Textron Annual Report 2013

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FY2013 Annual Report · Textron

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40 WESTMINSTER STREET

PROVIDENCE, RI 02903

(401) 421-2800

WWW.TEXTRON.COM

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1 3

INNO

TION

Innovation Realized

It ends with a product. With talent,
hard work and commitment, we
put new products in the hands of
our customers. Here are some
of the innovative products we
delivered in 2013:

Kautex Next Generation
Carbon Canister™
meets the challenges
of more stringent
environmental
regulations.

Cessna TTx is the world’s
fastest commercially
produced ﬁ xed-gear
piston aircraft, made from
all-composite materials
and delivering advanced
technology and comfort.

Cushman Hauler
PRO™ is a silent,
zero-emissions
electric vehicle with
the range and power
once exclusive to gas-
powered machines.

Citation Sovereign+
is a visionary midsize
jet featuring state-of-
the-art cockpit, all-new
interior and extended
range.

Innovation Born

It starts with an idea. A group of
talented people then take this idea
to places that most of us can’t
imagine. Here are some of the
major innovations we
announced in 2013:

Bell Helicopter’s V-280
B
Valor is next generation
V
tiltrotor technology
that offers the defense
industry unparalleled
speed and agility for
tomorrow’s missions.

Bell Helicopter’s
505 Jet Ranger X TM
reclaims a market the
cco
company pioneered nearly
50 years ago, delivering a
550
n
new design and features
that customers want.

Scorpion pushes the
performance envelope
and redeﬁ nes what
it takes to own and
operate a military
tactical jet.

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FFeebbrrruuuaaarrryy

March

April

MMayy

June

July

August

September

October

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D
December

Bell Helicopter’s 412EPITM, announced in
March and delivered in December, offers
greater situational awareness and improved
performance in hot temperatures and at
higher altitudes.

Citation M2 is the upgrade
every jet-aspiring aviator dreams
of—with exceptional power and beauty in
an efﬁ cient, entry-level jet.

TEXTRON’S DIVERSE PRODUCT PORTFOLIO

Textron is known around the world for its powerful brands of aircraft, defense and industrial products that provide customers with
groundbreaking technologies, innovative solutions and ﬁ rst-class service.

BELL HELICOPTER

CESSNA

INDUSTRIAL

TEXTRON SYSTEMS

BELL-BOEING V-22 OSPREY

CESSNA CITATION X+

KAUTEX GENERATION II SCR SYSTEM™

COMMANDO ™ ELITE

BELL 429™

CESSNA CJ4

CUSHMAN TITAN HD™

SHIP-TO-SHORE CONNECTOR

BELL 412™

CESSNA CITATION LATITUDE

GREENLEE G3 TUGGER™

AEROSONDE®

BELL 407™

CESSNA TTX

E-Z-GO TXT™

MAST

BELL AH-1Z

CESSNA TURBO STATIONAIR

JACOBSEN LF510™

G-CLAW™

TEXTRON AIRLAND SCORPION JET

The Textron AirLand Scorpion Jet was introduced in 2013 by Textron AirLand,
LLC, the joint venture of Textron Inc. and AirLand Enterprises, LLC. Scorpion
is designed to be a highly-affordable twin-jet tactical aircraft for intelligence,
surveillance and reconnaissance missions, including precision strike capabilities.

TEXTRON AIRLAND SCORPION JET

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TEXTRON’S GLOBAL NETWORK OF BUSINESSES
CESSNA

TEXTRON SYSTEMS

BELL HELICOPTER

INDUSTRIAL

FINANCE

Bell Helicopter is one of the
leading suppliers of helicopters
and related spare parts and
services in the world and is the
pioneer of the revolutionary
tiltrotor aircraft. Bell Helicopter
has delivered more than 35,000
aircraft to customers around the
world. Greater than one-third of
all helicopters in operation today
carry the Bell Helicopter brand,
including both military and
commercial applications.

Textron Systems provides
innovative solutions to the
defense, aerospace, homeland
security and general aviation
markets with product lines
that include unmanned aircraft
systems, marine and land
systems, weapons and sensors,
and defense and aviation mission
support products and services.
Textron Systems includes AAI
Logistics & Technical Services,
AAI Test & Training, AAI
Unmanned Aircraft Systems,
Lycoming, Overwatch Geospatial
Solutions, Overwatch Intelligence
Solutions, Textron Defense
Systems, Textron Marine & Land
Systems and Textron Simulation
& Training Systems.

With the world’s largest installed
base, Cessna continues to lead
general aviation through two
principal lines of business:
aircraft sales and aftermarket
services. Aircraft sales include
Citation jets, Caravan single-
engine utility turboprops and
single-engine utility and high-
performance piston aircraft.
Aftermarket services include
parts, scheduled maintenance,
inspection, and repair services.

Our Industrial segment offers
three main product lines:
fuel systems and functional
components produced by
Kautex; golf, turf care and
light transportation vehicles
and equipment manufactured
by E-Z-GO and Jacobsen;
and manual and powered
professional tools, testing and
measurement equipment made
by Greenlee.

Our Finance segment, operated
by Textron Financial Corporation,
is a commercial ﬁ nance business
that provides ﬁ nancing solutions
primarily for purchasers of
Cessna aircraft and Bell
Helicopter rotorcraft.

