Textron (TXT) 10-K risk factor changes: FY2017 vs FY2016

During [removed: 2016,] [added: 2017,] we derived approximately [removed: 25%] [added: 22%] of our revenues from sales to a variety of U.S. Government entities.

[added: We also enter into] “fee for service” contracts with the U.S. Government where we retain ownership of, and consequently the risk of loss on, aircraft [removed: and equipment supplied to perform under these contracts.]

Our [removed: U.S. Government contracts contain provisions that] [added: failure to comply with procurement regulations and requirements could] allow the U.S. Government to [removed: unilaterally] suspend or debar us from receiving new contracts for a period of time, reduce the value of existing contracts, issue modifications to a contract, [added: withhold cash on contract payments,] and control and potentially prohibit the export of our products, services and associated [removed: materials.][added: materials, any of which could negatively impact our results of operations, financial condition or liquidity.]

Under fixed-price contracts, [removed: as a general rule,] [added: generally] we receive a fixed price irrespective of the actual costs we incur, and, consequently, any costs in excess of the fixed price are absorbed by us.

[removed: For example, the government has expressed a preference for requiring] [added: Additionally, fixed-price contracts may require] progress payments rather than performance based payments [removed: on new fixed-price contracts,] which [removed: if implemented, delays] [added: can delay] our ability to recover a significant amount of costs incurred on a contract and thus [removed: affects] [added: affect] the timing of our cash flows.

In addition, a [removed: majority] [added: substantial number] of the new originations in our finance receivable portfolio are cross-border transactions for aircraft sold outside of the U.S. Cross-border transactions present additional challenges and risks in realizing upon collateral in the event of borrower default, which may result in difficulty or delay in collecting on the related finance receivables.

[removed: In addition,] we outsource certain support functions, including certain global IT infrastructure services, to third-party service providers.

In addition, as a U.S. defense contractor, we face certain security threats, including threats to our IT infrastructure, unlawful attempts to gain access to our [removed: proprietary or classified] information and threats to the physical security of our facilities and employees, as do our customers, suppliers, subcontractors and joint venture partners.

While we have experienced cybersecurity attacks, we have not suffered any material losses relating to such attacks, and we believe our threat detection and [added: mitigation processes and procedures are robust.]

[removed: An IT system failure, issues related to implementation of new IT systems] [added: Future attacks] or breach of data security, whether of our systems or the systems of our service providers or other third parties who may have access to our data for business purposes, could disrupt our operations, cause the loss of business information or compromise confidential [removed: information.][added: information, exposing us to liability or regulatory action.]

Such an incident also could require significant management attention and [removed: resources and increased] [added: resources, increase] costs, [added: which may not be covered by insurance,] and [removed: could] [added: result in reputational damage, potentially] adversely [removed: affect] [added: affecting] our competitiveness and our results of operations.

[removed: In addition, the] [added: The] market for our product offerings may not develop or continue to expand as we currently anticipate.

During [removed: 2016,] [added: 2017,] we derived approximately 38% of our revenues from international business, including U.S. exports, and we expect international revenues to continue to increase.

Although we maintain policies and procedures designed to facilitate compliance with these laws, a violation of such laws by any of our international representatives, [removed: consultants, joint ventures, business partners, subcontractors or suppliers, even if prohibited by our policies, could have an adverse effect on our business and reputation.]

[added: For example, both U.S. and foreign governments and government agencies regulate the] aviation industry, and they may impose new regulations with additional aircraft security or other requirements or restrictions, including, for example, restrictions and/or fees related to carbon emissions levels.

Changes in environmental [added: and climate change] laws and regulations, including [removed: those enacted in response] [added: laws relating] to [removed: climate change concerns and other actions known as “green initiatives,”] [added: greenhouse gas emissions,] could lead to the necessity for new or additional investment in product designs or manufacturing processes and could increase environmental compliance expenditures, including costs to defend regulatory reviews.

[removed: This is particularly true for our defined benefit pension plans, where required contributions to those plans and related] expenses are driven by, among other things, our assumptions of the expected long-term rate of return on plan assets, the discount rate used for future payment obligations and the rates of future cost growth.

Approximately [removed: 7,300,] [added: 7,200,] or [removed: 28%,] [added: 27%,] of our U.S. employees are unionized, and many of our non-U.S. employees are represented by organized councils.

Further uncertainty with respect to ongoing programs could also result in the event that the U.S. Government finances its operations through temporary funding measures such as “continuing resolutions” rather than full-year appropriations.

and equipment supplied to perform under these contracts.

New laws, regulations or procurement requirements or changes to current ones (including, for example, regulations related to cybersecurity) can significantly increase our costs and risks and reduce our profitability.

_The use of multi-award contracts by the U.S. Government may increase competition and pricing pressure._

The U.S. Government increasingly relies upon competitive contract award types, including indefinite-delivery, indefinite-quantity and multi-award contracts, which have the potential to create greater competition and increased pricing pressure, as well as to increase our cost by requiring that we submit multiple bids.

In addition, multi-award contracts require that we make sustained efforts to obtain task orders and delivery orders under the contract.

Further, the competitive bidding process is costly and demands managerial time to prepare bids and proposals for contracts that may not be awarded to us or may be split among competitors.

_Our profitability and cash flow may vary depending on the mix of our government contracts and our ability to control costs_.

Fixed-price incentive-based fee arrangements provide that allowable costs incurred are reimbursable but are subject to a cost-share which could negatively impact our profitability.

In addition,

In addition, our investments in equipment or technology that we believe will enable us to obtain future service contracts for our U.S. Government or other customers may not result in contracts or revenues sufficient to offset such investment.

consultants, joint ventures, business partners, subcontractors or suppliers, even if prohibited by our policies, could have an adverse effect on our business and reputation.

This is particularly true for our defined benefit pension plans, where required contributions to those plans and related

The Tax Cuts and Jobs Act (the “Act”) was enacted on December 22, 2017 and significantly changed U.S. income tax law.

We have made provisional estimates of the impact of the Act on the remeasurement of our net deferred tax assets and the one-time transition tax in 2017.

However, the financial reporting effects of the Act are complex and are subject to change as guidance interpreting the Act is issued.

The effect of such guidance, as well as any additional tax reform legislation in the United States or elsewhere, could adversely affect our effective tax rate, have a material impact on the value of our deferred tax assets or increase our future U.S. tax expense.

We also enter into

_Cost overruns on U.S. Government contracts could subject us to losses or adversely affect our future business._

Additionally, U.S. Government procurement policies increasingly favor fixed-price incentive-based fee arrangements rather than traditional fixed-price contracts; these fee arrangements could negatively impact our profitability.

Other current U.S. Government policies could negatively impact our working capital and cash flow.

mitigation processes and procedures are robust.

For example, both U.S. and foreign governments and government agencies regulate the

Financial highlights of [removed: 2016] [added: 2017] include the following:

· Generated [removed: $988] [added: $947] million in cash from operating activities of our manufacturing [removed: businesses.][added: businesses, net of a $300 million discretionary contribution to fund a U.S. pension plan.]

· Returned [removed: $263] [added: $603] million to our shareholders through share repurchases and dividend payments.

| _(Dollars in millions)_ | | [added: 2017 | |] 2016 | | 2015 | | [removed: 2014] [added: 2017] | | 2016 | [removed: | 2015 |]

| Revenues | $ | [removed: 13,788] [added: 14,198] | $ | [removed: 13,423] [added: 13,788] | $ | [removed: 13,878] [added: 13,423] | | 3% | | [removed: (3)%] [added: 3%] |

· Higher Textron Aviation revenues of $99 million, primarily due to the impact from an acquired business of $66 million and higher volume and mix of $42 million, largely the result of higher Citation jet volume of $165 million, partially offset by lower [added: commercial] turboprop volume.

· Lower Bell revenues of $215 million, primarily due to a decrease in commercial revenues of $269 million, largely reflecting lower [added: commercial] aircraft deliveries.

Revenues [removed: decreased $455] [added: increased $410] million, 3%, in [removed: 2015,] [added: 2017,] compared with [removed: 2014, as decreases] [added: 2016, largely driven by increases] in the [removed: Bell and] [added: Industrial,] Textron Systems [removed: segments were] [added: and Bell segments,] partially offset by [removed: higher] [added: lower] revenues [removed: in] [added: at] the Textron Aviation [removed: and Industrial segments.][added: segment.]

The net revenue [removed: decrease] [added: increase] included the following factors:

[removed: · Higher Industrial segment revenues of $206 million, primarily due to] [added: Revenues were also impacted by] higher volume of [removed: $357] [added: $77] million, [removed: largely in] [added: primarily related to] the Fuel Systems and Functional Components product [removed: line,] [added: line] and [removed: the] [added: a favorable] impact [removed: from acquisitions] of [removed: $103 million, partially offset by an unfavorable] [added: $27 million from] foreign [removed: exchange impact of $240 million.][added: exchange, primarily related to the Euro.]

| Cost of sales | $ | [removed: 11,311] [added: 11,795] | $ | [removed: 10,979] [added: 11,311] | $ | [removed: 11,421] [added: 10,979] | | [removed: 3%] [added: 4%] | | [removed: (4)%] [added: 3%] |

| Gross margin as a percentage of Manufacturing revenues | | [removed: 17.5%] [added: 16.5%] | | [removed: 17.7%] [added: 17.5%] | | [removed: 17.1%] [added: 17.7%] | | | | |

| Selling and administrative expense | $ | [removed: 1,304] [added: 1,337] | $ | 1,304 | $ | [removed: 1,361] [added: 1,304] | | [removed: —] [added: 3%] | | [removed: (4)%] [added: —] |

[removed: In 2016, cost] [added: Cost] of sales increased $332 million, 3%, [added: in 2016,] compared with 2015, largely due to higher volume at the Textron Systems, Industrial and Textron Aviation segments, and an increase from acquired businesses.

| Interest expense | $ | 174 | $ | [removed: 169] [added: 174] | $ | [removed: 191] [added: 169] | | [removed: 3%] [added: —] | | [removed: (12)%] [added: 3%] |

Consolidated interest expense increased $5 [removed: million, 3%,] [added: million] in 2016, compared with 2015, primarily due to higher average debt outstanding.

Special charges recorded [removed: in 2016 by segment] [added: for these plans] are as follows:

| _(In millions)_ | | Severance Costs | | Asset Impairments | | Contract Terminations and Other | | [added: Acquisition Integration/ Transaction Costs | |] Total Special Charges |

| Textron Systems | [removed: $] | [removed: 15] [added: 6] | [removed: $] | [removed: 34] [added: 16] | [removed: $] | [removed: 13] [added: (1)] | [removed: $] | [removed: 62] [added: —] | [added: | 21 |]

| Textron Aviation | | [removed: 33] [added: 11] | | [removed: 1] [added: 17] | | [removed: 1] [added: —] | | [removed: 35] [added: —] | [added: | 28 |]

| Industrial | [added: $] | [removed: 17] [added: 26] | [added: $] | [removed: 2] [added: 1] | [added: $] | [removed: 1] [added: 19] | [added: $] | [removed: 20] [added: 12] | [added: $ | 58 |]

| Bell | | [removed: 4] [added: 3] | | [removed: 1] [added: 12] | | [added: 8 | |] — | | [removed: 5] [added: 23] |

| Corporate | | 1 | | — | | — | | [added: — | |] 1 |

| [added: Total] | $ | 70 | $ | 38 | $ | 15 | $ | [added: — | $ |] 123 |

The total headcount reduction [removed: related to restructuring activities] [added: under this plan] is expected to be approximately [removed: 1,700] [added: 2,100] positions, representing [removed: approximately] 5% of our workforce.

| | | | | [removed: 2016] [added: 2017] | | [removed: 2015] [added: 2016] | | [removed: 2014] [added: 2015] |

| Effective tax rate | | | | [removed: 3.8%] [added: 59.8%] | | [removed: 28.1%] [added: 3.8%] | | [removed: 29.1%] [added: 28.1%] |

Approximately [removed: 25%] [added: 22%] of our [removed: 2016] [added: 2017] revenues were derived from contracts with the U.S. Government.

| Revenues | $ | [removed: 4,921] [added: 4,686] | $ | [removed: 4,822] [added: 4,921] | $ | [removed: 4,568] [added: 4,822] | | [removed: 2%] [added: (5)%] | | [removed: 6%] [added: 2%] |

| Operating expenses | | [removed: 4,532] [added: 4,383] | | [removed: 4,422] [added: 4,532] | | [removed: 4,334] [added: 4,422] | | [removed: 2%] [added: (3)%] | | 2% |

| Segment profit | | [added: 303 | |] 389 | | 400 | | [removed: 234] [added: (22)%] | | (3)% | [removed: | 71% |]

| Profit margin | | [removed: 7.9%] [added: 6.5%] | | [removed: 8.3%] [added: 7.9%] | | [removed: 5.1%] [added: 8.3%] | | | | |

| Backlog | $ | [removed: 1,041] [added: 1,180] | $ | [removed: 1,074] [added: 1,041] | $ | [removed: 1,365] [added: 1,074] | | [removed: (3)%] [added: 13%] | | [removed: (21)%] [added: (3)%] |

| _(In millions)_ | | | | | | [removed: | |] 2016 versus 2015 |

The increase in volume and mix was largely due to higher Citation jet volume of $165 million, partially offset by lower [added: commercial] turboprop volume.

Factors contributing to the [removed: 2015] [added: 2017] year-over-year revenue change are provided below:

| Acquisitions | | | | | | | [removed: $] | [removed: 219] [added: 10] |

| Volume and mix | | | | | | | [added: $] | [removed: 35] [added: (99)] |

| Total change | | | | | | | $ | [removed: 254] [added: (86)] |

We delivered [removed: 166] [added: 180] Citation [removed: jets and 117] [added: jets, 86] King Air turboprops [added: and 13 Beechcraft T-6 trainers] in [removed: 2015,] [added: 2017,] compared with [removed: 159] [added: 178] Citation [removed: jets and 113] [added: jets, 106] King Air turboprops [added: and 38 Beechcraft T-6 trainers] in [removed: 2014.][added: 2016.]

