, and, therefore, we are exposed to movements in foreign currency exchange rates. The primary purpose of our foreign currency hedging activities is to manage the volatility associated with foreign currency purchases of materials, foreign currency sales of products, and other assets and liabilities in the normal course of business. We primarily utilize forward exchange contracts and purchased options with maturities of no more than three years that qualify as cash flow hedges and are intended to offset the effect of exchange rate fluctuations on forecasted sales, inventory purchases and overhead expenses. At July 2, 2011, we had a net deferred gain of $28 million in Accumulated other comprehensive loss related to these cash flow hedges. Net gains and losses recognized in earnings and Accumulated other comprehensive loss on these cash flow hedges, including gains and losses related to hedge ineffectiveness, were not material in the three- and six-month periods ended July 2, 2011 and July 3, 2010. We do not expect the amount of gains and losses in Accumulated other comprehensive loss that will be reclassified to earnings in the next twelve months to be material.

We hedge our net investment position in major currencies and generate foreign currency interest payments that offset other transactional exposures in these currencies. To accomplish this, we borrow directly in foreign currency and designate a portion of foreign currency debt as a hedge of net investments. We also may utilize currency forwards as hedges of our related foreign net investments. We record changes in the fair value of these contracts in other comprehensive income to the extent they are effective as cash flow hedges. If a contract does not qualify for hedge accounting or is designated as a fair value hedge, changes in the fair value of the contract are recorded in earnings. Currency effects on the effective portion of these hedges, which are reflected in the foreign currency translation adjustment account within OCI, produced a $27 million after-tax gain in the first half of 2011, resulting in an accumulated net gain balance of $41 million at July 2, 2011. The ineffective portion of these hedges was insignificant.

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Assets Recorded at Fair Value on a Nonrecurring Basis

The table below presents those assets that are measured at fair value on a nonrecurring basis that had fair value measurement adjustments during the first half of 2011 and 2010. These assets were measured using significant unobservable inputs (Level 3) and include the following:

					Gain (Loss)
	Balance at				Six Months Ended
	July 2,		July 3,		July 2,			July 3,
(In millions)	2011		2010		2011			2010
Finance group
Impaired finance receivables	$	407	$	519	$	(50	)	$	(104	)
Finance receivables held for sale		180		421		(14	)		(15	)
Other assets		91		87		(18	)		(26	)

Impaired Finance Receivables — Impaired nonaccrual finance receivables are included in the table above since the measurement of required reserves on our impaired finance receivables is significantly dependent on the fair value of the underlying collateral. Fair values of collateral are determined based on the use of appraisals, industry pricing guides, input from market participants, our recent experience selling similar assets or internally developed discounted cash flow models. Fair value measurements recorded on impaired finance receivables resulted in charges to provision for loan losses and primarily were related to initial fair value adjustments.

Finance Receivables Held for Sale — Finance receivables held for sale are recorded at the lower of cost or fair value. As a result of our plan to exit the non-captive Finance business certain finance receivables are classified as held for sale. At July 2, 2011, the finance receivables held for sale are primarily assets in the golf mortgage, other liquidating and timeshare product lines. Timeshare and other liquidating finance receivables classified as held for sale were identified at the individual loan level; whereas golf course mortgages were identified as a portion of a larger portfolio with common characteristics based on the intention to balance the sale of certain loans with the collection of others to maximize economic value. These finance receivables are recorded at fair value on a nonrecurring basis during periods in which the fair value is lower than the cost value.

There are no active, quoted market prices for our finance receivables. The estimate of fair value was determined based on the use of discounted cash flow models to estimate the exit price we expect to receive in the principal market for each type of loan in an orderly transaction, which includes both the sale of pools of similar assets and the sale of individual loans. The models we used incorporate 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 credit line utilization rates. Where available, assumptions related to the expectations of current market participants are compared with observable market inputs, including bids from prospective purchasers of similar loans and certain bond market indices for loans perceived to be of similar credit quality. Although we utilize and prioritize these market observable inputs in our discounted cash flow models, these inputs are not typically derived from markets with directly comparable loan structures, industries and collateral types. Therefore, all valuations of finance receivables held for sale involve significant management judgment, which can result in differences between our fair value estimates and those of other market participants.

Other assets — Other assets include repossessed assets and properties, operating assets received in satisfaction of troubled finance receivables and other investments, which are accounted for under the equity method of accounting and have no active, quoted market prices. The fair value of these assets is determined based on the use of appraisals, industry pricing guides, input from market participants, our recent experience selling similar assets or internally developed discounted cash flow models. For our other investments, the discounted cash flow models incorporate assumptions specific to the nature of the investments’ business and underlying assets and include industry valuation benchmarks such as discount rates, capitalization rates and cash flow multiples.

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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:

	July 2, 2011						January 1, 2011
	Carrying			Estimated			Carrying			Estimated
(In millions)	Value			Fair Value			Value			Fair Value
Manufacturing group
Long-term debt, excluding leases	$	(2,219	)	$	(2,776	)	$	(2,172	)	$	(2,698	)
Finance group
Finance receivables held for investment, excluding leases		2,878			2,639			3,345			3,131
Debt		(2,499	)		(2,442	)		(3,660	)		(3,528	)

Fair value for the Manufacturing group debt is determined using market observable data for similar transactions. At July 2, 2011 and January 1, 2011, approximately 44% and 33%, respectively, of the fair value of term debt for the Finance group was determined based on observable market transactions. The remaining Finance group debt was determined based on discounted cash flow analyses using observable market inputs from debt with similar duration, subordination and credit default expectations. We utilize the same valuation methodologies to determine the fair value estimates for finance receivables held for investment as used for finance receivables held for sale.

Note 12: Income Tax Expense

For both the three and six months ended July 2, 2011, income tax expense equated to an effective income tax rate (provision on income from continuing operations) of 32%, compared to the Federal statutory income tax rate of 35%.

For the three and six months ended July 3, 2010, income tax expense equated to an effective income tax rate of 18% and 30%, compared to the Federal statutory income tax rate of 35%. In the second quarter of 2010, the rate was significantly lower than the statutory rate primarily due to $10 million in benefits related to changes in the functional currency of two Canadian subsidiaries as a result of the termination of the qualified business status for one subsidiary and a Quebec legislative change for another subsidiary. For the first half of 2010, the effective tax rate included the write-off of an $11 million deferred tax asset related to a change in the tax treatment of the Medicare Part D program related to U.S. health-care legislation enacted in the first quarter of 2010, partially offset by $10 million in benefits related to changes in the functional currency of two Canadian subsidiaries noted above.

Note 13: Segment Information

We operate in, and report financial information for, the following five business segments: Cessna, Bell, Textron Systems, Industrial and Finance. Segment profit is an important measure used for evaluating performance and for decision-making purposes. Segment profit for the manufacturing segments excludes interest expense, certain corporate expenses and special charges. The measurement for the Finance segment excludes special charges and includes interest income and expense along with intercompany interest expense. Provisions for losses on finance receivables involving the sale or lease of our products are recorded by the selling manufacturing division when our Finance group has recourse to the Manufacturing group.

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Our revenues by segment and a reconciliation of segment profit to income from continuing operations before income taxes are as follows:

	Three Months Ended						Six Months Ended
	July 2,			July 3,			July 2,			July 3,
(In millions)	2011			2010			2011			2010
REVENUES
Manufacturing Group
Cessna	$	652		$	635		$	1,208		$	1,068
Bell		872			823			1,621			1,441
Textron Systems		452			534			897			992
Industrial		719			661			1,422			1,286
		2,695			2,653			5,148			4,787
Finance Group		33			56			59			132
Total revenues	$	2,728		$	2,709		$	5,207		$	4,919
SEGMENT OPERATING PROFIT
Manufacturing Group
Cessna	$	5		$	3		$	(33	)	$	(21	)
Bell		120			108			211			182
Textron Systems		49			70			102			125
Industrial		55			51			116			100
		229			232			396			386
Finance Group		(33	)		(71	)		(77	)		(129	)
Segment profit		196			161			319			257
Corporate expenses and other, net		(23	)		(17	)		(62	)		(54	)
Interest expense, net for Manufacturing group		(38	)		(35	)		(76	)		(71	)
Special charges		—			(10	)		—			(22	)
Income from continuing operations before income taxes	$	135		$	99		$	181		$	110

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Item 2. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

Consolidated Results of Operations

Revenues

	Three Months Ended					Six Months Ended
	July 2,			July 3,		July 2,			July 3,
(Dollars in millions)	2011			2010		2011			2010
Revenues	$	2,728		$	2,709	$	5,207		$	4,919
% change compared with prior period		0.7	%				5.9	%

Revenues increased $19 million, 0.7%, in the second quarter of 2011, compared with the corresponding period of 2010, as revenue increases in the Industrial, Bell and Cessna segments were partially offset by lower revenue in the Textron Systems and Finance segments. The net revenue increase included the following factors:

• Higher Industrial segment revenues of $58 million, primarily due to a favorable foreign exchange impact of $43 million, largely due to fluctuations with the euro;

• Higher revenues of $49 million in the Bell segment, largely due to higher volume in our military programs reflecting higher deliveries of H-1 aircraft; and

• An increase in Cessna’s revenue of $17 million, primarily related to pricing;

• Partially offset by a decrease in Textron Systems’ revenue of $82 million, primarily due to lower volume in the Unmanned Aircraft System (UAS) and Mission Support and Other product lines; and

• Lower revenues at the Finance segment of $23 million, primarily attributable to the lower average finance receivable portfolio balance resulting from the continued liquidation.

Revenues increased $288 million, 5.9%, in the first half of 2011, compared with the corresponding period of 2010, as revenue increases in the Bell, Cessna, and Industrial segments were partially offset by lower revenue in the Textron Systems and Finance segments. The net revenue increase included the following factors:

• Higher revenues of $180 million in the Bell segment, largely due to higher volume in our military programs reflecting higher deliveries of V-22 and H-1 aircraft;

• An increase in Cessna revenues of $140 million, primarily due to a $108 million impact related to the mix of light- and mid-size Citation business jets sold in the first half of 2011; and

• Higher Industrial segment revenues of $136 million, largely due to higher volume of $68 million, reflecting continued improvements in the automotive industry, and a favorable foreign exchange impact of $50 million, largely due to fluctuations with the euro;

• Partially offset by a decrease in Textron Systems’ revenue of $95 million, primarily due to lower volume in the UAS and Mission Support and Other product lines; and

• Lower revenues at the Finance segment of $73 million, primarily attributable to the lower average finance receivable portfolio balance resulting from the continued liquidation.

Cost of Sales and Selling and Administrative Expense

	Three Months Ended						Six Months Ended
	July 2,			July 3,			July 2,			July 3,
(Dollars in millions)	2011			2010			2011			2010
Operating expenses	$	2,520		$	2,487		$	4,879		$	4,548
% change compared with prior period		1.3	%					7.3	%
Cost of sales	$	2,225		$	2,188		$	4,280		$	3,963
% change compared with prior period		1.7	%					8.0	%
Gross margin percentage of Manufacturing revenues		17.4	%		17.5	%		16.9	%		17.2	%
Selling and administrative expenses	$	295		$	299		$	599		$	585
% change compared with prior period		(1.3	%)					2.4	%

Manufacturing cost of sales and selling and administrative expenses together comprise our operating expenses. Consolidated operating expenses remained flat at $2.5 billion in both the second quarter of 2011 and 2010 and were $4.9 billion and $4.5 billion in the first half of 2011 and 2010, respectively. Changes in operating expenses are more fully discussed in our Segment Analysis below.

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Consolidated manufacturing cost of sales as a percentage of Manufacturing revenues was 82.6% and 82.5% in the second quarter of 2011 and 2010, respectively. On a dollar basis, Consolidated manufacturing cost of sales increased $37 million, 1.7%, in the second quarter of 2011, compared with the corresponding period of 2010, principally due to higher net sales volume changes in the Bell and Cessna segments, partially offset by lower net sales volume at Textron Systems. Cost of sales increased at the Industrial segment, primarily due to the impact of foreign exchange on direct materials and labor of $30 million, largely due to fluctuations with the euro.

Consolidated manufacturing cost of sales as a percentage of Manufacturing revenues was 83.1% and 82.8% in the first half of 2011 and 2010, respectively. On a dollar basis, consolidated cost of sales increased $317 million, 8%, in the first half of 2011, principally due to higher net sales volume changes in the Bell, Cessna, and Industrial segments, partially offset by lower net sales volume at Textron Systems. Cost of sales also increased at the Industrial segment due to the impact of foreign exchange on direct materials and labor of $35 million, largely due to fluctuations with the euro.

On a consolidated basis, selling and administrative expense decreased $4 million, 1.3%, to $295 million in the second quarter of 2011, compared with the corresponding period of 2010. For the first half of 2011, selling and administrative expense increased $14 million, 2%, to $599 million, compared with the corresponding period of 2010. These changes were largely driven by fluctuations in our sales volume.

Interest Expense

	Three Months Ended					Six Months Ended
	July 2,			July 3,		July 2,			July 3,
(Dollars in millions)	2011			2010		2011			2010
Interest expense	$	61		$	69	$	123		$	140
% change compared with prior period		(11.6	%)				(12.1	%)

Interest expense on the Consolidated Statement of Operations includes interest for both the Finance and Manufacturing borrowing groups with interest related to intercompany borrowings eliminated. Our consolidated interest expense decreased for both the second quarter and first half of 2011, compared to the corresponding periods of 2010, primarily due to a decrease for the Finance group, largely due to the reduction in its debt as it liquidates the non-captive commercial finance business.

Special Charges

Special charges of $10 million in the second quarter of 2010 and $22 million in the first half of 2010 represent restructuring costs incurred under the program that was completed at the end of 2010 and primarily represent severance costs. There were no special charges in 2011.

Income Tax Expense

For both the three and six months ended July 2, 2011, income tax expense equated to an effective income tax rate (provision on income from continuing operations) of 32%, compared to the Federal statutory income tax rate of 35%.

For the three and six months ended July 3, 2010, income tax expense equated to an effective income tax rate of 18% and 30%, compared to the Federal statutory income tax rate of 35%. In the second quarter of 2010, the rate was significantly lower than the statutory rate primarily due to $10 million in benefits related to changes in the functional currency of two Canadian subsidiaries as a result of the termination of the qualified business status for one subsidiary and a Quebec legislative change for another subsidiary. For the first half of 2010, the effective tax rate included the write-off of an $11 million deferred tax asset related to a change in the tax treatment of the Medicare Part D program related to U.S. health-care legislation enacted in the first quarter of 2010, partially offset by $10 million in benefits related to changes in the functional currency of two Canadian subsidiaries noted above.

Backlog

	July 2,		January 1,
(In millions)	2011		2011
Bell	$	6,953	$	7,199
Cessna		2,522		2,928
Textron Systems		1,550		1,598

Backlog at Bell decreased $246 million in the first half of 2011, primarily reflecting deliveries related to the V-22 and H-1 programs, partially offset by commercial aircraft orders in excess of deliveries. Backlog declined $406 million at Cessna primarily reflecting deliveries in excess of orders.

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Segment Analysis

We operate in, and report financial information for, the following five business segments: Cessna, Bell, Textron Systems, Industrial and Finance. Segment profit is an important measure used for evaluating performance and for decision-making purposes. Segment profit for the manufacturing segments excludes interest expense, certain corporate expenses and special charges. The measurement for the Finance segment excludes special charges and includes interest income and expense along with intercompany interest expense.

In our discussion of comparative results for the Manufacturing group, changes in revenue and segment profit typically are expressed for our commercial business in terms of volume, pricing, foreign exchange and acquisitions. Additionally, changes in segment profit may be expressed in terms of mix, inflation and cost performance. Volume changes in revenue represent increases/decreases in the number of units delivered or services provided. Pricing represents changes in unit pricing. Foreign exchange is the change resulting from translating foreign-denominated amounts into U.S. dollars at exchange rates that are different from the prior period. Acquisitions refer to the results generated from businesses that were acquired within the previous 12 months. For segment profit, mix represents a change due to the composition of products and/or services sold at different profit margins. Inflation represents higher material, wages, benefits, pension or other costs. Cost performance reflects an increase or decrease in research and development, depreciation, selling and administrative costs, warranty, product liability, quality/scrap, labor efficiency, overhead, product line profitability, start-up, ramp up and cost-reduction initiatives or other manufacturing inputs.

Approximately 34% of our revenues are derived from contracts with the U.S. Government. For our segments that have significant contracts with the U.S. Government, we typically express changes in segment profit related to the government business in terms of volume, changes in program performance or changes in contract mix. Changes in volume that are discussed in net sales typically drive corresponding changes in our segment profit based on the profit rate for a particular contract. Changes in program performance typically relate to profit recognition associated with revisions to total estimated costs at completion that reflect improved or deteriorated operating performance or award fee rates. Changes in contract mix refer to changes in operating margin due to a change in the relative volume of contracts with higher or lower fee rates such that the overall average margin rate for the segment changes.

Cessna

	Three Months Ended						Six Months Ended
	July 2,			July 3,			July 2,			July 3,
(Dollars in millions)	2011			2010			2011			2010
Revenues	$	652		$	635		$	1,208		$	1,068
Operating expenses		647			632			1,241			1,089
Segment profit (loss)		5			3			(33	)		(21	)
Profit margin		0.8	%		0.5	%		(2.7	)%		(2.0	)%

The following factors contributed to the change in Cessna’s revenue for the periods:

	Q2 2011		YTD 2011
	versus		versus
(In millions)	Q2 2010		YTD 2010
Volume and mix	$	3	$	127
Pricing		14		13
Total change	$	17	$	140

In the second quarter of 2011, Cessna’s revenues increased $17 million, 3%, compared with the corresponding period of 2010. Cessna’s aftermarket revenues grew to 29% of its segment revenue in the second quarter of 2011, compared with 26% of segment revenue in the second quarter of 2010. We delivered 38 and 43 Citation business jets in the second quarter of 2011 and 2010, respectively.

In the first half of 2011, Cessna’s revenues increased $140 million, 13%, compared with the corresponding period of 2010, primarily due to a $108 million impact related to the mix of light- and mid-size Citation business jets sold during the period. We delivered 69 and 74 Citation business jets in the first half of 2011 and 2010, respectively. Cessna’s aftermarket revenues represented $32 million of the higher volume, while accounting for 31% of Cessna’s segment revenue in both the first half of 2011 and 2010, respectively.

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The following factors contributed to the change in Cessna’s segment profit for the periods:

	Q2 2011			YTD 2011
	versus			versus
(In millions)	Q2 2010			YTD 2010
Volume and mix	$	(2	)	$	14
Pricing, net of inflation		10			6
Performance		(6	)		(32	)
Total change	$	2		$	(12	)

Cessna’s segment profit increased $2 million in the second quarter of 2011, compared with the corresponding period of 2010, primarily due to higher pricing, net of inflation of $10 million, partially offset by unfavorable performance of $6 million. Performance included $14 million in higher engineering and development expenses as we increased our investment in future product offerings.