SELECTED YEAR-OVER-YEAR FINANCIAL DATA

(Dollars in Millions, Except Per Share Amounts)

Total Revenues
Total Segment Proﬁ t
Income from Continuing Operations

PER SHARE OF COMMON STOCK
Common Stock Price:
Low
High
Year-End
Diluted EPS from Continuing Operations

COMMON SHARES OUTSTANDING (In Thousands)
Diluted Average
Year-End

FINANCIAL POSITION
Total Assets
Manufacturing Group Debt
Finance Group Debt
Shareholders’ Equity
Manufacturing Group Debt-to-Capital (Net of Cash)
Manufacturing Group Debt-to-Capital

2013 2012

$12,104

$12,237

963
498

1,132
581

$23.94

$18.37

37.43
36.61
1.75

29.18
24.12
1.97

284,428
282,059

294,663
271,263

$12,944

$13,033

1,931
1,256
4,384
15%
31%

2,301
1,686
2,991
24%
44%

KEY PERFORMANCE METRICS
Net Cash Provided by Operating Activities of Continuing Operations for Manufacturing Group—GAAP
Manufacturing Cash Flow Before Pension Contributions—Non-GAAP1

$658

$958

256

793

1 Manufacturing Cash Flow Before Pension Contributions is a Non-GAAP Measure. See Page 10 for Reconciliation to GAAP.

Textron’s Global Network of Businesses | Selected Year-Over-Year Financial Data | 1

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Fellow
Shareholders,

For Textron, 2013 was a pivotal year. We realized $12.1 billion in total revenues and

saw an operating proﬁ t of $963 million. In our Industrial segment, acquisition and

product innovation led to a four percent increase in revenues compared to 2012.

At Bell Helicopter, the delivery of 41 V-22s and a double-digit rise in commercial

deliveries contributed to a six percent increase in revenues over last year. The

certiﬁ cation of three new Cessna models in 2013 positioned us for future growth

as global markets gain momentum. At Textron Systems, we steadily grew our

international customer base, capturing signiﬁ cant contracts from new customers in

the Middle East and Asia Paciﬁ c regions.

Innovation to Drive Growth

Across all of our businesses, innovation matters—

and this was the year we set out to prove it.
Anticipating the military’s next generation
rotorcraft needs, Bell Helicopter presented

the V-280 Valor as the ready contender for the U.S.
Department of Defense’s future vertical lift program
and a viable option for foreign military applications.
Upgrades to our unmanned aircraft systems
allowed for broader, more strategic missions while
enhancements to our intelligence-gathering software
improved analysts’ ability to view and customize
critical data. We introduced our expanded family of
COMMANDO™ armored vehicles to equip soldiers
with a greater range of ﬁ repower, as well as a vehicle
for safe to-and-from-base transport. Additionally, for
global military customers, Textron AirLand launched
the successful ﬁ rst ﬂ ight of our Scorpion intelligence,
surveillance and reconnaissance aircraft, making it
one of the fastest-developed, American-made, tactical
jets—progressing from initial design to ﬁ rst ﬂ ight in
less than 24 months.

For commercial customers, Bell Helicopter announced
plans to return to the short-light single-engine
helicopter market with a modern version of its popular
JetRanger™. Also in 2013, Bell Helicopter made
enhancements to several products in its lineup, offering
customers improved situational awareness and safety;
greater landing and taxiing maneuverability; and
increased speed, range and load capacities. In addition
to certifying new models for delivery in 2013, Cessna
introduced advanced diagnostic service technology in
new Citations and continued to hit major production
milestones for the Citation X+ and Latitude. Across
our Industrial segment, we introduced more than 30
new products for our warehousing, industrial transport,
turf care, utility and electrician customers; upgraded
several of our most popular golf cars and rugged
outdoor sporting vehicles for a more comfortable and
quieter ride; and saw innovation deliver value in the
form of major contracts for Kautex carbon canisters
and catalytic reduction systems for some of the world’s
largest automakers.

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Letter To Shareholders | 2

Extended Reach to Capture More Business

Our focus on strengthening customer relationships
led to several important expansions in 2013. In our
Industrial segment, we increased our international
sales capacity at Jacobsen and Greenlee; added
more than 130 new E-Z-GO dealers to our domestic
distribution network; and opened new Klauke
manufacturing facilities in China and Mexico, and sales
and distribution locations in Poland and Spain. In our
aerospace businesses, Cessna continued to establish
its manufacturing presence in China; Bell Helicopter
expanded its service offerings in England, Russia and
Singapore and made a number of “ﬁ rst” deliveries to
customers in Europe, Latin America and Asia.

In our military businesses our focus on critical
customer requirements delivered big program wins for
us globally. In the U.S., we signed a second, multi-year
V-22 contract valued at $6.5 billion. Overseas, we won
major new government contracts in 2013 worth more
than $700 million to build precision weapons for the
Kingdom of Saudi Arabia, additional armored vehicles
and training services for the Afghan National Army,
and armored personnel carriers and technical support
services for the Colombian Army.

Portfolio Expansion to Support Growth

Over the course of the year, we completed six
strategic acquisitions—two that expand our offerings
to the power utility market, two that expand our
ﬂ ight simulation and training services for military and
commercial aviation markets and two that expand

our global service center network. In a move that
complements our aerospace business, we signed
an agreement to acquire Beech Holdings, the parent
company of Beechcraft—a name well known for its
business, special mission, light attack, and trainer
aircraft.

Conﬁ dence in Our Future

Our teams made great progress in 2013 as we brought
important new products to the market, continued to
increase our sales and service resources around the
world and made acquisitions that expand our product
and service offerings to customers.

Entering 2014, I am conﬁ dent that we have the right
people in the right places and that our teams are
taking the right actions. By continuing to grow our
capabilities—both in terms of our talent and our
operations—we will see even greater gains for our
shareholders, our customers and our employees alike
in the coming year. I look forward to being a part of it.

