Textron (TXT) 10-Q 28 Jul 16 2016 Q2 Quarterly report Financial data

Document and Entity Information

Document and Entity Information - shares	6 Months Ended
	Jul. 02, 2016	Jul. 15, 2016
Document and Entity Information
Entity Registrant Name	TEXTRON INC
Entity Central Index Key	217,346
Document Type	10-Q
Document Period End Date	Jul. 2, 2016
Amendment Flag	false
Current Fiscal Year End Date	--12-31
Entity Current Reporting Status	Yes
Entity Filer Category	Large Accelerated Filer
Entity Common Stock, Shares Outstanding		269,463,621
Document Fiscal Year Focus	2,016
Document Fiscal Period Focus	Q2

Consolidated Statements of Oper

Consolidated Statements of Operations - USD ($) $ in Millions	3 Months Ended		6 Months Ended
	Jul. 02, 2016	Jul. 04, 2015	Jul. 02, 2016	Jul. 04, 2015
Revenues
Manufacturing revenues	$ 3,491	$ 3,223	$ 6,672	$ 6,274
Finance revenues	20	24	40	46
Total revenues	3,511	3,247	6,712	6,320
Costs and expenses
Cost of sales	2,889	2,635	5,524	5,144
Selling and administrative expense	318	329	626	666
Interest expense	44	42	87	85
Total costs and expenses	3,251	3,006	6,237	5,895
Income from continuing operations before income taxes	260	241	475	425
Income tax expense	82	72	146	128
Income from continuing operations	178	169	329	297
Loss from discontinued operations, net of income taxes	(1)	(2)	(2)	(2)
Net income	$ 177	$ 167	$ 327	$ 295
Basic earnings per share
Continuing operations (in dollars per share)	$ 0.66	$ 0.61	$ 1.21	$ 1.07
Discontinued operations (in dollars per share)		(0.01)		(0.01)
Basic earnings per share (in dollars per share)	0.66	0.60	1.21	1.06
Diluted earnings per share
Continuing operations (in dollars per share)	0.66	0.60	1.21	1.06
Discontinued operations (in dollars per share)	(0.01)		(0.01)	(0.01)
Diluted earnings per share (in dollars per share)	0.65	0.60	1.20	1.05
Dividends per share
Common stock (in dollars per share)	$ 0.02	$ 0.02	$ 0.04	$ 0.04

Consolidated Statements of Comp

Consolidated Statements of Comprehensive Income - USD ($) $ in Millions	3 Months Ended		6 Months Ended
	Jul. 02, 2016	Jul. 04, 2015	Jul. 02, 2016	Jul. 04, 2015
Consolidated Statements of Comprehensive Income
Net income	$ 177	$ 167	$ 327	$ 295
Other comprehensive income (loss), net of tax:
Pension and postretirement benefits adjustments, net of reclassifications	15	87	36	111
Deferred gains (losses) on hedge contracts, net of reclassifications	4	4	25	(8)
Foreign currency translation adjustments	(20)	10	4	(46)
Other comprehensive income (loss)	(1)	101	65	57
Comprehensive income	$ 176	$ 268	$ 392	$ 352

Consolidated Balance Sheets

Consolidated Balance Sheets - USD ($) shares in Thousands, $ in Millions	Jul. 02, 2016	Jan. 02, 2016
Assets
Cash and equivalents	$ 743	$ 1,005
Inventories	4,595	4,144
Finance receivables, net	985	1,087
Total assets	15,034	14,708
Liabilities
Total liabilities	9,848	9,744
Shareholders' equity
Common stock	36	36
Capital surplus	1,643	1,587
Treasury stock	(774)	(559)
Retained earnings	5,614	5,298
Accumulated other comprehensive loss	(1,333)	(1,398)
Total shareholders' equity	5,186	4,964
Total liabilities and shareholders' equity	$ 15,034	$ 14,708
Common shares outstanding	269,344	274,228
Manufacturing group
Assets
Cash and equivalents	$ 661	$ 946
Accounts receivable, net	1,144	1,047
Inventories	4,595	4,144
Other current assets	370	341
Total current assets	6,770	6,478
Property, plant and equipment, less accumulated depreciation and amortization of $4,082 and $3,915	2,582	2,492
Goodwill	2,118	2,023
Other assets	2,339	2,399
Total assets	13,809	13,392
Liabilities
Short-term debt and current portion of long-term debt	278	262
Accounts payable	1,218	1,063
Accrued liabilities	2,202	2,467
Total current liabilities	3,698	3,792
Other liabilities	2,293	2,376
Long-term debt	2,785	2,435
Total liabilities	8,776	8,603
Finance group
Assets
Cash and equivalents	82	59
Finance receivables, net	985	1,087
Other assets	158	170
Total assets	1,225	1,316
Liabilities
Other liabilities	223	228
Debt	849	913
Total liabilities	$ 1,072	$ 1,141

Consolidated Balance Sheets (Pa

Consolidated Balance Sheets (Parenthetical) - USD ($) $ in Millions	Jul. 02, 2016	Jan. 02, 2016
Consolidated Balance Sheets
Accumulated depreciation and amortization	$ 4,082	$ 3,915

