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iso4217:USD
xbrli:shares
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iso4217:USD
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<html>
<head></head>
<body>
<!-- Begin Block Tagged Note 1 - us-gaap:OrganizationConsolidationAndPresentationOfFinancialStatementsDisclosureTextBlock-->
<div style="font-family: 'Times New Roman',Times,serif">
<!-- xbrl,ns -->
<div align="center" style="font-size: 10pt; margin-top: 0pt"><b>
</b>
</div>
<div align="left" style="font-size: 10pt; margin-top: 12pt"><b>Note 1: Basis of Presentation</b>
</div>
<div align="left" style="font-size: 10pt; margin-top: 6pt">Our consolidated financial statements include the accounts of Textron Inc. and all of its
majority-owned subsidiaries, along with any variable interest entities for which we are the primary
beneficiary. We have prepared these unaudited consolidated financial statements in accordance with
accounting principles generally accepted in the U.S. for interim financial information.
Accordingly, these interim financial statements do not include all of the information and footnotes
required by accounting principles generally accepted in the U.S. for complete financial statements.
The consolidated interim financial statements included in this quarterly report should be read in
conjunction with the consolidated financial statements included in our Annual Report on Form 10-K
for the year ended January 3, 2009. In the opinion of management, the interim financial statements
reflect all adjustments (consisting only of normal recurring adjustments) that are necessary for
the fair presentation of our consolidated financial position, results of operations and cash flows
for the interim periods presented. The results of operations for the interim periods are not
necessarily indicative of the results to be expected for the full year. We have evaluated
subsequent events up to the time of our filing with the Securities and Exchange Commission on July
31, 2009, which is the date that these financial statements were issued.
</div>
<div align="left" style="font-size: 10pt; margin-top: 6pt">Our financings are conducted through two separate borrowing groups. The Manufacturing group
consists of Textron Inc. consolidated with all of its majority-owned subsidiaries that operate in
the Cessna, Bell, Textron Systems and Industrial segments, except for the entities comprising the
Finance group. The Finance group consists of Textron Financial Corporation along with the entities
consolidated into it. We designed this framework to enhance our borrowing power by separating the
Finance group. Our Manufacturing group operations include the development, production and delivery
of tangible goods and services, while our Finance group provides financial services. Due to the
fundamental differences between each borrowing group’s activities, investors, rating agencies and
analysts use different measures to evaluate each group’s performance. To support those evaluations,
we present balance sheet and cash flow information for each borrowing group within the consolidated
financial statements. All significant intercompany transactions are eliminated from the
consolidated financial statements, including retail and wholesale financing activities for
inventory sold by our Manufacturing group that is financed by our Finance group.
</div>
<div align="left" style="font-size: 10pt; margin-top: 6pt">As discussed in Note 4: Discontinued Operations, on April 3, 2009, we sold HR Textron and in
November 2008, we completed the sale of our Fluid & Power business unit. Both of these businesses
have been classified as discontinued operations, and all prior period information has been recast
to reflect this presentation.
</div>
</div>
</body>
</html>
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<head></head>
<body>
<!-- Begin Block Tagged Note 2 - us-gaap:RestructuringAndRelatedActivitiesDisclosureTextBlock-->
<div style="font-family: 'Times New Roman',Times,serif">
<div align="left" style="font-size: 10pt; margin-top: 12pt"><b>Note 2: Special Charges</b>
</div>
<div align="left" style="font-size: 10pt; margin-top: 6pt">In the fourth quarter of 2008, we initiated a restructuring program to reduce overhead costs and
improve productivity across the company, which includes corporate and segment direct and indirect
workforce reductions and streamlining of administrative overhead, and announced the exit of
portions of our commercial finance business. This program was expanded in the first half of 2009
to include additional workforce reductions, primarily at Cessna, and the cancellation of the
Citation Columbus development project. We expect to eliminate approximately 10,000 positions
worldwide representing approximately 23% of our global workforce at the inception of the program.
As of July 4, 2009, we have exited 11 owned and leased facilities and plants under this program.
</div>
<!-- Folio -->
<!-- /Folio -->
</div>
<!-- PAGEBREAK -->
<div style="font-family: 'Times New Roman',Times,serif">
<div align="left" style="font-size: 10pt; margin-top: 6pt">Restructuring costs by segment are as follows:
</div>
<div align="center">
<table style="font-size: 10pt; text-align: left" cellspacing="0" border="0" cellpadding="0" width="100%">
<!-- Begin Table Head -->
<tr valign="bottom">
<td width="40%"> </td>
<td width="5%"> </td>
<td width="3%"> </td>
<td width="1%"> </td>
<td width="3%"> </td>
<td width="5%"> </td>
<td width="3%"> </td>
<td width="1%"> </td>
<td width="3%"> </td>
<td width="5%"> </td>
<td width="3%"> </td>
<td width="1%"> </td>
<td width="3%"> </td>
<td width="5%"> </td>
<td width="3%"> </td>
<td width="1%"> </td>
<td width="3%"> </td>
<td width="5%"> </td>
<td width="3%"> </td>
<td width="1%"> </td>
<td width="3%"> </td>
</tr>
<tr style="font-size: 8pt" valign="bottom">
<td> </td>
<td> </td>
<td nowrap="nowrap" align="right" colspan="3">Severance</td>
<td> </td>
<td nowrap="nowrap" align="right" colspan="3">Curtailment</td>
<td> </td>
<td nowrap="nowrap" align="right" colspan="3">Contract</td>
<td> </td>
<td nowrap="nowrap" align="right" colspan="3">Asset</td>
<td> </td>
<td nowrap="nowrap" align="right" colspan="3">Total</td>
</tr>
<tr style="font-size: 8pt" valign="bottom">
<td nowrap="nowrap" align="left"><i>(In millions)</i></td>
<td> </td>
<td nowrap="nowrap" align="right" colspan="3">Costs</td>
<td> </td>
<td nowrap="nowrap" align="right" colspan="3">Charges, Net</td>
<td> </td>
<td nowrap="nowrap" align="right" colspan="3">Terminations</td>
<td> </td>
<td nowrap="nowrap" align="right" colspan="3">Impairments</td>
<td> </td>
<td nowrap="nowrap" align="right" colspan="3">Restructuring</td>
</tr>
<!-- End Table Head -->
<!-- Begin Table Body -->
<tr style="font-size: 1px">
<td colspan="21" align="left" style="border-top: 1px solid #000000"> </td>
</tr>
<tr valign="bottom" style="background: #cceeff">
<td>
<div style="margin-left:15px; text-indent:-15px">Three Months Ended July 4, 2009
</div></td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
</tr>
<tr style="font-size: 1px">
<td colspan="21" align="left" style="border-top: 1px solid #000000"> </td>
</tr>
<tr valign="bottom">
<td>
<div style="margin-left:15px; text-indent:-15px">Cessna
</div></td>
<td> </td>
<td align="right">$</td>
<td align="right">38</td>
<td> </td>
<td> </td>
<td align="right">$</td>
<td align="right">26</td>
<td> </td>
<td> </td>
<td align="right">$</td>
<td align="right">1</td>
<td> </td>
<td> </td>
<td align="right">$</td>
<td align="right">52</td>
<td> </td>
<td> </td>
<td align="right">$</td>
<td align="right">117</td>
<td> </td>
</tr>
<tr valign="bottom" style="background: #cceeff">
<td>
<div style="margin-left:15px; text-indent:-15px">Industrial
</div></td>
<td> </td>
<td> </td>
<td align="right">4</td>
<td> </td>
<td> </td>
<td nowrap="nowrap" align="right"> </td>
<td align="right">(4</td>
<td nowrap="nowrap">)</td>
<td> </td>
<td> </td>
<td align="right">1</td>
<td> </td>
<td> </td>
<td> </td>
<td align="right">—</td>
<td> </td>
<td> </td>
<td> </td>
<td align="right">1</td>
<td> </td>
</tr>
<tr valign="bottom">
<td>
<div style="margin-left:15px; text-indent:-15px">Finance
</div></td>
<td> </td>
<td> </td>
<td align="right">4</td>
<td> </td>
<td> </td>
<td> </td>
<td align="right">1</td>
<td> </td>
<td> </td>
<td> </td>
<td align="right">—</td>
<td> </td>
<td> </td>
<td> </td>
<td align="right">—</td>
<td> </td>
<td> </td>
<td> </td>
<td align="right">5</td>
<td> </td>
</tr>
<tr valign="bottom" style="background: #cceeff">
<td>
<div style="margin-left:15px; text-indent:-15px">Corporate
</div></td>
<td> </td>
<td> </td>
<td align="right">3</td>
<td> </td>
<td> </td>
<td> </td>
<td align="right">—</td>
<td> </td>
<td> </td>
<td> </td>
<td align="right">—</td>
<td> </td>
<td> </td>
<td> </td>
<td align="right">—</td>
<td> </td>
<td> </td>
<td> </td>
<td align="right">3</td>
<td> </td>
</tr>
<tr valign="bottom">
<td>
<div style="margin-left:15px; text-indent:-15px">Textron Systems
</div></td>
<td> </td>
<td> </td>
<td align="right">1</td>
<td> </td>
<td> </td>
<td> </td>
<td align="right">2</td>
<td> </td>
<td> </td>
<td> </td>
<td align="right">—</td>
<td> </td>
<td> </td>
<td> </td>
<td align="right">—</td>
<td> </td>
<td> </td>
<td> </td>
<td align="right">3</td>
<td> </td>
</tr>
<tr style="font-size: 1px">
<td colspan="21" align="left" style="border-top: 1px solid #000000"> </td>
</tr>
<tr valign="bottom" style="background: #cceeff">
<td>
<div style="margin-left:15px; text-indent:-15px"> 
</div></td>
<td> </td>
<td align="right">$</td>
<td align="right">50</td>
<td> </td>
<td> </td>
<td align="right">$</td>
<td align="right">25</td>
<td> </td>
<td> </td>
<td align="right">$</td>
<td align="right">2</td>
<td> </td>
<td> </td>
<td align="right">$</td>
<td align="right">52</td>
<td> </td>
<td> </td>
<td align="right">$</td>
<td align="right">129</td>
<td> </td>
</tr>
<tr style="font-size: 1px">
<td colspan="21" align="left" style="border-top: 3px double #000000"> </td>
</tr>
<tr valign="bottom"><!-- Blank Space -->
<td>
<div style="margin-left:15px; text-indent:-15px"> 
</div></td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
</tr>
<tr valign="bottom">
<td>
<div style="margin-left:15px; text-indent:-15px">Six Months Ended July 4, 2009
</div></td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
</tr>
<tr style="font-size: 1px">
<td colspan="21" align="left" style="border-top: 1px solid #000000"> </td>
</tr>
<tr valign="bottom" style="background: #cceeff">
<td>
<div style="margin-left:15px; text-indent:-15px">Cessna
</div></td>
<td> </td>
<td align="right">$</td>
<td align="right">64</td>
<td> </td>
<td> </td>
<td align="right">$</td>
<td align="right">26</td>
<td> </td>
<td> </td>
<td align="right">$</td>
<td align="right">1</td>
<td> </td>
<td> </td>
<td align="right">$</td>
<td align="right">52</td>
<td> </td>
<td> </td>
<td align="right">$</td>
<td align="right">143</td>
<td> </td>
</tr>
<tr valign="bottom">
<td>
<div style="margin-left:15px; text-indent:-15px">Industrial
</div></td>
<td> </td>
<td> </td>
<td align="right">5</td>
<td> </td>
<td> </td>
<td nowrap="nowrap" align="right"> </td>
<td align="right">(4</td>
<td nowrap="nowrap">)</td>
<td> </td>
<td> </td>
<td align="right">1</td>
<td> </td>
<td> </td>
<td> </td>
<td align="right">—</td>
<td> </td>
<td> </td>
<td> </td>
<td align="right">2</td>
<td> </td>
</tr>
<tr valign="bottom" style="background: #cceeff">
<td>
<div style="margin-left:15px; text-indent:-15px">Finance
</div></td>
<td> </td>
<td> </td>
<td align="right">6</td>
<td> </td>
<td> </td>
<td> </td>
<td align="right">1</td>
<td> </td>
<td> </td>
<td> </td>
<td align="right">1</td>
<td> </td>
<td> </td>
<td> </td>
<td align="right">—</td>
<td> </td>
<td> </td>
<td> </td>
<td align="right">8</td>
<td> </td>
</tr>
<tr valign="bottom">
<td>
<div style="margin-left:15px; text-indent:-15px">Corporate
</div></td>
<td> </td>
<td> </td>
<td align="right">5</td>
<td> </td>
<td> </td>
<td> </td>
<td align="right">—</td>
<td> </td>
<td> </td>
<td> </td>
<td align="right">—</td>
<td> </td>
<td> </td>
<td> </td>
<td align="right">—</td>
<td> </td>
<td> </td>
<td> </td>
<td align="right">5</td>
<td> </td>
</tr>
<tr valign="bottom" style="background: #cceeff">
<td>
<div style="margin-left:15px; text-indent:-15px">Textron Systems
</div></td>
<td> </td>
<td> </td>
<td align="right">1</td>
<td> </td>
<td> </td>
<td> </td>
<td align="right">2</td>
<td> </td>
<td> </td>
<td> </td>
<td align="right">—</td>
<td> </td>
<td> </td>
<td> </td>
<td align="right">—</td>
<td> </td>
<td> </td>
<td> </td>
<td align="right">3</td>
<td> </td>
</tr>
<tr style="font-size: 1px">
<td colspan="21" align="left" style="border-top: 1px solid #000000"> </td>
</tr>
<tr valign="bottom">
<td>
<div style="margin-left:15px; text-indent:-15px"> 
</div></td>
<td> </td>
<td align="right">$</td>
<td align="right">81</td>
<td> </td>
<td> </td>
<td align="right">$</td>
<td align="right">25</td>
<td> </td>
<td> </td>
<td align="right">$</td>
<td align="right">3</td>
<td> </td>
<td> </td>
<td align="right">$</td>
<td align="right">52</td>
<td> </td>
<td> </td>
<td align="right">$</td>
<td align="right">161</td>
<td> </td>
</tr>
<tr style="font-size: 1px">
<td colspan="21" align="left" style="border-top: 3px double #000000"> </td>
</tr>
<!-- End Table Body -->
</table>
</div>
<div align="left" style="font-size: 10pt; margin-top: 6pt">We record restructuring costs in special charges as these costs are generally of a nonrecurring
nature and are not included in segment profit, which is our measure used for evaluating performance
and for decision-making purposes. Severance costs related to an approved restructuring program are
classified as special charges unless the costs are for volume-related reductions of direct labor
that are deemed to be of a temporary or cyclical nature. Most of our severance benefits are
provided for under existing severance programs and the associated costs are accrued when they are
probable and estimable. Special one-time termination benefits are accounted for once an approved
plan is communicated to employees that establishes the terms of the benefit arrangement, the number
of employees to be terminated, along with their job classification and location, and the expected
completion date.
</div>
<div align="left" style="font-size: 10pt; margin-top: 6pt">We recorded net curtailment charges of $25 million for our pension and other postretirement benefit
plans in the second quarter of 2009, as our analysis of the impact of workforce reductions on these
plans indicated that curtailments had occurred and the amounts could be reasonably estimated. These
net curtailment charges are based primarily on the headcount reductions through the end of the
second quarter. The curtailment charge for the pension plan is primarily due to the recognition of
prior service costs that were previously being amortized over a period of years. We will continue
to evaluate additional workforce reductions as they take place to assess additional potential
curtailments that may occur.
</div>
<div align="left" style="font-size: 10pt; margin-top: 6pt">Asset impairment charges include a $43 million charge recorded in the second quarter of 2009 to
write off assets related to the Citation Columbus development project. Due to the prevailing
adverse market conditions and after analysis of the business jet market related to the product
offering, Cessna formally cancelled the Citation Columbus development project in the second quarter
of 2009. Cessna began this project in early 2008 for the development of an all-new, wide-bodied,
eight-passenger business jet designed for international travel that would extend Cessna’s product
offering as its largest business jet to date. This development project had capitalized costs
related to tooling and a partially-constructed manufacturing facility of which $43 million is
considered not to be recoverable.
</div>
<div align="left" style="font-size: 10pt; margin-top: 6pt">Since inception of the program, we have incurred $225 million in restructuring costs with $124
million in severance, $72 million in non-cash asset impairment charges, $25 million in net pension
and other postretirement benefit plan curtailment non-cash charges and $4 million in contract
termination costs. Of these amounts, $148 million was incurred at Cessna, $35 million in the
Finance segment, $27 million in the Industrial segment, $11 million at Corporate and $4 million at
Textron Systems.
</div>
<!-- Folio -->
<!-- /Folio -->
</div>
<!-- PAGEBREAK -->
<div style="font-family: 'Times New Roman',Times,serif">
<div align="left" style="font-size: 10pt; margin-top: 6pt">An analysis of the restructuring program and related reserve account is summarized below:
</div>
<div align="center">
<table style="font-size: 10pt; text-align: left" cellspacing="0" border="0" cellpadding="0" width="100%">
<!-- Begin Table Head -->
<tr valign="bottom">
<td width="40%"> </td>
<td width="5%"> </td>
<td width="3%"> </td>
<td width="1%"> </td>
<td width="3%"> </td>
<td width="5%"> </td>
<td width="3%"> </td>
<td width="1%"> </td>
<td width="3%"> </td>
<td width="5%"> </td>
<td width="3%"> </td>
<td width="1%"> </td>
<td width="3%"> </td>
<td width="5%"> </td>
<td width="3%"> </td>
<td width="1%"> </td>
<td width="3%"> </td>
<td width="5%"> </td>
<td width="3%"> </td>
<td width="1%"> </td>
<td width="3%"> </td>
</tr>
<tr style="font-size: 8pt" valign="bottom">
<td> </td>
<td> </td>
<td nowrap="nowrap" align="right" colspan="3">Severance</td>
<td> </td>
<td nowrap="nowrap" align="right" colspan="3">Curtailment</td>
<td> </td>
<td nowrap="nowrap" align="right" colspan="3">Contract</td>
<td> </td>
<td nowrap="nowrap" align="right" colspan="3">Asset</td>
<td> </td>
<td nowrap="nowrap" align="right" colspan="3"> </td>
</tr>
<tr style="font-size: 8pt" valign="bottom">
<td nowrap="nowrap" align="left"><i>(In millions)</i></td>
<td> </td>
<td nowrap="nowrap" align="right" colspan="3">Costs</td>
<td> </td>
<td nowrap="nowrap" align="right" colspan="3">Charges, Net</td>
<td> </td>
<td nowrap="nowrap" align="right" colspan="3">Terminations</td>
<td> </td>
<td nowrap="nowrap" align="right" colspan="3">Impairment</td>
<td> </td>
<td nowrap="nowrap" align="right" colspan="3">Total</td>
</tr>
<!-- End Table Head -->
<!-- Begin Table Body -->
<tr style="font-size: 1px">
<td colspan="21" align="left" style="border-top: 1px solid #000000"> </td>
</tr>
<tr valign="bottom" style="background: #cceeff">
<td>
<div style="margin-left:15px; text-indent:-15px">Balance at January 3, 2009
</div></td>
<td> </td>
<td align="right">$</td>
<td align="right">36</td>
<td> </td>
<td> </td>
<td align="right">$</td>
<td align="right">—</td>
<td> </td>
<td> </td>
<td align="right">$</td>
<td align="right">1</td>
<td> </td>
<td> </td>
<td align="right">$</td>
<td align="right">—</td>
<td> </td>
<td> </td>
<td align="right">$</td>
<td align="right">37</td>
<td> </td>
</tr>
<tr valign="bottom">
<td>
<div style="margin-left:15px; text-indent:-15px">Provisions
</div></td>
<td> </td>
<td> </td>
<td align="right">81</td>
<td> </td>
<td> </td>
<td> </td>
<td align="right">25</td>
<td> </td>
<td> </td>
<td> </td>
<td align="right">3</td>
<td> </td>
<td> </td>
<td> </td>
<td align="right">52</td>
<td> </td>
<td> </td>
<td> </td>
<td align="right">161</td>
<td> </td>
</tr>
<tr valign="bottom" style="background: #cceeff">
<td>
<div style="margin-left:15px; text-indent:-15px">Non-cash settlement
</div></td>
<td> </td>
<td> </td>
<td align="right">—</td>
<td> </td>
<td> </td>
<td nowrap="nowrap" align="right"> </td>
<td align="right">(25</td>
<td nowrap="nowrap">)</td>
<td> </td>
<td> </td>
<td align="right">—</td>
<td> </td>
<td> </td>
<td nowrap="nowrap" align="right"> </td>
<td align="right">(52</td>
<td nowrap="nowrap">)</td>
<td> </td>
<td nowrap="nowrap" align="right"> </td>
<td align="right">(77</td>
<td nowrap="nowrap">)</td>
</tr>
<tr valign="bottom">
<td>
<div style="margin-left:15px; text-indent:-15px">Cash paid
</div></td>
<td> </td>
<td nowrap="nowrap" align="right"> </td>
<td align="right">(65</td>
<td nowrap="nowrap">)</td>
<td> </td>
<td> </td>
<td align="right">—</td>
<td> </td>
<td> </td>
<td nowrap="nowrap" align="right"> </td>
<td align="right">(1</td>
<td nowrap="nowrap">)</td>
<td> </td>
<td> </td>
<td align="right">—</td>
<td> </td>
<td> </td>
<td nowrap="nowrap" align="right"> </td>
<td align="right">(66</td>
<td nowrap="nowrap">)</td>
</tr>
<tr style="font-size: 1px">
<td colspan="21" align="left" style="border-top: 1px solid #000000"> </td>
</tr>
<tr valign="bottom" style="background: #cceeff">
<td>
<div style="margin-left:15px; text-indent:-15px">Balance at July 4, 2009
</div></td>
<td> </td>
<td align="right">$</td>
<td align="right">52</td>
<td> </td>
<td> </td>
<td align="right">$</td>
<td align="right">—</td>
<td> </td>
<td> </td>
<td align="right">$</td>
<td align="right">3</td>
<td> </td>
<td> </td>
<td align="right">$</td>
<td align="right">—</td>
<td> </td>
<td> </td>
<td align="right">$</td>
<td align="right">55</td>
<td> </td>
</tr>
<tr style="font-size: 1px">
<td colspan="21" align="left" style="border-top: 3px double #000000"> </td>
</tr>
<!-- End Table Body -->
</table>
</div>
<div align="left" style="font-size: 10pt; margin-top: 6pt">The specific restructuring measures and associated estimated costs are based on our best judgment
under prevailing circumstances. We believe that the restructuring reserve balance of $55 million
is adequate to cover the costs presently accruable relating to activities formally identified and
committed to under approved plans as of July 4, 2009 and anticipate that all actions related to
these liabilities will be completed within a 12-month period. We estimate that we will incur
approximately $40 million in additional pre-tax restructuring costs in 2009 that will result in
future cash outlays, primarily attributable to severance payments related to additional workforce
reductions throughout the company. We expect that the program will be substantially completed by
the end of 2009.