Scott C. Donnelly
Chairman and Chief Executive Ofﬁ cer

3 | Letter To Shareholders

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Bell Helicopter

Strong Deliveries and a Steady Stream of New Orders
Drive Revenue Growth

Performance
Highlights

(In millions)

2013

2012

2011

Segment Revenues

$4,511

$4,274

$ 3,525

Segment Proﬁ t

$573

$639

521

On both the commercial and military sides, innovation was also
a driving force in 2013. At the Paris Air Show, we announced to
commercial customers our plans to manufacture the Bell 505 Jet
Ranger XTM, a new, short-light single-engine helicopter. We also
introduced customer-driven upgrades to our ﬂ eet with the Bell
412EPITM, the 407GTTM and the 429WLGTM. For our military customers,
we leveraged our tiltrotor technology and introduced the Bell V-280
Valor to compete for the Department of Defense’s Future Vertical Lift
long-term program. This program is expected to eventually replace
2,000 to 4,000 medium-class utility and attack helicopters and be
worth an estimated $100 billion—with additional potential for foreign
military sales.

At Bell Helicopter, customer relationships extend beyond the sale of
the aircraft. This is evidenced by the fact that our customer service
and support remained a hallmark in 2013. For the 20th consecutive
year, we ranked ﬁ rst for customer service and support among
readers of Professional Pilot and placed ﬁ rst in product support and
service by readers of Aviation International News. These accolades
are especially gratifying because they come from our customers—
owners and operators with very high expectations for the operability
and safety of their rotorcraft. Emphasizing our commitment to safety,
we also hosted three international safety symposia to educate pilots
and technicians on common safety practices and applications.

Moving into 2014, we plan to build on our 2013 successes. We will
grow our presence around the world by demonstrating a steadfast
commitment to product innovation and sales and service networks
that meet the exacting requirements of our customers—so they
complete every mission safe and sound.

Bell Helicopter | 4

In 2013, Bell Helicopter performed well for customers,
making a record number of military and commercial
rotorcraft deliveries. This helped our full-year revenues
increase from $4.3 billion in 2012 to $4.5 billion in 2013.
We also saw a steady stream of new orders throughout 2013
and introduced new products and product upgrades that will
serve the mission needs of our customers for years to come.

Executing on existing orders, we delivered 213 commercial

aircraft, a 13 percent increase over the 188 aircraft delivered
in 2012. Many of those were “ﬁ rsts” delivered to international
customers—helping to further strengthen our global presence.

Poland, Russia and Switzerland took delivery of their ﬁ rst 407GXTM,
the U.K. and Nigeria took delivery of their ﬁ rst 429TM, and United Arab
Emirates was the ﬁ rst country to take delivery of the new 412EPITM.
This strong slate of deliveries also extended to the military, with the
delivery of 41 V-22s and 25 H-1s to customers. Among these was the
ﬁ rst HMX-V22 that serves presidential and other special missions.

To help us seize new global opportunities and support continued
strong international deliveries, in 2013, we expanded our sales
teams around the world. On the commercial side, this led to a year-
over-year increase in orders for new rotorcraft in both our U.S. and
international markets—including a 50 percent rise in orders from
China. In our military business, we entered into an agreement with
the U.S. government to deliver 99 V-22s as part of a ﬁ ve-year, $6.5
billion contract. Reﬂ ecting the growing interest abroad in the tiltrotor
program, the Department of Defense informed Congress of its intent
to sell six V-22s to Israel.

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Textron Systems

Customer-Centric Focus and Mission Alignment Lead to
Major International Wins

Performance
Highlights

(In millions)

2013

2012

2011

Segment Revenues

$1,665

$1,737

$ 1,872

Segment Proﬁ t

$147

$132

141

Against a backdrop of U.S. defense budget uncertainty,
Textron Systems maintained a steady focus on building
customer relationships around the world and enhancing
its ability to serve customers’ end-to-end mission needs.
Efforts to grow international business led to an 11 percent
increase in non-U.S. revenues in 2013 compared to 2012.
To strengthen our ability to serve military and non-military
customers beyond “point of sale,” we acquired two ﬂ ight
simulation and training companies—Mechtronix, based in
Canada, and OPINICUS in the U.S.—and combined them with
our existing training and simulation business to form Textron
Simulation & Training Systems.

Across our defense businesses, quickly identifying customer

requirements and proposing solutions that demonstrate an in-
depth understanding of conditions in the ﬁ eld produced
major new international contract wins in 2013. Textron Defense

Systems won a $641 million foreign military sales contract to build
precision weapon systems for the Kingdom of Saudi Arabia and
signed a Foreign Military Sale agreement for additional precision
weapons for the Republic of Korea. Textron Marine & Land Systems
won more than $150 million in multinational contracts to build
additional armored vehicles and provide training services for the
Afghan National Army, and additional armored personnel carriers,
armored turrets, and technical support services for the Colombian
Army. These wins were in addition to a contract to improve the
survivability of the U.S. Army’s HMMWV light tactical vehicles. In
2013, AAI won a mix of foreign and domestic contracts to install

advanced systems that ensure the aligned operation of aircraft
weapons, navigation and sensor sub-systems; provide logistics
to support the smooth operation of hydraulic components used in
today’s tactical aircraft; lessen the load of lightweight arms carried
by U.S. soldiers; and deliver additional aircraft simulation and training
systems for the U.S. Army.

