Textron (TXT) 10-Q 31 Jul 09 2010 Q1 Quarterly report Financial data

Document and Company Informatio

Document and Company Information (USD $)
	6 Months Ended Jul. 04, 2009	Jul. 18, 2009
Document And Company Information [Abstract]
Entity Registrant Name	Textron Inc.
Entity Central Index Key	0000217346
Document Type	10-Q
Document Period End Date	2009-07-04
Amendment Flag	false
Amendment Description	N/A
Current Fiscal Year End Date	--01-02
Entity Well-known Seasoned Issuer	Yes
Entity Voluntary Filers	No
Entity Current Reporting Status	Yes
Entity Filer Category	Large Accelerated Filer
Entity Public Float	$2,512,000,000
Entity Common Stock, Shares Outstanding		270,236,965

Consolidated Statements of Oper

Consolidated Statements of Operations (USD $)
In Millions, except Per Share data	3 Months Ended Jul. 04, 2009	3 Months Ended Jun. 28, 2008	6 Months Ended Jul. 04, 2009	6 Months Ended Jun. 28, 2008
Segment Manufacturing Group Member
Costs, expenses and other
Income (loss) from continuing operations			$99	$440
Income from discontinued operations, net of income taxes			47	14
Net income (loss)			146	454
Segment Finance Group Member
Costs, expenses and other
Provision for losses on finance receivables			163	67
Income (loss) from continuing operations			(118)	35
Net income (loss)			(118)	35
Consolidated
Revenues
Manufacturing revenues	2,526	3,507	4,930	6,599
Finance revenues	86	177	208	391
Total revenues	2,612	3,684	5,138	6,990
Costs, expenses and other
Cost of sales	2,101	2,775	4,100	5,209
Selling and administrative	340	393	686	784
Interest expense, net	75	101	157	216
Provision for losses on finance receivables	87	40	163	67
Gain on sale of assets	0	0	(50)	0
Special charges	129	0	161	0
Total costs, expenses and other	2,732	3,309	5,217	6,276
Income (loss) from continuing operations before income taxes	(120)	375	(79)	714
Income tax expense (benefit)	(58)	125	(60)	239
Income (loss) from continuing operations	(62)	250	(19)	475
Income from discontinued operations, net of income taxes	4	8	47	14
Net income (loss)	($58)	$258	$28	$489
Basic earnings per share
Basic earnings per share, Continuing operations	-0.23	$1	-0.07	1.9
Basic earnings per share, Discontinued operations	0.01	0.03	0.18	0.06
Basic earnings per share	-0.22	1.03	0.11	1.96
Diluted earnings per share
Diluted earnings per share, Continuing operations	-0.23	0.98	-0.07	1.87
Diluted earnings per share, Discontinued operations	0.01	0.03	0.18	0.05
Diluted earnings per share	-0.22	1.01	0.11	1.92
Dividends per share
Dividends per share of common stock	0.02	0.23	0.04	0.46
Consolidated | Series A, $2.08 Preferred stock
Dividends per share
Preferred Stock Dividends per share	0.52	0.52	1.04	1.04
Consolidated | Series B, $1.40 Preferred stock
Dividends per share
Preferred Stock Dividends per share	0.35	0.35	0.7	0.7

Consolidated Balance Sheets

Consolidated Balance Sheets (USD $)
In Millions, except Share data	Jul. 04, 2009	Jan. 03, 2009
Segment Manufacturing Group Member
Assets
Cash and cash equivalents	$1,396	$531
Accounts receivable, net	839	894
Inventories	3,001	3,093
Other current assets	471	584
Assets of discontinued operations	58	334
Total current assets	5,765	5,436
Property, plant and equipment, less accumulated depreciation and amortization of $2,574 and $2,436	2,005	2,088
Goodwill	1,697	1,698
Other assets	1,858	1,465
Total assets	11,325	10,687
Liabilities
Current portion of long-term debt and short-term debt	6	876
Accounts payable	721	1,101
Accrued liabilities	2,193	2,609
Liabilities of discontinued operations	119	195
Total current liabilities	3,039	4,781
Other liabilities	2,892	2,926
Long-term debt	3,354	1,693
Total liabilities	9,285	9,400
Segment Finance Group Member
Assets
Cash and cash equivalents	489	16
Finance receivables held for investment, net	6,553	6,724
Finance receivables held for sale	613	1,658
Other assets	864	946
Total assets	8,519	9,344
Liabilities
Other liabilities	376	540
Deferred income taxes	206	337
Debt	7,057	7,388
Total liabilities	7,639	8,265
Consolidated
Assets
Cash and cash equivalents	1,885	547
Total assets	19,844	20,031
Liabilities
Total liabilities	16,924	17,665
Shareholders' equity
Preferred stock	2	2
Common stock	35	32
Capital surplus	1,406	1,229
Retained earnings	3,043	3,025
Accumulated other comprehensive loss	(1,258)	(1,422)
Total shareholders' equity including cost of treasury shares	3,228	2,866
Less cost of treasury shares	308	500
Total shareholders' equity	2,920	2,366
Total liabilities and shareholders' equity	$19,844	$20,031
Common shares outstanding (in thousands)	270,051	242,041