Consolidated Statements of Cash

Consolidated Statements of Cash Flows - USD ($) $ in Millions	6 Months Ended
	Jul. 02, 2016	Jul. 04, 2015
Cash flows from operating activities
Net income	$ 327	$ 295
Less: Loss from discontinued operations	(2)	(2)
Income from continuing operations	329	297
Non-cash items:
Depreciation and amortization	223	220
Deferred income taxes	32	(15)
Other, net	51	53
Changes in assets and liabilities:
Accounts receivable, net	(80)	(144)
Inventories	(454)	(516)
Other assets	28	(24)
Accounts payable	147	123
Accrued and other liabilities	(377)	27
Income taxes, net	12	93
Pension, net	14	40
Captive finance receivables, net	48	53
Other operating activities, net	(3)	(2)
Net cash provided by (used in) operating activities of continuing operations	(30)	205
Net cash used in operating activities of discontinued operations	(1)	(3)
Net cash provided by (used in) operating activities	(31)	202
Cash flows from investing activities
Capital expenditures	(207)	(173)
Net cash used in acquisitions	(179)	(34)
Finance receivables repaid	36	46
Other investing activities, net	52	26
Net cash provided by (used in) investing activities	(298)	(135)
Cash flows from financing activities
Proceeds from long-term debt	362	9
Increase in short-term debt	12	105
Principal payments on long-term debt and nonrecourse debt	(90)	(130)
Purchases of Textron common stock	(215)	(87)
Dividends paid	(11)	(11)
Other financing activities, net	10	21
Net cash provided by (used in) financing activities	68	(93)
Effect of exchange rate changes on cash and equivalents	(1)	(4)
Net increase (decrease) in cash and equivalents	(262)	(30)
Cash and equivalents at beginning of period	1,005	822
Cash and equivalents at end of period	743	792
Manufacturing group
Cash flows from operating activities
Net income	320	285
Less: Loss from discontinued operations	(2)	(2)
Income from continuing operations	322	287
Non-cash items:
Depreciation and amortization	217	215
Deferred income taxes	37	(6)
Other, net	51	51
Changes in assets and liabilities:
Accounts receivable, net	(80)	(144)
Inventories	(441)	(525)
Other assets	29	(34)
Accounts payable	147	123
Accrued and other liabilities	(373)	33
Income taxes, net	10	78
Pension, net	14	40
Dividends received from Finance Group	29
Other operating activities, net	(3)	(2)
Net cash provided by (used in) operating activities of continuing operations	(41)	116
Net cash used in operating activities of discontinued operations	(1)	(3)
Net cash provided by (used in) operating activities	(42)	113
Cash flows from investing activities
Capital expenditures	(207)	(173)
Net cash used in acquisitions	(179)	(34)
Other investing activities, net	3
Net cash provided by (used in) investing activities	(383)	(207)
Cash flows from financing activities
Proceeds from long-term debt	345
Increase in short-term debt	12	105
Purchases of Textron common stock	(215)	(87)
Dividends paid	(11)	(11)
Other financing activities, net	10	21
Net cash provided by (used in) financing activities	141	28
Effect of exchange rate changes on cash and equivalents	(1)	(4)
Net increase (decrease) in cash and equivalents	(285)	(70)
Cash and equivalents at beginning of period	946	731
Cash and equivalents at end of period	661	661
Finance group
Cash flows from operating activities
Net income	7	10
Income from continuing operations	7	10
Non-cash items:
Depreciation and amortization	6	5
Deferred income taxes	(5)	(9)
Other, net		2
Changes in assets and liabilities:
Other assets	(1)	10
Accrued and other liabilities	(4)	(6)
Income taxes, net	2	15
Net cash provided by (used in) operating activities of continuing operations	5	27
Net cash provided by (used in) operating activities	5	27
Cash flows from investing activities
Finance receivables repaid	170	181
Finance receivables originated	(86)	(82)
Other investing activities, net	36	35
Net cash provided by (used in) investing activities	120	134
Cash flows from financing activities
Proceeds from long-term debt	17	9
Principal payments on long-term debt and nonrecourse debt	(90)	(130)
Dividends paid	(29)
Net cash provided by (used in) financing activities	(102)	(121)
Net increase (decrease) in cash and equivalents	23	40
Cash and equivalents at beginning of period	59	91
Cash and equivalents at end of period	$ 82	$ 131

Basis of Presentation

Basis of Presentation	6 Months Ended
	Jul. 02, 2016
Basis of Presentation
Basis of Presentation	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 2, 2016. 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 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. 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. During 2016 and 2015, we changed our estimates of revenues and costs on certain long-term contracts that are accounted for under the percentage-of-completion method of accounting. These changes in estimates increased income from continuing operations before income taxes in the second quarter of 2016 and 2015 by $10 million and $36 million, respectively, ($6 million and $23 million after tax, or $0.02 and $0.08 per diluted share, respectively). For the second quarter of 2016 and 2015, the gross favorable program profit adjustments totaled $19 million and $40 million, respectively, and the gross unfavorable program profit adjustments totaled $9 million and $4 million, respectively. The changes in estimates increased income from continuing operations before income taxes in the first half of 2016 and 2015 by $39 million and $54 million, respectively, ($25 million and $34 million after tax, or $0.09 and $0.12 per diluted share, respectively). For the first half of 2016 and 2015, the gross favorable program profit adjustments totaled $53 million and $73 million, respectively, and the gross unfavorable program profit adjustments totaled $14 million and $19 million, respectively. New Accounting Pronouncements In May 2014, the Financial Accounting Standards Board (FASB) issued Accounting Standards Update (ASU) No. 2014-09, Revenue from Contracts with Customers , that outlines a comprehensive five-step revenue recognition model based on the principle that an entity should recognize revenue to depict the transfer of promised goods or services to customers in an amount that reflects the consideration to which the entity expects to be entitled in exchange for those goods and services. In July 2015, the FASB approved a one-year deferral of the effective date of the standard to the beginning of 2018 for public companies, with an option that would permit companies to adopt the standard as early as the original effective date of 2017. The new standard may be adopted either retrospectively or on a modified retrospective basis whereby it would be applied to new contracts and existing contracts with remaining performance obligations as of the effective date, with a cumulative catch-up adjustment recorded to beginning retained earnings at the effective date for those contracts. We are currently evaluating the impacts of adoption on our consolidated financial position, results of operations and related disclosures, along with the implementation approach to be used. In February 2016, the FASB issued ASU No. 2016-02, Leases , that requires all leases with a term greater than 12 months be recognized on the balance sheet, while lease expenses would continue to be recognized in the statement of operations in a manner similar to current accounting guidance. The new standard is effective for our company at the beginning of fiscal 2019 and early adoption is permitted. Entities must adopt the standard on a modified retrospective basis whereby it would be applied at the beginning of the earliest comparative year. We are currently evaluating the impact of adoption on our consolidated financial statements. In June 2016, the FASB issued ASU No. 2016-13, Financial Instruments – Credit Losses. For most financial assets, such as trade and other receivables, loans and other instruments, this standard changes the current incurred loss model to a forward-looking expected credit loss model, which generally will result in the earlier recognition of allowances for losses. The new standard is effective for our company at the beginning of fiscal 2020 with early adoption permitted beginning in fiscal 2019. Entities are required to apply the provisions of the standard through a cumulative-effect adjustment to retained earnings as of the effective date. W e are currently evaluating the impact of adoption on our consolidated financial statements.

Business Acquisitions

Business Acquisitions	6 Months Ended
	Jul. 02, 2016
Business Acquisitions
Business Acquisitions	Note 2. Business Acquisitions In the first half of 2016, we paid $179 million in cash and assumed debt of $19 million to acquire five businesses, net of cash acquired and holdbacks. Our acquisition of Able Engineering and Component Services, Inc. and Able Aerospace, Inc. (Able) in the first quarter represented the largest of these businesses and is included in the Textron Aviation segment. Able is an industry-leading repair and overhaul business that provides component repairs, component exchanges and replacement parts, among other support and service offerings for commercial rotorcraft and fixed-wing aircraft customers around the world. We are in the process of allocating the purchase price and valuing the acquired assets and liabilities for these acquisitions. Based on the preliminary allocation of the aggregate purchase price for these acquisitions, $95 million has been allocated to goodwill, related to expected synergies and the value of the existing workforce, and $63 million to intangible assets. Of the recorded goodwill, approximately $37 million is deductible for tax purposes. The intangible assets are primarily related to customer relationships and technologies, which will be amortized over 10 to 18 years. The operating results of these acquisitions have been included in the Consolidated Statements of Operations since their respective closing dates.