Cessna’s operating expenses increased by $15 million, 2%, in the second quarter of 2011, compared with the corresponding period of 2010, primarily due to the $14 million of higher engineering and development expenses as discussed above.

Cessna’s segment loss was $12 million higher in the first half of 2011, compared with the corresponding period of 2010, primarily due to unfavorable performance of $32 million, partially offset by a $14 million impact related to volume and mix, primarily related to business jet mix. Performance included higher engineering and development expenses of $23 million, primarily due to new product development, and lower income from forfeited deposits of $15 million.

Cessna’s operating expenses increased by $152 million, 14%, in the first half of 2011, compared with the corresponding period of 2010, primarily due to an $81 million increase in direct material costs and a $37 million increase in manufacturing overhead largely in correlation with the revenue increase. As discussed above, operating expenses also increased due to higher engineering and development expenses and lower income from forfeited deposits.

Bell

	Three Months Ended						Six Months Ended
	July 2,			July 3,			July 2,			July 3,
(Dollars in millions)	2011			2010			2011			2010
Revenues
V-22 program	$	360		$	358		$	718		$	568
Other military		259			210			429			408
Commercial		253			255			474			465
Total revenues		872			823			1,621			1,441
Operating expenses		752			715			1,410			1,259
Segment profit		120			108			211			182
Profit margin		13.8	%		13.1	%		13.0	%		12.6	%

Bell manufactures helicopters, tiltrotor aircraft, and related spare parts and provides services for military and/or commercial markets. Bell’s major U.S. Government programs at this time are the V-22 tiltrotor aircraft and the H-1 helicopter platforms, which are both in the production stage and represent a significant portion of Bell’s revenues from the U.S. Government. During 2011, we continued to ramp up production and deliveries to meet customer schedule requirements for these programs.

The following factors contributed to the change in Bell’s revenue for the periods:

	Q2 2011		YTD 2011
	versus		versus
(In millions)	Q2 2010		YTD 2010
Volume	$	47	$	171
Other		2		9
Total change	$	49	$	180

Bell’s revenues increased $49 million, 6%, in the second quarter of 2011, compared with the corresponding period of 2010, primarily due to higher volume. We delivered 9 V-22 aircraft during the second quarter of 2011, compared with 8 deliveries in the second quarter of 2010. These higher deliveries were partially offset by lower production support volume. We also delivered 8 H-1 aircraft in the second quarter of 2011, compared with 3 deliveries in the second quarter of 2010, which primarily contributed to the $49 million, 23%, increase in other military revenues. Commercial revenues were

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essentially unchanged on 22 commercial aircraft deliveries in the second quarter of 2011, compared with 21 aircraft in the second quarter of 2010.

Bell’s revenues increased $180 million, 12%, in the first half of 2011, compared with the corresponding period of 2010, primarily due to higher volume. We delivered 18 V-22 aircraft during the first half of 2011, compared with 12 deliveries in the first half of 2010, which was the primary driver in the $150 million, 26%, increase in V-22 revenues in the first half of 2011. We also delivered 12 H-1 aircraft in the first half of 2011, compared with 6 deliveries in the first half of 2010. Other military revenues increased $21 million, 5%, in 2011 largely due to the higher deliveries of H-1 aircraft, partially offset by a $70 million decrease in aftermarket volume reflecting the completion of several non-recurring programs in 2010, along with timing of deliveries for other programs. Commercial revenues increased $9 million, 2%, on 37 commercial aircraft deliveries in the first half of 2011, compared with 36 aircraft in the first half of 2010, primarily due to higher aftermarket volume.

The following factors contributed to the change in Bell’s segment profit for the periods:

	Q2 2011			YTD 2011
	versus			versus
(In millions)	Q2 2010			YTD 2010
Volume and mix	$	(13	)	$	(9	)
Pricing, net of inflation		(3	)		—
Performance		28			38
Total change	$	12		$	29

Bell’s segment profit increased $12 million, 11%, in the second quarter of 2011, compared with the corresponding period of 2010, primarily due to improved program performance of $28 million, partially offset by unfavorable mix primarily related to commercial aircraft sold. Bell’s improved program performance primarily reflects the impact from efficiencies in our military programs that were realized in connection with the ramp up of production lines and lower overhead costs over the contract periods. Program performance also included the impact of a $21 million program adjustment recognized in the second quarter of 2010 related to the recognition of profit on the H-1 and V-22 programs for reimbursement of prior year costs.

Bell’s operating expenses increased $37 million, 54%, in the second quarter of 2011, compared with the corresponding period of 2010, primarily due to higher net sales volume discussed above.

Bell’s segment profit increased $29 million, 16%, in the first half of 2011, compared with the corresponding period of 2010, primarily due to improved program performance of $38 million, partially offset by unfavorable mix primarily in commercial aircraft sold. Bell’s improved program performance primarily reflects the impact from efficiencies in our military programs that were realized in connection with the ramp up of production lines and lower overhead and material costs over the contract periods. Program performance also included the impact of a $21 million program adjustment recognized in the second quarter of 2010 related to the recognition of profit on the H-1 and V-22 programs for reimbursement of prior year costs.

Bell’s operating expenses increased $151 million, 12%, in the first half of 2011, compared with the corresponding period of 2010, primarily due to higher sales volume discussed above.

Textron Systems

	Three Months Ended						Six Months Ended
	July 2,			July 3,			July 2,			July 3,
(Dollars in millions)	2011			2010			2011			2010
Revenues	$	452		$	534		$	897		$	992
Operating expenses		403			464			795			867
Segment profit		49			70			102			125
Profit margin		10.8	%		13.1	%		11.4	%		12.6	%

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The following factors contributed to the change in Textron Systems’ revenue for the periods:

	Q2 2011			YTD 2011
	versus			versus
(In millions)	Q2 2010			YTD 2010
Volume	$	(81	)	$	(97	)
Other		(1	)		2
Total change	$	(82	)	$	(95	)

Revenues at Textron Systems decreased $82 million, 15%, in the second quarter of 2011, compared with the corresponding period of 2010, primarily due to lower volume in the UAS and Mission Support and Other product lines of $58 million and $36 million, respectively. The lower UAS volume was largely due to the timing of revenues from various programs, while the lower Mission Support and Other volume was largely due to the completion of several test and training programs.

Revenues at Textron Systems decreased $95 million, 10%, in the first half of 2011, compared with the corresponding period of 2010, primarily due to lower volume in the UAS and Mission Support and Other product lines of $53 million and $37 million, respectively. The lower UAS volume was largely due to the timing of revenues from various programs, while the lower Mission Support and Other volume was largely due to the completion of several test and training programs.

The following factors contributed to the change in Textron Systems’ segment profit for the periods:

	Q2 2011			YTD 2011
	versus			versus
(In millions)	Q2 2010			YTD 2010
Volume	$	(16	)	$	(20	)
Other		(5	)		(3	)
Total change	$	(21	)	$	(23	)

Segment profit at Textron Systems decreased $21 million, 30%, in the second quarter of 2011, compared with the corresponding period of 2010, primarily due to the impact of lower volume described above. Textron Systems’ operating expenses decreased $61 million, 13%, in the second quarter of 2011, compared with the corresponding period of 2010, primarily due to lower sales volume.

Segment profit at Textron Systems decreased $23 million, 18%, in the first half of 2011, compared with the corresponding period of 2010, primarily due to the impact of lower volume described above. Textron Systems’ operating expenses decreased $72 million, 8%, in the first half of 2011, compared with the corresponding period of 2010, primarily due to lower sales volume.

Industrial

	Three Months Ended						Six Months Ended
	July 2,			July 3,			July 2,			July 3,
(Dollars in millions)	2011			2010			2011			2010
Revenues:
Fuel systems and functional components	$	450		$	417		$	921		$	823
Other industrial		269			244			501			463
Total revenues		719			661			1,422			1,286
Operating expenses		664			610			1,306			1,186
Segment profit		55			51			116			100
Profit margin		7.6	%		7.7	%		8.2	%		7.8	%

The following factors contributed to the change in Industrial’s revenue for the periods:

	Q2 2011		YTD 2011
	versus		versus
(In millions)	Q2 2010		YTD 2010
Volume	$	5	$	68
Foreign exchange		43		50
Acquisitions		8		11
Other		2		7
Total change	$	58	$	136

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Industrial segment sales increased $58 million, 9%, in the second quarter of 2011, compared with the corresponding period of 2010. Sales of the segment’s fuel systems and functional components increased $33 million, 8% in the second quarter of 2011, compared with the corresponding period of 2010, primarily due to a favorable foreign exchange impact of $35 million, largely due to fluctuations with the euro. Other industrial revenues increased primarily due to a favorable foreign exchange impact of $8 million, largely due to fluctuations with the euro and the impact of acquisitions.

Industrial segment sales increased $136 million, 11%, in the first half of 2011, compared with the corresponding period of 2010. Sales of the segment’s fuel systems and functional components increased $98 million, 12%, in the first half of 2011, compared with the corresponding period of 2010, primarily due to higher volume of $60 million, reflecting continued improvements in the automotive industry, and a favorable foreign exchange impact of $42 million, largely due to fluctuations with the euro. Other industrial revenues increased primarily due to higher volume in the powered tools, testing and measurement equipment product line.

The following factors contributed to the change in Industrial’s segment profit for the periods:

	Q2 2011			YTD 2011
	versus			versus
(In millions)	Q2 2010			YTD 2010
Volume	$	2		$	18
Inflation, net of pricing		(12	)		(23	)
Performance		10			16
Other		4			5
Total change	$	4		$	16

Industrial segment profit increased $4 million, 8%, in the second quarter of 2011, compared with the corresponding period of 2010, largely due to improved performance of $10 million, reflecting continued cost reduction activities. Inflation, net of pricing of $12 million was primarily due to higher direct material costs for various commodity and material components throughout the Industrial businesses that exceed related price increases.

Operating expenses for the Industrial segment increased $54 million, 9%, in the second quarter of 2011, compared with the corresponding period of 2010, largely due to $38 million in higher direct material and labor costs, primarily due to the impact of foreign exchange due to fluctuations with the euro, and $16 million in cost inflation for various commodity and material components throughout the Industrial businesses.

Industrial segment profit increased $16 million, 16%, in the first half of 2011, compared with the corresponding period of 2010, primarily due to an $18 million impact from higher volume and improved performance of $16 million, partially offset by inflation, net of pricing of $23 million. Performance was favorable for the period due to continued cost reduction activities and improved manufacturing leverage resulting from higher volume.

Operating expenses for the Industrial segment increased $120 million, 10%, in the first half of 2011, compared with the corresponding period of 2010, primarily due to $93 million in higher direct material and labor costs, principally due to higher sales volume, a $35 million impact of foreign exchange due to fluctuations with the euro and $21 million in cost inflation for various commodity and material components throughout the Industrial businesses. Operating expenses were also favorably impacted by improved performance due to continued cost reduction activities and improved manufacturing leverage resulting from higher volume.

Finance

	Three Months Ended						Six Months Ended
	July 2,			July 3,			July 2,			July 3,
(In millions)	2011			2010			2011			2010
Revenues	$	33		$	56		$	59		$	132
Provision for losses on finance receivables		12			44			24			99
Segment profit (loss)		(33	)		(71	)		(77	)		(129	)

Our plan to exit the non-captive commercial finance business in our Finance segment is being effected through a combination of orderly liquidation and selected sales of the remaining non-captive finance receivables. The exit plan is expected to be substantially complete over the next three to five years.

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Finance segment revenues decreased $23 million, 41%, in the second quarter of 2011, compared with the corresponding period of 2010, primarily attributable to the impact of a $2.0 billion lower average finance receivable balance. Finance segment revenues decreased $73 million, 55%, in the first half of 2011, compared with the corresponding period of 2010, primarily attributable to the impact of a $2.1 billion lower average finance receivable balance.

Finance segment loss decreased $38 million, 54%, in the second quarter of 2011, compared with the corresponding period of 2010, primarily due to the following factors:

• $32 million in lower provision for loan losses, primarily the result of a decline in the accounts identified as nonaccrual during the quarter as compared to last year; and

• $15 million in lower operating and administrative expenses, primarily due to lower compensation expense associated with a workforce reduction and other cost reductions related to the exit of the non-captive business;

• Partially offset by a $17 million reduction in interest margin resulting from the lower average finance receivable portfolio balance.

Finance segment loss decreased $52 million, 40%, in the first half of 2011, compared with the corresponding period of 2010, primarily due to the following factors:

• $75 million in lower provision for loan losses, primarily the result of a decline in the accounts identified as nonaccrual during the first half of 2011 as compared to last year; and

• $25 million in lower operating and administrative expenses, primarily due to lower compensation expense associated with a workforce reduction and other cost reductions related to the exit of the non-captive business;

• Partially offset by a $37 million reduction in interest margin resulting from the lower average finance receivable portfolio balance.

Finance Portfolio Quality

The following table reflects information about the Finance segment’s credit performance related to finance receivables held for investment. Finance receivables held for sale are reflected at fair value on the Consolidated Balance Sheets. As a result, finance receivables held for sale are not included in the credit performance statistics below.

	July 2,			January 1,
(Dollars in millions)	2011			2011
Finance receivables held for investment	$	3,644		$	4,213
Nonaccrual finance receivables	$	696		$	850
Allowance for losses	$	299		$	342
Ratio of nonaccrual finance receivables to finance receivables held for investment		19.10	%		20.17	%
Ratio of allowance for losses on impaired nonaccrual finance receivables to impaired nonaccrual finance receivables		27.46	%		23.82	%
Ratio of allowance for losses on finance receivables to nonaccrual finance receivables held for investment		42.96	%		40.30	%
Ratio of allowance for losses on finance receivables to finance receivables held for investment		8.21	%		8.13	%
60+ days contractual delinquency as a percentage of finance receivables held for investment		8.29	%		9.77	%
60+ days contractual delinquency	$	302		$	411
Repossessed assets and properties	$	131		$	157
Operating assets received in satisfaction of troubled finance receivables	$	80		$	107

At July 2, 2011, finance receivables held for investment included $1.5 billion of non-captive finance receivables, compared with $1.9 billion at the end of 2010. Finance receivables held for sale by the non-captive business totaled $180 million at July 2, 2011, compared with $413 million at the end of 2010.

Nonaccrual finance receivables decreased $154 million, 18%, from the year-end balance, primarily due to reductions of $105 million in the timeshare portfolio, $27 million in the aviation portfolio and $21 million in the other liquidating portfolio. The reduction in the timeshare portfolio was mostly due to the resolution of one significant account and cash collections on several other accounts. The decrease in the aviation portfolio was due to the resolution of several accounts through cash collections and repossession of collateral, partially offset by new accounts identified as nonaccrual in 2011.

We believe that the percentage of nonaccrual finance receivables generally will remain high as we execute our liquidation plan. The liquidation plan is also likely to result in a slower rate of liquidation for nonaccrual finance receivables. See Note 6 to the Consolidated Financial Statements for more detailed information on the nonaccrual finance receivables by product line, along with a summary of finance receivables held for investment based on our internally assigned credit quality indicators.

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Liquidity and Capital Resources

Our financings are conducted through two separate borrowing groups. The Manufacturing group consists of Textron Inc. consolidated with its majority-owned subsidiaries that operate in the Cessna, Bell, Textron Systems and Industrial segments. The Finance group, which also is the Finance segment, consists of TFC, its consolidated subsidiaries and three other finance subsidiaries owned by Textron Inc. We designed this framework to enhance our borrowing power by separating the Finance group. Our Manufacturing group operations include the development, production and delivery of tangible goods and services, while our Finance group provides financial services. Due to the fundamental differences between each borrowing group’s activities, investors, rating agencies and analysts use different measures to evaluate each group’s performance. To support those evaluations, we present balance sheet and cash flow information for each borrowing group within the Consolidated Financial Statements.

Key information that is utilized in assessing our liquidity is summarized below:

	July 2,			January 1,
(Dollars in millions)	2011			2011
Manufacturing group
Cash and equivalents	$	610		$	898
Debt		2,543			2,302
Shareholders’ equity		3,174			2,972
Capital (debt plus shareholders’ equity)		5,717			5,274
Net debt (net of cash and equivalents) to capital		37.9	%		32.1	%
Debt to capital		44.5	%		43.6	%
Finance group
Cash and equivalents	$	41		$	33
Debt		2,499			3,660

We believe that our calculations of debt to capital and net debt to capital are useful measures as they provide a summary indication of the level of debt financing (i.e., leverage) that is in place to support our capital structure, as well as to provide an indication of the capacity to add further leverage. We believe that with our existing cash balances, coupled with the continued successful execution of the exit plan for the non-captive portion of the commercial finance business, and cash we expect to generate from our manufacturing operations, we will have sufficient cash to meet our future needs.

We maintain an effective shelf registration statement filed with the Securities and Exchange Commission that allows us to issue an unlimited amount of public debt and other securities.

On March 23, 2011, Textron Inc. entered into a senior unsecured revolving credit facility for an aggregate principal amount of $1.0 billion. This facility agreement expires in March 2015 and replaces the $1.25 billion 5-year facility that was scheduled to expire in April 2012. TFC also has a credit facility that expires in April 2012. During the first half of 2011, the borrowing capacity of TFC’s facility was reduced to an aggregate principal amount of $700 million. At July 2, 2011, there were no amounts outstanding under the Textron Inc. facility and $500 million outstanding under TFC’s facility.

In the first half of 2011, we liquidated $802 million of the Finance group’s finance receivables, net of originations. These finance receivable reductions occurred in both the non-captive and captive finance portfolios, but were primarily driven by the non-captive portfolio in connection with our exit plan, including $351 million in the timeshare product line. These reductions resulted from the combination of scheduled finance receivable collections, sales, discounted payoffs, repossession of collateral, charge-offs and impairment charges. At July 2, 2011, $1.7 billion of finance receivables remained in the non-captive portfolio.

In 2009, we issued $600 million of 4.5% Convertible Senior Notes with a maturity date of May 1, 2013 as discussed in Note 8 to the Consolidated Financial Statements. For at least 20 trading days during the 30 consecutive trading days ended June 30, 2011, our common stock price exceeded the $17.06 per share conversion threshold price set forth for these convertible notes. Accordingly, the notes are convertible at the holder’s option through September 30, 2011. We may deliver shares of common stock, cash or a combination of cash and shares of common stock in satisfaction of our obligations upon conversion of the convertible notes. We intend to settle the face value of the convertible notes in cash. We have continued to classify these convertible notes as long term based on our intent and ability to maintain the debt outstanding for at least one year through the use of various funding sources available to us.

