UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

Form 10-Q

(Mark One)


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

For the quarterly period ended ~~April~~July 2, 2022


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

For the transition period from ______ to ______.

Commission File Number 1-5480

Textron Inc.

(Exact name of registrant as specified in its charter)


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

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

(401) 421-2800

(Registrant’s telephone number, including area code)

Securities registered pursuant to Section 12(b) of the Act:


Title of each class	Trading Symbol (s)	Name of each exchange on which registered
Common stock, $0.125 par value	TXT	New York Stock Exchange (NYSE)

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

Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T during the preceding 12 months (or for such shorter period that the registrant was required to submit such files). Yes þ No ¨

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

Large accelerated filer

Accelerated filer

☐

Non-accelerated filer

☐

Smaller reporting company

☐

Emerging growth company

☐

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

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

As of ~~April~~July 15, 2022, there were ~~215,083,317~~211,531,587 shares of common stock outstanding.

Table of Contents

TEXTRON INC.

Index to Form 10-Q

For the Quarterly Period Ended ~~April~~July 2, 2022


		Page
PART I.	FINANCIAL INFORMATION

Item 1.	Financial Statements

	Consolidated Statements of Operations (Unaudited)	3

	Consolidated Statements of Comprehensive Income (Unaudited)	4

	Consolidated Balance Sheets (Unaudited)	5

	Consolidated Statements of Cash Flows (Unaudited)	6

	Notes to the Consolidated Financial Statements (Unaudited)	8

	Note 1. Basis of Presentation	8
	Note 2. Business Acquisition	89
	Note 3 .3. Accounts Receivable and Finance Receivables	9
	Note 4 .4. Inventories	10
	Note 5 .5. Warranty Liability	1011
	Note 6 .6. Leases	1011
	Note 7 .7. Derivative Instruments and Fair Value Measurements	11
	Note 8 .8. Shareholders’ Equity	1213
	Note 9 .9. Segment Information	1415
	Note 10 . 10. Revenues	14
	~~Note 1~~1 . ~~Share-Based Compensation~~	15
	Note 1 21 . Retirement Plans	17
	Note 1 3.2 . Special Charges	17
	Note 1 43 . Income Taxes	1817
	Note 1 54 . Commitments and Contingencies	18

Item 2.	Management’s Discussion and Analysis of Financial Condition and Results of Operations	19

Item 3.	Quantitative and Qualitative Disclosures about Market Risk	2830

Item 4.	Controls and Procedures	2830

PART II.	OTHER INFORMATION

Item 1A1 .	~~Risk Factors~~Legal Proceedings	2830

Item 2.	Unregistered Sales of Equity Securities and Use of Proceeds	28

~~Item~~ 5 .	~~Other Information~~	2930

Item 6.	Exhibits	3031

	Signatures	3132

Table of Contents

PART I. FINANCIAL INFORMATION

Item 1. Financial Statements

TEXTRON INC.

Consolidated Statements of Operations (Unaudited)


		Three Months Ended					Three Months Ended				Six Months Ended
(In millions, except per share amounts)	(In millions, except per share amounts)		April 2, 2022		April 3, 2021			(In millions, except per share amounts)	July 2, 2022		July 3, 2021		July 2, 2022		July 3, 2021
Revenues	Revenues							Revenues
Manufacturing product revenues	Manufacturing product revenues		$	2,448	$	2,403		Manufacturing product revenues	$	2,689	$	2,666	$	5,137	$	5,069
Manufacturing service revenues	Manufacturing service revenues		537		461			Manufacturing service revenues	451		513		988		974
Finance revenues	Finance revenues		16		15			Finance revenues	14		12		30		27
Total revenues	Total revenues		3,001		2,879			Total revenues	3,154		3,191		6,155		6,070
Costs, expenses and other	Costs, expenses and other							Costs, expenses and other
Cost of products sold	Cost of products sold		2,069		2,061			Cost of products sold	2,304		2,271		4,373		4,332
Cost of services sold	Cost of services sold		423		339			Cost of services sold	337		389		760		728
Selling and administrative expense	Selling and administrative expense		305		298			Selling and administrative expense	278		314		583		612
Interest expense	Interest expense		33		40			Interest expense	32		36		65		76
Non-service components of pension and postretirement income, net	Non-service components of pension and postretirement income, net		(61)		(40)			Non-service components of pension and postretirement income, net	(60)		(39)		(121)		(79)
Special charges	Special charges		—		6			Special charges	—		4		—		10
Gain on business disposition	Gain on business disposition		—		(15)			Gain on business disposition	—		(2)		—		(17)
Total costs, expenses and other	Total costs, expenses and other		2,769		2,689			Total costs, expenses and other	2,891		2,973		5,660		5,662
Income before income taxes			232		190
Income from continuing operations before income taxes								Income from continuing operations before income taxes	263		218		495		408
Income tax expense	Income tax expense		39		19			Income tax expense	45		34		84		53

Income from continuing operations								Income from continuing operations	218		184		411		355
Loss from discontinued operations								Loss from discontinued operations	(1)		(1)		(1)		(1)
Net income	Net income		$	193	$	171		Net income	$	217	$	183	$	410	$	354
Earnings per share
Basic			$	0.89	$	0.75

Diluted			$	0.88	$	0.75

Basic Earnings per share								Basic Earnings per share
Continuing operations								Continuing operations	$	1.01	$	0.82	$	1.90	$	1.57
Discontinued operations								Discontinued operations	—		(0.01)		—		(0.01)
Basic Earnings per share								Basic Earnings per share	$	1.01	$	0.81	$	1.90	$	1.56
Diluted Earnings per share								Diluted Earnings per share
Continuing operations								Continuing operations	$	1.00	$	0.81	$	1.88	$	1.56
Discontinued operations								Discontinued operations	—		(0.01)		—		(0.01)
Diluted Earnings per share								Diluted Earnings per share	$	1.00	$	0.80	$	1.88	$	1.55

See Notes to the Consolidated Financial Statements.

Table of Contents

TEXTRON INC.

Consolidated Statements of Comprehensive Income (Unaudited)


		Three Months Ended					Three Months Ended				Six Months Ended
(In millions)	(In millions)		April 2, 2022		April 3, 2021			(In millions)	July 2, 2022		July 3, 2021		July 2, 2022		July 3, 2021
Net income	Net income		$	193	$	171		Net income	$	217	$	183	$	410	$	354
Other comprehensive income, net of tax
Other comprehensive income (loss), net of tax								Other comprehensive income (loss), net of tax
Pension and postretirement benefits adjustments, net of reclassifications	Pension and postretirement benefits adjustments, net of reclassifications		17		30			Pension and postretirement benefits adjustments, net of reclassifications	17		30		34		60
Foreign currency translation adjustments, net of reclassifications	Foreign currency translation adjustments, net of reclassifications		(14)		(18)			Foreign currency translation adjustments, net of reclassifications	(90)		15		(104)		(3)
Deferred gains on hedge contracts, net of reclassifications			7		4
Other comprehensive income			10		16
Deferred gains (losses) on hedge contracts, net of reclassifications								Deferred gains (losses) on hedge contracts, net of reclassifications	(3)		2		4		6
Other comprehensive income (loss)								Other comprehensive income (loss)	(76)		47		(66)		63
Comprehensive income	Comprehensive income		$	203	$	187		Comprehensive income	$	141	$	230	$	344	$	417

See Notes to the Consolidated Financial Statements.

Table of Contents

TEXTRON INC.

Consolidated Balance Sheets (Unaudited)


(Dollars in millions)	(Dollars in millions)	April 2, 2022		January 1, 2022		(Dollars in millions)	July 2, 2022		January 1, 2022
Assets	Assets					Assets
Manufacturing group	Manufacturing group					Manufacturing group
Cash and equivalents	Cash and equivalents	$	1,978	$	1,922	Cash and equivalents	$	1,764	$	1,922
Accounts receivable, net	Accounts receivable, net	800		838		Accounts receivable, net	876		838
Inventories	Inventories	3,663		3,468		Inventories	3,739		3,468
Other current assets	Other current assets	1,055		1,018		Other current assets	972		1,018
Total current assets	Total current assets	7,496		7,246		Total current assets	7,351		7,246
Property, plant and equipment, less accumulated depreciation and amortization of $4,914 and $4,888, respectively		2,488		2,538
Property, plant and equipment, less accumulated depreciation and amortization of $4,945 and $4,888, respectively						Property, plant and equipment, less accumulated depreciation and amortization of $4,945 and $4,888, respectively	2,469		2,538
Goodwill	Goodwill	2,147		2,149		Goodwill	2,278		2,149
Other assets	Other assets	3,025		3,027		Other assets	3,113		3,027
Total Manufacturing group assets	Total Manufacturing group assets	15,156		14,960		Total Manufacturing group assets	15,211		14,960
Finance group	Finance group					Finance group
Cash and equivalents	Cash and equivalents	148		195		Cash and equivalents	77		195
Finance receivables, net	Finance receivables, net	578		605		Finance receivables, net	561		605
Other assets	Other assets	29		67		Other assets	30		67
Total Finance group assets	Total Finance group assets	755		867		Total Finance group assets	668		867
Total assets	Total assets	$	15,911	$	15,827	Total assets	$	15,879	$	15,827
Liabilities and shareholders’ equity	Liabilities and shareholders’ equity					Liabilities and shareholders’ equity
Liabilities	Liabilities					Liabilities
Manufacturing group	Manufacturing group					Manufacturing group
Current portion of long-term debt	Current portion of long-term debt	$	7	$	6	Current portion of long-term debt	$	7	$	6
Accounts payable	Accounts payable	823		786		Accounts payable	807		786
Other current liabilities	Other current liabilities	2,507		2,344		Other current liabilities	2,660		2,344
Total current liabilities	Total current liabilities	3,337		3,136		Total current liabilities	3,474		3,136
Other liabilities	Other liabilities	1,912		2,005		Other liabilities	1,956		2,005
Long-term debt	Long-term debt	3,178		3,179		Long-term debt	3,177		3,179
Total Manufacturing group liabilities	Total Manufacturing group liabilities	8,427		8,320		Total Manufacturing group liabilities	8,607		8,320
Finance group	Finance group					Finance group
Other liabilities	Other liabilities	97		110		Other liabilities	89		110
Debt	Debt	470		582		Debt	382		582
Total Finance group liabilities	Total Finance group liabilities	567		692		Total Finance group liabilities	471		692
Total liabilities	Total liabilities	8,994		9,012		Total liabilities	9,078		9,012
Shareholders’ equity	Shareholders’ equity					Shareholders’ equity
Common stock	Common stock	28		28		Common stock	28		28
Capital surplus	Capital surplus	1,924		1,863		Capital surplus	1,953		1,863
Treasury stock	Treasury stock	(314)		(157)		Treasury stock	(596)		(157)
Retained earnings	Retained earnings	6,058		5,870		Retained earnings	6,271		5,870
Accumulated other comprehensive loss	Accumulated other comprehensive loss	(779)		(789)		Accumulated other comprehensive loss	(855)		(789)
Total shareholders’ equity	Total shareholders’ equity	6,917		6,815		Total shareholders’ equity	6,801		6,815
Total liabilities and shareholders’ equity	Total liabilities and shareholders’ equity	$	15,911	$	15,827	Total liabilities and shareholders’ equity	$	15,879	$	15,827
Common shares outstanding (in thousands)	Common shares outstanding (in thousands)	215,751		216,935		Common shares outstanding (in thousands)	211,825		216,935

See Notes to the Consolidated Financial Statements.

Table of Contents

TEXTRON INC.

Consolidated Statements of Cash Flows (Unaudited)

For the ~~Three~~Six Months Ended ~~April~~July 2, 2022 and ~~April~~July 3, 2021, respectively


		Consolidated					Consolidated
(In millions)	(In millions)	2022		2021		(In millions)	2022		2021
Cash flows from operating activities	Cash flows from operating activities					Cash flows from operating activities
Net income		$	193	$	171
Adjustments to reconcile net income to net cash provided by operating activities:
Income from continuing operations						Income from continuing operations	$	411	$	355
Adjustments to reconcile income from continuing operations to net cash provided by operating activities:						Adjustments to reconcile income from continuing operations to net cash provided by operating activities:
Non-cash items:	Non-cash items:					Non-cash items:
Depreciation and amortization	Depreciation and amortization	93		90		Depreciation and amortization	191		188
Deferred income taxes	Deferred income taxes	(52)		11		Deferred income taxes	(118)		16

Gain on business disposition	Gain on business disposition	—		(15)		Gain on business disposition	—		(17)
Other, net	Other, net	36		38		Other, net	55		64
Changes in assets and liabilities:	Changes in assets and liabilities:					Changes in assets and liabilities:
Accounts receivable, net	Accounts receivable, net	37		(103)		Accounts receivable, net	(48)		(38)
Inventories	Inventories	(176)		(178)		Inventories	(246)		(162)
Other assets	Other assets	(4)		(17)		Other assets	85		22
Accounts payable	Accounts payable	38		259		Accounts payable	24		188
Other liabilities	Other liabilities	26		(105)		Other liabilities	269		103
Income taxes, net	Income taxes, net	71		(11)		Income taxes, net	32		8
Pension, net	Pension, net	(41)		(23)		Pension, net	(83)		(42)
Captive finance receivables, net	Captive finance receivables, net	18		69		Captive finance receivables, net	35		89
Other operating activities, net	Other operating activities, net	2		(5)		Other operating activities, net	8		(1)

Net cash provided by operating activities of continuing operations						Net cash provided by operating activities of continuing operations	615		773
Net cash used in operating activities of discontinued operations						Net cash used in operating activities of discontinued operations	(2)		(1)
Net cash provided by operating activities	Net cash provided by operating activities	241		181		Net cash provided by operating activities	613		772
Cash flows from investing activities	Cash flows from investing activities					Cash flows from investing activities
Capital expenditures	Capital expenditures	(48)		(53)		Capital expenditures	(114)		(128)
Net cash used in business acquisitions						Net cash used in business acquisitions	(198)		—
Net proceeds from corporate-owned life insurance policies						Net proceeds from corporate-owned life insurance policies	25		—
Proceeds from sale of property, plant and equipment	Proceeds from sale of property, plant and equipment	18		—		Proceeds from sale of property, plant and equipment	18		—

Net proceeds from business disposition	Net proceeds from business disposition	—		39		Net proceeds from business disposition	—		38
Finance receivables repaid	Finance receivables repaid	13		13		Finance receivables repaid	21		19
Other investing activities, net	Other investing activities, net	45		6		Other investing activities, net	44		6
Net cash provided by investing activities		28		5
Net cash used in investing activities						Net cash used in investing activities	(204)		(65)
Cash flows from financing activities	Cash flows from financing activities					Cash flows from financing activities

Decrease in short-term debt						Decrease in short-term debt	(15)		—

Principal payments on long-term debt and nonrecourse debt	Principal payments on long-term debt and nonrecourse debt	(121)		(287)		Principal payments on long-term debt and nonrecourse debt	(223)		(553)
Purchases of Textron common stock	Purchases of Textron common stock	(157)		(91)		Purchases of Textron common stock	(439)		(287)
Dividends paid	Dividends paid	(5)		(5)		Dividends paid	(9)		(9)
Proceeds from options exercised	Proceeds from options exercised	28		27		Proceeds from options exercised	32		77
Other financing activities, net	Other financing activities, net	(3)		(3)		Other financing activities, net	(4)		(2)
Net cash used in financing activities	Net cash used in financing activities	(258)		(359)		Net cash used in financing activities	(658)		(774)
Effect of exchange rate changes on cash and equivalents	Effect of exchange rate changes on cash and equivalents	(2)		(3)		Effect of exchange rate changes on cash and equivalents	(27)		1
Net increase (decrease) in cash and equivalents		9		(176)
Net decrease in cash and equivalents						Net decrease in cash and equivalents	(276)		(66)
Cash and equivalents at beginning of period	Cash and equivalents at beginning of period	2,117		2,254		Cash and equivalents at beginning of period	2,117		2,254
Cash and equivalents at end of period	Cash and equivalents at end of period	$	2,126	$	2,078	Cash and equivalents at end of period	$	1,841	$	2,188

See Notes to the Consolidated Financial Statements.