Retirement Plans

Retirement Plans	6 Months Ended
	Jul. 02, 2016
Retirement Plans
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 (credit) for these plans are as follows: Three Months Ended Six Months Ended (In millions) July 2, 2016 July 4, 2015 July 2, 2016 July 4, 2015 Pension Benefits Service cost $ $ $ $ Interest cost Expected return on plan assets Amortization of net actuarial loss Amortization of prior service cost Curtailment and other charges — — Net periodic benefit cost $ $ $ $ Postretirement Benefits Other Than Pensions Service cost $ — $ $ $ Interest cost Amortization of prior service credit Net periodic benefit credit $ $ $ $ In April 2015, our Bell segment announced cost reduction actions that resulted in a headcount reduction of approximately 12% of the Bell workforce. We determined that a curtailment had occurred in Bell’s pension plan as a result of this reduction, which triggered a remeasurement of the projected benefit obligation. We remeasured Bell’s pension plan incorporating a 50 basis-point increase in the discount rate to 4.75%, while other assumptions remained consistent with year-end. The remeasurement reduced our unrealized losses by approximately $98 million which was recorded in other comprehensive income in the second quarter of 2015.

Earnings Per Share

Earnings Per Share	6 Months Ended
	Jul. 02, 2016
Earnings Per Share
Earnings Per Share	Note 4. 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. The weighted-average shares outstanding for basic and diluted EPS are as follows: Three Months Ended Six Months Ended (In thousands) July 2, 2016 July 4, 2015 July 2, 2016 July 4, 2015 Basic weighted-average shares outstanding Dilutive effect of stock options Diluted weighted-average shares outstanding Stock options to purchase 5 million shares of common stock are excluded from the calculation of diluted weighted average shares outstanding for both the three and six months ended July 2, 2016, as their effect would have been anti-dilutive. Stock options to purchase 2 million and 1 million shares of common stock are excluded from the calculation of diluted weighted average shares outstanding for the three and six months ended July 4, 2015, respectively, as their effect would have been anti-dilutive.

Accounts Receivable and Finance

Accounts Receivable and Finance Receivables	6 Months Ended
	Jul. 02, 2016
Accounts Receivable and Finance Receivables
Accounts Receivable and Finance Receivables	Note 5. Accounts Receivable and Finance Receivables Accounts Receivable Accounts receivable is composed of the following: (In millions) July 2, 2016 January 2, 2016 Commercial $ $ U.S. Government contracts Allowance for doubtful accounts Total $ $ We have unbillable receivables, primarily on U.S. Government contracts, that arise when the revenues we have appropriately recognized based on performance cannot be billed yet under terms of the contract. Unbillable receivables within accounts receivable totaled $188 million at July 2, 2016 and $135 million at January 2, 2016. Finance Receivables Finance receivables are presented in the following table: (In millions) July 2, 2016 January 2, 2016 Finance receivables * $ $ Allowance for losses Total finance receivables, net $ $ * Includes finance receivables held for sale of $30 million at both July 2, 2016 and January 2, 2016. Credit Quality Indicators and Nonaccrual Finance Receivables 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, 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. Accrual of interest income is suspended for these accounts and all cash collections are generally applied to reduce the net investment balance. Once we conclude that the collection of all principal and interest is no longer doubtful, we resume the accrual of interest and recognize previously suspended interest income at the time either a) the loan becomes contractually current through payment according to the original terms of the loan, or b) if the loan has been modified, following a period of performance under the terms of the modification. 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. Delinquency 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. Finance receivables categorized based on the credit quality indicators and by the delinquency aging category are summarized as follows: (In millions) July 2, 2016 January 2, 2016 Performing $ $ Watchlist Nonaccrual Nonaccrual as a percentage of finance receivables Less than 31 days past due $ $ 31-60 days past due 61-90 days past due Over 90 days past due 60 + days contractual delinquency as a percentage of finance receivables Impaired Loans On a quarterly basis, we evaluate individual finance receivables for impairment in non-homogeneous portfolios and larger balance accounts in homogeneous loan portfolios. 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. Interest income recognized on impaired loans was not significant in the first half of 2016 or 2015. A summary of impaired finance receivables, excluding leveraged leases, and the average recorded investment is provided below: (In millions) July 2, 2016 January 2, 2016 Recorded investment: Impaired loans with related allowance for losses $ $ Impaired loans with no related allowance for losses Total $ $ Unpaid principal balance $ $ Allowance for losses on impaired loans Average recorded investment A summary of the allowance for losses on finance receivables, based on how the underlying finance receivables are evaluated for impairment, is provided below. The finance receivables reported in this table specifically exclude leveraged leases in accordance with U.S. generally accepted accounting principles. (In millions) July 2, 2016 January 2, 2016 Allowance based on collective evaluation $ $ Allowance based on individual evaluation Finance receivables evaluated collectively $ $ Finance receivables evaluated individually Allowance for Losses We maintain an allowance for losses on finance receivables at a level considered adequate to cover inherent losses in the portfolio based on management’s evaluation. For larger balance accounts specifically identified as impaired, a reserve is established based on comparing the expected future cash flows, discounted at the finance receivable’s effective interest rate, or the fair value of the underlying collateral if the finance receivable is collateral dependent, to its carrying amount. The expected future cash flows consider collateral value; financial performance and liquidity of our borrower; existence and financial strength of guarantors; estimated recovery costs, including legal expenses; and costs associated with the repossession and eventual disposal of collateral. When there is a range of potential outcomes, we perform multiple discounted cash flow analyses and weight the potential outcomes based on their relative likelihood of occurrence. The evaluation of our portfolio is inherently subjective, as it requires estimates, including the amount and timing of future cash flows expected to be received on impaired finance receivables and the estimated fair value of the underlying collateral, which may differ from actual results. While our analysis is specific to each individual account, critical factors included in this analysis include industry valuation guides, age and physical condition of the collateral, payment history and existence and financial strength of guarantors. We also establish an allowance for losses to cover probable but specifically unknown losses existing in the portfolio. This allowance is established as a percentage of non-recourse finance receivables, which have not been identified as requiring specific reserves. The percentage is based on a combination of factors, including historical loss experience, current delinquency and default trends, collateral values and both general economic and specific industry trends. Finance receivables are charged off at the earlier of the date the collateral is repossessed or when no payment has been received for six months, unless management deems the receivable collectible. A rollforward of the allowance for losses on finance receivables is provided below: Six Months Ended (In millions) July 2, 2016 July 4, 2015 Beginning of period $ $ Provision for losses Charge-offs Recoveries End of period $ $

Inventories

Inventories	6 Months Ended
	Jul. 02, 2016
Inventories
Inventories	Note 6. Inventories Inventories are composed of the following: (In millions) July 2, 2016 January 2, 2016 Finished goods $ $ Work in process Raw materials and components Progress/milestone payments Total $ $

Warranty Liability

Warranty Liability	6 Months Ended
	Jul. 02, 2016
Warranty Liability
Warranty Liability	Note 7. Warranty Liability Changes in our warranty liability are as follows: Six Months Ended (In millions) July 2, 2016 July 4, 2015 Beginning of period $ $ Provision Settlements Acquisitions Adjustments* End of period $ $ * Adjustments include changes to prior year estimates, new issues on prior year sales and currency translation adjustments.