Consolidated Balance Sheets (Pa

Consolidated Balance Sheets (Parenthetical) (Segment Manufacturing Group Member, USD $)
In Millions	Jul. 04, 2009	Jan. 03, 2009
Accumulated depreciation and amortization	$2,574	$2,436

Consolidated Statements of Cash

Consolidated Statements of Cash Flows (USD $)
In Millions	6 Months Ended Jul. 04, 2009	6 Months Ended Jun. 28, 2008
Segment Manufacturing Group Member
Cash flows from operating activities:
Net income (loss)	$146	$454
Income from discontinued operations	47	14
Income (loss) from continuing operations	99	440
Adjustments to reconcile income (loss) from continuing operations to net cash provided by (used in) operating activities:
Dividends received from the Finance group	184	142
Capital contribution paid to Finance group	(88)	0
Non-cash items:
Depreciation and amortization	178	180
Asset impairment charges	52	0
Share-based compensation	18	27
Amortization of interest expense on convertible notes	5	0
Deferred income taxes	(3)	8
Changes in assets and liabilities:
Accounts receivable, net	70	(90)
Inventories	81	(632)
Other assets	(44)	76
Accounts payable	(382)	229
Accrued and other liabilities	(256)	27
Other operating activities, net	34	28
Net cash provided by (used in) operating activities of continuing operations	(52)	435
Net cash used in operating activities of discontinued operations	(12)	(31)
Net cash provided by (used in) operating activities	(64)	404
Cash flows from investing activities:
Net cash used in acquisitions	0	(100)
Capital expenditures	(113)	(188)
Proceeds from sale of property, plant and equipment	2	1
Other investing activities, net	(18)	0
Net cash provided by (used in) investing activities of continuing operations	(129)	(287)
Net cash provided by (used in) investing activities of discontinued operations	261	(6)
Net cash provided by (used in) investing activities	132	(293)
Cash flows from financing activities:
Increase (decrease) in short-term debt	(869)	82
Proceeds from long-term lines of credit	1,230	0
Payments on long-term lines of credit	(28)	0
Principal payments on long-term debt	(30)	(47)
Payments on borrowings against officers life insurance policies	(410)	0
Intergroup financing	133	0
Proceeds from issuance of convertible notes, net of fees paid	582	0
Purchase of convertible note hedge	(140)	0
Proceeds from issuance of common stock and warrants	333	0
Proceeds from option exercises	0	38
Purchases of Textron common stock	0	(134)
Dividends paid	(10)	(106)
Net cash provided by (used in) financing activities of continuing operations	791	(167)
Net cash used in financing activities of discontinued operations	0	(2)
Net cash provided by (used in) financing activities	791	(169)
Effect of exchange rate changes on cash and cash equivalents	6	11
Net increase (decrease) in cash and cash equivalents	865	(47)
Cash and cash equivalents at beginning of period	531	471
Cash and cash equivalents at end of period	1,396	424
Segment Finance Group Member
Cash flows from operating activities:
Net income (loss)	(118)	35
Income (loss) from continuing operations	(118)	35
Non-cash items:
Depreciation and amortization	19	19
Provision for losses on finance receivables held for investment	163	67
Portfolio losses on finance receivables	60	0
Gains on extinguishment of debt	(39)	0
Deferred income taxes	(123)	(41)
Changes in assets and liabilities:
Other assets	26	20
Accrued and other liabilities	63	(8)
Other operating activities, net	21	(9)
Net cash provided by (used in) operating activities of continuing operations	72	83
Net cash provided by (used in) operating activities	72	83
Cash flows from investing activities:
Finance receivables originated or purchased	(2,234)	(6,338)
Finance receivables repaid	2,873	5,690
Proceeds on receivables sales, including securitizations	184	617
Capital expenditures	0	(6)
Proceeds from sale of repossessed assets and properties	127	9
Purchase of marketable securities	0	(100)
Other investing activities, net	61	(6)
Net cash provided by (used in) investing activities of continuing operations	1,011	(134)
Net cash provided by (used in) investing activities	1,011	(134)
Cash flows from financing activities:
Increase (decrease) in short-term debt	(759)	(48)
Proceeds from long-term lines of credit	1,740	0
Proceeds from issuance of long-term debt	16	1,122
Principal payments on long-term debt	(1,405)	(886)
Intergroup financing	(112)	0
Capital contributions paid to Finance group	88	0
Dividends paid	(184)	(142)
Net cash provided by (used in) financing activities of continuing operations	(616)	46
Net cash provided by (used in) financing activities	(616)	46
Effect of exchange rate changes on cash and cash equivalents	6	1
Net increase (decrease) in cash and cash equivalents	473	(4)
Cash and cash equivalents at beginning of period	16	60
Cash and cash equivalents at end of period	489	56
Consolidated
Cash flows from operating activities:
Net income (loss)	28	489
Income from discontinued operations	47	14
Income (loss) from continuing operations	(19)	475
Non-cash items:
Depreciation and amortization	197	199
Provision for losses on finance receivables held for investment	163	67
Portfolio losses on finance receivables	60	0
Asset impairment charges	52	0
Gains on extinguishment of debt	(39)	0
Share-based compensation	18	27
Amortization of interest expense on convertible notes	5	0
Deferred income taxes	(126)	(33)
Changes in assets and liabilities:
Accounts receivable, net	70	(90)
Inventories	75	(644)
Other assets	(12)	103
Accounts payable	(382)	229
Accrued and other liabilities	(193)	19
Captive finance receivables, net	84	23
Other operating activities, net	55	19
Net cash provided by (used in) operating activities of continuing operations	8	394
Net cash used in operating activities of discontinued operations	(12)	(31)
Net cash provided by (used in) operating activities	(4)	363
Cash flows from investing activities:
Finance receivables originated or purchased	(1,950)	(5,818)
Finance receivables repaid	2,505	5,257
Proceeds on receivables sales, including securitizations	184	507
Net cash used in acquisitions	0	(100)
Capital expenditures	(113)	(194)
Proceeds from sale of property, plant and equipment	2	1
Proceeds from sale of repossessed assets and properties	127	9
Purchase of marketable securities	0	(100)
Other investing activities, net	64	(1)
Net cash provided by (used in) investing activities of continuing operations	819	(439)
Net cash provided by (used in) investing activities of discontinued operations	261	(6)
Net cash provided by (used in) investing activities	1,080	(445)
Cash flows from financing activities:
Increase (decrease) in short-term debt	(1,628)	34
Proceeds from long-term lines of credit	2,970	0
Payments on long-term lines of credit	(28)	0
Proceeds from issuance of long-term debt	16	1,122
Principal payments on long-term debt	(1,435)	(933)
Payments on borrowings against officers life insurance policies	(410)	0
Proceeds from issuance of convertible notes, net of fees paid	582	0
Purchase of convertible note hedge	(140)	0
Proceeds from issuance of common stock and warrants	333	0
Proceeds from option exercises	0	38
Purchases of Textron common stock	0	(134)
Dividends paid	(10)	(106)
Net cash provided by (used in) financing activities of continuing operations	250	21
Net cash used in financing activities of discontinued operations	0	(2)
Net cash provided by (used in) financing activities	250	19
Effect of exchange rate changes on cash and cash equivalents	12	12
Net increase (decrease) in cash and cash equivalents	1,338	(51)
Cash and cash equivalents at beginning of period	547	531
Cash and cash equivalents at end of period	$1,885	$480