In terms of innovation aligned with customer needs, in 2013, Textron
Marine & Land Systems introduced three new COMMANDO™ vehicles;
two that deliver more ﬁ repower in a highly protected armored
vehicle and one offering ease of ground transport; AAI extended the
range of its latest unmanned aircraft to support broader and more
strategic war zone missions; and Overwatch enhanced its intelligence
gathering software for a better user interface and improved analyst
productivity. At Lycoming, 2013 brought several developments
aimed at improved performance—chief among them, installation
of Lycoming-manufactured engines in our fee-for-service unmanned
aircraft systems.

We also achieved signiﬁ cant milestones throughout the year. We
reached more than 900,000 Shadow® and Aersonde® unmanned
aircraft ﬂ ight hours; delivered the 500th ﬂ ight line electronic
warfare test system; and consistently hit key program dates for
next-generation U.S. Navy landing craft and Canadian Armed Forces
armored vehicles. Looking back at these milestones and our wins
in 2013, we enter 2014 conﬁ dent in our ability to meet critical
customer needs around the world. The relationships we’ve built with
our domestic and international customers, our extended capability
to provide full life-cycle solutions and the people we’ve placed around
the world position us for ongoing success.

5 | Textron Systems

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Cessna

New Product and Service Network Investments
Position Cessna for Growth

Performa
Performance
Highlights

(In millions)

2013

2012

2011

Segment Revenues

$2,784

$ 3,111 $ 2,990

Segment Proﬁ t (Loss)

$(48)

$82

While Cessna revenues for 2013 were disappointing, we

the program covers all scheduled service for the jet’s ﬁ rst ﬁ ve

began to see our aggressive investments in new products

years or 1,500 ﬂ ight hours. As further proof of Cessna’s service

have a positive impact in the fourth quarter—with revenues

delivery commitment, Cessna Mobile Service Units reached a major

nearly doubling over the prior quarter and rising slightly

milestone, surpassing 10,000 service visits.

higher than the same quarter last year. For the year, Cessna

reported $2.8 billion in revenues.

three new aircraft models. In March, the ﬁ rst Citation

Sovereign+ production unit rolled off the manufacturing line

During the course of the year, we certiﬁ ed and began delivering

aircraft which features winglets, a new cabin design and state-of-the-
art cockpit. These new features result in extended range, improved

and, in December, customers began taking deliveries of this

passenger comfort and reduced pilot workload. Also in March, the

During the year, we also continued to strengthen our international

foothold. Just a year after announcing our joint venture with the

Aviation Industry Corporation of China and the China Aviation Industry

General Aircraft Company, we completed facility construction,

installed tooling and equipment, and placed management teams in

our Shijiazhuang location. In terms of Asia-Paciﬁ c sales in 2013, we
received the ﬁ rst Chinese order for Citation Mustangs to be used for
charter services; delivered the ﬁ rst Citation Mustang destined for
service in India; and announced the Russian purchase of 79 Cessna

Citation M2 made its ﬁ rst ﬂ ight and, by year-end, customers started

172 Skyhawk aircraft—one of the aircraft’s largest orders on record.

taking deliveries of this aircraft that redeﬁ nes performance and

capability in this product segment. In July, less than a year after the

Cessna TTx moved into production, the aircraft saw its ﬁ rst customer

delivery—as the world’s fastest, commercially produced ﬁ xed-gear,

single-engine piston aircraft.

Moving forward, Cessna enters 2014 having won two category titles

in the annual Robb Report “Best of the Best” competition and hit

major production milestones for its next generation of new products

in the queue—in particular, the Citation X+, the Citation Latitude,

and new models that bring jet fuel technology to the propeller

In 2013, we also redeﬁ ned Cessna aircraft servicing. In new Citation

market. With continued excellent delivery times, unmatched product

models, we introduced next-generation diagnostic equipment to alert

performance, increased marketing and sales activity, service center

the owner, pilot and Citation Service Center of record at the ﬁ rst

expansion, and unwavering commitment to new product investments,

sign of a problem—helping to hasten operator preparedness and

Cessna is well positioned to remain at the forefront of the general

aircraft return-to-service. To reduce operating costs for mid-size jet

aviation market.

customers, we introduced the Citation Sovereign Shield program;

Cessna | 6

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Industrial

Innovation, Strategic Acquisitions and New Ways to Reach
Customers Accelerate Sales

Performance
Highlights

(In millions)

2013

2012

2011

Segment Revenues

$3,012

$2,900

$ 2,785

Segment Proﬁ t

$242

$215

$202

Whether it was launching new products for electrical

the beneﬁ ts of our tools. Seeking to grow into adjacent markets, we

contractors, outdoor enthusiasts and automobile

acquired Sherman + Reilly and HD Electric, which positions Greenlee

manufacturers or seizing opportunities to broaden our reach

to offer a more complete product solution to power utility companies.

into new markets, 2013 was a great year for our Industrial

businesses. This translated into 2013 revenues of $3.0

billion, a four percent increase over 2012, and a proﬁ t of

$242 million, a 13 percent increase over 2012.

vehicle lineup. For our industrial customers, we expanded our

At E-Z-GO, we continued to invest in our light transportation

Cushman line of burden carriers as we added the Cushman
Hauler PRO™, a fully electric, zero-emissions utility vehicle

for use in turf and facilities maintenance. With an upgrade to our Bad
Boy Buggies Ambush iS™ vehicle, we gave hunting enthusiasts the
ability to operate in gas, electric or hybrid mode. We redesigned the

iconic E-Z-GO TXT™ golf car and Freedom TXT™ vehicle, adding more

comfort and convenience features like larger cup holders, mobile

device ports and stow-away compartments. These innovations led to

an impressive year for E-Z-GO, resulting in a nine percent increase in

revenues over 2012.