Table of Contents

TEXTRON INC.

Consolidated Statements of Cash Flows (Unaudited) (Continued)

For the ~~Three~~Six Months Ended ~~April~~July 2, 2022 and ~~April~~July 3, 2021, respectively


		Manufacturing Group				Finance Group					Manufacturing Group				Finance Group
(In millions)	(In millions)	2022		2021		2022		2021		(In millions)	2022		2021		2022		2021
Cash flows from operating activities	Cash flows from operating activities									Cash flows from operating activities
Net income (loss)		$	185	$	177	$	8	$	(6)
Adjustments to reconcile net income (loss) to net cash provided by (used in) operating activities:
Income (loss) from continuing operations										Income (loss) from continuing operations	$	395	$	358	$	16	$	(3)
Adjustments to reconcile income (loss) from continuing operations to net cash provided by (used in) operating activities:										Adjustments to reconcile income (loss) from continuing operations to net cash provided by (used in) operating activities:
Non-cash items:	Non-cash items:									Non-cash items:
Depreciation and amortization	Depreciation and amortization	93		88		—		2		Depreciation and amortization	191		183		—		5
Deferred income taxes	Deferred income taxes	(45)		11		(7)		—		Deferred income taxes	(106)		18		(12)		(2)

Gain on business disposition	Gain on business disposition	—		(15)		—		—		Gain on business disposition	—		(17)		—		—
Other, net	Other, net	37		39		(1)		(1)		Other, net	62		66		(7)		(2)
Changes in assets and liabilities:	Changes in assets and liabilities:									Changes in assets and liabilities:
Accounts receivable, net	Accounts receivable, net	37		(103)		—		—		Accounts receivable, net	(48)		(38)		—		—
Inventories	Inventories	(176)		(178)		—		—		Inventories	(246)		(162)		—		—
Other assets	Other assets	(4)		(17)		—		—		Other assets	85		23		—		(1)
Accounts payable	Accounts payable	38		259		—		—		Accounts payable	24		188		—		—
Other liabilities	Other liabilities	37		(103)		(11)		(2)		Other liabilities	279		103		(10)		—
Income taxes, net	Income taxes, net	62		(23)		9		12		Income taxes, net	28		—		4		8
Pension, net	Pension, net	(41)		(23)		—		—		Pension, net	(83)		(42)		—		—

Other operating activities, net	Other operating activities, net	2		(5)		—		—		Other operating activities, net	8		(1)		—		—

Net cash provided by (used in) operating activities of continuing operations										Net cash provided by (used in) operating activities of continuing operations	589		679		(9)		5
Net cash used in operating activities of discontinued operations										Net cash used in operating activities of discontinued operations	(2)		(1)		—		—
Net cash provided by (used in) operating activities	Net cash provided by (used in) operating activities	225		107		(2)		5		Net cash provided by (used in) operating activities	587		678		(9)		5
Cash flows from investing activities	Cash flows from investing activities									Cash flows from investing activities
Capital expenditures	Capital expenditures	(48)		(53)		—		—		Capital expenditures	(114)		(128)		—		—
Net cash used in business acquisitions										Net cash used in business acquisitions	(198)		—		—		—
Net proceeds from corporate-owned life insurance policies										Net proceeds from corporate-owned life insurance policies	25		—		—		—
Proceeds from sale of property, plant and equipment	Proceeds from sale of property, plant and equipment	18		—		—		—		Proceeds from sale of property, plant and equipment	18		—		—		—

Net proceeds from business disposition	Net proceeds from business disposition	—		39		—		—		Net proceeds from business disposition	—		38		—		—
Finance receivables repaid	Finance receivables repaid	—		—		40		89		Finance receivables repaid	—		—		79		137
Finance receivables originated	Finance receivables originated	—		—		(9)		(7)		Finance receivables originated	—		—		(23)		(29)
Other investing activities, net	Other investing activities, net	2		—		43		6		Other investing activities, net	—		—		44		6
Net cash provided by (used in) investing activities	Net cash provided by (used in) investing activities	(28)		(14)		74		88		Net cash provided by (used in) investing activities	(269)		(90)		100		114
Cash flows from financing activities	Cash flows from financing activities									Cash flows from financing activities

Decrease in short-term debt										Decrease in short-term debt	(15)		—		—		—

Principal payments on long-term debt and nonrecourse debt	Principal payments on long-term debt and nonrecourse debt	(2)		(267)		(119)		(20)		Principal payments on long-term debt and nonrecourse debt	(14)		(519)		(209)		(34)
Purchases of Textron common stock	Purchases of Textron common stock	(157)		(91)		—		—		Purchases of Textron common stock	(439)		(287)		—		—
Dividends paid	Dividends paid	(5)		(5)		—		—		Dividends paid	(9)		(9)		—		—
Proceeds from options exercised	Proceeds from options exercised	28		27		—		—		Proceeds from options exercised	32		77		—		—
Other financing activities, net	Other financing activities, net	(3)		(3)		—		—		Other financing activities, net	(4)		(2)		—		—
Net cash used in financing activities	Net cash used in financing activities	(139)		(339)		(119)		(20)		Net cash used in financing activities	(449)		(740)		(209)		(34)
Effect of exchange rate changes on cash and equivalents	Effect of exchange rate changes on cash and equivalents	(2)		(3)		—		—		Effect of exchange rate changes on cash and equivalents	(27)		1		—		—
Net increase (decrease) in cash and equivalents	Net increase (decrease) in cash and equivalents	56		(249)		(47)		73		Net increase (decrease) in cash and equivalents	(158)		(151)		(118)		85
Cash and equivalents at beginning of period	Cash and equivalents at beginning of period	1,922		2,146		195		108		Cash and equivalents at beginning of period	1,922		2,146		195		108
Cash and equivalents at end of period	Cash and equivalents at end of period	$	1,978	$	1,897	$	148	$	181	Cash and equivalents at end of period	$	1,764	$	1,995	$	77	$	193

See Notes to the Consolidated Financial Statements.

Table of Contents

TEXTRON INC.

Notes to the Consolidated Financial Statements (Unaudited)

Note 1. Basis of Presentation

Our Consolidated Financial Statements include the accounts of Textron Inc. (Textron) and its majority-owned subsidiaries. We have prepared these unaudited consolidated financial statements in accordance with accounting principles generally accepted in the U.S. for interim financial information. Accordingly, these interim financial statements do not include all of the information and footnotes required by accounting principles generally accepted in the U.S. for complete financial statements. The consolidated interim financial statements included in this quarterly report should be read in conjunction with the consolidated financial statements included in our Annual Report on Form 10-K for the year ended January 1, 2022. 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.

Our financings are conducted through 2 separate borrowing groups. The Manufacturing group consists of Textron consolidated with its majority-owned subsidiaries that operate in the Textron Aviation, Bell, Textron Systems and Industrial ~~segments.~~segments, and our new reporting segment, Textron eAviation, formed in the second quarter of 2022. Textron eAviation includes the operating results of Pipistrel, a manufacturer of electrically powered aircraft acquired on April 15, 2022, as discussed in Note 2, along with other research and development initiatives related to sustainable aviation solutions. The Finance group, which also is the Finance segment, consists of Textron Financial Corporation and its consolidated subsidiaries. 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 financing activities for inventory sold by our Manufacturing group and financed by our Finance group.

Use of Estimates

We prepare our financial statements in conformity with generally accepted accounting principles, which require us to make estimates and assumptions that affect the amounts reported in the financial statements. Actual results could differ from those estimates. Our estimates and assumptions are reviewed periodically, and the effects of changes, if any, are reflected in the Consolidated Statements of Operations in the period that they are determined.

Contract Estimates

For contracts where revenue is recognized over time, we recognize changes in estimated contract revenues, costs and profits using the cumulative catch-up method of accounting. This method recognizes the cumulative effect of changes on current and prior periods with the impact of the change from inception-to-date recorded in the current period. Anticipated losses on contracts are recognized in full in the period in which the losses become probable and estimable.

In the ~~first~~second quarter of 2022, our cumulative catch-up adjustments decreased segment profit by ~~$17~~$4 million and net income by ~~$13~~$3 million, ~~$0.06~~$0.01 per diluted share. In the ~~first~~second quarter of 2021, our cumulative catch-up adjustments increased segment profit by ~~$14~~$15 million and net income by $11 million, $0.05 per diluted share. Gross favorable profit adjustments totaled ~~$16~~$25 million and ~~$36~~$40 million in the ~~first~~second quarter of 2022 and 2021, respectively, and gross unfavorable profit adjustments totaled ~~$33~~$29 million and ~~$22~~$25 million, respectively. We reduced revenues by ~~$12~~$21 million and recognized revenues of ~~$18~~$20 million in the ~~first~~second quarter of 2022 and 2021, respectively, from performance obligations satisfied in prior periods that related to changes in profit booking rates.

In the first half of 2022, our cumulative catch-up adjustments decreased segment profit by $21 million and net income by $16 million, $0.07 per diluted share. In the first half of 2021, our cumulative catch-up adjustments increased segment profit by $29 million and net income by $22 million, $0.10 per diluted share. Gross favorable profit adjustments totaled $41 million and $76 million in the first half of 2022 and 2021, respectively, and gross unfavorable profit adjustments totaled $62 million and $47 million, respectively. We reduced revenues by $33 million and recognized revenues of $38 million in the first half of 2022 and 2021, respectively, from performance obligations satisfied in prior periods that related to changes in profit booking rates.

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Note 2. Business Acquisition

On April 15, 2022, we acquired Pipistrel, a manufacturer of electrically powered aircraft, for a cash purchase price of ~~approximately~~ $240 ~~million.~~million, which included the assumption of $35 million of debt and other contractual obligations under the agreement and a final fixed payment of $21 million due in 2024. Beginning ~~with~~in the second quarter of 2022, this business ~~will be~~is included in a new reporting segment, Textron eAviation, which ~~will be focused~~combines the operating results of Pipistrel along with other research and development initiatives related to sustainable aviation solutions.

We allocated the purchase price for this business on a preliminary basis to the assets acquired and liabilities assumed based on their estimated fair values at the acquisition date. We expect to finalize the purchase accounting as soon as reasonably possible during the one-year measurement period. Based on the ~~development~~preliminary allocation, $142 million has been allocated to goodwill, related to expected synergies and the value of ~~sustainable aircraft.~~

the assembled workforce, and $76 million to intangible assets, primarily including developed technologies. The intangible assets were primarily valued using the relief-from-royalty method. This method utilizes significant unobservable inputs, or Level 3 inputs, as defined by the fair value hierarchy and requires us to make estimates and assumptions about sales, growth rates, royalty rates and discount rates based on marketplace data.

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Note 3. Accounts Receivable and Finance Receivables

Accounts Receivable

Accounts receivable is composed of the following:


(In millions)	(In millions)	April 2, 2022		January 1, 2022		(In millions)	July 2, 2022		January 1, 2022
Commercial	Commercial	$	711	$	704	Commercial	$	767	$	704
U.S. Government contracts	U.S. Government contracts	115		158		U.S. Government contracts	133		158
		826		862			900		862
Allowance for credit losses	Allowance for credit losses	(26)		(24)		Allowance for credit losses	(24)		(24)
Total accounts receivable, net	Total accounts receivable, net	$	800	$	838	Total accounts receivable, net	$	876	$	838

Finance Receivables

Finance receivables are presented in the following table:


(In millions)	(In millions)	April 2, 2022		January 1, 2022		(In millions)	July 2, 2022		January 1, 2022
Finance receivables	Finance receivables	$	603	$	630	Finance receivables	$	586	$	630
Allowance for credit losses	Allowance for credit losses	(25)		(25)		Allowance for credit losses	(25)		(25)
Total finance receivables, net	Total finance receivables, net	$	578	$	605	Total finance receivables, net	$	561	$	605

Finance Receivable Portfolio Quality

We internally assess the quality of our finance receivables based on a number of key credit quality indicators and statistics such as delinquency, loan balance to estimated collateral value and the financial strength of individual borrowers and guarantors. Because many of these indicators are difficult to apply across an entire class of receivables, we evaluate individual loans on a quarterly basis and classify these loans into three categories based on the key credit quality indicators for the individual loan. These three categories are performing, watchlist and nonaccrual.

We classify finance receivables as nonaccrual if credit quality indicators suggest full collection of principal and interest is doubtful. In addition, we automatically classify accounts as nonaccrual once they are contractually delinquent by more than three months unless collection of principal and interest is not doubtful. Accounts are classified as watchlist when credit quality indicators have deteriorated as compared with typical underwriting criteria, and we believe collection of full principal and interest is probable but not certain. All other finance receivables that do not meet the watchlist or nonaccrual categories are classified as performing.

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

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Finance receivables categorized based on the credit quality indicators and by the delinquency aging category are summarized as follows:


(Dollars in millions)	(Dollars in millions)	April 2, 2022		January 1, 2022		(Dollars in millions)	July 2, 2022		January 1, 2022
Performing	Performing	$	526	$	536	Performing	$	518	$	536

Nonaccrual	Nonaccrual	77		94		Nonaccrual	68		94
Nonaccrual as a percentage of finance receivables	Nonaccrual as a percentage of finance receivables	12.77%		14.92%		Nonaccrual as a percentage of finance receivables	11.60%		14.92%
Current and less than 31 days past due	Current and less than 31 days past due	$	599	$	624	Current and less than 31 days past due	$	577	$	624
31-60 days past due	31-60 days past due	2		5		31-60 days past due	4		5
61-90 days past due	61-90 days past due	2		—		61-90 days past due	5		—
Over 90 days past due	Over 90 days past due	—		1		Over 90 days past due	—		1
60+ days contractual delinquency as a percentage of finance receivables	60+ days contractual delinquency as a percentage of finance receivables	0.33%		0.16%		60+ days contractual delinquency as a percentage of finance receivables	0.85%		0.16%

At ~~April~~July 2, 2022, 39% of our performing finance receivables were originated since the beginning of 2020 and 27% were originated from 2017 to 2019. For finance receivables categorized as nonaccrual, ~~71%~~7% were originated since the beginning of 2020 and 70% were originated from 2017 to 2019.

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On a quarterly basis, we evaluate individual larger balance accounts for impairment. A finance receivable is considered impaired when it is probable that we will be unable to collect all amounts due according to the contractual terms of the loan agreement based on our review of the credit quality indicators described above. Impaired finance receivables include both nonaccrual accounts and accounts for which full collection of principal and interest remains probable, but the account’s original terms have been, or are expected to be, significantly modified. If the modification specifies an interest rate equal to or greater than a market rate for a finance receivable with comparable risk, the account is not considered impaired in years subsequent to the modification.

A summary of finance receivables and the allowance for credit losses, based on the results of our impairment evaluation, is provided below. The finance receivables included in this table specifically exclude leveraged leases in accordance with U.S. generally accepted accounting principles.