During 2017, we maintained focus on investing in our businesses through continued development of new products and services.

We also completed the strategic acquisition of Arctic Cat, a platform to expand and grow our Textron Specialized Vehicles business.

In addition, we continued to take cost reduction actions through the execution of our restructuring plans and integration activities in order to realign our businesses, improve overall operating efficiency and better position our businesses for the future.

All of these activities support our overall strategy of long-term growth and expansion of our product portfolio and the creation of long-term shareholder value.

· Invested $634 million in research and development activities, $423 million in capital expenditures and $316 million for the acquisition of Arctic Cat.

· Continued execution of our 2016 restructuring plan and the restructuring and integration of the Arctic Cat acquisition, resulting in special charges of $130 million.

· Higher Industrial revenues of $492 million, primarily due to the impact from the acquisition of Arctic Cat described in the Segment Analysis section below.

· Higher Textron Systems revenues of $84 million, primarily due to higher volume of $176 million in the Marine and Land Systems product line, partially offset by lower volume in the other products lines.

· Higher Bell revenues of $78 million, primarily due to an increase in commercial revenues of $89 million, largely reflecting higher commercial aircraft deliveries.

· Lower Textron Aviation revenues of $235 million, primarily due to lower volume and mix of $307 million, largely the result of lower military and commercial turboprop volume.

| _(Dollars in millions)_ | | 2017 | | 2016 | | 2015 | | 2017 | | 2016 |

In 2017, cost of sales increased $484 million, 4%, and selling and administrative expense increased $33 million, 3%, compared with 2016, primarily due to an increase from acquired businesses, largely Arctic Cat.

Gross margin as a percentage of Manufacturing revenues decreased 100 basis points from 2016, primarily due to lower margins at the Textron Systems segment, largely reflecting an unfavorable impact from net program adjustments, and the Industrial segment, which included the impact from the Arctic Cat acquisition.

| _(Dollars in millions)_ | | 2017 | | 2016 | | 2015 | | 2017 | | 2016 |

Under this plan, Textron Systems discontinued production of its sensor-fuzed weapon product within its Weapons and Sensors operating unit, we combined our Jacobsen business with the Textron Specialized Vehicles business by consolidating facilities and general and administrative functions, and we reduced headcount at Textron Aviation, as well as other businesses and corporate functions.

In December 2017, we decided to take additional restructuring actions to further consolidate operating facilities and streamline product lines, primarily within the Bell, Textron Systems and Industrial segments, which resulted in additional special charges of $45 million in the fourth quarter of 2017.

We recorded total special charges of $213 million since the inception of the 2016 plan, which included $97 million of severance costs, $84 million of asset impairments and $32 million in contract terminations and other costs.

Of these amounts, $83 million was incurred at Textron Systems, $63 million at Textron Aviation, $38 million at Industrial, $28 million at Bell and $1 million at Corporate.

In connection with the acquisition of Arctic Cat, as discussed in Note 2 to the Consolidated Financial Statements, we initiated a restructuring plan in the first quarter of 2017 to integrate this business into our Textron Specialized Vehicles business within the Industrial segment and reduce operating redundancies and maximize efficiencies.

Under the Arctic Cat plan, we recorded restructuring charges of $28 million in 2017, which included $19 million of severance costs, largely related to change-of-control provisions, and $9 million of contract termination and other costs.

In addition, we recorded $12 million of acquisition-related integration and transaction costs in 2017.

| 2017 | | | | | | | | | | |

| Total | $ | 46 | $ | 46 | $ | 26 | $ | 12 | $ | 130 |

| 2016 | | | | | | | | | | |

| Industrial | $ | 17 | $ | 2 | $ | 1 | $ | — | $ | 20 |

| Bell | | 4 | | 1 | | — | | — | | 5 |

| Textron Systems | | 15 | | 34 | | 13 | | — | | 62 |

In 2017, our effective tax rate was significantly higher than the U.S. federal statutory tax rate of 35%, largely due to the impact from the Tax Cuts and Jobs Act (the “Act”).

In the fourth quarter of 2017, we recorded a provisional estimate of $266 million for one-time adjustments resulting from the Act.

Approximately $154 million of this provisional estimate represents a charge resulting from the remeasurement of our U.S. federal deferred tax assets and liabilities, and the remainder represents a provision for the transition tax on post-1986 earnings and profits previously deferred from U.S. income taxes.

In addition, the Act reduces the U.S. federal corporate tax rate from 35% to 21%, which is expected to lower our effective tax rate for 2018 and future years.

| _(Dollars in millions)_ | | 2017 | | 2016 | | 2015 | | 2017 | | 2016 |

| _(In millions)_ | | | | | | | | 2017 versus 2016 |

| Volume and mix | | | | | | | $ | (307) |

Textron Aviation’s revenues decreased $235 million, 5%, in 2017, compared with 2016, primarily due to lower volume and mix of $307 million, largely the result of lower military and commercial turboprop volume.

Textron Aviation’s operating expenses decreased $149 million, 3%, in 2017, compared with 2016, largely due to lower net volume as described above.

| _(In millions)_ | | | | | | | | 2017 versus 2016 |

| Pricing, net of inflation | | | | | | | | 56 |

Segment profit at Textron Aviation decreased $86 million, 22%, in 2017, compared with 2016, primarily as a result of lower net volume and mix as described above.

The favorable impact of $56 million from pricing, net of inflation, was largely offset by an unfavorable impact of $43 million from performance and other, largely reflecting higher research, development and engineering costs, which included costs related to the Scorpion program in 2017.

In 2016, revenues and segment profit grew by 3% and 4%, respectively, despite challenging and weaker than expected end markets, most notably the business jet and commercial helicopter markets.

We continued to invest in our businesses through the ongoing development of new products and services, and the completion of several strategic business acquisitions to support growth and create long-term shareholder value.

· Invested $677 million in research and development activities, $446 million in capital expenditures and $186 million in business acquisitions.

· Initiated a plan to restructure and realign our businesses to improve overall operating efficiency and to better position our businesses for the future, which resulted in special charges of $123 million.

· Lower Bell revenues of $791 million, largely due to a decrease of $577 million in V-22 program revenues, primarily reflecting lower aircraft deliveries, a decrease of $193 million in commercial revenues, largely related to a change in mix of commercial aircraft sold during the period, and lower commercial aftermarket volume of $92 million.

· Lower Textron Systems revenues of $104 million, primarily due to lower volume in the Unmanned Systems product line, largely reflecting lower deliveries in the fourth quarter.

· Higher Textron Aviation revenues of $254 million, primarily due to the first quarter impact of the Beechcraft acquisition of $219 million and higher volume and mix of $35 million.

We completed the acquisition of Beechcraft on March 14, 2014, and as a result, 2014 does not reflect a full twelve months of its revenues.

Selling and administrative expense was unchanged in 2016, compared with 2015.

Cost of sales decreased $442 million, 4%, in 2015, compared with 2014, largely due to lower volume at the Bell segment and a $217 million favorable foreign exchange impact mostly from the strengthening of the U.S. dollar against the Euro, partially offset by higher volume at the Industrial segment, and an increase from acquired businesses, primarily Beechcraft.

The 60 basis-point improvement in gross margin was largely driven by the Textron Aviation segment, primarily reflecting the net impact of the Beechcraft acquisition, which includes the benefit of the integrated cost structure of Beechcraft and Cessna, and lower amortization of fair value step-up adjustments related to acquired Beechcraft inventories.

Selling and administrative expense decreased $57 million, 4%, in 2015, compared with 2014.

Significant factors contributing to the decrease in expense include a favorable impact from ongoing cost reduction activities at the Bell segment and lower share-based compensation expense of $22 million, which were partially offset by an increase from acquired businesses, primarily Beechcraft.

In 2015, consolidated interest expense decreased $22 million, 12%, compared with 2014, primarily due to favorable borrowing costs and lower average debt outstanding.

| --- | --- | --- | --- | --- | --- | --- | --- | --- |

As part of this plan, Textron Systems will discontinue production of its sensor-fuzed weapon product by the end of the first quarter of 2017, resulting in headcount reductions, facility consolidations and asset impairments within its Weapons and Sensors operating unit.

Historically, sensor-fuzed weapon sales have relied on foreign military and direct commercial international customers for which both executive branch and congressional approval is required.

The political environment has made it difficult to obtain these approvals.

Within our Industrial segment, the plan provides for the combination of our Jacobsen business with the Textron Specialized Vehicles businesses, resulting in the consolidation of certain facilities and general and administrative functions and related headcount reductions.

In addition, we initiated restructuring actions, principally headcount reductions, in our Textron Aviation segment, as well as other businesses and corporate

functions.

We expect to incur additional pre-tax charges under this plan in the range of $17 million to $47 million, primarily related to contract termination, severance, facility consolidation and relocation costs.

The remaining charges are expected to primarily be in the Industrial, Textron Systems and Textron Aviation segments.

We anticipate the plan to be substantially completed by the end of the first half of 2017.

Total expected cash outlays for restructuring activities are estimated to be approximately $100 million to $120 million, of which $22 million was paid in 2016 and the remainder will be paid in 2017.

In 2014, we executed a restructuring program in our Textron Aviation segment to align the Cessna and acquired Beechcraft business, reduce operating redundancies and maximize operating efficiencies.

We recorded special charges of $41 million related to these restructuring activities in 2014, along with $11 million of transaction costs from the acquisition of Beechcraft.

| _(In millions)_ | | | | | | | | 2015 versus 2014 |

Textron Aviation’s revenues increased $254 million, 6%, in 2015, compared with 2014, primarily due to the first quarter impact of the Beechcraft acquisition of $219 million and higher volume and mix of $35 million.

Textron Aviation’s operating expenses increased $88 million in 2015, compared with 2014, primarily due to the incremental operating costs related to the Beechcraft acquisition and higher volume, partially offset by lower amortization of $51 million related to fair value step-up adjustments of acquired Beechcraft inventories sold during the period.

Segment profit at Textron Aviation increased $166 million, 71%, in 2015, compared with 2014, primarily due to an increase in performance and other, reflecting the net profit impact from the Beechcraft acquisition, which includes the benefit of the integrated cost structure of Beechcraft and Cessna, and lower amortization of $51 million related to fair value step-up adjustments as described above.

Segment profit was also favorably impacted by higher volume as well as the mix of products sold.

Textron Aviation’s backlog decreased $33 million, 3%, in 2016 and $291 million, 21%, in 2015.

Bell’s revenues decreased $791 million, 19%, in 2015, compared with 2014, primarily due to the following factors:

· $577 million decrease in V-22 program revenues, primarily reflecting lower aircraft deliveries, as we delivered 24 V-22 aircraft in 2015, compared with 37 V-22 aircraft in 2014.

· $193 million decrease in commercial revenues, largely related to a change in mix of commercial aircraft sold during the period, reflecting lower sales activity across the commercial helicopter market, and $92 million of lower aftermarket volume.

Bell delivered 175 commercial aircraft in 2015, compared with 178 aircraft in 2014.

· $21 million decrease in other military, which included $41 million recorded in the second quarter of 2014 related to the settlement of the SDD phase of the ARH program.

Bell delivered 24 H-1 aircraft in both periods.

Bell’s operating expenses decreased $662 million, 18%, in 2015, compared with 2014, primarily due to lower net sales volume as described above and the favorable impact of ongoing cost reduction activities.

[removed: For our manufacturing operations, we] [added: We also] manage exposures to foreign currency assets and earnings primarily by funding certain foreign currency-denominated assets with liabilities in the same currency so that certain exposures are naturally offset.

[removed: In managing] [added: For] our [added: manufacturing operations, we manage our] foreign currency transaction [removed: exposures, we also enter] [added: exposures by entering] into foreign currency exchange contracts.

The notional amount of outstanding foreign currency exchange contracts was approximately [removed: $665] [added: $426] million and [removed: $706] [added: $665] million at [removed: the end of 2016] [added: December 30, 2017] and [removed: 2015,] [added: December 31, 2016,] respectively.

| [removed: | 2016 | | |] [added: _(In millions)_] | | | [removed: 2015] | [added: 2017] | | [added: 2016] | | [added: 2015] |

| Debt | $ | [removed: (187)] [added: (212)] | $ | [removed: (211)] [added: (232)] | $ | [removed: (21)] [added: (23)] | $ | [removed: (224)] [added: (187)] | $ | [removed: (250)] [added: (211)] | $ | [removed: (25)] [added: (21)] |

| Foreign currency exchange contracts | | [removed: (3)] [added: 11] | | [removed: (3)] [added: 11] | | [removed: 29] [added: 26] | | [removed: (21)] [added: (3)] | | [removed: (21)] [added: (3)] | | [removed: 31] [added: 29] |

| Debt | $ | [removed: (2,690)] [added: (3,007)] | $ | [removed: (2,809)] [added: (3,136)] | $ | [removed: (22)] [added: (33)] | $ | [removed: (2,628)] [added: (2,690)] | $ | [removed: (2,744)] [added: (2,809)] | $ | [removed: (18)] [added: (22)] |

| Finance receivables | $ | [removed: 759] [added: 643] | $ | [removed: 788] [added: 675] | $ | [removed: 15] [added: 14] | $ | [removed: 894] [added: 759] | $ | [removed: 850] [added: 788] | $ | [removed: 21] [added: 15] |

| Debt | | [removed: (903)] [added: (824)] | | [removed: (831)] [added: (799)] | | [removed: 20] [added: 2] | | [removed: (913)] [added: (903)] | | [removed: (840)] [added: (831)] | | [removed: 19] [added: 20] |

The impact of foreign currency exchange rate changes on our Consolidated Financial Statements are as follows:

| --- | --- | --- | --- | --- | --- | --- | --- | --- |

| Increase (decrease) in revenues | | | $ | 27 | $ | (36) | $ | (244) |

| Decrease in segment profit | | | | (1) | | (12) | | (20) |

| | December 30, 2017 | | | | | | December 31, 2016 | | | | | |

| | $ | (201) | $ | (221) | $ | 3 | $ | (190) | $ | (214) | $ | 8 |

Foreign currency exchange rate changes decreased both revenues and segment profit in 2016 by $36 million and $12 million, respectively, and in 2015 by $244 million and $20 million, respectively.