Basis Of Presentation

Basis Of Presentation
	6 Months Ended Jul. 04, 2009
Basis of Presentation [Abstract]
Basis of Presentation	Note 1: Basis of Presentation Our consolidated financial statements include the accounts of Textron Inc. and all of its majority-owned subsidiaries, along with any variable interest entities for which we are the primary beneficiary. We have prepared these unaudited consolidated financial statements in accordance with accounting principles generally accepted in the U.S. for interim financial information. Accordingly, these interim financial statements do not include all of the information and footnotes required by accounting principles generally accepted in the U.S. for complete financial statements. The consolidated interim financial statements included in this quarterly report should be read in conjunction with the consolidated financial statements included in our Annual Report on Form 10-K for the year ended January3, 2009. In the opinion of management, the interim financial statements reflect all adjustments (consisting only of normal recurring adjustments) that are necessary for the fair presentation of our consolidated financial position, results of operations and cash flows for the interim periods presented. The results of operations for the interim periods are not necessarily indicative of the results to be expected for the full year. We have evaluated subsequent events up to the time of our filing with the Securities and Exchange Commission on July 31, 2009, which is the date that these financial statements were issued. Our financings are conducted through two separate borrowing groups. The Manufacturing group consists of Textron Inc. consolidated with all of its majority-owned subsidiaries that operate in the Cessna, Bell, Textron Systems and Industrial segments, except for the entities comprising the Finance group. The Finance group consists of Textron Financial Corporation along with the entities consolidated into it. We designed this framework to enhance our borrowing power by separating the Finance group. Our Manufacturing group operations include the development, production and delivery of tangible goods and services, while our Finance group provides financial services. Due to the fundamental differences between each borrowing groups activities, investors, rating agencies and analysts use different measures to evaluate each groups performance. To support those evaluations, we present balance sheet and cash flow information for each borrowing group within the consolidated financial statements. All significant intercompany transactions are eliminated from the consolidated financial statements, including retail and wholesale financing activities for inventory sold by our Manufacturing group that is financed by our Finance group. As discussed in Note 4: Discontinued Operations, on April3, 2009, we sold HR Textron and in November2008, we completed the sale of our Fluid Power business unit. Both of these businesses have been classified as discontinued operations, and all prior period information has been recast to reflect this presentation.