(In millions)	(In millions)	April 2, 2022		January 1, 2022		(In millions)	July 2, 2022		January 1, 2022
Finance receivables evaluated collectively	Finance receivables evaluated collectively	$	436	$	441	Finance receivables evaluated collectively	$	428	$	441
Finance receivables evaluated individually	Finance receivables evaluated individually	77		94		Finance receivables evaluated individually	68		94
Allowance for credit losses based on collective evaluation	Allowance for credit losses based on collective evaluation	21		21		Allowance for credit losses based on collective evaluation	21		21
Allowance for credit losses based on individual evaluation	Allowance for credit losses based on individual evaluation	4		4		Allowance for credit losses based on individual evaluation	4		4
Impaired finance receivables with specific allowance for credit losses	Impaired finance receivables with specific allowance for credit losses	$	27	$	33	Impaired finance receivables with specific allowance for credit losses	$	25	$	33
Impaired finance receivables with no specific allowance for credit losses	Impaired finance receivables with no specific allowance for credit losses	50		61		Impaired finance receivables with no specific allowance for credit losses	43		61
Unpaid principal balance of impaired finance receivables	Unpaid principal balance of impaired finance receivables	92		109		Unpaid principal balance of impaired finance receivables	82		109
Allowance for credit losses on impaired finance receivables	Allowance for credit losses on impaired finance receivables	4		4		Allowance for credit losses on impaired finance receivables	4		4
Average recorded investment of impaired finance receivables	Average recorded investment of impaired finance receivables	85		117		Average recorded investment of impaired finance receivables	80		117

Note 4. Inventories

Inventories are composed of the following:


(In millions)	(In millions)	April 2, 2022		January 1, 2022		(In millions)	July 2, 2022		January 1, 2022
Finished goods	Finished goods	$	1,100	$	1,071	Finished goods	$	1,110	$	1,071
Work in process	Work in process	1,686		1,548		Work in process	1,705		1,548
Raw materials and components	Raw materials and components	877		849		Raw materials and components	924		849
Total inventories	Total inventories	$	3,663	$	3,468	Total inventories	$	3,739	$	3,468

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Note 5. Warranty Liability

Changes in our warranty liability are as follows:


		Three Months Ended					Six Months Ended
(In millions)	(In millions)	April 2, 2022		April 3, 2021		(In millions)	July 2, 2022		July 3, 2021
Beginning of period	Beginning of period	$	127	$	119	Beginning of period	$	127	$	119
Provision	Provision	16		14		Provision	34		31
Settlements	Settlements	(19)		(20)		Settlements	(34)		(35)
Adjustments*	Adjustments*	6		3		Adjustments*	10		1
End of period	End of period	$	130	$	116	End of period	$	137	$	116

* Adjustments include changes to prior year estimates, new issues on prior year sales, acquisitions and currency translation adjustments.

Note 6. Leases

We primarily lease certain manufacturing plants, offices, warehouses, training and service centers at various locations worldwide through operating leases. Our operating leases have remaining lease terms up to 27 years, which include options to extend the lease term for periods up to 25 years when it is reasonably certain the option will be exercised. Operating lease cost totaled $17 million and $16 million in the second quarter of 2022 and 2021, respectively, and $34 million and $32 million in the first ~~quarter~~half of 2022 and 2021, respectively. Variable and short-term lease costs were not significant. Cash paid for operating leases totaled ~~$17~~$35 million and ~~$16~~$33 million in the first ~~quarter~~half of 2022 and 2021, respectively, and is classified in cash flows from operating activities. Noncash transactions totaled $7$17 million and ~~$45~~$63 million in the first ~~quarter~~half of 2022 and 2021, respectively, reflecting the recognition of operating lease assets and liabilities for new or extended leases.

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Balance sheet and other information related to our operating leases is as follows:


(Dollars in millions)	(Dollars in millions)	April 2, 2022		January 1, 2022		(Dollars in millions)	July 2, 2022		January 1, 2022
Other assets	Other assets	$	367	$	374	Other assets	$	359	$	374
Other current liabilities	Other current liabilities	56		56		Other current liabilities	56		56
Other liabilities	Other liabilities	317		325		Other liabilities	310		325
Weighted-average remaining lease term (in years)	Weighted-average remaining lease term (in years)	10.3		10.5		Weighted-average remaining lease term (in years)	10.1		10.5
Weighted-average discount rate	Weighted-average discount rate	3.18%		3.19%		Weighted-average discount rate	3.22%		3.19%

At ~~April~~July 2, 2022, maturities of our operating lease liabilities on an undiscounted basis totaled ~~$52~~$35 million for the remainder of 2022, ~~$62~~$65 million for 2023, ~~$53~~$55 million for 2024, ~~$46~~$47 million for 2025, $35 million for 2026 and ~~$216~~$217 million thereafter.

Note 7. Derivative Instruments and Fair Value Measurements

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

Assets and Liabilities Recorded at Fair Value on a Recurring Basis

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. We primarily utilize foreign currency exchange contracts with maturities of no more than three years to manage this volatility. These contracts qualify as cash flow hedges and are intended to offset the effect of exchange rate fluctuations on forecasted sales, inventory purchases and overhead expenses. Net gains and losses recognized in earnings and Accumulated other comprehensive loss on cash flow hedges, including gains and losses related to hedge ineffectiveness, were not significant in the periods presented.

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Our foreign currency exchange contracts are measured at fair value using the market method valuation technique. The inputs to this technique utilize current foreign currency exchange forward market rates published by third-party leading financial news and data providers. These are observable data that represent the rates that the financial institution uses for contracts entered into at that date; however, they are not based on actual transactions, so they are classified as Level 2. At ~~April~~July 2, 2022 and January 1, 2022, we had foreign currency exchange contracts with notional amounts upon which the contracts were based of ~~$345~~$264 million and $272 million, respectively. At ~~April~~July 2, 2022, the fair value amounts of our foreign currency exchange contracts were a $7$3 million asset and a $2$4 million liability. At January 1, 2022, the fair value amounts of our foreign currency exchange contracts were a $4 million asset and a $3 million liability.

Our Finance group enters into interest rate swap agreements to mitigate certain exposures to fluctuations in interest rates. By using these contracts, we are able to convert floating-rate cash flows to fixed-rate cash flows. These agreements are designated as cash flow hedges. At ~~April~~July 2, 2022, we had a swap agreement for a notional amount of ~~$280~~$272 million with a maturity of August 2023, and a swap agreement for a notional amount of $25 million, maturing in June 2025, with a combined fair value of a $5$7 million asset. At January 1, 2022, we had a swap agreement for a notional amount of $289 million with a maturity of August 2023 and an insignificant fair value. The fair value of these swap agreements is determined using values published by third-party leading financial news and data providers. These values are observable data that represent the value that financial institutions use for contracts entered into at that date, but are not based on actual transactions, so they are classified as Level 2.

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Assets and Liabilities Not Recorded at Fair Value

The carrying value and estimated fair value of our financial instruments that are not reflected in the financial statements at fair value are as follows:


		April 2, 2022				January 1, 2022					July 2, 2022				January 1, 2022
		Carrying		Estimated		Carrying		Estimated			Carrying		Estimated		Carrying		Estimated
(In millions)	(In millions)	Value		Fair Value		Value		Fair Value		(In millions)	Value		Fair Value		Value		Fair Value
Manufacturing group	Manufacturing group									Manufacturing group
Debt, excluding leases	Debt, excluding leases	$	(3,180)	$	(3,118)	$	(3,181)	$	(3,346)	Debt, excluding leases	$	(3,178)	$	(2,974)	$	(3,181)	$	(3,346)
Finance group	Finance group									Finance group
Finance receivables, excluding leases	Finance receivables, excluding leases	394		400		413		444		Finance receivables, excluding leases	381		351		413		444
Debt	Debt	(470)		(414)		(582)		(546)		Debt	(382)		(310)		(582)		(546)

Fair value for the Manufacturing group debt is determined using market observable data for similar transactions (Level 2). The fair value for the Finance group debt was determined primarily based on discounted cash flow analyses using observable market inputs from debt with similar duration, subordination and credit default expectations (Level 2). Fair value estimates for finance receivables were determined based on internally developed discounted cash flow models primarily utilizing significant unobservable inputs (Level 3), which include estimates of the rate of return, financing cost, capital structure and/or discount rate expectations of current market participants combined with estimated loan cash flows based on credit losses, payment rates and expectations of borrowers’ ability to make payments on a timely basis.

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Note 8. Shareholders’ Equity

A reconciliation of Shareholders’ equity is presented below:


(In millions)	(In millions)	Common Stock		Capital Surplus		Treasury Stock		Retained Earnings		Accumulated Other Comprehensive Loss		Total Shareholders' Equity		(In millions)	Common Stock		Capital Surplus		Treasury Stock		Retained Earnings		Accumulated Other Comprehensive Loss		Total Shareholders' Equity

Three months ended April 2, 2022
Three months ended July 2, 2022														Three months ended July 2, 2022
Beginning of period	Beginning of period	$	28	$	1,863	$	(157)	$	5,870	$	(789)	$	6,815	Beginning of period	$	28	$	1,924	$	(314)	$	6,058	$	(779)	$	6,917
Net income	Net income	—		—		—		193		—		193		Net income	—		—		—		217		—		217
Other comprehensive income		—		—		—		—		10		10
Other comprehensive loss														Other comprehensive loss	—		—		—		—		(76)		(76)
Share-based compensation activity	Share-based compensation activity	—		61		—		—		—		61		Share-based compensation activity	—		29		—		—		—		29
Dividends declared	Dividends declared	—		—		—		(5)		—		(5)		Dividends declared	—		—		—		(4)		—		(4)
Purchases of common stock	Purchases of common stock	—		—		(157)		—		—		(157)		Purchases of common stock	—		—		(282)		—		—		(282)

End of period	End of period	$	28	$	1,924	$	(314)	$	6,058	$	(779)	$	6,917	End of period	$	28	$	1,953	$	(596)	$	6,271	$	(855)	$	6,801
Three months ended April 3, 2021
Three months ended July 3, 2021														Three months ended July 3, 2021
Beginning of period	Beginning of period	$	29	$	1,785	$	(203)	$	5,973	$	(1,739)	$	5,845	Beginning of period	$	29	$	1,845	$	(294)	$	6,139	$	(1,723)	$	5,996
Net income	Net income	—		—		—		171		—		171		Net income	—		—		—		183		—		183
Other comprehensive income	Other comprehensive income	—		—		—		—		16		16		Other comprehensive income	—		—		—		—		47		47
Share-based compensation activity	Share-based compensation activity	—		60		—		—		—		60		Share-based compensation activity	—		75		—		—		—		75
Dividends declared	Dividends declared	—		—		—		(5)		—		(5)		Dividends declared	—		—		—		(4)		—		(4)
Purchases of common stock	Purchases of common stock	—		—		(91)		—		—		(91)		Purchases of common stock	—		—		(196)		—		—		(196)
End of period	End of period	$	29	$	1,845	$	(294)	$	6,139	$	(1,723)	$	5,996	End of period	$	29	$	1,920	$	(490)	$	6,318	$	(1,676)	$	6,101
Six months ended July 2, 2022														Six months ended July 2, 2022
Beginning of period														Beginning of period	$	28	$	1,863	$	(157)	$	5,870	$	(789)	$	6,815
Net income														Net income	—		—		—		410		—		410
Other comprehensive loss														Other comprehensive loss	—		—		—		—		(66)		(66)
Share-based compensation activity														Share-based compensation activity	—		90		—		—		—		90
Dividends declared														Dividends declared	—		—		—		(9)		—		(9)
Purchases of common stock														Purchases of common stock	—		—		(439)		—		—		(439)

End of period														End of period	$	28	$	1,953	$	(596)	$	6,271	$	(855)	$	6,801
Six months ended July 3, 2021														Six months ended July 3, 2021
Beginning of period														Beginning of period	$	29	$	1,785	$	(203)	$	5,973	$	(1,739)	$	5,845
Net income														Net income	—		—		—		354		—		354
Other comprehensive income														Other comprehensive income	—		—		—		—		63		63
Share-based compensation activity														Share-based compensation activity	—		135		—		—		—		135
Dividends declared														Dividends declared	—		—		—		(9)		—		(9)
Purchases of common stock														Purchases of common stock	—		—		(287)		—		—		(287)
End of period														End of period	$	29	$	1,920	$	(490)	$	6,318	$	(1,676)	$	6,101

Dividends per share of common stock were $0.02 for both the second quarter of 2022 and 2021 and $0.04 for both the first ~~quarter~~half of 2022 and 2021.

Earnings Per Share

We calculate basic and diluted earnings per share (EPS) based on net income, which approximates income available to common shareholders for each period. Basic EPS is calculated using the two-class method, which includes the weighted-average number of common shares outstanding during the period and restricted stock units to be paid in stock that are deemed participating securities as they provide nonforfeitable rights to dividends. Diluted EPS considers the dilutive effect of all potential future common stock, including stock options.

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


		Three Months Ended			Three Months Ended			Six Months Ended
(In thousands)	(In thousands)		April 2, 2022	April 3, 2021		(In thousands)	July 2, 2022	July 3, 2021	July 2, 2022	July 3, 2021
Basic weighted-average shares outstanding	Basic weighted-average shares outstanding		217,010	227,009		Basic weighted-average shares outstanding	214,587	225,963	215,799	226,486
Dilutive effect of stock options	Dilutive effect of stock options		2,597	1,275		Dilutive effect of stock options	2,071	2,483	2,334	1,810
Diluted weighted-average shares outstanding	Diluted weighted-average shares outstanding		219,607	228,284		Diluted weighted-average shares outstanding	216,658	228,446	218,133	228,296

~~Stock~~

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For both the second quarter and first half of 2022, stock options to purchase 1.0 ~~million and 4.3~~ million shares of common stock were excluded from the calculation of diluted weighted-average shares outstanding ~~for~~as their effect would have been anti-dilutive. For the first ~~quarter~~half of ~~2022 and~~ 2021, ~~respectively,~~stock options to purchase 2.1 million shares of common stock were excluded from the calculation of diluted weighted-average shares outstanding as their effect would have been anti-dilutive.