</div>
</div>
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<body>
<!-- Begin Block Tagged Note 3 - us-gaap:PensionAndOtherPostretirementBenefitsDisclosureTextBlock-->
<div style="font-family: 'Times New Roman',Times,serif">
<div align="left" style="font-size: 10pt; margin-top: 12pt"><b>Note 3: Retirement Plans</b>
</div>
<div align="left" style="font-size: 10pt; margin-top: 6pt">We provide defined benefit pension plans and other postretirement benefits to eligible employees.
The components of net periodic benefit cost for these plans are as follows:
</div>
<div align="center">
<table style="font-size: 10pt; text-align: left" cellspacing="0" border="0" cellpadding="0" width="100%">
<!-- Begin Table Head -->
<tr valign="bottom">
<td width="42%"> </td>
<td width="5%"> </td>
<td width="1%"> </td>
<td width="5%"> </td>
<td width="1%"> </td>
<td width="5%"> </td>
<td width="1%"> </td>
<td width="5%"> </td>
<td width="1%"> </td>
<td width="5%"> </td>
<td width="1%"> </td>
<td width="5%"> </td>
<td width="1%"> </td>
<td width="5%"> </td>
<td width="1%"> </td>
<td width="5%"> </td>
<td width="1%"> </td>
</tr>
<tr style="font-size: 8pt" valign="bottom">
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td nowrap="nowrap" align="center" colspan="7">Postretirement Benefits </td>
</tr>
<tr style="font-size: 8pt" valign="bottom">
<td> </td>
<td> </td>
<td nowrap="nowrap" align="center" colspan="7" style="border-bottom: 1px solid #000000">Pension Benefits </td>
<td style="border-bottom: 1px solid #000000"> </td>
<td nowrap="nowrap" align="center" colspan="7" style="border-bottom: 1px solid #000000">Other Than Pensions </td>
</tr>
<tr style="font-size: 8pt" valign="bottom">
<td> </td>
<td> </td>
<td nowrap="nowrap" align="right" colspan="2">July 4,</td>
<td> </td>
<td> </td>
<td nowrap="nowrap" align="right" colspan="2">June 28,</td>
<td> </td>
<td> </td>
<td nowrap="nowrap" align="right" colspan="2">July 4,</td>
<td> </td>
<td> </td>
<td nowrap="nowrap" align="right" colspan="2">June 28,</td>
<td> </td>
</tr>
<tr style="font-size: 8pt" valign="bottom">
<td nowrap="nowrap" align="left"><i>(In millions)</i></td>
<td> </td>
<td nowrap="nowrap" align="right" colspan="2">2009</td>
<td> </td>
<td> </td>
<td nowrap="nowrap" align="right" colspan="2">2008</td>
<td> </td>
<td> </td>
<td nowrap="nowrap" align="right" colspan="2">2009</td>
<td> </td>
<td> </td>
<td nowrap="nowrap" align="right" colspan="2">2008</td>
<td> </td>
</tr>
<!-- End Table Head -->
<!-- Begin Table Body -->
<tr style="font-size: 1px">
<td colspan="17" align="left" style="border-top: 1px solid #000000"> </td>
</tr>
<tr valign="bottom" style="background: #cceeff">
<td>
<div style="margin-left:15px; text-indent:-15px">Three Months Ended
</div></td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
</tr>
<tr style="font-size: 1px">
<td colspan="17" align="left" style="border-top: 1px solid #000000"> </td>
</tr>
<tr valign="bottom">
<td>
<div style="margin-left:15px; text-indent:-15px">Service cost
</div></td>
<td> </td>
<td align="left">$</td>
<td align="right">30</td>
<td> </td>
<td> </td>
<td align="left">$</td>
<td align="right">35</td>
<td> </td>
<td> </td>
<td align="left">$</td>
<td align="right">2</td>
<td> </td>
<td> </td>
<td align="left">$</td>
<td align="right">3</td>
<td> </td>
</tr>
<tr valign="bottom" style="background: #cceeff">
<td>
<div style="margin-left:15px; text-indent:-15px">Interest cost
</div></td>
<td> </td>
<td> </td>
<td align="right">79</td>
<td> </td>
<td> </td>
<td> </td>
<td align="right">76</td>
<td> </td>
<td> </td>
<td> </td>
<td align="right">10</td>
<td> </td>
<td> </td>
<td> </td>
<td align="right">10</td>
<td> </td>
</tr>
<tr valign="bottom">
<td>
<div style="margin-left:15px; text-indent:-15px">Expected return on plan assets
</div></td>
<td> </td>
<td nowrap="nowrap" align="right"> </td>
<td align="right">(98</td>
<td nowrap="nowrap">)</td>
<td> </td>
<td nowrap="nowrap" align="right"> </td>
<td align="right">(101</td>
<td nowrap="nowrap">)</td>
<td> </td>
<td> </td>
<td align="right">—</td>
<td> </td>
<td> </td>
<td> </td>
<td align="right">—</td>
<td> </td>
</tr>
<tr valign="bottom" style="background: #cceeff">
<td>
<div style="margin-left:15px; text-indent:-15px">Amortization of prior service cost (credit)
</div></td>
<td> </td>
<td> </td>
<td align="right">4</td>
<td> </td>
<td> </td>
<td> </td>
<td align="right">5</td>
<td> </td>
<td> </td>
<td nowrap="nowrap" align="right"> </td>
<td align="right">(2</td>
<td nowrap="nowrap">)</td>
<td> </td>
<td nowrap="nowrap" align="right"> </td>
<td align="right">(2</td>
<td nowrap="nowrap">)</td>
</tr>
<tr valign="bottom">
<td>
<div style="margin-left:15px; text-indent:-15px">Amortization of net loss
</div></td>
<td> </td>
<td> </td>
<td align="right">2</td>
<td> </td>
<td> </td>
<td> </td>
<td align="right">5</td>
<td> </td>
<td> </td>
<td> </td>
<td align="right">2</td>
<td> </td>
<td> </td>
<td> </td>
<td align="right">4</td>
<td> </td>
</tr>
<tr style="font-size: 1px">
<td colspan="17" align="left" style="border-top: 1px solid #000000"> </td>
</tr>
<tr valign="bottom" style="background: #cceeff">
<td>
<div style="margin-left:15px; text-indent:-15px">Net periodic benefit cost
</div></td>
<td> </td>
<td align="left">$</td>
<td align="right">17</td>
<td> </td>
<td> </td>
<td align="left">$</td>
<td align="right">20</td>
<td> </td>
<td> </td>
<td align="left">$</td>
<td align="right">12</td>
<td> </td>
<td> </td>
<td align="left">$</td>
<td align="right">15</td>
<td> </td>
</tr>
<tr style="font-size: 1px">
<td colspan="17" align="left" style="border-top: 3px double #000000"> </td>
</tr>
<tr valign="bottom"><!-- Blank Space -->
<td>
<div style="margin-left:15px; text-indent:-15px"> 
</div></td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
</tr>
<tr valign="bottom">
<td>
<div style="margin-left:15px; text-indent:-15px">Six Months Ended
</div></td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
</tr>
<tr style="font-size: 1px">
<td colspan="17" align="left" style="border-top: 1px solid #000000"> </td>
</tr>
<tr valign="bottom" style="background: #cceeff">
<td>
<div style="margin-left:15px; text-indent:-15px">Service cost
</div></td>
<td> </td>
<td align="left">$</td>
<td align="right">63</td>
<td> </td>
<td> </td>
<td align="left">$</td>
<td align="right">71</td>
<td> </td>
<td> </td>
<td align="left">$</td>
<td align="right">4</td>
<td> </td>
<td> </td>
<td align="left">$</td>
<td align="right">5</td>
<td> </td>
</tr>
<tr valign="bottom">
<td>
<div style="margin-left:15px; text-indent:-15px">Interest cost
</div></td>
<td> </td>
<td> </td>
<td align="right">155</td>
<td> </td>
<td> </td>
<td> </td>
<td align="right">152</td>
<td> </td>
<td> </td>
<td> </td>
<td align="right">19</td>
<td> </td>
<td> </td>
<td> </td>
<td align="right">21</td>
<td> </td>
</tr>
<tr valign="bottom" style="background: #cceeff">
<td>
<div style="margin-left:15px; text-indent:-15px">Expected return on plan assets
</div></td>
<td> </td>
<td nowrap="nowrap" align="right"> </td>
<td align="right">(195</td>
<td nowrap="nowrap">)</td>
<td> </td>
<td nowrap="nowrap" align="right"> </td>
<td align="right">(203</td>
<td nowrap="nowrap">)</td>
<td> </td>
<td> </td>
<td align="right">—</td>
<td> </td>
<td> </td>
<td> </td>
<td align="right">—</td>
<td> </td>
</tr>
<tr valign="bottom">
<td>
<div style="margin-left:15px; text-indent:-15px">Amortization of prior service cost (credit)
</div></td>
<td> </td>
<td> </td>
<td align="right">9</td>
<td> </td>
<td> </td>
<td> </td>
<td align="right">10</td>
<td> </td>
<td> </td>
<td nowrap="nowrap" align="right"> </td>
<td align="right">(3</td>
<td nowrap="nowrap">)</td>
<td> </td>
<td nowrap="nowrap" align="right"> </td>
<td align="right">(3</td>
<td nowrap="nowrap">)</td>
</tr>
<tr valign="bottom" style="background: #cceeff">
<td>
<div style="margin-left:15px; text-indent:-15px">Amortization of net loss
</div></td>
<td> </td>
<td> </td>
<td align="right">8</td>
<td> </td>
<td> </td>
<td> </td>
<td align="right">9</td>
<td> </td>
<td> </td>
<td> </td>
<td align="right">4</td>
<td> </td>
<td> </td>
<td> </td>
<td align="right">8</td>
<td> </td>
</tr>
<tr style="font-size: 1px">
<td colspan="17" align="left" style="border-top: 1px solid #000000"> </td>
</tr>
<tr valign="bottom">
<td>
<div style="margin-left:15px; text-indent:-15px">Net periodic benefit cost
</div></td>
<td> </td>
<td align="left">$</td>
<td align="right">40</td>
<td> </td>
<td> </td>
<td align="left">$</td>
<td align="right">39</td>
<td> </td>
<td> </td>
<td align="left">$</td>
<td align="right">24</td>
<td> </td>
<td> </td>
<td align="left">$</td>
<td align="right">31</td>
<td> </td>
</tr>
<tr style="font-size: 1px">
<td colspan="17" align="left" style="border-top: 3px double #000000"> </td>
</tr>
<!-- End Table Body -->
</table>
</div>
<div align="left" style="font-size: 10pt; margin-top: 6pt">Due to the magnitude of the workforce reductions under the restructuring program discussed in Note
2: Special Charges, in the second quarter of 2009, we determined that a curtailment had occurred in
certain pension and other postretirement benefit plans. Accordingly, we recorded a net curtailment
charge of $25 million, reflecting the recognition of prior service cost of $30 million related to
the pension plans and $5 million of prior service credits related to other postretirement benefit
plans. In addition, we re-measured the plans that had the curtailments and revised our assumptions
accordingly. The discount rate for these plans was increased from 6.25% to 7.0%, while other
assumptions remained consistent with year-end assumptions. As a result of the curtailment and
revised discount rate, we recorded a reduction in our unrealized losses of approximately $130
million through other comprehensive loss.
</div>
<!-- Folio -->
<!-- /Folio -->
</div>
<!-- PAGEBREAK -->
<div style="font-family: 'Times New Roman',Times,serif">
</div>
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<!-- Begin Block Tagged Note 4 - us-gaap:DisposalGroupsIncludingDiscontinuedOperationsDisclosureTextBlock-->
<div style="font-family: 'Times New Roman',Times,serif">
<div align="left" style="font-size: 10pt; margin-top: 12pt"><b>Note 4: Discontinued Operations</b>
</div>
<div align="left" style="font-size: 10pt; margin-top: 6pt">On April 3, 2009, we sold HR Textron, an operating unit previously reported within the Textron
Systems segment, for $376 million in cash. The sale resulted in an after-tax gain of $7 million
and net after-tax proceeds of approximately $275 million.
</div>
<div align="left" style="font-size: 10pt; margin-top: 6pt">In November 2008, we completed the sale of our Fluid & Power business unit and received
approximately $527 million in cash, a six-year note with a face value of $28 million and may
receive up to $50 million based on final 2008 operating results that would be primarily payable in
a six-year note. During the first quarter of 2009, the final settlement of this transaction was
extended until later this year.
</div>
<div align="left" style="font-size: 10pt; margin-top: 6pt">Results of our discontinued businesses are as follows:
</div>
<div align="center">
<table style="font-size: 10pt; text-align: left" cellspacing="0" border="0" cellpadding="0" width="100%">
<!-- Begin Table Head -->
<tr valign="bottom">
<td width="42%"> </td>
<td width="5%"> </td>
<td width="1%"> </td>
<td width="5%"> </td>
<td width="1%"> </td>
<td width="5%"> </td>
<td width="1%"> </td>
<td width="5%"> </td>
<td width="1%"> </td>
<td width="5%"> </td>
<td width="1%"> </td>
<td width="5%"> </td>
<td width="1%"> </td>
<td width="5%"> </td>
<td width="1%"> </td>
<td width="5%"> </td>
<td width="1%"> </td>
</tr>
<tr style="font-size: 8pt" valign="bottom">
<td> </td>
<td> </td>
<td nowrap="nowrap" align="center" colspan="7" style="border-bottom: 1px solid #000000">Three Months Ended </td>
<td style="border-bottom: 1px solid #000000"> </td>
<td nowrap="nowrap" align="center" colspan="7" style="border-bottom: 1px solid #000000">Six Months Ended </td>
</tr>
<tr style="font-size: 8pt" valign="bottom">
<td> </td>
<td> </td>
<td nowrap="nowrap" align="right" colspan="2">July 4,</td>
<td> </td>
<td> </td>
<td nowrap="nowrap" align="right" colspan="2">June 28,</td>
<td> </td>
<td> </td>
<td nowrap="nowrap" align="right" colspan="2">July 4,</td>
<td> </td>
<td> </td>
<td nowrap="nowrap" align="right" colspan="2">June 28,</td>
<td> </td>
</tr>
<tr style="font-size: 8pt" valign="bottom">
<td nowrap="nowrap" align="left"><i>(In millions)</i></td>
<td> </td>
<td nowrap="nowrap" align="right" colspan="2">2009</td>
<td> </td>
<td> </td>
<td nowrap="nowrap" align="right" colspan="2">2008</td>
<td> </td>
<td> </td>
<td nowrap="nowrap" align="right" colspan="2">2009</td>
<td> </td>
<td> </td>
<td nowrap="nowrap" align="right" colspan="2">2008</td>
<td> </td>
</tr>
<!-- End Table Head -->
<!-- Begin Table Body -->
<tr style="font-size: 1px">
<td colspan="17" align="left" style="border-top: 1px solid #000000"> </td>
</tr>
<tr valign="bottom" style="background: #cceeff">
<td>
<div style="margin-left:15px; text-indent:-15px">Revenue
</div></td>
<td> </td>
<td align="left">$</td>
<td align="right">—</td>
<td> </td>
<td> </td>
<td align="left">$</td>
<td align="right">236</td>
<td> </td>
<td> </td>
<td align="left">$</td>
<td align="right">48</td>
<td> </td>
<td> </td>
<td align="left">$</td>
<td align="right">447</td>
<td> </td>
</tr>
<tr style="font-size: 1px">
<td colspan="17" align="left" style="border-top: 1px solid #000000"> </td>
</tr>
<tr valign="bottom">
<td>
<div style="margin-left:15px; text-indent:-15px">Income (loss) from discontinued operations
before income taxes
</div></td>
<td> </td>
<td align="left">$</td>
<td align="right">—</td>
<td> </td>
<td> </td>
<td align="left">$</td>
<td align="right">14</td>
<td> </td>
<td> </td>
<td nowrap="nowrap" align="left">$</td>
<td align="right">(1</td>
<td nowrap="nowrap">)</td>
<td> </td>
<td align="left">$</td>
<td align="right">25</td>
<td> </td>
</tr>
<tr valign="bottom" style="background: #cceeff">
<td>
<div style="margin-left:15px; text-indent:-15px">Income tax expense (benefit)
</div></td>
<td> </td>
<td nowrap="nowrap" align="right"> </td>
<td align="right">(4</td>
<td nowrap="nowrap">)</td>
<td> </td>
<td> </td>
<td align="right">6</td>
<td> </td>
<td> </td>
<td nowrap="nowrap" align="right"> </td>
<td align="right">(41</td>
<td nowrap="nowrap">)</td>
<td> </td>
<td> </td>
<td align="right">11</td>
<td> </td>
</tr>
<tr style="font-size: 1px">
<td colspan="17" align="left" style="border-top: 1px solid #000000"> </td>
</tr>
<tr valign="bottom"><!-- Blank Space -->
<td>
<div style="margin-left:15px; text-indent:-15px"> 
</div></td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
</tr>
<tr valign="bottom">
<td>
<div style="margin-left:15px; text-indent:-15px"> 
</div></td>
<td> </td>
<td> </td>
<td align="right">4</td>
<td> </td>
<td> </td>
<td> </td>
<td align="right">8</td>
<td> </td>
<td> </td>
<td> </td>
<td align="right">40</td>
<td> </td>
<td> </td>
<td> </td>
<td align="right">14</td>
<td> </td>
</tr>
<tr valign="bottom" style="background: #cceeff">
<td>
<div style="margin-left:15px; text-indent:-15px">Gain on sale, net of income taxes
</div></td>
<td> </td>
<td> </td>
<td align="right">—</td>
<td> </td>
<td> </td>
<td> </td>
<td align="right">—</td>
<td> </td>
<td> </td>
<td> </td>
<td align="right">7</td>
<td> </td>
<td> </td>
<td> </td>
<td align="right">—</td>
<td> </td>
</tr>
<tr style="font-size: 1px">
<td colspan="17" align="left" style="border-top: 1px solid #000000"> </td>
</tr>
<tr valign="bottom">
<td>
<div style="margin-left:15px; text-indent:-15px">Income from discontinued operations, net of
income taxes
</div></td>
<td> </td>
<td align="left">$</td>
<td align="right">4</td>
<td> </td>
<td> </td>
<td align="left">$</td>
<td align="right">8</td>
<td> </td>
<td> </td>
<td align="left">$</td>
<td align="right">47</td>
<td> </td>
<td> </td>
<td align="left">$</td>
<td align="right">14</td>
<td> </td>
</tr>
<tr style="font-size: 1px">
<td colspan="17" align="left" style="border-top: 3px double #000000"> </td>
</tr>
<!-- End Table Body -->
</table>
</div>
<div align="left" style="font-size: 10pt; margin-top: 6pt">In the first half of 2009, we had a $34 million tax benefit from the reduction in tax contingencies
as a result of the HR Textron sale and a valuation allowance reversal on a previously established
deferred tax asset.