The impact of foreign currency exchange rate changes on revenues and segment profit for 2014 was not significant.

| | $ | (190) | $ | (214) | $ | 8 | $ | (245) | $ | (271) | $ | 6 |

We have approximately [removed: 36,000] [added: 37,000] employees worldwide.

Financial information by business segment and geographic area appears in Note 16 to the Consolidated Financial Statements on pages [removed: 66] [added: 67] through 68 of this Annual Report on Form 10-K.

The following description of our business should be read in conjunction with “Management’s Discussion and Analysis of Financial Condition and Results of Operations” on pages 19 through [removed: 35] [added: 34] of this Annual Report on Form 10-K.

The segment has two principal product lines: aircraft [removed: sales] and aftermarket.

Aircraft [added: includes] sales [removed: include] [added: of] business jets, turboprop aircraft, piston engine aircraft, and military trainer and defense aircraft.

Revenues in the Textron Aviation segment accounted for [removed: approximately 36%,] [added: 33%,] 36% and [removed: 33%] [added: 36%] of our total revenues in [removed: 2016, 2015] [added: 2017, 2016] and [removed: 2014,] [added: 2015,] respectively.

| _(In millions)_ | | | | [removed: 2016] [added: 2017] | | [removed: 2015] [added: 2016] | | [removed: 2014] [added: 2015] |

| Aircraft [removed: sales] | | | $ | [removed: 3,412] [added: 3,112] | $ | [removed: 3,404] [added: 3,412] | $ | [removed: 3,182] [added: 3,404] |

| Aftermarket | | | | [removed: 1,509] [added: 1,574] | | [removed: 1,418] [added: 1,509] | | [removed: 1,386] [added: 1,418] |

| Total revenues | | | $ | [removed: 4,921] [added: 4,686] | $ | [removed: 4,822] [added: 4,921] | $ | [removed: 4,568] [added: 4,822] |

The family of jets currently produced by Textron Aviation includes the [removed: Mustang,] Citation M2, Citation CJ3+, Citation CJ4, Citation XLS+, Citation Latitude, Citation Sovereign+, and the Citation X+, the fastest civilian jet in the world.

In addition, [removed: Textron Aviation is developing] the [added: new] Citation Longitude, a super-midsize jet which achieved first flight in October [removed: 2016 and] [added: 2016,] is expected to enter into service in [removed: 2017, and the Citation Hemisphere, a large-cabin jet for which first flight is targeted in 2019.][added: early 2018.]

Textron Aviation’s turboprop aircraft include the Beechcraft King [removed: Air, which offers the King] Air C90GTx, King Air 250, King Air 350ER and King Air 350i, and the Cessna [removed: Caravan, a utility turboprop.][added: Caravan and Grand Caravan EX.]

[removed: In addition, Textron Aviation recently announced the] [added: The] Cessna Denali, a high-performance single engine turboprop aircraft, [removed: which] is [removed: targeted] [added: expected] to achieve its first flight in 2018.

Textron Aviation also offers the T-6 trainer, which is used to train pilots [removed: of] [added: from] more than 20 countries, [removed: and] the AT-6 light attack military [removed: aircraft.][added: aircraft, and the Scorpion.]

Textron Aviation’s piston engine aircraft include the Beechcraft Baron and Bonanza, and the Cessna Skyhawk, Skylane, [removed: Turbo Stationair] and the [removed: high performance TTx.][added: Turbo Stationair.]

The Scorpion [removed: represents] [added: is] a highly affordable, multi-mission aircraft [removed: offering diverse capabilities including intelligence, surveillance and reconnaissance, humanitarian assistance, disaster relief, advanced training and precision strike,] designed primarily for the tactical military jet aviation market.

In support of its family of aircraft, Textron Aviation operates a global network of [removed: 19] [added: 18] service centers, two of which are co-located with Bell Helicopter, along with more than 350 authorized independent service centers located throughout the world.

Revenues for Bell accounted for [removed: approximately] 23%, [removed: 26%] [added: 23%] and [removed: 31%] [added: 26%] of our total revenues in [removed: 2016, 2015] [added: 2017, 2016] and [removed: 2014,] [added: 2015,] respectively.

| V-22 Program | | | $ | [removed: 1,151] [added: 1,129] | $ | [removed: 1,194] [added: 1,151] | $ | [removed: 1,771] [added: 1,194] |

| Other Military | | | | [removed: 936] [added: 947] | | [removed: 839] [added: 936] | | [removed: 860] [added: 839] |

| Commercial | | | | [removed: 1,152] [added: 1,241] | | [removed: 1,421] [added: 1,152] | | [removed: 1,614] [added: 1,421] |

| Total revenues | | | $ | [removed: 3,239] [added: 3,317] | $ | [removed: 3,454] [added: 3,239] | $ | [removed: 4,245] [added: 3,454] |

While the U.S. Marine Corps is the primary customer for H-1 helicopters, we [removed: have received orders for Pakistan] [added: also sell H-1 helicopters] under the U.S. Government-sponsored foreign military sales program.

The helicopters currently offered by Bell for commercial applications include the [removed: 206L-4, 407, 407GT,] 407GXP, 412EP, 412EPI, [removed: 429] [added: 429, 429WLG, 505 Jet Ranger X] and Huey II.

In addition, [removed: Bell achieved first flight in 2015 for] the 525 Relentless, [removed: its] [added: Bell’s] first super medium commercial [removed: helicopter.][added: helicopter, is expected to achieve certification in 2019.]

For both its military programs and its commercial products, Bell provides post-sale support and service for an installed base of approximately 13,000 helicopters through a network of [removed: six] [added: five] Bell-operated service centers, four global parts distribution centers and over 100 independent service centers located in [removed: 32] [added: 35] countries.

Textron Systems’ product lines consist of unmanned [removed: aircraft] systems, marine and land systems, [removed: weapons] and [removed: sensors,] simulation, training and other defense and aviation mission support products and services.

Textron Systems is a supplier to the defense, aerospace and general aviation markets, and represents [removed: approximately] 13%, [removed: 11%] [added: 13%] and [removed: 12%] [added: 11%] of our total revenues in [removed: 2016, 2015] [added: 2017, 2016] and [removed: 2014,] [added: 2015,] respectively.

| Unmanned Systems | | | $ | [removed: 763] [added: 714] | $ | [removed: 686] [added: 763] | $ | [removed: 797] [added: 686] |

| Marine and Land Systems | | | | [removed: 294] [added: 470] | | [removed: 188] [added: 294] | | [removed: 158] [added: 188] |

| Simulation, Training and Other | | | | [removed: 417] [added: 656] | | [removed: 391] [added: 699] | | [removed: 405] [added: 646] |

| Total revenues | | | $ | [removed: 1,756] [added: 1,840] | $ | [removed: 1,520] [added: 1,756] | $ | [removed: 1,624] [added: 1,520] |

[added: Our] Unmanned Systems [removed: consists] [added: product line includes the offerings] of the Unmanned Systems and Support Solutions businesses.

This business’s products include the U.S. Army’s premier tactical unmanned aircraft system, the Shadow, which [added: has] surpassed one million flight hours [removed: during 2016,] [added: since its introduction,] and the Aerosonde Small Unmanned Aircraft System, a multi-mission capable unmanned aircraft system that has amassed more than [removed: 150,000] [added: 200,000] flight hours in commercial and military operations around the world.

[removed: It produces a family of extremely mobile, highly protective vehicles] [added: Marine and Land Systems’ primary U.S. Government program is] for the [removed: U.S. Army and international allies,] [added: development] and [removed: is developing] [added: production of] the U.S. Navy’s next generation Landing Craft Air Cushion as part of the Ship-to-Shore Connector program.

[removed: The] Weapons and Sensors [removed: business consists of state-of-the-art smart weapons,] [added: offers advanced precision guided weapons systems,] airborne and ground-based sensors and surveillance systems, and protection systems for the defense and aerospace industries.

[added: Our] Simulation, Training and Other [added: product line] includes [removed: six] [added: products and services from five] businesses: TRU Simulation + Training, [removed: Lycoming,] [added: Textron Airborne Solutions,] Electronic Systems, [removed: Advanced Information Solutions, Geospatial Solutions] [added: Lycoming,] and [removed: Textron Airborne Solutions.][added: Weapons and Sensors.]

Electronic Systems provides high technology test [removed: equipment and] [added: equipment,] electronic warfare test and training [removed: solutions.][added: solutions and intelligence software solutions for U.S. and international defense, intelligence and law enforcement communities.]

Textron Airborne [removed: Solutions] [added: Solutions, which includes Airborne Tactical Advantage Company,] focuses on live military air-to-air and air-to-ship training and support services for U.S. Navy, Marine and Air Force [removed: pilots, and includes the recently acquired Airborne Tactical Advantage Company.][added: pilots.]

Textron Aviation is also continuing the development of the Citation Hemisphere, a large-cabin jet.

In addition, Textron Aviation recently announced the Cessna Skycourier, a twin-engine, high-wing, large-utility turboprop aircraft, which is targeted for first flight in 2019.

This aircraft is not yet in production, pending customer orders.

In addition, Able Aerospace Services, Inc., a subsidiary of Textron Aviation, also provides component and maintenance, repair and overhaul services in support of commercial and military fixed- and rotor-wing aircraft.

| _(In millions)_ | | | | 2017 | | 2016 | | 2015 |

Bell is developing the V-280 Valor, a next generation vertical lift aircraft as part of the Joint Multi Role Technology Demonstrator (JMR-TD) initiative.

The JMR-TD program is the science and technology precursor to the Department of Defense’s Future Vertical Lift program.

Aircraft designed through this initiative will compete to replace thousands of aging utility and attack helicopters for the U.S. Armed Forces over the next decade.

The V-280 achieved its first flight in December 2017.

| _(In millions)_ | | | | 2017 | | 2016 | | 2015 |

Our Marine and Land Systems product line includes advanced marine craft, armored vehicles, turrets and related subsystems, in service with U.S. and international militaries, special operations forces, police forces and civilian entities.

Industrial segment revenues, which represented 30%, 28% and 26% of our total revenues in 2017, 2016 and 2015, respectively, were as follows:

| _(In millions)_ | | | | 2017 | | 2016 | | 2015 |

Kautex also develops and manufactures clear-vision systems for automobiles and selective catalytic reduction systems used to reduce emissions from diesel engines, as well as plastic bottles and containers for medical, household, agricultural, laboratory and industrial uses.

Additionally, Kautex operates a business that produces cast iron engine camshafts, crankshafts and other engine components.

See Note 2 to the Consolidated Financial Statements for additional information regarding the acquisition of Arctic Cat that we completed on March 6, 2017.

This product line encompasses the Greenlee, Greenlee Communications, Greenlee Utility, HD Electric, Klauke, Sherman+Reilly and Endura businesses and brands.

Backlog with the U.S. Government represented 58% of our total backlog at December 30, 2017 and excluded amounts where funding has not been formally appropriated.

For information regarding the impact of the new revenue recognition accounting standard on backlog, see Note 1 to the Consolidated Financial Statements on page 48 of this Annual Report on Form 10-K.

Some of these trademarks, trade names and service marks are used in this Annual Report on Form 10-K and other reports, including: A-2PATS; Able Aerospace Services; Able Preferred; Aeronautical Accessories; AAI; acAlert; Aerosonde; AirScout; Alterra; AH-1Z; Ambush; Arctic Cat; Ascent;

Ms. Duffy joined Textron in 1997 as a member of the corporate legal team and has since held positions of increasing responsibility within the Company’s legal function, most recently serving as Vice President and Deputy General Counsel-Litigation, a position she had held since 2011.

In that role she was responsible for managing the corporate litigation staff with primary oversight of litigation throughout Textron.

She has also played an active role in developing, implementing and standardizing human resources policies across the Company and served as the senior legal advisor on employment and benefits issues.

· The impact of changes in tax legislation (including the recently enacted Tax Cuts and Jobs Act).

The Scorpion was added to the Textron Aviation product line and will be included in this segment’s results beginning January 1, 2017.

The Scorpion has completed more than 800 flight hours, and the first flight of a production conforming aircraft was achieved in December 2016.

Also, in 2016, we entered into a cooperative research and development agreement with the U.S. Air Force under which an airworthiness assessment of this aircraft will be performed.

To further enhance its service capabilities, during 2016, Textron Aviation acquired Able Engineering and Component Services, Inc. and Able Aerospace, Inc., an industry-leading repair and overhaul business that provides component repairs, component exchanges and replacement parts, among other support and service offerings for commercial rotorcraft and fixed-wing aircraft customers around the world.

The new 505 Jet Ranger X, a short-light single helicopter, achieved certification in Canada at the end of 2016, with a follow-on Federal Aviation Administration (FAA) certification expected in the first quarter of 2017.

On July 6, 2016, one of the two test aircraft used in flight testing for the 525 Relentless helicopters crashed.

We are cooperating fully with the National Transportation Safety Board in its investigation of the accident and working closely with the FAA on progressing toward certification of the 525.

While we have temporarily suspended flight activity for the remaining test aircraft, other certification activities and production work on the 525 program continue.

The timing of the aircraft’s certification and entry into service will be determined upon resumption of flight testing.

| Weapons and Sensors | | | | 282 | | 255 | | 264 |

The Marine and Land Systems business is a world leader in the design, production and support of armored vehicles, turrets and related subsystems as well as advanced marine craft.