Accumulated Other Comprehensive Loss and Other Comprehensive Income

The components of Accumulated other comprehensive loss are presented below:


(In millions)	(In millions)	Pension and Postretirement Benefits Adjustments		Foreign Currency Translation Adjustments		Deferred Gains (Losses) on Hedge Contracts		Accumulated Other Comprehensive Loss		(In millions)	Pension and Postretirement Benefits Adjustments		Foreign Currency Translation Adjustments		Deferred Gains (Losses) on Hedge Contracts		Accumulated Other Comprehensive Loss
Balance at January 1, 2022	Balance at January 1, 2022	$	(799)	$	9	$	1	$	(789)	Balance at January 1, 2022	$	(799)	$	9	$	1	$	(789)
Other comprehensive loss before reclassifications	Other comprehensive loss before reclassifications	—		(14)		7		(7)		Other comprehensive loss before reclassifications	—		(104)		4		(100)
Reclassified from Accumulated other comprehensive loss	Reclassified from Accumulated other comprehensive loss	17		—		—		17		Reclassified from Accumulated other comprehensive loss	34		—		—		34
Balance at April 2, 2022		$	(782)	$	(5)	$	8	$	(779)
Balance at July 2, 2022										Balance at July 2, 2022	$	(765)	$	(95)	$	5	$	(855)
Balance at January 2, 2021	Balance at January 2, 2021	$	(1,780)	$	42	$	(1)	$	(1,739)	Balance at January 2, 2021	$	(1,780)	$	42	$	(1)	$	(1,739)
Other comprehensive loss before reclassifications	Other comprehensive loss before reclassifications	—		(32)		4		(28)		Other comprehensive loss before reclassifications	—		(17)		6		(11)
Reclassified from Accumulated other comprehensive loss	Reclassified from Accumulated other comprehensive loss	30		14		—		44		Reclassified from Accumulated other comprehensive loss	60		14		—		74
Balance at April 3, 2021		$	(1,750)	$	24	$	3	$	(1,723)
Balance at July 3, 2021										Balance at July 3, 2021	$	(1,720)	$	39	$	5	$	(1,676)

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


		April 2, 2022						April 3, 2021							July 2, 2022						July 3, 2021
(In millions)	(In millions)	Pre-Tax Amount		Tax (Expense) Benefit		After-tax Amount		Pre-Tax Amount		Tax (Expense) Benefit		After-tax Amount		(In millions)	Pre-Tax Amount		Tax (Expense) Benefit		After-tax Amount		Pre-Tax Amount		Tax (Expense) Benefit		After-tax Amount
Three Months Ended														Three Months Ended
Pension and postretirement benefits adjustments:														Pension and postretirement benefits adjustments:
Amortization of net actuarial loss*														Amortization of net actuarial loss*	$	21	$	(6)	$	15	$	38	$	(9)	$	29
Amortization of prior service cost*														Amortization of prior service cost*	2		—		2		2		(1)		1
Pension and postretirement benefits adjustments, net														Pension and postretirement benefits adjustments, net	23		(6)		17		40		(10)		30
Foreign currency translation adjustments														Foreign currency translation adjustments	(90)		—		(90)		15		—		15
Deferred gains (losses) on hedge contracts:														Deferred gains (losses) on hedge contracts:
Current deferrals														Current deferrals	(5)		2		(3)		2		—		2

Three Months Ended
Deferred gains (losses) on hedge contracts, net														Deferred gains (losses) on hedge contracts, net	(5)		2		(3)		2		—		2
Total														Total	$	(72)	$	(4)	$	(76)	$	57	$	(10)	$	47
Six Months Ended														Six Months Ended
Pension and postretirement benefits adjustments:	Pension and postretirement benefits adjustments:													Pension and postretirement benefits adjustments:
Amortization of net actuarial loss*	Amortization of net actuarial loss*	$	21	$	(5)	$	16	$	38	$	(9)	$	29	Amortization of net actuarial loss*	$	42	$	(11)	$	31	$	76	$	(18)	$	58
Amortization of prior service cost*	Amortization of prior service cost*	2		(1)		1		2		(1)		1		Amortization of prior service cost*	4		(1)		3		4		(2)		2
Pension and postretirement benefits adjustments, net	Pension and postretirement benefits adjustments, net	23		(6)		17		40		(10)		30		Pension and postretirement benefits adjustments, net	46		(12)		34		80		(20)		60
Foreign currency translation adjustments:	Foreign currency translation adjustments:													Foreign currency translation adjustments:
Foreign currency translation adjustments	Foreign currency translation adjustments	(14)		—		(14)		(32)		—		(32)		Foreign currency translation adjustments	(104)		—		(104)		(17)		—		(17)
Business disposition	Business disposition	—		—		—		14		—		14		Business disposition	—		—		—		14		—		14
Foreign currency translation adjustments, net	Foreign currency translation adjustments, net	(14)		—		(14)		(18)		—		(18)		Foreign currency translation adjustments, net	(104)		—		(104)		(3)		—		(3)
Deferred gains on hedge contracts:	Deferred gains on hedge contracts:													Deferred gains on hedge contracts:
Current deferrals	Current deferrals	10		(3)		7		5		(1)		4		Current deferrals	5		(1)		4		7		(1)		6

Deferred gains on hedge contracts, net	Deferred gains on hedge contracts, net	10		(3)		7		5		(1)		4		Deferred gains on hedge contracts, net	5		(1)		4		7		(1)		6
Total	Total	$	19	$	(9)	$	10	$	27	$	(11)	$	16	Total	$	(53)	$	(13)	$	(66)	$	84	$	(21)	$	63

*These components of other comprehensive income (loss) are included in the computation of net periodic pension cost (income). See Note 15 of our 2021 Annual Report on Form 10-K for additional information.

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Note 9. Segment Information

~~We operate~~Through the first quarter of 2022, we operated in, and ~~report~~reported financial information for, the following 5 business segments: Textron Aviation, Bell, Textron Systems, Industrial and Finance. Beginning in the second quarter of 2022, we formed a new reporting segment within the Manufacturing group, Textron eAviation, which includes the operating results of Pipistrel, a manufacturer of electrically powered aircraft that we acquired on April 15, 2022, as discussed in Note 2, along with other research and development initiatives related to sustainable aviation solutions. 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, gains/losses on major business dispositions and special charges. The measurement for the Finance segment includes interest income and expense along with intercompany interest income and expense.

Our revenues by segment, along with a reconciliation of segment profit to income from continuing operations before income taxes, are included in the table below:


		Three Months Ended					Three Months Ended				Six Months Ended
(In millions)	(In millions)		April 2, 2022		April 3, 2021			(In millions)	July 2, 2022		July 3, 2021		July 2, 2022		July 3, 2021
Revenues	Revenues							Revenues
Textron Aviation	Textron Aviation		$	1,040	$	865		Textron Aviation	$	1,284	$	1,161	$	2,324	$	2,026
Bell	Bell		834		846			Bell	687		891		1,521		1,737
Textron Systems	Textron Systems		273		328			Textron Systems	293		333		566		661
Industrial	Industrial		838		825			Industrial	871		794		1,709		1,619
Textron eAviation								Textron eAviation	5		—		5		—
Finance	Finance		16		15			Finance	14		12		30		27
Total revenues	Total revenues		$	3,001	$	2,879		Total revenues	$	3,154	$	3,191	$	6,155	$	6,070
Segment Profit	Segment Profit							Segment Profit
Textron Aviation	Textron Aviation		$	121	$	47		Textron Aviation	$	155	$	96	$	276	$	143
Bell	Bell		98		105			Bell	63		110		161		215
Textron Systems	Textron Systems		33		51			Textron Systems	42		48		75		99
Industrial	Industrial		43		47			Industrial	41		32		84		79
Textron eAviation								Textron eAviation	(8)		—		(8)		—
Finance	Finance		9		6			Finance	10		3		19		9
Segment profit	Segment profit		304		256			Segment profit	303		289		607		545
Corporate expenses and other, net	Corporate expenses and other, net		(44)		(40)			Corporate expenses and other, net	(12)		(37)		(56)		(77)
Interest expense, net for Manufacturing group	Interest expense, net for Manufacturing group		(28)		(35)			Interest expense, net for Manufacturing group	(28)		(32)		(56)		(67)
Special charges	Special charges		—		(6)			Special charges	—		(4)		—		(10)
Gain on business disposition	Gain on business disposition		—		15			Gain on business disposition	—		2		—		17
Income before income taxes			$	232	$	190
Income from continuing operations before income taxes								Income from continuing operations before income taxes	$	263	$	218	$	495	$	408

Note 10. Revenues

Disaggregation of Revenues

Our revenues disaggregated by major product type are presented below:


		Three Months Ended					Three Months Ended				Six Months Ended
(In millions)	(In millions)		April 2, 2022		April 3, 2021			(In millions)	July 2, 2022		July 3, 2021		July 2, 2022		July 3, 2021
Aircraft	Aircraft		$	646	$	535		Aircraft	$	856	$	797	$	1,502	$	1,332
Aftermarket parts and services	Aftermarket parts and services		394		330			Aftermarket parts and services	428		364		822		694
Textron Aviation	Textron Aviation		1,040		865			Textron Aviation	1,284		1,161		2,324		2,026
Military aircraft and support programs	Military aircraft and support programs		597		577			Military aircraft and support programs	402		572		999		1,149
Commercial helicopters, parts and services	Commercial helicopters, parts and services		237		269			Commercial helicopters, parts and services	285		319		522		588
Bell	Bell		834		846			Bell	687		891		1,521		1,737
Textron Systems	Textron Systems		273		328			Textron Systems	293		333		566		661
Fuel systems and functional components	Fuel systems and functional components		464		497			Fuel systems and functional components	435		440		899		937
Specialized vehicles	Specialized vehicles		374		328			Specialized vehicles	436		354		810		682
Industrial	Industrial		838		825			Industrial	871		794		1,709		1,619
Textron eAviation								Textron eAviation	5		—		5		—
Finance	Finance		16		15			Finance	14		12		30		27
Total revenues	Total revenues		$	3,001	$	2,879		Total revenues	$	3,154	$	3,191	$	6,155	$	6,070

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Our revenues for our segments by customer type and geographic location are presented below:


(In millions)	(In millions)	Textron Aviation		Bell		Textron Systems		Industrial		Finance		Total		(In millions)	Textron Aviation		Bell		Textron Systems		Industrial		Textron eAviation		Finance		Total

Three months ended April 2, 2022
Three months ended July 2, 2022														Three months ended July 2, 2022
Customer type:	Customer type:													Customer type:
Commercial	Commercial	$	1,021	$	234	$	19	$	835	$	16	$	2,125	Commercial	$	1,253	$	279	$	19	$	862	$	5	$	14	$	2,432
U.S. Government	U.S. Government	19		600		254		3		—		876		U.S. Government	31		408		274		9		—		—		722
Total revenues	Total revenues	$	1,040	$	834	$	273	$	838	$	16	$	3,001	Total revenues	$	1,284	$	687	$	293	$	871	$	5	$	14	$	3,154
Geographic location:	Geographic location:													Geographic location:
United States	United States	$	732	$	670	$	246	$	426	$	5	$	2,079	United States	$	776	$	504	$	268	$	466	$	1	$	5	$	2,020
Europe	Europe	119		28		8		190		1		346		Europe	239		43		10		185		3		—		480

Other international	Other international	189		136		19		222		10		576		Other international	269		140		15		220		1		9		654
Total revenues	Total revenues	$	1,040	$	834	$	273	$	838	$	16	$	3,001	Total revenues	$	1,284	$	687	$	293	$	871	$	5	$	14	$	3,154
Three months ended April 3, 2021
Three months ended July 3, 2021														Three months ended July 3, 2021
Customer type:	Customer type:													Customer type:
Commercial	Commercial	$	846	$	266	$	58	$	820	$	15	$	2,005	Commercial	$	1,127	$	350	$	67	$	787	$	—	$	12	$	2,343
U.S. Government	U.S. Government	19		580		270		5		—		874		U.S. Government	34		541		266		7		—		—		848
Total revenues	Total revenues	$	865	$	846	$	328	$	825	$	15	$	2,879	Total revenues	$	1,161	$	891	$	333	$	794	$	—	$	12	$	3,191
Geographic location:	Geographic location:													Geographic location:
United States	United States	$	609	$	616	$	289	$	378	$	8	$	1,900	United States	$	885	$	677	$	297	$	406	$	—	$	6	$	2,271
Europe	Europe	84		36		10		236		—		366		Europe	122		47		9		192		—		1		371

Other international	Other international	172		194		29		211		7		613		Other international	154		167		27		196		—		5		549
Total revenues	Total revenues	$	865	$	846	$	328	$	825	$	15	$	2,879	Total revenues	$	1,161	$	891	$	333	$	794	$	—	$	12	$	3,191
Six months ended July 2, 2022														Six months ended July 2, 2022
Customer type:														Customer type:
Commercial														Commercial	$	2,274	$	513	$	38	$	1,697	$	5	$	30	$	4,557
U.S. Government														U.S. Government	50		1,008		528		12		—		—		1,598
Total revenues														Total revenues	$	2,324	$	1,521	$	566	$	1,709	$	5	$	30	$	6,155
Geographic location:														Geographic location:
United States														United States	$	1,508	$	1,174	$	514	$	892	$	1	$	10	$	4,099
Europe														Europe	358		71		18		375		3		1		826

Other international														Other international	458		276		34		442		1		19		1,230
Total revenues														Total revenues	$	2,324	$	1,521	$	566	$	1,709	$	5	$	30	$	6,155
Six months ended July 3, 2021														Six months ended July 3, 2021
Customer type:														Customer type:
Commercial														Commercial	$	1,973	$	616	$	125	$	1,607	$	—	$	27	$	4,348
U.S. Government														U.S. Government	53		1,121		536		12		—		—		1,722
Total revenues														Total revenues	$	2,026	$	1,737	$	661	$	1,619	$	—	$	27	$	6,070
Geographic location:														Geographic location:
United States														United States	$	1,494	$	1,293	$	586	$	784	$	—	$	14	$	4,171
Europe														Europe	206		83		19		428		—		1		737

Other international														Other international	326		361		56		407		—		12		1,162
Total revenues														Total revenues	$	2,026	$	1,737	$	661	$	1,619	$	—	$	27	$	6,070

Remaining Performance Obligations

Our remaining performance obligations, which is the equivalent of our backlog, represent the expected transaction price allocated to our contracts that we expect to recognize as revenues in future periods when we perform under the contracts. These remaining obligations exclude unexercised contract options and potential orders under ordering-type contracts such as Indefinite Delivery, Indefinite Quantity contracts. At ~~April~~July 2, 2022, we had ~~$12.1~~$13.2 billion in remaining performance obligations of which we expect to recognize revenues of approximately ~~78%~~75% through 2023, an additional ~~19%~~21% through 2025, and the balance thereafter.

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Contract Assets and Liabilities

Assets and liabilities related to our contracts with customers are reported on a contract-by-contract basis at the end of each reporting period. At ~~April~~July 2, 2022 and January 1, 2022, contract assets totaled ~~$754~~$643 million and $717 million, respectively, and contract liabilities totaled ~~$1.5~~$1.6 billion and $1.2 billion, respectively, reflecting timing differences between revenues recognized, billings and payments from customers. InWe recognized revenues of $293 million and $170 million in the ~~first~~second quarter of 2022 and 2021, ~~we recognized revenues of $206~~respectively, and $499 million and ~~$278~~$448 million in the first half of 2022 and 2021, respectively, that were included in the contract liability balance at the beginning of each year.

~~Note 11. Share-Based Compensation~~

Under our share-based compensation plan, we have authorization to provide awards to selected employees and non-employee directors in the form of stock options, restricted stock, restricted stock units, stock appreciation rights, performance stock, performance share units and other awards. Compensation expense included in net income for our share-based compensation plan is as follows:

Three Months Ended
(In millions) April 2,
2022 April 3,
2021
Compensation expense $ 34 $ 55
Income tax expense (8) (13)
Total compensation expense included in net income $ 26 $ 42

~~Compensation expense included stock option expense of $12 million in both the first quarter of 2022 and 2021.~~

~~Table of Contents~~

~~Stock Options~~

Options to purchase our shares have a maximum term of ten years and generally vest ratably over a three-year period. Stock option compensation cost is calculated under the fair value approach using the Black-Scholes option-pricing model to determine the fair value of options granted on the date of grant. The expected volatility used in this model is based on historical volatilities and implied volatilities from traded options on our common stock. The expected term is based on historical option exercise data, which is adjusted to reflect any anticipated changes in expected behavior.