Special Charges

Special Charges
	6 Months Ended Jul. 04, 2009
Special Charges [Abstract]
Special Charges	Note 2: Special Charges In the fourth quarter of 2008, we initiated a restructuring program to reduce overhead costs and improve productivity across the company, which includes corporate and segment direct and indirect workforce reductions and streamlining of administrative overhead, and announced the exit of portions of our commercial finance business. This program was expanded in the first half of 2009 to include additional workforce reductions, primarily at Cessna, and the cancellation of the Citation Columbus development project. We expect to eliminate approximately 10,000 positions worldwide representing approximately 23% of our global workforce at the inception of the program. As of July4, 2009, we have exited 11 owned and leased facilities and plants under this program. Restructuring costs by segment are as follows: Severance Curtailment Contract Asset Total (In millions) Costs Charges, Net Terminations Impairments Restructuring Three Months Ended July4, 2009 Cessna $ 38 $ 26 $ 1 $ 52 $ 117 Industrial 4 (4 ) 1 1 Finance 4 1 5 Corporate 3 3 Textron Systems 1 2 3 $ 50 $ 25 $ 2 $ 52 $ 129 Six Months Ended July4, 2009 Cessna $ 64 $ 26 $ 1 $ 52 $ 143 Industrial 5 (4 ) 1 2 Finance 6 1 1 8 Corporate 5 5 Textron Systems 1 2 3 $ 81 $ 25 $ 3 $ 52 $ 161 We record restructuring costs in special charges as these costs are generally of a nonrecurring nature and are not included in segment profit, which is our measure used for evaluating performance and for decision-making purposes. Severance costs related to an approved restructuring program are classified as special charges unless the costs are for volume-related reductions of direct labor that are deemed to be of a temporary or cyclical nature. Most of our severance benefits are provided for under existing severance programs and the associated costs are accrued when they are probable and estimable. Special one-time termination benefits are accounted for once an approved plan is communicated to employees that establishes the terms of the benefit arrangement, the number of employees to be terminated, along with their job classification and location, and the expected completion date. We recorded net curtailment charges of $25million for our pension and other postretirement benefit plans in the second quarter of 2009, as our analysis of the impact of workforce reductions on these plans indicated that curtailments had occurred and the amounts could be reasonably estimated. These net curtailment charges are based primarily on the headcount reductions through the end of the second quarter. The curtailment charge for the pension plan is primarily due to the recognition of prior se

Retirement Plans

Retirement Plans
	6 Months Ended Jul. 04, 2009
Retirement Plans [Abstract]
Retirement Plans	Note 3: Retirement Plans We provide defined benefit pension plans and other postretirement benefits to eligible employees. The components of net periodic benefit cost for these plans are as follows: Postretirement Benefits Pension Benefits Other Than Pensions July 4, June 28, July 4, June 28, (In millions) 2009 2008 2009 2008 Three Months Ended Service cost $ 30 $ 35 $ 2 $ 3 Interest cost 79 76 10 10 Expected return on plan assets (98 ) (101 ) Amortization of prior service cost (credit) 4 5 (2 ) (2 ) Amortization of net loss 2 5 2 4 Net periodic benefit cost $ 17 $ 20 $ 12 $ 15 Six Months Ended Service cost $ 63 $ 71 $ 4 $ 5 Interest cost 155 152 19 21 Expected return on plan assets (195 ) (203 ) Amortization of prior service cost (credit) 9 10 (3 ) (3 ) Amortization of net loss 8 9 4 8 Net periodic benefit cost $ 40 $ 39 $ 24 $ 31 Due to the magnitude of the workforce reductions under the restructuring program discussed in Note 2: Special Charges, in the second quarter of 2009, we determined that a curtailment had occurred in certain pension and other postretirement benefit plans. Accordingly, we recorded a net curtailment charge of $25million, reflecting the recognition of prior service cost of $30million related to the pension plans and $5million of prior service credits related to other postretirement benefit plans. In addition, we re-measured the plans that had the curtailments and revised our assumptions accordingly. The discount rate for these plans was increased from 6.25% to 7.0%, while other assumptions remained consistent with year-end assumptions. As a result of the curtailment and revised discount rate, we recorded a reduction in our unrealized losses of approximately $130 million through other comprehensive loss.

Discontinued Operations

Discontinued Operations
	6 Months Ended Jul. 04, 2009
Discontinued Operations [Abstract]
Discontinued Operations	Note 4: Discontinued Operations On April3, 2009, we sold HR Textron, an operating unit previously reported within the Textron Systems segment, for $376million in cash. The sale resulted in an after-tax gain of $7million and net after-tax proceeds of approximately $275million. In November2008, we completed the sale of our Fluid Power business unit and received approximately $527million in cash, a six-year note with a face value of $28million and may receive up to $50million based on final 2008 operating results that would be primarily payable in a six-year note. During the first quarter of 2009, the final settlement of this transaction was extended until later this year. Results of our discontinued businesses are as follows: Three Months Ended Six Months Ended July 4, June 28, July 4, June 28, (In millions) 2009 2008 2009 2008 Revenue $ $ 236 $ 48 $ 447 Income (loss)from discontinued operations before income taxes $ $ 14 $ (1 ) $ 25 Income tax expense (benefit) (4 ) 6 (41 ) 11 4 8 40 14 Gain on sale, net of income taxes 7 Income from discontinued operations, net of income taxes $ 4 $ 8 $ 47 $ 14 In the first half of 2009, we had a $34million tax benefit from the reduction in tax contingencies as a result of the HR Textron sale and a valuation allowance reversal on a previously established deferred tax asset.