_Weapons and Sensors_

During the third quarter of 2016, as discussed in Note 12 to the consolidated financial statements, we announced a plan to discontinue production of our sensor-fuzed weapon product by the end of the first quarter of 2017, with final deliveries to be completed by the end of 2017.

Advanced Information Solutions and Geospatial Solutions provide intelligence software solutions for U.S. and international defense, intelligence and law enforcement communities.

Industrial segment revenues were as follows:

Kautex also produces cast iron engine camshafts and develops and produces plastic bottles and containers for food, household, laboratory and industrial uses.

Revenues of Kautex accounted for approximately 16%, 15% and 14% of our total revenues in 2016, 2015 and 2014, respectively.

As discussed in Note 12 to the consolidated financial statements, the Jacobsen business is being combined into the Textron Specialized Vehicles business in order to optimize efficiencies and better serve their shared customers and distributors.

The Specialized Vehicles and Equipment product line includes the E-Z-GO, Textron Off Road, TUG Technologies, Douglas Equipment, Ransomes, Jacobsen, Cushman, Dixie Chopper, and the recently acquired Premier and Safeaero, businesses and brands.

We recently entered into an agreement to acquire Arctic Cat Inc., a leader in the recreational vehicle industry.

The company manufactures and markets all-terrain vehicles, side-by-sides and snowmobiles, in addition to related parts, garments and accessories under the Arctic Cat® and Motorfist® brand names.

Subject to customary closing conditions, we expect the transaction to close in March 2017.

These businesses also encompass the Greenlee, Greenlee Communications, Greenlee Utility, HD Electric, Klauke, Sherman+Reilly and Endura brand names, and their products are used principally in the construction, maintenance, telecommunications, data communications, electrical, utility and plumbing industries.

At the end of 2016, approximately 61% of our total backlog was with the U.S. Government, which included only funded amounts as the U.S. Government is obligated only up to the amount of funding formally appropriated for a contract.

and mechanical systems for aircraft.

Ms. Johnson joined Textron in 1996 and has held various human resources leadership positions across Textron’s businesses, including Senior Human Resources Business Partner for Greenlee and Vice President of Human Resources for E-Z-GO, a position she held from 2006 until joining Bell in 2009.

At Bell, she most recently served as Director of Talent and Organizational Development.

Prior to Textron, Ms. Johnson held roles in human resources, marketing and sales, and finance disciplines at several organizations, including IBM and Hamilton Sundstrand, a United Technologies Company.

[removed: On] [added: As previously reported in Textron’s Annual Report on Form 10-K for the fiscal year ended December 31, 2016, on] February 7, 2012, a lawsuit was filed in the United States Bankruptcy Court, Northern District of Ohio, Eastern Division (Akron) by Brian A.

We [removed: intend to] [added: are] vigorously [removed: defend] [added: defending] this lawsuit.

For the fiscal year ended December [removed: 31, 2016][added: 30, 2017]

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated [removed: filer or a] [added: filer,] smaller reporting [added: company, or an emerging growth] company.

See definitions of “large accelerated filer,” “accelerated [removed: filer” and] [added: filer,”] “smaller reporting company” [added: and “emerging growth company”] in Rule 12b-2 of the Exchange [removed: Act.][added: Act (Check one):]

[added: |] Large accelerated filer \[ ü \] [added: | |] Accelerated filer \[ \] [added: | |]

[added: |] Non-accelerated filer \[ \] [added: |] Smaller reporting company \[ \] [added: | | Emerging growth company \[ \] |]

[removed: (Do] [added: | (do] not check if [removed: a] smaller reporting company) [added: | | | |]

The aggregate market value of the registrant’s Common Stock held by non-affiliates at July [removed: 2, 2016] [added: 1, 2017] was approximately [removed: $9.8] [added: $12.5] billion based on the New York Stock Exchange closing price for such shares on that date.

At February [removed: 4, 2017, 270,086,401] [added: 3, 2018, 261,771,970] shares of Common Stock were outstanding.

Part III of this Report incorporates information from certain portions of the registrant’s Definitive Proxy Statement for its Annual Meeting of Shareholders to be held on April [removed: 26, 2017.][added: 25, 2018.]

| [PART [removed: I](#PARTI_112249] [added: I](#PARTI_030638] "Click to goto ") | | Page |

| [Item [removed: 1.](#Item1_Business_112251)] [added: 1.](#Item1_Business_030639)] | [removed: [Business](#Item1_Business_112251)] [added: [Business](#Item1_Business_030639)] | 3 |

| [Item [removed: 1A.](#Item1A_RiskFactors_121640)] [added: 1A.](#Item1A_RiskFactors_033304)] | [Risk [removed: Factors](#Item1A_RiskFactors_121640)] [added: Factors](#Item1A_RiskFactors_033304)] | 10 |

| [Item [removed: 1B.](#Item1B_UnresolvedStaffComments_122249)] [added: 1B.](#Item1B_UnresolvedStaffComments_050005)] | [Unresolved Staff [removed: Comments](#Item1B_UnresolvedStaffComments_122249)] [added: Comments](#Item1B_UnresolvedStaffComments_050005)] | 15 |

| [Item [removed: 2.](#Item2_Properties_122251)] [added: 2.](#Item2_Properties_050007)] | [removed: [Properties](#Item2_Properties_122251)] [added: [Properties](#Item2_Properties_050007)] | 15 |

| [Item [removed: 3.](#Item3_LegalProceedings_122252)] [added: 3.](#Item3_LegalProceedings_050010)] | [Legal [removed: Proceedings](#Item3_LegalProceedings_122252)] [added: Proceedings](#Item3_LegalProceedings_050010)] | [removed: 15] [added: 16] |

| [Item [removed: 4.](#Item4_MineSafetyDisclosures_011558)] [added: 4.](#Item4_MineSafetyDisclosures_050012)] | [Mine Safety [removed: Disclosures](#Item4_MineSafetyDisclosures_011558)] [added: Disclosures](#Item4_MineSafetyDisclosures_050012)] | 16 |

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| [Item [removed: 5.](#Item5_MarketforRegistrantsCommon_011603)] [added: 5.](#Item5_Marketfor_050018)] | [Market for Registrant’s Common Equity, Related Stockholder Matters and Issuer Purchases of Equity [removed: Securities](#Item5_MarketforRegistrantsCommon_011603)] [added: Securities](#Item5_Marketfor_050018)] | 16 |

| [Item [removed: 6.](#Item6_SelectedFinancialData_011615)] [added: 6.](#Item6_SelectedFinancialData_050049)] | [Selected Financial [removed: Data](#Item6_SelectedFinancialData_011615)] [added: Data](#Item6_SelectedFinancialData_050049)] | 18 |

| [Item [removed: 7.](#Item7_ManagementsDiscussionandAn_011623)] [added: 7.](#Item7_ManagementsDiscussionandAn_050051)] | [Management’s Discussion and Analysis of Financial Condition and Results of [removed: Operations](#Item7_ManagementsDiscussionandAn_011623)] [added: Operations](#Item7_ManagementsDiscussionandAn_050051)] | 19 |

| [Item [removed: 7A.](#Item7A_QuantitativeandQualitativ_010114)] [added: 7A.](#Item7A_QuantitativeandQualitativ_051324)] | [Quantitative and Qualitative Disclosures About Market [removed: Risk](#Item7A_QuantitativeandQualitativ_010114)] [added: Risk](#Item7A_QuantitativeandQualitativ_051324)] | [removed: 35] [added: 34] |

| [Item [removed: 8.](#Item8_FinancialStatementsandSupp_010756)] [added: 8.](#Item8_FinancialStatementsandSupp_043459)] | [Financial Statements and Supplementary [removed: Data](#Item8_FinancialStatementsandSupp_010756)] [added: Data](#Item8_FinancialStatementsandSupp_043459)] | 36 |

| [Item [removed: 9.](#Item9_ChangesInandDisagreementsW_013605)] [added: 9.](#Item9_ChangesInandDisagreementsW_082441)] | [Changes In and Disagreements With Accountants on Accounting and Financial [removed: Disclosure](#Item9_ChangesInandDisagreementsW_013605)] [added: Disclosure](#Item9_ChangesInandDisagreementsW_082441)] | 71 |

| [Item [removed: 9A.](#Item9A_ControlsandProcedures_013606)] [added: 9A.](#Item9A_ControlsandProcedures_082442)] | [Controls and [removed: Procedures](#Item9A_ControlsandProcedures_013606)] [added: Procedures](#Item9A_ControlsandProcedures_082442)] | 71 |

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| [Item [removed: 10.](#Item10_DirectorsExecutiveOfficer_013609)] [added: 10.](#Item10_DirectorsExecutiveOfficer_094251)] | [Directors, Executive Officers and Corporate [removed: Governance](#Item10_DirectorsExecutiveOfficer_013609)] [added: Governance](#Item10_DirectorsExecutiveOfficer_094251)] | 73 |

| [Item [removed: 11.](#Item11_ExecutiveCompensation_013610)] [added: 11.](#Item11_ExecutiveCompensati_094310)] | [Executive [removed: Compensation](#Item11_ExecutiveCompensation_013610)] [added: Compensation](#Item11_ExecutiveCompensati_094310)] | 73 |

| [Item [removed: 12.](#Item12_SecurityOwnershipofCertai_013612)] [added: 12.](#Item12_SecurityOwnershipofCertai_094314)] | [Security Ownership of Certain Beneficial Owners and Management and Related Stockholder [removed: Matters](#Item12_SecurityOwnershipofCertai_013612)] [added: Matters](#Item12_SecurityOwnershipofCertai_094314)] | 73 |

| [Item [removed: 13.](#Item13_CertainRelationshipsandRe_013613)] [added: 13.](#Item13_CertainRelationshipsandRe_094319)] | [Certain Relationships and Related Transactions and Director [removed: Independence](#Item13_CertainRelationshipsandRe_013613)] [added: Independence](#Item13_CertainRelationshipsandRe_094319)] | 73 |

| [Item [removed: 14.](#Item14_PrincipalAccountantFeesan_013615)] [added: 14.](#Item14_PrincipalAccountantFeesan_094325)] | [Principal Accountant Fees and [removed: Services](#Item14_PrincipalAccountantFeesan_013615)] [added: Services](#Item14_PrincipalAccountantFeesan_094325)] | 73 |

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10-K 1 a18-1018_110k.htm 10-K

| --- | --- | --- | --- |

| | | | |

| | | | |

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act.

\[ \]

For the Fiscal Year Ended December 30, 2017

| [Item 16.](#Item16_Form10KSummary_112736) | [Form 10-K Summary](#Item16_Form10KSummary_112736) | 77 |

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10-K 1 a17-1034_110k.htm 10-K

(Check one):

On December [removed: 31, 2016,] [added: 30, 2017,] we operated a total of 63 plants located throughout the U.S. and [removed: 53] [added: 52] plants outside the U.S. We own [removed: 58] [added: 61] plants and lease the remainder for a total manufacturing space of approximately [removed: 24.3] [added: 24.6] million square feet.

The principal market on which our common stock is traded is the New York Stock Exchange under the symbol “TXT.” At December [removed: 31, 2016,] [added: 30, 2017,] there were approximately [removed: 9,400] [added: 8,800] record holders of Textron common stock.

| First quarter | $ | [removed: 41.74] [added: 50.93] | $ | [removed: 30.69] [added: 43.66] | $ | 0.02 | $ | [removed: 45.61] [added: 41.74] | $ | [removed: 40.95] [added: 30.69] | $ | 0.02 |

| Second quarter | | [removed: 40.61] [added: 48.67] | | [removed: 34.00] [added: 45.00] | | 0.02 | | [removed: 46.93] [added: 40.61] | | [removed: 42.97] [added: 34.00] | | 0.02 |

| Third quarter | | [removed: 41.33] [added: 54.07] | | [removed: 35.06] [added: 47.00] | | 0.02 | | [removed: 44.98] [added: 41.33] | | [removed: 32.20] [added: 35.06] | | 0.02 |

| Fourth quarter | | [removed: 49.82] [added: 57.71] | | [removed: 37.19] [added: 51.07] | | 0.02 | | [removed: 43.93] [added: 49.82] | | [removed: 38.18] [added: 37.19] | | 0.02 |

The following provides information about our fourth quarter [removed: 2016] [added: 2017] repurchases of equity securities that are registered pursuant to Section 12 of the Securities Exchange Act of 1934, as amended:

_* These shares were purchased pursuant to a plan authorizing the repurchase of up to 25 million shares of Textron common stock that had been announced on January [removed: 23, 2013, which had no expiration date._][added: 25, 2017.]

The following graph compares the total return on a cumulative basis at the end of each year of $100 invested in our common stock on December 31, [removed: 2011] [added: 2012] with the Standard & Poor’s (S&P) 500 Stock Index, the S&P 500 Aerospace & Defense (A&D) Index and the S&P 500 Industrials Index, all of which include Textron.

[removed: ][added: ]

| | | [removed: 2011 | | |] 2012 | | | 2013 | | | 2014 | | | 2015 | | | 2016 | | [added: | 2017 | |]

| | 2017 | | | | | | 2016 | | | | | |

| October 1, 2017 – November 4, 2017 | 740 | $ | 53.44 | 740 | 14,767 |

| November 5, 2017 – December 2, 2017 | 860 | | 53.52 | 860 | 13,907 |

| December 3, 2017 – December 30, 2017 | 825 | | 55.55 | 825 | 13,082 |

| Total | 2,425 | $ | 54.19 | 2,425 | |

This plan has no expiration date._

| Textron Inc. | $ | 100.00 | | $ | 148.69 | | $ | 170.68 | | $ | 170.59 | | $ | 197.59 | | $ | 230.63 | |

| S&P 500 | | 100.00 | | | 132.39 | | | 150.51 | | | 152.59 | | | 170.84 | | | 208.14 | |

| S&P 500 A&D | | 100.00 | | | 154.92 | | | 172.63 | | | 182.01 | | | 216.42 | | | 305.97 | |

| S&P 500 Industrials | | 100.00 | | | 131.64 | | | 147.91 | | | 152.19 | | | 167.59 | | | 205.41 | |

| | 2016 | | | | | | 2015 | | | | | |

| October 2, 2016 – November 5, 2016 | 200 | $ | 39.92 | 200 | 4,434 |

| November 6, 2016 – December 3, 2016 | 450 | | 39.87 | 450 | 3,984 |

| December 4, 2016 – December 31, 2016 | — | | — | — | 3,984 |

| Total | 650 | $ | 39.88 | 650 | |

On January 25, 2017, we announced the adoption of a new plan authorizing the repurchase of up to 25 million shares of Textron common stock.