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Manufacturing Group Cash Flows

Cash flows from continuing operations for the Manufacturing group are summarized below:

	Six Months Ended
	July 2,			July 3,
(In millions)	2011			2010
Operating activities	$	146		$	166
Investing activities		(211	)		(143	)
Financing activities		(231	)		(734	)

Operating activities generated less cash in 2011 largely due to $170 million in higher pension contributions in the first half of 2011, which offset improvement in our working capital and higher earnings, adjusted for non-cash items such as depreciation and amortization. Cash used for restructuring activities totaled $31 million and $28 million in the first half of 2011 and 2010, respectively.

We used more cash for investing activities largely due to higher capital expenditures, which totaled $169 million and $83 million in the first half of 2011 and 2010, respectively.

We used less cash for financing activities in the first half of 2011, largely due to the repayment in 2010 of $502 million on our bank credit lines. We also began to issue commercial paper again in 2011 for our short-term financing needs, for which we ended the quarter with $189 million in outstanding borrowings, which was offset by a $183 million increase in intergroup financing for our Finance group.

Capital Contributions Paid To and Dividends Received From TFC

Under a Support Agreement between Textron Inc. and TFC, Textron Inc. is required to maintain a controlling interest in TFC. The agreement also requires Textron Inc. to ensure that TFC maintains fixed charge coverage of no less than 125% and consolidated shareholder’s equity of no less than $200 million. Cash contributions paid to TFC to maintain compliance with the Support Agreement and dividends paid by TFC to Textron Inc. are detailed below:

	Six Months Ended
	July 2,			July 3,
(In millions)	2011			2010
Dividends paid by TFC to Textron Inc.	$	179		$	215
Capital contributions paid to TFC under Support Agreement		(112	)		(146	)

An additional cash contribution of $40 million was paid to TFC on July 12, 2011 as required by the Support Agreement.

Due to the nature of these contributions, we classify these contributions within cash flows used by operating activities for the Manufacturing group in the Consolidated Statement of Cash Flows. Capital contributions to support Finance group growth in the ongoing captive finance business are classified as cash flows from financing activities. The Finance group’s loss is excluded from the Manufacturing group’s cash flows, while dividends from the Finance group are included within cash flows from operating activities for the Manufacturing group as they represent a return on investment.

Finance Group Cash Flows

The cash flows from continuing operations for the Finance group are summarized below:

	Six Months Ended
	July 2,			July 3,
(In millions)	2011			2010
Operating activities	$	28		$	(11	)
Investing activities		784			1,326
Financing activities		(805	)		(1,289	)

Cash flow from operating activities improved in the first half of 2011, compared with the corresponding period of 2010 largely due to a $51 million payment made to the Manufacturing group in the first half of 2010 under the tax sharing agreement, compared with a $40 million refund received in the first half of 2011. This was partially offset by lower earnings for the Finance group after adjusting for non-cash items such as provision for losses on finance receivables.

Cash receipts from the collection of finance receivables continued to outpace finance receivable originations, which resulted in net cash inflow from investing activities in both 2011 and 2010. Finance receivables repaid and proceeds from sales totaled $919 million and $1.7 billion in the first half of 2011 and 2010, respectively, while cash outflows for originations

28

declined to $244 million and $471 million, respectively. These decreases were largely driven by the wind down of the non-captive finance receivable portfolio.

In the first half of 2011, TFC paid $940 million against the outstanding balance on its bank line of credit; however, cash used for financing activities was lower in 2011 primarily, due to $498 million in long-term debt repayments in the first half of 2011, compared with $1.5 billion in the first half of 2010. In addition, the Finance group received $265 million in proceeds from the issuance of long-term debt in the first half of 2011, compared with $28 million in the first half of 2010.

TFC borrowed $395 million and $212 million from Textron Inc. with interest in the first half of 2011 and 2010, respectively, to pay down maturing debt. As of July 2, 2011 and January 1, 2011, the outstanding balance due to Textron Inc. for these borrowings was $710 million and $315 million, respectively.

Consolidated Cash Flows

The consolidated cash flows from continuing operations, after elimination of activity between the borrowing groups, are summarized below:

	Six Months Ended
	July 2,			July 3,
(In millions)	2011			2010
Operating activities	$	219		$	250
Investing activities		501			1,039
Financing activities		(1,009	)		(1,974	)

Operating activities generated less cash in 2011 largely due to $170 million in higher pension contributions, which offset working capital improvements and higher earnings, adjusted for non-cash items such as depreciation and amortization.

Cash receipts from the collection of finance receivables continued to outpace finance receivable originations, which resulted in net cash inflow from investing activities in both 2011 and 2010. Finance receivables repaid and proceeds from sales totaled $679 million and $1.3 billion in the first half of 2011 and 2010, respectively, while cash outflows for originations declined to $110 million and $270 million, respectively. These decreases were largely driven by the wind down of the non-captive finance receivable portfolio.

Cash used for financing activities was lower in 2011 primarily due to lower repayments of long-term debt of $511 million in the first half of 2011, compared with $1,491 million in the first half of 2010. In addition, we received proceeds of $265 million in the first half of 2011 from the issuance of debt, compared with $28 million in the first half of 2010. In the first half of 2011, we began to issue commercial paper again for our short-term financing needs, ending the period with $189 million of outstanding borrowings. The increase in proceeds from these borrowings was offset by a $438 million increase in discretionary payments made against the outstanding balance on our bank lines of credit.

Captive Financing and Other Intercompany Transactions

The Finance group finances retail purchases and leases for new and used aircraft and equipment in support of our Manufacturing group, otherwise known as captive financing. In the Consolidated Statements of Cash Flows, cash received from customers or from securitizations is reflected as operating activities when received from third parties. However, in the cash flow information provided for the separate borrowing groups, cash flows related to captive financing activities are reflected based on the operations of each group. For example, when product is sold by our Manufacturing group to a customer and is financed by the Finance group, the origination of the finance receivable is recorded within investing activities as a cash outflow in the Finance group’s statement of cash flows. Meanwhile, in the Manufacturing group’s statement of cash flows, the cash received from the Finance group on the customer’s behalf is recorded within operating cash flows as a cash inflow. Although cash is transferred between the two borrowing groups, there is no cash transaction reported in the consolidated cash flows at the time of the original financing. These captive financing activities, along with all significant intercompany transactions, are reclassified or eliminated from the Consolidated Statements of Cash Flows.

29

Reclassification and elimination adjustments included in the Consolidated Statement of Cash Flows are summarized below:

	Six Months Ended
	July 2,			July 3,
(In millions)	2011			2010
Reclassifications from investing activities:
Finance receivable originations for Manufacturing group inventory sales	$	(134	)	$	(201	)
Cash received from customers and sale of receivables		240			360
Other capital contributions made to Finance group		(40	)		—
Other		6			(15	)
Total reclassifications from investing activities		72			144
Reclassifications from financing activities:
Capital contribution paid by Manufacturing group to Finance group under Support Agreement		112			146
Dividends received by Manufacturing group from Finance group		(179	)		(215	)
Other capital contributions made to Finance group		40			—
Other		—			20
Total reclassifications from financing activities		(27	)		(49	)
Total reclassifications and adjustments to cash flow from operating activities	$	45		$	95

Forward-Looking Information

Certain statements in this Quarterly Report on Form 10-Q and other oral and written statements made by us from time to time are “forward-looking statements” within the meaning of the Private Securities Litigation Reform Act of 1995. These forward-looking statements, which may describe strategies, goals, outlook or other non-historical matters, or project revenues, income, returns or other financial measures, often include words such as “believe,” “expect,” “anticipate,” “intend”, “plan,” “estimate,” “guidance”, “project”, “target”, “potential”, “will”, “should”, “could”, “likely” or “may” and similar expressions intended to identify forward-looking statements. These statements are only predictions and involve known and unknown risks, uncertainties, and other factors that may cause our actual results to differ materially from those expressed or implied by such forward-looking statements. Given these uncertainties, you should not place undue reliance on these forward-looking statements. 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. In addition to those factors described herein under “RISK FACTORS,” factors that could cause actual results to differ materially from past and projected future results are the following:

• Changing priorities or reductions in the U.S. Government defense budget, including those related to military operations in foreign countries;

• Changes in worldwide economic or political conditions that impact demand for our products, interest rates or foreign exchange rates;

• Our ability to perform as anticipated and to control costs under contracts with the U.S. Government;

• 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, or, under certain circumstances, to suspend or debar us as a contractor eligible to receive future contract awards;

• Changes in foreign military funding priorities or budget constraints and determinations, or changes in government regulations or policies on the export and import of military and commercial products;

• Our Finance segment’s ability to maintain portfolio credit quality or to realize full value of receivables and of assets acquired upon foreclosure of receivables;

• Textron Financial Corporation’s (“TFC”) ability to maintain certain minimum levels of financial performance required under its committed bank line of credit and under Textron’s support agreement with TFC;

• Our ability to access the capital markets at reasonable rates;

• Performance issues with key suppliers, subcontractors or business partners;

• Legislative or regulatory actions impacting our operations or demand for our products;

• Our ability to control costs and successfully implement various cost-reduction activities;

• The efficacy of research and development investments to develop new products or unanticipated expenses in connection with the launching of significant new products or programs;

• The timing of our new product launches or certifications of our new aircraft products;

• Our ability to keep pace with our competitors in the introduction of new products and upgrades with features and technologies desired by our customers;

30

• 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;

• Increases in pension expenses or employee and retiree medical benefits;

• Uncertainty in estimating reserves, including reserves established to address contingent liabilities, unrecognized tax benefits, or potential losses on TFC’s receivables;

• Difficult conditions in the financial markets which may adversely impact our customers’ ability to fund or finance purchases of our products; and

• Continued volatility in the economy resulting in a prolonged downturn in the markets in which we do business.

Item 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

There has been no significant change in our exposure to market risk during the six months ended July 2, 2011. For discussion of our exposure to market risk, refer to Item 7A. Quantitative and Qualitative Disclosures about Market Risk contained in Textron’s 2010 Annual Report on Form 10-K.

Item 4. CONTROLS AND PROCEDURES

We have carried out an evaluation, under the supervision and with the participation of our management, including our Chairman and Chief Executive Officer (CEO) and our Executive Vice President and Chief Financial Officer (CFO), of the effectiveness of the design and operation of our disclosure controls and procedures (as defined in Rule 13a-15(e) and 15d-15(e) under the Securities Exchange Act of 1934, as amended (the Act)) as of the end of the fiscal quarter covered by this report. Based upon that evaluation, our CEO and CFO concluded that our disclosure controls and procedures are effective in providing reasonable assurance that (a) the information required to be disclosed by us in the reports that we file or submit under the Act is recorded, processed, summarized and reported within the time periods specified in the Securities and Exchange Commission’s rules and forms, and (b) such information is accumulated and communicated to our management, including our CEO and CFO, as appropriate to allow timely decisions regarding required disclosure.

There were no changes in our internal control over financial reporting during the fiscal quarter ended July 2, 2011 that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.

PART II. OTHER INFORMATION

Item 1A. RISK FACTORS

Our business, financial condition and results of operations are subject to various risks, including the following risk factor as well as the risk factors discussed in our Annual Report on Form 10-K for the year ended January 2, 2011, all of which should be carefully considered by investors in our securities.

We have customer concentration with the U.S. Government.
During 2010, we derived approximately 34% of our revenues from sales to a variety of U.S. Government entities. Our ability to compete successfully for and retain U.S. Government business is highly dependent on technical excellence, management proficiency, strategic alliances, cost-effective performance, and the ability to recruit and retain key personnel. Our revenues from the U.S. Government largely result from contracts awarded to us under various U.S. Government defense-related programs. The funding of these programs is subject to congressional appropriation decisions. Although multiple-year contracts may be planned in connection with major procurements, Congress generally appropriates funds on a fiscal year basis even though a program may continue for several years. Consequently, programs often are only partially funded initially, and additional funds are committed only as Congress makes further appropriations. The reduction or termination of funding, or changes in the timing of funding, for a U.S. Government program in which we provide products or services would result in a reduction or loss of anticipated future revenues attributable to that program and could have a negative impact on our results of operations. Significant changes in national and international priorities for defense spending could impact the funding, or the timing of funding, of our programs, which could negatively impact our results of operations and financial condition.

In addition, as has been widely reported, the U.S. Government is reportedly approaching its existing statutory limit on the amount of permissible federal debt, and this limit must be raised in order for the U.S. Government to continue to pay its obligations on a timely basis. If the debt ceiling is not raised, it is unclear how the U.S. Government would prioritize its payments towards its various programs and where our payments would fall in that priority list. In addition, all forms of U.S. Government financing, such as performance-based payments and milestone payments may be delayed until the debt crisis is resolved. As described above, a significant portion of our products and services are provided under U.S. Government contracts. U.S. Government contracts generally require the contractor to continue to perform on the contract even if the U.S. Government is unable to make timely payments; failure to continue

31

contract performance places the contractor at risk of termination for default. Should conditions occur such that the U.S. Government does not pay us on a timely basis, we would need to finance our continued performance of the impacted contracts from our available cash resources, credit facilities and/or access to the capital markets, if available. An extended delay in the timely payment by the U.S. Government could result in a material adverse effect on our cash flows, results of operations and financial condition.

Item 6. EXHIBITS

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 2, 2011, 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.

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 thereunto duly authorized.

	TEXTRON INC.
Date: July 29, 2011	/s/ Richard L. Yates
	Richard L. Yates
	Senior Vice President and Corporate Controller (principal accounting officer)

32

LIST OF EXHIBITS

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 2, 2011, 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.

33

EX-12.1

EXHIBIT 12.1

TEXTRON INC.
MANUFACTURING GROUP
COMPUTATION OF RATIO OF INCOME TO FIXED CHARGES
(unaudited)
(In millions, except ratio)

	Six Months
	Ended
	July 2, 2011
Fixed charges:
Interest expense*	$	88
Estimated interest portion of rents		14
Total fixed charges	$	102
Income:
Income from continuing operations before income taxes	$	181
Fixed charges		102
Dividends received from TFC		179
Capital contributions paid to TFC under Support Agreement		(112	)
Eliminate pretax loss of Finance group		77
Adjusted income	$	427
Ratio of income to fixed charges		4.19

* Includes interest expense on all third-party indebtedness, except for interest related to unrecognized tax benefits, which is included in income tax expense.

EX-12.2

EXHIBIT 12.2

TEXTRON INC.
INCLUDING ALL MAJORITY-OWNED SUBSIDIARIES
COMPUTATION OF RATIO OF INCOME TO FIXED CHARGES
(unaudited)
(In millions, except ratio)

	Six Months
	Ended
	July 2, 2011
Fixed charges:
Interest expense*	$	123
Estimated interest portion of rents		16
Total fixed charges	$	139
Income:
Income from continuing operations before income taxes	$	181
Fixed charges		139
Adjusted income	$	320
Ratio of income to fixed charges		2.30

* Includes interest expense on all third-party indebtedness, except for interest related to unrecognized tax benefits, which is included in income tax expense.

EX-31.1

Exhibit 31.1

Certification of Chief Executive Officer Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002

I, Scott C. Donnelly, Chairman, President and Chief Executive Officer of Textron Inc. certify that:

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 29, 2011	/s/ Scott C. Donnelly
	Scott C. Donnelly
	Chairman, President and Chief Executive Officer

EX-31.2

Exhibit 31.2

Certification of Chief Financial Officer Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002

I, Frank T. Connor, Executive Vice President and Chief Financial Officer of Textron Inc. certify that:

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 29, 2011	/s/ Frank T. Connor
	Frank T. Connor
	Executive Vice President and Chief Financial Officer

EX-32.1

Exhibit 32.1

TEXTRON INC.

CERTIFICATION PURSUANT TO
18 U.S.C. SECTION 1350,
AS ADOPTED PURSUANT TO
SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002

In connection with the Quarterly Report of Textron Inc. (the “Company”) on Form 10-Q for the six months ended July 2, 2011 as filed with the Securities and Exchange Commission on the date hereof (the “Report”), I, Scott C. Donnelly, Chairman, President and Chief Executive Officer of the Company, certify, pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, that to my knowledge:

(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 29, 2011	/s/ Scott C. Donnelly
	Scott C. Donnelly
	Chairman, President and Chief Executive Officer

EX-32.2

Exhibit 32.2

TEXTRON INC.

CERTIFICATION PURSUANT TO
18 U.S.C. SECTION 1350,
AS ADOPTED PURSUANT TO
SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002

In connection with the Quarterly Report of Textron Inc. (the “Company”) on Form 10-Q for the six months ended July 2, 2011 as filed with the Securities and Exchange Commission on the date hereof (the “Report”), I, Frank T. Connor, Executive Vice President and Chief Financial Officer of the Company, certify, pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, that to my knowledge:

(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 29, 2011	/s/ Frank T. Connor
	Frank T. Connor
	Executive Vice President and Chief Financial Officer

XML



Document and Entity Information (USD $) In Billions, except Share data	6 Months Ended
	Jul. 02, 2011	Jul. 15, 2011	Jul. 02, 2010
Document and Entity Information [Abstract]
Entity Registrant Name	TEXTRON INC
Entity Central Index Key	0000217346
Document Type	10-Q
Document Period End Date	Jul. 02, 2011
Amendment Flag	false
Document Fiscal Year Focus	2011
Document Fiscal Period Focus	Q2
Current Fiscal Year End Date	--01-02
Entity Well-known Seasoned Issuer	Yes
Entity Voluntary Filers	No
Entity Current Reporting Status	Yes
Entity Filer Category	Large Accelerated Filer
Entity Public Float			$ 4.4
Entity Common Stock, Shares Outstanding		277,332,707

XML



Earnings per Share

6 Months Ended

Jul. 02, 2011

Earnings Per Share [Abstract]

Earnings Per Share

Note 5: Earnings Per 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 earnings per share 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 earnings per share 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 and upon the exercise of the related warrants. The convertible note call options purchased in connection with the issuance of the convertible notes 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 earnings per share are as follows:

	Three Months Ended				Six Months Ended
	July 2,		July 3,		July 2,		July 3,
(In thousands)	2011		2010		2011		2010
Basic weighted-average shares outstanding		277,406		274,098		276,882		273,636
Dilutive effect of convertible notes, warrants, stock options and restricted stock units		37,802		28,299		40,379		28,133
Diluted weighted-average shares outstanding		315,208		302,397		317,261		301,769

Stock options to purchase 3 million shares of common stock outstanding are excluded from our calculation of diluted weighted-average shares outstanding for both the three- and six-month periods ended July 2, 2011 as the exercise prices were greater than the average market price of our common stock for the periods. Stock options to purchase 6 million shares of common stock outstanding are excluded from our calculation of diluted weighted-average shares outstanding for both the three- and six-month periods ended July 3, 2010 as the exercise prices were greater than the average market price of our common stock for the periods. These securities could potentially dilute earnings per share in the future.