For Jacobsen, sales of turf equipment climbed and revenues rose

as we added more salespeople and stepped up our marketing and

promotional activities in 2013. These actions helped Jacobsen

capitalize on a number of opportunities, including closing its single

largest sale of all-electric riding mowers; doubling Ransomes Mastiff

mower sales for soccer ﬁ elds in Latin America; landing several high-

proﬁ le wins across the U.S.; and realizing a ﬁ ve percent increase in
revenues compared to 2012.

With innovative, cost-competitive solutions for automotive customers,

our Kautex business won new contracts and drove growth in 2013,

demonstrating that the right technology is a key differentiator for

customers. BMW, Renault, Jaguar Land Rover and Volkswagen all

selected Kautex’s Selective Catalytic Reduction System™ for their

new vehicle lines, with BMW also selecting Kautex’s Next Generation

Carbon Canister™ for their 3 and 5 series vehicles for the U.S.

market. Continuing to expand its global reach, Kautex announced

At Greenlee, 2013 was a year that featured new product

plans to build its ﬁ rst plant in Russia after winning new business with

introductions, continued expansion into new markets and two

Ford in that country.

strategic acquisitions. To address the contractor’s need for workforce

efﬁ ciency, Greenlee introduced 28 new products to its family of

brands and deployed its professional tool specialists to job sites in

North America and Europe—letting end-user customers see ﬁ rsthand

In 2014, we will continue to focus our efforts on developing new

products, further expanding our distribution channels and looking for
innovative ways to generate growth.

7 | Industrial

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Finance

Textron Product Financing Supports Business Growth

Performance
Highlights

(In millions)

2013

2012

2011

Segment Revenues

$132

$215

103

Segment Proﬁ t (Loss)

$49

64 $ (333)

Working with these export credit agencies has been a critical part
of attracting international customers.

Having a strong ﬁ nancial service business to facilitate the loans
and leases of our aircraft and rotorcraft is a winning proposition
for us and our customers. As an example of this, funding through
Textron Financial in 2013 supported the sale of 66 new aircraft
for Cessna and Bell Helicopter in 2013, including a number of
important rotocraft deliveries for the oil and gas industry.

Moving into 2014, our ﬁ nancing business intends to remain
focused on providing a seamless process for customers
to purchase and ﬁ nance our products. Doing this helps us
strengthen our relationship with the customer and sets a path for
future sales opportunities around the world.

At Textron Financial, in 2013, we largely completed the
execution of our non-captive portfolio liquidation plan
that began in 2008 to exit the ﬁ nancing of non-Textron
brands. Of ﬁ nance receivables totaling $1.5 billion in
2013, only $185 million represent our remaining non-
captive receivables. Concentrating on ﬁ nancing the
purchase of our own manufactured brands helped us post
$132 million in revenues for the segment and a segment
proﬁ t of $49 million in 2013.

Reﬂ ecting efforts across the company to grow international

business, 60 percent of the loans we originated in 2013
were for non-U.S. customers. A large portion—90
percent—of that non-U.S. ﬁ nancing was offered through

our key strategic relationship with the Export-Import Bank of the
United States and Export Development Canada.

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Finance | 8

LEADERSHIP

BOARD OF DIRECTORS
Scott C. Donnelly (1)
Chairman, President and Chief Executive Ofﬁ cer
Textron Inc.

Kathleen M. Bader (1) (3)
President and Chief Executive Ofﬁ cer (Retired)
NatureWorks LLC

R. Kerry Clark (2) (4)
Chairman and Chief Executive Ofﬁ cer (Retired)
Cardinal Health, Inc.

James T. Conway (2) (3)
General (Retired)
U.S. Marine Corps

Ivor J. Evans (2) (3)
Chairman, Chief Executive Ofﬁ cer and President
Meritor, Inc.

Lawrence K. Fish (3) (4)
Chairman and Chief Executive Ofﬁ cer (Retired)
Citizens Financial Group, Inc.

Paul E. Gagné (2) (4)
Chairman
Wajax Corporation

Dain M. Hancock (2) (4)
Executive Vice President (Retired)
Lockheed Martin Corporation

Lord Powell of Bayswater KCMG (3) (4) (5)
Former Private Secretary and Advisor on Foreign Affairs and Defence to
Prime Ministers Margaret Thatcher and John Major

Lloyd G. Trotter (1) (4)
Managing Partner
GenNx 360 Capital Partners

James L. Ziemer (1) (2)
President and Chief Executive Ofﬁ cer (Retired)
Harley-Davidson, Inc.

NUMBERS INDICATE COMMITTEE MEMBERSHIPS: (1) Executive
Committee: Chair, Scott C. Donnelly, (2) Audit Committee: Chair, James
L. Ziemer, (3) Nominating and Corporate Governance Committee: Chair,
Kathleen M. Bader, (4) Organization and Compensation Committee: Chair,
Lloyd G. Trotter, (5) Lead Director: Lord Powell of Bayswater KCMG