This new plan has no expiration date and replaced the existing plan adopted in 2013 that had 4.0 million remaining shares available for repurchase.

| Textron Inc. | $ | 100.00 | | $ | 134.50 | | $ | 199.98 | | $ | 229.56 | | $ | 229.44 | | $ | 265.75 | |

| S&P 500 | | 100.00 | | | 116.00 | | | 153.57 | | | 174.60 | | | 177.01 | | | 198.18 | |

| S&P 500 A&D | | 100.00 | | | 114.56 | | | 177.48 | | | 197.77 | | | 208.52 | | | 247.93 | |

| S&P 500 Industrials | | 100.00 | | | 114.76 | | | 151.06 | | | 169.73 | | | 174.65 | | | 192.32 | |

| (_Dollars in millions, except per share amounts_) | | [added: 2017 | |] 2016 | | 2015 | | 2014 | | 2013 | [removed: | 2012 |]

| Textron Aviation | $ | [added: 4,686 | $ |] 4,921 | $ | 4,822 | $ | 4,568 | $ | 2,784 | [removed: $ | 3,111 |]

| Bell | | [added: 3,317 | |] 3,239 | | 3,454 | | 4,245 | | 4,511 | [removed: | 4,274 |]

| Textron Systems | | [added: 1,840 | |] 1,756 | | 1,520 | | 1,624 | | 1,665 | [removed: | 1,737 |]

| Industrial | | [added: 4,286 | |] 3,794 | | 3,544 | | 3,338 | | 3,012 | [removed: | 2,900 |]

| Finance | | [added: 69 | |] 78 | | 83 | | 103 | | 132 | [removed: | 215 |]

| Total revenues | $ | [added: 14,198 | $ |] 13,788 | $ | 13,423 | $ | 13,878 | $ | 12,104 | [removed: $ | 12,237 |]

| Textron Aviation (a) | $ | [added: 303 | $ |] 389 | $ | 400 | $ | 234 | $ | (48) | [removed: $ | 82 |]

| Bell | | [added: 415 | |] 386 | | 400 | | 529 | | 573 | [removed: | 639 |]

| Textron Systems | | [added: 139 | |] 186 | | 129 | | 150 | | 147 | [removed: | 132 |]

| Industrial | | [added: 290 | |] 329 | | 302 | | 280 | | 242 | [removed: | 215 |]

| Finance | | [added: 22 | |] 19 | | 24 | | 21 | | 49 | [removed: | 64 |]

| Total segment profit | | [added: 1,169 | |] 1,309 | | 1,255 | | 1,214 | | 963 | [removed: | 1,132 |]

| Corporate expenses and other, net | | [added: (132) | |] (172) | | (154) | | (161) | | (166) | [removed: | (148) |]

| Interest expense, net for Manufacturing group | | [added: (145) | |] (138) | | (130) | | (148) | | (123) | [removed: | (143) |]

| Special charges (b) | | [added: (130) | |] (123) | | — | | (52) | | — | [removed: | — |]

| Income tax expense (c) | | [added: (456) | |] (33) | | (273) | | (248) | | (176) | [removed: | (260) |]

| Income from continuing operations | $ | [added: 306 | $ |] 843 | $ | 698 | $ | 605 | $ | 498 | [removed: $ | 581 |]

| Basic earnings per share — continuing operations | $ | [added: 1.15 | $ |] 3.11 | $ | 2.52 | $ | 2.17 | $ | 1.78 | [removed: $ | 2.07 |]

| Diluted earnings per share — continuing operations | $ | [added: 1.14 | $ |] 3.09 | $ | 2.50 | $ | 2.15 | $ | 1.75 | [removed: $ | 1.97 |]

| Basic average shares outstanding (_in thousands)_ | | [added: 266,380 | |] 270,774 | | 276,682 | | 279,409 | | 279,299 | [removed: | 280,182 |]

| Diluted average shares outstanding (_in thousands)_ | | [added: 268,750 | |] 272,365 | | 278,727 | | 281,790 | | 284,428 | [removed: | 294,663 |]

| Book value at year-end | $ | [added: 21.60 | $ |] 20.62 | $ | 18.10 | $ | 15.45 | $ | 15.54 | [removed: $ | 11.03 |]

| Price at year-end | $ | [added: 56.59 | $ |] 48.56 | $ | 42.01 | $ | 42.17 | $ | 36.61 | [removed: $ | 24.12 |]

| Total assets | $ | [added: 15,340 | $ |] 15,358 | $ | 14,708 | $ | 14,605 | $ | 12,944 | [removed: $ | 13,033 |]

| Manufacturing group debt | $ | [added: 3,088 | $ |] 2,777 | $ | 2,697 | $ | 2,811 | $ | 1,931 | [removed: $ | 2,301 |]

| Finance group debt | $ | [added: 824 | $ |] 903 | $ | 913 | $ | 1,063 | $ | 1,256 | [removed: $ | 1,686 |]

| Shareholders’ equity | $ | [added: 5,647 | $ |] 5,574 | $ | 4,964 | $ | 4,272 | $ | 4,384 | [removed: $ | 2,991 |]

| Manufacturing group debt-to-capital (net of cash) | | [added: 26% | |] 23% | | 26% | | 33% | | 15% | [removed: | 24% |]

| Manufacturing group debt-to-capital | | [added: 35% | |] 33% | | 35% | | 40% | | 31% | [removed: | 44% |]

| Capital expenditures | $ | [added: 423 | $ |] 446 | $ | 420 | $ | 429 | $ | 444 | [removed: $ | 480 |]

| Manufacturing group depreciation | $ | [added: 362 | $ |] 368 | $ | 383 | $ | 379 | $ | 335 | [removed: $ | 315 |]

_(a)_ _Segment profit [removed: includes] [added: included] amortization of $12 million and $63 million in 2015 and 2014, respectively, related to fair value step-up adjustments of Beechcraft acquired inventories sold during the period._

For 2014, special charges [removed: include] [added: included] acquisition and restructuring costs related to the acquisition of Beechcraft._

[removed: _(c)_ _In] [added: In] 2016, we recognized an income tax benefit of $319 million, inclusive of interest, of which $206 million is attributable to continuing operations and $113 million is attributable to discontinued operations.

_(b)_ _Special charges included $90 million and $123 million in 2017 and 2016, respectively, related to our 2016 restructuring plan.

We also recorded special charges of $40 million in 2017 related to the Arctic Cat acquisition, which included restructuring, integration and transaction costs.

_(c)_ _Income tax expense for 2017 included a $266 million charge to reflect our provisional estimate of the net impact of the Tax Cuts and Jobs Act, which was enacted on December 22, 2017.

_(b)_ _In 2016, we initiated a plan to restructure and realign our businesses by implementing headcount reductions, facility consolidations and other actions in order to improve overall operating efficiency across Textron.

Special charges for 2016 include restructuring charges for this plan, which primarily consists of severance costs of $70 million and asset impairments of $38 million.

| [Consolidated Statements of Operations for each of the years in the three-year period ended December [removed: 31, 2016](#ConsolidatedStatementsofOperatio_010810] [added: 30, 2017](#ConsolidatedStatementsofOperatio_050905] "Click to goto ") | 37 |

| [Consolidated Statements of Comprehensive Income for each of the years in the three-year period ended December [removed: 31, 2016](#ConsolidatedStatementsofComprehe_010813] [added: 30, 2017](#ConsolidatedStatementsofComprehe_050908] "Click to goto ") | 38 |

| [Consolidated Balance Sheets as of December [removed: 31, 2016] [added: 30, 2017] and [removed: January 2, 2016](#ConsolidatedBalanceSheets_012741] [added: December 31, 2016](#ConsolidatedBalanceSheets_051305] "Click to goto ") | 39 |

| [Consolidated Statements of Shareholders’ Equity for each of the years in the three-year period ended December [removed: 31, 2016](#ConsolidatedStatementsofSharehol_013559] [added: 30, 2017](#ConsolidatedStatementsofSharehol_052426] "Click to goto ") | 40 |

| [Consolidated Statements of Cash Flows for each of the years in the three-year period ended December [removed: 31, 2016](#ConsolidatedStatementsofCashFlow_013604] [added: 30, 2017](#ConsolidatedStatementsofCashFlow_053406] "Click to goto ") | 41 |

| [Notes to the Consolidated Financial [removed: Statements](#NotestotheConsolidatedFinancialS_014459] [added: Statements](#NotestotheConsolidatedFinancialS_114420] "Click to goto ") | |

| [Note 1. Summary of Significant Accounting [removed: Policies](#Note1_SummaryofSignificantAccoun_015208] [added: Policies](#Note1_SummaryofSignificantAccoun_063003] "Click to goto ") | 43 |

| [Note 2. Business Acquisitions, Goodwill and Intangible [removed: Assets](#Note2_BusinessAcquisitionsGoodwi_015220] [added: Assets](#Note2_BusinessAcquisitionsGoodwi_063012] "Click to goto ") | 48 |

| [Note 3. Accounts Receivable and Finance [removed: Receivables](#Note3_AccountsReceivableandFinan_032546] [added: Receivables](#Note3_AccountsReceivableandFinan_062202] "Click to goto ") | [removed: 49] [added: 50] |

| [Note 4. [removed: Inventories](#Note4_Inventories_032556] [added: Inventories](#Note4_Inventories_062208] "Click to goto ") | [removed: 51] [added: 52] |

| [Note 5. Property, Plant and Equipment, [removed: Net](#Note5_PropertyPlantandEquipmentN_032559] [added: Net](#Note5_PropertyPlantandEquipmentN_062211] "Click to goto ") | [removed: 51] [added: 52] |

| [Note 6. Accrued [removed: Liabilities](#Note6_AccruedLiabilities_032606] [added: Liabilities](#Note6_AccruedLiabilities_062214] "Click to goto ") | 52 |

| [Note 7. Debt and Credit [removed: Facilities](#Note7_DebtandCreditFacilities_032609] [added: Facilities](#Note7_DebtandCreditFacilities_062216] "Click to goto ") | [removed: 52] [added: 53] |

| [Note 8. Derivative Instruments and Fair Value [removed: Measurements](#Note8_DerivativeInstrumentsandFa_032440] [added: Measurements](#Note8_DerivativeInstrumentsandFa_070941] "Click to goto ") | [removed: 53] [added: 54] |

| [Note 9. Shareholders’ [removed: Equity](#Note9_ShareholdersEquity_032448] [added: Equity](#Note9_ShareholdersEquity_070945] "Click to goto ") | [removed: 54] [added: 55] |

| [Note 10. Share-Based [removed: Compensation](#Note10_ShareBasedCompensation_032822] [added: Compensation](#Note10_ShareBasedCompensation_070950] "Click to goto ") | 56 |

| [Note 11. Retirement [removed: Plans](#Note11_RetirementPlans_035219] [added: Plans](#Note11_RetirementPlans_072032] "Click to goto ") | 58 |

| [Note 12. Special [removed: Charges](#Note12_SpecialCharges_024427] [added: Charges](#Note12_SpecialCharges_062531] "Click to goto ") | 62 |

| [Note 13. Income [removed: Taxes](#Note13_IncomeTaxes_024441] [added: Taxes](#Note13_IncomeTaxes_064629] "Click to goto ") | 63 |

| [Note 14. Commitments and [removed: Contingencies](#Note14_CommitmentsandContingenci_024446] [added: Contingencies](#Note14_CommitmentsandContingenci_070508] "Click to goto ") | [removed: 65] [added: 66] |

| [Note 15. Supplemental Cash Flow [removed: Information](#Note15_SupplementalCashFlowInfor_031715] [added: Information](#Note15_SupplementalCashFlowInfor_070520] "Click to goto ") | [removed: 66] [added: 67] |

| [Note 16. Segment and Geographic [removed: Data](#Note16_SegmentandGeographicData_013850] [added: Data](#Note16_SegmentandGeographicData_070525] "Click to goto ") | [removed: 66] [added: 67] |

| [Report of Independent Registered Public Accounting [removed: Firm](#ReportofIndependentRegisteredPub_013900] [added: Firm](#ReportofIndependentRegisteredPub_082510] "Click to goto ") | 69 |

| [Quarterly Data for [removed: 2016] [added: 2017] and [removed: 2015 (Unaudited)](#QuarterlyData_060505] [added: 2016 (Unaudited)](#QuarterlyData_082531] "Click to goto ") | 70 |

| [Schedule II – Valuation and Qualifying [removed: Accounts](#ScheduleIIValuationandQualifying_060440] [added: Accounts](#ScheduleIIValuationandQualifying_082537] "Click to goto ") | 71 |