XML



Accounts Receivable and Finance Receivables

6 Months Ended

Jul. 02, 2011

Accounts Receivable and Finance Receivables [Abstract]

Accounts Receivable and Finance Receivables

Note 6: Accounts Receivable and Finance Receivables

Accounts Receivable

Accounts receivable is composed of the following:

	July 2,			January 1,
(In millions)	2011			2011
Commercial	$	572		$	496
U.S. Government contracts		320			416
		892			912
Allowance for doubtful accounts		(18	)		(20	)
	$	874		$	892

We have unbillable receivables on U.S. Government contracts that arise when the revenues we have appropriately recognized based on performance cannot be billed yet under terms of the contract. Unbillable receivables within accounts receivable totaled $165 million at July 2, 2011 and $195 million at January 1, 2011.

Finance Receivables

Finance receivables by product line, which includes both finance receivables held for investment and finance receivables held for sale, are presented in the following table:

(Dollars in millions)	July 2, 2011				January 1, 2011
Aviation	$	1,985	52	%	$	2,120	46	%
Golf equipment		167	4			212	5
Golf mortgage		746	20			876	19
Timeshare		543	14			894	19
Structured capital		281	7			317	7
Other liquidating		102	3			207	4
Total finance receivables		3,824	100	%		4,626	100	%
Less: Allowance for losses		299				342
Less: Finance receivables held for sale		180				413
Total finance receivables held for investment, net	$	3,345			$	3,871

Credit Quality Indicators and Nonaccrual Finance Receivables

We internally assess the quality of our finance receivables held for investment portfolio based on a number of key credit quality indicators and statistics such as delinquency, loan balance to collateral value, the liquidity position of individual borrowers and guarantors, debt service coverage in the golf mortgage product line and default rates of our notes receivable collateral in the timeshare product line. Because many of these indicators are difficult to apply across an entire class of receivables, we evaluate individual loans on a quarterly basis and classify these loans into three categories based on the key credit quality indicators for the individual loan. These three categories are performing, watchlist and nonaccrual.

We classify finance receivables held for investment as nonaccrual if credit quality indicators suggest full collection is doubtful. In addition, we automatically classify accounts as nonaccrual that are contractually delinquent by more than three months unless collection is not doubtful. Cash payments on nonaccrual accounts, including finance charges, generally are applied to reduce the net investment balance. We resume the accrual of interest when the loan becomes contractually current through payment according to the original terms of the loan or, if a loan has been modified, following a period of performance under the terms of the modification, provided we conclude that collection of all principal and interest is no longer doubtful. Previously suspended interest income is recognized at that time.

Accounts are classified as watchlist when credit quality indicators have deteriorated as compared with typical underwriting criteria, and we believe collection of full principal and interest is probable but not certain. All other finance receivables held for investment that do not meet the watchlist or nonaccrual categories are classified as performing.

A summary of finance receivables held for investment categorized based on the internally assigned credit quality indicators discussed above is as follows:

	July 2, 2011											January 1, 2011
(In millions)	Performing			Watchlist			Nonaccrual			Total		Performing			Watchlist			Nonaccrual			Total
Aviation	$	1,640		$	203		$	142		$	1,985	$	1,713		$	238		$	169		$	2,120
Golf equipment		110			42			15			167		138			51			23			212
Golf mortgage		192			201			226			619		163			303			219			685
Timeshare		206			27			277			510		222			77			382			681
Structured capital		255			26			—			281		290			27			—			317
Other liquidating		44			2			36			82		130			11			57			198
Total	$	2,447		$	501		$	696		$	3,644	$	2,656		$	707		$	850		$	4,213
% of Total		67.2	%		13.7	%		19.1	%				63.0	%		16.8	%		20.2	%

We measure delinquency based on the contractual payment terms of our loans and leases. In determining the delinquency aging category of an account, any/all principal and interest received is applied to the most past-due principal and/or interest amounts due. If a significant portion of the contractually due payment is delinquent, the entire finance receivable balance is reported in accordance with the most past-due delinquency aging category.

Finance receivables held for investment by delinquency aging category is summarized in the tables below:

	Less Than						Greater Than
	31 Days		31-60 Days		61-90 Days		90 Days
(In millions)	Past Due		Past Due		Past Due		Past Due		Total
July 2, 2011
Aviation	$	1,842	$	44	$	38	$	61	$	1,985
Golf equipment		144		11		3		9		167
Golf mortgage		522		12		—		85		619
Timeshare		425		—		—		85		510
Structured capital		281		—		—		—		281
Other liquidating		59		2		1		20		82
Total	$	3,273	$	69	$	42	$	260	$	3,644
January 1, 2011
Aviation	$	1,964	$	67	$	41	$	48	$	2,120
Golf equipment		171		13		9		19		212
Golf mortgage		543		12		7		123		685
Timeshare		533		14		6		128		681
Structured capital		317		—		—		—		317
Other liquidating		166		2		1		29		198
Total	$	3,694	$	108	$	64	$	347	$	4,213

At July 2, 2011, accrual status loans that were 90 days past due totaled $7 million. We had no accrual status loans that were 90 days past due at January 1, 2011. At July 2, 2011, the 60+ days contractual delinquency as a percentage of finance receivables held for investment was 8.29%, compared with 9.77% at January 1, 2011.

Impaired Loans

We evaluate individual finance receivables held for investment in non-homogeneous portfolios and larger accounts in homogeneous loan portfolios for impairment on a quarterly basis. Finance receivables classified as held for sale are reflected at the lower of cost or fair value and are excluded from these evaluations. A finance receivable is considered impaired when it is probable that we will be unable to collect all amounts due according to the contractual terms of the loan agreement based on our review of the credit quality indicators discussed above. Impaired finance receivables include both nonaccrual accounts and accounts for which full collection of principal and interest remains probable, but the account’s original terms have been, or are expected to be, significantly modified. If the modification specifies an interest rate equal to or greater than a market rate for a finance receivable with comparable risk, the account is not considered impaired in years subsequent to the modification. There was no significant interest income recognized on impaired loans in the first half of 2011 or 2010.

The average recorded investment in impaired loans for the first half of 2011 and 2010 is provided below:

			Golf		Golf				Other
(In millions)	Aviation		Equipment		Mortgage		Timeshare		Liquidating		Total
For the six months ended July 2, 2011
Impaired loans with a related allowance for losses recorded	$	136	$	4	$	193	$	309	$	18	$	660
Impaired loans with no related allowance for losses recorded		20		—		92		48		18		178
Total	$	156	$	4	$	285	$	357	$	36	$	838
For the six months ended July 3, 2010
Impaired loans with a related allowance for losses recorded	$	210	$	4	$	183	$	357	$	24	$	778
Impaired loans with no related allowance for losses recorded		12		2		116		63		69		262
Total	$	222	$	6	$	299	$	420	$	93	$	1,040

A summary of impaired finance receivables, excluding leveraged leases, and related allowance for losses is provided below:

			Golf		Golf				Other
(In millions)	Aviation		Equipment		Mortgage		Timeshare		Liquidating		Total
July 2, 2011
Impaired loans with a related allowance for losses recorded:
Recorded investment	$	118	$	3	$	198	$	245	$	18	$	582
Unpaid principal balance		120		3		208		281		24		636
Related allowance		43		1		44		86		9		183
Impaired loans with no related allowance for losses recorded:
Recorded investment		22		—		96		77		10		205
Unpaid principal balance		22		—		102		77		51		252
Total impaired loans:
Recorded investment		140		3		294		322		28		787
Unpaid principal balance		142		3		310		358		75		888
Related allowance		43		1		44		86		9		183
January 1, 2011
Impaired loans with a related allowance for losses recorded:
Recorded investment	$	147	$	4	$	175	$	355	$	16	$	697
Unpaid principal balance		144		5		178		385		15		727
Related allowance		45		2		39		102		3		191
Impaired loans with no related allowance for losses recorded:
Recorded investment		17		—		138		69		30		254
Unpaid principal balance		21		—		146		74		89		330
Total impaired loans:
Recorded investment		164		4		313		424		46		951
Unpaid principal balance		165		5		324		459		104		1,057
Related allowance		45		2		39		102		3		191

Allowance for Losses
We maintain the allowance for losses on finance receivables held for investment at a level considered adequate to cover inherent losses in the portfolio based on management’s evaluation and analysis by product line. For larger balance accounts specifically identified as impaired, including large accounts in homogeneous portfolios, a reserve is established based on comparing the carrying value with either a) the expected future cash flows, discounted at the finance receivable’s effective interest rate; or b) the fair value, if the finance receivable is collateral dependent. The expected future cash flows consider collateral value; financial performance and liquidity of our borrower; existence and financial strength of guarantors; estimated recovery costs, including legal expenses; and costs associated with the repossession/foreclosure and eventual disposal of collateral. When there is a range of potential outcomes, we perform multiple discounted cash flow analyses and weight the potential outcomes based on their relative likelihood of occurrence using the probability-weighted approach.

The evaluation of our portfolios is inherently subjective as it requires estimates. These estimates include the amount and timing of future cash flows expected to be received on impaired finance receivables and the underlying collateral, which may differ from actual results. While our analysis is specific to each individual account, the most critical factors included in this analysis vary by product line. For the aviation product line, these factors include industry valuation guides, physical condition of the aircraft, payment history, and existence and financial strength of guarantors. For the golf equipment line, the critical factors are the age and condition of the collateral, while the factors for the golf mortgage line include historical golf course, hotel or marina cash flow performance; estimates of golf rounds and price per round or occupancy and room rates; market discount and capitalization rates; and existence and financial strength of guarantors. For the timeshare product line, the critical factors are the historical performance of consumer notes receivable collateral, real estate valuations, operating expenses of the borrower, the impact of bankruptcy court rulings on the value of the collateral, legal and other professional expenses and borrower’s access to capital.

We also establish an allowance for losses by product line to cover probable but specifically unknown losses existing in the portfolio. For homogeneous portfolios, including the aviation and golf equipment product lines, the allowance is established as a percentage of non-recourse finance receivables, which have not been identified as requiring specific reserves. The percentage is based on a combination of factors, including historical loss experience, current delinquency and default trends, collateral values, and both general economic and specific industry trends. For non-homogeneous portfolios, including the golf mortgage and timeshare product lines, the allowance is established as a percentage of watchlist balances, as defined on page 10, which represents a combination of assumed default likelihood and loss severity based on historical experience, industry trends and collateral values. In establishing our allowance for losses to cover accounts not specifically identified, the most critical factors for the aviation product line include the collateral value of the portfolio, historical default experience and delinquency trends; for golf equipment, factors considered include historical loss experience and delinquency trends; and for golf mortgage, factors include an evaluation of individual loan credit quality indicators such as delinquency, loan balance to collateral value, debt service coverage, existence and financial strength of guarantors, historical progression from watchlist to nonaccrual status and historical loss severity. For the timeshare product line, we evaluate individual loan credit quality indicators such as borrowing base shortfalls for revolving notes receivable facilities, default rates of our notes receivable collateral, borrower’s access to capital, historical progression from watchlist to nonaccrual status and estimates of loss severity based on analysis of impaired loans in the product line.

Finance receivables held for investment are written down to the fair value (less estimated costs to sell) of the related collateral at the earlier of the date when the collateral is repossessed or when no payment has been received for six months unless management deems the receivable collectable. Finance receivables are charged off when the remaining balance is deemed to be uncollectible.

A rollforward of the allowance for losses on finance receivables held for investment and a summary of its composition, based on how the underlying finance receivables are evaluated for impairment, is presented below. The finance receivables reported in the following table specifically exclude $281 million of leveraged leases at both July 2, 2011 and July 3, 2010, in accordance with authoritative accounting standards:

													Structured
													Capital and
				Golf			Golf						Other
(In millions)	Aviation			Equipment			Mortgage			Timeshare			Liquidating			Total
For the six months ended July 2, 2011
Allowance for losses
Beginning balance	$	107		$	16		$	79		$	106		$	34		$	342
Provision for losses		16			(2	)		(1	)		10			1			24
Net charge-offs and transfers		(17	)		(3	)		(4	)		(28	)		(15	)		(67	)
Ending balance	$	106		$	11		$	74		$	88		$	20		$	299
Ending balance based on individual evaluations		43			1			44			86			9			183
Ending balance based on collective evaluation		63			10			30			2			11			116
Finance receivables
Individually evaluated for impairment	$	140		$	3		$	294		$	322		$	28		$	787
Collectively evaluated for impairment		1,845			164			325			188			54			2,576
Balance at end of period	$	1,985		$	167		$	619		$	510		$	82		$	3,363
For the six months ended July 3, 2010
Allowance for losses
Beginning balance	$	114		$	9		$	65		$	79		$	74		$	341
Provision for losses		16			7			51			32			(7	)		99
Net charge-offs		(30	)		(3	)		(41	)		(1	)		(13	)		(88	)
Ending balance	$	100		$	13		$	75		$	110		$	54		$	352
Ending balance based on individual evaluations		39			1			40			99			2			181
Ending balance based on collective evaluation		61			12			35			11			52			171
Finance receivables
Individually evaluated for impairment	$	163		$	7		$	304		$	448		$	85		$	1,007
Collectively evaluated for impairment		2,081			227			484			634			363			3,789
Balance at end of period	$	2,244		$	234		$	788		$	1,082		$	448		$	4,796

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Inventories

6 Months Ended

Jul. 02, 2011

Inventories [Abstract]

Inventories

Note 7: Inventories

	July 2,			January 1,
(In millions)	2011			2011
Finished goods	$	989		$	784
Work in process		2,309			2,125
Raw materials		418			506
		3,716			3,415
Progress/milestone payments		(1,154	)		(1,138	)
	$	2,562		$	2,277

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Debt

6 Months Ended

Jul. 02, 2011

Debt [Abstract]

Debt

Note 8: Debt

On May 5, 2009, we issued $600 million of convertible notes with a maturity date of May 1, 2013 and concurrently purchased call options to acquire our common stock and sold warrants to purchase our common stock for the purpose of reducing the potential dilutive effect to our shareholders and/or our cash outflow upon the conversion of the convertible notes. For more information on these transactions, see Note 8 to the Consolidated Financial Statements in Textron’s 2010 Annual Report on Form 10-K. For at least 20 trading days during the 30 consecutive trading days ended June 30, 2011, our common stock price exceeded the $17.06 per share conversion threshold price set forth for these convertible notes. Accordingly, the notes are convertible at the holder’s option through September 30, 2011. We may deliver shares of common stock, cash or a combination of cash and shares of common stock in satisfaction of our obligations upon conversion of the convertible notes. We intend to settle the face value of the convertible notes in cash. Based on a July 2, 2011 stock price of $23.94, the “if converted value” exceeds the face amount of the notes by $494 million; however, after giving effect to the exercise of the call options and warrants, the incremental cash or share settlement in excess of the face amount would result in either a 15.6 million net share issuance or a cash payment of $374 million, or a combination of cash and stock, at our option. We have continued to classify these convertible notes as long-term based on our intent and ability to maintain the debt outstanding for at least one year through the use of various funding sources available to us.

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Accrued Liabilities

6 Months Ended

Jul. 02, 2011

Accrued Liabilities [Abstract]

Accrued Liabilities

Note 9: Accrued Liabilities

We provide limited warranty and product maintenance programs, including parts and labor, for certain products for periods ranging from one to five years. Changes in our warranty and product maintenance liabilities are as follows:

	Six Months Ended
	July 2,			July 3,
(In millions)	2011			2010
Accrual at the beginning of period	$	242		$	263
Provision		111			83
Settlements		(116	)		(113	)
Adjustments to prior accrual estimates		(7	)		—
Accrual at the end of period	$	230		$	233

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Commitments and Contingencies

6 Months Ended

Jul. 02, 2011

Commitments and Contingencies [Abstract]

Commitments and Contingencies

Note 10: Commitments and Contingencies

We are subject to legal proceedings and other claims arising out of the conduct of our business, including proceedings and claims relating to commercial and financial transactions; government contracts; compliance with applicable laws and regulations; production partners; product liability; employment; and environmental, safety and health matters. Some of these legal proceedings and claims seek damages, fines or penalties in substantial amounts or remediation of environmental contamination. As a government contractor, we are subject to audits, reviews and investigations to determine whether our operations are being conducted in accordance with applicable regulatory requirements. Under federal government procurement regulations, certain claims brought by the U.S. Government could result in our being suspended or debarred from U.S. Government contracting for a period of time. On the basis of information presently available, we do not believe that existing proceedings and claims will have a material effect on our financial position or results of operations.

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Derivative Instruments and Fair Value Measurements

6 Months Ended

Jul. 02, 2011

Derivative Instruments and Fair Value Measurements [Abstract]

Derivative Instruments and Fair Value Measurements

Note 11. Derivative Instruments and Fair Value Measurements

We measure fair value at the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date. We prioritize the assumptions that market participants would use in pricing the asset or liability into a three-tier fair value hierarchy. This fair value hierarchy gives the highest priority (Level 1) to quoted prices in active markets for identical assets or liabilities and the lowest priority (Level 3) to unobservable inputs in which little or no market data exist, requiring companies to develop their own assumptions. Observable inputs that do not meet the criteria of Level 1, and include quoted prices for similar assets or liabilities in active markets or quoted prices for identical assets and liabilities in markets that are not active are categorized as Level 2. Level 3 inputs are those that reflect our estimates about the assumptions market participants would use in pricing the asset or liability based on the best information available in the circumstances. Valuation techniques for assets and liabilities measured using Level 3 inputs may include methodologies such as the market approach, the income approach or the cost approach and may use unobservable inputs such as projections, estimates and management’s interpretation of current market data. These unobservable inputs are utilized only to the extent that observable inputs are not available or cost-effective to obtain.

Assets and Liabilities Recorded at Fair Value on a Recurring Basis

The assets and liabilities that are recorded at fair value on a recurring basis consist primarily of our derivative financial instruments, which are categorized as Level 2 in the fair value hierarchy. The fair value amounts of these instruments that are designated as hedging instruments are provided below:

			Asset (Liability)
			July 2,			January 1,
(In millions)	Borrowing Group	Balance Sheet Location	2011			2011
Assets
Interest rate exchange contracts*	Finance	Other assets	$	29		$	34
Foreign currency exchange contracts	Manufacturing	Other current assets		42			39
Total			$	71		$	73
Liabilities
Interest rate exchange contracts*	Finance	Other liabilities	$	(5	)	$	(6	)
Foreign currency exchange contracts	Manufacturing	Accrued liabilities		(9	)		(2	)
Total			$	(14	)	$	(8	)

* Interest rate exchange contracts represent fair value hedges.