Comprehensive Income

Comprehensive Income
	6 Months Ended Jul. 04, 2009
Comprehensive Income [Abstract]
Comprehensive Income	Note 5: Comprehensive Income Our comprehensive income for the periods is provided below: Three Months Ended Six Months Ended July 4, June 28, July 4, June 28, (In millions) 2009 2008 2009 2008 Net income (loss) $ (58 ) $ 258 $ 28 $ 489 Other comprehensive income, net of income taxes: Unrealized gain on pension, net of income taxes of $48 82 82 Pension curtailment, net of income taxes of $10 15 15 Recognition of prior service cost and unrealized losses on pension and postretirement benefits 5 10 12 20 Deferred gains (losses)on hedge contracts 38 30 (17 ) Net deferred loss on retained interests (7 ) (1 ) (9 ) Foreign currency translation and other 32 13 34 (5 ) Comprehensive income $ 107 $ 280 $ 192 $ 487

Earnings Per Share

Earnings Per Share
	6 Months Ended Jul. 04, 2009
Earnings Per Share Disclosure [Abstract]
Earnings per Share	Note 6: Earnings per Share In the first quarter of 2009, we adopted the new accounting standard for determining whether instruments granted in share-based payment transactions are participating securities. This new standard requires us to include any unvested share-based payment awards that contain nonforfeitable rights to dividends or dividend equivalents (whether paid or unpaid) as participating securities in our computation of basic earnings per share pursuant to the two-class method. In 2008, we granted restricted stock units that include nonforfeitable rights to dividends once declared. Accordingly, with the adoption of this new standard, these restricted stock units are considered participating securities and are included in our calculation of basic earnings per share using the two-class method. Prior period basic and diluted weighted-average shares outstanding have been recast to conform to the new calculation. The adoption of this standard resulted in a $0.01 reduction in diluted earnings per share from continuing operations for the second quarter of 2008, and had no impact on the first half of 2008. We calculate basic and diluted earnings per share based on income available to common shareholders, which approximates net income for each period, and the restricted stock unit participating securities. We use the weighted-average number of common shares outstanding during the period and the 2008 restricted stock units discussed above for the computation of basic earnings per share using the two-class method. Diluted earnings per share includes the dilutive effect of convertible preferred shares, stock options and restricted stock units in the weighted-average number of common shares outstanding. The 2008 restricted stock units are included in the diluted weighted-average shares outstanding by virtue of their inclusion in basic weighted-average shares outstanding using the two-class method as described above. This result is more dilutive than if we had used the treasury stock method to calculate diluted weighted-average shares outstanding for these restricted stock units. The weighted-average shares outstanding for basic and diluted earnings per share are as follows: Three Months Ended Six Months Ended July 4, June 28, July 4, June 28, (In thousands) 2009 2008 2009 2008 Basic weighted-average shares outstanding 264,091 250,039 255,261 249,674 Dilutive effect of convertible preferred shares, stock options and restricted stock units 4,541 4,917 Diluted weighted-average shares outstanding 264,091 254,580 255,261 254,591 Diluted weighted average shares outstanding for the three and six months ended July4, 2009 equal basic weighted average shares outstanding, as we incurred losses from continuing operations in each of these periods. A weighted average of approximately 11million units of restricted stock and options to purchase common stock were anti-dilutive for the three and six months ended July4, 2009, and were not included in the computation of diluted earnings per share for thes

Accounts Receivable Finance Rec

Accounts Receivable Finance Receivables and Securitizations
	6 Months Ended Jul. 04, 2009
Accounts Receivable and Finance Receivables Held for Investment [Abstract]
Accounts Receivable Finance Receivables and Securitizations	Note 7: Accounts Receivable, Finance Receivables and Securitizations Accounts Receivable July 4, January 3, (In millions) 2009 2009 Accounts receivable Commercial $ 474 $ 496 Accounts receivable U.S. Government contracts 391 422 865 918 Allowance for doubtful accounts (26 ) (24 ) $ 839 $ 894 Finance Receivables We evaluate finance receivables on a managed as well as owned basis since we retain subordinated interests in finance receivables sold in securitizations resulting in credit risk. In contrast, we do not have a retained financial interest or credit risk in the performance of the serviced portfolio and, therefore, performance of these portfolios is limited to billing and collection activities. Our Finance group manages and services finance receivables for a variety of investors, participants and third-party portfolio owners. A reconciliation of our managed and serviced finance receivables to finance receivables held for investment, net is provided below: July 4, January 3, (In millions) 2009 2009 Total managed and serviced finance receivables $ 9,868 $ 12,173 Less: Nonrecourse participations sold to independent investors (793 ) (820 ) Less: Third-party portfolio servicing (430 ) (532 ) Total managed finance receivables 8,645 10,821 Less: Securitized receivables (1,195 ) (2,248 ) Owned finance receivables 7,450 8,573 Less: Finance receivables held for sale (613 ) (1,658 ) Finance receivables held for investment 6,837 6,915 Allowance for loan losses (284 ) (191 ) Finance receivables held for investment, net $ 6,553 $ 6,724 Finance receivables held for investment at July4, 2009 and January3, 2009 include approximately $0.6billion and $1.1billion, respectively, of finance receivables that have been legally sold to special purpose entities and are consolidated subsidiaries of Textron Financial Corporation. The assets of these special purpose entities are pledged as collateral for $484million and $853 million of debt at July4, 2009 and January3, 2009, respectively, which is reflected as securitized on-balance sheet debt. In connection with our fourth quarter 2008 plan to exit portions of the commercial finance business, we classified certain finance receivables as held for sale. Following an effort to market the portfolios held for sale and the progress made in liquidating our portfolios, we believe that we will be able to maximize the economic value of a portion of the finance receivables held for sale through orderly liquidation rather than selling the portfolios. Accordingly, since we now intend to hold a portion of these finance receivables for the foreseeable future, we have reclassified $654million and $65million, net of valuation allowances, from the held for sale classification to held for investment during the first and second quarter of 2009, respectively. The remaining balance of these reclassified finance receivables was $697million, net of a $1