For each of the years in the three-year period ended December [removed: 31, 2016][added: 30, 2017]

| _(In millions, except per share data)_ | | | | [removed: 2016] [added: 2017] | | [removed: 2015] [added: 2016] | | [removed: 2014] [added: 2015] |

| Manufacturing revenues | | | $ | [removed: 13,710] [added: 14,129] | $ | [removed: 13,340] [added: 13,710] | $ | [removed: 13,775] [added: 13,340] |

| Finance revenues | | | | [removed: 78] [added: 69] | | [removed: 83] [added: 78] | | [removed: 103] [added: 83] |

| Total revenues | | | | [removed: 13,788] [added: 14,198] | | [removed: 13,423] [added: 13,788] | | [removed: 13,878] [added: 13,423] |

| Cost of sales | | | | [removed: 11,311] [added: 11,795] | | [removed: 10,979] [added: 11,311] | | [removed: 11,421] [added: 10,979] |

| Selling and administrative expense | | | | [removed: 1,304] [added: 1,337] | | 1,304 | | [removed: 1,361] [added: 1,304] |

| Interest expense | | | | 174 | | [removed: 169] [added: 174] | | [removed: 191] [added: 169] |

| Special charges | | | | [removed: 123] [added: 130] | | [removed: —] [added: 123] | | [removed: 52] [added: —] |

| Total costs, expenses and other | | | | [removed: 12,912] [added: 13,436] | | [removed: 12,452] [added: 12,912] | | [removed: 13,025] [added: 12,452] |

| Income from continuing operations before income taxes | | | | [removed: 876] [added: 762] | | [removed: 971] [added: 876] | | [removed: 853] [added: 971] |

| Income tax expense | | | | [removed: 33] [added: 456] | | [removed: 273] [added: 33] | | [removed: 248] [added: 273] |

| Income from continuing operations | | | | [removed: 843] [added: 306] | | [removed: 698] [added: 843] | | [removed: 605] [added: 698] |

| Income (loss) from discontinued operations, net of income taxes* | | | | [removed: 119] [added: 1] | | [removed: (1)] [added: 119] | | [removed: (5)] [added: (1)] |

| Net income | | | $ | [removed: 962] [added: 307] | $ | [removed: 697] [added: 962] | $ | [removed: 600] [added: 697] |

| Discontinued operations | | | | — | | 0.44 | | — |

For each of the years in the three-year period ended December 30, 2017

| | | | | | | | | |

| | | | | | | | | | | | | |

| Retirement of treasury stock | | (1) | | (69) | | 534 | | (464) | | | | — |

| Balance at December 30, 2017 | $ | 33 | $ | 1,669 | $ | (48) | $ | 5,368 | $ | (1,375) | $ | 5,647 |

For each of the years in the three-year period ended December 30, 2017

| | | | | | | | | |

| Net income | | | $ | 307 | $ | 962 | $ | 697 |

For each of the years in the three-year period ended December 30, 2017

Gross unfavorable program adjustments for 2017 included $44 million related to the Tactical Armoured Patrol Vehicle program.

In 2017, this program experienced inefficiencies resulting from various production issues during the ramp up and subsequent production.

_Long-Term Contracts_

_Finance Revenues_

customer deposits.

_Revenue Recognition_

This new standard became effective for us at the beginning of 2018, and will be adopted using the modified retrospective transition method.

Under this method, we will record the cumulative effect of adopting the new standard in the first quarter of 2018.

Based on review and analysis of our contracts, the standard primarily impacts our Bell and Textron Systems segments, which have long-term production contracts with the U.S. Government.

Prior to adoption of the new standard, revenue was generally recognized for these contracts as units were delivered, while under the new standard, revenue will be recognized over time, principally as costs are incurred.

This change will generally result in an acceleration of revenue for these contracts.

At the adoption date, the impact of recognizing these revenues under the new standard for historical periods ending prior to December 31, 2017 will result in a cumulative after-tax transition adjustment to increase retained earnings by approximately $90 million, largely related to the Bell segment.

In addition, the transition adjustment will establish contract assets of approximately $350 million, with corresponding decreases in inventory of approximately $200 million and in contract liabilities (deferred revenue and customer deposits) and accounts receivables, primarily reflecting the conversion of contracts to the cost-to-cost method.

This change is not expected to have a significant impact on our future operating results as the revenues that would have been recognized under the units-of-delivery method in future years, will essentially be replaced by the acceleration of revenue on other contracts into earlier periods using the

cost-to-cost method.

The new standard will have no impact on cash flows and does not affect the economics of our underlying customer contracts.

The standard does not have a significant impact on revenue recognition for our Textron Aviation and Industrial segments, which will continue to primarily recognize revenue at the point in time when the customer accepts delivery of the goods provided.

At the end of 2017, our backlog excluded amounts where funding from the U.S. Government had not been formally appropriated.

Under the new standard, backlog will generally include these unfunded amounts as backlog will be the equivalent of the transaction price allocated to our remaining performance obligations, which represents the revenue we expect to recognize under our contracts in future periods for which work has not yet been performed.

At adoption, the increase in our backlog for the unfunded amounts will be fully offset by the decrease due to the acceleration of revenues in the transition adjustment.

We expect backlog at the Bell segment to decrease by approximately 15% at the adoption date, which will partially be offset by an increase of approximately 7% at the Textron Systems segment.

We have updated the accounting policies affected by this standard, redesigned our related internal controls over financial reporting and are expanding the disclosures to be included in our first quarter Form 10-Q to meet the new requirements.

In March 2017, the FASB issued ASU No. 2017-07, _Improving the Presentation of Net Periodic Pension Cost and Net Periodic Postretirement Benefit Cost_.

This standard requires companies to present only the service cost component of net periodic benefit costs in operating income in the same line as other employee compensation costs, while the other components of net periodic benefit costs must be excluded from operating income.

In addition, only the service cost component will be eligible for capitalization into inventory.

This standard is effective for our company at the beginning of 2018.

The reclassification of the other components of net periodic benefit cost out of operating income must be applied retrospectively, while the change in the amount companies may capitalize into inventory can be applied prospectively.

This standard will not have a material impact on our consolidated financial statements and will not change our segment reporting.

On March 6, 2017, we completed the acquisition of Arctic Cat Inc. (Arctic Cat), a publicly-held company (NASDAQ: ACAT), pursuant to a cash tender offer for $18.50 per share, followed by a short-form merger.

The cash paid for this business, including repayment of debt and net of cash acquired, totaled $316 million.

| [Note 17. Subsequent Event](#Note17_SubsequentEvent_013858 "Click to goto ") | 68 |

_*Income from discontinued operations, net of income taxes for the year ended December 31, 2016 primarily includes the settlement of a U.S. federal income tax audit.

| --- | --- | --- | --- | --- |

| Balance at December 28, 2013 | $ | 35 | $ | 1,331 | $ | — | $ | 4,045 | $ | (1,027) | $ | 4,384 |

| --- | --- | --- | --- | --- | --- | --- |

In July 2015, the FASB approved a one-year deferral of the effective date of the standard to the beginning of 2018 for public companies, with an option to adopt the standard as early as the original effective date of 2017.

The standard may be adopted either retrospectively or on a modified retrospective basis.

We will adopt the standard in 2018 and expect to apply it on a modified retrospective basis, with a cumulative catch-up adjustment recognized at the beginning of 2018.

The standard will primarily impact our businesses under long-term production contracts with the U.S. Government as these contracts currently use the units-of-delivery accounting method; under the new standard, these contracts will transition to a model that recognizes revenue over time, principally as costs are incurred, resulting in earlier revenue recognition.

In 2016, approximately 25% of our revenues were from contracts with the U.S. Government.

Given the complexity of our contracts, we are continuing to assess the potential effect that the standard is expected to have on our consolidated financial statements.

Able is an industry-leading repair and overhaul business that provides component repairs, component exchanges and replacement parts, among other support and service offerings for commercial rotorcraft and fixed-wing aircraft customers around the world.

We are in the process of allocating the purchase price and valuing the acquired assets and liabilities for certain of these acquisitions.

Based on the allocation of the aggregate purchase price for these acquisitions as of December 31, 2016, $101 million has been allocated to goodwill, related to expected synergies and the value of the existing workforce, and $59 million to intangible assets.

On March 14, 2014, we completed the acquisition of all of the outstanding equity interests in Beech Holdings, LLC, which included Beechcraft Corporation and other subsidiaries, (collectively “Beechcraft”), for an aggregate cash payment of $1.5 billion.

The acquisition of Beechcraft and the formation of the Textron Aviation segment has provided increased scale and complementary product offerings, allowing us to strengthen our position across the aviation industry and enhance our ability to support our customers.

We financed $1.1 billion of the purchase price with the issuance of long-term debt and the remaining balance was paid from cash on hand.

During 2014, we also made aggregate cash payments of $149 million for seven acquisitions within our Industrial and Systems Segments, including Tug Technologies Corporation, a manufacturer of ground support equipment in the aviation industry.

| Balance at January 3, 2015 | $ | 554 | $ | 31 | $ | 1,057 | $ | 385 | $ | 2,027 |

| | | | | | | 1,091 | | 1,080 |

| | | | | | | 5,413 | | 5,261 |

| | | | | | | 6,704 | | 6,407 |

| Acquisitions | | | | 2 | | 3 | | 43 |

| 4.625% due 2016 | | | | | $ | — | $ | 250 |

| Variable-rate notes due 2016-2025 (weighted-average rate of 1.97% and 1.54%, respectively) (a) (b) | | | | | | 42 | | 52 |

| Securitized debt (weighted-average rate of 1.71%) | | | | | | — | | 41 |

| Manufacturing group | $ | 363 | $ | 157 | $ | 457 | $ | 195 | $ | 507 |

| Total | $ | 427 | $ | 396 | $ | 645 | $ | 231 | $ | 530 |

This facility replaced the existing 5-year facility, which had no outstanding borrowings and was scheduled to expire in October 2018.

Currency effects on the effective portion of these hedges, which are

Assets Recorded at Fair Value on a Nonrecurring Basis

During the years ended December 31, 2016 and January 2, 2016, the Finance group’s impaired nonaccrual finance receivables of $44 million and $45 million, respectively, were measured at fair value on a nonrecurring basis using significant unobservable inputs (Level 3).

Impaired nonaccrual finance receivables represent assets recorded at fair value on a nonrecurring basis since the measurement of required reserves on our impaired finance receivables is significantly dependent on the fair value of the underlying collateral.

For impaired nonaccrual finance receivables secured by aviation assets, the fair values of collateral are determined primarily based on the use of industry pricing guides.

Fair value measurements recorded on impaired finance receivables resulted in charges to provision for loan losses totaling $10 million, $13 million and $18 million for 2016, 2015 and 2014, respectively.

| Dilutive effect of: | | | | | | | | |

| Accelerated Share Repurchase agreement | | | | — | | — | | 332 |

| Balance at January 3, 2015 | $ | (1,511) | $ | 18 | $ | (13) | $ | (1,506) |

| Reclassified from Accumulated other comprehensive loss | | 92 | | — | | 15 | | 107 |

| Granted | | | | | | 1,795 | | 34.51 |

We performed an evaluation of the effectiveness of our disclosure controls and procedures as of December [removed: 31, 2016.][added: 30, 2017.]

Based on this evaluation, the CEO and CFO concluded that our disclosure controls and procedures were operating and effective as of December [removed: 31, 2016.][added: 30, 2017.]

Based on our evaluation under the 2013 Framework, we have concluded that Textron Inc. maintained, in all material respects, effective internal control over financial reporting as of December [removed: 31, 2016.][added: 30, 2017.]

The independent registered public accounting firm, Ernst & Young LLP, has audited the Consolidated Financial Statements of Textron Inc. and has issued an attestation report on Textron’s internal controls over financial reporting as of December [removed: 31, 2016,] [added: 30, 2017,] as stated in its report, which is included herein.

[removed: _Report] [added: Report] of Independent Registered Public Accounting [removed: Firm on Internal Control over Financial Reporting_][added: Firm]

[removed: The] [added: To the] Board of Directors and [added: the] Shareholders of Textron Inc.

We have audited Textron Inc.’s internal control over financial reporting as of December [removed: 31, 2016,] [added: 30, 2017,] based on criteria established in Internal [removed: Control –] [added: Control—] Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission (2013 [removed: Framework)] [added: Framework),] (the COSO criteria).

[removed: Textron Inc.’s] [added: The Company’s] management is responsible for maintaining effective internal control over financial [removed: reporting,] [added: reporting] and for its assessment of the effectiveness of internal control over financial reporting included in the accompanying Management’s Report on Internal Control Over Financial Reporting.

We conducted our audit in accordance with the standards of the [removed: Public Company Accounting Oversight Board (United States).][added: PCAOB.]

In our opinion, [removed: Textron] [added: Textron,] Inc. [added: (the Company)] maintained, in all material respects, effective internal control over financial reporting as of December [removed: 31, 2016,] [added: 30, 2017,] based on the COSO criteria.

We also have audited, in accordance with the standards of the Public Company Accounting Oversight Board (United [removed: States),] [added: States) (PCAOB),] the Consolidated Balance Sheets of [removed: Textron Inc.] [added: the Company] as of December [removed: 31, 2016] [added: 30, 2017] and [removed: January 2,] [added: December 31,] 2016, and the related Consolidated Statements of Operations, Comprehensive Income, [removed: Shareholders’] [added: Shareholder’s] Equity and Cash Flows for each of the three years in the period ended December [removed: 31, 2016] [added: 30, 2017, and the related notes and financial statement schedule contained on page 71,] of [removed: Textron Inc.] [added: the Company] and our report dated February [removed: 22, 2017] [added: 15, 2018] expressed an unqualified opinion thereon.

Opinion on Internal Control over Financial Reporting

Basis for Opinion

We are a public accounting firm registered with the PCAOB and are required to be independent with respect to the Company in accordance with the U.S. federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB.

Definition and Limitations of Internal Control Over Financial Reporting

February 15, 2018

February 22, 2017

The information appearing under “ELECTION OF DIRECTORS— Nominees for Director,” “CORPORATE GOVERNANCE—Corporate Governance Guidelines and Policies,” “— Code of Ethics,” “–Board Committees— _Audit Committee_,” and “SECTION 16(a) BENEFICIAL OWNERSHIP REPORTING COMPLIANCE” in the Proxy Statement for our Annual Meeting of Shareholders to be held on April [removed: 26, 2017] [added: 25, 2018] is incorporated by reference into this Annual Report on Form 10-K.