</div>
</div>
</body>
</html>
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<html>
<head></head>
<body>
<!-- Begin Block Tagged Note 5 - us-gaap:ComprehensiveIncomeNoteTextBlock-->
<div style="font-family: 'Times New Roman',Times,serif">
<div align="left" style="font-size: 10pt; margin-top: 12pt"><b>Note 5: Comprehensive Income</b>
</div>
<div align="left" style="font-size: 10pt; margin-top: 6pt">Our comprehensive income for the periods is provided below:
</div>
<div align="center">
<table style="font-size: 10pt; text-align: left" cellspacing="0" border="0" cellpadding="0" width="100%">
<!-- Begin Table Head -->
<tr valign="bottom">
<td width="42%"> </td>
<td width="5%"> </td>
<td width="1%"> </td>
<td width="5%"> </td>
<td width="1%"> </td>
<td width="5%"> </td>
<td width="1%"> </td>
<td width="5%"> </td>
<td width="1%"> </td>
<td width="5%"> </td>
<td width="1%"> </td>
<td width="5%"> </td>
<td width="1%"> </td>
<td width="5%"> </td>
<td width="1%"> </td>
<td width="5%"> </td>
<td width="1%"> </td>
</tr>
<tr style="font-size: 8pt" valign="bottom">
<td> </td>
<td> </td>
<td nowrap="nowrap" align="center" colspan="7" style="border-bottom: 1px solid #000000">Three Months Ended </td>
<td style="border-bottom: 1px solid #000000"> </td>
<td nowrap="nowrap" align="center" colspan="7" style="border-bottom: 1px solid #000000">Six Months Ended</td>
</tr>
<tr style="font-size: 8pt" valign="bottom">
<td> </td>
<td> </td>
<td nowrap="nowrap" align="right" colspan="2">July 4,</td>
<td> </td>
<td> </td>
<td nowrap="nowrap" align="right" colspan="2">June 28,</td>
<td> </td>
<td> </td>
<td nowrap="nowrap" align="right" colspan="2">July 4,</td>
<td> </td>
<td> </td>
<td nowrap="nowrap" align="right" colspan="2">June 28,</td>
<td> </td>
</tr>
<tr style="font-size: 8pt" valign="bottom">
<td nowrap="nowrap" align="left"><i>(In millions)</i></td>
<td> </td>
<td nowrap="nowrap" align="right" colspan="2">2009</td>
<td> </td>
<td> </td>
<td nowrap="nowrap" align="right" colspan="2">2008</td>
<td> </td>
<td> </td>
<td nowrap="nowrap" align="right" colspan="2">2009</td>
<td> </td>
<td> </td>
<td nowrap="nowrap" align="right" colspan="2">2008</td>
<td> </td>
</tr>
<!-- End Table Head -->
<!-- Begin Table Body -->
<tr style="font-size: 1px">
<td colspan="17" align="left" style="border-top: 1px solid #000000"> </td>
</tr>
<tr valign="bottom" style="background: #cceeff">
<td>
<div style="margin-left:15px; text-indent:-15px">Net income (loss)
</div></td>
<td> </td>
<td nowrap="nowrap" align="left">$</td>
<td align="right">(58</td>
<td nowrap="nowrap">)</td>
<td> </td>
<td align="left">$</td>
<td align="right">258</td>
<td> </td>
<td> </td>
<td align="left">$</td>
<td align="right">28</td>
<td> </td>
<td> </td>
<td align="left">$</td>
<td align="right">489</td>
<td> </td>
</tr>
<tr valign="bottom">
<td>
<div style="margin-left:15px; text-indent:-15px">Other comprehensive income, net of income taxes:
</div></td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
</tr>
<tr valign="bottom" style="background: #cceeff">
<td>
<div style="margin-left:30px; text-indent:-15px">Unrealized gain on pension, net of income taxes of $48
</div></td>
<td> </td>
<td> </td>
<td align="right">82</td>
<td> </td>
<td> </td>
<td> </td>
<td align="right">—</td>
<td> </td>
<td> </td>
<td> </td>
<td align="right">82</td>
<td> </td>
<td> </td>
<td> </td>
<td align="right">—</td>
<td> </td>
</tr>
<tr valign="bottom">
<td>
<div style="margin-left:30px; text-indent:-15px">Pension curtailment, net of income taxes of $10
</div></td>
<td> </td>
<td> </td>
<td align="right">15</td>
<td> </td>
<td> </td>
<td> </td>
<td align="right">—</td>
<td> </td>
<td> </td>
<td> </td>
<td align="right">15</td>
<td> </td>
<td> </td>
<td> </td>
<td align="right">—</td>
<td> </td>
</tr>
<tr valign="bottom" style="background: #cceeff">
<td>
<div style="margin-left:30px; text-indent:-15px">Recognition of prior service cost and unrealized
losses on pension and postretirement benefits
</div></td>
<td> </td>
<td> </td>
<td align="right">5</td>
<td> </td>
<td> </td>
<td> </td>
<td align="right">10</td>
<td> </td>
<td> </td>
<td> </td>
<td align="right">12</td>
<td> </td>
<td> </td>
<td> </td>
<td align="right">20</td>
<td> </td>
</tr>
<tr valign="bottom">
<td>
<div style="margin-left:30px; text-indent:-15px">Deferred gains (losses) on hedge contracts
</div></td>
<td> </td>
<td> </td>
<td align="right">38</td>
<td> </td>
<td> </td>
<td> </td>
<td align="right">—</td>
<td> </td>
<td> </td>
<td> </td>
<td align="right">30</td>
<td> </td>
<td> </td>
<td nowrap="nowrap" align="right"> </td>
<td align="right">(17</td>
<td nowrap="nowrap">)</td>
</tr>
<tr valign="bottom" style="background: #cceeff">
<td>
<div style="margin-left:30px; text-indent:-15px">Net deferred loss on retained interests
</div></td>
<td> </td>
<td nowrap="nowrap" align="right"> </td>
<td align="right">(7</td>
<td nowrap="nowrap">)</td>
<td> </td>
<td nowrap="nowrap" align="right"> </td>
<td align="right">(1</td>
<td nowrap="nowrap">)</td>
<td> </td>
<td nowrap="nowrap" align="right"> </td>
<td align="right">(9</td>
<td nowrap="nowrap">)</td>
<td> </td>
<td> </td>
<td align="right">—</td>
<td> </td>
</tr>
<tr valign="bottom">
<td>
<div style="margin-left:30px; text-indent:-15px">Foreign currency translation and other
</div></td>
<td> </td>
<td> </td>
<td align="right">32</td>
<td> </td>
<td> </td>
<td> </td>
<td align="right">13</td>
<td> </td>
<td> </td>
<td> </td>
<td align="right">34</td>
<td> </td>
<td> </td>
<td nowrap="nowrap" align="right"> </td>
<td align="right">(5</td>
<td nowrap="nowrap">)</td>
</tr>
<tr style="font-size: 1px">
<td colspan="17" align="left" style="border-top: 1px solid #000000"> </td>
</tr>
<tr valign="bottom" style="background: #cceeff">
<td>
<div style="margin-left:15px; text-indent:-15px">Comprehensive income
</div></td>
<td> </td>
<td align="left">$</td>
<td align="right">107</td>
<td> </td>
<td> </td>
<td align="left">$</td>
<td align="right">280</td>
<td> </td>
<td> </td>
<td align="left">$</td>
<td align="right">192</td>
<td> </td>
<td> </td>
<td align="left">$</td>
<td align="right">487</td>
<td> </td>
</tr>
<tr style="font-size: 1px">
<td colspan="17" align="left" style="border-top: 3px double #000000"> </td>
</tr>
<!-- End Table Body -->
</table>
</div>
</div>
</body>
</html>
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<html>
<head></head>
<body>
<!-- Begin Block Tagged Note 6 - us-gaap:EarningsPerShareTextBlock-->
<div style="font-family: 'Times New Roman',Times,serif">
<div align="left" style="font-size: 10pt; margin-top: 12pt"><b>Note 6: Earnings per Share</b>
</div>
<div align="left" style="font-size: 10pt; margin-top: 6pt">In the first quarter of 2009, we adopted the new accounting standard for determining whether
instruments granted in share-based payment transactions are participating securities. This new
standard requires us to include any unvested share-based payment awards that contain nonforfeitable
rights to dividends or dividend equivalents (whether paid or unpaid) as participating securities in
our computation of basic earnings per share pursuant to the two-class method. In 2008, we granted
restricted stock units that include nonforfeitable rights to dividends once declared. Accordingly,
with the adoption of this new standard, these restricted stock units are considered participating
securities and are included in our calculation of basic earnings per share using the two-class
method.
</div>
<!-- Folio -->
<!-- /Folio -->
</div>
<!-- PAGEBREAK -->
<div style="font-family: 'Times New Roman',Times,serif">
<div align="left" style="font-size: 10pt; margin-top: 6pt">Prior period basic and diluted weighted-average shares outstanding have been recast to conform to
the new calculation. The adoption of this standard resulted in a $0.01 reduction in diluted
earnings per share from continuing operations for the second quarter of 2008, and had no impact on
the first half of 2008.
</div>
<div align="left" style="font-size: 10pt; margin-top: 6pt">We calculate basic and diluted earnings per share based on income available to common shareholders,
which approximates net income for each period, and the restricted stock unit participating
securities. We use the weighted-average number of common shares outstanding during the period and
the 2008 restricted stock units discussed above for the computation of basic earnings per share
using the two-class method. Diluted earnings per share includes the dilutive effect of convertible
preferred shares, stock options and restricted stock units in the weighted-average number of common
shares outstanding. The 2008 restricted stock units are included in the diluted weighted-average
shares outstanding by virtue of their inclusion in basic weighted-average shares outstanding using
the two-class method as described above. This result is more dilutive than if we had used the
treasury stock method to calculate diluted weighted-average shares outstanding for these restricted
stock units.
</div>
<div align="left" style="font-size: 10pt; margin-top: 6pt">The weighted-average shares outstanding for basic and diluted earnings per share are as follows:
</div>
<div align="center">
<table style="font-size: 10pt; text-align: left" cellspacing="0" border="0" cellpadding="0" width="100%">
<!-- Begin Table Head -->
<tr valign="bottom">
<td width="52%"> </td>
<td width="5%"> </td>
<td width="3%"> </td>
<td width="1%"> </td>
<td width="3%"> </td>
<td width="5%"> </td>
<td width="3%"> </td>
<td width="1%"> </td>
<td width="3%"> </td>
<td width="5%"> </td>
<td width="3%"> </td>
<td width="1%"> </td>
<td width="3%"> </td>
<td width="5%"> </td>
<td width="3%"> </td>
<td width="1%"> </td>
<td width="3%"> </td>
</tr>
<tr style="font-size: 8pt" valign="bottom">
<td> </td>
<td> </td>
<td nowrap="nowrap" align="center" colspan="7" style="border-bottom: 1px solid #000000">Three Months Ended </td>
<td style="border-bottom: 1px solid #000000"> </td>
<td nowrap="nowrap" align="center" colspan="7" style="border-bottom: 1px solid #000000">Six Months Ended</td>
</tr>
<tr style="font-size: 8pt" valign="bottom">
<td> </td>
<td> </td>
<td nowrap="nowrap" align="right" colspan="3">July 4,</td>
<td> </td>
<td nowrap="nowrap" align="right" colspan="3">June 28,</td>
<td> </td>
<td nowrap="nowrap" align="right" colspan="3">July 4,</td>
<td> </td>
<td nowrap="nowrap" align="right" colspan="3">June 28,</td>
</tr>
<tr style="font-size: 8pt" valign="bottom">
<td nowrap="nowrap" align="left"><i>(In thousands)</i></td>
<td> </td>
<td nowrap="nowrap" align="right" colspan="3">2009</td>
<td> </td>
<td nowrap="nowrap" align="right" colspan="3">2008</td>
<td> </td>
<td nowrap="nowrap" align="right" colspan="3">2009</td>
<td> </td>
<td nowrap="nowrap" align="right" colspan="3">2008</td>
</tr>
<!-- End Table Head -->
<!-- Begin Table Body -->
<tr style="font-size: 1px">
<td colspan="17" align="left" style="border-top: 1px solid #000000"> </td>
</tr>
<tr valign="bottom" style="background: #cceeff">
<td>
<div style="margin-left:15px; text-indent:-15px">Basic weighted-average shares outstanding
</div></td>
<td> </td>
<td> </td>
<td align="right">264,091</td>
<td> </td>
<td> </td>
<td> </td>
<td align="right">250,039</td>
<td> </td>
<td> </td>
<td> </td>
<td align="right">255,261</td>
<td> </td>
<td> </td>
<td> </td>
<td align="right">249,674</td>
<td> </td>
</tr>
<tr valign="bottom">
<td>
<div style="margin-left:15px; text-indent:-15px">Dilutive effect of convertible preferred
shares, stock options and restricted stock
units
</div></td>
<td> </td>
<td> </td>
<td align="right">—</td>
<td> </td>
<td> </td>
<td> </td>
<td align="right">4,541</td>
<td> </td>
<td> </td>
<td> </td>
<td align="right">—</td>
<td> </td>
<td> </td>
<td> </td>
<td align="right">4,917</td>
<td> </td>
</tr>
<tr style="font-size: 1px">
<td colspan="17" align="left" style="border-top: 1px solid #000000"> </td>
</tr>
<tr valign="bottom" style="background: #cceeff">
<td>
<div style="margin-left:15px; text-indent:-15px">Diluted weighted-average shares outstanding
</div></td>
<td> </td>
<td> </td>
<td align="right">264,091</td>
<td> </td>
<td> </td>
<td> </td>
<td align="right">254,580</td>
<td> </td>
<td> </td>
<td> </td>
<td align="right">255,261</td>
<td> </td>
<td> </td>
<td> </td>
<td align="right">254,591</td>
<td> </td>
</tr>
<tr style="font-size: 1px">
<td colspan="17" align="left" style="border-top: 3px double #000000"> </td>
</tr>
<!-- End Table Body -->
</table>
</div>
<div align="left" style="font-size: 10pt; margin-top: 6pt">Diluted weighted average shares outstanding for the three and six months ended July 4, 2009 equal
basic weighted average shares outstanding, as we incurred losses from continuing operations in each
of these periods. A weighted average of approximately 11 million units of restricted stock and
options to purchase common stock were anti-dilutive for the three and six months ended July 4,
2009, and were not included in the computation of diluted earnings per share for these periods.
These securities could potentially dilute basic earnings per share in the future.
</div>
<div align="left" style="font-size: 10pt; margin-top: 6pt">On May 5, 2009, we issued 4.50% Convertible Senior Notes (the “Notes”) due 2013, as discussed in
Note 9: Debt. In connection with the issuance of these notes, we entered into a warrant
transaction with the note underwriters to sell common stock warrants. The initial strike price of
these warrants is $15.75 per share of our common stock and the warrants cover an aggregate of
45,714,300 shares of our common stock. If our closing stock price exceeds this strike price, this
number of shares will be dilutive. It is our intention to settle the face value of the Notes in
cash upon conversion/maturity.
</div>
<div align="left" style="font-size: 10pt; margin-top: 6pt">Concurrently with the offering and sale of the Notes, we also offered and sold to the public under
the Textron Inc. registration statement 23,805,000 shares of our common stock for net proceeds of
approximately $238 million, after deducting discounts, commissions and expenses.
</div>
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<!-- Begin Block Tagged Note 7 - us-gaap:LoansNotesTradeAndOtherReceivablesDisclosureTextBlock-->
<div style="font-family: 'Times New Roman',Times,serif">
<div align="left" style="font-size: 10pt; margin-top: 12pt"><b>Note 7: Accounts Receivable, Finance Receivables and Securitizations</b>
</div>
<div align="left" style="font-size: 10pt; margin-top: 6pt"><i>Accounts Receivable</i>
</div>
<div align="center">
<table style="font-size: 10pt; text-align: left" cellspacing="0" border="0" cellpadding="0" width="100%">
<!-- Begin Table Head -->
<tr valign="bottom">
<td width="76%"> </td>
<td width="5%"> </td>
<td width="3%"> </td>
<td width="1%"> </td>
<td width="3%"> </td>
<td width="5%"> </td>
<td width="3%"> </td>
<td width="1%"> </td>
<td width="3%"> </td>
</tr>
<tr style="font-size: 8pt" valign="bottom">
<td> </td>
<td> </td>
<td nowrap="nowrap" align="right" colspan="3">July 4,</td>
<td> </td>
<td nowrap="nowrap" align="right" colspan="3">January 3,</td>
</tr>
<tr style="font-size: 8pt" valign="bottom">
<td nowrap="nowrap" align="left"><i>(In millions)</i></td>
<td> </td>
<td nowrap="nowrap" align="right" colspan="3">2009</td>
<td> </td>
<td nowrap="nowrap" align="right" colspan="3">2009</td>
</tr>
<!-- End Table Head -->
<!-- Begin Table Body -->
<tr style="font-size: 1px">
<td colspan="9" align="left" style="border-top: 1px solid #000000"> </td>
</tr>
<tr valign="bottom" style="background: #cceeff">
<td>
<div style="margin-left:15px; text-indent:-15px">Accounts receivable – Commercial
</div></td>
<td> </td>
<td align="right">$</td>
<td align="right">474</td>
<td> </td>
<td> </td>
<td align="right">$</td>
<td align="right">496</td>
<td> </td>
</tr>
<tr valign="bottom">
<td>
<div style="margin-left:15px; text-indent:-15px">Accounts receivable – U.S. Government contracts
</div></td>
<td> </td>
<td> </td>
<td align="right">391</td>
<td> </td>
<td> </td>
<td> </td>
<td align="right">422</td>
<td> </td>
</tr>
<tr style="font-size: 1px">
<td colspan="9" align="left" style="border-top: 1px solid #000000"> </td>
</tr>
<tr valign="bottom" style="background: #cceeff">
<td>
<div style="margin-left:15px; text-indent:-15px"> 
</div></td>
<td> </td>
<td> </td>
<td align="right">865</td>
<td> </td>
<td> </td>
<td> </td>
<td align="right">918</td>
<td> </td>
</tr>
<tr valign="bottom">
<td>
<div style="margin-left:15px; text-indent:-15px">Allowance for doubtful accounts
</div></td>
<td> </td>
<td nowrap="nowrap" align="right"> </td>
<td align="right">(26</td>
<td nowrap="nowrap">)</td>
<td> </td>
<td nowrap="nowrap" align="right"> </td>
<td align="right">(24</td>
<td nowrap="nowrap">)</td>
</tr>
<tr style="font-size: 1px">
<td colspan="9" align="left" style="border-top: 1px solid #000000"> </td>
</tr>
<tr valign="bottom" style="background: #cceeff">
<td>
<div style="margin-left:15px; text-indent:-15px"> 
</div></td>
<td> </td>
<td align="right">$</td>
<td align="right">839</td>
<td> </td>
<td> </td>
<td align="right">$</td>
<td align="right">894</td>
<td> </td>
</tr>
<tr style="font-size: 1px">
<td colspan="9" align="left" style="border-top: 3px double #000000"> </td>
</tr>
<!-- End Table Body -->
</table>
</div>
<!-- Folio -->
<!-- /Folio -->
</div>
<!-- PAGEBREAK -->
<div style="font-family: 'Times New Roman',Times,serif">
<div align="left" style="font-size: 10pt; margin-top: 12pt"><i>Finance Receivables</i>
</div>
<div align="left" style="font-size: 10pt; margin-top: 6pt">We evaluate finance receivables on a managed as well as owned basis since we retain subordinated
interests in finance receivables sold in securitizations resulting in credit risk. In contrast, we
do not have a retained financial interest or credit risk in the performance of the serviced
portfolio and, therefore, performance of these portfolios is limited to billing and collection
activities. Our Finance group manages and services finance receivables for a variety of investors,
participants and third-party portfolio owners. A reconciliation of our managed and serviced
finance receivables to finance receivables held for investment, net is provided below:
</div>
<div align="center">
<table style="font-size: 10pt; text-align: left" cellspacing="0" border="0" cellpadding="0" width="100%">
<!-- Begin Table Head -->
<tr valign="bottom">
<td width="76%"> </td>
<td width="5%"> </td>
<td width="3%"> </td>
<td width="1%"> </td>
<td width="3%"> </td>
<td width="5%"> </td>
<td width="3%"> </td>
<td width="1%"> </td>
<td width="3%"> </td>
</tr>
<tr style="font-size: 8pt" valign="bottom">
<td> </td>
<td> </td>
<td nowrap="nowrap" align="right" colspan="3">July 4,</td>
<td> </td>
<td nowrap="nowrap" align="right" colspan="3">January 3,</td>
</tr>
<tr style="font-size: 8pt" valign="bottom">
<td nowrap="nowrap" align="left"><i>(In millions)</i></td>
<td> </td>
<td nowrap="nowrap" align="right" colspan="3">2009</td>
<td> </td>
<td nowrap="nowrap" align="right" colspan="3">2009</td>
</tr>
<!-- End Table Head -->
<!-- Begin Table Body -->
<tr style="font-size: 1px">
<td colspan="9" align="left" style="border-top: 1px solid #000000"> </td>
</tr>
<tr valign="bottom" style="background: #cceeff">
<td>
<div style="margin-left:15px; text-indent:-15px">Total managed and serviced finance receivables
</div></td>
<td> </td>
<td align="right">$</td>
<td align="right">9,868</td>
<td> </td>
<td> </td>
<td align="right">$</td>
<td align="right">12,173</td>
<td> </td>
</tr>
<tr valign="bottom">
<td>
<div style="margin-left:15px; text-indent:-15px">Less: Nonrecourse participations sold to independent investors
</div></td>
<td> </td>
<td nowrap="nowrap" align="right"> </td>
<td align="right">(793</td>
<td nowrap="nowrap">)</td>
<td> </td>
<td nowrap="nowrap" align="right"> </td>
<td align="right">(820</td>
<td nowrap="nowrap">)</td>
</tr>
<tr valign="bottom" style="background: #cceeff">
<td>
<div style="margin-left:15px; text-indent:-15px">Less: Third-party portfolio servicing
</div></td>
<td> </td>
<td nowrap="nowrap" align="right"> </td>
<td align="right">(430</td>
<td nowrap="nowrap">)</td>
<td> </td>
<td nowrap="nowrap" align="right"> </td>
<td align="right">(532</td>
<td nowrap="nowrap">)</td>
</tr>
<tr style="font-size: 1px">
<td colspan="9" align="left" style="border-top: 1px solid #000000"> </td>
</tr>
<tr valign="bottom">
<td>
<div style="margin-left:15px; text-indent:-15px">Total managed finance receivables
</div></td>
<td> </td>
<td> </td>
<td align="right">8,645</td>
<td> </td>
<td> </td>
<td> </td>
<td align="right">10,821</td>
<td> </td>
</tr>
<tr valign="bottom" style="background: #cceeff">
<td>
<div style="margin-left:15px; text-indent:-15px">Less: Securitized receivables
</div></td>
<td> </td>
<td nowrap="nowrap" align="right"> </td>
<td align="right">(1,195</td>
<td nowrap="nowrap">)</td>
<td> </td>
<td nowrap="nowrap" align="right"> </td>
<td align="right">(2,248</td>
<td nowrap="nowrap">)</td>
</tr>
<tr style="font-size: 1px">
<td colspan="9" align="left" style="border-top: 1px solid #000000"> </td>
</tr>
<tr valign="bottom">
<td>
<div style="margin-left:15px; text-indent:-15px">Owned finance receivables
</div></td>
<td> </td>
<td> </td>
<td align="right">7,450</td>
<td> </td>
<td> </td>
<td> </td>
<td align="right">8,573</td>
<td> </td>
</tr>
<tr valign="bottom" style="background: #cceeff">
<td>
<div style="margin-left:15px; text-indent:-15px">Less: Finance receivables held for sale
</div></td>
<td> </td>
<td nowrap="nowrap" align="right"> </td>
<td align="right">(613</td>
<td nowrap="nowrap">)</td>
<td> </td>
<td nowrap="nowrap" align="right"> </td>
<td align="right">(1,658</td>
<td nowrap="nowrap">)</td>
</tr>
<tr style="font-size: 1px">
<td colspan="9" align="left" style="border-top: 1px solid #000000"> </td>
</tr>
<tr valign="bottom">
<td>
<div style="margin-left:15px; text-indent:-15px">Finance receivables held for investment
</div></td>
<td> </td>
<td> </td>
<td align="right">6,837</td>
<td> </td>
<td> </td>
<td> </td>
<td align="right">6,915</td>
<td> </td>
</tr>
<tr valign="bottom" style="background: #cceeff">
<td>
<div style="margin-left:15px; text-indent:-15px">Allowance for loan losses
</div></td>
<td> </td>
<td nowrap="nowrap" align="right"> </td>
<td align="right">(284</td>
<td nowrap="nowrap">)</td>
<td> </td>
<td nowrap="nowrap" align="right"> </td>
<td align="right">(191</td>
<td nowrap="nowrap">)</td>
</tr>
<tr style="font-size: 1px">
<td colspan="9" align="left" style="border-top: 1px solid #000000"> </td>
</tr>
<tr valign="bottom">
<td>
<div style="margin-left:15px; text-indent:-15px">Finance receivables held for investment, net
</div></td>
<td> </td>
<td align="right">$</td>
<td align="right">6,553</td>
<td> </td>
<td> </td>
<td align="right">$</td>
<td align="right">6,724</td>
<td> </td>
</tr>
<tr style="font-size: 1px">
<td colspan="9" align="left" style="border-top: 3px double #000000"> </td>
</tr>
<!-- End Table Body -->
</table>
</div>
<div align="left" style="font-size: 10pt; margin-top: 6pt">Finance receivables held for investment at July 4, 2009 and January 3, 2009 include approximately
$0.6 billion and $1.1 billion, respectively, of finance receivables that have been legally sold to
special purpose entities and are consolidated subsidiaries of Textron Financial Corporation. The
assets of these special purpose entities are pledged as collateral for $484 million and $853
million of debt at July 4, 2009 and January 3, 2009, respectively, which is reflected as
securitized on-balance sheet debt.