Inventories

Inventories
	6 Months Ended Jul. 04, 2009
Inventories [Abstract]
Inventories	Note 8: Inventories July 4, January 3, (In millions) 2009 2009 Finished goods $ 1,281 $ 1,081 Work in process 1,850 1,866 Raw materials 623 765 3,754 3,712 Progress/milestone payments (753 ) (619 ) $ 3,001 $ 3,093

Debt

Debt
	6 Months Ended Jul. 04, 2009
Debt [Abstract]
Debt	Note 9: Debt 4.50% Convertible Senior Notes On May5, 2009, we issued $600million of 4.50% Convertible Senior Notes (the Notes). The Notes have a maturity date of May1, 2013 and interest is payable semi-annually on May 1 and November 1. The Notes are convertible, under certain circumstances, at the holders option, into shares of our common stock, at an initial conversion rate of 76.1905 shares of common stock per $1,000 principal amount of Notes, which is equivalent to an initial conversion price of approximately $13.125 per share. Upon conversion, we have the right to settle the conversion of each $1,000 principal amount of Notes with any of the three following alternatives: (1)shares of our common stock, (2)cash, or (3)a combination of cash and shares of our common stock. The Notes are convertible only under the following certain circumstances: (1)during any calendar quarter commencing after June30, 2009 and only during such calendar quarter, if the last reported sale price of our common stock for at least 20 trading days during the 30 consecutive trading days ending on the last trading day of the preceding calendar quarter is more than 130% of the applicable conversion price per share of common stock on the last trading day of such preceding calendar quarter, (2)during the five business day period after any ten consecutive trading day measurement period in which the trading price per $1,000 principal amount of Notes for each day in the measurement period was less than 98% of the product of the last reported sale price of our common stock and the applicable conversion rate, (3)if specified distributions to holders of our common stock are made or specified corporate transactions occur, or (4)at any time on or after February19, 2013. As of July4, 2009, none of the conditions permitting conversion of the Notes had been satisfied. The net proceeds from the issuance of the Notes totaled approximately $582million after deducting discounts, commissions and expenses. The Notes are accounted for in accordance with generally accepted accounting principles, which require us to separately account for the liability (debt)and the equity (conversion option) components of the Notes in a manner that reflects our non-convertible debt borrowing rate. Accordingly, we recorded a debt discount and corresponding increase to additional paid in capital of approximately $135million as of the date of issuance. We are amortizing the debt discount utilizing the effective interest method over the life of the Notes which increases the effective interest rate of the Notes from its coupon rate of 4.50% to 11.72%. Transaction costs of $18million were proportionately allocated between the liability and equity components. Concurrently with the pricing of the Notes, we entered into convertible note hedge transactions with two counterparties, including an underwriter and an affiliate of an underwriter, of the Notes, for purposes of reducing the potential dilutive effect upon the conversion of the Notes. The initial strike price of the convertible note hedge transactions is $13.125 per share of our common stock (the same as the initial conversion price of t

Guarantees And Indemnifications

Guarantees And Indemnifications
	6 Months Ended Jul. 04, 2009
Guarantees And Indemnifications [Abstract]
Guarantees and Indemnifications	Note 10: Guarantees and Indemnifications As disclosed under the caption Guarantees and Indemnifications in Note 18 to the Consolidated Financial Statements in Textrons 2008 Annual Report on Form 10-K, we have issued or are party to certain guarantees, including a performance guarantee related to the VH-71 helicopter program. In June2009, we received notification that the VH-71 helicopter program was terminated for convenience by the U.S. Government. As of July4, 2009, there has been no other material change to our guarantees. Warranty and Product Maintenance Programs We provide limited warranty and product maintenance programs, including parts and labor, for certain products for periods ranging from one to five years. We estimate the costs that may be incurred under warranty programs and record a liability in the amount of such costs at the time product revenue is recognized. Factors that affect this liability include the number of products sold, historical and anticipated rates of warranty claims, and cost per claim. We assess the adequacy of our recorded warranty and product maintenance liabilities periodically and adjust the amounts as necessary. Changes in our warranty and product maintenance liabilities are as follows: Six Months Ended July 4, June 28, (In millions) 2009 2008 Accrual at the beginning of period $ 278 $ 312 Provision 81 95 Settlements (117 ) (96 ) Adjustments to prior accrual estimates 1 (8 ) Other adjustments (3 ) Accrual at the end of period $ 243 $ 300