The information appearing under “CORPORATE GOVERNANCE —Compensation of Directors,” “COMPENSATION COMMITTEE REPORT,” “COMPENSATION DISCUSSION AND ANALYSIS” and “EXECUTIVE COMPENSATION” in the Proxy Statement for our Annual Meeting of Shareholders to be held on April [removed: 26, 2017] [added: 25, 2018] is incorporated by reference into this Annual Report on Form 10-K.

The information appearing under “SECURITY OWNERSHIP” and “EXECUTIVE COMPENSATION – Equity Compensation Plan Information” in the Proxy Statement for our Annual Meeting of Shareholders to be held on April [removed: 26, 2017] [added: 25, 2018] is incorporated by reference into this Annual Report on Form 10-K.

The information appearing under “CORPORATE GOVERNANCE--Director Independence” and “EXECUTIVE COMPENSATION — Transactions with Related Persons” in the Proxy Statement for our Annual Meeting of Shareholders to be held on April [removed: 26, 2017] [added: 25, 2018] is incorporated by reference into this Annual Report on Form 10-K.

The information appearing under “RATIFICATION OF APPOINTMENT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM — Fees to Independent Auditors” in the Proxy Statement for our Annual Meeting of Shareholders to be held on April [removed: 26, 2017] [added: 25, 2018] is incorporated by reference into this Annual Report on Form 10-K.

| 3.1A | | [removed: Restated] [added: [Restated] Certificate of Incorporation of Textron as filed with the Secretary of State of Delaware on April 29, 2010. Incorporated by reference to Exhibit 3.1 to Textron’s Quarterly Report on Form 10-Q for the fiscal quarter ended April 3, 2010. (SEC File No. [removed: 1-5480)] [added: 1-5480)](http://www.sec.gov/Archives/edgar/data/217346/000021734610000048/threeone.htm)] |

| 3.1B | | [removed: Certificate] [added: [Certificate] of Amendment of Restated Certificate of Incorporation of Textron Inc., filed with the Secretary of State of Delaware on April 27, 2011. Incorporated by reference to Exhibit 3.1 to Textron’s Quarterly Report on Form 10-Q for the fiscal quarter ended April 2, 2011. (SEC File No. [removed: 1-5480)] [added: 1-5480)](http://www.sec.gov/Archives/edgar/data/217346/000021734611000048/exhibitthreeone.htm)] |

| 3.2 | | [removed: Amended] [added: [Amended] and Restated By-Laws of Textron Inc., effective April 28, 2010 and further amended April 27, 2011, July 23, 2013, February 25, 2015 and December 6, 2016. Incorporated by reference to Exhibit 3.2 to Textron’s Current Report on Form 8-K filed on December 8, [removed: 2016.] [added: 2016.](http://www.sec.gov/Archives/edgar/data/217346/000110465916161176/a16-22811_1ex3d2.htm)] |

| 4.1A | | [removed: Support] [added: [Support] Agreement dated as of May 25, 1994, between Textron Inc. and Textron Financial Corporation. Incorporated by reference to Exhibit 4.1 to Textron’s Annual Report on Form 10-K for the fiscal year ended December 31, 2011. (SEC File No. [removed: 1-5480)] [added: 1-5480)](http://www.sec.gov/Archives/edgar/data/217346/000119312512074981/d276253dex41.htm)] |

| 4.1B | | [removed: Amendment] [added: [Amendment] to Support Agreement, dated as of December 23, 2015, by and between Textron Inc. and Textron Financial Corporation. Incorporated by reference to Exhibit 4.1B to Textron’s Annual Report on Form 10-K for the fiscal year ended January 2, [removed: 2016.] [added: 2016.](http://www.sec.gov/Archives/edgar/data/217346/000110465916099562/a15-23451_1ex4d1b.htm)] |

| 10.1A | | [removed: Textron] [added: [Textron] Inc. 2007 Long-Term Incentive Plan (Amended and Restated as of April 28, 2010). Incorporated by reference to Exhibit 10.1 to Textron’s Quarterly Report on Form 10-Q for the fiscal quarter ended March 31, 2012. [added: (SEC File No. 1-5480)](http://www.sec.gov/Archives/edgar/data/217346/000119312512184508/d322891dex101.htm)] |

| 10.1B | | [removed: Form] [added: [Form] of Non-Qualified Stock Option Agreement. Incorporated by reference to Exhibit 10.2 to Textron’s Quarterly Report on Form 10-Q for the fiscal quarter ended June 30, 2007. (SEC File No. [removed: 1-5480)] [added: 1-5480)](http://www.sec.gov/Archives/edgar/data/217346/000021734607000103/tentwo.htm)] |

| 10.1C | | [removed: Form] [added: [Form] of Incentive Stock Option Agreement. Incorporated by reference to Exhibit 10.3 to Textron’s Quarterly Report on Form 10-Q for the fiscal quarter ended June 30, 2007. (SEC File No. [removed: 1-5480)] [added: 1-5480)](http://www.sec.gov/Archives/edgar/data/217346/000021734607000103/tenthree.htm)] |

| 10.1D | | [removed: Form] [added: [Form] of Restricted Stock Unit Grant Agreement. Incorporated by reference to Exhibit 10.4 to Textron’s Quarterly Report on Form 10-Q for the fiscal quarter ended June 30, 2007. (SEC File No. [removed: 1-5480)] [added: 1-5480)](http://www.sec.gov/Archives/edgar/data/217346/000021734607000103/tenfour.htm)] |

| 10.1E | | [removed: Form] [added: [Form] of Restricted Stock Unit Grant Agreement with Dividend Equivalents. Incorporated by reference to Exhibit 10.2 to Textron’s Quarterly Report on Form 10-Q for the fiscal quarter ended March 29, 2008. (SEC File No. [removed: 1-5480)] [added: 1-5480)](http://www.sec.gov/Archives/edgar/data/217346/000021734608000080/tenonetwo.htm)] |

| 10.1F | | [removed: Form] [added: [Form] of [removed: Cash-Settled Restricted Stock] [added: Performance Share] Unit Grant [removed: Agreement with Dividend Equivalents.] [added: Agreement.] Incorporated by reference to Exhibit [removed: 10.1G] [added: 10.1H] to Textron’s Annual Report on Form 10-K for the fiscal year ended January 3, 2009. (SEC File No. [removed: 1-5480)] [added: 1-5480)](http://www.sec.gov/Archives/edgar/data/217346/000095013509001252/b74351tiexv10w1h.htm)] |

| [removed: 10.1H] [added: 10.1G] | | [removed: Form] [added: [Form] of Non-Qualified Stock Option Agreement. Incorporated by reference to Exhibit 10.1 to Textron’s Quarterly Report on Form 10-Q for the fiscal quarter ended March 29, [removed: 2014.] [added: 2014.](http://www.sec.gov/Archives/edgar/data/217346/000110465914033439/a14-9291_1ex10d1.htm)] |

| [removed: 10.1I] [added: 10.1H] | | [removed: Form] [added: [Form] of Stock-Settled Restricted Stock Unit Grant Agreement with Dividend Equivalents. Incorporated by reference to Exhibit 10.2 to Textron’s Quarterly Report on Form 10-Q for the fiscal quarter ended March 29, [removed: 2014.] [added: 2014.](http://www.sec.gov/Archives/edgar/data/217346/000110465914033439/a14-9291_1ex10d2.htm)] |

| [removed: 10.1J] [added: 10.1I] | | [removed: Form] [added: [Form] of Performance Share Unit Grant Agreement. Incorporated by reference to Exhibit 10.3 to Textron’s Quarterly Report on Form 10-Q for the fiscal quarter ended March 29, [removed: 2014.] [added: 2014.](http://www.sec.gov/Archives/edgar/data/217346/000110465914033439/a14-9291_1ex10d3.htm)] |

| [removed: 10.2A] [added: 10.8A] | | [removed: Textron Inc. Short-Term Incentive] [added: [Severance] Plan [removed: (As amended] [added: for Textron Key Executives, As Amended] and [removed: restated effective] [added: Restated Effective] January [removed: 3, 2010).] [added: 1, 2010.] Incorporated by reference to Exhibit [removed: 10.1] [added: 10.10] to Textron’s [removed: Quarterly] [added: Annual] Report on Form [removed: 10-Q] [added: 10-K] for the fiscal [removed: quarter] [added: year] ended [removed: April 3,] [added: January 2,] 2010. (SEC File No. [removed: 1-5480)] [added: 1-5480)](http://www.sec.gov/Archives/edgar/data/217346/000095012310016801/b77277exv10w10.htm)] |

| [removed: 10.2B] [added: 10.7C] | | [removed: Amendment] [added: [Amendment] No. [removed: 1] [added: 2] to [removed: Textron Inc. Short-Term Incentive] [added: Deferred Income] Plan [removed: (As amended] [added: for Non-Employee Directors, as Amended] and [removed: restated effective] [added: Restated Effective] January [removed: 3, 2010), dated July 22, 2015.] [added: 1, 2009.] Incorporated by reference to Exhibit 10.1 to Textron’s Quarterly Report on Form 10-Q for the fiscal quarter ended [removed: October 3, 2015.] [added: April 1, 2017.](http://www.sec.gov/Archives/edgar/data/217346/000110465917026335/a17-8816_1ex10d1.htm)] |

| 10.3A | | [removed: Textron] [added: [Textron] Inc. 2015 Long-Term Incentive Plan. Incorporated by reference to Exhibit 10.1 to Textron’s Quarterly Report on Form 10-Q for the fiscal quarter ended July 4, [removed: 2015.] [added: 2015.](http://www.sec.gov/Archives/edgar/data/217346/000110465915054257/a15-11861_1ex10d1.htm)] |

| 10.3B | | [removed: Form] [added: [Form] of Non-Qualified Stock Option Agreement under 2015 Long-Term Incentive Plan. Incorporated by reference to Exhibit 10.1 to Textron’s Quarterly Report on Form 10-Q for the fiscal quarter ended April 2, [removed: 2016.] [added: 2016.](http://www.sec.gov/Archives/edgar/data/217346/000110465916114825/a16-6092_1ex10d1.htm)] |

| 10.3C | | [removed: Form] [added: [Form] of Stock-Settled Restricted Stock Unit (with Dividend Equivalents) Grant Agreement under 2015 Long-Term Incentive Plan. Incorporated by reference to Exhibit 10.2 to Textron’s Quarterly Report on Form 10-Q for the fiscal quarter ended April 2, [removed: 2016.] [added: 2016.](http://www.sec.gov/Archives/edgar/data/217346/000110465916114825/a16-6092_1ex10d2.htm)] |

| 10.3D | | [removed: Form] [added: [Form] of Performance Share Unit Grant Agreement under 2015 Long-Term Incentive Plan. Incorporated by reference to Exhibit 10.3 to Textron’s Quarterly Report on Form 10-Q for the fiscal quarter ended April 2, [removed: 2016.] [added: 2016.](http://www.sec.gov/Archives/edgar/data/217346/000110465916114825/a16-6092_1ex10d3.htm)] |

| 10.4 | | [removed: Textron] [added: [Textron] Spillover Savings Plan, effective October 5, 2015. Incorporated by reference to Exhibit 10.4 to Textron’s Annual Report on Form 10-K for the fiscal year ended January 2, [removed: 2016.] [added: 2016.](http://www.sec.gov/Archives/edgar/data/217346/000110465916099562/a15-23451_1ex10d4.htm)] |

| 10.5A | | [removed: Textron] [added: [Textron] Spillover Pension Plan, As Amended and Restated Effective January 3, 2010, including Appendix A (as amended and restated effective January 3, 2010), Defined Benefit Provisions of the Supplemental Benefits Plan for Textron Key Executives (As in effect before January 1, 2007). Incorporated by reference to Exhibit 10.4 to Textron’s Quarterly Report on Form 10-Q for the fiscal quarter ended April 3, 2010. (SEC File No. [removed: 1-5480)] [added: 1-5480)](http://www.sec.gov/Archives/edgar/data/217346/000021734610000048/tenfour.htm)] |

| 10.5B | | [removed: Amendments] [added: [Amendments] to the Textron Spillover Pension Plan, dated October 12, 2011. Incorporated by reference to Exhibit 10.5B to Textron’s Annual Report on Form 10-K for the fiscal year ended December 31, 2011. (SEC File No. [removed: 1-5480)] [added: 1-5480)](http://www.sec.gov/Archives/edgar/data/217346/000119312512074981/d276253dex105b.htm)] |

| 10.5C | | [removed: Second] [added: [Second] Amendment to the Textron Spillover Pension Plan, dated October 7, 2013. Incorporated by reference to Exhibit 10.5C to Textron’s Annual Report on Form 10-K for the fiscal year ended December 28, [removed: 2013.] [added: 2013.](http://www.sec.gov/Archives/edgar/data/217346/000110465914009908/a13-26941_1ex10d5c.htm)] |

| 10.6 | | [removed: Deferred] [added: [Deferred] Income Plan for Textron Executives, Effective October 5, 2015. Incorporated by reference to Exhibit 10.6 to Textron’s Annual Report on Form 10-K for the fiscal year ended January 2, [removed: 2016.] [added: 2016.](http://www.sec.gov/Archives/edgar/data/217346/000110465916099562/a15-23451_1ex10d6.htm)] |

| 10.7A | | [removed: Deferred] [added: [Deferred] Income Plan for Non-Employee Directors, As Amended and Restated Effective January 1, 2009, including Appendix A, Prior Plan Provisions (As in effect before January 1, 2008). Incorporated by reference to Exhibit 10.9 to Textron’s Annual Report on Form 10-K for the fiscal year ended January 3, 2009. (SEC File No. [removed: 1-5480)] [added: 1-5480)](http://www.sec.gov/Archives/edgar/data/217346/000095013509001252/b74351tiexv10w9.htm)] |