</div>
<div align="left" style="font-size: 10pt; margin-top: 6pt">In connection with our fourth quarter 2008 plan to exit portions of the commercial finance
business, we classified certain finance receivables as held for sale. Following an effort to
market the portfolios held for sale and the progress made in liquidating our portfolios, we believe
that we will be able to maximize the economic value of a portion of the finance receivables held
for sale through orderly liquidation rather than selling the portfolios. Accordingly, since we now
intend to hold a portion of these finance receivables for the foreseeable future, we have
reclassified $654 million and $65 million, net of valuation allowances, from the held for sale
classification to held for investment during the first and second quarter of 2009, respectively.
The remaining balance of these reclassified finance receivables was $697 million, net of a $144
million valuation allowance at July 4, 2009.
</div>
<div align="left" style="font-size: 10pt; margin-top: 6pt">We periodically evaluate finance receivables, excluding homogeneous loan portfolios and finance
leases, for impairment. A loan is considered impaired when it is probable that we will be unable
to collect all amounts due according to the contractual terms of the loan agreement. Impaired
loans are classified as either nonaccrual or accrual loans. Nonaccrual loans include accounts that
are contractually delinquent by more than three months for which the accrual of interest income is
suspended. Impaired accrual loans represent loans with original terms that have been significantly
modified to reflect deferred principal payments, generally at market interest rates, for which
collection of principal and interest is not doubtful.
</div>
<!-- Folio -->
<!-- /Folio -->
</div>
<!-- PAGEBREAK -->
<div style="font-family: 'Times New Roman',Times,serif">
<div align="left" style="font-size: 10pt; margin-top: 6pt">At July 4, 2009, impaired loans include $585 million of nonaccrual loans for which we have
established specific reserves of $134 million based on our review of the loan and the estimated
fair value of the collateral. At January 3, 2009, we established $43 million in specific reserves
on $182 million of nonaccrual loans. The impaired loans included within finance receivables held
for investment are as follows:
</div>
<div align="center">
<table style="font-size: 10pt; text-align: left" cellspacing="0" border="0" cellpadding="0" width="100%">
<!-- Begin Table Head -->
<tr valign="bottom">
<td width="76%"> </td>
<td width="5%"> </td>
<td width="3%"> </td>
<td width="1%"> </td>
<td width="3%"> </td>
<td width="5%"> </td>
<td width="3%"> </td>
<td width="1%"> </td>
<td width="3%"> </td>
</tr>
<tr style="font-size: 8pt" valign="bottom">
<td> </td>
<td> </td>
<td nowrap="nowrap" align="right" colspan="3">July 4,</td>
<td> </td>
<td nowrap="nowrap" align="right" colspan="3">January 3,</td>
</tr>
<tr style="font-size: 8pt" valign="bottom">
<td nowrap="nowrap" align="left"><i>(In millions)</i></td>
<td> </td>
<td nowrap="nowrap" align="right" colspan="3">2009</td>
<td> </td>
<td nowrap="nowrap" align="right" colspan="3">2009</td>
</tr>
<!-- End Table Head -->
<!-- Begin Table Body -->
<tr style="font-size: 1px">
<td colspan="9" align="left" style="border-top: 1px solid #000000"> </td>
</tr>
<tr valign="bottom" style="background: #cceeff">
<td>
<div style="margin-left:15px; text-indent:-15px">Impaired nonaccrual loans
</div></td>
<td> </td>
<td align="right">$</td>
<td align="right">629</td>
<td> </td>
<td> </td>
<td align="right">$</td>
<td align="right">234</td>
<td> </td>
</tr>
<tr valign="bottom">
<td>
<div style="margin-left:15px; text-indent:-15px">Impaired accrual loans
</div></td>
<td> </td>
<td> </td>
<td align="right">96</td>
<td> </td>
<td> </td>
<td> </td>
<td align="right">19</td>
<td> </td>
</tr>
<tr style="font-size: 1px">
<td colspan="9" align="left" style="border-top: 1px solid #000000"> </td>
</tr>
<tr valign="bottom" style="background: #cceeff">
<td>
<div style="margin-left:15px; text-indent:-15px">Total impaired loans
</div></td>
<td> </td>
<td align="right">$</td>
<td align="right">725</td>
<td> </td>
<td> </td>
<td align="right">$</td>
<td align="right">253</td>
<td> </td>
</tr>
<tr style="font-size: 1px">
<td colspan="9" align="left" style="border-top: 3px double #000000"> </td>
</tr>
<!-- End Table Body -->
</table>
</div>
<div align="left" style="font-size: 10pt; margin-top: 6pt">Nonaccrual finance receivables include impaired nonaccrual loans and accounts in homogeneous loan
portfolios that are contractually delinquent by more than three months. At July 4, 2009 and January
3, 2009, nonaccrual finance receivables totaled $683 million and $277 million, respectively. The
increase is primarily attributable to the lack of liquidity available to borrowers within the
resort finance business and to a significant increase in delinquent accounts, combined with
weakening collateral values in the captive finance business.
</div>
<div align="left" style="font-size: 10pt; margin-top: 12pt"><i>Securitizations</i>
</div>
<div align="left" style="font-size: 10pt; margin-top: 6pt">Our Finance group has historically sold its distribution finance receivables to a qualified special
purpose trust through securitization transactions. Distribution finance receivables represent loans
secured by dealer inventories that typically are collected upon the sale of the underlying product.
The distribution finance revolving securitization trust is a master trust that purchases inventory
finance receivables from the Finance group and issues asset-backed notes to investors. Through a
revolving securitization, the proceeds from collection of the principal balance of these loans can
be used by the trust to purchase additional distribution finance receivables from us each month.
Proceeds from securitizations include amounts received related to the incremental increase in the
issuance of additional asset-backed notes to investors, and exclude amounts received related to the
ongoing replenishment of the outstanding sold balance of these short-duration finance receivables.
In the first half of 2009, we had no proceeds from securitizations, compared with $250 million in
the first half of 2008.
</div>
<div align="left" style="font-size: 10pt; margin-top: 6pt">Generally, we retain an interest in the assets sold in the form of servicing responsibilities and
subordinated interests, including interest-only securities, seller certificates and cash reserves.
We had $110 million and $191 million of retained interests on our Consolidated Balance Sheets
associated with $1.2 billion and $2.2 billion of off-balance sheet finance receivables in the
distribution finance securitization trust as of July 4, 2009 and January 3, 2009, respectively. At
July 4, 2009, the trust had $1.2 billion in asset-backed notes. Cash received on retained interests
totaled $42 million and $29 million in the first half of 2009 and 2008, respectively. Total net
pre-tax gains (losses), including impairments were $(20) million and $15 million in the second
quarter of 2009 and 2008, respectively, and $(27) million and $30 million, in the first half of
2009 and 2008, respectively. See Note 12: Fair Values of Assets and Liabilities for disclosure of
the fair value estimates for retained interests in securitizations and the impairments recorded on
the interest-only securities and other retained interests in the first half of 2009.
</div>
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<body>
<!-- Begin Block Tagged Note 8 - us-gaap:InventoryDisclosureTextBlock-->
<div style="font-family: 'Times New Roman',Times,serif">
<div align="left" style="font-size: 10pt; margin-top: 12pt"><b>Note 8: Inventories</b>
</div>
<div align="center">
<table style="font-size: 10pt; text-align: left" cellspacing="0" border="0" cellpadding="0" width="100%">
<!-- Begin Table Head -->
<tr valign="bottom">
<td width="76%"> </td>
<td width="5%"> </td>
<td width="3%"> </td>
<td width="1%"> </td>
<td width="3%"> </td>
<td width="5%"> </td>
<td width="3%"> </td>
<td width="1%"> </td>
<td width="3%"> </td>
</tr>
<tr style="font-size: 8pt" valign="bottom">
<td> </td>
<td> </td>
<td nowrap="nowrap" align="right" colspan="3">July 4,</td>
<td> </td>
<td nowrap="nowrap" align="right" colspan="3">January 3,</td>
</tr>
<tr style="font-size: 8pt" valign="bottom">
<td nowrap="nowrap" align="left"><i>(In millions)</i></td>
<td> </td>
<td nowrap="nowrap" align="right" colspan="3">2009</td>
<td> </td>
<td nowrap="nowrap" align="right" colspan="3">2009</td>
</tr>
<!-- End Table Head -->
<!-- Begin Table Body -->
<tr style="font-size: 1px">
<td colspan="9" align="left" style="border-top: 1px solid #000000"> </td>
</tr>
<tr valign="bottom" style="background: #cceeff">
<td>
<div style="margin-left:15px; text-indent:-15px">Finished goods
</div></td>
<td> </td>
<td align="right">$</td>
<td align="right">1,281</td>
<td> </td>
<td> </td>
<td align="right">$</td>
<td align="right">1,081</td>
<td> </td>
</tr>
<tr valign="bottom">
<td>
<div style="margin-left:15px; text-indent:-15px">Work in process
</div></td>
<td> </td>
<td> </td>
<td align="right">1,850</td>
<td> </td>
<td> </td>
<td> </td>
<td align="right">1,866</td>
<td> </td>
</tr>
<tr valign="bottom" style="background: #cceeff">
<td>
<div style="margin-left:15px; text-indent:-15px">Raw materials
</div></td>
<td> </td>
<td> </td>
<td align="right">623</td>
<td> </td>
<td> </td>
<td> </td>
<td align="right">765</td>
<td> </td>
</tr>
<tr style="font-size: 1px">
<td colspan="9" align="left" style="border-top: 1px solid #000000"> </td>
</tr>
<tr valign="bottom">
<td>
<div style="margin-left:15px; text-indent:-15px"> 
</div></td>
<td> </td>
<td> </td>
<td align="right">3,754</td>
<td> </td>
<td> </td>
<td> </td>
<td align="right">3,712</td>
<td> </td>
</tr>
<tr valign="bottom" style="background: #cceeff">
<td>
<div style="margin-left:15px; text-indent:-15px">Progress/milestone payments
</div></td>
<td> </td>
<td nowrap="nowrap" align="right"> </td>
<td align="right">(753</td>
<td nowrap="nowrap">)</td>
<td> </td>
<td nowrap="nowrap" align="right"> </td>
<td align="right">(619</td>
<td nowrap="nowrap">)</td>
</tr>
<tr style="font-size: 1px">
<td colspan="9" align="left" style="border-top: 1px solid #000000"> </td>
</tr>
<tr valign="bottom">
<td>
<div style="margin-left:15px; text-indent:-15px"> 
</div></td>
<td> </td>
<td align="right">$</td>
<td align="right">3,001</td>
<td> </td>
<td> </td>
<td align="right">$</td>
<td align="right">3,093</td>
<td> </td>
</tr>
<tr style="font-size: 1px">
<td colspan="9" align="left" style="border-top: 3px double #000000"> </td>
</tr>
<!-- End Table Body -->
</table>
</div>
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<!-- Begin Block Tagged Note 9 - us-gaap:DebtDisclosureTextBlock-->
<div style="font-family: 'Times New Roman',Times,serif">
<div align="left" style="font-size: 10pt; margin-top: 12pt"><b>Note 9: Debt</b>
</div>
<div align="left" style="font-size: 10pt; margin-top: 6pt"><i>4.50% Convertible Senior Notes</i>
</div>
<div align="left" style="font-size: 10pt; margin-top: 6pt">On May 5, 2009, we issued $600 million of 4.50% Convertible Senior Notes (the “Notes”). The Notes
have a maturity date of May 1, 2013 and interest is payable semi-annually on May 1 and November 1.
The Notes are convertible, under certain circumstances, at the holder’s option, into shares of our
common stock, at an initial conversion rate of 76.1905 shares of common stock per $1,000 principal
amount of Notes, which is equivalent to an initial conversion price of approximately $13.125 per
share. Upon conversion, we have the right to settle the conversion of each $1,000 principal amount
of Notes with any of the three following alternatives: (1) shares of our common stock, (2) cash, or
(3) a combination of cash and shares of our common stock.
</div>
<div align="left" style="font-size: 10pt; margin-top: 6pt">The Notes are convertible only under the following certain circumstances: (1) during any calendar
quarter commencing after June 30, 2009 and only during such calendar quarter, if the last reported
sale price of our common stock for at least 20 trading days during the 30 consecutive trading days
ending on the last trading day of the preceding calendar quarter is more than 130% of the
applicable conversion price per share of common stock on the last trading day of such preceding
calendar quarter, (2) during the five business day period after any ten consecutive trading day
measurement period in which the trading price per $1,000 principal amount of Notes for each day in
the measurement period was less than 98% of the product of the last reported sale price of our
common stock and the applicable conversion rate, (3) if specified distributions to holders of our
common stock are made or specified corporate transactions occur, or (4) at any time on or after
February 19, 2013. As of July 4, 2009, none of the conditions permitting conversion of the Notes
had been satisfied.
</div>
<div align="left" style="font-size: 10pt; margin-top: 6pt">The net proceeds from the issuance of the Notes totaled approximately $582 million after deducting
discounts, commissions and expenses. The Notes are accounted for in accordance with generally
accepted accounting principles, which require us to separately account for the liability (debt) and
the equity (conversion option) components of the Notes in a manner that reflects our
non-convertible debt borrowing rate. Accordingly, we recorded a debt discount and corresponding
increase to additional paid in capital of approximately $135 million as of the date of issuance.
We are amortizing the debt discount utilizing the effective interest method over the life of the
Notes which increases the effective interest rate of the Notes from its coupon rate of 4.50% to
11.72%. Transaction costs of $18 million were proportionately allocated between the liability and
equity components.
</div>
<div align="left" style="font-size: 10pt; margin-top: 6pt">Concurrently with the pricing of the Notes, we entered into convertible note hedge transactions
with two counterparties, including an underwriter and an affiliate of an underwriter, of the Notes,
for purposes of reducing the potential dilutive effect upon the conversion of the Notes. The
initial strike price of the convertible note hedge transactions is $13.125 per share of our common
stock (the same as the initial conversion price of the Notes) and is subject to certain customary
adjustments. The convertible note hedge transactions cover 45,714,300 shares of common stock,
subject to anti-dilution adjustments. We may settle the convertible note hedge transactions in
shares, cash or a combination of cash and shares, at our option. The cost of the convertible note
hedge transactions was $140 million, which was recorded as a reduction to additional paid-in
capital. Separately and concurrently with entering into these hedge transactions, we entered into
warrant transactions whereby we sold warrants to each of the hedge counterparties to acquire,
subject to anti-dilution adjustments, an aggregate of 45,714,300 shares of common stock at an
initial exercise price of $15.75 per share. The aggregate proceeds from the warrant transactions
were $95 million, which was recorded as an increase to additional paid-in capital.
</div>
<div align="left" style="font-size: 10pt; margin-top: 6pt">We incurred cash and non-cash interest expense of $10 million for these Notes in the second quarter
of 2009. As of July 4, 2009, the unamortized discount amount was $144 million, resulting in a net
carrying value of $456 million for the liability component.
</div>
<div align="left" style="font-size: 10pt; margin-top: 12pt"><i>Credit facility</i>
</div>
<div align="left" style="font-size: 10pt; margin-top: 6pt">On July 14, 2009, a newly formed, wholly-owned finance subsidiary of Textron entered into a credit
agreement with the Export-Import Bank of the United States which establishes a $500 million credit
facility to provide funding to finance purchases of aircraft by non-U.S. buyers from Cessna and
Bell. The facility is structured to be available for financing sales to international customers
who take delivery of new aircraft by December 2010.
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<!-- Begin Block Tagged Note 10 - us-gaap:ProductWarrantyDisclosureTextBlock-->
<div style="font-family: 'Times New Roman',Times,serif">
<div align="left" style="font-size: 10pt; margin-top: 12pt"><b>Note 10: Guarantees and Indemnifications</b>
</div>
<div align="left" style="font-size: 10pt; margin-top: 6pt">As disclosed under the caption “Guarantees and Indemnifications” in Note 18 to the Consolidated
Financial Statements in Textron’s 2008 Annual Report on Form 10-K, we have issued or are party to
certain guarantees, including a performance guarantee related to the VH-71 helicopter program. In
June 2009, we received notification that the VH-71 helicopter program was terminated for
convenience by the U.S. Government. As of July 4, 2009, there has been no other material change to
our guarantees.