The Finance group’s interest rate exchange contracts are not exchange traded and are measured at fair value utilizing widely accepted, third-party developed valuation models. The actual terms of each individual contract are entered into a valuation model, along with interest rate and foreign exchange rate data, which is based on readily observable market data published by third-party leading financial news and data providers. Credit risk is factored into the fair value of these assets and liabilities based on the differential between both our credit default swap spread for liabilities and the counterparty’s credit default swap spread for assets as compared with a standard AA-rated counterparty; however, this had no significant impact on the valuation at July 2, 2011. At July 2, 2011 and January 1, 2011, we had interest rate exchange contracts with notional amounts of $0.9 billion and $1.1 billion, respectively.

Foreign currency exchange contracts are measured at fair value using the market method valuation technique. The inputs to this technique utilize current foreign currency exchange forward market rates published by third-party leading financial news and data providers. These are observable data that represent the rates that the financial institution uses for contracts entered into at that date; however, they are not based on actual transactions so they are classified as Level 2. At July 2, 2011 and January 1, 2011, we had foreign currency exchange contracts with notional amounts of $713 million and $635 million, respectively.

The Finance group also has investments in other marketable securities totaling $23 million and $51 million at July 2, 2011 and January 1, 2011, respectively, that are classified as available for sale. These investments are classified as Level 2 as the fair value for these notes was determined based on observable market inputs for similar securitization interests in markets that are relatively inactive compared with the market environment in which they were originally issued and based on bids received from prospective purchasers.

Fair Value Hedges

Our Finance group enters into interest rate exchange contracts to mitigate exposure to changes in the fair value of its fixed-rate receivables and debt due to fluctuations in interest rates. By using these contracts, we are able to convert our fixed-rate cash flows to floating-rate cash flows. The amount of ineffectiveness on our fair value hedges and the gain (loss) recorded in the Consolidated Statements of Operations were both insignificant in the first half of 2011 and 2010.

Cash Flow Hedges

We manufacture and sell our products in a number of countries throughout the world, and, therefore, we are exposed to movements in foreign currency exchange rates. The primary purpose of our foreign currency hedging activities is to manage the volatility associated with foreign currency purchases of materials, foreign currency sales of products, and other assets and liabilities in the normal course of business. We primarily utilize forward exchange contracts and purchased options with maturities of no more than three years that qualify as cash flow hedges and are intended to offset the effect of exchange rate fluctuations on forecasted sales, inventory purchases and overhead expenses. At July 2, 2011, we had a net deferred gain of $28 million in Accumulated other comprehensive loss related to these cash flow hedges. Net gains and losses recognized in earnings and Accumulated other comprehensive loss on these cash flow hedges, including gains and losses related to hedge ineffectiveness, were not material in the three- and six-month periods ended July 2, 2011 and July 3, 2010. We do not expect the amount of gains and losses in Accumulated other comprehensive loss that will be reclassified to earnings in the next twelve months to be material.

We hedge our net investment position in major currencies and generate foreign currency interest payments that offset other transactional exposures in these currencies. To accomplish this, we borrow directly in foreign currency and designate a portion of foreign currency debt as a hedge of net investments. We also may utilize currency forwards as hedges of our related foreign net investments. We record changes in the fair value of these contracts in other comprehensive income to the extent they are effective as cash flow hedges. If a contract does not qualify for hedge accounting or is designated as a fair value hedge, changes in the fair value of the contract are recorded in earnings. Currency effects on the effective portion of these hedges, which are reflected in the foreign currency translation adjustment account within OCI, produced a $27 million after-tax gain in the first half of 2011, resulting in an accumulated net gain balance of $41 million at July 2, 2011. The ineffective portion of these hedges was insignificant.

Assets Recorded at Fair Value on a Nonrecurring Basis

The table below presents those assets that are measured at fair value on a nonrecurring basis that had fair value measurement adjustments during the first half of 2011 and 2010. These assets were measured using significant unobservable inputs (Level 3) and include the following:

					Gain (Loss)
	Balance at				Six Months Ended
	July 2,		July 3,		July 2,			July 3,
(In millions)	2011		2010		2011			2010
Finance group
Impaired finance receivables	$	407	$	519	$	(50	)	$	(104	)
Finance receivables held for sale		180		421		(14	)		(15	)
Other assets		91		87		(18	)		(26	)

Impaired Finance Receivables — Impaired nonaccrual finance receivables are included in the table above since the measurement of required reserves on our impaired finance receivables is significantly dependent on the fair value of the underlying collateral. Fair values of collateral are determined based on the use of appraisals, industry pricing guides, input from market participants, our recent experience selling similar assets or internally developed discounted cash flow models. Fair value measurements recorded on impaired finance receivables resulted in charges to provision for loan losses and primarily were related to initial fair value adjustments.

Finance Receivables Held for Sale — Finance receivables held for sale are recorded at the lower of cost or fair value. As a result of our plan to exit the non-captive Finance business certain finance receivables are classified as held for sale. At July 2, 2011, the finance receivables held for sale are primarily assets in the golf mortgage, other liquidating and timeshare product lines. Timeshare and other liquidating finance receivables classified as held for sale were identified at the individual loan level; whereas golf course mortgages were identified as a portion of a larger portfolio with common characteristics based on the intention to balance the sale of certain loans with the collection of others to maximize economic value. These finance receivables are recorded at fair value on a nonrecurring basis during periods in which the fair value is lower than the cost value.

There are no active, quoted market prices for our finance receivables. The estimate of fair value was determined based on the use of discounted cash flow models to estimate the exit price we expect to receive in the principal market for each type of loan in an orderly transaction, which includes both the sale of pools of similar assets and the sale of individual loans. The models we used incorporate 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 credit line utilization rates. Where available, assumptions related to the expectations of current market participants are compared with observable market inputs, including bids from prospective purchasers of similar loans and certain bond market indices for loans perceived to be of similar credit quality. Although we utilize and prioritize these market observable inputs in our discounted cash flow models, these inputs are not typically derived from markets with directly comparable loan structures, industries and collateral types. Therefore, all valuations of finance receivables held for sale involve significant management judgment, which can result in differences between our fair value estimates and those of other market participants.

Other assets — Other assets include repossessed assets and properties, operating assets received in satisfaction of troubled finance receivables and other investments, which are accounted for under the equity method of accounting and have no active, quoted market prices. The fair value of these assets is determined based on the use of appraisals, industry pricing guides, input from market participants, our recent experience selling similar assets or internally developed discounted cash flow models. For our other investments, the discounted cash flow models incorporate assumptions specific to the nature of the investments’ business and underlying assets and include industry valuation benchmarks such as discount rates, capitalization rates and cash flow multiples.

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:

	July 2, 2011						January 1, 2011
	Carrying			Estimated			Carrying			Estimated
(In millions)	Value			Fair Value			Value			Fair Value
Manufacturing group
Long-term debt, excluding leases	$	(2,219	)	$	(2,776	)	$	(2,172	)	$	(2,698	)
Finance group
Finance receivables held for investment, excluding leases		2,878			2,639			3,345			3,131
Debt		(2,499	)		(2,442	)		(3,660	)		(3,528	)

Fair value for the Manufacturing group debt is determined using market observable data for similar transactions. At July 2, 2011 and January 1, 2011, approximately 44% and 33%, respectively, of the fair value of term debt for the Finance group was determined based on observable market transactions. The remaining Finance group debt was determined based on discounted cash flow analyses using observable market inputs from debt with similar duration, subordination and credit default expectations. We utilize the same valuation methodologies to determine the fair value estimates for finance receivables held for investment as used for finance receivables held for sale.

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Income Tax Expense

6 Months Ended

Jul. 02, 2011

Income Tax Expense [Abstract]

Income Tax Expense

Note 12: Income Tax Expense

For both the three and six months ended July 2, 2011, income tax expense equated to an effective income tax rate (provision on income from continuing operations) of 32%, compared to the Federal statutory income tax rate of 35%.

For the three and six months ended July 3, 2010, income tax expense equated to an effective income tax rate of 18% and 30%, compared to the Federal statutory income tax rate of 35%. In the second quarter of 2010, the rate was significantly lower than the statutory rate primarily due to $10 million in benefits related to changes in the functional currency of two Canadian subsidiaries as a result of the termination of the qualified business status for one subsidiary and a Quebec legislative change for another subsidiary. For the first half of 2010, the effective tax rate included the write-off of an $11 million deferred tax asset related to a change in the tax treatment of the Medicare Part D program related to U.S. health-care legislation enacted in the first quarter of 2010, partially offset by $10 million in benefits related to changes in the functional currency of two Canadian subsidiaries noted above.

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Segment Information

6 Months Ended

Jul. 02, 2011

Segment Information [Abstract]

Segment Information

Note 13: Segment Information

We operate in, and report financial information for, the following five business segments: Cessna, Bell, Textron Systems, Industrial and Finance. Segment profit is an important measure used for evaluating performance and for decision-making purposes. Segment profit for the manufacturing segments excludes interest expense, certain corporate expenses and special charges. The measurement for the Finance segment excludes special charges and includes interest income and expense along with intercompany interest expense. Provisions for losses on finance receivables involving the sale or lease of our products are recorded by the selling manufacturing division when our Finance group has recourse to the Manufacturing group.

Our revenues by segment and a reconciliation of segment profit to income from continuing operations before income taxes are as follows:

	Three Months Ended						Six Months Ended
	July 2,			July 3,			July 2,			July 3,
(In millions)	2011			2010			2011			2010
REVENUES
Manufacturing Group
Cessna	$	652		$	635		$	1,208		$	1,068
Bell		872			823			1,621			1,441
Textron Systems		452			534			897			992
Industrial		719			661			1,422			1,286
		2,695			2,653			5,148			4,787
Finance Group		33			56			59			132
Total revenues	$	2,728		$	2,709		$	5,207		$	4,919
SEGMENT OPERATING PROFIT
Manufacturing Group
Cessna	$	5		$	3		$	(33	)	$	(21	)
Bell		120			108			211			182
Textron Systems		49			70			102			125
Industrial		55			51			116			100
		229			232			396			386
Finance Group		(33	)		(71	)		(77	)		(129	)
Segment profit		196			161			319			257
Corporate expenses and other, net		(23	)		(17	)		(62	)		(54	)
Interest expense, net for Manufacturing group		(38	)		(35	)		(76	)		(71	)
Special charges		—			(10	)		—			(22	)
Income from continuing operations before income taxes	$	135		$	99		$	181		$	110

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Accounting Policies (Policies)

6 Months Ended

Jul. 02, 2011

Accounting Policies [Abstract]

Earnings Per 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 earnings per share 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 earnings per share 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 and upon the exercise of the related warrants. The convertible note call options purchased in connection with the issuance of the convertible notes 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.

Credit Quality Indicators and Nonaccrual Finance Receivables

We internally assess the quality of our finance receivables held for investment portfolio based on a number of key credit quality indicators and statistics such as delinquency, loan balance to collateral value, the liquidity position of individual borrowers and guarantors, debt service coverage in the golf mortgage product line and default rates of our notes receivable collateral in the timeshare product line. Because many of these indicators are difficult to apply across an entire class of receivables, we evaluate individual loans on a quarterly basis and classify these loans into three categories based on the key credit quality indicators for the individual loan. These three categories are performing, watchlist and nonaccrual.

We classify finance receivables held for investment as nonaccrual if credit quality indicators suggest full collection is doubtful. In addition, we automatically classify accounts as nonaccrual that are contractually delinquent by more than three months unless collection is not doubtful. Cash payments on nonaccrual accounts, including finance charges, generally are applied to reduce the net investment balance. We resume the accrual of interest when the loan becomes contractually current through payment according to the original terms of the loan or, if a loan has been modified, following a period of performance under the terms of the modification, provided we conclude that collection of all principal and interest is no longer doubtful. Previously suspended interest income is recognized at that time.

Accounts are classified as watchlist when credit quality indicators have deteriorated as compared with typical underwriting criteria, and we believe collection of full principal and interest is probable but not certain. All other finance receivables held for investment that do not meet the watchlist or nonaccrual categories are classified as performing.

Impaired Loan

We evaluate individual finance receivables held for investment in non-homogeneous portfolios and larger accounts in homogeneous loan portfolios for impairment on a quarterly basis. Finance receivables classified as held for sale are reflected at the lower of cost or fair value and are excluded from these evaluations. A finance receivable is considered impaired when it is probable that we will be unable to collect all amounts due according to the contractual terms of the loan agreement based on our review of the credit quality indicators discussed above. Impaired finance receivables include both nonaccrual accounts and accounts for which full collection of principal and interest remains probable, but the account’s original terms have been, or are expected to be, significantly modified. If the modification specifies an interest rate equal to or greater than a market rate for a finance receivable with comparable risk, the account is not considered impaired in years subsequent to the modification. There was no significant interest income recognized on impaired loans in the first half of 2011 or 2010.

Allowance for losses

Allowance for Losses
We maintain the allowance for losses on finance receivables held for investment at a level considered adequate to cover inherent losses in the portfolio based on management’s evaluation and analysis by product line. For larger balance accounts specifically identified as impaired, including large accounts in homogeneous portfolios, a reserve is established based on comparing the carrying value with either a) the expected future cash flows, discounted at the finance receivable’s effective interest rate; or b) the fair value, if the finance receivable is collateral dependent. The expected future cash flows consider collateral value; financial performance and liquidity of our borrower; existence and financial strength of guarantors; estimated recovery costs, including legal expenses; and costs associated with the repossession/foreclosure and eventual disposal of collateral. When there is a range of potential outcomes, we perform multiple discounted cash flow analyses and weight the potential outcomes based on their relative likelihood of occurrence using the probability-weighted approach.

The evaluation of our portfolios is inherently subjective as it requires estimates. These estimates include the amount and timing of future cash flows expected to be received on impaired finance receivables and the underlying collateral, which may differ from actual results. While our analysis is specific to each individual account, the most critical factors included in this analysis vary by product line. For the aviation product line, these factors include industry valuation guides, physical condition of the aircraft, payment history, and existence and financial strength of guarantors. For the golf equipment line, the critical factors are the age and condition of the collateral, while the factors for the golf mortgage line include historical golf course, hotel or marina cash flow performance; estimates of golf rounds and price per round or occupancy and room rates; market discount and capitalization rates; and existence and financial strength of guarantors. For the timeshare product line, the critical factors are the historical performance of consumer notes receivable collateral, real estate valuations, operating expenses of the borrower, the impact of bankruptcy court rulings on the value of the collateral, legal and other professional expenses and borrower’s access to capital.

We also establish an allowance for losses by product line to cover probable but specifically unknown losses existing in the portfolio. For homogeneous portfolios, including the aviation and golf equipment product lines, the allowance is established as a percentage of non-recourse finance receivables, which have not been identified as requiring specific reserves. The percentage is based on a combination of factors, including historical loss experience, current delinquency and default trends, collateral values, and both general economic and specific industry trends. For non-homogeneous portfolios, including the golf mortgage and timeshare product lines, the allowance is established as a percentage of watchlist balances, as defined on page 10, which represents a combination of assumed default likelihood and loss severity based on historical experience, industry trends and collateral values. In establishing our allowance for losses to cover accounts not specifically identified, the most critical factors for the aviation product line include the collateral value of the portfolio, historical default experience and delinquency trends; for golf equipment, factors considered include historical loss experience and delinquency trends; and for golf mortgage, factors include an evaluation of individual loan credit quality indicators such as delinquency, loan balance to collateral value, debt service coverage, existence and financial strength of guarantors, historical progression from watchlist to nonaccrual status and historical loss severity. For the timeshare product line, we evaluate individual loan credit quality indicators such as borrowing base shortfalls for revolving notes receivable facilities, default rates of our notes receivable collateral, borrower’s access to capital, historical progression from watchlist to nonaccrual status and estimates of loss severity based on analysis of impaired loans in the product line.

Finance receivables held for investment are written down to the fair value (less estimated costs to sell) of the related collateral at the earlier of the date when the collateral is repossessed or when no payment has been received for six months unless management deems the receivable collectable. Finance receivables are charged off when the remaining balance is deemed to be uncollectible.