EXECUTIVE OFFICERS

SEGMENT AND BUSINESS
UNIT PRESIDENTS

CORPORATE OFFICERS

Mark S. Bamford
Vice President, Audit Services

John R. Curran
Vice President - Mergers &
Acquisitions

Julie G. Duffy
Vice President and Deputy
General Counsel – Litigation

Patricia L. Elmer
Vice President - Tax

Mary F. Lovejoy
Vice President and Treasurer

Paul Mc Gartoll
Vice President - Strategy and
Business Development

Elizabeth C. Perkins
Vice President and Deputy
General Counsel

Robert O. Rowland
Senior Vice President -
Washington Operations

Diane K. Schwarz
Vice President and Chief
Information Ofﬁ cer

Cathy A. Streker
Vice President - Human
Resources

Adele J. Suddes
Vice President -
Communications

Douglas R. Wilburne
Vice President - Investor
Relations

Richard L. Yates
Senior Vice President and
Corporate Controller

Scott C. Donnelly
Chairman, President and Chief
Executive Ofﬁ cer

Scott A. Ernest
President and Chief Executive
Ofﬁ cer, Cessna Aircraft

Frank T. Connor
Executive Vice President and
Chief Financial Ofﬁ cer

John L. Garrison
President and Chief Executive
Ofﬁ cer, Bell Helicopter

Cheryl H. Johnson
Executive Vice President,
Human Resources

J. Scott Hall
President, Textron Industrial
Segment and Greenlee

E. Robert Lupone
Executive Vice President,
General Counsel and Secretary

Kevin P. Holleran
President, E-Z-GO

John Klopfer
President and Chief Executive
Ofﬁ cer, Textron Financial

Ellen M. Lord
President and Chief Executive
Ofﬁ cer, Textron Systems

Vicente Perez
President and Chief Executive
Ofﬁ cer, Kautex

David Withers
President, Jacobsen

9 | Textron Leadership

44496 Text.indd 9

2/27/14 4:30 PM

Footnote to Selected Year-Over-Year Financial Data

1 We use Manufacturing cash ﬂ ow before pension contributions as our measure of free cash ﬂ ow. This measure is not a ﬁ nancial measure under
generally accepted accounting principles (GAAP) and should be used in conjunction with GAAP cash measures provided in our Consolidated
Statements of Cash Flows. Free cash ﬂ ow is a measure generally used by investors, analysts and management to gauge a company’s ability
to generate cash from operations in excess of that necessary to be reinvested to sustain and grow the business and fund its obligations.

Our deﬁ nition of Manufacturing cash ﬂ ow before pension contributions adjusts net cash from operating activities of continuing operations for the
Manufacturing group for dividends received from TFC, capital contributions provided under the Support Agreement and debt agreements, capital
expenditures, proceeds from the sale of property, plant and equipment and contributions to our pension plans. We believe that our calculation
provides a relevant measure of liquidity and is a useful basis for assessing our ability to fund operations and obligations. This measure may not
be comparable with similarly titled measures reported by other companies, as there is no deﬁ nitive accounting standard on how the measure
should be calculated. A reconciliation of net cash from operating activities of continuing operations for the Manufacturing group as presented in
our Consolidated Statements of Cash Flows to Manufacturing cash ﬂ ow before pension contributions is provided below:

(In millions)
Net cash from operating activities of continuing operations for the Manufacturing group - GAAP
Less: Capital expenditures

Dividends received from TFC
Plus: Capital contributions paid to TFC

Proceeds on sale of property, plant and equipment
Total pension contributions

Manufacturing cash ﬂ ow before pension contributions – Non-GAAP

2013
658
(444)
(175)
1
22
194
256

2012
958
(480)
(345)
240
15
405
793

44496 Text.indd 10

2/27/14 4:30 PM

Textron Footnotes | 10

FORM 10-K TABLE OF CONTENTS

Business Summary

Management’s Discussion and Analysis

Segment Analysis

Financial Statements

Controls and Procedures

Corporate Information

2
18
20
39

UNITED STATES SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549

Form 10-K

[ x ] ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

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

For the fiscal year ended December 28, 2013
or

OF 1934

For the transition period from to .

Commission File Number 1-5480
Textron Inc.
(Exact name of registrant as specified in its charter)

Delaware
(State or other jurisdiction of
incorporation or organization)

05-0315468
(I.R.S. Employer
Identification No.)

40 Westminster Street, Providence, RI

(Address of principal executive offices)

02903
(Zip code)

Registrant’s Telephone Number, Including Area Code: (401) 421-2800

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

Title of Each Class
Common Stock — par value $0.125

Name of Each Exchange on Which Registered

New York Stock Exchange

Securities registered pursuant to Section 12(g) of the Act: None

Indicate by check mark if the registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities Act. Yes (cid:57) No

Indicate by check mark if the registrant is not required to file reports pursuant to Section 13 or Section 15(d) of the Act. Yes No (cid:57)

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such
filing requirements for the past 90 days. Yes (cid:57) No

Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File
required to be submitted and posted pursuant to Rule 405 of Regulation S-T during the preceding 12 months (or for such shorter period that the
registrant was required to submit and post such files). Yes (cid:57) No____

Indicate by check mark if disclosure of delinquent filers pursuant to Item 405 of Regulation S-K is not contained herein, and will not be contained, to
the best of registrant’s knowledge, in definitive proxy or information statements incorporated by reference in Part III of this Form 10-K or any
amendment to this Form 10-K. [ (cid:57) ]

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

Large accelerated filer [ (cid:57) ]

Accelerated filer [ ]

Non-accelerated filer [ ]
(Do not check if a smaller reporting company)

Smaller reporting company [ ]

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Act). Yes No (cid:57)

The aggregate market value of the registrant’s Common Stock held by non-affiliates at June 28, 2013 was approximately $7.3 billion based on the
New York Stock Exchange closing price for such shares on that date. The registrant has no non-voting common equity.

At February 1, 2014, 282,500,851 shares of Common Stock were outstanding.

Documents Incorporated by Reference

Part III of this Report incorporates information from certain portions of the registrant’s Definitive Proxy Statement for its Annual Meeting of
Shareholders to be held on April 23, 2014.