Debt

Debt	6 Months Ended
	Jul. 02, 2016
Debt
Debt	Note 8. Debt Under our shelf registration statement, on March 11, 2016, we issued $350 million of fixed-rate notes due March 15, 2026 that bear an annual interest rate of 4.0%. The net proceeds of the issuance totaled $345 million, after deducting underwriting discounts, commissions and offering expenses.

Derivative Instruments and Fair

Derivative Instruments and Fair Value Measurements	6 Months Ended
	Jul. 02, 2016
Derivative Instruments and Fair Value Measurements
Derivative Instruments and Fair Value Measurements	Note 9. 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 w ith 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. 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 July 2, 2016 and January 2, 2016, we had foreign currency exchange contracts with notional amounts upon which the contracts were based of $734 million and $706 million, respectively. At July 2, 2016, the fair value amounts of our foreign currency exchange contracts were a $7 million asset and an $11 million liability. At January 2, 2016, the fair value amounts of our foreign currency exchange contracts were a $7 million asset and a $28 million liability. 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 a net investment. We record changes in the fair value of these contracts in other comprehensive income to the extent they are effective as cash flow hedges. Currency effects on the effective portion of these hedges, which are reflected in the foreign currency translation adjustments within Accumulated other comprehensive loss, were not significant in the periods presented. Assets Recorded at Fair Value on a Nonrecurring Basis During the periods ended July 2, 2016 and January 2, 2016, the Finance group’s impaired nonaccrual finance receivables of $51 million and $45 million, respectively, were measured at fair value on a nonrecurring basis using significant unobservable inputs (Level 3). Impaired nonaccrual finance receivables represent assets recorded at fair value on a nonrecurring basis since the measurement of required reserves on our impaired finance receivables is significantly dependent on the fair value of the underlying collateral. For impaired nonaccrual finance receivables secured by aviation assets, the fair values of collateral are determined primarily based on the use of industry pricing guides. Fair value measurements recorded on impaired finance receivables were not significant for both the three and six months ended July 2, 2016 and July 4, 2015. 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: July 2, 2016 January 2, 2016 (In millions) Carrying Value Estimated Fair Value Carrying Value Estimated Fair Value Manufacturing group Long-term debt, excluding leases $ $ $ $ Finance group Finance receivables, excluding leases Debt Fair value for the Manufacturing group debt is determined using market observable data for similar transactions (Level 2). At both July 2, 2016 and January 2, 2016, approximately 75% of the fair value of term debt for the Finance group was determined based on discounted cash flow analyses using observable market inputs from debt with similar duration, subordination and credit default expectations (Level 2). F air 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.

Accumulated Other Comprehensive

Accumulated Other Comprehensive Loss and Other Comprehensive Income (Loss)	6 Months Ended
	Jul. 02, 2016
Accumulated Other Comprehensive Loss and Other Comprehensive Income (Loss)
Accumulated Other Comprehensive Loss and Other Comprehensive Income (Loss)	Note 10. Accumulated Other Comprehensive Loss and Other Comprehensive Income (Loss) The components of Accumulated Other Comprehensive Loss are presented below: (In millions) Pension and Postretirement Benefits Adjustments Deferred Gains (Losses) on Hedge Contracts Foreign Currency Translation Adjustments Accumulated Other Comprehensive Loss For the six months ended July 2, 2016 Beginning of the period $ $ $ $ Other comprehensive income before reclassifications Reclassified from Accumulated other comprehensive loss — Other comprehensive income End of the period $ $ $ $ For the six months ended July 4, 2015 Beginning of the period $ $ $ $ Other comprehensive income (loss) before reclassifications Reclassified from Accumulated other comprehensive loss — Other comprehensive income (loss) End of the period $ $ $ $ The before and after-tax components of other comprehensive income (loss) are presented below: July 2, 2016 July 4, 2015 (In millions) Pre-Tax Amount Tax (Expense) Benefit After-Tax Amount Pre-Tax Amount Tax (Expense) Benefit After-Tax Amount Three Months Ended Pension and postretirement benefits adjustments: Amortization of net actuarial loss* $ $ $ $ $ $ Amortization of prior service credit* — — — Unrealized gains — — — Pension and postretirement benefits adjustments, net Deferred gains on hedge contracts: Current deferrals — Reclassification adjustments Deferred gains on hedge contracts, net Foreign currency translation adjustments Total $ $ $ $ $ $ Six Months Ended Pension and postretirement benefits adjustments: Amortization of net actuarial loss* $ $ $ $ $ $ Amortization of prior service credit* Unrealized gains Pension and postretirement benefits adjustments, net Deferred gains (losses) on hedge contracts: Current deferrals Reclassification adjustments Deferred gains (losses) on hedge contracts, net Foreign currency translation adjustments Total $ $ $ $ $ $ *These components of other comprehensive income are included in the computation of net periodic pension cost. See Note 11 of our 2015 Annual Report on Form 10-K for additional information.

Commitments and Contingencies

Commitments and Contingencies	6 Months Ended
	Jul. 02, 2016
Commitments and Contingencies
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; 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.

Segment Information

Segment Information	6 Months Ended
	Jul. 02, 2016
Segment Information
Segment Information	Note 12. Segment Information We operate in, and report financial information for, the following five business segments: Textron Aviation, 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 and certain corporate expenses. The measurement for the Finance segment includes interest income and expense. Our revenues by segment, along with a reconciliation of segment profit to income from continuing operations before income taxes, are as follows: Three Months Ended Six Months Ended (In millions) July 2, 2016 July 4, 2015 July 2, 2016 July 4, 2015 Revenues Textron Aviation $ $ $ $ Bell Textron Systems Industrial Finance Total revenues $ $ $ $ Segment Profit Textron Aviation $ $ $ $ Bell Textron Systems Industrial Finance Segment profit Corporate expenses and other, net Interest expense, net for Manufacturing group Income from continuing operations before income taxes $ $ $ $

Subsequent Events

Subsequent Events	6 Months Ended
	Jul. 02, 2016
Subsequent Events
Subsequent Events	Note 13. Subsequent Events On July 11, 2016, the Internal Revenue Service Office of Appeals approved a final settlement for our 1998 to 2008 tax years. As a result, in the third quarter of 2016 we expect to record an income tax benefit of approximately $175 million, exclusive of interest, of which $110 million is attributable to continuing operations and $65 million is attributable to discontinued operations. In addition, we expect to record a favorable income tax benefit in the third quarter of 2016 upon the reversal of accrued interest of approximately $140 million, of which approximately $90 million is attributable to continuing operations.