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Consolidated Statements of Operations (Unaudited) (USD $) In Millions, except Per Share data	3 Months Ended		6 Months Ended
	Jul. 02, 2011	Jul. 03, 2010	Jul. 02, 2011	Jul. 03, 2010
Revenues
Manufacturing revenues	$ 2,695	$ 2,653	$ 5,148	$ 4,787
Finance revenues	33	56	59	132
Total revenues	2,728	2,709	5,207	4,919
Costs, expenses and other
Cost of sales	2,225	2,188	4,280	3,963
Selling and administrative expense	295	299	599	585
Provision for losses on finance receivables	12	44	24	99
Interest expense	61	69	123	140
Special charges		10		22
Total costs, expenses and other	2,593	2,610	5,026	4,809
Income from continuing operations before income taxes	135	99	181	110
Income tax expense	43	18	58	33
Income from continuing operations	92	81	123	77
Income (loss) from discontinued operations, net of income taxes	(2)	1	(4)	(3)
Net income	$ 90	$ 82	$ 119	$ 74
Basic earnings per share
Continuing operations	$ 0.33	$ 0.30	$ 0.44	$ 0.28
Discontinued operations	$ (0.01)		$ (0.01)	$ (0.01)
Basic earnings per share	$ 0.32	$ 0.30	$ 0.43	$ 0.27
Diluted earnings per share
Continuing operations	$ 0.29	$ 0.27	$ 0.39	$ 0.26
Discontinued operations			$ (0.01)	$ (0.01)
Diluted earnings per share	$ 0.29	$ 0.27	$ 0.38	$ 0.25
Dividends per share
Common stock	$ 0.02	$ 0.02	$ 0.04	$ 0.04

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Special Charges (Tables)

6 Months Ended

Jul. 02, 2011

Special Charges [Abstract]

Restructuring cost by segment

	Severance			Contract
(In millions)	Costs			Terminations		Total
Three Months Ended July 3, 2010
Cessna	$	6		$	—	$	6
Textron Systems		1			—		1
Finance		2			1		3
	$	9		$	1	$	10
Six Months Ended July 3, 2010
Cessna	$	14		$	2	$	16
Bell		1			—		1
Textron Systems		1			—		1
Finance		5			1		6
Corporate		(2	)		—		(2	)
	$	19		$	3	$	22

Restructuring reserve

	Severance			Contract
(In millions)	Costs			Terminations			Total
Balance at January 1, 2011	$	57		$	5		$	62
Cash paid		(33	)		(1	)		(34	)
Balance at July 2, 2011	$	24		$	4		$	28

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Retirement Plans (Tables)

6 Months Ended

Jul. 02, 2011

Retirement Plans [Abstract]

Schedule Of Costs Of Retirement Plans

							Postretirement Benefits
	Pension Benefits						Other Than Pensions
	July 2,			July 3,			July 2,			July 3,
(In millions)	2011			2010			2011			2010
Three Months Ended
Service cost	$	32		$	31		$	2		$	2
Interest cost		82			79			8			8
Expected return on plan assets		(98	)		(92	)		—			—
Amortization of prior service cost (credit)		4			4			(2	)		(1	)
Amortization of net loss		19			9			3			3
Net periodic benefit cost	$	39		$	31		$	11		$	12
Six Months Ended
Service cost	$	64		$	62		$	4		$	4
Interest cost		164			158			16			16
Expected return on plan assets		(196	)		(184	)		—			—
Amortization of prior service cost (credit)		8			8			(3	)		(2	)
Amortization of net loss		38			18			6			6
Net periodic benefit cost	$	78		$	62		$	23		$	24

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Comprehensive Income (Tables)

6 Months Ended

Jul. 02, 2011

Comprehensive Income [Abstract]

Schedule of Comprehensive Income (Loss)

	Three Months Ended					Six Months Ended
	July 2,		July 3,			July 2,		July 3,
(In millions)	2011		2010			2011		2010
Net income	$	90	$	82		$	119	$	74
Other comprehensive income (loss):
Recognition of prior service cost and unrealized losses on pension and postretirement benefits		15		10			33		20
Deferred gains on hedge contracts		2		—			8		7
Foreign currency translation and other		3		(32	)		15		(41	)
Comprehensive income	$	110	$	60		$	175	$	60

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Earnings per Share (Tables)

6 Months Ended

Jul. 02, 2011

Earnings Per Share [Abstract]

Weighted-average shares outstanding for basic & Diluted earnings per share

	Three Months Ended				Six Months Ended
	July 2,		July 3,		July 2,		July 3,
(In thousands)	2011		2010		2011		2010
Basic weighted-average shares outstanding		277,406		274,098		276,882		273,636
Dilutive effect of convertible notes, warrants, stock options and restricted stock units		37,802		28,299		40,379		28,133
Diluted weighted-average shares outstanding		315,208		302,397		317,261		301,769

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Accounts Receivable and Finance Receivables (Tables)

6 Months Ended

Jul. 02, 2011

Accounts Receivable and Finance Receivables [Abstract]

Accounts Receivable

	July 2,			January 1,
(In millions)	2011			2011
Commercial	$	572		$	496
U.S. Government contracts		320			416
		892			912
Allowance for doubtful accounts		(18	)		(20	)
	$	874		$	892

Finance Receivables

(Dollars in millions)	July 2, 2011				January 1, 2011
Aviation	$	1,985	52	%	$	2,120	46	%
Golf equipment		167	4			212	5
Golf mortgage		746	20			876	19
Timeshare		543	14			894	19
Structured capital		281	7			317	7
Other liquidating		102	3			207	4
Total finance receivables		3,824	100	%		4,626	100	%
Less: Allowance for losses		299				342
Less: Finance receivables held for sale		180				413
Total finance receivables held for investment, net	$	3,345			$	3,871

Finance receivables held for investment based on the internally assigned credit quality

	July 2, 2011											January 1, 2011
(In millions)	Performing			Watchlist			Nonaccrual			Total		Performing			Watchlist			Nonaccrual			Total
Aviation	$	1,640		$	203		$	142		$	1,985	$	1,713		$	238		$	169		$	2,120
Golf equipment		110			42			15			167		138			51			23			212
Golf mortgage		192			201			226			619		163			303			219			685
Timeshare		206			27			277			510		222			77			382			681
Structured capital		255			26			—			281		290			27			—			317
Other liquidating		44			2			36			82		130			11			57			198
Total	$	2,447		$	501		$	696		$	3,644	$	2,656		$	707		$	850		$	4,213
% of Total		67.2	%		13.7	%		19.1	%				63.0	%		16.8	%		20.2	%

Finance receivables held for investment by delinquency aging

	Less Than						Greater Than
	31 Days		31-60 Days		61-90 Days		90 Days
(In millions)	Past Due		Past Due		Past Due		Past Due		Total
July 2, 2011
Aviation	$	1,842	$	44	$	38	$	61	$	1,985
Golf equipment		144		11		3		9		167
Golf mortgage		522		12		—		85		619
Timeshare		425		—		—		85		510
Structured capital		281		—		—		—		281
Other liquidating		59		2		1		20		82
Total	$	3,273	$	69	$	42	$	260	$	3,644
January 1, 2011
Aviation	$	1,964	$	67	$	41	$	48	$	2,120
Golf equipment		171		13		9		19		212
Golf mortgage		543		12		7		123		685
Timeshare		533		14		6		128		681
Structured capital		317		—		—		—		317
Other liquidating		166		2		1		29		198
Total	$	3,694	$	108	$	64	$	347	$	4,213

Summary of impaired finance receivables, excluding leveraged leases, and related allowance for losses

			Golf		Golf				Other
(In millions)	Aviation		Equipment		Mortgage		Timeshare		Liquidating		Total
For the six months ended July 2, 2011
Impaired loans with a related allowance for losses recorded	$	136	$	4	$	193	$	309	$	18	$	660
Impaired loans with no related allowance for losses recorded		20		—		92		48		18		178
Total	$	156	$	4	$	285	$	357	$	36	$	838
For the six months ended July 3, 2010
Impaired loans with a related allowance for losses recorded	$	210	$	4	$	183	$	357	$	24	$	778
Impaired loans with no related allowance for losses recorded		12		2		116		63		69		262
Total	$	222	$	6	$	299	$	420	$	93	$	1,040

Average recorded investment in impaired loans

			Golf		Golf				Other
(In millions)	Aviation		Equipment		Mortgage		Timeshare		Liquidating		Total
July 2, 2011
Impaired loans with a related allowance for losses recorded:
Recorded investment	$	118	$	3	$	198	$	245	$	18	$	582
Unpaid principal balance		120		3		208		281		24		636
Related allowance		43		1		44		86		9		183
Impaired loans with no related allowance for losses recorded:
Recorded investment		22		—		96		77		10		205
Unpaid principal balance		22		—		102		77		51		252
Total impaired loans:
Recorded investment		140		3		294		322		28		787
Unpaid principal balance		142		3		310		358		75		888
Related allowance		43		1		44		86		9		183
January 1, 2011
Impaired loans with a related allowance for losses recorded:
Recorded investment	$	147	$	4	$	175	$	355	$	16	$	697
Unpaid principal balance		144		5		178		385		15		727
Related allowance		45		2		39		102		3		191
Impaired loans with no related allowance for losses recorded:
Recorded investment		17		—		138		69		30		254
Unpaid principal balance		21		—		146		74		89		330
Total impaired loans:
Recorded investment		164		4		313		424		46		951
Unpaid principal balance		165		5		324		459		104		1,057
Related allowance		45		2		39		102		3		191

Allowance for Losses

													Structured
													Capital and
				Golf			Golf						Other
(In millions)	Aviation			Equipment			Mortgage			Timeshare			Liquidating			Total
For the six months ended July 2, 2011
Allowance for losses
Beginning balance	$	107		$	16		$	79		$	106		$	34		$	342
Provision for losses		16			(2	)		(1	)		10			1			24
Net charge-offs and transfers		(17	)		(3	)		(4	)		(28	)		(15	)		(67	)
Ending balance	$	106		$	11		$	74		$	88		$	20		$	299
Ending balance based on individual evaluations		43			1			44			86			9			183
Ending balance based on collective evaluation		63			10			30			2			11			116
Finance receivables
Individually evaluated for impairment	$	140		$	3		$	294		$	322		$	28		$	787
Collectively evaluated for impairment		1,845			164			325			188			54			2,576
Balance at end of period	$	1,985		$	167		$	619		$	510		$	82		$	3,363
For the six months ended July 3, 2010
Allowance for losses
Beginning balance	$	114		$	9		$	65		$	79		$	74		$	341
Provision for losses		16			7			51			32			(7	)		99
Net charge-offs		(30	)		(3	)		(41	)		(1	)		(13	)		(88	)
Ending balance	$	100		$	13		$	75		$	110		$	54		$	352
Ending balance based on individual evaluations		39			1			40			99			2			181
Ending balance based on collective evaluation		61			12			35			11			52			171
Finance receivables
Individually evaluated for impairment	$	163		$	7		$	304		$	448		$	85		$	1,007
Collectively evaluated for impairment		2,081			227			484			634			363			3,789
Balance at end of period	$	2,244		$	234		$	788		$	1,082		$	448		$	4,796

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Inventories (Tables)

6 Months Ended

Jul. 02, 2011

Inventories [Abstract]

Inventories

	July 2,			January 1,
(In millions)	2011			2011
Finished goods	$	989		$	784
Work in process		2,309			2,125
Raw materials		418			506
		3,716			3,415
Progress/milestone payments		(1,154	)		(1,138	)
	$	2,562		$	2,277

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Accrued Liabilities (Tables)

6 Months Ended

Jul. 02, 2011

Accrued Liabilities [Abstract]

Accruals

	Six Months Ended
	July 2,			July 3,
(In millions)	2011			2010
Accrual at the beginning of period	$	242		$	263
Provision		111			83
Settlements		(116	)		(113	)
Adjustments to prior accrual estimates		(7	)		—
Accrual at the end of period	$	230		$	233

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Derivative Instruments and Fair Value Measurements (Tables)

6 Months Ended

Jul. 02, 2011

Derivative Instruments and Fair Value Measurements [Abstract]

Fair value of derivative instruments designated as hedging instruments

			Asset (Liability)
			July 2,			January 1,
(In millions)	Borrowing Group	Balance Sheet Location	2011			2011
Assets
Interest rate exchange contracts*	Finance	Other assets	$	29		$	34
Foreign currency exchange contracts	Manufacturing	Other current assets		42			39
Total			$	71		$	73
Liabilities
Interest rate exchange contracts*	Finance	Other liabilities	$	(5	)	$	(6	)
Foreign currency exchange contracts	Manufacturing	Accrued liabilities		(9	)		(2	)
Total			$	(14	)	$	(8	)

Assets measured at fair value on a nonrecurring basis

					Gain (Loss)
	Balance at				Six Months Ended
	July 2,		July 3,		July 2,			July 3,
(In millions)	2011		2010		2011			2010
Finance group
Impaired finance receivables	$	407	$	519	$	(50	)	$	(104	)
Finance receivables held for sale		180		421		(14	)		(15	)
Other assets		91		87		(18	)		(26	)

Carrying value and estimated fair values of financial instruments

	July 2, 2011						January 1, 2011
	Carrying			Estimated			Carrying			Estimated
(In millions)	Value			Fair Value			Value			Fair Value
Manufacturing group
Long-term debt, excluding leases	$	(2,219	)	$	(2,776	)	$	(2,172	)	$	(2,698	)
Finance group
Finance receivables held for investment, excluding leases		2,878			2,639			3,345			3,131
Debt		(2,499	)		(2,442	)		(3,660	)		(3,528	)

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Segment Information (Tables)

6 Months Ended

Jul. 02, 2011

Segment Information [Abstract]

Segment information

	Three Months Ended						Six Months Ended
	July 2,			July 3,			July 2,			July 3,
(In millions)	2011			2010			2011			2010
REVENUES
Manufacturing Group
Cessna	$	652		$	635		$	1,208		$	1,068
Bell		872			823			1,621			1,441
Textron Systems		452			534			897			992
Industrial		719			661			1,422			1,286
		2,695			2,653			5,148			4,787
Finance Group		33			56			59			132
Total revenues	$	2,728		$	2,709		$	5,207		$	4,919
SEGMENT OPERATING PROFIT
Manufacturing Group
Cessna	$	5		$	3		$	(33	)	$	(21	)
Bell		120			108			211			182
Textron Systems		49			70			102			125
Industrial		55			51			116			100
		229			232			396			386
Finance Group		(33	)		(71	)		(77	)		(129	)
Segment profit		196			161			319			257
Corporate expenses and other, net		(23	)		(17	)		(62	)		(54	)
Interest expense, net for Manufacturing group		(38	)		(35	)		(76	)		(71	)
Special charges		—			(10	)		—			(22	)
Income from continuing operations before income taxes	$	135		$	99		$	181		$	110

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Special Charges (Details) (USD $) In Millions	3 Months Ended	6 Months Ended
	Jul. 03, 2010	Jul. 03, 2010
Restructuring cost by segment
Special charges	$ 10	$ 22
Severance Costs [Member]
Restructuring cost by segment
Special charges	9	19
Severance Costs [Member] | Cessna [Member]
Restructuring cost by segment
Special charges	6	14
Severance Costs [Member] | Bell [Member]
Restructuring cost by segment
Special charges		1
Severance Costs [Member] | Textron Systems [Member]
Restructuring cost by segment
Special charges	1	1
Severance Costs [Member] | Finance [ Member]
Restructuring cost by segment
Special charges	2	5
Severance Costs [Member] | Corporate [Member]
Restructuring cost by segment
Special charges		(2)
Contract Terminations [Member]
Restructuring cost by segment
Special charges	1	3
Contract Terminations [Member] | Cessna [Member]
Restructuring cost by segment
Special charges		2
Contract Terminations [Member] | Finance [ Member]
Restructuring cost by segment
Special charges	1	1
Cessna [Member]
Restructuring cost by segment
Special charges	6	16
Bell [Member]
Restructuring cost by segment
Special charges		1
Textron Systems [Member]
Restructuring cost by segment
Special charges	1	1
Finance [ Member]
Restructuring cost by segment
Special charges	3	6
Corporate [Member]
Restructuring cost by segment
Special charges		$ (2)

XML



Consolidated Balance Sheets (Unaudited) (USD $) In Millions, except Share data in Thousands	Jul. 02, 2011	Jan. 01, 2011
Assets
Cash and equivalents	$ 651	$ 931
Inventories	2,562	2,277
Finance receivables held for sale	180	413
Total assets	14,839	15,282
Liabilities
Total liabilities	11,665	12,310
Shareholders' equity
Common stock	35	35
Capital surplus	1,278	1,301
Retained earnings	3,145	3,037
Accumulated other comprehensive loss	(1,260)	(1,316)
Total shareholders' equity including cost of treasury shares	3,198	3,057
Less cost of treasury shares	24	85
Total shareholders' equity	3,174	2,972
Total liabilities and shareholders' equity	14,839	15,282
Common shares outstanding (in thousands)	277,224	275,739
Manufacturing Group [Member]
Assets
Cash and equivalents	610	898
Accounts receivable, net	874	892
Inventories	2,562	2,277
Other current assets	1,395	980
Total current assets	5,441	5,047
Property, plant and equipment, less accumulated depreciation and amortization of $3,040 and $2,869	1,964	1,932
Goodwill	1,651	1,632
Other assets	1,692	1,722
Total assets	10,748	10,333
Liabilities
Short term and current portion of long-term debt	351	19
Accounts payable	742	622
Accrued liabilities	1,915	2,016
Total current liabilities	3,008	2,657
Long-term debt	2,192	2,283
Other liabilities	2,865	2,993
Total liabilities	8,065	7,933
Finance Group [Member]
Assets
Cash and equivalents	41	33
Finance receivables held for investment, net	3,345	3,871
Finance receivables held for sale	180	413
Other assets	525	632
Total assets	4,091	4,949
Liabilities
Other liabilities	379	391
Due to Manufacturing group	722	326
Debt	2,499	3,660
Total liabilities	$ 3,600	$ 4,377

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Special Charges (Details 1) (USD $) In Millions	6 Months Ended
	Jul. 02, 2011
Restructuring reserve
Restructuring Reserve, Beginning Balance	$ 62
Cash paid	(34)
Restructuring Reserve, Ending Balance	28
Severance Costs [Member]
Restructuring reserve
Restructuring Reserve, Beginning Balance	57
Cash paid	(33)
Restructuring Reserve, Ending Balance	24
Contract Terminations [Member]
Restructuring reserve
Restructuring Reserve, Beginning Balance	5
Cash paid	(1)
Restructuring Reserve, Ending Balance	$ 4

XML



Retirement Plans (Details) (USD $) In Millions	3 Months Ended		6 Months Ended
	Jul. 02, 2011	Jul. 03, 2010	Jul. 02, 2011	Jul. 03, 2010
Pension Plans Defined Benefit [Member]
Defined Benefit Plan Net Periodic Benefit Cost
Service cost	$ 32	$ 31	$ 64	$ 62
Interest cost	82	79	164	158
Expected return on plan assets	(98)	(92)	(196)	(184)
Amortization of prior service cost (credit)	4	4	8	8
Amortization of net loss	19	9	38	18
Net periodic benefit cost	39	31	78	62
Other Postretirement Benefit Plans Defined Benefit [Member]
Defined Benefit Plan Net Periodic Benefit Cost
Service cost	2	2	4	4
Interest cost	8	8	16	16
Amortization of prior service cost (credit)	(2)	(1)	(3)	(2)
Amortization of net loss	3	3	6	6
Net periodic benefit cost	$ 11	$ 12	$ 23	$ 24

XML



Comprehensive Income (Details) (USD $) In Millions	3 Months Ended		6 Months Ended
	Jul. 02, 2011	Jul. 03, 2010	Jul. 02, 2011	Jul. 03, 2010
Comprehensive Income (Loss), Net of Tax, Attributable to Parent
Net income	$ 90	$ 82	$ 119	$ 74
Other comprehensive income (loss):
Recognition of prior service cost and unrealized losses on pension and postretirement benefits	15	10	33	20
Deferred gains on hedge contracts	2		8	7
Foreign currency translation and other	3	(32)	15	(41)
Comprehensive income	$ 110	$ 60	$ 175	$ 60

XML



Earnings per Share (Details) In Thousands	3 Months Ended		6 Months Ended
	Jul. 02, 2011	Jul. 03, 2010	Jul. 02, 2011	Jul. 03, 2010
Weighted-average shares outstanding for basic & Diluted earnings per share
Basic weighted-average shares outstanding	277,406	274,098	276,882	273,636
Dilutive effect of Convertible Notes, warrants, stock options and restricted stock units	37,802	28,299	40,379	28,133
Diluted weighted-average shares outstanding	315,208	302,397	317,261	301,769

XML



Earnings per Share (Details Textual) In Millions	3 Months Ended		6 Months Ended
	Jul. 02, 2011	Jul. 03, 2010	Jul. 02, 2011	Jul. 03, 2010
Earnings Per Share (Textuals) [Abstract]
Shares of Common Stock Outstanding excluded from calculation	3	6	3	6