~~We grant options annually on the first day of March. The assumptions used in our option-pricing model for these grants and the weighted-average fair value for these options are as follows:~~

March 1, 2022 March 1, 2021
Fair value of options at grant date $ 19.95 $ 15.05
Dividend yield 0.1% 0.2%
Expected volatility 29.2% 33.6%
Risk-free interest rate 1.9% 0.7%
Expected term (in years) 4.8 4.7

~~The stock option activity during the first quarter of 2022 is provided below:~~

(Options in thousands) Number of
Options Weighted-
Average
Exercise Price
Outstanding at January 1, 2022 8,289 $ 46.18
Granted 1,049 71.07
Exercised (705) (38.35)
Forfeited or expired (28) (45.34)
Outstanding at April 2, 2022 8,605 $ 49.86
Exercisable at April 2, 2022 5,902 $ 47.13

At April 2, 2022, our outstanding options had an aggregate intrinsic value of $199 million and a weighted-average remaining contractual life of 6.5 years. Our exercisable options had an aggregate intrinsic value of $153 million and a weighted-average remaining contractual life of 5.3 years at April 2, 2022. The total intrinsic value of options exercised during the first quarter of 2022 and 2021 was $23 million and $15 million, respectively.

~~Restricted Stock Units~~

We issue restricted stock units that include the right to receive dividend equivalents and are settled in both cash and stock. Beginning in 2020, new grants of restricted stock units will vest in full on the third anniversary of the grant date. Restricted stock units granted prior to 2020 vest one-third each in the third, fourth and fifth year following the year of the grant. The fair value of these units is based on the trading price of our common stock. For units payable in stock, we use the trading price on the grant date, while units payable in cash are remeasured using the price at each reporting period date. The activity for restricted stock units payable in both stock and cash during the first quarter of 2022 is provided below:

Units Payable in Stock Units Payable in Cash
(Shares/Units in thousands) Number of
Shares Weighted-
Average Grant
Date Fair Value Number of
Units Weighted-
Average Grant
Date Fair Value
Outstanding at January 1, 2022, nonvested 569 $ 50.01 1,158 $ 49.92
Granted 84 71.07 223 71.07
Vested (126) (53.95) (246) (54.02)
Forfeited — — (10) (49.55)
Outstanding at April 2, 2022, nonvested 527 $ 52.44 1,125 $ 53.23

~~Table of Contents~~

~~The fair value of the restricted stock unit awards that vested and/or amounts paid under these awards is as follows:~~

Three Months Ended
(In millions) April 2,
2022 April 3,
2021
Fair value of awards vested $ 24 $ 19
Cash paid 17 13

~~Performance Share Units~~

~~The activity for our performance share units during the first quarter of 2022 is as follows:~~

(Units in thousands) Number of
Units Weighted-
Average Grant
Date Fair Value
Outstanding at January 1, 2022, nonvested 526 $ 45.87
Granted 174 71.07
Outstanding at April 2, 2022, nonvested 700 $ 52.14

~~Cash paid under these awards totaled $15 million and $6 million in the first quarter of 2022 and 2021, respectively.~~

Note ~~12.~~11. Retirement Plans

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


		Three Months Ended					Three Months Ended				Six Months Ended
(In millions)	(In millions)		April 2, 2022		April 3, 2021			(In millions)	July 2, 2022		July 3, 2021		July 2, 2022		July 3, 2021
Pension Benefits	Pension Benefits							Pension Benefits
Service cost	Service cost		$	27	$	29		Service cost	$	27	$	29	$	54	$	58
Interest cost	Interest cost		68		63			Interest cost	68		63		136		126
Expected return on plan assets	Expected return on plan assets		(153)		(144)			Expected return on plan assets	(153)		(144)		(306)		(288)
Amortization of net actuarial loss	Amortization of net actuarial loss		22		39			Amortization of net actuarial loss	22		38		44		77
Amortization of prior service cost	Amortization of prior service cost		3		3			Amortization of prior service cost	3		3		6		6
Net periodic benefit income*	Net periodic benefit income*		$	(33)	$	(10)		Net periodic benefit income*	$	(33)	$	(11)	$	(66)	$	(21)
Postretirement Benefits Other Than Pensions	Postretirement Benefits Other Than Pensions							Postretirement Benefits Other Than Pensions
Service cost	Service cost		$	1	$	1		Service cost	$	—	$	—	$	1	$	1
Interest cost	Interest cost		1		1			Interest cost	2		2		3		3
Amortization of net actuarial gain	Amortization of net actuarial gain		(1)		(1)			Amortization of net actuarial gain	(1)		—		(2)		(1)
Amortization of prior service credit	Amortization of prior service credit		(1)		(1)			Amortization of prior service credit	(1)		(1)		(2)		(2)
Net periodic benefit income			$	—	$	—
Net periodic benefit cost								Net periodic benefit cost	$	—	$	1	$	—	$	1

* Excludes the cost associated with the defined contribution component, included in certain of our U.S.-based defined benefit pension plans, that totaled $4$3 million and $3 million in the second quarter of 2022 and 2021, respectively, and $7 million and $6 million for the first ~~quarter~~half of 2022 and 2021, respectively.

Note ~~13.~~12. Special Charges

In the second quarter and first ~~quarter~~half of 2021, we recognized special charges of $6$4 million and $10 million, respectively, related to a restructuring plan initiated in 2020 in response to the economic challenges and uncertainty resulting from the COVID-19 pandemic. There were no special charges recorded in the second quarter and first ~~quarter~~half of 2022.

Our restructuring reserve activity is summarized below:


(In millions)	(In millions)	Severance Costs		Contract Terminations and Other		Total		(In millions)	Severance Costs		Contract Terminations and Other		Total
Balance at January 1, 2022	Balance at January 1, 2022	$	19	$	9	$	28	Balance at January 1, 2022	$	19	$	9	$	28

Cash paid	Cash paid	(6)		—		(6)		Cash paid	(10)		(1)		(11)

Balance at April 2, 2022		$	13	$	9	$	22
Foreign currency translation								Foreign currency translation	(1)		—		(1)
Balance at July 2, 2022								Balance at July 2, 2022	$	8	$	8	$	16

The majority of the remaining cash outlays of ~~$22~~$16 million is expected to be paid in ~~2022.~~the next nine months.

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Note ~~14.~~13. Income Taxes

Our effective tax rate for the second quarter and first ~~quarter~~half of 2022 was 17.1% and ~~2021 was 16.8% and 10.0%~~17.0%, respectively. In the second quarter and first ~~quarter~~half of 2022, the effective tax rate was lower than the U.S. federal statutory rate of 21%, largely due to the favorable impact of research and development credits.

Our effective tax rate for the second quarter and first half of 2021 was 15.6% and 13.0%, respectively. In the second quarter and first half of 2021, the effective tax rate was lower than the U.S. federal statutory rate of 21%, largely due to the favorable impact of research and development credits. In the first ~~quarter~~half of 2021, the effective tax rate ~~was lower than the U.S. federal statutory rate of 21%, largely due to~~also included a $12 million benefit recognized for additional research and development credits related to prior years.

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Note ~~15.~~14. Commitments and Contingencies

We are subject to legal proceedings and other claims arising out of the conduct of our business, including proceedings and claims relating to commercial and financial transactions; government contracts; alleged lack of compliance with applicable laws and regulations; production partners; product liability; patent and trademark infringement; employment disputes; 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 suspension or debarment from U.S. Government contracting for a period of time. On the basis of information presently available, we do not believe that existing proceedings and claims will have a material effect on our financial position or results of operations.

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Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations

Consolidated Results of Operations


		Three Months Ended						Three Months Ended						Six Months Ended
(Dollars in millions)	(Dollars in millions)		April 2, 2022		April 3, 2021		% Change		(Dollars in millions)	July 2, 2022		July 3, 2021		% Change	July 2, 2022		July 3, 2021		% Change
Revenues	Revenues		$	3,001	$	2,879	4%		Revenues	$	3,154	$	3,191	(1)%	$	6,155	$	6,070	1%
Cost of sales	Cost of sales		2,492		2,400		4%		Cost of sales	2,641		2,660		(1)%	5,133		5,060		1%
Gross margin as a % of Manufacturing revenues	Gross margin as a % of Manufacturing revenues		16.5%		16.2%				Gross margin as a % of Manufacturing revenues	15.9%		16.3%			16.2%		16.3%
Selling and administrative expense	Selling and administrative expense		305		298		2%		Selling and administrative expense	278		314		(11)%	583		612		(5)%

During the first half of 2022, all of our manufacturing segments were impacted by labor shortages and ongoing global supply chain shortages and delays resulting from the continuation of the COVID-19 pandemic and the war in Ukraine. While our businesses are managing through these challenges, in some cases they have caused, and we expect will continue to cause, some manufacturing inefficiencies and delays in delivery of certain of our products to customers.

An analysis of our consolidated operating results is set forth below. A more detailed analysis of our segments’ operating results is provided in the Segment Analysis section on pages 1920 to ~~23.~~25.

Revenues

Revenues ~~increased $122~~decreased $37 million ~~4%,~~ in the ~~first~~second quarter of 2022, compared with the ~~first~~second quarter of 2021. The revenue ~~increase~~decrease primarily included the following factors:

•~~Higher Textron Aviation revenues of $175 million, reflecting higher volume and mix of $142 million and higher pricing of $33 million.~~

•~~Higher Industrial~~Lower Bell revenues of ~~$13~~$204 million, largely due to ~~a favorable impact~~lower military revenues of ~~$46~~$170 million, ~~from pricing, principally~~primarily in the ~~Specialized Vehicles product line, partially offset by~~H-1 program due to lower aircraft and spares production volume, reflecting lower demand, and ~~mix in the Fuel Systems and Functional Components product line.~~lower commercial revenues of $34 million.

•Lower Textron Systems revenues of ~~$55~~$40 million, ~~primarily~~largely due to lower volume of ~~$59~~$44 million, which included a $39 million decrease from our Afghanistan fee-for-service and aircraft support contracts.

•Higher Textron Aviation revenues of $123 million, reflecting higher volume and mix of $79 million and higher pricing of $44 million.

•Higher Industrial revenues of $77 million, due to favorable impact from pricing of $64 million and higher volume and mix of $37 million, principally in the Specialized Vehicles product line, partially offset by $24 million from foreign exchange rate fluctuations.

Revenues increased $85 million in the first half of 2022, compared with the first half of 2021. The revenue increase primarily included the following factors:

•Higher Textron Aviation revenues of $298 million, reflecting higher volume and mix of $221 million and higher pricing of $77 million.

•Higher Industrial revenues of $90 million, largely due to favorable impact from pricing of $110 million, principally in the Specialized Vehicles product line, partially offset by $33 million from exchange rate fluctuations.

•Lower Bell revenues of ~~$12~~$216 million, largely due to lower military revenues of $150 million, primarily in the H-1 program due to lower aircraft and spares production volume, reflecting lower demand, and lower commercial revenues of ~~$32~~$66 million.

•Lower Textron Systems revenues of $95 million, largely ~~reflecting the mix~~due to lower volume of $103 million, which included a $78 million decrease from our Afghanistan fee-for-service and aircraft ~~sold during the periods, partially offset by higher military revenues of $20 million.~~support contracts.

Cost of Sales and Selling and Administrative Expense

Cost of sales ~~increased $92~~decreased $19 million ~~4%,~~ in the ~~first~~second quarter of 2022, compared with the ~~first~~second quarter of 2021, largely due to lower net volume and mix described above, partially offset by inflation of ~~$73~~$108 million, principally reflecting higher material cost in the Industrial and Textron Aviation segments. Gross margin as a percentage of Manufacturing revenues ~~increased 30~~decreased 40 basis points in the ~~first~~second quarter of 2022 ~~primarily due to~~as higher margin at the Textron Aviation segment, reflecting higher volume and mix, was more than offset by lower margin at the other Manufacturing segments, primarily at the Bell Segment, reflecting lower volume and ~~pricing,~~mix.

Cost of sales increased $73 million in the first half of 2022, compared with the first half of 2021, largely due to inflation of $181 million, principally reflecting higher material cost in the Industrial and Textron Aviation segments, partially offset by lower ~~margins~~net volume and mix. Gross margin as a percentage of Manufacturing revenues decreased 10 basis points in the first half of 2022 as higher margin at the Textron Aviation segment, reflecting higher volume and mix, was offset by lower margin at the other ~~manufacturing~~Manufacturing segments.

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Selling and administrative expense decreased $36 million, 11%, and $29 million, 5%, in the second quarter and first half of 2022, respectively, compared with the corresponding periods in 2021, primarily reflecting lower share-based compensation expense.

Non-service components of pension and postretirement income, net

In the second quarter of 2022, non-service components of pension and postretirement income, net increased by $21 million, 54%, to $60 million. In the first half of 2022, non-service components of pension and postretirement income, net increased by $42 million, 53%, to $121 million. The increase in both periods was primarily driven by an increase in the discount rate utilized for our domestic qualified pension plans and actual pension asset returns that exceeded our expected return on plan assets assumption.

Income Taxes

Backlog

Our backlog is summarized below:


(In millions)	(In millions)	April 2, 2022		January 1, 2022		(In millions)	July 2, 2022		January 1, 2022
Textron Aviation	Textron Aviation	$	5,122	$	4,120	Textron Aviation	$	5,830	$	4,120
Bell	Bell	4,817		3,871		Bell	5,281		3,871
Textron Systems	Textron Systems	2,135		2,144		Textron Systems	2,061		2,144
Total backlog	Total backlog	$	12,074	$	10,135	Total backlog	$	13,172	$	10,135

Textron Aviation's backlog increased ~~$1.0~~$1.7 billion, ~~24%~~42%, in the first ~~quarter~~half of 2022, reflecting orders in excess of deliveries. Backlog at Bell increased ~~$946 million, 24%~~$1.4 billion, 36%, ~~primarily reflecting~~largely due to new orders in excess of deliveries and revenues recognized. Bell was awarded a ~~new~~ $1.4 billion 5-year contract with the U.S. Government for spares and logistic support for the V-22 tiltrotor ~~aircraft.~~aircraft in the first quarter of 2022.

Segment Analysis

~~We operate~~Through the first quarter of 2022, we operated in, and ~~report~~reported financial information for, the following five business segments: Textron Aviation, Bell, Textron Systems, Industrial and Finance. Beginning in the second quarter of 2022, we formed a new reporting segment within the Manufacturing group, Textron eAviation. This new segment includes the operating results of Pipistrel, a manufacturer of electrically powered aircraft that we acquired on April 15, 2022, as discussed in Note 2 to the Consolidated Financial Statements, along with other research and development initiatives related to sustainable aviation solutions.

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, gains/losses on

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major business dispositions and special charges. The measurement for the Finance segment includes interest income and expense along with intercompany interest income and expense. Operating expenses for the Manufacturing segments include cost of sales, selling and administrative expense and other non-service components of net periodic benefit cost/(income), and exclude certain corporate expenses and special charges.

In our discussion of comparative results for the Manufacturing group, changes in revenues and segment profit for our commercial businesses typically are expressed in terms of volume and mix, pricing, foreign exchange, acquisitions and dispositions, inflation and performance. For revenues, volume and mix represents changes in revenues from increases or decreases in the number of units delivered or services provided and the composition of products and/or services sold. For segment profit, volume and mix represents a change due to the number of units delivered or services provided and the composition of products and/or services sold at different profit margins. Pricing represents changes in unit pricing. Foreign exchange is the change resulting from translating foreign-denominated amounts into U.S. dollars at exchange rates that are different from the prior period. Revenues generated by acquired businesses are reflected in Acquisitions for a twelve-month period, while reductions in revenues and segment profit from the sale of businesses are reflected as Dispositions. Inflation represents higher material, wages, benefits, pension service cost or other costs. Performance reflects an increase or decrease in research and development, depreciation, selling and administrative costs, warranty, product liability, quality/scrap, labor efficiency, overhead, non-service pension cost/(income), product line profitability, start-up, ramp up and cost-reduction initiatives or other manufacturing inputs.