1 Textron Inc. Annual Report • 2013

PART I

Item 1. Business

Textron Inc. is a multi-industry company that leverages its global network of aircraft, defense, industrial and finance businesses to
provide customers with innovative products and services around the world. We have approximately 32,000 employees worldwide.
Textron Inc. was founded in 1923 and reincorporated in Delaware on July 31, 1967. Unless otherwise indicated, references to
“Textron Inc.,” the “Company,” “we,” “our” and “us” in this Annual Report on Form 10-K refer to Textron Inc. and its
consolidated subsidiaries.

We conduct our business through five operating segments: Cessna, Bell, Textron Systems and Industrial, which represent our
manufacturing businesses, and Finance, which represents our finance business. A description of the business of each of our
segments is set forth below. Our business segments include operations that are unincorporated divisions of Textron Inc. and others
that are separately incorporated subsidiaries. Financial information by business segment and geographic area appears in Note 15
to the Consolidated Financial Statements on pages 75 through 76 of this Annual Report on Form 10-K. The following description
of our business should be read in conjunction with “Management’s Discussion and Analysis of Financial Condition and Results of
Operations” on pages 18 through 37 of this Annual Report on Form 10-K. Information included in this Annual Report on Form
10-K refers to our continuing businesses unless otherwise indicated.

Cessna Segment
Cessna is the world’s leading general aviation company based on unit sales with two principal lines of business: aircraft sales and
aftermarket services. Aircraft sales include Citation jets, Caravan single-engine utility turboprops and single-engine utility and
high-performance piston aircraft. Aftermarket services include parts, maintenance, inspection and repair services. Revenues in the
Cessna segment accounted for approximately 23%, 25% and 26% of our total revenues in 2013, 2012 and 2011, respectively.
Revenues for Cessna’s principal lines of business were as follows:

(In millions)
Aircraft sales
Aftermarket

2013

2012

$ 1,868
916
$ 2,784

$ 2,318
793
$ 3,111

2011
$ 2,263
727
$ 2,990

The family of jets currently produced by Cessna includes the Mustang, Citation M2, Citation CJ2+, Citation CJ3, Citation CJ4,
Citation XLS+ and the new Citation Sovereign+. The new Citation X+, recently verified by the FAA as the fastest civilian jet in
the world, is expected to be certified in early 2014. In addition, Cessna is developing the Citation Latitude, a midsize business jet
scheduled for first flight in 2014 and expected to enter into service in 2015, as well as the Citation Longitude, a super midsize
business jet expected to enter into service in 2017.

The Cessna Caravan is the world’s best-selling utility turboprop. Caravans are used in the United States primarily for overnight
express package shipments and for personal transportation. International uses of Caravans include air taxi service, humanitarian
flights, tourism and freight transport. Cessna also offers a single-engine piston product line that includes the Skyhawk SP,
Stationair and the new high performance TTx which we began delivering during 2013. The Turbo Skylane JT-A, Cessna’s first
Jet-A fueled piston aircraft, is expected to be certified and to begin delivering in 2014.

The Citation family of aircraft currently is supported by 15 Citation Service Centers owned or operated by Cessna, two of which
are co-located with Bell Helicopter, along with authorized independent service stations and centers located in more than 25
countries throughout the world. Cessna-owned Service Centers provide customers with 24-hour service and maintenance. Cessna
also provides around-the-clock parts support for Citation aircraft. Cessna offers an array of service options for Citation aircraft,
known as ServiceDirect®, which delivers service capabilities directly to customer locations with a Mobile Service Unit fleet of 22
vehicles in the United States, Canada and Europe. Cessna Caravan and single-engine piston customers receive product support
through independently owned service stations and around-the-clock parts support through Cessna.

Cessna markets its products worldwide through its own sales force, as well as through a network of authorized independent sales
representatives. Cessna has several competitors domestically and internationally in various market segments. Cessna’s aircraft
compete with other aircraft that vary in size, speed, range, capacity and handling characteristics on the basis of price, product
quality and reliability, direct operating costs, product support and reputation.

Textron Inc. Annual Report • 2013 2

Bell Segment
Bell Helicopter is one of the leading suppliers of military and commercial helicopters, tiltrotor aircraft, and related spare parts and
services in the world. Revenues for Bell accounted for approximately 37%, 35% and 31% of our total revenues in 2013, 2012 and
2011, respectively. Revenues by Bell’s principal lines of business were as follows:

(In millions)
Military:
V-22 Program
Other Military
Commercial

2013

2012

2011

$ 1,755
959
1,797
$ 4,511

$ 1,611
940
1,723
$ 4,274

$ 1,380
919
1,226
$ 3,525

Bell supplies advanced military helicopters and support to the U.S. Government and to military customers outside the United
States. Bell’s primary U.S. Government programs are the V-22 tiltrotor aircraft and the H-1 helicopters. Bell is one of the leading
suppliers of helicopters to the U.S. Government and, in association with The Boeing Company (Boeing), the only supplier of
military tiltrotor aircraft. Tiltrotor aircraft are designed to provide the benefits of both helicopters and fixed-wing aircraft.
Through its strategic alliance with Boeing, Bell produces and supports the V-22 tiltrotor aircraft for the U.S. Department of
Defense (DoD). During 2013, the Bell Boeing V-22 program was awarded a five-year contract for the production and delivery of
an additional 99 V-22 tiltrotor aircraft from 2014 through 2019. The U.S. Marine Corps H-1 helicopter program includes a utility
model and an advanced attack model, the UH-1Y and the AH-1Z, respectively, which have 84% parts commonality between them.
Bell also continues to support the OH-58D Kiowa Warrior armed scout helicopter for the U.S. Army.