XML



Accounts Receivable and Finance Receivables (Details) (USD $) In Millions	Jul. 02, 2011	Jan. 01, 2011
Accounts Receivable, Net [Abstract]
Accounts Receivable, Gross	$ 892	$ 912
Allowance for doubtful accounts	(18)	(20)
Commercial [Member]
Accounts Receivable, Net [Abstract]
Accounts Receivable, Gross	572	496
U. S. Government Contracts [Member]
Accounts Receivable, Net [Abstract]
Accounts Receivable, Gross	320	416
Manufacturing Group [Member]
Accounts Receivable, Net [Abstract]
Accounts Receivable, Net	$ 874	$ 892

XML



Accounts Receivable and Finance Receivables (Details 1) (USD $) In Millions, unless otherwise specified	Jul. 02, 2011	Jan. 01, 2011	Jul. 03, 2010	Jan. 02, 2010
Finance Receivables
Total finance receivables	$ 3,824	$ 4,626
Finance receivables, percent	100.00%	100.00%
Less: Allowance for losses	299	342	(352)	(341)
Less: Finance receivables held for sale	180	413
Aviation [Member]
Finance Receivables
Total finance receivables	1,985	2,120
Finance receivables, percent	52.00%	46.00%
Golf Equipment [Member]
Finance Receivables
Total finance receivables	167	212
Finance receivables, percent	4.00%	5.00%
Golf Mortgage [Member]
Finance Receivables
Total finance receivables	746	876
Finance receivables, percent	20.00%	19.00%
Timeshare [Member]
Finance Receivables
Total finance receivables	543	894
Finance receivables, percent	14.00%	19.00%
Structured Capital [Member]
Finance Receivables
Total finance receivables	281	317
Finance receivables, percent	7.00%	7.00%
Other Liquidating [Member]
Finance Receivables
Total finance receivables	102	207
Finance receivables, percent	3.00%	4.00%
Finance Group [Member]
Finance Receivables
Less: Finance receivables held for sale	180	413
Total finance receivables held for investment, net	$ 3,345	$ 3,871

XML



Accounts Receivable and Finance Receivables (Details 2) (USD $) In Millions, unless otherwise specified	Jul. 02, 2011	Jan. 01, 2011
Finance receivables held for investment based on the internally assigned credit quality
Total finance receivables held for investment	$ 3,644	$ 4,213
Aviation [Member]
Finance receivables held for investment based on the internally assigned credit quality
Total finance receivables held for investment	1,985	2,120
Aviation [Member] | Performing [Member]
Finance receivables held for investment based on the internally assigned credit quality
Total finance receivables held for investment	1,640	1,713
Aviation [Member] | Watchlist [Member]
Finance receivables held for investment based on the internally assigned credit quality
Total finance receivables held for investment	203	238
Aviation [Member] | Nonaccrual [Member]
Finance receivables held for investment based on the internally assigned credit quality
Total finance receivables held for investment	142	169
Golf Equipment [Member]
Finance receivables held for investment based on the internally assigned credit quality
Total finance receivables held for investment	167	212
Golf Equipment [Member] | Performing [Member]
Finance receivables held for investment based on the internally assigned credit quality
Total finance receivables held for investment	110	138
Golf Equipment [Member] | Watchlist [Member]
Finance receivables held for investment based on the internally assigned credit quality
Total finance receivables held for investment	42	51
Golf Equipment [Member] | Nonaccrual [Member]
Finance receivables held for investment based on the internally assigned credit quality
Total finance receivables held for investment	15	23
Golf Mortgage [Member]
Finance receivables held for investment based on the internally assigned credit quality
Total finance receivables held for investment	619	685
Golf Mortgage [Member] | Performing [Member]
Finance receivables held for investment based on the internally assigned credit quality
Total finance receivables held for investment	192	163
Golf Mortgage [Member] | Watchlist [Member]
Finance receivables held for investment based on the internally assigned credit quality
Total finance receivables held for investment	201	303
Golf Mortgage [Member] | Nonaccrual [Member]
Finance receivables held for investment based on the internally assigned credit quality
Total finance receivables held for investment	226	219
Timeshare [Member]
Finance receivables held for investment based on the internally assigned credit quality
Total finance receivables held for investment	510	681
Timeshare [Member] | Performing [Member]
Finance receivables held for investment based on the internally assigned credit quality
Total finance receivables held for investment	206	222
Timeshare [Member] | Watchlist [Member]
Finance receivables held for investment based on the internally assigned credit quality
Total finance receivables held for investment	27	77
Timeshare [Member] | Nonaccrual [Member]
Finance receivables held for investment based on the internally assigned credit quality
Total finance receivables held for investment	277	382
Structured Capital [Member]
Finance receivables held for investment based on the internally assigned credit quality
Total finance receivables held for investment	281	317
Structured Capital [Member] | Performing [Member]
Finance receivables held for investment based on the internally assigned credit quality
Total finance receivables held for investment	255	290
Structured Capital [Member] | Watchlist [Member]
Finance receivables held for investment based on the internally assigned credit quality
Total finance receivables held for investment	26	27
Other Liquidating [Member]
Finance receivables held for investment based on the internally assigned credit quality
Total finance receivables held for investment	82	198
Other Liquidating [Member] | Performing [Member]
Finance receivables held for investment based on the internally assigned credit quality
Total finance receivables held for investment	44	130
Other Liquidating [Member] | Watchlist [Member]
Finance receivables held for investment based on the internally assigned credit quality
Total finance receivables held for investment	2	11
Other Liquidating [Member] | Nonaccrual [Member]
Finance receivables held for investment based on the internally assigned credit quality
Total finance receivables held for investment	36	57
Performing [Member]
Finance receivables held for investment based on the internally assigned credit quality
Total finance receivables held for investment	2,447	2,656
Finance receivables held for investment based on the internally assigned credit quality, percent	67.20%	63.00%
Watchlist [Member]
Finance receivables held for investment based on the internally assigned credit quality
Total finance receivables held for investment	501	707
Finance receivables held for investment based on the internally assigned credit quality, percent	13.70%	16.80%
Nonaccrual [Member]
Finance receivables held for investment based on the internally assigned credit quality
Total finance receivables held for investment	$ 696	$ 850
Finance receivables held for investment based on the internally assigned credit quality, percent	19.10%	20.20%

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Accounts Receivable and Finance Receivables (Details 3) (USD $) In Millions	Jul. 02, 2011	Jan. 01, 2011
Finance receivables held for investment by delinquency aging
Financing receivable held for investment, recorded investment, 0 To 30 days past due	$ 3,273	$ 3,694
Financing receivable held for investment, recorded investment, 31 to 60 days past due	69	108
Financing receivable held for investment, recorded investment, 61 days to 90 days past due	42	64
Financing receivable held for investment, recorded investment, greater than 90 days past due	260	347
Total finance receivables held for investment	3,644	4,213
Aviation [Member]
Finance receivables held for investment by delinquency aging
Financing receivable held for investment, recorded investment, 0 To 30 days past due	1,842	1,964
Financing receivable held for investment, recorded investment, 31 to 60 days past due	44	67
Financing receivable held for investment, recorded investment, 61 days to 90 days past due	38	41
Financing receivable held for investment, recorded investment, greater than 90 days past due	61	48
Total finance receivables held for investment	1,985	2,120
Golf Equipment [Member]
Finance receivables held for investment by delinquency aging
Financing receivable held for investment, recorded investment, 0 To 30 days past due	144	171
Financing receivable held for investment, recorded investment, 31 to 60 days past due	11	13
Financing receivable held for investment, recorded investment, 61 days to 90 days past due	3	9
Financing receivable held for investment, recorded investment, greater than 90 days past due	9	19
Total finance receivables held for investment	167	212
Golf Mortgage [Member]
Finance receivables held for investment by delinquency aging
Financing receivable held for investment, recorded investment, 0 To 30 days past due	522	543
Financing receivable held for investment, recorded investment, 31 to 60 days past due	12	12
Financing receivable held for investment, recorded investment, 61 days to 90 days past due		7
Financing receivable held for investment, recorded investment, greater than 90 days past due	85	123
Total finance receivables held for investment	619	685
Timeshare [Member]
Finance receivables held for investment by delinquency aging
Financing receivable held for investment, recorded investment, 0 To 30 days past due	425	533
Financing receivable held for investment, recorded investment, 31 to 60 days past due		14
Financing receivable held for investment, recorded investment, 61 days to 90 days past due		6
Financing receivable held for investment, recorded investment, greater than 90 days past due	85	128
Total finance receivables held for investment	510	681
Structured Capital [Member]
Finance receivables held for investment by delinquency aging
Financing receivable held for investment, recorded investment, 0 To 30 days past due	281	317
Total finance receivables held for investment	281	317
Other Liquidating [Member]
Finance receivables held for investment by delinquency aging
Financing receivable held for investment, recorded investment, 0 To 30 days past due	59	166
Financing receivable held for investment, recorded investment, 31 to 60 days past due	2	2
Financing receivable held for investment, recorded investment, 61 days to 90 days past due	1	1
Financing receivable held for investment, recorded investment, greater than 90 days past due	20	29
Total finance receivables held for investment	$ 82	$ 198

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Accounts Receivable and Finance Receivables (Details 4) (USD $) In Millions	Jul. 02, 2011	Jan. 01, 2011
Impaired Financing Receivables
Recorded investment	$ 787	$ 951
Unpaid principal balance	888	1,057
Related allowance	183	191
Aviation [Member] | Impaired Financing Receivable With Related Allowance For Losses Recorded [Member]
Impaired Financing Receivables
Recorded investment	118	147
Unpaid principal balance	120	144
Related allowance	43	45
Golf Equipment [Member] | Impaired Financing Receivable With Related Allowance For Losses Recorded [Member]
Impaired Financing Receivables
Recorded investment	3	4
Unpaid principal balance	3	5
Related allowance	1	2
Golf Mortgage [Member] | Impaired Financing Receivable With Related Allowance For Losses Recorded [Member]
Impaired Financing Receivables
Recorded investment	198	175
Unpaid principal balance	208	178
Related allowance	44	39
Timeshare [Member] | Impaired Financing Receivable With Related Allowance For Losses Recorded [Member]
Impaired Financing Receivables
Recorded investment	245	355
Unpaid principal balance	281	385
Related allowance	86	102
Other Liquidating [Member] | Impaired Financing Receivable With Related Allowance For Losses Recorded [Member]
Impaired Financing Receivables
Recorded investment	18	16
Unpaid principal balance	24	15
Related allowance	9	3
Impaired Financing Receivable With Related Allowance For Losses Recorded [Member]
Impaired Financing Receivables
Recorded investment	582	697
Unpaid principal balance	636	727
Related allowance	183	191
Aviation [Member] | Impaired Financing Receivable With No Related Allowance For Losses Recorded [Member]
Impaired Financing Receivables
Recorded investment	22	17
Unpaid principal balance	22	21
Golf Mortgage [Member] | Impaired Financing Receivable With No Related Allowance For Losses Recorded [Member]
Impaired Financing Receivables
Recorded investment	96	138
Unpaid principal balance	102	146
Timeshare [Member] | Impaired Financing Receivable With No Related Allowance For Losses Recorded [Member]
Impaired Financing Receivables
Recorded investment	77	69
Unpaid principal balance	77	74
Other Liquidating [Member] | Impaired Financing Receivable With No Related Allowance For Losses Recorded [Member]
Impaired Financing Receivables
Recorded investment	10	30
Unpaid principal balance	51	89
Impaired Financing Receivable With No Related Allowance For Losses Recorded [Member]
Impaired Financing Receivables
Recorded investment	205	254
Unpaid principal balance	252	330
Aviation [Member]
Impaired Financing Receivables
Recorded investment	140	164
Unpaid principal balance	142	165
Related allowance	43	45
Golf Equipment [Member]
Impaired Financing Receivables
Recorded investment	3	4
Unpaid principal balance	3	5
Related allowance	1	2
Golf Mortgage [Member]
Impaired Financing Receivables
Recorded investment	294	313
Unpaid principal balance	310	324
Related allowance	44	39
Timeshare [Member]
Impaired Financing Receivables
Recorded investment	322	424
Unpaid principal balance	358	459
Related allowance	86	102
Other Liquidating [Member]
Impaired Financing Receivables
Recorded investment	28	46
Unpaid principal balance	75	104
Related allowance	$ 9	$ 3

XML



Consolidated Balance Sheets (Unaudited) (Parenthetical) (Manufacturing Group [Member], USD $) In Millions	Jul. 02, 2011	Jan. 01, 2011
Manufacturing Group [Member]
Assets
Accumulated depreciation and amortization on property, plant and equipment	$ 3,040	$ 2,869

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Accounts Receivable and Finance Receivables (Details 5) (USD $) In Millions	6 Months Ended
	Jul. 02, 2011	Jul. 03, 2010
Average recorded investment in impaired loans
Impaired financing receivable average recorded investment, Total	$ 838	$ 1,040
Aviation [Member] | Impaired Financing Receivable With Related Allowance For Losses Recorded [Member]
Average recorded investment in impaired loans
Impaired financing receivable average recorded investment, Total	136	210
Golf Equipment [Member] | Impaired Financing Receivable With Related Allowance For Losses Recorded [Member]
Average recorded investment in impaired loans
Impaired financing receivable average recorded investment, Total	4	4
Golf Mortgage [Member] | Impaired Financing Receivable With Related Allowance For Losses Recorded [Member]
Average recorded investment in impaired loans
Impaired financing receivable average recorded investment, Total	193	183
Timeshare [Member] | Impaired Financing Receivable With Related Allowance For Losses Recorded [Member]
Average recorded investment in impaired loans
Impaired financing receivable average recorded investment, Total	309	357
Other Liquidating [Member] | Impaired Financing Receivable With Related Allowance For Losses Recorded [Member]
Average recorded investment in impaired loans
Impaired financing receivable average recorded investment, Total	18	24
Impaired Financing Receivable With Related Allowance For Losses Recorded [Member]
Average recorded investment in impaired loans
Impaired financing receivable average recorded investment, Total	660	778
Aviation [Member] | Impaired Financing Receivable With No Related Allowance For Losses Recorded [Member]
Average recorded investment in impaired loans
Impaired financing receivable average recorded investment, Total	20	12
Golf Equipment [Member] | Impaired Financing Receivable With No Related Allowance For Losses Recorded [Member]
Average recorded investment in impaired loans
Impaired financing receivable average recorded investment, Total		2
Golf Mortgage [Member] | Impaired Financing Receivable With No Related Allowance For Losses Recorded [Member]
Average recorded investment in impaired loans
Impaired financing receivable average recorded investment, Total	92	116
Timeshare [Member] | Impaired Financing Receivable With No Related Allowance For Losses Recorded [Member]
Average recorded investment in impaired loans
Impaired financing receivable average recorded investment, Total	48	63
Other Liquidating [Member] | Impaired Financing Receivable With No Related Allowance For Losses Recorded [Member]
Average recorded investment in impaired loans
Impaired financing receivable average recorded investment, Total	18	69
Impaired Financing Receivable With No Related Allowance For Losses Recorded [Member]
Average recorded investment in impaired loans
Impaired financing receivable average recorded investment, Total	178	262
Aviation [Member]
Average recorded investment in impaired loans
Impaired financing receivable average recorded investment, Total	156	222
Golf Equipment [Member]
Average recorded investment in impaired loans
Impaired financing receivable average recorded investment, Total	4	6
Golf Mortgage [Member]
Average recorded investment in impaired loans
Impaired financing receivable average recorded investment, Total	285	299
Timeshare [Member]
Average recorded investment in impaired loans
Impaired financing receivable average recorded investment, Total	357	420
Other Liquidating [Member]
Average recorded investment in impaired loans
Impaired financing receivable average recorded investment, Total	$ 36	$ 93

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Accounts Receivable and Finance Receivables (Details 6) (USD $) In Millions	6 Months Ended
	Jul. 02, 2011	Jul. 03, 2010
Allowance for losses
Beginning Balance	$ (342)	$ 341
Provision for losses	24	99
Net Charge-off and Transfers	(67)	(88)
Ending Balance	(299)	352
Ending balance based on individual evaluations	183	181
Ending balance based on collective evaluation	116	171
Individually evaluated for impairment	787	1,007
Collectively evaluated for impairment	2,576	3,789
Balance at end of period	3,363	4,796
Aviation [Member]
Allowance for losses
Beginning Balance	107	114
Provision for losses	16	16
Net Charge-off and Transfers	(17)	(30)
Ending Balance	106	100
Ending balance based on individual evaluations	43	39
Ending balance based on collective evaluation	63	61
Individually evaluated for impairment	140	163
Collectively evaluated for impairment	1,845	2,081
Balance at end of period	1,985	2,244
Golf Equipment [Member]
Allowance for losses
Beginning Balance	16	9
Provision for losses	(2)	7
Net Charge-off and Transfers	(3)	(3)
Ending Balance	11	13
Ending balance based on individual evaluations	1	1
Ending balance based on collective evaluation	10	12
Individually evaluated for impairment	3	7
Collectively evaluated for impairment	164	227
Balance at end of period	167	234
Golf Mortgage [Member]
Allowance for losses
Beginning Balance	79	65
Provision for losses	(1)	51
Net Charge-off and Transfers	(4)	(41)
Ending Balance	74	75
Ending balance based on individual evaluations	44	40
Ending balance based on collective evaluation	30	35
Individually evaluated for impairment	294	304
Collectively evaluated for impairment	325	484
Balance at end of period	619	788
Timeshare [Member]
Allowance for losses
Beginning Balance	106	79
Provision for losses	10	32
Net Charge-off and Transfers	(28)	(1)
Ending Balance	88	110
Ending balance based on individual evaluations	86	99
Ending balance based on collective evaluation	2	11
Individually evaluated for impairment	322	448
Collectively evaluated for impairment	188	634
Balance at end of period	510	1,082
Structured Capital and Other Liquidating
Allowance for losses
Beginning Balance	34	74
Provision for losses	1	(7)
Net Charge-off and Transfers	(15)	(13)
Ending Balance	20	54
Ending balance based on individual evaluations	9	2
Ending balance based on collective evaluation	11	52
Individually evaluated for impairment	28	85
Collectively evaluated for impairment	54	363
Balance at end of period	$ 82	$ 448

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Accounts Receivable and Finance Receivables (Details Textual) (USD $) In Millions, unless otherwise specified	6 Months Ended
	Jul. 02, 2011	Jul. 03, 2010	Jan. 01, 2011
Accounts Receivable and Finance Receivables (Textuals) [Abstract]
Unbillable receivables on U.S. Government contracts within accounts receivable	$ 165		$ 195
Recorded investment in accrual status loans that are 90 days past due	7
Contractual delinquency of 60 plus days as percentage of finance receivables held for investment	8.29%		9.77%
Significant interest income recognized on impaired loans	0	0
Leveraged leases	$ 281	$ 281