Basis of Presentation (Policies

Basis of Presentation (Policies)	6 Months Ended
	Jul. 02, 2016
Basis of Presentation
Use of Estimates	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. During 2016 and 2015, we changed our estimates of revenues and costs on certain long-term contracts that are accounted for under the percentage-of-completion method of accounting. These changes in estimates increased income from continuing operations before income taxes in the second quarter of 2016 and 2015 by $10 million and $36 million, respectively, ($6 million and $23 million after tax, or $0.02 and $0.08 per diluted share, respectively). For the second quarter of 2016 and 2015, the gross favorable program profit adjustments totaled $19 million and $40 million, respectively, and the gross unfavorable program profit adjustments totaled $9 million and $4 million, respectively. The changes in estimates increased income from continuing operations before income taxes in the first half of 2016 and 2015 by $39 million and $54 million, respectively, ($25 million and $34 million after tax, or $0.09 and $0.12 per diluted share, respectively). For the first half of 2016 and 2015, the gross favorable program profit adjustments totaled $53 million and $73 million, respectively, and the gross unfavorable program profit adjustments totaled $14 million and $19 million, respectively.
New Accounting Pronouncements	New Accounting Pronouncements In May 2014, the Financial Accounting Standards Board (FASB) issued Accounting Standards Update (ASU) No. 2014-09, Revenue from Contracts with Customers , that outlines a comprehensive five-step revenue recognition model based on the principle that an entity should recognize revenue to depict the transfer of promised goods or services to customers in an amount that reflects the consideration to which the entity expects to be entitled in exchange for those goods and services. In July 2015, the FASB approved a one-year deferral of the effective date of the standard to the beginning of 2018 for public companies, with an option that would permit companies to adopt the standard as early as the original effective date of 2017. The new standard may be adopted either retrospectively or on a modified retrospective basis whereby it would be applied to new contracts and existing contracts with remaining performance obligations as of the effective date, with a cumulative catch-up adjustment recorded to beginning retained earnings at the effective date for those contracts. We are currently evaluating the impacts of adoption on our consolidated financial position, results of operations and related disclosures, along with the implementation approach to be used. In February 2016, the FASB issued ASU No. 2016-02, Leases , that requires all leases with a term greater than 12 months be recognized on the balance sheet, while lease expenses would continue to be recognized in the statement of operations in a manner similar to current accounting guidance. The new standard is effective for our company at the beginning of fiscal 2019 and early adoption is permitted. Entities must adopt the standard on a modified retrospective basis whereby it would be applied at the beginning of the earliest comparative year. We are currently evaluating the impact of adoption on our consolidated financial statements. In June 2016, the FASB issued ASU No. 2016-13, Financial Instruments – Credit Losses. For most financial assets, such as trade and other receivables, loans and other instruments, this standard changes the current incurred loss model to a forward-looking expected credit loss model, which generally will result in the earlier recognition of allowances for losses. The new standard is effective for our company at the beginning of fiscal 2020 with early adoption permitted beginning in fiscal 2019. Entities are required to apply the provisions of the standard through a cumulative-effect adjustment to retained earnings as of the effective date. W e are currently evaluating the impact of adoption on our consolidated financial statements.

Retirement Plans (Tables)

Retirement Plans (Tables)	6 Months Ended
	Jul. 02, 2016
Retirement Plans
Components of net periodic benefit cost (credit)	Three Months Ended Six Months Ended (In millions) July 2, 2016 July 4, 2015 July 2, 2016 July 4, 2015 Pension Benefits Service cost $ $ $ $ Interest cost Expected return on plan assets Amortization of net actuarial loss Amortization of prior service cost Curtailment and other charges — — Net periodic benefit cost $ $ $ $ Postretirement Benefits Other Than Pensions Service cost $ — $ $ $ Interest cost Amortization of prior service credit Net periodic benefit credit $ $ $ $

Earnings Per Share (Tables)

Earnings Per Share (Tables)	6 Months Ended
	Jul. 02, 2016
Earnings Per Share
Weighted-average shares outstanding for basic and diluted EPS	Three Months Ended Six Months Ended (In thousands) July 2, 2016 July 4, 2015 July 2, 2016 July 4, 2015 Basic weighted-average shares outstanding Dilutive effect of stock options Diluted weighted-average shares outstanding

Accounts Receivable and Finan23

Accounts Receivable and Finance Receivables (Tables)	6 Months Ended
	Jul. 02, 2016
Accounts Receivable and Finance Receivables
Accounts receivable	(In millions) July 2, 2016 January 2, 2016 Commercial $ $ U.S. Government contracts Allowance for doubtful accounts Total $ $
Finance receivables	(In millions) July 2, 2016 January 2, 2016 Finance receivables * $ $ Allowance for losses Total finance receivables, net $ $ * Includes finance receivables held for sale of $30 million at both July 2, 2016 and January 2, 2016.
Finance receivables by credit quality indicator and by delinquency aging category	(In millions) July 2, 2016 January 2, 2016 Performing $ $ Watchlist Nonaccrual Nonaccrual as a percentage of finance receivables Less than 31 days past due $ $ 31-60 days past due 61-90 days past due Over 90 days past due 60 + days contractual delinquency as a percentage of finance receivables
Summary of impaired finance receivables, excluding leveraged leases, and the average recorded investment	(In millions) July 2, 2016 January 2, 2016 Recorded investment: Impaired loans with related allowance for losses $ $ Impaired loans with no related allowance for losses Total $ $ Unpaid principal balance $ $ Allowance for losses on impaired loans Average recorded investment
Allowance for losses on finance receivables on an individual and on a collective basis	(In millions) July 2, 2016 January 2, 2016 Allowance based on collective evaluation $ $ Allowance based on individual evaluation Finance receivables evaluated collectively $ $ Finance receivables evaluated individually
Rollforward of the allowance for losses on finance receivables	Six Months Ended (In millions) July 2, 2016 July 4, 2015 Beginning of period $ $ Provision for losses Charge-offs Recoveries End of period $ $

Inventories (Tables)

Inventories (Tables)	6 Months Ended
	Jul. 02, 2016
Inventories
Inventories	(In millions) July 2, 2016 January 2, 2016 Finished goods $ $ Work in process Raw materials and components Progress/milestone payments Total $ $

Warranty Liability (Tables)

Warranty Liability (Tables)	6 Months Ended
	Jul. 02, 2016
Warranty Liability
Changes in warranty liability	Six Months Ended (In millions) July 2, 2016 July 4, 2015 Beginning of period $ $ Provision Settlements Acquisitions Adjustments* End of period $ $ * Adjustments include changes to prior year estimates, new issues on prior year sales and currency translation adjustments.