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Approximately 26% of our 2021 revenues were derived from contracts with the U.S. Government, including those under the U.S. Government-sponsored foreign military sales program. For our segments that contract with the U.S. Government, changes in revenues related to these contracts are expressed in terms of volume. Changes in segment profit for these contracts are typically expressed in terms of volume and mix and performance; these include cumulative catch-up adjustments associated with a) revisions to the transaction price that may reflect contract modifications or changes in assumptions related to award fees and other variable consideration or b) changes in the total estimated costs at completion due to improved or deteriorated operating performance.

Textron Aviation


		Three Months Ended						Three Months Ended						Six Months Ended
(Dollars in millions)	(Dollars in millions)		April 2, 2022		April 3, 2021		% Change		(Dollars in millions)	July 2, 2022		July 3, 2021		% Change	July 2, 2022		July 3, 2021		% Change
Revenues:	Revenues:								Revenues:
Aircraft	Aircraft		$	646	$	535	21%		Aircraft	$	856	$	797	7%	$	1,502	$	1,332	13%
Aftermarket parts and services	Aftermarket parts and services		394		330		19%		Aftermarket parts and services	428		364		18%	822		694		18%
Total revenues	Total revenues		1,040		865		20%		Total revenues	1,284		1,161		11%	2,324		2,026		15%
Operating expenses	Operating expenses		919		818		12%		Operating expenses	1,129		1,065		6%	2,048		1,883		9%
Segment profit	Segment profit		121		47		157%		Segment profit	$	155	$	96	61%	$	276	$	143	93%
Profit margin	Profit margin		11.6%		5.4%				Profit margin	12.1%		8.3%			11.9%		7.1%

Textron Aviation Revenues and Operating Expenses

The following factors contributed to the change in Textron Aviation’s revenues ~~from~~for the ~~prior year quarter:~~periods:


~~(In millions)~~	Q1 2022 versus Q1 2021
~~Volume and mix~~	$	~~142~~
~~Pricing~~	33
~~Total change~~	$	~~175~~


(In millions)	Q2 2022 versus Q2 2021		YTD 2022 versus YTD 2021
Volume and mix	$	79	$	221
Pricing	44		77
Total change	$	123	$	298

Textron Aviation’s revenues increased ~~$175~~$123 million, ~~20%~~11%, in the ~~first~~second quarter of 2022, compared with the ~~first~~second quarter of 2021, ~~primarily~~reflecting higher volume and mix of $79 million and higher pricing of $44 million. The increase in volume and mix was largely due to higher Citation jet ~~volume of $93 million,~~and aftermarket volume, ~~of $61 million and commercial turboprop volume of $59 million,~~ partially offset by lower pre-owned volume. The higher aftermarket volume reflected increased aircraft utilization. We delivered 3948 Citation jets and 3135 commercial turboprops in the second quarter of 2022, compared with 44 Citation jets and 33 commercial turboprops in the second quarter of 2021.

Textron Aviation’s revenues increased $298 million, 15%, in the first half of 2022, compared with the first half of 2021, reflecting higher volume and mix of $221 million and higher pricing of $77 million. The increase in volume and mix was largely due to higher Citation jet, aftermarket and commercial turboprop volume, partially offset by lower pre-owned volume. The higher aftermarket volume reflected increased aircraft utilization. We delivered 87 Citation jets and 66 commercial turboprops in the first ~~quarter~~half of 2022, compared with 2872 Citation jets and 1447 commercial turboprops in the first ~~quarter~~half of 2021.

Textron Aviation’s operating expenses increased ~~$101~~$64 million, ~~12%~~6%, and $165 million, 9%, in the second quarter and first ~~quarter~~half of 2022, respectively, compared with the ~~first quarter~~corresponding periods of 2021, largely due to higher volume and mix described above and inflation of ~~$17 million.~~

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$29 million and $46 million, respectively.

Textron Aviation Segment Profit

The following factors contributed to the change in Textron Aviation’s segment profit ~~from~~for the ~~prior year quarter:~~periods:


~~(In millions)~~	Q1 2022 versus Q1 2021
~~Volume and mix~~	$	55
~~Pricing, net of inflation~~	16
~~Performance~~	3
~~Total change~~	$	74


(In millions)	Q2 2022 versus Q2 2021		YTD 2022 versus YTD 2021
Volume and mix	$	25	$	80
Pricing, net of inflation	15		31
Performance	19		22
Total change	$	59	$	133

Segment profit at Textron Aviation increased ~~$74~~$59 million, 61%, in the ~~first~~second quarter of 2022, compared with the second quarter of 2021, largely due to the impact from higher volume and mix of $25 million described above, a favorable impact from performance of $19 million and favorable pricing, net of inflation of $15 million.

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Segment profit at Textron Aviation increased $133 million, 93%, in the first ~~quarter~~half of 2022, compared with the first half of 2021, largely due to the impact from higher volume and mix described above, ~~and~~ favorable pricing, net of inflation of ~~$16~~$31 million and a favorable impact from performance of $22 million.

Bell


		Three Months Ended						Three Months Ended						Six Months Ended
(Dollars in millions)	(Dollars in millions)		April 2, 2022		April 3, 2021		% Change		(Dollars in millions)	July 2, 2022		July 3, 2021		% Change	July 2, 2022		July 3, 2021		% Change
Revenues:	Revenues:								Revenues:
Military aircraft and support programs	Military aircraft and support programs		$	597	$	577	3%		Military aircraft and support programs	$	402	$	572	(30)%	$	999	$	1,149	(13)%
Commercial helicopters, parts and services	Commercial helicopters, parts and services		237		269		(12)%		Commercial helicopters, parts and services	285		319		(11)%	522		588		(11)%
Total revenues	Total revenues		834		846		(1)%		Total revenues	687		891		(23)%	1,521		1,737		(12)%
Operating expenses	Operating expenses		736		741		(1)%		Operating expenses	624		781		(20)%	1,360		1,522		(11)%
Segment profit	Segment profit		98		105		(7)%		Segment profit	$	63	$	110	(43)%	$	161	$	215	(25)%
Profit margin	Profit margin		11.8%		12.4%				Profit margin	9.2%		12.3%			10.6%		12.4%

Bell’s major U.S. Government programs at this time are the V-22 tiltrotor aircraft and the H-1 helicopter platforms, which are both in the production and support stage and represent a significant portion of Bell’s revenues from the U.S. Government. Over the next several years, the H-1 helicopter program with the U.S. Government will be transitioning from the production stage to the support stage.

Bell Revenues and Operating Expenses

The following factors contributed to the change in Bell’s revenues ~~from~~for the ~~prior year quarter:~~periods:


~~(In millions)~~	Q1 2022 versus Q1 2021
~~Volume and mix~~	$	~~(23)~~
~~Pricing~~	11

~~Total change~~	$	~~(12)~~


(In millions)	Q2 2022 versus Q2 2021		YTD 2022 versus YTD 2021
Volume and mix	$	(217)	$	(240)
Pricing	13		24

Total change	$	(204)	$	(216)

Bell’s revenues decreased ~~$12~~$204 million, 23%, in the ~~first~~second quarter of 2022, compared with the ~~first~~second quarter of 2021, largely due to lower ~~commercial revenues of $32 million, largely reflecting the mix of aircraft sold during the periods, partially offset by higher~~ military revenues of ~~$20 million.~~$170 million, primarily in the H-1 program due to lower aircraft and spares production volume, reflecting lower demand. Commercial revenues decreased $34 million, primarily due to lower volume and mix. We delivered 2534 commercial helicopters in the second quarter of 2022, compared with 47 commercial helicopters in the second quarter of 2021.

Bell’s revenues decreased $216 million, 12%, in the first half of 2022, compared with the first half of 2021, largely due to lower military revenues of $150 million, primarily in the H-1 program due to lower aircraft and spares production volume, reflecting lower demand. Commercial revenues decreased $66 million, primarily due to lower volume and mix. We delivered 59 commercial helicopters in the first ~~quarter~~half of 2022, compared with 1764 commercial helicopters in the first ~~quarter~~half of 2021.

Bell’s operating expenses decreased $157 million, 20%, and $162 million, 11% in the second quarter and first half of 2022, respectively, compared with the corresponding periods of 2021, primarily due to lower volume and mix described above.

Bell Segment Profit

The following factors contributed to the change in Bell’s segment profit ~~from~~for the ~~prior year quarter:~~periods:


~~(In millions)~~	Q1 2022 versus Q1 2021
~~Volume and mix~~	$	~~(10)~~
~~Inflation, net of pricing~~	~~(3)~~
~~Performance~~	6
~~Total change~~	$	~~(7)~~


(In millions)	Q2 2022 versus Q2 2021		YTD 2022 versus YTD 2021
Volume and mix	$	(62)	$	(72)
Performance	16		22
Inflation, net of pricing	(1)		(4)
Total change	$	(47)	$	(54)

Bell’s segment profit decreased $7$47 million, 7%43%, in the ~~first~~second quarter of 2022, compared with the second quarter of 2021, primarily reflecting lower volume and mix as described above, partially offset by a favorable impact from performance of $16 million. Performance included lower research and development costs, pension costs and selling and administrative expense of $26 million, partially offset by an unfavorable change in net program adjustments.

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Bell’s segment profit decreased $54 million, 25%, in the first ~~quarter~~half of 2022, compared with the first half of 2021, primarily reflecting lower volume and mix described above, partially offset by a favorable impact from performance of $6$22 million.

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Performance included lower research and development costs, pension costs and selling and administrative expense of ~~$21~~$57 million, ~~as well as~~partially offset by an unfavorable change ~~of $23 million~~ in net program adjustments.

Textron Systems


		Three Months Ended						Three Months Ended						Six Months Ended
(Dollars in millions)	(Dollars in millions)		April 2, 2022		April 3, 2021		% Change		(Dollars in millions)	July 2, 2022		July 3, 2021		% Change	July 2, 2022		July 3, 2021		% Change
Revenues	Revenues		$	273	$	328	(17)%		Revenues	$	293	$	333	(12)%	$	566	$	661	(14)%
Operating expenses	Operating expenses		240		277		(13)%		Operating expenses	251		285		(12)%	491		562		(13)%
Segment profit	Segment profit		33		51		(35)%		Segment profit	$	42	$	48	(13)%	$	75	$	99	(24)%
Profit margin	Profit margin		12.1%		15.5%				Profit margin	14.3%		14.4%			13.3%		15.0%

Textron Systems Revenues and Operating Expenses

The following factors contributed to the change in Textron Systems’ revenues ~~from~~for the ~~prior year quarter:~~periods:


~~(In millions)~~	Q1 2022 versus Q1 2021

~~Volume~~	$	~~(59)~~
~~Other~~	4
~~Total change~~	$	~~(55)~~


(In millions)	Q2 2022 versus Q2 2021		YTD 2022 versus YTD 2021

Volume	$	(44)	$	(103)
Other	4		8
Total change	$	(40)	$	(95)

Textron Systems' revenues decreased ~~$55~~$40 million, ~~17%~~12%, and $95 million, 14%, in the second quarter and first ~~quarter~~half of 2022, respectively, compared with the ~~first quarter~~corresponding periods of 2021. Lower volume of ~~$59~~$44 million and $103 million, respectively, included a decrease of $39 million ~~decrease~~and $78 million, respectively, from our Afghanistan fee-for-service and aircraft support contracts, primarily reflecting the impact from the U.S. Army’s withdrawal from Afghanistan.

Textron ~~Systems'~~Systems’ operating expenses decreased ~~$37~~$34 million, 12%, and $71 million, 13%, in the second quarter and first ~~quarter~~half of 2022, respectively, compared with the ~~first quarter~~corresponding periods of 2021, primarily related to lower net volume described above.

Textron Systems Segment Profit

The following factors contributed to the change in Textron Systems’ segment profit ~~from~~for the ~~prior year quarter:~~periods:


~~(In millions)~~	Q1 2022 versus Q1 2021
~~Volume and mix~~	$	~~(11)~~
~~Performance and other~~	~~(7)~~

~~Total change~~	$	~~(18)~~


(In millions)	Q2 2022 versus Q2 2021		YTD 2022 versus YTD 2021
Volume and mix	$	(4)	$	(15)
Performance and other	(2)		(9)

Total change	$	(6)	$	(24)

Textron Systems’ segment profit decreased ~~$18~~$6 million, ~~35%~~13%, in the ~~first~~second quarter of 2022, compared with the second quarter of 2021, primarily due to lower volume and mix of $4 million described above.

Textron Systems’ segment profit decreased $24 million, 24%, in the first ~~quarter~~half of 2022, compared with the first half of 2021, due to lower volume and mix of ~~$11~~$15 million described above and an unfavorable impact from performance and other of ~~$7 million, primarily related to lower net favorable program adjustments on the Afghanistan fee-for-service contracts.~~

~~Industrial~~

Three Months Ended
(Dollars in millions) April 2,
2022 April 3,
2021 % Change
Revenues:
Fuel systems and functional components $ 464 $ 497 (7)%
Specialized vehicles 374 328 14%
Total revenues 838 825 2%
Operating expenses 795 778 2%
Segment profit 43 47 (9)%
Profit margin 5.1% 5.7%
$9 million.

2223

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Industrial


	Three Months Ended					Six Months Ended
(Dollars in millions)	July 2, 2022		July 3, 2021		% Change	July 2, 2022		July 3, 2021		% Change
Revenues:
Fuel systems and functional components	$	435	$	440	(1)%	$	899	$	937	(4)%
Specialized vehicles	436		354		23%	810		682		19%
Total revenues	871		794		10%	1,709		1,619		6%
Operating expenses	830		762		9%	1,625		1,540		6%
Segment profit	$	41	$	32	28%	$	84	$	79	6%
Profit margin	4.7%		4.0%			4.9%		4.9%

Industrial Revenues and Operating Expenses

The following factors contributed to the change in Industrial’s revenues ~~from~~for the ~~prior year quarter:~~periods:


~~(In millions)~~	Q1 2022 versus Q1 2021
~~Pricing~~	$	46
~~Volume and mix~~	~~(24)~~
~~Foreign exchange~~	~~(9)~~
~~Total change~~	$	13


(In millions)	Q2 2022 versus Q2 2021		YTD 2022 versus YTD 2021
Pricing	$	64	$	110
Volume and mix	37		13
Foreign exchange	(24)		(33)
Total change	$	77	$	90

Industrial segment revenues increased ~~$13~~$77 million, 2%10%, in the ~~first~~second quarter of 2022, compared with the ~~first~~second quarter of 2021, primarily due to a $64 million favorable impact from pricing and $37 million from higher volume and mix, principally in the Specialized Vehicles product line, partially offset by $24 million from foreign exchange rate fluctuations, primarily related to the Euro.