Commitments And Contingencies

Commitments And Contingencies
	6 Months Ended Jul. 04, 2009
Commitments And Contingencies [Abstract]
Commitments and Contingencies	Note 11: Commitments and Contingencies We are subject to legal proceedings and other claims arising out of the conduct of our business, including proceedings and claims relating to commercial and financial transactions; government contracts; compliance with applicable laws and regulations; production partners; product liability; employment; and environmental, safety and health matters. Some of these legal proceedings and claims seek damages, fines or penalties in substantial amounts or remediation of environmental contamination. As a government contractor, we are subject to audits, reviews and investigations to determine whether our operations are being conducted in accordance with applicable regulatory requirements. Under federal government procurement regulations, certain claims brought by the U.S. Government could result in our being suspended or debarred from U.S. Government contracting for a period of time. On the basis of information presently available, we do not believe that existing proceedings and claims will have a material effect on our financial position or results of operations. The Internal Revenue Service (IRS)has challenged our tax positions related to certain lease transactions within the Finance segment. During the third quarter of 2008, the IRS made a settlement offer to numerous companies, including Textron, to resolve the disputed tax treatment of these leases. Based on the terms of the offer and our decision to accept the offer, we revised our estimate of this tax contingency. Final resolution of this matter will result in the acceleration of future cash payments to the IRS, which we expect will occur over a period of years in connection with the conclusion of IRS examinations of the relevant tax years. At July4, 2009, $198million of federal tax liabilities were recorded on our Consolidated Balance Sheet related to these leases. ARH Program Termination On October16, 2008, we received notification from the U.S. Department of Defense that it would not certify the continuation of the Armed Reconnaissance Helicopter (ARH)program to Congress under the Nunn-McCurdy Act, resulting in the termination of the program for the convenience of the Government. The ARH program included a development phase, covered by the System Development and Demonstration (SDD)contract, and a production phase. We are in the process of establishing the termination costs for the SDD contract, which we believe will be fully recoverable from the U.S. Government. Prior to termination of the program, we obtained inventory and incurred vendor obligations for long-lead time materials related to the anticipated Low Rate Initial Production (LRIP)contracts to maintain the program schedule based on our belief that the LRIP contracts would be awarded. We have since terminated these vendor contracts and have initiated negotiations to settle our termination obligations, which we estimate may cost up to approximately $80million. We continue to evaluate the utility of the related inventory to other Bell programs, customers, or vendors. This review and the related discussions with vendors are ongoing. We estimate that our potential loss res

Fair Values Of Assets And Liabi

Fair Values Of Assets And Liabilities
	6 Months Ended Jul. 04, 2009
Fair Values Of Assets And Liabilities [Abstract]
Fair Values of Assets and Liabilities	Note 12: Fair Values of Assets and Liabilities We measure fair value at the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date. We prioritize the assumptions that market participants would use in pricing the asset or liability (the inputs) into a three-tier fair value hierarchy. This fair value hierarchy gives the highest priority (Level 1) to quoted prices in active markets for identical assets or liabilities and the lowest priority (Level 3) to unobservable inputs in which little or no market data exists, requiring companies to develop their own assumptions. Observable inputs that do not meet the criteria of Level 1, and include quoted prices for similar assets or liabilities in active markets or quoted prices for identical assets and liabilities in markets that are not active, are categorized as Level 2. Level 3 inputs are those that reflect our estimates about the assumptions market participants would use in pricing the asset or liability, based on the best information available in the circumstances. Valuation techniques for assets and liabilities measured using Level 3 inputs may include methodologies such as the market approach, the income approach or the cost approach, and may use unobservable inputs such as projections, estimates and managements interpretation of current market data. These unobservable inputs are only utilized to the extent that observable inputs are not available or cost-effective to obtain. Assets and Liabilities Recorded at Fair Value on a Recurring Basis The table below presents the assets and liabilities measured at fair value on a recurring basis categorized by the level of inputs used in the valuation of each asset and liability. July 4, 2009 January 3, 2009 (In millions) (Level 1) (Level 2) (Level 3) (Level 1) (Level 2) (Level 3) Assets Manufacturing group Foreign currency exchange contracts $ $ 25 $ $ $ 2 $ Finance group Derivative financial instruments, net 60 112 Interest-only securities 3 12 Total assets $ $ 85 $ 3 $ $ 114 $ 12 Liabilities Manufacturing group Forward contracts for Textron Inc. stock $ 7 $ $ $ 98 $ $ Foreign currency exchange contracts 8 84 Total liabilities $ 7 $ 8 $ $ 98 $ 84 $ The table below presents the change in fair value measurements for our interest-only securities that used significant unobservable inputs (Level 3): Three Six Months Ended Months Ended July 4, June 28, July 4, June 28, (In millions) 2009 2008 2009 2008 Balance, beginning of period $ 3 $ 52 $ 12 $