Derivative Instruments and Fa26

Derivative Instruments and Fair Value Measurements (Tables)	6 Months Ended
	Jul. 02, 2016
Derivative Instruments and Fair Value Measurements
Carrying value and estimated fair value of financial instruments	July 2, 2016 January 2, 2016 (In millions) Carrying Value Estimated Fair Value Carrying Value Estimated Fair Value Manufacturing group Long-term debt, excluding leases $ $ $ $ Finance group Finance receivables, excluding leases Debt

Accumulated Other Comprehensi27

Accumulated Other Comprehensive Loss and Other Comprehensive Income (Loss) (Tables)	6 Months Ended
	Jul. 02, 2016
Accumulated Other Comprehensive Loss and Other Comprehensive Income (Loss)
Schedule of components of Accumulated Other Comprehensive Loss	(In millions) Pension and Postretirement Benefits Adjustments Deferred Gains (Losses) on Hedge Contracts Foreign Currency Translation Adjustments Accumulated Other Comprehensive Loss For the six months ended July 2, 2016 Beginning of the period $ $ $ $ Other comprehensive income before reclassifications Reclassified from Accumulated other comprehensive loss — Other comprehensive income End of the period $ $ $ $ For the six months ended July 4, 2015 Beginning of the period $ $ $ $ Other comprehensive income (loss) before reclassifications Reclassified from Accumulated other comprehensive loss — Other comprehensive income (loss) End of the period $ $ $ $
Schedule of before and after-tax components of other comprehensive income (loss)	July 2, 2016 July 4, 2015 (In millions) Pre-Tax Amount Tax (Expense) Benefit After-Tax Amount Pre-Tax Amount Tax (Expense) Benefit After-Tax Amount Three Months Ended Pension and postretirement benefits adjustments: Amortization of net actuarial loss* $ $ $ $ $ $ Amortization of prior service credit* — — — Unrealized gains — — — Pension and postretirement benefits adjustments, net Deferred gains on hedge contracts: Current deferrals — Reclassification adjustments Deferred gains on hedge contracts, net Foreign currency translation adjustments Total $ $ $ $ $ $ Six Months Ended Pension and postretirement benefits adjustments: Amortization of net actuarial loss* $ $ $ $ $ $ Amortization of prior service credit* Unrealized gains Pension and postretirement benefits adjustments, net Deferred gains (losses) on hedge contracts: Current deferrals Reclassification adjustments Deferred gains (losses) on hedge contracts, net Foreign currency translation adjustments Total $ $ $ $ $ $ *These components of other comprehensive income are included in the computation of net periodic pension cost. See Note 11 of our 2015 Annual Report on Form 10-K for additional information.

Segment Information (Tables)

Segment Information (Tables)	6 Months Ended
	Jul. 02, 2016
Segment Information
Revenues by segment and reconciliation of segment profit to income from continuing operations before income taxes	Three Months Ended Six Months Ended (In millions) July 2, 2016 July 4, 2015 July 2, 2016 July 4, 2015 Revenues Textron Aviation $ $ $ $ Bell Textron Systems Industrial Finance Total revenues $ $ $ $ Segment Profit Textron Aviation $ $ $ $ Bell Textron Systems Industrial Finance Segment profit Corporate expenses and other, net Interest expense, net for Manufacturing group Income from continuing operations before income taxes $ $ $ $

Basis of Presentation - Number

Basis of Presentation - Number of borrowing groups (Details)	6 Months Ended
	Jul. 02, 2016item
Basis of Presentation
Number of borrowing groups	2

Basis of Presentation - Contrac

Basis of Presentation - Contracts accounted for under percentage of completion method (Details) - Contracts accounted for under percentage of completion method - USD ($) $ / shares in Units, $ in Millions	3 Months Ended		6 Months Ended
	Jul. 02, 2016	Jul. 04, 2015	Jul. 02, 2016	Jul. 04, 2015
Use of Estimates
Change in Accounting Estimate Financial Effect Increase in Income from Continuing Operations before Income Taxes	$ 10	$ 36	$ 39	$ 54
Change in Accounting Estimate Financial Effect Increase in Income from Continuing Operations after taxes	$ 6	$ 23	$ 25	$ 34
Change in Accounting Estimate Financial Effect Increase in Earnings Per Share Diluted	$ 0.02	$ 0.08	$ 0.09	$ 0.12
Gross Favorable Program Profit Adjustments	$ 19	$ 40	$ 53	$ 73
Gross Unfavorable Program Profit Adjustments	$ 9	$ 4	$ 14	$ 19

Business Acquisitions (Details)

Business Acquisitions (Details) - Business Acquisitions 2016 $ in Millions	6 Months Ended
	Jul. 02, 2016USD ($)item
Business Acquisitions
Aggregate cash payment	$ 179
Debt assumed	$ 19
Number of businesses acquired | item	5
Goodwill	$ 95
Tax-deductible goodwill	37
Customer Relationships and Technologies
Business Acquisitions
Intangible assets	$ 63
Minimum | Customer Relationships and Technologies
Business Acquisitions
Estimated lives of intangible assets	10 years
Maximum | Customer Relationships and Technologies
Business Acquisitions
Estimated lives of intangible assets	18 years

Retirement Plans (Details)

Retirement Plans (Details) - USD ($) $ in Millions	3 Months Ended		6 Months Ended
	Jul. 02, 2016	Jul. 04, 2015	Jul. 02, 2016	Jul. 04, 2015
Net periodic benefit cost (credit)
Unrealized gains, pre-tax		$ 98	$ 7	$ 98
Pension Benefits
Net periodic benefit cost (credit)
Service cost	$ 25	29	49	59
Interest cost	85	82	170	163
Expected return on plan assets	(122)	(121)	(245)	(242)
Amortization of net actuarial loss	26	39	52	78
Amortization of prior service cost (credit)	3	4	7	8
Curtailment and other charges		6		6
Net periodic benefit cost (credit)	17	39	33	72
Postretirement Benefits Other Than Pensions
Net periodic benefit cost (credit)
Service cost		1	1	2
Interest cost	4	4	8	8
Amortization of prior service cost (credit)	(5)	(6)	(11)	(12)
Net periodic benefit cost (credit)	$ (1)	$ (1)	$ (2)	$ (2)
Bell
Net periodic benefit cost (credit)
Workforce reduction (as a percent)		12.00%
Increase to discount rate as a result of remeasurement (as a percent)		0.50%
Discount rate (as a percent)		4.75%
Unrealized gains, pre-tax		$ 98

Earnings Per Share (Details)

Earnings Per Share (Details) - shares shares in Thousands	3 Months Ended		6 Months Ended
	Jul. 02, 2016	Jul. 04, 2015	Jul. 02, 2016	Jul. 04, 2015
Weighted-average shares outstanding for basic and diluted
Basic weighted-average shares outstanding	269,888	277,715	270,774	277,808
Dilutive effect of stock options	1,428	2,220	1,398	2,216
Diluted weighted-average shares outstanding	271,316	279,935	272,172	280,024
Anti-dilutive effect of weighted average shares	5,000	2,000	5,000	1,000

Accounts Receivable and Finan34

Accounts Receivable and Finance Receivables - Accounts receivable (Details) - USD ($) $ in Millions	Jul. 02, 2016	Jan. 02, 2016
Accounts Receivable
Unbillable receivables within accounts receivable	$ 188	$ 135
Manufacturing group
Accounts Receivable
Accounts Receivable, Gross	1,176	1,080
Allowance for doubtful accounts	(32)	(33)
Total	1,144	1,047
Commercial | Manufacturing group
Accounts Receivable
Accounts Receivable, Gross	902	841
U. S. Government Contracts | Manufacturing group
Accounts Receivable
Accounts Receivable, Gross	$ 274	$ 239