XML



Inventories (Details) (USD $) In Millions	Jul. 02, 2011	Jan. 01, 2011
Inventories
Finished goods	$ 989	$ 784
Work in process	2,309	2,125
Raw materials	418	506
Inventories, Gross	3,716	3,415
Progress/milestone payments	(1,154)	(1,138)
Inventories, net	$ 2,562	$ 2,277

XML



Debt (Details) (USD $) In Millions, except Per Share data	6 Months Ended
	Jul. 02, 2011	May 05, 2009
Additional Debt (Textuals) [Abstract]
Stock Price on July 2, 2011	$ 23.94
Amount if converted value in excess of principal	$ 494
Potential incremental share settlement in excess of the face amount of the notes that could be issued upon conversion of convertible notes, after giving effect to the exercise of the call options and warrants	15.6
Potential incremental cash payment in excess of the face amount of the notes upon conversion of convertible notes, after giving effect to the exercise of the call options and warrants	374
Number of days for which common stock price exceeded the threshold price during 30 consecutive trading days	20 days
Period of consecutive trading days during which stock price was measured for having exceeded the conversion threshold price	30 days
Date through which the notes are convertible at the holder's option	Sep. 30, 2011
4.5% Convertible Notes [Member]
Debt (Textuals) [Abstract]
Issued Convertible Notes		$ 600
Maturity date	May 01, 2013
Conversion threshold price for convertible notes	$ 17.06

XML



Accrued Liabilities (Details) (USD $) In Millions	6 Months Ended
	Jul. 02, 2011	Jul. 03, 2010
Accruals
Accrual at the beginning of period	$ 242	$ 263
Provision	111	83
Settlements	(116)	(113)
Adjustments to prior accrual estimates	(7)
Accrual at the end of period	$ 230	$ 233
Maximum [Member]
Accrued Liabilities (Textuals) [Abstract]
Term of Limited warranty and maintenance programs	5 years
Minimum [Member]
Accrued Liabilities (Textuals) [Abstract]
Term of Limited warranty and maintenance programs	1 year

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Derivative Instruments and Fair Value Measurements (Details) (USD $) In Millions	Jul. 02, 2011	Jan. 01, 2011
Fair value of derivative instruments
Derivative Asset, Fair Value	$ 71	$ 73
Derivative Liability, Fair Value	(14)	(8)
Finance Group [Member] | Interest rate exchange contracts [Member] | Fair Value Hedging [Member] | Other Assets [Member]
Fair value of derivative instruments
Derivative Asset, Fair Value	29	34
Finance Group [Member] | Interest rate exchange contracts [Member] | Fair Value Hedging [Member] | Other Liabilities [Member]
Fair value of derivative instruments
Derivative Liability, Fair Value	(5)	(6)
Manufacturing Group [Member] | Cash Flow Hedging [Member] | Other Current Assets [Member]
Fair value of derivative instruments
Foreign currency exchange contracts	42	39
Manufacturing Group [Member] | Cash Flow Hedging [Member] | Accrued Liabilities Current [Member]
Fair value of derivative instruments
Foreign currency exchange contracts	$ (9)	$ (2)

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Derivative Instruments and Fair Value Measurements (Details1) (Finance Group [Member], Fair Value, Measurements, Nonrecurring [Member], Unobservable Inputs (Level 3) [Member], USD $) In Millions	6 Months Ended
	Jul. 02, 2011	Jul. 03, 2010
Finance Group [Member] | Fair Value, Measurements, Nonrecurring [Member] | Unobservable Inputs (Level 3) [Member]
Assets measured at fair value on a nonrecurring basis
Impaired finance receivables, Balance	$ 407	$ 519
Finance receivables held for sale, Balance	180	421
Other assets, Balance	91	87
Impaired finance receivables, Gain (Loss)	(50)	(104)
Finance receivables held for sale, Gain (Loss)	(14)	(15)
Other assets, Gain (Loss)	$ (18)	$ (26)

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Derivative Instruments and Fair Value Measurements (Details 2) (USD $) In Millions	Jul. 02, 2011	Jan. 01, 2011
Manufacturing Group [Member] | Carrying Value [Member]
Carrying value of financial instruments not recorded at fair value
Long-term debt, excluding leases	$ (2,219)	$ (2,172)
Manufacturing Group [Member] | Estimated Fair Value [Member]
Carrying value of financial instruments not recorded at fair value
Long-term debt, excluding leases	(2,776)	(2,698)
Finance Group [Member]
Carrying value of financial instruments not recorded at fair value
Debt	(2,499)	(3,660)
Finance Group [Member] | Carrying Value [Member]
Carrying value of financial instruments not recorded at fair value
Finance receivables held for investment, excluding leases	2,878	3,345
Finance Group [Member] | Estimated Fair Value [Member]
Carrying value of financial instruments not recorded at fair value
Finance receivables held for investment, excluding leases	2,639	3,131
Debt	$ (2,442)	$ (3,528)

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Derivative Instruments and Fair Value Measurements (Details Textual) (USD $) In Millions, unless otherwise specified	6 Months Ended									6 Months Ended
	Jul. 02, 2011	Jul. 02, 2011 Finance Group [Member] Interest rate exchange contracts [Member]	Jan. 01, 2011 Finance Group [Member] Interest rate exchange contracts [Member]	Jul. 02, 2011 Manufacturing Group [Member] Foreign currency exchange contracts [Member]	Jan. 01, 2011 Manufacturing Group [Member] Foreign currency exchange contracts [Member]	Jul. 02, 2011 Foreign currency exchange contracts [Member]	Jul. 02, 2011 Net Investment Hedge [Member]	Jul. 02, 2011 Finance Group [Member]	Jan. 01, 2011 Finance Group [Member]	Jul. 02, 2011 Manufacturing Group [Member]
Derivative Instruments and Fair Value Measurements (Textuals) [Abstract]
Currency effects (after-tax gain) on the effective portion of cash flow hedges, which are reflected in the cumulative translation adjustment account within OCI	$ 27
Additional Derivative Instruments and Fair Value Measurements (Textuals) [Abstract]
Net deferred gain in Accumulated OCI						28	41
Notional amounts		900	1,100	713	635
Investments in other marketable securities								$ 23	$ 51
Portion of fair value of term debt determined based on observable market transactions								44.00%	33.00%
Forward exchange contracts and purchased options maximum maturity period										3 years

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Consolidated Statements of Cash Flows (Unaudited) (USD $) In Millions	6 Months Ended
	Jul. 02, 2011	Jul. 03, 2010
Cash flows from operating activities:
Net income	$ 119	$ 74
Less: Income (loss) from discontinued operations	(4)	(3)
Income from continuing operations	123	77
Non-cash items:
Depreciation and amortization	195	187
Provision for losses on finance receivables held for investment	24	99
Portfolio losses on finance receivables	44	50
Deferred income taxes	57	11
Other, net	79	55
Changes in assets and liabilities:
Accounts receivable, net	36	(94)
Inventories	(276)	(217)
Other assets	(51)	56
Accounts payable	110	152
Accrued and other liabilities	(230)	(285)
Captive finance receivables, net	106	159
Other operating activities, net	2
Net cash provided by (used in) operating activities of continuing operations	219	250
Net cash used in operating activities of discontinued operations	(2)	(3)
Net cash provided by (used in) operating activities	217	247
Cash flows from investing activities:
Finance receivables originated or purchased	(110)	(270)
Finance receivables repaid	422	990
Proceeds on receivable sales	257	343
Capital expenditures	(169)	(83)
Net cash used in acquisitions	(3)	(43)
Proceeds from sale of repossessed assets and properties	72	66
Other investing activities, net	32	36
Net cash provided by (used in) investing activities	501	1,039
Cash flows from financing activities:
Payments on long-term lines of credit	(940)	(502)
Increase in short-term debt	189
Principal payments on long-term debt	(511)	(1,491)
Proceeds from issuance of long-term debt	265	28
Proceeds from option exercises	4	2
Dividends paid	(11)	(11)
Other financing activities, net	(5)
Net cash used in financing activities	(1,009)	(1,974)
Effect of exchange rate changes on cash and equivalents	11	(13)
Net increase (decrease) in cash and equivalents	(280)	(701)
Cash and equivalents at beginning of period	931	1,892
Cash and equivalents at end of period	651	1,191
Manufacturing Group [Member]
Cash flows from operating activities:
Net income	171	152
Less: Income (loss) from discontinued operations	(4)	(3)
Income from continuing operations	175	155
Adjustments to reconcile income from continuing operations to net cash provided by (used in) operating activities:
Dividends received from TFC	179	215
Capital contribution paid to TFC under Support Agreement	(112)	(146)
Non-cash items:
Depreciation and amortization	180	170
Deferred income taxes	50	32
Other, net	66	55
Changes in assets and liabilities:
Accounts receivable, net	36	(94)
Inventories	(279)	(217)
Other assets	(51)	51
Accounts payable	110	152
Accrued and other liabilities	(210)	(206)
Other operating activities, net	2	(1)
Net cash provided by (used in) operating activities of continuing operations	146	166
Net cash used in operating activities of discontinued operations	(2)	(3)
Net cash provided by (used in) operating activities	144	163
Cash flows from investing activities:
Capital expenditures	(169)	(83)
Net cash used in acquisitions	(3)	(43)
Other investing activities, net	(39)	(17)
Net cash provided by (used in) investing activities	(211)	(143)
Cash flows from financing activities:
Payments on long-term lines of credit		(502)
Increase in short-term debt	189
Intergroup financing	(395)	(212)
Principal payments on long-term debt	(13)	(11)
Proceeds from issuance of long-term debt	0
Proceeds from option exercises	4	2
Dividends paid	(11)	(11)
Other financing activities, net	(5)
Net cash used in financing activities	(231)	(734)
Effect of exchange rate changes on cash and equivalents	10	(13)
Net increase (decrease) in cash and equivalents	(288)	(727)
Cash and equivalents at beginning of period	898	1,748
Cash and equivalents at end of period	610	1,021
Finance Group [Member]
Cash flows from operating activities:
Net income	(52)	(78)
Income from continuing operations	(52)	(78)
Non-cash items:
Depreciation and amortization	15	17
Provision for losses on finance receivables held for investment	24	99
Portfolio losses on finance receivables	44	50
Deferred income taxes	7	(21)
Other, net	13
Changes in assets and liabilities:
Other assets	(3)	1
Accrued and other liabilities	(20)	(79)
Net cash provided by (used in) operating activities of continuing operations	28	(11)
Net cash provided by (used in) operating activities	28	(11)
Cash flows from investing activities:
Finance receivables originated or purchased	(244)	(471)
Finance receivables repaid	662	1,350
Proceeds on receivable sales	257	343
Proceeds from sale of repossessed assets and properties	72	66
Other investing activities, net	37	38
Net cash provided by (used in) investing activities	784	1,326
Cash flows from financing activities:
Payments on long-term lines of credit	(940)
Intergroup financing	395	212
Principal payments on long-term debt	(498)	(1,480)
Proceeds from issuance of long-term debt	265	28
Capital contributions paid to TFC under Support Agreement	112	146
Other capital contributions paid to Finance group	40	20
Dividends paid	(179)	(215)
Net cash used in financing activities	(805)	(1,289)
Effect of exchange rate changes on cash and equivalents	1
Net increase (decrease) in cash and equivalents	8	26
Cash and equivalents at beginning of period	33	144
Cash and equivalents at end of period	$ 41	$ 170

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Income Tax Expense [Details] (USD $) In Millions, unless otherwise specified	3 Months Ended		6 Months Ended
	Jul. 02, 2011	Jul. 03, 2010	Jul. 02, 2011	Jul. 03, 2010
Income Tax Expense [Textuals] [Abstract]
Continuing operations income tax rate	32.00%	18.00%	32.00%	30.00%
Federal statutory income tax rate	35.00%	35.00%	35.00%	35.00%
Effective tax rate reconciliation, Benefits related to changes in functional currency of Canadian subsidiaries		$ 10		$ 10
Effective tax rate reconciliation, Write-off of deferred tax asset				$ 11

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Segment information (Details) (USD $) In Millions	3 Months Ended		6 Months Ended
	Jul. 02, 2011	Jul. 03, 2010	Jul. 02, 2011	Jul. 03, 2010
Revenues
Manufacturing revenues	$ 2,695	$ 2,653	$ 5,148	$ 4,787
Finance revenues	33	56	59	132
Total revenues	2,728	2,709	5,207	4,919
SEGMENT OPERATING PROFIT
Segment profit	196	161	319	257
Corporate expenses and other, net	(23)	(17)	(62)	(54)
Interest Expense, net for Manufacturing group	(38)	(35)	(76)	(71)
Special charges		(10)		(22)
Income from continuing operations before income taxes	135	99	181	110
Manufacturing Group [Member] | Cessna [Member]
Revenues
Manufacturing revenues	652	635	1,208	1,068
SEGMENT OPERATING PROFIT
Segment profit	5	3	(33)	(21)
Cessna [Member]
SEGMENT OPERATING PROFIT
Special charges		(6)		(16)
Manufacturing Group [Member] | Bell [Member]
Revenues
Manufacturing revenues	872	823	1,621	1,441
SEGMENT OPERATING PROFIT
Segment profit	120	108	211	182
Bell [Member]
SEGMENT OPERATING PROFIT
Special charges				(1)
Manufacturing Group [Member] | Textron Systems [Member]
Revenues
Manufacturing revenues	452	534	897	992
SEGMENT OPERATING PROFIT
Segment profit	49	70	102	125
Textron Systems [Member]
SEGMENT OPERATING PROFIT
Special charges		(1)		(1)
Manufacturing Group [Member] | Industrial [Member]
Revenues
Manufacturing revenues	719	661	1,422	1,286
SEGMENT OPERATING PROFIT
Segment profit	55	51	116	100
Finance [ Member]
SEGMENT OPERATING PROFIT
Segment profit	(33)	(71)	(77)	(129)
Special charges		(3)		(6)
Manufacturing Group [Member]
SEGMENT OPERATING PROFIT
Segment profit	$ 229	$ 232	$ 396	$ 386

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Basis of Presentation

6 Months Ended

Jul. 02, 2011

Basis Of Presentation [Abstract]

Basis of Presentation

Note 1: Basis of Presentation

Our consolidated financial statements include the accounts of Textron Inc. and its majority-owned subsidiaries. We have prepared these unaudited consolidated financial statements in accordance with accounting principles generally accepted in the U.S. for interim financial information. Accordingly, these interim financial statements do not include all of the information and footnotes required by accounting principles generally accepted in the U.S. for complete financial statements. The consolidated interim financial statements included in this quarterly report should be read in conjunction with the consolidated financial statements included in our Annual Report on Form 10-K for the year ended January 1, 2011. In the opinion of management, the interim financial statements reflect all adjustments (consisting only of normal recurring adjustments) that are necessary for the fair presentation of our consolidated financial position, results of operations and cash flows for the interim periods presented. The results of operations for the interim periods are not necessarily indicative of the results to be expected for the full year. Certain prior period amounts have been reclassified to conform with the current year presentation.

Our financings are conducted through two separate borrowing groups. The Manufacturing group consists of Textron Inc. consolidated with its majority-owned subsidiaries that operate in the Cessna, Bell, Textron Systems and Industrial segments. The Finance group, which also is the Finance segment, consists of Textron Financial Corporation, its consolidated subsidiaries and three other finance subsidiaries owned by Textron Inc. We designed this framework to enhance our borrowing power by separating the Finance group. Our Manufacturing group operations include the development, production and delivery of tangible goods and services, while our Finance group provides financial services. Due to the fundamental differences between each borrowing group’s activities, investors, rating agencies and analysts use different measures to evaluate each group’s performance. To support those evaluations, we present balance sheet and cash flow information for each borrowing group within the consolidated financial statements. All significant intercompany transactions are eliminated from the consolidated financial statements, including retail and wholesale financing activities for inventory sold by our Manufacturing group and financed by our Finance group.

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Special Charges

6 Months Ended

Jul. 02, 2011

Special Charges [Abstract]

Special Charges

Note 2: Special Charges

In 2010, special charges included restructuring costs incurred under a restructuring program that was completed at the end of 2010. There were no special charges in the first half of 2011.

Restructuring costs by segment and type for the three and six months ended July 3, 2010 are as follows:

	Severance			Contract
(In millions)	Costs			Terminations		Total
Three Months Ended July 3, 2010
Cessna	$	6		$	—	$	6
Textron Systems		1			—		1
Finance		2			1		3
	$	9		$	1	$	10
Six Months Ended July 3, 2010
Cessna	$	14		$	2	$	16
Bell		1			—		1
Textron Systems		1			—		1
Finance		5			1		6
Corporate		(2	)		—		(2	)
	$	19		$	3	$	22

An analysis of our restructuring reserve activity is summarized below:

	Severance			Contract
(In millions)	Costs			Terminations			Total
Balance at January 1, 2011	$	57		$	5		$	62
Cash paid		(33	)		(1	)		(34	)
Balance at July 2, 2011	$	24		$	4		$	28

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Retirement Plans

6 Months Ended

Jul. 02, 2011

Retirement Plans [Abstract]

Retirement Plans

Note 3: Retirement Plans

We provide defined benefit pension plans and other postretirement benefits to eligible employees. The components of net periodic benefit cost for these plans are as follows:

							Postretirement Benefits
	Pension Benefits						Other Than Pensions
	July 2,			July 3,			July 2,			July 3,
(In millions)	2011			2010			2011			2010
Three Months Ended
Service cost	$	32		$	31		$	2		$	2
Interest cost		82			79			8			8
Expected return on plan assets		(98	)		(92	)		—			—
Amortization of prior service cost (credit)		4			4			(2	)		(1	)
Amortization of net loss		19			9			3			3
Net periodic benefit cost	$	39		$	31		$	11		$	12
Six Months Ended
Service cost	$	64		$	62		$	4		$	4
Interest cost		164			158			16			16
Expected return on plan assets		(196	)		(184	)		—			—
Amortization of prior service cost (credit)		8			8			(3	)		(2	)
Amortization of net loss		38			18			6			6
Net periodic benefit cost	$	78		$	62		$	23		$	24

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Comprehensive Income

6 Months Ended

Jul. 02, 2011

Comprehensive Income [Abstract]

Comprehensive Income

Note 4: Comprehensive Income

Our comprehensive income, net of taxes, is provided below:

	Three Months Ended					Six Months Ended
	July 2,		July 3,			July 2,		July 3,
(In millions)	2011		2010			2011		2010
Net income	$	90	$	82		$	119	$	74
Other comprehensive income (loss):
Recognition of prior service cost and unrealized losses on pension and postretirement benefits		15		10			33		20
Deferred gains on hedge contracts		2		—			8		7
Foreign currency translation and other		3		(32	)		15		(41	)
Comprehensive income	$	110	$	60		$	175	$	60