</div>
<div align="left" style="font-size: 10pt; margin-top: 12pt"><i>Warranty and Product Maintenance Programs</i>
</div>
<div align="left" style="font-size: 10pt; margin-top: 6pt">We provide limited warranty and product maintenance programs, including parts and labor, for
certain products for periods ranging from one to five years. We estimate the costs that may be
incurred under warranty programs and record a liability in the amount of such costs at the time
product revenue is recognized. Factors that affect this liability include the number of products
sold, historical and anticipated rates of warranty claims, and cost per claim. We assess the
adequacy of our recorded warranty and product maintenance liabilities periodically and adjust the
amounts as necessary.
</div>
<div align="left" style="font-size: 10pt; margin-top: 6pt">Changes in our warranty and product maintenance liabilities are as follows:
</div>
<div align="center">
<table style="font-size: 10pt; text-align: left" cellspacing="0" border="0" cellpadding="0" width="100%">
<!-- Begin Table Head -->
<tr valign="bottom">
<td width="76%"> </td>
<td width="5%"> </td>
<td width="3%"> </td>
<td width="1%"> </td>
<td width="3%"> </td>
<td width="5%"> </td>
<td width="3%"> </td>
<td width="1%"> </td>
<td width="3%"> </td>
</tr>
<tr style="font-size: 8pt" valign="bottom">
<td> </td>
<td> </td>
<td nowrap="nowrap" align="center" colspan="7" style="border-bottom: 1px solid #000000">Six Months Ended </td>
</tr>
<tr style="font-size: 8pt" valign="bottom">
<td> </td>
<td> </td>
<td nowrap="nowrap" align="right" colspan="3">July 4,</td>
<td> </td>
<td nowrap="nowrap" align="right" colspan="3">June 28,</td>
</tr>
<tr style="font-size: 8pt" valign="bottom">
<td nowrap="nowrap" align="left"><i>(In millions)</i></td>
<td> </td>
<td nowrap="nowrap" align="right" colspan="3">2009</td>
<td> </td>
<td nowrap="nowrap" align="right" colspan="3">2008</td>
</tr>
<!-- End Table Head -->
<!-- Begin Table Body -->
<tr style="font-size: 1px">
<td colspan="9" align="left" style="border-top: 1px solid #000000"> </td>
</tr>
<tr valign="bottom" style="background: #cceeff">
<td>
<div style="margin-left:15px; text-indent:-15px">Accrual at the beginning of period
</div></td>
<td> </td>
<td align="right">$</td>
<td align="right">278</td>
<td> </td>
<td> </td>
<td align="right">$</td>
<td align="right">312</td>
<td> </td>
</tr>
<tr valign="bottom">
<td>
<div style="margin-left:15px; text-indent:-15px">Provision
</div></td>
<td> </td>
<td> </td>
<td align="right">81</td>
<td> </td>
<td> </td>
<td> </td>
<td align="right">95</td>
<td> </td>
</tr>
<tr valign="bottom" style="background: #cceeff">
<td>
<div style="margin-left:15px; text-indent:-15px">Settlements
</div></td>
<td> </td>
<td nowrap="nowrap" align="right"> </td>
<td align="right">(117</td>
<td nowrap="nowrap">)</td>
<td> </td>
<td nowrap="nowrap" align="right"> </td>
<td align="right">(96</td>
<td nowrap="nowrap">)</td>
</tr>
<tr valign="bottom">
<td>
<div style="margin-left:15px; text-indent:-15px">Adjustments to prior accrual estimates
</div></td>
<td> </td>
<td> </td>
<td align="right">1</td>
<td> </td>
<td> </td>
<td nowrap="nowrap" align="right"> </td>
<td align="right">(8</td>
<td nowrap="nowrap">)</td>
</tr>
<tr valign="bottom" style="background: #cceeff">
<td>
<div style="margin-left:15px; text-indent:-15px">Other adjustments
</div></td>
<td> </td>
<td> </td>
<td align="right">—</td>
<td> </td>
<td> </td>
<td nowrap="nowrap" align="right"> </td>
<td align="right">(3</td>
<td nowrap="nowrap">)</td>
</tr>
<tr style="font-size: 1px">
<td colspan="9" align="left" style="border-top: 1px solid #000000"> </td>
</tr>
<tr valign="bottom">
<td>
<div style="margin-left:15px; text-indent:-15px">Accrual at the end of period
</div></td>
<td> </td>
<td align="right">$</td>
<td align="right">243</td>
<td> </td>
<td> </td>
<td align="right">$</td>
<td align="right">300</td>
<td> </td>
</tr>
<tr style="font-size: 1px">
<td colspan="9" align="left" style="border-top: 3px double #000000"> </td>
</tr>
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<div style="font-family: 'Times New Roman',Times,serif">
<div align="left" style="font-size: 10pt; margin-top: 12pt"><b>Note 11: Commitments and Contingencies</b>
</div>
<div align="left" style="font-size: 10pt; margin-top: 6pt">We are subject to legal proceedings and other claims arising out of the conduct of our business,
including proceedings and claims relating to commercial and financial transactions; government
contracts; compliance with applicable laws and regulations; production partners; product liability;
employment; and environmental, safety and health matters. Some of these legal proceedings and
claims seek damages, fines or penalties in substantial amounts or remediation of environmental
contamination. As a government contractor, we are subject to audits, reviews and investigations to
determine whether our operations are being conducted in accordance with applicable regulatory
requirements. Under federal government procurement regulations, certain claims brought by the U.S.
Government could result in our being suspended or debarred from U.S. Government contracting for a
period of time. On the basis of information presently available, we do not believe that existing
proceedings and claims will have a material effect on our financial position or results of
operations.
</div>
<div align="left" style="font-size: 10pt; margin-top: 6pt">The Internal Revenue Service (IRS) has challenged our tax positions related to certain lease
transactions within the Finance segment. During the third quarter of 2008, the IRS made a
settlement offer to numerous companies, including Textron, to resolve the disputed tax treatment of
these leases. Based on the terms of the offer and our decision to accept the offer, we revised our
estimate of this tax contingency. Final resolution of this matter will result in the acceleration
of future cash payments to the IRS, which we expect will occur over a period of years in connection
with the conclusion of IRS examinations of the relevant tax years. At July 4, 2009, $198 million of
federal tax liabilities were recorded on our Consolidated Balance Sheet related to these leases.
</div>
<div align="left" style="font-size: 10pt; margin-top: 12pt"><i>ARH Program Termination</i>
</div>
<div align="left" style="font-size: 10pt; margin-top: 6pt">On October 16, 2008, we received notification from the U.S. Department of Defense that it would not
certify the continuation of the Armed Reconnaissance Helicopter (ARH) program to Congress under the
Nunn-McCurdy Act, resulting in the termination of the program for the convenience of the
Government. The ARH program included a development phase, covered by the System Development and
Demonstration (SDD) contract, and a production phase. We are in the process of establishing the
termination costs for the SDD contract, which we believe will be fully recoverable from the U.S.
Government.
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<div align="left" style="font-size: 10pt; margin-top: 6pt">Prior to termination of the program, we obtained inventory and incurred vendor obligations for
long-lead time materials related to the anticipated Low Rate Initial Production (LRIP) contracts to
maintain the program schedule based on our belief that the LRIP contracts would be awarded. We have
since terminated these vendor contracts and have initiated negotiations to settle our termination
obligations, which we estimate may cost up to approximately $80 million. We continue to evaluate
the utility of the related inventory to other Bell programs, customers, or vendors. This review and
the related discussions with vendors are ongoing. We estimate that our potential loss resulting
from our LRIP-related vendor obligations will be between approximately $50 million and $80 million.
At July 4, 2009, our reserves related to this program totaled $50 million. We intend to provide a
termination proposal or separate claim to the U.S. Government to request reimbursement of costs
expended in support of the LRIP program.
</div>
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<!-- Begin Block Tagged Note 12 - us-gaap:FairValueDisclosuresTextBlock-->
<div style="font-family: 'Times New Roman',Times,serif">
<div align="left" style="font-size: 10pt; margin-top: 12pt"><b>Note 12: Fair Values of Assets and Liabilities</b>
</div>
<div align="left" style="font-size: 10pt; margin-top: 6pt">We measure fair value at the price that would be received to sell an asset or paid to transfer a
liability in an orderly transaction between market participants at the measurement date. We
prioritize the assumptions that market participants would use in pricing the asset or liability
(the “inputs”) into a three-tier fair value hierarchy. This fair value hierarchy gives the highest
priority (Level 1) to quoted prices in active markets for identical assets or liabilities and the
lowest priority (Level 3) to unobservable inputs in which little or no market data exists,
requiring companies to develop their own assumptions. Observable inputs that do not meet the
criteria of Level 1, and include quoted prices for similar assets or liabilities in active markets
or quoted prices for identical assets and liabilities in markets that are not active, are
categorized as Level 2. Level 3 inputs are those that reflect our estimates about the assumptions
market participants would use in pricing the asset or liability, based on the best information
available in the circumstances. Valuation techniques for assets and liabilities measured using
Level 3 inputs may include methodologies such as the market approach, the income approach or the
cost approach, and may use unobservable inputs such as projections, estimates and management’s
interpretation of current market data. These unobservable inputs are only utilized to the extent
that observable inputs are not available or cost-effective to obtain.
</div>
<div align="left" style="font-size: 10pt; margin-top: 12pt"><i>Assets and Liabilities Recorded at Fair Value on a Recurring Basis</i>
</div>
<div align="left" style="font-size: 10pt; margin-top: 6pt">The table below presents the assets and liabilities measured at fair value on a recurring basis
categorized by the level of inputs used in the valuation of each asset and liability.
</div>
<div align="center">
<table style="font-size: 10pt; text-align: left" cellspacing="0" border="0" cellpadding="0" width="100%">
<!-- Begin Table Head -->
<tr valign="bottom">
<td width="28%"> </td>
<td width="5%"> </td>
<td width="1%"> </td>
<td width="3%"> </td>
<td width="1%"> </td>
<td width="5%"> </td>
<td width="1%"> </td>
<td width="3%"> </td>
<td width="1%"> </td>
<td width="5%"> </td>
<td width="1%"> </td>
<td width="3%"> </td>
<td width="1%"> </td>
<td width="5%"> </td>
<td width="1%"> </td>
<td width="3%"> </td>
<td width="1%"> </td>
<td width="5%"> </td>
<td width="1%"> </td>
<td width="3%"> </td>
<td width="1%"> </td>
<td width="5%"> </td>
<td width="1%"> </td>
<td width="3%"> </td>
<td width="1%"> </td>
</tr>
<tr style="font-size: 8pt" valign="bottom">
<td> </td>
<td> </td>
<td nowrap="nowrap" align="center" colspan="11" style="border-bottom: 1px solid #000000">July 4, 2009 </td>
<td> </td>
<td nowrap="nowrap" align="center" colspan="11" style="border-bottom: 1px solid #000000">January 3, 2009</td>
</tr>
<tr style="font-size: 8pt" valign="bottom">
<td nowrap="nowrap" align="left"><i>(In millions)</i></td>
<td> </td>
<td nowrap="nowrap" align="right" colspan="2">(Level 1)</td>
<td> </td>
<td> </td>
<td nowrap="nowrap" align="right" colspan="2">(Level 2)</td>
<td> </td>
<td> </td>
<td nowrap="nowrap" align="right" colspan="2">(Level 3)</td>
<td> </td>
<td> </td>
<td nowrap="nowrap" align="right" colspan="2">(Level 1)</td>
<td> </td>
<td> </td>
<td nowrap="nowrap" align="right" colspan="2">(Level 2)</td>
<td> </td>
<td> </td>
<td nowrap="nowrap" align="right" colspan="2">(Level 3)</td>
<td> </td>
</tr>
<!-- End Table Head -->
<!-- Begin Table Body -->
<tr style="font-size: 1px">
<td colspan="25" align="left" style="border-top: 1px solid #000000"> </td>
</tr>
<tr valign="bottom" style="background: #cceeff">
<td>
<div style="margin-left:15px; text-indent:-15px"><b>Assets</b>
</div></td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
</tr>
<tr valign="bottom">
<td>
<div style="margin-left:15px; text-indent:-15px"><b>Manufacturing group</b>
</div></td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
</tr>
<tr valign="bottom" style="background: #cceeff">
<td>
<div style="margin-left:30px; text-indent:-15px">Foreign currency exchange
contracts
</div></td>
<td> </td>
<td align="left">$</td>
<td align="right">—</td>
<td> </td>
<td> </td>
<td align="left">$</td>
<td align="right">25</td>
<td> </td>
<td> </td>
<td align="left">$</td>
<td align="right">—</td>
<td> </td>
<td> </td>
<td align="left">$</td>
<td align="right">—</td>
<td> </td>
<td> </td>
<td align="left">$</td>
<td align="right">2</td>
<td> </td>
<td> </td>
<td align="left">$</td>
<td align="right">—</td>
<td> </td>
</tr>
<tr valign="bottom">
<td>
<div style="margin-left:15px; text-indent:-15px"><b>Finance group</b>
</div></td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
</tr>
<tr valign="bottom" style="background: #cceeff">
<td>
<div style="margin-left:30px; text-indent:-15px">Derivative financial
instruments, net
</div></td>
<td> </td>
<td> </td>
<td align="right">—</td>
<td> </td>
<td> </td>
<td> </td>
<td align="right">60</td>
<td> </td>
<td> </td>
<td> </td>
<td align="right">—</td>
<td> </td>
<td> </td>
<td> </td>
<td align="right">—</td>
<td> </td>
<td> </td>
<td> </td>
<td align="right">112</td>
<td> </td>
<td> </td>
<td> </td>
<td align="right">—</td>
<td> </td>
</tr>
<tr valign="bottom">
<td>
<div style="margin-left:30px; text-indent:-15px">Interest-only securities
</div></td>
<td> </td>
<td> </td>
<td align="right">—</td>
<td> </td>
<td> </td>
<td> </td>
<td align="right">—</td>
<td> </td>
<td> </td>
<td> </td>
<td align="right">3</td>
<td> </td>
<td> </td>
<td> </td>
<td align="right">—</td>
<td> </td>
<td> </td>
<td> </td>
<td align="right">—</td>
<td> </td>
<td> </td>
<td> </td>
<td align="right">12</td>
<td> </td>
</tr>
<tr style="font-size: 1px">
<td colspan="25" align="left" style="border-top: 1px solid #000000"> </td>
</tr>
<tr valign="bottom" style="background: #cceeff">
<td>
<div style="margin-left:30px; text-indent:-15px">Total assets
</div></td>
<td> </td>
<td align="left">$</td>
<td align="right">—</td>
<td> </td>
<td> </td>
<td align="left">$</td>
<td align="right">85</td>
<td> </td>
<td> </td>
<td align="left">$</td>
<td align="right">3</td>
<td> </td>
<td> </td>
<td align="left">$</td>
<td align="right">—</td>
<td> </td>
<td> </td>
<td align="left">$</td>
<td align="right">114</td>
<td> </td>
<td> </td>
<td align="left">$</td>
<td align="right">12</td>
<td> </td>
</tr>
<tr style="font-size: 1px">
<td colspan="25" align="left" style="border-top: 3px double #000000"> </td>
</tr>
<tr valign="bottom">
<td>
<div style="margin-left:15px; text-indent:-15px"><b>Liabilities</b>
</div></td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
</tr>
<tr valign="bottom" style="background: #cceeff">
<td>
<div style="margin-left:15px; text-indent:-15px"><b>Manufacturing group</b>
</div></td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
</tr>
<tr valign="bottom">
<td nowrap="nowrap">
<div style="margin-left:30px; text-indent:-15px">Forward contracts for
Textron Inc. stock
</div></td>
<td> </td>
<td align="left">$</td>
<td align="right">7</td>
<td> </td>
<td> </td>
<td align="left">$</td>
<td align="right">—</td>
<td> </td>
<td> </td>
<td align="left">$</td>
<td align="right">—</td>
<td> </td>
<td> </td>
<td align="left">$</td>
<td align="right">98</td>
<td> </td>
<td> </td>
<td align="left">$</td>
<td align="right">—</td>
<td> </td>
<td> </td>
<td align="left">$</td>
<td align="right">—</td>
<td> </td>
</tr>
<tr valign="bottom" style="background: #cceeff">
<td>
<div style="margin-left:30px; text-indent:-15px">Foreign currency exchange
contracts
</div></td>
<td> </td>
<td> </td>
<td align="right">—</td>
<td> </td>
<td> </td>
<td> </td>
<td align="right">8</td>
<td> </td>
<td> </td>
<td> </td>
<td align="right">—</td>
<td> </td>
<td> </td>
<td> </td>
<td align="right">—</td>
<td> </td>
<td> </td>
<td> </td>
<td align="right">84</td>
<td> </td>
<td> </td>
<td> </td>
<td align="right">—</td>
<td> </td>
</tr>
<tr style="font-size: 1px">
<td colspan="25" align="left" style="border-top: 1px solid #000000"> </td>
</tr>
<tr valign="bottom">
<td>
<div style="margin-left:30px; text-indent:-15px">Total liabilities
</div></td>
<td> </td>
<td align="left">$</td>
<td align="right">7</td>
<td> </td>
<td> </td>
<td align="left">$</td>
<td align="right">8</td>
<td> </td>
<td> </td>
<td align="left">$</td>
<td align="right">—</td>
<td> </td>
<td> </td>
<td align="left">$</td>
<td align="right">98</td>
<td> </td>
<td> </td>
<td align="left">$</td>
<td align="right">84</td>
<td> </td>
<td> </td>
<td align="left">$</td>
<td align="right">—</td>
<td> </td>
</tr>
<tr style="font-size: 1px">
<td colspan="25" align="left" style="border-top: 3px double #000000"> </td>
</tr>
<!-- End Table Body -->
</table>
</div>
<!-- Folio -->
<!-- /Folio -->
</div>
<!-- PAGEBREAK -->
<div style="font-family: 'Times New Roman',Times,serif">
<div align="left" style="font-size: 10pt; margin-top: 6pt">The table below presents the change in fair value measurements for our interest-only securities
that used significant unobservable inputs <br />
(Level 3):
</div>
<div align="center">
<table style="font-size: 10pt; text-align: left" cellspacing="0" border="0" cellpadding="0" width="100%">
<!-- Begin Table Head -->
<tr valign="bottom">
<td width="52%"> </td>
<td width="5%"> </td>
<td width="3%"> </td>
<td width="1%"> </td>
<td width="3%"> </td>
<td width="5%"> </td>
<td width="3%"> </td>
<td width="1%"> </td>
<td width="3%"> </td>
<td width="5%"> </td>
<td width="3%"> </td>
<td width="1%"> </td>
<td width="3%"> </td>
<td width="5%"> </td>
<td width="3%"> </td>
<td width="1%"> </td>
<td width="3%"> </td>
</tr>
<tr style="font-size: 8pt" valign="bottom">
<td> </td>
<td> </td>
<td nowrap="nowrap" align="center" colspan="7">Three </td>
<td> </td>
<td nowrap="nowrap" align="center" colspan="7">Six </td>
</tr>
<tr style="font-size: 8pt" valign="bottom">
<td> </td>
<td> </td>
<td nowrap="nowrap" align="center" colspan="7" style="border-bottom: 1px solid #000000">Months Ended </td>
<td style="border-bottom: 1px solid #000000"> </td>
<td nowrap="nowrap" align="center" colspan="7" style="border-bottom: 1px solid #000000">Months Ended </td>
</tr>
<tr style="font-size: 8pt" valign="bottom">
<td> </td>
<td> </td>
<td nowrap="nowrap" align="right" colspan="3">July 4,</td>
<td> </td>
<td nowrap="nowrap" align="right" colspan="3">June 28,</td>
<td> </td>
<td nowrap="nowrap" align="right" colspan="3">July 4,</td>
<td> </td>
<td nowrap="nowrap" align="right" colspan="3">June 28,</td>
</tr>
<tr style="font-size: 8pt" valign="bottom">
<td nowrap="nowrap" align="left"><i>(In millions)</i></td>
<td> </td>
<td nowrap="nowrap" align="right" colspan="3">2009</td>
<td> </td>
<td nowrap="nowrap" align="right" colspan="3">2008</td>
<td> </td>
<td nowrap="nowrap" align="right" colspan="3">2009</td>
<td> </td>
<td nowrap="nowrap" align="right" colspan="3">2008</td>
</tr>
<!-- End Table Head -->
<!-- Begin Table Body -->
<tr style="font-size: 1px">
<td colspan="17" align="left" style="border-top: 1px solid #000000"> </td>
</tr>
<tr valign="bottom" style="background: #cceeff">
<td>
<div style="margin-left:15px; text-indent:-15px">Balance, beginning of period
</div></td>
<td> </td>
<td align="right">$</td>
<td align="right">3</td>
<td> </td>
<td> </td>
<td align="right">$</td>
<td align="right">52</td>
<td> </td>
<td> </td>
<td align="right">$</td>
<td align="right">12</td>
<td> </td>
<td> </td>
<td align="right">$</td>
<td align="right">43</td>
<td> </td>
</tr>
<tr valign="bottom">
<td>
<div style="margin-left:15px; text-indent:-15px">Net gains for the period:
</div></td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
</tr>
<tr valign="bottom" style="background: #cceeff">
<td>
<div style="margin-left:30px; text-indent:-15px">Increase due to securitization gains on sale of finance receivables
</div></td>
<td> </td>
<td> </td>
<td align="right">—</td>
<td> </td>
<td> </td>
<td> </td>