Accounts Receivable and Finan35

Accounts Receivable and Finance Receivables - Finance receivables (Details) - USD ($) $ in Millions	Jul. 02, 2016	Jan. 02, 2016	Jul. 04, 2015	Jan. 03, 2015
Finance Receivables
Finance receivables, gross	$ 1,027	$ 1,135
Allowance for losses	(42)	(48)	$ (54)	$ (51)
Total finance receivables, net	985	1,087
Finance receivables held for sale	$ 30	$ 30

Accounts Receivable and Finan36

Accounts Receivable and Finance Receivables - Finance receivables categorized based on credit quality indicators (Details) $ in Millions	6 Months Ended
	Jul. 02, 2016USD ($)item	Jan. 02, 2016USD ($)
Finance receivables categorized based on the internally assigned credit quality
Number of loan categories based on key credit quality indicators for individual loan | item	3
Performing
Finance receivables categorized based on the internally assigned credit quality
Total finance receivables	$ 792	$ 891
Watchlist
Finance receivables categorized based on the internally assigned credit quality
Total finance receivables	106	130
Nonaccrual
Finance receivables categorized based on the internally assigned credit quality
Total finance receivables	$ 99	$ 84
Nonaccrual as a percentage of finance receivables	9.93%	7.60%
Nonaccrual | Minimum
Finance receivables categorized based on the internally assigned credit quality
Number of months of contractual delinquency to classify accounts as nonaccrual unless such collection is not doubtful	3 months

Accounts Receivable and Finan37

Accounts Receivable and Finance Receivables - Finance receivables by delinquency aging category (Details) - USD ($) $ in Millions	Jul. 02, 2016	Jan. 02, 2016
Finance receivables held for investment by delinquency aging
Less than 31 days past due	$ 889	$ 950
31- 60 days past due	51	86
61- 90 days past due	23	42
Over 90 days past due	$ 34	$ 27
60+ days contractual delinquency as a percentage of finance receivables	5.72%	6.24%

Accounts Receivable and Finan38

Accounts Receivable and Finance Receivables - Summary of impaired finance receivables, excluding leveraged leases, and the average recorded investment (Details) - USD ($) $ in Millions	6 Months Ended	12 Months Ended
	Jul. 02, 2016	Jan. 02, 2016
Summary of impaired finance receivables, excluding leveraged leases, at year end and the average recorded investment
Recorded investment, impaired loans with related allowance for losses	$ 62	$ 62
Recorded investment, impaired loans with no related allowance for losses	40	42
Recorded investment, Total	102	104
Unpaid principal balance	106	113
Allowance for losses on impaired loans	11	17
Average recorded investment	$ 95	$ 102

Accounts Receivable and Finan39

Accounts Receivable and Finance Receivables - Allowance for losses on finance receivables on an individual and on a collective basis (Details) - USD ($) $ in Millions	Jul. 02, 2016	Jan. 02, 2016
Finance receivables
Allowance based on collective evaluation	$ 31	$ 31
Allowance based on individual evaluation	11	17
Finance receivables evaluated collectively	797	883
Finance receivables evaluated individually	$ 102	$ 104

Accounts Receivable and Finan40

Accounts Receivable and Finance Receivables - Rollforward of the allowance for losses on finance receivables (Details) - USD ($) $ in Millions	6 Months Ended
	Jul. 02, 2016	Jul. 04, 2015
Allowance for losses
Beginning of period	$ 48	$ 51
Provision for losses	(1)	(1)
Charge-offs	(10)	(2)
Recoveries	5	6
End of period	$ 42	$ 54

Inventories (Details)

Inventories (Details) - USD ($) $ in Millions	Jul. 02, 2016	Jan. 02, 2016
Inventories
Finished goods	$ 1,967	$ 1,735
Work in process	2,932	2,921
Raw materials and components	659	605
Inventories, Gross	5,558	5,261
Progress/milestone payments	(963)	(1,117)
Total	$ 4,595	$ 4,144

Warranty Liability (Details)

Warranty Liability (Details) - USD ($) $ in Millions	6 Months Ended
	Jul. 02, 2016	Jul. 04, 2015
Changes in warranty liability
Beginning of period	$ 143	$ 148
Provision	37	33
Settlements	(37)	(37)
Acquisitions	2	4
Adjustments	(6)	(6)
End of period	$ 139	$ 142

Debt (Details)

Debt (Details) - 4.00% notes due 2026 $ in Millions	Mar. 11, 2016USD ($)
Debt
Face amount	$ 350
Interest rate (as a percent)	4.00%
Net proceeds from issuance	$ 345

Derivative Instruments and Fa44

Derivative Instruments and Fair Value Measurements - Assets and liabilities recorded at fair value on a recurring basis (Details) - Manufacturing group - USD ($) $ in Millions	6 Months Ended
	Jul. 02, 2016	Jan. 02, 2016
Fair value of derivative instruments
Forward exchange contracts maximum maturity period	3 years
Foreign currency exchange contracts
Fair value of derivative instruments
Notional amounts	$ 734	$ 706
Level 2 | Foreign currency exchange contracts
Fair value of derivative instruments
Derivative Asset, Fair Value	7	7
Derivative Liability, Fair Value	$ 11	$ 28

Derivative Instruments and Fa45

Derivative Instruments and Fair Value Measurements - Assets recorded at fair value on a nonrecurring basis (Details) - USD ($) $ in Millions	Jul. 02, 2016	Jan. 02, 2016
Fair Value Measurements, Nonrecurring | Finance group | Unobservable Inputs (Level 3)
Assets measured at fair value on a nonrecurring basis
Impaired finance receivables, Balance	$ 51	$ 45

Derivative Instruments and Fa46

Derivative Instruments and Fair Value Measurements - Assets and liabilities not recorded at fair value (Details) - USD ($) $ in Millions	Jul. 02, 2016	Jan. 02, 2016
Manufacturing group | Carrying Value
Financial instruments not reflected at fair value
Long-term debt, excluding leases	$ (2,958)	$ (2,628)
Manufacturing group | Estimated Fair Value
Financial instruments not reflected at fair value
Long-term debt, excluding leases	$ (3,169)	$ (2,744)
Finance group
Fair Value, Balance Sheet Grouping, Financial Statement Captions
Portion of fair value of term debt determined based on observable market transactions (as a percent)	75.00%	75.00%
Financial instruments not reflected at fair value
Debt	$ (849)	$ (913)
Finance group | Carrying Value
Financial instruments not reflected at fair value
Finance receivables, excluding leases	777	863
Debt	(849)	(913)
Finance group | Estimated Fair Value
Financial instruments not reflected at fair value
Finance receivables, excluding leases	770	820
Debt	$ (750)	$ (840)

