Shareholders' Equity

12 Months Ended

Dec. 31, 2011

Shareholders' Equity [Abstract]

Shareholder's Equity

Note 10. Shareholders’ Equity

Capital Stock

We have authorization for 15 million shares of preferred stock with a par value of $0.01 and 500 million shares of common stock with a par value of $0.125. Outstanding common stock activity for the three years ended December 31, 2011 is presented below:

(In thousands)	2011		2010		2009
Beginning balance		275,739		272,272		242,041
Exercise of stock options		177		336		10
Conversion of preferred stock to common stock		—		31		556
Issued to Textron Savings Plan		2,686		2,682		5,460
Common stock offering		—		—		23,805
Other issuances		271		418		400
Ending balance		278,873		275,739		272,272

Reserved Shares of Common Stock

At the end of 2011, common stock reserved for the conversion of convertible notes, the exercise of outstanding stock options and warrants, and the issuance of shares upon vesting of outstanding restricted stock units totaled 62 million shares. See the “Convertible Senior Notes and Related Transactions” section in Note 8 for information on our convertible debt.

Income per Common Share

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

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

(In thousands)	2011		2010		2009
Basic weighted-average shares outstanding		277,684		274,452		262,923
Dilutive effect of:
Convertible notes and warrants		28,869		27,450		—
Stock options and restricted stock units		702		653		—
Diluted weighted-average shares outstanding		307,255		302,555		262,923

In 2011 and 2010, stock options to purchase 5 million and 7 million shares, respectively, of common stock outstanding are excluded from our calculation of diluted weighted-average shares outstanding as the exercise prices were greater than the average market price of our common stock for those periods. These securities could potentially dilute EPS in the future. In 2009, the potential dilutive effect of 8 million weighted-average shares of 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 was excluded from the computation of diluted weighted-average shares outstanding as the shares would have an anti-dilutive effect on the loss from continuing operations.

Other Comprehensive Income (Loss)

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

(In millions)	Pre-Tax Amount			Tax (Expense) Benefit			After-Tax Amount
2011
Foreign currency translation adjustment	$	(1	)	$	(2	)	$	(3	)
Deferred gains on hedge contracts		(7	)		2			(5	)
Pension adjustments		(527	)		177			(350	)
Other reclassification adjustments		75			(26	)		49
	$	(460	)	$	151		$	(309	)
2010
Foreign currency translation adjustment	$	44		$	(46	)	$	(2	)
Deferred gains on hedge contracts		17			(3	)		14
Pension adjustments		(186	)		74			(112	)
Recognition of foreign currency translation loss (see Note 11)		91			(17	)		74
Other reclassification adjustments		49			(18	)		31
	$	15		$	(10	)	$	5
2009
Foreign currency translation adjustment	$	16		$	7		$	23
Deferred gains on hedge contracts		90			(23	)		67
Pension adjustments		6			(31	)		(25	)
Reclassification adjustments		30			(9	)		21
Pension curtailment		25			(10	)		15
	$	167		$	(66	)	$	101

Components of Accumulated Other Comprehensive Loss

(In millions)	December 31, 2011			January 1, 2011
Foreign currency translation adjustment	$	79		$	82
Pension and postretirement benefit adjustments		(1,711	)		(1,425	)
Deferred gains on hedge contracts		7			27
Accumulated other comprehensive loss	$	(1,625	)	$	(1,316	)