<td align="right">21</td>
<td> </td>
<td> </td>
<td> </td>
<td align="right">—</td>
<td> </td>
<td> </td>
<td> </td>
<td align="right">42</td>
<td> </td>
</tr>
<tr valign="bottom">
<td>
<div style="margin-left:30px; text-indent:-15px">Change in value recognized in Finance revenues
</div></td>
<td> </td>
<td> </td>
<td align="right">—</td>
<td> </td>
<td> </td>
<td> </td>
<td align="right">—</td>
<td> </td>
<td> </td>
<td> </td>
<td align="right">—</td>
<td> </td>
<td> </td>
<td> </td>
<td align="right">1</td>
<td> </td>
</tr>
<tr valign="bottom" style="background: #cceeff">
<td>
<div style="margin-left:30px; text-indent:-15px">Change in value recognized in other comprehensive income
</div></td>
<td> </td>
<td> </td>
<td align="right">2</td>
<td> </td>
<td> </td>
<td nowrap="nowrap" align="right"> </td>
<td align="right">(2</td>
<td nowrap="nowrap">)</td>
<td> </td>
<td nowrap="nowrap" align="right"> </td>
<td align="right">(1</td>
<td nowrap="nowrap">)</td>
<td> </td>
<td> </td>
<td align="right">—</td>
<td> </td>
</tr>
<tr valign="bottom">
<td>
<div style="margin-left:15px; text-indent:-15px">Impairments recognized in earnings
</div></td>
<td> </td>
<td nowrap="nowrap" align="right"> </td>
<td align="right">(2</td>
<td nowrap="nowrap">)</td>
<td> </td>
<td> </td>
<td align="right">—</td>
<td> </td>
<td> </td>
<td nowrap="nowrap" align="right"> </td>
<td align="right">(8</td>
<td nowrap="nowrap">)</td>
<td> </td>
<td> </td>
<td align="right">—</td>
<td> </td>
</tr>
<tr valign="bottom" style="background: #cceeff">
<td>
<div style="margin-left:15px; text-indent:-15px">Collections
</div></td>
<td> </td>
<td> </td>
<td align="right">—</td>
<td> </td>
<td> </td>
<td nowrap="nowrap" align="right"> </td>
<td align="right">(18</td>
<td nowrap="nowrap">)</td>
<td> </td>
<td> </td>
<td align="right">—</td>
<td> </td>
<td> </td>
<td nowrap="nowrap" align="right"> </td>
<td align="right">(33</td>
<td nowrap="nowrap">)</td>
</tr>
<tr style="font-size: 1px">
<td colspan="17" align="left" style="border-top: 1px solid #000000"> </td>
</tr>
<tr valign="bottom">
<td>
<div style="margin-left:15px; text-indent:-15px">Balance, end of period
</div></td>
<td> </td>
<td align="right">$</td>
<td align="right">3</td>
<td> </td>
<td> </td>
<td align="right">$</td>
<td align="right">53</td>
<td> </td>
<td> </td>
<td align="right">$</td>
<td align="right">3</td>
<td> </td>
<td> </td>
<td align="right">$</td>
<td align="right">53</td>
<td> </td>
</tr>
<tr style="font-size: 1px">
<td colspan="17" align="left" style="border-top: 3px double #000000"> </td>
</tr>
<!-- End Table Body -->
</table>
</div>
<div align="left" style="font-size: 10pt; margin-top: 12pt"><i>Assets Recorded at Fair Value on a Nonrecurring Basis</i>
</div>
<div align="left" style="font-size: 10pt; margin-top: 6pt">The table below presents those assets that are measured at fair value on a nonrecurring basis that
had fair value measurement adjustments in 2009. These assets were measured using significant
unobservable inputs (Level 3) and include the following as of July 4, 2009:
</div>
<div align="center">
<table style="font-size: 10pt; text-align: left" cellspacing="0" border="0" cellpadding="0" width="100%">
<!-- Begin Table Head -->
<tr valign="bottom">
<td width="88%"> </td>
<td width="5%"> </td>
<td width="3%"> </td>
<td width="1%"> </td>
<td width="3%"> </td>
</tr>
<tr style="font-size: 8pt" valign="bottom">
<td nowrap="nowrap" align="left"><i>(In millions)</i></td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
</tr>
<!-- End Table Head -->
<!-- Begin Table Body -->
<tr style="font-size: 1px">
<td colspan="5" align="left" style="border-top: 1px solid #000000"> </td>
</tr>
<tr valign="bottom" style="background: #cceeff">
<td>
<div style="margin-left:15px; text-indent:-15px"><b>Finance group</b>
</div></td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
</tr>
<tr valign="bottom">
<td>
<div style="margin-left:30px; text-indent:-15px">Finance receivables held for sale
</div></td>
<td> </td>
<td align="right">$</td>
<td align="right">613</td>
<td> </td>
</tr>
<tr valign="bottom" style="background: #cceeff">
<td>
<div style="margin-left:30px; text-indent:-15px">Impaired loans
</div></td>
<td> </td>
<td> </td>
<td align="right">451</td>
<td> </td>
</tr>
<tr valign="bottom">
<td>
<div style="margin-left:30px; text-indent:-15px">Retained interests in securitizations, excluding interest-only securities
</div></td>
<td> </td>
<td> </td>
<td align="right">110</td>
<td> </td>
</tr>
<tr valign="bottom" style="background: #cceeff">
<td>
<div style="margin-left:30px; text-indent:-15px">Other assets
</div></td>
<td> </td>
<td> </td>
<td align="right">75</td>
<td> </td>
</tr>
<tr style="font-size: 1px">
<td colspan="5" align="left" style="border-top: 3px double #000000"> </td>
</tr>
<!-- End Table Body -->
</table>
</div>
<div align="left" style="font-size: 10pt; margin-top: 6pt"><i>Finance Receivables Held for Sale </i>- Finance receivables held for sale are recorded at the lower of
cost or fair value. We recorded a $12 million increase to the valuation allowance for the held for
sale portfolio to reflect changes in fair value in the first half of 2009, of which $11 million was
recorded in the second quarter of 2009. There was no change to the methodology used to determine
fair value for these receivables during 2009. See Note 7: Accounts Receivable, Finance Receivables
and Securitizations, regarding the change in classification of certain finance receivables from
held for sale to held for investment in 2009.
</div>
<div align="left" style="font-size: 10pt; margin-top: 6pt"><i>Impaired Loans </i>- Loan impairment is measured by comparing the expected future cash flows discounted
at the loan’s effective interest rate, or the fair value of the collateral if the loan is
collateral dependent, to its carrying amount. If the carrying amount is higher, we establish a
reserve based on this difference. This evaluation is inherently subjective, as it requires
estimates, including the amount and timing of future cash flows expected to be received on impaired
loans and the underlying collateral, which may differ from actual results. The measurement of
required reserves on these loans is largely dependent on significant unobservable inputs including
the fair value of the underlying collateral, which are determined utilizing either appraisals,
industry pricing guides, input from market participants, our recent experience selling similar
assets or internally developed discounted cash flow models. Fair market value adjustments totaled
$85 million in the second quarter of 2009 and $117 million in the first half of 2009, primarily
related to initial fair value adjustments for loans impaired during the respective period.
</div>
<div align="left" style="font-size: 10pt; margin-top: 6pt"><i>Retained Interests in Securitizations, Excluding Interest-only Securities — </i>Retained interests in
securitizations represent our subordinated interest in finance receivables sold to qualified
special purpose trusts. The portion of our retained interests related to interest-only securities
is recorded at fair value on a recurring basis, while the remaining retained interests are recorded
at fair value on a nonrecurring basis. We estimate fair value upon the initial recognition of the
retained interest based on the present value of expected future cash flows using our best estimates
of key assumptions — credit losses, prepayment speeds, forward interest rate yield curves and
discount rates commensurate with the risks involved. These inputs are classified as Level 3 since
they reflect our own judgment regarding the assumptions market participants would use in pricing
these assets based on the best information available in the circumstances as there is no active
market for these assets.
</div>
<!-- Folio -->
<!-- /Folio -->
</div>
<!-- PAGEBREAK -->
<div style="font-family: 'Times New Roman',Times,serif">
<div align="left" style="font-size: 10pt; margin-top: 6pt">We review the fair values of the retained interests using a discounted cash flow model and updated
assumptions, and compare such amounts with the carrying value. At July 4, 2009, the key economic
assumptions used in measuring the retained interests related to the distribution finance revolving
securitization included an annual rate for expected credit losses of 2.85%, a monthly payment rate
of 12.1% and a residual cash flow discount rate of 12.9%. Net charge-offs as a percentage of
distribution finance receivables was 3.81% for first half of 2009, compared with 1.94% for the full
year of 2008. The 60+ days contractual delinquency percentage for distribution finance
receivables was 5.74% and 2.08% at July 4, 2009 and January 3, 2009, respectively.
</div>
<div align="left" style="font-size: 10pt; margin-top: 6pt">During the second quarter of 2009, we recognized a $31 million other-than-temporary impairment of
our retained interests, excluding interest-only securities. Of this amount, $18 million was charge
to income primarily due to credit losses, representing a decrease in cash flows expected to be
collected on these interests for the distribution finance revolving securitization. The remaining
$13 million impairment charge was recognized in other comprehensive income as it is attributable to
an increase in market discount rates. Since we have the intent and ability to hold these retained
interests to maturity, changes in market discount rates do not affect our ultimate realization of
our investment.
</div>
<div align="left" style="font-size: 10pt; margin-top: 6pt"><i>Other assets — </i>Other assets include repossessed assets and properties and operating assets received
in satisfaction of troubled finance receivables. The fair value of repossessed assets and
properties and operating assets received in satisfaction of troubled finance receivables is
determined based on the use of appraisals, industry pricing guides, input from market participants,
our recent experience selling similar assets or internally developed discounted cash flow models.
For repossessed assets and properties, which are considered assets held for sale, if the carrying
amount of the asset is higher than the estimated fair value, we record a corresponding charge to
income for the difference. For operating assets received in satisfaction of troubled finance
receivables, if the sum of the undiscounted cash flows is estimated to be less than the carrying
value, we record a charge to income for any shortfall between estimated fair value and the carrying
amount. Fair value measurements recorded during the three and six months ended July 4, 2009 on
these assets resulted in an $18 million and $22 million charge, respectively, recorded to Finance
revenues in the Consolidated Statement of Operations.
</div>
<div align="left" style="font-size: 10pt; margin-top: 6pt">In connection with the cancellation of the Citation Columbus development program, we recorded a $43
million in impairment charge to write off capitalized costs related to tooling and a
partially-constructed manufacturing facility, which we no longer consider to be recoverable. The
fair value of the remaining assets was determined using Level 3 inputs and was less than $1
million. See Note 2: Special Charges for more detail regarding these charges.
</div>
<div align="left" style="font-size: 10pt; margin-top: 12pt"><i>Assets and Liabilities Not Recorded at Fair Value</i>
</div>
<div align="left" style="font-size: 10pt; margin-top: 6pt">The carrying value and estimated fair values of our financial instruments that are not reflected in
the financial statements at fair value are as follows:
</div>
<div align="center">
<table style="font-size: 10pt; text-align: left" cellspacing="0" border="0" cellpadding="0" width="100%">
<!-- Begin Table Head -->
<tr valign="bottom">
<td width="52%"> </td>
<td width="5%"> </td>
<td width="3%"> </td>
<td width="1%"> </td>
<td width="3%"> </td>
<td width="5%"> </td>
<td width="3%"> </td>
<td width="1%"> </td>
<td width="3%"> </td>
<td width="5%"> </td>
<td width="3%"> </td>
<td width="1%"> </td>
<td width="3%"> </td>
<td width="5%"> </td>
<td width="3%"> </td>
<td width="1%"> </td>
<td width="3%"> </td>
</tr>
<tr style="font-size: 8pt" valign="bottom">
<td> </td>
<td> </td>
<td nowrap="nowrap" align="center" colspan="7" style="border-bottom: 1px solid #000000">July 4, 2009 </td>
<td style="border-bottom: 1px solid #000000"> </td>
<td nowrap="nowrap" align="center" colspan="7" style="border-bottom: 1px solid #000000">January 3, 2009</td>
</tr>
<tr style="font-size: 8pt" valign="bottom">
<td> </td>
<td> </td>
<td nowrap="nowrap" align="right" colspan="3">Carrying</td>
<td> </td>
<td nowrap="nowrap" align="right" colspan="3">Estimated</td>
<td> </td>
<td nowrap="nowrap" align="right" colspan="3">Carrying</td>
<td> </td>
<td nowrap="nowrap" align="right" colspan="3">Estimated</td>
</tr>
<tr style="font-size: 8pt" valign="bottom">
<td nowrap="nowrap" align="left"><i>(In millions)</i></td>
<td> </td>
<td nowrap="nowrap" align="right" colspan="3">Value</td>
<td> </td>
<td nowrap="nowrap" align="right" colspan="3">Fair Value</td>
<td> </td>
<td nowrap="nowrap" align="right" colspan="3">Value</td>
<td> </td>
<td nowrap="nowrap" align="right" colspan="3">Fair Value</td>
</tr>
<!-- End Table Head -->
<!-- Begin Table Body -->
<tr style="font-size: 1px">
<td colspan="17" align="left" style="border-top: 1px solid #000000"> </td>
</tr>
<tr valign="bottom" style="background: #cceeff">
<td>
<div style="margin-left:15px; text-indent:-15px"><b>Manufacturing group</b>
</div></td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
</tr>
<tr valign="bottom">
<td>
<div style="margin-left:30px; text-indent:-15px">Debt
</div></td>
<td> </td>
<td nowrap="nowrap" align="right">$</td>
<td align="right">(3,265</td>
<td nowrap="nowrap">)</td>
<td> </td>
<td nowrap="nowrap" align="right">$</td>
<td align="right">(2,954</td>
<td nowrap="nowrap">)</td>
<td> </td>
<td nowrap="nowrap" align="right">$</td>
<td align="right">(2,438</td>
<td nowrap="nowrap">)</td>
<td> </td>
<td nowrap="nowrap" align="right">$</td>
<td align="right">(2,074</td>
<td nowrap="nowrap">)</td>
</tr>
<tr valign="bottom" style="background: #cceeff">
<td>
<div style="margin-left:15px; text-indent:-15px"><b>Finance group</b>
</div></td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
</tr>
<tr valign="bottom">
<td>
<div style="margin-left:30px; text-indent:-15px">Finance receivables held for investment
</div></td>
<td> </td>
<td> </td>
<td align="right">5,615</td>
<td> </td>
<td> </td>
<td> </td>
<td align="right">4,747</td>
<td> </td>
<td> </td>
<td> </td>
<td align="right">5,665</td>
<td> </td>
<td> </td>
<td> </td>
<td align="right">4,828</td>
<td> </td>
</tr>
<tr valign="bottom" style="background: #cceeff">
<td>
<div style="margin-left:30px; text-indent:-15px">Retained interest in securitizations,
excluding interest only securities
</div></td>
<td> </td>
<td> </td>
<td align="right">6</td>
<td> </td>
<td> </td>
<td> </td>
<td align="right">6</td>
<td> </td>
<td> </td>
<td> </td>
<td align="right">188</td>
<td> </td>
<td> </td>
<td> </td>
<td align="right">178</td>
<td> </td>
</tr>
<tr valign="bottom">
<td>
<div style="margin-left:30px; text-indent:-15px">Investment in other marketable securities
</div></td>
<td> </td>
<td> </td>
<td align="right">80</td>
<td> </td>
<td> </td>
<td> </td>
<td align="right">60</td>
<td> </td>
<td> </td>
<td> </td>
<td align="right">95</td>
<td> </td>
<td> </td>
<td> </td>
<td align="right">78</td>
<td> </td>
</tr>
<tr valign="bottom" style="background: #cceeff">
<td>
<div style="margin-left:30px; text-indent:-15px">Debt
</div></td>
<td> </td>
<td nowrap="nowrap" align="right"> </td>
<td align="right">(7,057</td>
<td nowrap="nowrap">)</td>
<td> </td>
<td nowrap="nowrap" align="right"> </td>
<td align="right">(6,087</td>
<td nowrap="nowrap">)</td>
<td> </td>
<td nowrap="nowrap" align="right"> </td>
<td align="right">(7,388</td>
<td nowrap="nowrap">)</td>
<td> </td>
<td nowrap="nowrap" align="right"> </td>
<td align="right">(6,507</td>
<td nowrap="nowrap">)</td>
</tr>
<tr style="font-size: 1px">
<td colspan="17" align="left" style="border-top: 3px double #000000"> </td>
</tr>
<!-- End Table Body -->
</table>
</div>
<div align="left" style="font-size: 10pt; margin-top: 6pt">In accordance with disclosure requirements, debt and finance receivables held for investment in the
table above exclude leases. Fair value for the Manufacturing group debt is determined using market
observable data for similar transactions. We utilize the same valuation methodologies to determine
the fair value estimates for finance receivables held for investment as used for finance
receivables held for sale.
</div>
<!-- Folio -->
<!-- /Folio -->
</div>
<!-- PAGEBREAK -->
<div style="font-family: 'Times New Roman',Times,serif">
<div align="left" style="font-size: 10pt; margin-top: 6pt">In the second quarter of 2009, certain retained interests in securitizations were recorded at fair
value as discussed in the preceding section and, accordingly, are not reflected in the above table.
</div>
<div align="left" style="font-size: 10pt; margin-top: 6pt">Investments in other marketable securities represent notes receivable issued by securitization
trusts that purchase timeshare notes receivable from timeshare developers. These notes are
classified as held-to-maturity and are held at cost. The estimate of fair value was based on
observable market inputs for similar securitization interests in markets that are currently
inactive.
</div>
<div align="left" style="font-size: 10pt; margin-top: 6pt">At July 4, 2009 and January 3, 2009, approximately 63% and 82%, respectively, of the fair value of
term debt for the Finance group was determined based on observable market transactions. The
remaining Finance group debt was determined based on discounted cash flow analyses using observable
market inputs from debt with similar duration, subordination and credit default expectations.
</div>
</div>
</body>
</html>
<!--DOCTYPE html PUBLIC "-//W3C//DTD XHTML 1.0 Transitional//EN" "http://www.w3.org/TR/xhtml1/DTD/xhtml1-transitional.dtd" -->
<html>
<head></head>
<body>
<!-- Begin Block Tagged Note 13 - us-gaap:DerivativeInstrumentsAndHedgingActivitiesDisclosureTextBlock-->
<div style="font-family: 'Times New Roman',Times,serif">
<div align="left" style="font-size: 10pt; margin-top: 12pt"><b>Note 13: Derivatives</b>
</div>
<div align="left" style="font-size: 10pt; margin-top: 6pt"><i>Fair Value Hedges</i>
</div>
<div align="left" style="font-size: 10pt; margin-top: 6pt">Our Finance group enters into interest rate exchange contracts to mitigate exposure to changes in
the fair value of its fixed-rate receivables and debt due to fluctuations in interest rates. By
using these contracts, we are able to convert our fixed-rate cash flows to floating-rate cash
flows.
</div>
<div align="left" style="font-size: 10pt; margin-top: 12pt"><i>Cash Flow Hedges</i>
</div>
<div align="left" style="font-size: 10pt; margin-top: 6pt">We experience variability in the cash flows we receive from our Finance group’s investments in
interest-only securities due to fluctuations in interest rates. To mitigate our exposure to this
variability, our Finance group enters into interest rate exchange, cap and floor agreements. The
combination of these instruments converts net residual floating-rate cash flows expected to be
received by our Finance group to fixed-rate cash flows. Changes in the fair value of these
instruments are recorded net of the income taxes in other comprehensive income (OCI).
</div>
<div align="left" style="font-size: 10pt; margin-top: 6pt">Our exposure to loss from nonperformance by the counterparties to our derivative agreements at July
4, 2009 is minimal. We do not anticipate nonperformance by counterparties in the periodic
settlements of amounts due. We have historically minimized this potential for risk by entering into
contracts exclusively with major, financially sound counterparties having no less than a long-term
bond rating of A. The recent uncertainty in the financial markets has negatively affected the bond
ratings of all of our counterparties, and we continuously monitor our exposures to ensure that we
limit our risks. The credit risk generally is limited to the amount by which the counterparties’
contractual obligations exceed our obligations to the counterparty.