Accumulated Other Comprehensi47

Accumulated Other Comprehensive Loss and Other Comprehensive Income (Loss) - Components of accumulated other comprehensive loss (Details) - USD ($) $ in Millions	6 Months Ended
	Jul. 02, 2016	Jul. 04, 2015
Components of Accumulated other comprehensive loss
Beginning of the period	$ (1,398)	$ (1,506)
Other comprehensive income (loss) before reclassifications	23	2
Reclassified from Accumulated other comprehensive loss	42	55
Other comprehensive income (loss)	65	57
End of the period	(1,333)	(1,449)
Pension and Postretirement Benefits Adjustments
Components of Accumulated other comprehensive loss
Beginning of the period	(1,327)	(1,511)
Other comprehensive income (loss) before reclassifications	5	62
Reclassified from Accumulated other comprehensive loss	31	49
Other comprehensive income (loss)	36	111
End of the period	(1,291)	(1,400)
Deferred Gains (Losses) on Hedge Contracts
Components of Accumulated other comprehensive loss
Beginning of the period	(24)	(13)
Other comprehensive income (loss) before reclassifications	14	(14)
Reclassified from Accumulated other comprehensive loss	11	6
Other comprehensive income (loss)	25	(8)
End of the period	1	(21)
Foreign Currency Translation Adjustments
Components of Accumulated other comprehensive loss
Beginning of the period	(47)	18
Other comprehensive income (loss) before reclassifications	4	(46)
Other comprehensive income (loss)	4	(46)
End of the period	$ (43)	$ (28)

Accumulated Other Comprehensi48

Accumulated Other Comprehensive Loss and Other Comprehensive Income - Before and after-tax components of other comprehensive income (loss) (Details) - USD ($) $ in Millions	3 Months Ended		6 Months Ended
	Jul. 02, 2016	Jul. 04, 2015	Jul. 02, 2016	Jul. 04, 2015
Pension and postretirement benefits adjustments, pre-tax:
Amortization of net actuarial loss, pre-tax	$ 26	$ 39	$ 52	$ 78
Amortization of prior service credit, pre-tax	(2)		(4)	(2)
Unrealized gains, pre-tax		98	7	98
Pension and postretirement benefits adjustments, net, pre-tax	24	137	55	174
Deferred gains (losses) on hedge contracts, pre-tax:
Current deferrals, pre-tax	(2)	3	20	(18)
Reclassification adjustments, pre-tax	8	3	15	9
Deferred gains (losses) on hedge contracts, net, pre-tax	6	6	35	(9)
Foreign currency translation adjustments, pre-tax	(14)	9	11	(43)
Other comprehensive income (loss), pre-tax	16	152	101	122
Pension and postretirement benefits adjustments, tax:
Amortization of net actuarial loss, tax	(10)	(14)	(19)	(28)
Amortization of prior service credit, tax	1		2	1
Unrealized gains, tax		(36)	(2)	(36)
Pension and postretirement benefits adjustments, net, tax	(9)	(50)	(19)	(63)
Deferred gains (losses) on hedge contracts, tax:
Current deferrals, tax		(1)	(6)	4
Reclassification adjustments, tax	(2)	(1)	(4)	(3)
Deferred gains (losses) on hedge contracts, net, tax	(2)	(2)	(10)	1
Foreign currency translation adjustments, tax	(6)	1	(7)	(3)
Other comprehensive income (loss), tax	(17)	(51)	(36)	(65)
Pension and postretirement benefits adjustments, after-tax:
Amortization of net actuarial loss, after-tax	16	25	33	50
Amortization of prior service credit, after-tax	(1)		(2)	(1)
Unrealized gains, after-tax		62	5	62
Pension and postretirement benefits adjustments net, after-tax	15	87	36	111
Deferred gains (losses) on hedge contracts, after-tax:
Current deferrals, after-tax	(2)	2	14	(14)
Reclassification adjustments, after-tax	6	2	11	6
Deferred gains (losses) on hedge contracts, net, after-tax	4	4	25	(8)
Foreign currency translation adjustments, after-tax	(20)	10	4	(46)
Other comprehensive income (loss)	$ (1)	$ 101	$ 65	$ 57

Segment Information (Details)

Segment Information (Details) $ in Millions	3 Months Ended		6 Months Ended
	Jul. 02, 2016USD ($)	Jul. 04, 2015USD ($)	Jul. 02, 2016USD ($)segment	Jul. 04, 2015USD ($)
Operating and reportable business segments
Number of business operating segments | segment			5
Number of reportable business segments | segment			5
Revenues
Manufacturing revenues	$ 3,491	$ 3,223	$ 6,672	$ 6,274
Finance revenues	20	24	40	46
Total revenues	3,511	3,247	6,712	6,320
Reconciliation of Operating Profit (Loss) from Segments to Consolidated
Income from continuing operations before income taxes	260	241	475	425
Operating Segment
Segment Profit
Segment Profit	328	306	608	565
Corporate, non-segment
Reconciliation of Operating Profit (Loss) from Segments to Consolidated
Corporate expenses and other, net	(31)	(33)	(63)	(75)
Manufacturing group | Reconciling Items
Reconciliation of Operating Profit (Loss) from Segments to Consolidated
Interest expense, net for Manufacturing group	(37)	(32)	(70)	(65)
Textron Aviation | Manufacturing group
Revenues
Manufacturing revenues	1,196	1,124	2,287	2,175
Textron Aviation | Manufacturing group | Operating Segment
Segment Profit
Segment Profit	81	88	154	155
Bell | Manufacturing group
Revenues
Manufacturing revenues	804	850	1,618	1,663
Bell | Manufacturing group | Operating Segment
Segment Profit
Segment Profit	81	101	163	177
Textron Systems | Manufacturing group
Revenues
Manufacturing revenues	487	322	811	637
Textron Systems | Manufacturing group | Operating Segment
Segment Profit
Segment Profit	60	21	89	49
Industrial | Manufacturing group
Revenues
Manufacturing revenues	1,004	927	1,956	1,799
Industrial | Manufacturing group | Operating Segment
Segment Profit
Segment Profit	99	86	190	168
Finance
Revenues
Finance revenues	20	24	40	46
Finance | Operating Segment
Segment Profit
Segment Profit	$ 7	$ 10	$ 12	$ 16

Subsequent Events (Details)

Subsequent Events (Details) - Subsequent Events - Internal Revenue Service (IRS) - Approval of 1998 To 2008 tax years final settlement on July 11, 2016 $ in Millions	3 Months Ended
	Oct. 01, 2016USD ($)
Subsequent Events
Income tax benefit on continuing and discontinued operations	$ 175
Income tax benefit on reversal of accrued interest	140
Continuing Operations
Subsequent Events
Income tax benefit on continuing operations	110
Income tax benefit on reversal of accrued interest	90
Discontinued Operations
Subsequent Events
Income tax benefit on discontinued operations	$ 65