| 10.7B | | [removed: Amendment] [added: [Amendment] No. 1 to Deferred Income Plan for Non-Employee Directors, as Amended and Restated Effective January 1, 2009, dated as of November 6, 2012. Incorporated by reference to Exhibit 10.8B to Textron’s Annual Report on Form 10-K for the fiscal year ended December 29, 2012. [added: (SEC File No. 1-5480)](http://www.sec.gov/Archives/edgar/data/217346/000110465913011048/a12-30151_4ex10d8b.htm)] |

| [removed: 10.8A] [added: 10.8B] | | [added: [First Amendment to the] Severance Plan for Textron Key Executives, [removed: As Amended and Restated Effective January 1,] [added: dated October 26,] 2010. Incorporated by reference to Exhibit [removed: 10.10] [added: 10.10B] to Textron’s Annual Report on Form 10-K for the fiscal year ended January [removed: 2, 2010.] [added: 1, 2011.] (SEC File No. [removed: 1-5480)] [added: 1-5480)](http://www.sec.gov/Archives/edgar/data/217346/000095012311020392/b83538exv10w10b.htm)] |

| 10.8C | | [removed: Second] [added: [Second] Amendment to the Severance Plan for Textron Key Executives, dated March 24, 2014. Incorporated by reference to Exhibit 10.5 to Textron’s Quarterly Report on Form 10-Q for the fiscal quarter ended March 29, [removed: 2014.] [added: 2014.](http://www.sec.gov/Archives/edgar/data/217346/000110465914033439/a14-9291_1ex10d5.htm)] |

| 10.10 | | [removed: Form] [added: [Form] of Indemnity Agreement between Textron and its non-employee directors (approved by the Nominating and Corporate Governance Committee of the Board of Directors on July 21, 2009 and entered into with all non-employee directors, effective as of August 1, 2009). Incorporated by reference to Exhibit 10.1 to Textron’s Quarterly Report on Form 10-Q for the fiscal quarter ended October 3, 2009. (SEC File No. [removed: 1-5480)] [added: 1-5480)](http://www.sec.gov/Archives/edgar/data/217346/000021734609000156/indemnityagmtdirector.htm)] |

| 10.11A | | [removed: Letter] [added: [Letter] Agreement between Textron and Scott C. Donnelly, dated June 26, 2008. Incorporated by reference to Exhibit 10.1 to Textron’s Quarterly Report on Form 10-Q for the fiscal quarter ended June 28, 2008. (SEC File No. [removed: 1-5480)] [added: 1-5480)](http://www.sec.gov/Archives/edgar/data/217346/000021734608000116/agreementwithsdonnelly.htm)] |

| 10.11B | | [removed: Amendment] [added: [Amendment] to Letter Agreement between Textron and Scott C. Donnelly, dated December 16, 2008, together with Addendum No.1 thereto, dated December 23, 2008. Incorporated by reference to Exhibit 10.15B to Textron’s Annual Report on Form 10-K for the fiscal year ended January 3, 2009. (SEC File No. [removed: 1-5480)] [added: 1-5480)](http://www.sec.gov/Archives/edgar/data/217346/000095013509001252/b74351tiexv10w15b.htm)] |

| 10.11C | | [removed: Agreement] [added: [Agreement] between Textron and Scott C. Donnelly, dated May 1, 2009, related to Mr. Donnelly’s personal use of a portion of hangar space at T.F. Green Airport which is leased by Textron. Incorporated by reference to Exhibit 10.1 to Textron’s Quarterly Report on Form 10-Q for the fiscal quarter ended July 4, 2009. (SEC File No. [removed: 1-5480)] [added: 1-5480)](http://www.sec.gov/Archives/edgar/data/217346/000021734609000117/donnellyhangeragreement.htm)] |

| 10.11D | | [removed: Hangar] [added: [Hangar] License and Services Agreement made and entered into on April 25, 2011 to be effective as of December 5, 2010, between Textron Inc. and Mr. Donnelly’s limited liability company. Incorporated by reference to Exhibit 10.1 to Textron’s Quarterly Report on Form 10-Q for the fiscal quarter ended April 2, 2011. (SEC File No. [removed: 1-5480)] [added: 1-5480)](http://www.sec.gov/Archives/edgar/data/217346/000021734611000048/sdhangeragreement.htm)] |

| 10.11E | | [removed: Amended] [added: [Amended] and Restated Hangar License and Services Agreement, made and entered into as of October 1, 2015, between Textron Inc. and Mr. Donnelly’s limited liability company. Incorporated by reference to Exhibit 10.2 to Textron’s Quarterly Report on Form 10-Q for the fiscal quarter ended October 3, [removed: 2015.] [added: 2015.](http://www.sec.gov/Archives/edgar/data/217346/000110465915073479/a15-17798_1ex10d2.htm)] |

| 10.12A | | [removed: Letter] [added: [Letter] Agreement between Textron and Frank Connor, dated July 27, 2009. Incorporated by reference to Exhibit 10.2 to Textron’s Quarterly Report on Form 10-Q for the fiscal quarter ended October 3, 2009. (SEC File No. [removed: 1-5480)] [added: 1-5480)](http://www.sec.gov/Archives/edgar/data/217346/000021734609000156/frankconnoragreement.htm)] |

| 10.12B | | [removed: Hangar] [added: [Hangar] License and Services Agreement made and entered into on April 25, 2011 to be effective as of December 5, 2010, between Textron Inc. and Mr. Connor’s limited liability company. Incorporated by reference to Exhibit 10.2 to Textron’s Quarterly Report on Form 10-Q for the fiscal quarter ended April 2, 2011. (SEC File No. [removed: 1-5480)] [added: 1-5480)](http://www.sec.gov/Archives/edgar/data/217346/000021734611000048/fchangeragreement.htm)] |

| 10.12C | | [removed: Amended] [added: [Amended] and Restated Hangar License and Services Agreement, made and entered into on July 24, 2015, between Textron Inc. and Mr. Connor’s limited liability company. Incorporated by reference to Exhibit 10.3 to Textron’s Quarterly Report on Form 10-Q for the fiscal quarter ended October 3, [removed: 2015.] [added: 2015.](http://www.sec.gov/Archives/edgar/data/217346/000110465915073479/a15-17798_1ex10d3.htm)] |

| 10.13 | | [removed: Letter] [added: [Letter] Agreement between Textron and [removed: Cheryl H. Johnson,] [added: Julie G. Duffy,] dated [removed: June 12, 2012.] [added: July 27, 2017.] Incorporated by reference to Exhibit [removed: 10.2] [added: 10.1] to Textron’s Quarterly Report on Form 10-Q for the fiscal quarter ended [removed: June] [added: September] 30, [removed: 2012.] [added: 2017.](http://www.sec.gov/Archives/edgar/data/217346/000110465917064241/a17-20574_1ex10d1.htm)] |

| 10.14A | | [removed: Letter] [added: [Letter] Agreement between Textron and E. Robert Lupone, dated December 22, 2011. Incorporated by reference to Exhibit 10.17 to Textron’s Annual Report on Form 10-K for the fiscal year ended December 31, 2011. (SEC File No. [removed: 1-5480)] [added: 1-5480)](http://www.sec.gov/Archives/edgar/data/217346/000119312512074981/d276253dex1017.htm)] |

| 10.2 | | [Textron Inc. Short-Term Incentive Plan. Incorporated by reference to Exhibit 10.2 to Textron’s Quarterly Report on Form 10-Q for the fiscal quarter ended April 1, 2017.](http://www.sec.gov/Archives/edgar/data/217346/000110465917026335/a17-8816_1ex10d2.htm) |

| 10.9 | | [Form of Indemnity Agreement between Textron and its executive officers.](https://www.sec.gov/Archives/edgar/data/217346/000110465918009905/a18-1018_1ex10d9.htm#Exhibit10_9_100732) |

| 10.15 | | [Director Compensation.](https://www.sec.gov/Archives/edgar/data/217346/000110465918009905/a18-1018_1ex10d15.htm#Exhibit10_15_100835) |

| 23 | | [Consent of Independent Registered Public Accounting Firm.](https://www.sec.gov/Archives/edgar/data/217346/000110465918009905/a18-1018_1ex23.htm#Exhibit23_105842 "Click to goto ") |

| 24 | | [Power of attorney.](https://www.sec.gov/Archives/edgar/data/217346/000110465918009905/a18-1018_1ex24.htm#Exhibit24_111432) |

| --- | --- | --- |

| | | |

| 10.1G | | Form of Performance Share Unit Grant Agreement. Incorporated by reference to Exhibit 10.1H to Textron’s Annual Report on Form 10-K for the fiscal year ended January 3, 2009. (SEC File No. 1-5480) |

| 10.8B | | First Amendment to the Severance Plan for Textron Key Executives, dated October 26, 2010. Incorporated by reference to Exhibit 10.10B to Textron’s Annual Report on Form 10-K for the fiscal year ended January 1, 2011. (SEC File No. 1-5480) |

| 10.9 | | Form of Indemnity Agreement between Textron and its executive officers. Incorporated by reference to Exhibit A to Textron’s Proxy Statement for its Annual Meeting of Shareholders on April 29, 1987. (SEC File No. 1-5480) |

| 10.15 | | Director Compensation. Incorporated by reference to Exhibit 10.15 to Textron’s Annual Report on Form 10-K for the fiscal year ended January 2, 2016. |

| 10.18A | | Master Services Agreement between Textron Inc. and Computer Sciences Corporation dated October 27, 2004. Incorporated by reference to Exhibit 10.26 to Textron’s Annual Report on Form 10-K for the fiscal year ended January 1, 2005. * (SEC File No. 1-5480) |

| 10.18B | | Amendment No. 4 to Master Services Agreement between Textron Inc. and Computer Sciences Corporation, dated July 1, 2007. Incorporated by reference to Exhibit 10.1 to Textron’s Quarterly Report on Form 10-Q for the fiscal quarter ended September 29, 2007. (SEC File No. 1-5480) |

| 10.18C | | Amendment No. 5 to Master Services Agreement between Textron Inc. and Computer Sciences Corporation, dated as of March 13, 2008. * Incorporated by reference to Exhibit 10.22C to Textron’s Annual Report on Form 10-K for the fiscal year ended January 1, 2011. (SEC File No. 1-5480) |

| 10.18D | | Amendment No. 6 to Master Services Agreement between Textron Inc. and Computer Sciences Corporation, dated as of June 17, 2009. Incorporated by reference to Exhibit 10.22D to Textron’s Annual Report on Form 10-K for the fiscal year ended January 1, 2011. (SEC File No. 1-5480) |

| 10.18E | | Amendment No. 7 to Master Services Agreement between Textron Inc. and Computer Sciences Corporation, dated as of September 30, 2010. * Incorporated by reference to Exhibit 10.22E to Textron’s Annual Report on Form 10-K for the fiscal year ended January 1, 2011. (SEC File No. 1-5480) |

| 10.19 | | \[Intentionally omitted\] |

| 10.20 | | Term Credit Agreement, dated as of January 24, 2014 Among Textron, JPMorgan Chase Bank, N.A., as administrative agent, Citibank, N.A. and Bank of America, N.A., as syndication agents, The Bank of Tokyo-Mitsubishi UFJ, Ltd., as documentation agent, and other lenders named therein. Incorporated by reference to Exhibit 10.20 to Textron’s Annual Report on Form 10-K for the fiscal year ended December 28, 2013. |

| 23 | | Consent of Independent Registered Public Accounting Firm. |

| 24 | | Power of attorney. |

Signatures

Pursuant to the requirement of Section 13 or 15(d) of the Securities Exchange Act of 1934, the registrant has duly caused this Annual Report on Form 10-K to be signed on its behalf by the undersigned, thereunto duly authorized on this 22nd day of February 2017.

| | | TEXTRON INC. | |

| --- | --- | --- | --- |

| | | Registrant | |

| | | | |

| | By: | /s/ Frank T. Connor | |

| | | Frank T. Connor | |

| | | Executive Vice President and Chief Financial Officer | |

Pursuant to the requirements of the Securities Exchange Act of 1934, this Annual Report on Form 10-K has been signed below on this 22nd day of February 2017 by the following persons on behalf of the registrant and in the capacities indicated:

| Name | | | | Title |

| --- | --- | --- | --- | --- |

| | | | | |

| /s/ Scott C. Donnelly | | | | |

| Scott C. Donnelly | | | | Chairman, President and Chief Executive Officer |

| | | | | (principal executive officer) |

| * | | | | |

| Kathleen M. Bader | | | | Director |

| R. Kerry Clark | | | | Director |

| James T. Conway | | | | Director |

| Ivor J. Evans | | | | Director |

| Lawrence K. Fish | | | | Director |

| Paul E. Gagné | | | | Director |

| Dain M. Hancock | | | | Director |

| Ralph D. Heath | | | | Director |

Not applicable.

Signatures

Pursuant to the requirement of Section 13 or 15(d) of the Securities Exchange Act of 1934, the registrant has duly caused this Annual Report on Form 10-K to be signed on its behalf by the undersigned, thereunto duly authorized on this 15th day of February 2018.

| | | TEXTRON INC. | |

| --- | --- | --- | --- |

| | | Registrant | |

| | | | |

| | By: | /s/ Frank T. Connor | |

| | | Frank T. Connor | |

| | | Executive Vice President and Chief Financial Officer | |

Pursuant to the requirements of the Securities Exchange Act of 1934, this Annual Report on Form 10-K has been signed below on this 15th day of February 2018 by the following persons on behalf of the registrant and in the capacities indicated:

| Name | | | | Title |

| --- | --- | --- | --- | --- |

| | | | | |

| | | | | |

| /s/ Scott C. Donnelly | | | | |

| Scott C. Donnelly | | | | Chairman, President and Chief Executive Officer |

| | | | | (principal executive officer) |

| * | | | | |

| Kathleen M. Bader | | | | Director |

| | | | | |

| * | | | | |

| R. Kerry Clark | | | | Director |

| | | | | |