</div>
<div align="left" style="font-size: 10pt; margin-top: 6pt">We manufacture and sell our products in a number of countries throughout the world, and, therefore,
we are exposed to movements in foreign currency exchange rates. The primary purpose of our foreign
currency hedging activities is to manage the volatility associated with foreign currency purchases
of materials, foreign currency sales of products, and other assets and liabilities created in the
normal course of business. We primarily utilize forward exchange contracts and purchased options
with maturities of no more than 18 months that qualify as cash flow hedges. These are intended to
offset the effect of exchange rate fluctuations on forecasted sales, inventory purchases and
overhead expenses. At July 4, 2009, we had a deferred gain of $4 million in OCI related to these
cash flow hedges, which we expect to reclassify into earnings in the next 18 months as the
underlying transactions occur.
</div>
<div align="left" style="font-size: 10pt; margin-top: 12pt"><i>Net Investment Hedges</i>
</div>
<div align="left" style="font-size: 10pt; margin-top: 6pt">We hedge our net investment position in major currencies and generate foreign currency interest
payments that offset other transactional exposures in these currencies. To accomplish this, we
borrow directly in foreign currency and designate a portion of foreign currency debt as a hedge of
net investments. We also may utilize currency forwards as hedges of our related foreign net
investments. Currency effects on the effective portion of these hedges, which are reflected in the
cumulative translation adjustment account within OCI, produced a $33 million after-tax loss,
leaving an accumulated net loss balance of $17 million. We recorded a $1 million after tax gain in
selling and administrative expenses in the first half of 2009 on the ineffective portion of these
hedges.
</div>
<!-- Folio -->
<!-- /Folio -->
</div>
<!-- PAGEBREAK -->
<div style="font-family: 'Times New Roman',Times,serif">
<div align="left" style="font-size: 10pt; margin-top: 12pt"><i>Stock-Based Compensation Hedges</i>
</div>
<div align="left" style="font-size: 10pt; margin-top: 6pt">We manage the expense related to certain stock-based compensation awards using cash settlement
forward contracts on our common stock. The use of these forward contracts modifies compensation
expense exposure to changes in the stock price with the intent to reduce potential variability.
Cash received or paid on the contract settlement is included in cash flows from operating
activities, consistent with the classification of the cash flows on the underlying hedged
compensation expense.
</div>
<div align="left" style="font-size: 10pt; margin-top: 12pt"><i>Fair Values of Derivative Instruments</i>
</div>
<div align="center">
<table style="font-size: 10pt; text-align: left" cellspacing="0" border="0" cellpadding="0" width="100%">
<!-- Begin Table Head -->
<tr valign="bottom">
<td width="52%"> </td>
<td width="5%"> </td>
<td width="3%"> </td>
<td width="1%"> </td>
<td width="3%"> </td>
<td width="5%"> </td>
<td width="3%"> </td>
<td width="1%"> </td>
<td width="3%"> </td>
<td width="5%"> </td>
<td width="3%"> </td>
<td width="1%"> </td>
<td width="3%"> </td>
<td width="5%"> </td>
<td width="3%"> </td>
<td width="1%"> </td>
<td width="3%"> </td>
</tr>
<tr style="font-size: 8pt" valign="bottom">
<td> </td>
<td> </td>
<td nowrap="nowrap" align="center" colspan="7" style="border-bottom: 1px solid #000000">Assets </td>
<td> </td>
<td nowrap="nowrap" align="center" colspan="7" style="border-bottom: 1px solid #000000">Liabilities </td>
</tr>
<tr style="font-size: 8pt" valign="bottom">
<td> </td>
<td> </td>
<td nowrap="nowrap" align="right" colspan="3">July 4,</td>
<td> </td>
<td nowrap="nowrap" align="right" colspan="3">January 3,</td>
<td> </td>
<td nowrap="nowrap" align="right" colspan="3">July 4,</td>
<td> </td>
<td nowrap="nowrap" align="right" colspan="3">January 3,</td>
</tr>
<tr style="font-size: 8pt" valign="bottom">
<td nowrap="nowrap" align="left"><i>(In millions)</i></td>
<td> </td>
<td nowrap="nowrap" align="right" colspan="3">2009</td>
<td> </td>
<td nowrap="nowrap" align="right" colspan="3">2009</td>
<td> </td>
<td nowrap="nowrap" align="right" colspan="3">2009</td>
<td> </td>
<td nowrap="nowrap" align="right" colspan="3">2009</td>
</tr>
<!-- End Table Head -->
<!-- Begin Table Body -->
<tr style="font-size: 1px">
<td colspan="17" align="left" style="border-top: 1px solid #000000"> </td>
</tr>
<tr valign="bottom" style="background: #cceeff">
<td>
<div style="margin-left:15px; text-indent:-15px"><b>Derivatives designated as hedging instruments</b>
</div></td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
</tr>
<tr valign="bottom">
<td>
<div style="margin-left:15px; text-indent:-15px"><b><i>Fair value hedges</i></b>
</div></td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
</tr>
<tr valign="bottom" style="background: #cceeff">
<td>
<div style="margin-left:15px; text-indent:-15px"><b>Finance group</b>
</div></td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
</tr>
<tr valign="bottom">
<td>
<div style="margin-left:30px; text-indent:-15px">Interest rate exchange contracts
</div></td>
<td> </td>
<td align="right">$</td>
<td align="right">65</td>
<td> </td>
<td> </td>
<td align="right">$</td>
<td align="right">112</td>
<td> </td>
<td> </td>
<td nowrap="nowrap" align="right">$</td>
<td align="right">(12</td>
<td nowrap="nowrap">)</td>
<td> </td>
<td nowrap="nowrap" align="right">$</td>
<td align="right">(7</td>
<td nowrap="nowrap">)</td>
</tr>
<tr style="font-size: 1px">
<td colspan="17" align="left" style="border-top: 1px solid #000000"> </td>
</tr>
<tr valign="bottom" style="background: #cceeff">
<td>
<div style="margin-left:15px; text-indent:-15px">Total fair value hedges
</div></td>
<td> </td>
<td> </td>
<td align="right">65</td>
<td> </td>
<td> </td>
<td> </td>
<td align="right">112</td>
<td> </td>
<td> </td>
<td nowrap="nowrap" align="right"> </td>
<td align="right">(12</td>
<td nowrap="nowrap">)</td>
<td> </td>
<td nowrap="nowrap" align="right"> </td>
<td align="right">(7</td>
<td nowrap="nowrap">)</td>
</tr>
<tr style="font-size: 1px">
<td colspan="17" align="left" style="border-top: 1px solid #000000"> </td>
</tr>
<tr valign="bottom">
<td>
<div style="margin-left:15px; text-indent:-15px"><b><i>Cash flow hedges</i></b>
</div></td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
</tr>
<tr valign="bottom" style="background: #cceeff">
<td>
<div style="margin-left:15px; text-indent:-15px"><b>Manufacturing group</b>
</div></td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
</tr>
<tr valign="bottom">
<td>
<div style="margin-left:30px; text-indent:-15px">Foreign currency exchange contracts
</div></td>
<td> </td>
<td> </td>
<td align="right">18</td>
<td> </td>
<td> </td>
<td> </td>
<td align="right">2</td>
<td> </td>
<td> </td>
<td nowrap="nowrap" align="right"> </td>
<td align="right">(8</td>
<td nowrap="nowrap">)</td>
<td> </td>
<td nowrap="nowrap" align="right"> </td>
<td align="right">(41</td>
<td nowrap="nowrap">)</td>
</tr>
<tr valign="bottom" style="background: #cceeff">
<td>
<div style="margin-left:30px; text-indent:-15px">Forward contracts for Textron Inc. stock
</div></td>
<td> </td>
<td> </td>
<td align="right">—</td>
<td> </td>
<td> </td>
<td> </td>
<td align="right">—</td>
<td> </td>
<td> </td>
<td nowrap="nowrap" align="right"> </td>
<td align="right">(7</td>
<td nowrap="nowrap">)</td>
<td> </td>
<td nowrap="nowrap" align="right"> </td>
<td align="right">(98</td>
<td nowrap="nowrap">)</td>
</tr>
<tr valign="bottom">
<td>
<div style="margin-left:15px; text-indent:-15px"><b>Finance group</b>
</div></td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
</tr>
<tr valign="bottom" style="background: #cceeff">
<td>
<div style="margin-left:30px; text-indent:-15px">Cross-currency interest rate exchange contracts
</div></td>
<td> </td>
<td> </td>
<td align="right">12</td>
<td> </td>
<td> </td>
<td> </td>
<td align="right">21</td>
<td> </td>
<td> </td>
<td nowrap="nowrap" align="right"> </td>
<td align="right">(1</td>
<td nowrap="nowrap">)</td>
<td> </td>
<td nowrap="nowrap" align="right"> </td>
<td align="right">(1</td>
<td nowrap="nowrap">)</td>
</tr>
<tr style="font-size: 1px">
<td colspan="17" align="left" style="border-top: 1px solid #000000"> </td>
</tr>
<tr valign="bottom">
<td>
<div style="margin-left:15px; text-indent:-15px">Total cash flow hedges
</div></td>
<td> </td>
<td> </td>
<td align="right">30</td>
<td> </td>
<td> </td>
<td> </td>
<td align="right">23</td>
<td> </td>
<td> </td>
<td nowrap="nowrap" align="right"> </td>
<td align="right">(16</td>
<td nowrap="nowrap">)</td>
<td> </td>
<td nowrap="nowrap" align="right"> </td>
<td align="right">(140</td>
<td nowrap="nowrap">)</td>
</tr>
<tr style="font-size: 1px">
<td colspan="17" align="left" style="border-top: 1px solid #000000"> </td>
</tr>
<tr valign="bottom" style="background: #cceeff">
<td>
<div style="margin-left:15px; text-indent:-15px">Total derivatives designated as hedging instruments
</div></td>
<td> </td>
<td align="right">$</td>
<td align="right">95</td>
<td> </td>
<td> </td>
<td align="right">$</td>
<td align="right">135</td>
<td> </td>
<td> </td>
<td nowrap="nowrap" align="right">$</td>
<td align="right">(28</td>
<td nowrap="nowrap">)</td>
<td> </td>
<td nowrap="nowrap" align="right">$</td>
<td align="right">(147</td>
<td nowrap="nowrap">)</td>
</tr>
<tr style="font-size: 1px">
<td colspan="17" align="left" style="border-top: 3px double #000000"> </td>
</tr>
<tr valign="bottom">
<td>
<div style="margin-left:15px; text-indent:-15px"><b>Derivatives not designated as hedging instruments</b>
</div></td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
</tr>
<tr valign="bottom" style="background: #cceeff">
<td>
<div style="margin-left:15px; text-indent:-15px"><b>Manufacturing group</b>
</div></td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
</tr>
<tr valign="bottom">
<td>
<div style="margin-left:30px; text-indent:-15px">Foreign currency exchange contracts
</div></td>
<td> </td>
<td align="right">$</td>
<td align="right">7</td>
<td> </td>
<td> </td>
<td align="right">$</td>
<td align="right">—</td>
<td> </td>
<td> </td>
<td align="right">$</td>
<td align="right">—</td>
<td> </td>
<td> </td>
<td nowrap="nowrap" align="right">$</td>
<td align="right">(43</td>
<td nowrap="nowrap">)</td>
</tr>
<tr valign="bottom" style="background: #cceeff">
<td>
<div style="margin-left:15px; text-indent:-15px"><b>Finance group</b>
</div></td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
</tr>
<tr valign="bottom">
<td>
<div style="margin-left:30px; text-indent:-15px">Foreign currency exchange contracts
</div></td>
<td> </td>
<td> </td>
<td align="right">—</td>
<td> </td>
<td> </td>
<td> </td>
<td align="right">—</td>
<td> </td>
<td> </td>
<td nowrap="nowrap" align="right"> </td>
<td align="right">(7</td>
<td nowrap="nowrap">)</td>
<td> </td>
<td> </td>
<td align="right">—</td>
<td> </td>
</tr>
<tr valign="bottom" style="background: #cceeff">
<td>
<div style="margin-left:30px; text-indent:-15px">Interest rate exchange contracts
</div></td>
<td> </td>
<td> </td>
<td align="right">—</td>
<td> </td>
<td> </td>
<td> </td>
<td align="right">—</td>
<td> </td>
<td> </td>
<td> </td>
<td align="right">—</td>
<td> </td>
<td> </td>
<td nowrap="nowrap" align="right"> </td>
<td align="right">(13</td>
<td nowrap="nowrap">)</td>
</tr>
<tr style="font-size: 1px">
<td colspan="17" align="left" style="border-top: 1px solid #000000"> </td>
</tr>
<tr valign="bottom">
<td>
<div style="margin-left:15px; text-indent:-15px">Total derivatives not designated as hedging instruments
</div></td>
<td> </td>
<td align="right">$</td>
<td align="right">7</td>
<td> </td>
<td> </td>
<td align="right">$</td>
<td align="right">—</td>
<td> </td>
<td> </td>
<td nowrap="nowrap" align="right">$</td>
<td align="right">(7</td>
<td nowrap="nowrap">)</td>
<td> </td>
<td nowrap="nowrap" align="right">$</td>
<td align="right">(56</td>
<td nowrap="nowrap">)</td>
</tr>
<tr style="font-size: 1px">
<td colspan="17" align="left" style="border-top: 3px double #000000"> </td>
</tr>
<!-- End Table Body -->
</table>
</div>
<div align="left" style="font-size: 10pt; margin-top: 6pt">The fair values of derivative instruments for the Manufacturing group are included in either other
current assets or accrued liabilities on our Consolidated Balance Sheets. For the Finance group,
they are included in either other assets or other liabilities.
</div>
<div align="left" style="font-size: 10pt; margin-top: 6pt">The effect of derivative instruments designated as fair value hedges is recorded in the
Consolidated Statements of Operations. The gain (loss) for each respective period is provided in
the following table:
</div>
<div align="center">
<table style="font-size: 10pt; text-align: left" cellspacing="0" border="0" cellpadding="0" width="100%">
<!-- Begin Table Head -->
<tr valign="bottom">
<td width="40%"> </td>
<td width="5%"> </td>
<td width="3%"> </td>
<td width="1%"> </td>
<td width="3%"> </td>
<td width="5%"> </td>
<td width="3%"> </td>
<td width="1%"> </td>
<td width="3%"> </td>
<td width="5%"> </td>
<td width="3%"> </td>
<td width="1%"> </td>
<td width="3%"> </td>
<td width="5%"> </td>
<td width="3%"> </td>
<td width="1%"> </td>
<td width="3%"> </td>
<td width="5%"> </td>
<td width="3%"> </td>
<td width="1%"> </td>
<td width="3%"> </td>
</tr>
<tr style="font-size: 8pt" valign="bottom">
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td nowrap="nowrap" align="center" colspan="7" style="border-bottom: 1px solid #000000">Three Months Ended </td>
<td style="border-bottom: 1px solid #000000"> </td>
<td nowrap="nowrap" align="center" colspan="7" style="border-bottom: 1px solid #000000">Six Months Ended </td>
</tr>
<tr style="font-size: 8pt" valign="bottom">
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td nowrap="nowrap" align="right" colspan="3">July 4,</td>
<td> </td>
<td nowrap="nowrap" align="right" colspan="3">June 28,</td>
<td> </td>
<td nowrap="nowrap" align="right" colspan="3">July 4,</td>
<td> </td>
<td nowrap="nowrap" align="right" colspan="3">June 28,</td>
</tr>
<tr style="font-size: 8pt" valign="bottom">
<td nowrap="nowrap" align="left"><i>(In millions)</i></td>
<td> </td>
<td nowrap="nowrap" align="right" colspan="3">Gain (Loss) Location</td>
<td> </td>
<td nowrap="nowrap" align="right" colspan="3">2009</td>
<td> </td>
<td nowrap="nowrap" align="right" colspan="3">2008</td>
<td> </td>
<td nowrap="nowrap" align="right" colspan="3">2009</td>
<td> </td>
<td nowrap="nowrap" align="right" colspan="3">2008</td>
</tr>
<!-- End Table Head -->
<!-- Begin Table Body -->
<tr style="font-size: 1px">
<td colspan="21" align="left" style="border-top: 1px solid #000000"> </td>
</tr>
<tr valign="bottom" style="background: #cceeff">
<td>
<div style="margin-left:15px; text-indent:-15px"><b>Finance group</b>
</div></td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
</tr>
<tr valign="bottom">
<td>
<div style="margin-left:30px; text-indent:-15px">Interest rate exchange contracts
</div></td>
<td> </td>
<td nowrap="nowrap" colspan="3" align="left">Interest expense, net</td>
<td> </td>
<td nowrap="nowrap" align="right">$</td>
<td align="right">(19</td>
<td nowrap="nowrap">)</td>
<td> </td>
<td nowrap="nowrap" align="right">$</td>
<td align="right">(37</td>
<td nowrap="nowrap">)</td>
<td> </td>
<td nowrap="nowrap" align="right">$</td>
<td align="right">(15</td>
<td nowrap="nowrap">)</td>
<td> </td>
<td align="right">$</td>
<td align="right">13</td>
<td> </td>
</tr>
<tr valign="bottom" style="background: #cceeff">
<td>
<div style="margin-left:30px; text-indent:-15px">Interest rate exchange contracts
</div></td>
<td> </td>
<td colspan="3" align="left">Finance charges</td>
<td> </td>
<td> </td>
<td align="right">8</td>
<td> </td>
<td> </td>
<td> </td>
<td align="right">1</td>
<td> </td>
<td> </td>
<td> </td>
<td align="right">6</td>
<td> </td>
<td> </td>
<td nowrap="nowrap" align="right"> </td>
<td align="right">(1</td>
<td nowrap="nowrap">)</td>
</tr>
<tr style="font-size: 1px">
<td colspan="21" align="left" style="border-top: 3px double #000000"> </td>
</tr>
<!-- End Table Body -->
</table>
</div>
<div align="left" style="font-size: 10pt; margin-top: 6pt">For our cash flow hedges, the amount of gain (loss) reclassified from accumulated other
comprehensive income into income (the effective portion) is provided in the following table:
</div>
<div align="center">
<table style="font-size: 10pt; text-align: left" cellspacing="0" border="0" cellpadding="0" width="100%">
<!-- Begin Table Head -->
<tr valign="bottom">
<td width="40%"> </td>
<td width="5%"> </td>
<td width="3%"> </td>
<td width="1%"> </td>
<td width="3%"> </td>
<td width="5%"> </td>
<td width="3%"> </td>
<td width="1%"> </td>
<td width="3%"> </td>
<td width="5%"> </td>
<td width="3%"> </td>
<td width="1%"> </td>
<td width="3%"> </td>
<td width="5%"> </td>
<td width="3%"> </td>
<td width="1%"> </td>
<td width="3%"> </td>
<td width="5%"> </td>
<td width="3%"> </td>
<td width="1%"> </td>
<td width="3%"> </td>
</tr>
<tr style="font-size: 8pt" valign="bottom">
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td nowrap="nowrap" align="center" colspan="7" style="border-bottom: 1px solid #000000">Three Months Ended </td>
<td style="border-bottom: 1px solid #000000"> </td>
<td nowrap="nowrap" align="center" colspan="7" style="border-bottom: 1px solid #000000">Six Months Ended</td>
</tr>
<tr style="font-size: 8pt" valign="bottom">
<td nowrap="nowrap" align="left"><i>(In millions)</i></td>
<td> </td>
<td nowrap="nowrap" align="right" colspan="3">Gain (Loss) Location</td>
<td> </td>
<td nowrap="nowrap" align="right" colspan="3">July 4,<br />
2009</td>
<td> </td>
<td nowrap="nowrap" align="right" colspan="3">June 28,<br />
2008</td>
<td> </td>
<td nowrap="nowrap" align="right" colspan="3">July 4, <br />
2009</td>
<td> </td>
<td nowrap="nowrap" align="right" colspan="3">June 28,<br />
2008</td>
</tr>
<!-- End Table Head -->
<!-- Begin Table Body -->
<tr style="font-size: 1px">
<td colspan="21" align="left" style="border-top: 1px solid #000000"> </td>
</tr>
<tr valign="bottom" style="background: #cceeff">
<td>
<div style="margin-left:15px; text-indent:-15px"><b>Manufacturing group</b>
</div></td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
</tr>
<tr valign="bottom">
<td>
<div style="margin-left:30px; text-indent:-15px">Foreign currency exchange contracts
</div></td>
<td> </td>
<td colspan="3" align="left">Cost of sales</td>
<td> </td>
<td nowrap="nowrap" align="right">$</td>
<td align="right">(4</td>
<td nowrap="nowrap">)</td>
<td> </td>
<td align="right">$</td>
<td align="right">1</td>
<td> </td>
<td> </td>
<td nowrap="nowrap" align="right">$</td>
<td align="right">(9</td>
<td nowrap="nowrap">)</td>
<td> </td>
<td align="right">$</td>
<td align="right">4</td>
<td> </td>
</tr>
<tr valign="bottom" style="background: #cceeff">
<td>
<div style="margin-left:30px; text-indent:-15px">Forward contracts for Textron Inc. stock
</div></td>
<td> </td>
<td nowrap="nowrap" colspan="3" align="left">Selling and administrative</td>
<td> </td>
<td nowrap="nowrap" align="right"> </td>
<td align="right">(2</td>
<td nowrap="nowrap">)</td>
<td> </td>
<td> </td>
<td align="right">2</td>
<td> </td>
<td> </td>
<td nowrap="nowrap" align="right"> </td>
<td align="right">(4</td>
<td nowrap="nowrap">)</td>
<td> </td>
<td> </td>
<td align="right">6</td>
<td> </td>
</tr>
<tr style="font-size: 1px">
<td colspan="21" align="left" style="border-top: 3px double #000000"> </td>
</tr>
<!-- End Table Body -->
</table>
</div>
<!-- Folio -->
<!-- /Folio -->
</div>
<!-- PAGEBREAK -->
<div style="font-family: 'Times New Roman',Times,serif">
<div align="left" style="font-size: 10pt; margin-top: 6pt">The amount of ineffectiveness on our fair value and cash flow hedges is insignificant. The amount
of gain (loss) in accumulated other comprehensive income (the effective portion) at the end of each
period is provided below:
</div>
<div align="center">
<table style="font-size: 10pt; text-align: left" cellspacing="0" border="0" cellpadding="0" width="100%">
<!-- Begin Table Head -->
<tr valign="bottom">
<td width="76%"> </td>
<td width="5%"> </td>
<td width="3%"> </td>
<td width="1%"> </td>
<td width="3%"> </td>
<td width="5%"> </td>
<td width="3%"> </td>
<td width="1%"> </td>
<td width="3%"> </td>
</tr>
<tr style="font-size: 8pt" valign="bottom">
<td> </td>
<td> </td>
<td nowrap="nowrap" align="right" colspan="3">July 4,</td>
<td> </td>
<td nowrap="nowrap" align="right" colspan="3">June 28,</td>
</tr>
<tr style="font-size: 8pt" valign="bottom">
<td nowrap="nowrap" align="left"><i>(In millions)</i></td>
<td> </td>
<td nowrap="nowrap" align="right" colspan="3">2009</td>
<td> </td>
<td nowrap="nowrap" align="right" colspan="3">2008</td>
</tr>
<!-- End Table Head -->
<!-- Begin Table Body -->
<tr style="font-size: 1px">
<td colspan="9" align="left" style="border-top: 1px solid #000000"> </td>
</tr>
<tr valign="bottom" style="background: #cceeff">
<td>
<div style="margin-left:15px; text-indent:-15px"><b>Manufacturing group</b>
</div></td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
</tr>
<tr valign="bottom">
<td>
<div style="margin-left:30px; text-indent:-15px">Foreign currency exchange contracts
</div></td>
<td> </td>
<td align="right">$</td>
<td align="right">8</td>
<td> </td>
<td> </td>
<td align="right">$</td>
<td align="right">21</td>
<td> </td>
</tr>
<tr valign="bottom" style="background: #cceeff">
<td>
<div style="margin-left:30px; text-indent:-15px">Forward contracts for Textron Inc. stock
</div></td>
<td> </td>
<td nowrap="nowrap" align="right"> </td>
<td align="right">(4</td>
<td nowrap="nowrap">)</td>
<td> </td>
<td> </td>
<td align="right">—</td>
<td> </td>
</tr>
<tr style="font-size: 1px">
<td colspan="9" align="left" style="border-top: 3px double #000000"> </td>
</tr>
<!-- End Table Body -->
</table>
</div>
<div align="left" style="font-size: 10pt; margin-top: 6pt">We also enter into certain foreign currency derivative instruments that do not meet hedge
accounting criteria and primarily are intended to protect against exposure related to intercompany
financing transactions. For these instruments, the Manufacturing group reported a gain in selling
and administrative expenses of $8 million and $25 million for the three and six months ended July
4, 2009, respectively, and a loss of $2 million and $10 million for the three and six months ended
June 28, 2008. Our Finance group reported a loss of $52 million in selling and administrative
expenses for the three and six months ended July 4, 2009 and a $3 million loss for the six months
ended June 28, 2008.