Industrial segment revenues increased $90 million, 6%, in the first half of ~~$46~~2022, compared with the first half of 2021, primarily due to a $110 million favorable impact from pricing, principally in the Specialized Vehicles product line, partially offset by $33 million from foreign exchange rate fluctuations, primarily related to the Euro. Higher volume and mix in the Specialized Vehicles product line was partially offset by lower volume and mix in the Fuel Systems and Functional Components product line, primarily due to the impact of global supply chain shortages on our original equipment manufacturer customers.

~~Operating~~Industrial's operating expenses increased ~~$17~~$68 million, 2%9%, in the ~~first~~second quarter of 2022, compared with the ~~first~~second quarter of 2021, primarily reflecting inflation of ~~$45~~$70 million, largely in material costs, and the impact of higher volume and mix described above, partially offset by a favorable impact of $22 million from foreign exchange rate fluctuations.

Industrial's operating expenses increased $85 million, 6%, in the first half of 2022, compared with the first half of 2021, primarily reflecting inflation of $115 million, largely in material costs, partially offset by ~~the~~a favorable impact of ~~lower volume and mix described above.~~$30 million from foreign exchange rate fluctuations.

Industrial Segment Profit

The following factors contributed to the change in Industrial’s segment profit ~~from~~for the ~~prior year quarter:~~periods:


~~(In millions)~~	Q1 2022 versus Q1 2021
~~Volume and mix~~	$	~~(6)~~

~~Performance and other~~	2

~~Total change~~	$	~~(4)~~


(In millions)	Q2 2022 versus Q2 2021		YTD 2022 versus YTD 2021
Performance	$	6	$	8
Volume and mix	11		5
Inflation, net of pricing	(6)		(5)
Foreign exchange	(2)		(3)
Total change	$	9	$	5

Segment profit for the Industrial segment ~~decreased $4~~increased $9 million, 9%28%, in the ~~first~~second quarter of 2022, compared with the ~~first~~second quarter of 2021, primarily due to ~~lower~~higher volume and mix of $11 million described ~~above.~~above and favorable performance of $6 million, partially offset by inflation, net of pricing of $6 million.

~~Finance~~

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Three Months Ended
(In millions) April 2,
2022 April 3,
2021
Revenues $ 16 $ 15
Segment profit 9 6

~~Finance~~Segment profit for the Industrial segment ~~revenues~~ increased $1$5 million, 6%, in the first ~~quarter~~half of 2022, compared with the first half of 2021, primarily due to favorable performance of $8 million and higher volume and mix of $5 million described above, partially offset by inflation, net of pricing of $5 million.

Textron eAviation

In the second quarter of 2022, Textron eAviation segment revenues and segment loss totaled $5 million and $8 million, respectively, which reflected the operating results of Pipistrel since its acquisition along with research and development costs for initiatives related to the development of sustainable aviation solutions.

Finance


	Three Months Ended				Six Months Ended
(In millions)	July 2, 2022		July 3, 2021		July 2, 2022		July 3, 2021
Revenues	$	14	$	12	$	30	$	27
Segment profit	10		3		19		9

Finance segment revenues increased $2 million and $3 million in the second quarter and first half of 2022, respectively, compared with the corresponding periods of 2021, and segment profit increased ~~$3 million.~~$7 million and $10 million, respectively. The following table reflects information about the Finance segment’s credit performance related to finance receivables.


(Dollars in millions)	(Dollars in millions)	April 2, 2022		January 1, 2022		(Dollars in millions)	July 2, 2022		January 1, 2022
Finance receivables	Finance receivables	$	603	$	630	Finance receivables	$	586	$	630
Allowance for credit losses	Allowance for credit losses	25		25		Allowance for credit losses	25		25
Ratio of allowance for credit losses to finance receivables	Ratio of allowance for credit losses to finance receivables	4.15%		3.97%		Ratio of allowance for credit losses to finance receivables	4.27%		3.97%
Nonaccrual finance receivables	Nonaccrual finance receivables	77		94		Nonaccrual finance receivables	68		94
Ratio of nonaccrual finance receivables to finance receivables	Ratio of nonaccrual finance receivables to finance receivables	12.77%		14.92%		Ratio of nonaccrual finance receivables to finance receivables	11.60%		14.92%
60+ days contractual delinquency	60+ days contractual delinquency	2		1		60+ days contractual delinquency	5		1
60+ days contractual delinquency as a percentage of finance receivables	60+ days contractual delinquency as a percentage of finance receivables	0.33%		0.16%		60+ days contractual delinquency as a percentage of finance receivables	0.85%		0.16%

We believe our allowance for credit losses adequately covers our exposure on these loans as our estimated collateral values largely exceed the outstanding loan amounts. Key portfolio quality indicators are discussed in Note 3 to the Consolidated Financial Statements.

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Liquidity and Capital Resources

Our financings are conducted through two separate borrowing groups. The Manufacturing group consists of Textron consolidated with its majority-owned subsidiaries that operate in the Textron Aviation, Bell, Textron Systems and Industrial ~~segments.~~segments along with Textron eAviation, a new segment formed at the beginning of the second quarter of 2022. The Finance group, which also is the Finance segment, consists of Textron Financial Corporation and its consolidated subsidiaries. We designed this framework to enhance our borrowing power by separating the Finance group. Our Manufacturing group operations include the development, production and delivery of tangible goods and services, while our Finance group provides financial services. Due to the fundamental differences between each borrowing group’s activities, investors, rating agencies and analysts use different measures to evaluate each group’s performance. To support those evaluations, we present balance sheet and cash flow information for each borrowing group within the Consolidated Financial Statements.

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


(Dollars in millions)	(Dollars in millions)	April 2, 2022		January 1, 2022		(Dollars in millions)	July 2, 2022		January 1, 2022
Manufacturing group	Manufacturing group					Manufacturing group
Cash and equivalents	Cash and equivalents	$	1,978	$	1,922	Cash and equivalents	$	1,764	$	1,922
Debt	Debt	3,185		3,185		Debt	3,184		3,185
Shareholders’ equity	Shareholders’ equity	6,917		6,815		Shareholders’ equity	6,801		6,815
Capital (debt plus shareholders’ equity)	Capital (debt plus shareholders’ equity)	10,102		10,000		Capital (debt plus shareholders’ equity)	9,985		10,000
Net debt (net of cash and equivalents) to capital	Net debt (net of cash and equivalents) to capital	15%		16%		Net debt (net of cash and equivalents) to capital	17%		16%
Debt to capital	Debt to capital	32%		32%		Debt to capital	32%		32%
Finance group	Finance group					Finance group
Cash and equivalents	Cash and equivalents	$	148	$	195	Cash and equivalents	$	77	$	195
Debt	Debt	470		582		Debt	382		582

We believe that our calculations of debt to capital and net debt to capital are useful measures as they provide a summary indication of the level of debt financing (i.e., leverage) that is in place to support our capital structure, as well as to provide an indication of the capacity to add further leverage. We expect to have sufficient cash to meet our needs based on our existing cash balances, the cash we expect to generate from our manufacturing operations and the availability of our existing credit facility.

Credit Facilities and Other Sources of Capital

Textron has a senior unsecured revolving credit facility for an aggregate principal amount of $1.0 billion, of which up to $100 million is available for the issuance of letters of credit. We may elect to increase the aggregate amount of commitments under the facility to up to $1.3 billion by designating an additional lender or by an existing lender agreeing to increase its commitment. The facility expires in October 2024, subject to up to two one-year extensions at our option with the consent of lenders representing a majority of the commitments under the facility. There were no amounts borrowed against the facility and there were $9 million of outstanding letters of credit issued under the facility at both ~~April~~July 2, 2022 and January 1, 2022.

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

Manufacturing Group Cash Flows

Cash flows for the Manufacturing group as presented in our Consolidated Statements of Cash Flows are summarized below:


		Three Months Ended					Six Months Ended
(In millions)	(In millions)	April 2, 2022		April 3, 2021		(In millions)	July 2, 2022		July 3, 2021
Operating activities	Operating activities	$	225	$	107	Operating activities	$	589	$	679
Investing activities	Investing activities	(28)		(14)		Investing activities	(269)		(90)
Financing activities	Financing activities	(139)		(339)		Financing activities	(449)		(740)

In the first ~~quarter~~half of 2022, cash flows from operating activities ~~were $225~~decreased $90 million to $589 million, compared with ~~$107~~$679 million in the first ~~quarter~~half of ~~2021. The $118 million year-over-year increase in cash flows was~~2021, primarily due to ~~working capital improvements, which included $244~~an increase in income tax payments of $140 million, largely resulting from ~~contract liabilities, largely reflecting higher customer deposits~~a change in tax legislation. Effective at the ~~Textron Aviation segment,~~beginning of 2022, the Tax Cuts and ~~$140 million from accounts receivable, partially offset by a $221 million change in accounts payable.~~

~~Cash flows used in investing activities~~Jobs Act of 2017 eliminated the option to deduct research and development expenditures immediately in the ~~first quarter~~year incurred and requires taxpayers to amortize such expenditures over five years. Without the option to deduct these expenses in the year incurred, our tax payments are expected to increase by approximately $300 million for the full year of 2022, ~~included capital expenditures~~depending on the final amount of ~~$48 million, partially offset by $18 million of proceeds from~~research and development expenses incurred during the sale of property, plant and equipment. Investing activities in the first quarter of 2021 included capital expenditures of $53 million, partially offset by $39 million of net proceeds from the disposition of TRU Simulation + Training Canada Inc.year.

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Cash flows used in investing activities in the first half of 2022 included $198 million of net cash paid for business acquisitions, largely related to the Pipistrel acquisition discussed in Note 2 to the Consolidated Financial Statements, and $114 million of capital expenditures. Investing activities in the first half of 2021 included $128 million of capital expenditures, partially offset by $38 million of net proceeds from the disposition of TRU Simulation + Training Canada Inc.

Cash flows used in financing activities in the first ~~quarter~~half of 2022 included ~~$157~~$439 million of cash paid to repurchase an aggregate of ~~2.2~~6.6 million shares of our common stock. In the first ~~quarter~~half of 2021, cash flows used in financing activities included ~~$267~~$519 million of payments on long-term debt and ~~$91~~$287 million of cash paid to repurchase an aggregate of ~~1.8~~4.8 million shares of our common stock.

On January 25, 2022, we announced the authorization of the repurchase of up to 25 million shares of our common stock. This new plan allows us to continue our practice of repurchasing shares to offset the impact of dilution from stock-based compensation and benefit plans and for opportunistic capital management purposes. The 2022 plan has no expiration date and replaced the prior 2020 share repurchase authorization.

Finance Group Cash Flows

Cash flows for the Finance group as presented in our Consolidated Statements of Cash Flows are summarized below:


		Three Months Ended					Six Months Ended
(In millions)	(In millions)	April 2, 2022		April 3, 2021		(In millions)	July 2, 2022		July 3, 2021
Operating activities	Operating activities	$	(2)	$	5	Operating activities	$	(9)	$	5
Investing activities	Investing activities	74		88		Investing activities	100		114
Financing activities	Financing activities	(119)		(20)		Financing activities	(209)		(34)

The Finance group’s cash flows from investing activities included collections on finance receivables totaling ~~$40~~$79 million and ~~$89~~$137 million in the first ~~quarter~~half of 2022 and 2021, respectively, and finance receivable originations of $9$23 million and $7$29 million, respectively. Cash flows provided by investing activities in the first ~~quarter~~half of 2022 also included ~~$43~~$44 million of other investing activities, largely related to proceeds from the sale of operating lease assets. In the first ~~quarter~~half of 2022 and 2021, financing activities included payments on long-term and nonrecourse debt of ~~$119~~$209 million and ~~$20~~$34 million, respectively.

Consolidated Cash Flows

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


		Three Months Ended					Six Months Ended
(In millions)	(In millions)	April 2, 2022		April 3, 2021		(In millions)	July 2, 2022		July 3, 2021
Operating activities	Operating activities	$	241	$	181	Operating activities	$	615	$	773
Investing activities	Investing activities	28		5		Investing activities	(204)		(65)
Financing activities	Financing activities	(258)		(359)		Financing activities	(658)		(774)

In the first ~~quarter~~half of 2022, cash flows from operating activities ~~were $241~~decreased $158 million to $615 million, compared with ~~$181~~$773 million in the first ~~quarter~~half of ~~2021. The $60 million year-over-year increase in cash flows was~~2021, primarily due to ~~working capital improvements, partially offset by~~an increase in income tax payments of $151 million, largely resulting from a $51 million decrease in cash flows from captive financing activities. The working capital improvements primarily included $244 million from contract liabilities, largely reflecting higher customer deposits at the Textron Aviation segment, and $140 million from accounts receivable, partially offset by a $221 million change in ~~accounts payable.~~tax legislation discussed above.

Cash flows ~~provided by~~used in investing activities in the first ~~quarter~~half of 2022 included ~~$45~~$198 million of net cash paid for business acquisitions, largely related to the Pipistrel acquisition, and $114 million of capital expenditures, partially offset by $44 million of other investing activities, ~~largely related to~~which included proceeds from the sale of operating lease ~~assets, and $18 million of proceeds from the sale of property, plant and equipment, partially offset by capital expenditures of $48 million.~~assets. Investing activities in the first ~~quarter~~half of 2021 included $128 million of capital expenditures, ~~of $53 million,~~ partially offset by ~~$39~~$38 million of net proceeds from the disposition of TRU Simulation + Training Canada Inc.

Cash flows used in financing activities in the first ~~quarter~~half of 2022 included ~~$157~~$439 million of cash paid to repurchase shares of our outstanding common stock and ~~$121~~$223 million of payments on long-term debt. In the first ~~quarter~~half of 2021, cash flows used in financing activities included ~~$287~~$553 million of payments on long-term debt and ~~$91~~$287 million of cash paid to repurchase shares of our outstanding common stock.

Captive Financing and Other Intercompany Transactions

The Finance group provides financing primarily to purchasers of new and pre-owned Textron Aviation aircraft and Bell helicopters manufactured by our Manufacturing group, otherwise known as captive financing. In the Consolidated Statements of Cash Flows, cash received from customers is reflected as operating activities when received from third parties. However, in the cash flow information provided for the separate borrowing groups, cash flows related to captive financing activities are reflected based on the operations of each group. For example, when product is sold by our Manufacturing group to a customer and is financed by the

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Finance group, the origination of the finance receivable is recorded within investing activities as a cash outflow in the Finance group’s statement of cash flows. Meanwhile, in the Manufacturing group’s statement of cash flows, the cash received from the Finance group on the customer’s behalf is recorded within operating cash flows as a cash inflow. Although cash is transferred

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between the two borrowing groups, there is no cash transaction reported in the consolidated cash flows at the time of the original financing. These captive financing activities, along with all significant intercompany transactions, are reclassified or eliminated from the Consolidated Statements of Cash Flows.

Reclassification adjustments included in the Consolidated Statements of Cash Flows are summarized below:


		Three Months Ended					Six Months Ended
(In millions)	(In millions)	April 2, 2022		April 3, 2021		(In millions)	July 2, 2022		July 3, 2021
Reclassification adjustments from investing activities to operating activities:	Reclassification adjustments from investing activities to operating activities:					Reclassification adjustments from investing activities to operating activities:
Cash received from customers	Cash received from customers	$	27	$	76	Cash received from customers	$	58	$	118
Finance receivable originations for Manufacturing group inventory sales	Finance receivable originations for Manufacturing group inventory sales	(9)		(7)		Finance receivable originations for Manufacturing group inventory sales	(23)		(29)

Total reclassification adjustments from investing activities to operating activities	Total reclassification adjustments from investing activities to operating activities	$	18	$	69	Total reclassification adjustments from investing activities to operating activities	$	35	$	89

Critical Accounting Estimates Update

Our Consolidated Financial Statements are prepared in conformity with U.S. generally accepted accounting principles, which require us to make estimates and assumptions that affect the amounts reported in the financial statements. The accounting estimates that we believe are most critical to the portrayal of our financial condition and results of operations are reported in Item 7 of our Annual Report on Form 10-K for the year ended January 1, 2022. The following section provides an update of the year-end disclosure.