Derivatives

Derivatives
	6 Months Ended Jul. 04, 2009
Derivatives [Abstract]
Derivatives	Note 13: Derivatives Fair Value Hedges Our Finance group enters into interest rate exchange contracts to mitigate exposure to changes in the fair value of its fixed-rate receivables and debt due to fluctuations in interest rates. By using these contracts, we are able to convert our fixed-rate cash flows to floating-rate cash flows. Cash Flow Hedges We experience variability in the cash flows we receive from our Finance groups investments in interest-only securities due to fluctuations in interest rates. To mitigate our exposure to this variability, our Finance group enters into interest rate exchange, cap and floor agreements. The combination of these instruments converts net residual floating-rate cash flows expected to be received by our Finance group to fixed-rate cash flows. Changes in the fair value of these instruments are recorded net of the income taxes in other comprehensive income (OCI). Our exposure to loss from nonperformance by the counterparties to our derivative agreements at July 4, 2009 is minimal. We do not anticipate nonperformance by counterparties in the periodic settlements of amounts due. We have historically minimized this potential for risk by entering into contracts exclusively with major, financially sound counterparties having no less than a long-term bond rating of A. The recent uncertainty in the financial markets has negatively affected the bond ratings of all of our counterparties, and we continuously monitor our exposures to ensure that we limit our risks. The credit risk generally is limited to the amount by which the counterparties contractual obligations exceed our obligations to the counterparty. We manufacture and sell our products in a number of countries throughout the world, and, therefore, we are exposed to movements in foreign currency exchange rates. The primary purpose of our foreign currency hedging activities is to manage the volatility associated with foreign currency purchases of materials, foreign currency sales of products, and other assets and liabilities created in the normal course of business. We primarily utilize forward exchange contracts and purchased options with maturities of no more than 18months that qualify as cash flow hedges. These are intended to offset the effect of exchange rate fluctuations on forecasted sales, inventory purchases and overhead expenses. At July4, 2009, we had a deferred gain of $4million in OCI related to these cash flow hedges, which we expect to reclassify into earnings in the next 18months as the underlying transactions occur. Net Investment Hedges We hedge our net investment position in major currencies and generate foreign currency interest payments that offset other transactional exposures in these currencies. To accomplish this, we borrow directly in foreign currency and designate a portion of foreign currency debt as a hedge of net investments. We also may utilize currency forwards as hedges of our related foreign net investments. Currency effects on the effective portion of these hedges, which are reflected in the cumulative translation adjustment account within OCI, produced a $33million after-tax loss, leaving an ac

Recently Issued Accounting Pron

Recently Issued Accounting Pronouncements
	6 Months Ended Jul. 04, 2009
Recently Issued Accounting Pronouncements [Abstract]
Recently Issued Accounting Pronouncements	Note 14: Recently Issued Accounting Pronouncements In June2009, the Financial Accounting Standards Board (FASB)issued Statement of Financial Accounting Standard (SFAS)No.166, Accounting for Transfers of Financial Assets an amendment of FASB Statement No.140. This standard eliminates the concept of a qualifying special-purpose entity (QSPE)and its exclusion from consolidation by the primary beneficiary in that variable interest entity (VIE)or the transferor of financial assets to the VIE. The new accounting guidance also requires that former QSPEs be reevaluated for consolidation. This standard is effective beginning in the first quarter of 2010 and early application is prohibited. The adoption of this standard may result in the consolidation of our off-balance sheet securitization trusts, which hold our securitized finance receivables and debt. As our off balance-sheet securitization trusts are winding down in conjunction with our liquidation plan, we are currently assessing the impact the adoption of this standard may have on our financial position, results of operations and liquidity when we are required to adopt it next year. Also in June2009, the FASB Issued SFAS No.167, Amendments to FASB Interpretation No 46(R). This standard changes the approach to determining the primary beneficiary of a VIE and requires companies to more frequently assess whether they must consolidate VIEs. This standard is effective beginning in the first quarter of 2010 and early application is prohibited. The adoption of this standard is not expected to have any significant impact on our financial position or results of operations.

Segment Information

Segment Information
	6 Months Ended Jul. 04, 2009
Segment Information [Abstract]
Segment Information	Note 15: Segment Information We operate in, and report financial information for, the following five business segments: Cessna, Bell, Textron Systems, Industrial and Finance. Segment profit is an important measure used for evaluating performance and for decision-making purposes. Segment profit for the manufacturing segments excludes interest expense, certain corporate expenses and special charges. The measurement for the Finance segment includes interest income and expense and excludes special charges. Provisions for losses on finance receivables involving the sale or lease of our products are recorded by the selling manufacturing division when our Finance group has recourse to the Manufacturing group. Our revenues by segment and a reconciliation of segment profit to income from continuing operations before income taxes are as follows: Three Months Ended Six Months Ended July 4, June 28, July 4, June 28, (In millions) 2009 2008 2009 2008 REVENUES MANUFACTURING: Cessna $ 871 $ 1,501 $ 1,640 $ 2,747 Bell 670 698 1,412 1,272 Textron Systems 477 467 895 986 Industrial 508 841 983 1,594 2,526 3,507 4,930 6,599 FINANCE 86 177 208 391 Total revenues $ 2,612 $ 3,684 $ 5,138 $ 6,990 SEGMENT OPERATING PROFIT MANUFACTURING: Cessna (a) $ 48 $ 262 $ 138 $ 469 Bell 72 68 141 121 Textron Systems 55 60 107 127 Industrial 12 44 3 85 187 434 389 802 FINANCE (99 ) 13 (165 ) 55 Segment profit 88 447 224 857 Special charges (129 ) (161 ) Corporate expenses and other, net (45 ) (43 ) (80 ) (84 ) Interest expense, net for Manufacturing group (34 ) (29 ) (62 ) (59 ) Income (loss)from continuing operations before income taxes $ (120 ) $ 375 $ (79 ) $ 714 (a) During the first quarter of 2009, we sold the assets of CESCOM, Cessnas aircraft maintenance tracking service line, resulting in a pre-tax gain of $50million.