</div>
</div>
</body>
</html>
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<html>
<head></head>
<body>
<!-- Begin Block Tagged Note 14 - us-gaap:ScheduleOfNewAccountingPronouncementsAndChangesInAccountingPrinciplesTextBlock-->
<div style="font-family: 'Times New Roman',Times,serif">
<div align="left" style="font-size: 10pt; margin-top: 12pt"><b>Note 14: Recently Issued Accounting Pronouncements</b>
</div>
<div align="left" style="font-size: 10pt; margin-top: 6pt">In June 2009, the Financial Accounting Standards Board (FASB) issued Statement of Financial
Accounting Standard (SFAS) No. 166, “Accounting for Transfers of Financial Assets — an amendment
of FASB Statement No. 140.” This standard eliminates the concept of a qualifying special-purpose
entity (QSPE) and its exclusion from consolidation by the primary beneficiary in that variable
interest entity (VIE) or the transferor of financial assets to the VIE. The new accounting
guidance also requires that former QSPEs be reevaluated for consolidation. This standard is
effective beginning in the first quarter of 2010 and early application is prohibited. The adoption
of this standard may result in the consolidation of our off-balance sheet securitization trusts,
which hold our securitized finance receivables and debt. As our off balance-sheet securitization
trusts are winding down in conjunction with our liquidation plan, we are currently assessing the
impact the adoption of this standard may have on our financial position, results of operations and
liquidity when we are required to adopt it next year.
</div>
<div align="left" style="font-size: 10pt; margin-top: 6pt">Also in June 2009, the FASB Issued SFAS No. 167, “Amendments to FASB Interpretation No 46(R).”
This standard changes the approach to determining the primary beneficiary of a VIE and requires
companies to more frequently assess whether they must consolidate VIEs. This standard is effective
beginning in the first quarter of 2010 and early application is prohibited. The adoption of this
standard is not expected to have any significant impact on our financial position or results of
operations.
</div>
</div>
</body>
</html>
<!--DOCTYPE html PUBLIC "-//W3C//DTD XHTML 1.0 Transitional//EN" "http://www.w3.org/TR/xhtml1/DTD/xhtml1-transitional.dtd" -->
<html>
<head></head>
<body>
<!-- Begin Block Tagged Note 15 - us-gaap:SegmentReportingDisclosureTextBlock-->
<div style="font-family: 'Times New Roman',Times,serif">
<div align="left" style="font-size: 10pt; margin-top: 12pt"><b>Note 15: Segment Information</b>
</div>
<div align="left" style="font-size: 10pt; margin-top: 6pt">We operate in, and report financial information for, the following five business segments: Cessna,
Bell, Textron Systems, Industrial and Finance. Segment profit is an important measure used for
evaluating performance and for decision-making purposes. Segment profit for the manufacturing
segments excludes interest expense, certain corporate expenses and special charges. The
measurement for the Finance segment includes interest income and expense and excludes special
charges. Provisions for losses on finance receivables involving the sale or lease of our products
are recorded by the selling manufacturing division when our Finance group has recourse to the
Manufacturing group.
</div>
<!-- Folio -->
<!-- /Folio -->
</div>
<!-- PAGEBREAK -->
<div style="font-family: 'Times New Roman',Times,serif">
<div align="left" style="font-size: 10pt; margin-top: 6pt">Our revenues by segment and a reconciliation of segment profit to income from continuing operations
before income taxes are as follows:
</div>
<div align="center">
<table style="font-size: 10pt; text-align: left" cellspacing="0" border="0" cellpadding="0" width="100%">
<!-- Begin Table Head -->
<tr valign="bottom">
<td width="52%"> </td>
<td width="5%"> </td>
<td width="3%"> </td>
<td width="1%"> </td>
<td width="3%"> </td>
<td width="5%"> </td>
<td width="3%"> </td>
<td width="1%"> </td>
<td width="3%"> </td>
<td width="5%"> </td>
<td width="3%"> </td>
<td width="1%"> </td>
<td width="3%"> </td>
<td width="5%"> </td>
<td width="3%"> </td>
<td width="3%"> </td>
<td width="1%"> </td>
</tr>
<tr style="font-size: 8pt" valign="bottom">
<td> </td>
<td> </td>
<td nowrap="nowrap" align="center" colspan="7" style="border-bottom: 1px solid #000000">Three Months Ended </td>
<td style="border-bottom: 1px solid #000000"> </td>
<td nowrap="nowrap" align="center" colspan="7" style="border-bottom: 1px solid #000000">Six Months Ended </td>
</tr>
<tr style="font-size: 8pt" valign="bottom">
<td> </td>
<td> </td>
<td nowrap="nowrap" align="right" colspan="2">July 4,</td>
<td> </td>
<td> </td>
<td nowrap="nowrap" align="right" colspan="2">June 28,</td>
<td> </td>
<td> </td>
<td nowrap="nowrap" align="right" colspan="2">July 4,</td>
<td> </td>
<td> </td>
<td nowrap="nowrap" align="right" colspan="2">June 28,</td>
<td> </td>
</tr>
<tr style="font-size: 8pt" valign="bottom">
<td nowrap="nowrap" align="left"><i>(In millions)</i></td>
<td> </td>
<td nowrap="nowrap" align="right" colspan="2">2009</td>
<td> </td>
<td> </td>
<td nowrap="nowrap" align="right" colspan="2">2008</td>
<td> </td>
<td> </td>
<td nowrap="nowrap" align="right" colspan="2">2009</td>
<td> </td>
<td> </td>
<td nowrap="nowrap" align="right" colspan="2">2008</td>
<td> </td>
</tr>
<!-- End Table Head -->
<!-- Begin Table Body -->
<tr style="font-size: 1px">
<td colspan="17" align="left" style="border-top: 1px solid #000000"> </td>
</tr>
<tr valign="bottom" style="background: #cceeff">
<td>
<div style="margin-left:15px; text-indent:-15px"><b>REVENUES</b>
</div></td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
</tr>
<tr valign="bottom">
<td>
<div style="margin-left:15px; text-indent:-15px">MANUFACTURING:
</div></td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
</tr>
<tr valign="bottom" style="background: #cceeff">
<td>
<div style="margin-left:30px; text-indent:-15px">Cessna
</div></td>
<td> </td>
<td align="left">$</td>
<td align="right">871</td>
<td> </td>
<td> </td>
<td align="left">$</td>
<td align="right">1,501</td>
<td> </td>
<td> </td>
<td align="left">$</td>
<td align="right">1,640</td>
<td> </td>
<td> </td>
<td align="left">$</td>
<td align="right">2,747</td>
<td> </td>
</tr>
<tr valign="bottom">
<td>
<div style="margin-left:30px; text-indent:-15px">Bell
</div></td>
<td> </td>
<td> </td>
<td align="right">670</td>
<td> </td>
<td> </td>
<td> </td>
<td align="right">698</td>
<td> </td>
<td> </td>
<td> </td>
<td align="right">1,412</td>
<td> </td>
<td> </td>
<td> </td>
<td align="right">1,272</td>
<td> </td>
</tr>
<tr valign="bottom" style="background: #cceeff">
<td>
<div style="margin-left:30px; text-indent:-15px">Textron Systems
</div></td>
<td> </td>
<td> </td>
<td align="right">477</td>
<td> </td>
<td> </td>
<td> </td>
<td align="right">467</td>
<td> </td>
<td> </td>
<td> </td>
<td align="right">895</td>
<td> </td>
<td> </td>
<td> </td>
<td align="right">986</td>
<td> </td>
</tr>
<tr valign="bottom">
<td>
<div style="margin-left:30px; text-indent:-15px">Industrial
</div></td>
<td> </td>
<td> </td>
<td align="right">508</td>
<td> </td>
<td> </td>
<td> </td>
<td align="right">841</td>
<td> </td>
<td> </td>
<td> </td>
<td align="right">983</td>
<td> </td>
<td> </td>
<td> </td>
<td align="right">1,594</td>
<td> </td>
</tr>
<tr style="font-size: 1px">
<td colspan="17" align="left" style="border-top: 1px solid #000000"> </td>
</tr>
<tr valign="bottom" style="background: #cceeff">
<td>
<div style="margin-left:15px; text-indent:-15px"> 
</div></td>
<td> </td>
<td> </td>
<td align="right">2,526</td>
<td> </td>
<td> </td>
<td> </td>
<td align="right">3,507</td>
<td> </td>
<td> </td>
<td> </td>
<td align="right">4,930</td>
<td> </td>
<td> </td>
<td> </td>
<td align="right">6,599</td>
<td> </td>
</tr>
<tr valign="bottom">
<td>
<div style="margin-left:15px; text-indent:-15px">FINANCE
</div></td>
<td> </td>
<td> </td>
<td align="right">86</td>
<td> </td>
<td> </td>
<td> </td>
<td align="right">177</td>
<td> </td>
<td> </td>
<td> </td>
<td align="right">208</td>
<td> </td>
<td> </td>
<td> </td>
<td align="right">391</td>
<td> </td>
</tr>
<tr style="font-size: 1px">
<td colspan="17" align="left" style="border-top: 1px solid #000000"> </td>
</tr>
<tr valign="bottom" style="background: #cceeff">
<td>
<div style="margin-left:15px; text-indent:-15px">Total revenues
</div></td>
<td> </td>
<td align="left">$</td>
<td align="right">2,612</td>
<td> </td>
<td> </td>
<td align="left">$</td>
<td align="right">3,684</td>
<td> </td>
<td> </td>
<td align="left">$</td>
<td align="right">5,138</td>
<td> </td>
<td> </td>
<td align="left">$</td>
<td align="right">6,990</td>
<td> </td>
</tr>
<tr style="font-size: 1px">
<td colspan="17" align="left" style="border-top: 3px double #000000"> </td>
</tr>
<tr valign="bottom">
<td>
<div style="margin-left:15px; text-indent:-15px"><b>SEGMENT OPERATING PROFIT</b>
</div></td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
</tr>
<tr valign="bottom" style="background: #cceeff">
<td>
<div style="margin-left:15px; text-indent:-15px">MANUFACTURING:
</div></td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
</tr>
<tr valign="bottom">
<td>
<div style="margin-left:30px; text-indent:-15px">Cessna <i>(a)</i>
</div></td>
<td> </td>
<td align="left">$</td>
<td align="right">48</td>
<td> </td>
<td> </td>
<td align="left">$</td>
<td align="right">262</td>
<td> </td>
<td> </td>
<td align="left">$</td>
<td align="right">138</td>
<td> </td>
<td> </td>
<td align="left">$</td>
<td align="right">469</td>
<td> </td>
</tr>
<tr valign="bottom" style="background: #cceeff">
<td>
<div style="margin-left:30px; text-indent:-15px">Bell
</div></td>
<td> </td>
<td> </td>
<td align="right">72</td>
<td> </td>
<td> </td>
<td> </td>
<td align="right">68</td>
<td> </td>
<td> </td>
<td> </td>
<td align="right">141</td>
<td> </td>
<td> </td>
<td> </td>
<td align="right">121</td>
<td> </td>
</tr>
<tr valign="bottom">
<td>
<div style="margin-left:30px; text-indent:-15px">Textron Systems
</div></td>
<td> </td>
<td> </td>
<td align="right">55</td>
<td> </td>
<td> </td>
<td> </td>
<td align="right">60</td>
<td> </td>
<td> </td>
<td> </td>
<td align="right">107</td>
<td> </td>
<td> </td>
<td> </td>
<td align="right">127</td>
<td> </td>
</tr>
<tr valign="bottom" style="background: #cceeff">
<td>
<div style="margin-left:30px; text-indent:-15px">Industrial
</div></td>
<td> </td>
<td> </td>
<td align="right">12</td>
<td> </td>
<td> </td>
<td> </td>
<td align="right">44</td>
<td> </td>
<td> </td>
<td> </td>
<td align="right">3</td>
<td> </td>
<td> </td>
<td> </td>
<td align="right">85</td>
<td> </td>
</tr>
<tr style="font-size: 1px">
<td colspan="17" align="left" style="border-top: 1px solid #000000"> </td>
</tr>
<tr valign="bottom">
<td>
<div style="margin-left:15px; text-indent:-15px"> 
</div></td>
<td> </td>
<td> </td>
<td align="right">187</td>
<td> </td>
<td> </td>
<td> </td>
<td align="right">434</td>
<td> </td>
<td> </td>
<td> </td>
<td align="right">389</td>
<td> </td>
<td> </td>
<td> </td>
<td align="right">802</td>
<td> </td>
</tr>
<tr valign="bottom" style="background: #cceeff">
<td>
<div style="margin-left:15px; text-indent:-15px">FINANCE
</div></td>
<td> </td>
<td nowrap="nowrap" align="right"> </td>
<td align="right">(99</td>
<td nowrap="nowrap">)</td>
<td> </td>
<td> </td>
<td align="right">13</td>
<td> </td>
<td> </td>
<td nowrap="nowrap" align="right"> </td>
<td align="right">(165</td>
<td nowrap="nowrap">)</td>
<td> </td>
<td> </td>
<td align="right">55</td>
<td> </td>
</tr>
<tr style="font-size: 1px">
<td colspan="17" align="left" style="border-top: 1px solid #000000"> </td>
</tr>
<tr valign="bottom">
<td>
<div style="margin-left:15px; text-indent:-15px">Segment profit
</div></td>
<td> </td>
<td> </td>
<td align="right">88</td>
<td> </td>
<td> </td>
<td> </td>
<td align="right">447</td>
<td> </td>
<td> </td>
<td> </td>
<td align="right">224</td>
<td> </td>
<td> </td>
<td> </td>
<td align="right">857</td>
<td> </td>
</tr>
<tr valign="bottom" style="background: #cceeff">
<td>
<div style="margin-left:15px; text-indent:-15px">Special charges
</div></td>
<td> </td>
<td nowrap="nowrap" align="right"> </td>
<td align="right">(129</td>
<td nowrap="nowrap">)</td>
<td> </td>
<td> </td>
<td align="right">—</td>
<td> </td>
<td> </td>
<td nowrap="nowrap" align="right"> </td>
<td align="right">(161</td>
<td nowrap="nowrap">)</td>
<td> </td>
<td> </td>
<td align="right">—</td>
<td> </td>
</tr>
<tr valign="bottom">
<td>
<div style="margin-left:15px; text-indent:-15px">Corporate expenses and other, net
</div></td>
<td> </td>
<td nowrap="nowrap" align="right"> </td>
<td align="right">(45</td>
<td nowrap="nowrap">)</td>
<td> </td>
<td nowrap="nowrap" align="right"> </td>
<td align="right">(43</td>
<td nowrap="nowrap">)</td>
<td> </td>
<td nowrap="nowrap" align="right"> </td>
<td align="right">(80</td>
<td nowrap="nowrap">)</td>
<td> </td>
<td nowrap="nowrap" align="right"> </td>
<td align="right">(84</td>
<td nowrap="nowrap">)</td>
</tr>
<tr valign="bottom" style="background: #cceeff">
<td>
<div style="margin-left:15px; text-indent:-15px">Interest expense, net for Manufacturing group
</div></td>
<td> </td>
<td nowrap="nowrap" align="right"> </td>
<td align="right">(34</td>
<td nowrap="nowrap">)</td>
<td> </td>
<td nowrap="nowrap" align="right"> </td>
<td align="right">(29</td>
<td nowrap="nowrap">)</td>
<td> </td>
<td nowrap="nowrap" align="right"> </td>
<td align="right">(62</td>
<td nowrap="nowrap">)</td>
<td> </td>
<td nowrap="nowrap" align="right"> </td>
<td align="right">(59</td>
<td nowrap="nowrap">)</td>
</tr>
<tr style="font-size: 1px">
<td colspan="17" align="left" style="border-top: 1px solid #000000"> </td>
</tr>
<tr valign="bottom">
<td>
<div style="margin-left:15px; text-indent:-15px">Income (loss) from continuing operations before income taxes
</div></td>
<td> </td>
<td nowrap="nowrap" align="left">$</td>
<td align="right">(120</td>
<td nowrap="nowrap">)</td>
<td> </td>
<td align="left">$</td>
<td align="right">375</td>
<td> </td>
<td> </td>
<td nowrap="nowrap" align="left">$</td>
<td align="right">(79</td>
<td nowrap="nowrap">)</td>
<td> </td>
<td align="left">$</td>
<td align="right">714</td>
<td> </td>
</tr>
<tr style="font-size: 1px">
<td colspan="17" align="left" style="border-top: 3px double #000000"> </td>
</tr>
<!-- End Table Body -->
</table>
</div>
<table width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt; text-align: left">
<tr>
<td width="3%"> </td>
<td width="1%"></td>
<td width="96"></td>
</tr>
<tr valign="top">
<td nowrap="nowrap" align="left"><i>(a)</i></td>
<td> </td>
<td><i>During the first quarter of 2009, we sold the assets of CESCOM, Cessna’s aircraft maintenance
tracking service line, resulting in a pre-tax gain of $50 million.</i></td>
</tr>
</table>
</div>
</body>
</html>
N/A
false
--01-02
2009-07-04
10-Q
0000217346
270236965
Yes
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Textron Inc.
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