Revenue Recognition

A substantial portion of our revenues is related to long-term contracts with the U.S. Government, including those under the U.S. Government-sponsored foreign military sales program, for the design, development, manufacture or modification of aerospace and defense products as well as related services. We generally use the cost-to-cost method to measure progress for these contracts because it best depicts the transfer of control to the customer that occurs as we incur costs on our contracts. Under this measure, the extent of progress towards completion is measured based on the ratio of costs incurred to date to the estimated costs at completion of the performance obligation, and revenue is recorded proportionally as costs are incurred.

Changes in our estimate of the total expected cost or in the transaction price for a contract typically impact our profit booking rate. We utilize the cumulative catch-up method of accounting to recognize the impact of these changes on our profit booking rate for a contract. Under this method, the inception-to-date impact of a profit adjustment on a contract is recognized in the period the adjustment is identified. The impact of our cumulative catch-up adjustments on segment profit recognized in prior periods is presented below:


		Three Months Ended					Three Months Ended				Six Months Ended
(In millions)	(In millions)		April 2, 2022		April 3, 2021			(In millions)	July 2, 2022		July 3, 2021		July 2, 2022		July 3, 2021
Gross favorable	Gross favorable		$	16	$	36		Gross favorable	$	25	$	40	$	41	$	76
Gross unfavorable	Gross unfavorable		(33)		(22)			Gross unfavorable	(29)		(25)		(62)		(47)
Net adjustments	Net adjustments		$	(17)	$	14		Net adjustments	$	(4)	$	15	$	(21)	$	29

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Forward-Looking Information

Certain statements in this Quarterly Report on Form 10-Q and other oral and written statements made by us from time to time are “forward-looking statements” within the meaning of the Private Securities Litigation Reform Act of 1995. These forward-looking statements, which may describe strategies, goals, outlook or other non-historical matters, or project revenues, income, returns or other financial measures, often include words such as “believe,” “expect,” “anticipate,” “intend,” “plan,” “estimate,” “guidance,” “project,” “target,” “potential,” “will,” “should,” “could,” “likely” or “may” and similar expressions intended to identify forward-looking statements. These statements are only predictions and involve known and unknown risks, uncertainties, and other factors that may cause our actual results to differ materially from those expressed or implied by such forward-looking statements. Given these uncertainties, you should not place undue reliance on these forward-looking statements. Forward-looking statements speak only as of the date on which they are made, and we undertake no obligation to update or revise any forward-looking statements. In addition to those factors described in our 2021 Annual Report on Form 10-K under “Risk Factors,” among the factors that could cause actual results to differ materially from past and projected future results are the following:

•Interruptions in the U.S. Government’s ability to fund its activities and/or pay its obligations;

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

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

•The U.S. Government’s ability to unilaterally modify or terminate its contracts with us for the U.S. Government’s convenience or for our failure to perform, to change applicable procurement and accounting policies, or, under certain circumstances, to withhold payment or suspend or debar us as a contractor eligible to receive future contract awards;

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

•Volatility in the global economy or changes in worldwide political conditions that adversely impact demand for our products;

•Volatility in interest rates or foreign exchange rates and inflationary pressures;

•Risks related to our international business, including establishing and maintaining facilities in locations around the world and relying on joint venture partners, subcontractors, suppliers, representatives, consultants and other business partners in connection with international business, including in emerging market countries;

•Our Finance segment’s ability to maintain portfolio credit quality or to realize full value of receivables;

•Performance issues with key suppliers or subcontractors;

•Legislative or regulatory actions, both domestic and foreign, impacting our operations or demand for our products;

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

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

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

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

•Pension plan assumptions and future contributions;

•Demand softness or volatility in the markets in which we do business;

•Cybersecurity threats, including the potential misappropriation of assets or sensitive information, corruption of data or operational disruption;

•Difficulty or unanticipated expenses in connection with integrating acquired businesses;

•The risk that acquisitions do not perform as planned, including, for example, the risk that acquired businesses will not achieve revenues and profit projections;

•The impact of changes in tax legislation;

•Risks and uncertainties related to the ongoing impact of the COVID-19 pandemic and the ~~potential impact of Russia’s invasion of,~~war between Russia and ~~continued military attacks on,~~ Ukraine on our business and operations; and

•The ability of our businesses to hire and retain the highly skilled personnel necessary for our businesses to succeed.

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Item 3. Quantitative and Qualitative Disclosures About Market Risk

There has been no significant change in our exposure to market risk during the fiscal quarter ended ~~April~~July 2, 2022. For discussion of our exposure to market risk, refer to Item 7A. Quantitative and Qualitative Disclosures about Market Risk contained in Textron’s 2021 Annual Report on Form 10-K.

Item 4. Controls and Procedures

We performed an evaluation of the effectiveness of our disclosure controls and procedures as of ~~April~~July 2, 2022. The evaluation was performed with the participation of senior management of each business segment and key Corporate functions, under the supervision of our Chairman, President and Chief Executive Officer (CEO) and our Executive Vice President and Chief Financial Officer (CFO). Based on this evaluation, the CEO and CFO concluded that our disclosure controls and procedures were operating and effective as of ~~April~~July 2, 2022.

There were no changes in our internal control over financial reporting during the fiscal quarter ended ~~April~~July 2, 2022 that materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.

PART II. OTHER INFORMATION

Item ~~1A. Risk Factors~~1. Legal Proceedings

~~The global economic impacts of Russia’s invasion of Ukraine could adversely affect our business, financial condition or operating results.~~

~~Russia’s invasion of, and continued military attacks~~As previously reported in Textron’s Annual Report on ~~Ukraine and~~Form 10-K for the resulting economic sanctions imposed by the international community have impacted the global economy and given rise to potential global security issues that may adversely affect international business and economic conditions. Certain of our direct or indirect suppliers have been negatively impacted by these events, resulting in increased costs to us for certain materials and components as well as potential shortages of critical components for certain of our products. These cost increases, along with increased energy and shipping costs, may negatively impact our profitability. Moreover, if we or our suppliers are unable to source critical components from alternative suppliers, our ability to meet our obligations to our customers could be adversely affected. In addition, these events have caused additional disruptionfiscal year ended January 4, 2020, on August 22, 2019, a purported shareholder class action lawsuit was filed in the ~~supply chains~~United States District Court in the Southern District of ~~our automotive OEM customers, already experiencing disruption due~~New York against Textron, its Chairman and Chief Executive Officer and its Chief Financial Officer. The suit, filed by Building Trades Pension Fund of Western Pennsylvania, alleges that the defendants violated the federal securities laws by making materially false and misleading statements and concealing material adverse facts related to the ~~impacts~~Arctic Cat acquisition and integration. The complaint seeks unspecified compensatory damages. On November 12, 2019, the Court appointed IWA Forest Industry Pension Fund (IWA) as the sole lead plaintiff in the case. On December 24, 2019, IWA filed an Amended Complaint in the now entitled In re Textron Inc. Securities Litigation. On February 14, 2020, IWA filed a Second Amended Complaint, and on March 6, 2020, Textron filed a motion to dismiss the Second Amended Complaint. On July 20, 2020, the Court granted Textron’s motion to dismiss and closed the case. On August 18, 2020, plaintiffs filed a notice of appeal contesting the dismissal, which Textron opposed. On September 17, 2021, the Second Circuit Court of Appeals narrowed the case, unanimously upholding dismissal of most of the ~~COVID-19 pandemic, which has caused, and may continue to cause, reduced demand for our automotive products. The continuation~~Second Amended Complaint, but reversing dismissal of one aspect of the ~~invasion~~Second Amended Complaint and remanding that remaining portion back to the District Court for further proceedings.

On June 23, 2022, as a result of ~~Ukraine~~a mediation process overseen by ~~Russia could lead~~an independent mediator, the Parties entered into a settlement agreement, subject to court approval, to settle plaintiff’s claims for an amount not material to Textron. Neither Textron nor any of the other ~~supply chain disruptions, increased inflationary pressures, and volatility~~defendants admitted any wrongdoing with respect to the allegations in ~~global markets and industries that could negatively impact our operations. Furthermore,~~ the potential for retaliatory acts of cyberwarfare from Russia against U.S. companies in response to increasing sanctions on Russia could result in increased cyber-attacks against us. The impact of any one or more of these or other factors could adversely affect our business, financial condition or operating results.case.

Item 2. Unregistered Sales of Equity Securities and Use of Proceeds

The following provides information about our ~~first~~second quarter of 2022 repurchases of equity securities that are registered pursuant to Section 12 of the Securities Exchange Act of 1934, as amended:

Period (shares in thousands) Total
Number of
Shares
Purchased * Average Price
Paid per Share
(excluding
commissions) Total Number of
Shares Purchased as
part of Publicly
Announced Plan * Maximum
Number of Shares
that may yet be
Purchased under
the Plan
January 2, 2022 – February 5, 2022 425 $ 67.85 425 24,575
February 6, 2022 – March 5, 2022 1,175 69.72 1,175 23,400
March 6, 2022 – April 2, 2022 645 72.36 645 22,755
Total 2,245 $ 70.13 2,245


Period (shares in thousands)	Total Number of Shares Purchased *	Average Price Paid per Share (excluding commissions)		Total Number of Shares Purchased as part of Publicly Announced Plan *	Maximum Number of Shares that may yet be Purchased under the Plan
April 3, 2022 – May 7, 2022	1,030	$	71.09	1,030	21,725
May 8, 2022 – June 4, 2022	1,560	64.16		1,560	20,165
June 5, 2022 – July 2, 2022	1,775	61.31		1,775	18,390
Total	4,365	$	64.64	4,365

* On January 25, 2022, our Board of Directors authorized the repurchase of up to 25 million shares of our common stock. This new plan has no expiration date and replaced the existing plan adopted in 2020. ~~There were no shares repurchased under the 2020 plan during the period January 2, 2022 through January 24, 2022.~~

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~~Item 5. Other Information~~

Because this Quarterly Report on Form 10-Q is being filed within four business days from the date of the reportable event, we have elected to make the following disclosure in this Quarterly Report on Form 10-Q instead of in a Current Report on Form 8-K under Item 5.07.

~~Item 5.07~~

a.~~The 2022 Annual Meeting of Shareholders of Textron was held on April 27, 2022.~~

b.~~The results of the voting on the matters submitted to our shareholders are as follows:~~

1.~~The following persons were elected to serve as directors until the next annual shareholders’ meeting and received the following votes:~~

For Against Abstain Broker Non-Vote
Scott C. Donnelly 185,085,248 6,171,993 496,753 9,891,438
Richard F. Ambrose 188,895,041 1,974,593 884,360 9,891,438
Kathleen M. Bader 184,404,855 6,605,989 743,150 9,891,438
R. Kerry Clark 183,783,954 7,091,746 878,294 9,891,438
James T. Conway 184,508,301 5,609,676 1,636,017 9,891,438
Ralph D. Heath 187,719,466 3,109,784 924,744 9,891,438
Deborah Lee James 186,972,233 3,910,413 871,348 9,891,438
Lionel L. Nowell III 188,210,654 2,611,730 931,610 9,891,438
James L. Ziemer 184,592,336 6,200,981 960,677 9,891,438
Maria T. Zuber 186,876,029 3,957,136 920,829 9,891,438

2.~~The advisory (non-binding) resolution to approve the compensation of our named executive officers, as disclosed in our proxy statement, was approved by the following vote:~~

For Against Abstain Broker Non-Vote
179,327,209 11,237,801 1,188,984 9,891,438

3.~~The appointment of Ernst & Young LLP by the Audit Committee as Textron's independent registered public accounting firm for 2022 was ratified by the following vote:~~

For Against Abstain
196,026,073 5,123,659 495,700

4.~~The shareholder proposal regarding special meetings was rejected by the following vote:~~

For Against Abstain Broker Non-Vote
64,054,217 125,508,964 2,190,813 9,891,438

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Item 6. Exhibits


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

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

32.1			Certification of Chief Executive Officer Pursuant to 18 U.S.C. 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002

32.2			Certification of Chief Financial Officer Pursuant to 18 U.S.C. 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002

101			The following materials from Textron Inc.’s Quarterly Report on Form 10-Q for the quarterly period ended ~~April~~July 2, 2022, formatted in XBRL (eXtensible Business Reporting Language): (i) the Consolidated Statements of Operations, (ii) the Consolidated Statements of Comprehensive Income, (iii) the Consolidated Balance Sheets, (iv) the Consolidated Statements of Cash Flows and (v) the Notes to the Consolidated Financial Statements.

104			Cover Page Interactive Data File (formatted as Inline XBRL and contained in Exhibit 101).

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Signatures

Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.


		TEXTRON INC.

Date:	~~April~~July 28, 2022	/s/ Mark S. Bamford
		Mark S. Bamford Vice President and Corporate Controller (principal accounting officer)

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	March 1, 2022		March 1, 2021
Fair value of options at grant date	$	19.95	$	15.05
Dividend yield	0.1%		0.2%
Expected volatility	29.2%		33.6%
Risk-free interest rate	1.9%		0.7%
Expected term (in years)	4.8		4.7


(Options in thousands)	Number of Options	Weighted- Average Exercise Price
Outstanding at January 1, 2022	8,289	$	46.18
Granted	1,049	71.07
Exercised	(705)	(38.35)
Forfeited or expired	(28)	(45.34)
Outstanding at April 2, 2022	8,605	$	49.86
Exercisable at April 2, 2022	5,902	$	47.13


	Units Payable in Stock			Units Payable in Cash
(Shares/Units in thousands)	Number of Shares	Weighted- Average Grant Date Fair Value		Number of Units	Weighted- Average Grant Date Fair Value
Outstanding at January 1, 2022, nonvested	569	$	50.01	1,158	$	49.92
Granted	84	71.07		223	71.07
Vested	(126)	(53.95)		(246)	(54.02)
Forfeited	—	—		(10)	(49.55)
Outstanding at April 2, 2022, nonvested	527	$	52.44	1,125	$	53.23


(Units in thousands)	Number of Units	Weighted- Average Grant Date Fair Value
Outstanding at January 1, 2022, nonvested	526	$	45.87
Granted	174	71.07
Outstanding at April 2, 2022, nonvested	700	$	52.14


	For	Against	Abstain	Broker Non-Vote
Scott C. Donnelly	185,085,248	6,171,993	496,753	9,891,438
Richard F. Ambrose	188,895,041	1,974,593	884,360	9,891,438
Kathleen M. Bader	184,404,855	6,605,989	743,150	9,891,438
R. Kerry Clark	183,783,954	7,091,746	878,294	9,891,438
James T. Conway	184,508,301	5,609,676	1,636,017	9,891,438
Ralph D. Heath	187,719,466	3,109,784	924,744	9,891,438
Deborah Lee James	186,972,233	3,910,413	871,348	9,891,438
Lionel L. Nowell III	188,210,654	2,611,730	931,610	9,891,438
James L. Ziemer	184,592,336	6,200,981	960,677	9,891,438
Maria T. Zuber	186,876,029	3,957,136	920,829	9,891,438