Through its commercial business, Bell is a leading supplier of commercially certified helicopters and support to corporate,
offshore petroleum exploration and development, utility, charter, police, fire, rescue, emergency medical helicopter operators and
foreign governments. Bell produces a variety of commercial aircraft types, including light single- and twin-engine helicopters and
medium twin-engine helicopters, along with other related products. The helicopters currently offered by Bell for commercial
applications include the 206L-4, 407, 407GX, 412EP/EPI, 429 and Huey II. Bell’s 525 Relentless, its first super medium
commercial helicopter, is currently in development with a projected first flight in 2014. In addition, during 2013 Bell announced
the development of the Bell SLS, a high performance, short-light single helicopter, which will reenter Bell into the market it
created with the introduction of the original JetRanger.

For both its military programs and its commercial products, Bell provides post-sale support and service for its installed base of
approximately 13,000 helicopters through a network of 8 Bell-operated service centers, two of which are co-located with Cessna,
106 independent service centers located in 34 countries and four supply centers that are located worldwide. Collectively, these
service sites offer a complete range of logistics support, including parts, support equipment, technical data, training devices, pilot
and maintenance training, component repair and overhaul, engine repair and overhaul, aircraft modifications, aircraft customizing,
accessory manufacturing, contractor maintenance, field service and product support engineering.

Bell competes against a number of competitors throughout the world for its helicopter business and its parts and support business.
Competition is based primarily on price, product quality and reliability, product support, performance and reputation.

Textron Systems Segment
Textron Systems’ product lines consist of unmanned aircraft systems, marine and land systems, weapons and sensors and a variety
of defense and aviation mission support products and services. Textron Systems is a supplier to the defense, aerospace, homeland
security and general aviation markets, and represents approximately 14%, 14% and 17% of Textron’s revenues in 2013, 2012 and
2011, respectively. While this segment sells most of its products to U.S. Government customers, it also sells products to
customers outside the U.S. through foreign military sales sponsored by the U.S. Government and directly through commercial
sales channels. Textron Systems competes on the basis of technology, contract performance, price, product quality and reliability,
product support and reputation. Revenues by Textron Systems’ product lines were as follows:

(In millions)
Unmanned Aircraft Systems
Marine and Land Systems
Weapons and Sensors
Mission Support and Other

3 Textron Inc. Annual Report • 2013

2013
666
392
311
296
$ 1,665

2012
694
443
285
315
$ 1,737

2011
701
519
298
354
$ 1,872

Unmanned Aircraft Systems
Unmanned Aircraft Systems (UAS) consists of the AAI UAS and AAI Logistics & Technical Services businesses. AAI UAS has
designed, manufactured and fielded combat-proven unmanned aircraft systems for more than 25 years, including the U.S. Army’s
premier tactical UAS, the Shadow. AAI UAS’s unmanned aircraft and interoperable command and control technologies provide
critical situational awareness and actionable intelligence for users worldwide. AAI Logistics & Technical Services provides
logistical support for various unmanned aircraft systems as well as training and supply chain services to government and
commercial customers worldwide.

Marine and Land Systems
The Marine and Land Systems business is operated as Textron Marine & Land Systems (TMLS). TMLS is a world leader in the
design, production and support of armored vehicles, turrets and related subsystems as well as advanced marine craft. TMLS
produces a family of extremely mobile, highly protective vehicles for the U.S. Army and international allies, and is developing the
U.S. Navy’s next generation air cushion vehicle.

Weapons and Sensors
The Weapons and Sensors business is operated as Textron Defense Systems (TDS). This business consists of state-of-the-art
smart weapons; airborne and ground-based sensors and surveillance systems; and protection systems for the defense, aerospace
and homeland security industries. TDS primarily sells its products to international allies through foreign military sales.

Mission Support and Other
Mission Support and Other includes three businesses: AAI Test & Training, Lycoming and Overwatch. AAI Test & Training
provides high technology test equipment and electronic warfare test and training solutions. Lycoming specializes in the
engineering, manufacture, service and support of piston aircraft engines for the general aviation and remotely piloted aircraft
markets. Overwatch, operated as Overwatch Geospatial Solutions and Overwatch Intelligence Solutions, provides intelligence
software solutions for U.S. and international defense, intelligence and law enforcement communities.

In December 2013, we acquired two flight simulation and aircraft training product companies, Mechtronix, Inc. and OPINICUS
Corporation. We intend to combine these businesses with our existing training and simulation business, currently included in the
UAS product line, which serves the military aircraft market, to form Textron Simulation & Training Systems. This business
designs, develops, installs and provides maintenance of advanced full flight simulators for both rotary- and fixed-wing aircraft and
designs, markets and supports aviation training products and related services for airlines, aircraft OEMs, flight training centers and
training organizations worldwide.

Industrial Segment
Our Industrial segment designs and manufactures a variety of products under three principal product lines. Industrial segment
revenues were as follows:

(In millions)
Fuel Systems and Functional Components
Golf, Turf Care and Light Transportation Vehicles
Powered Tools, Testing and Measurement Equipment

2013

2012

$ 1,853
713
446
$ 3,012

$ 1,842
660
398
$ 2,900

2011
$ 1,823
560
402
$ 2,785

Fuel Systems and Functional Components
Our Fuel Systems and Functional Components product line is operated by our Kautex business unit, which is headquartered in
Bonn, Germany. Kautex is a leading developer and manufacturer of blow-molded plastic fuel systems for cars, light trucks, all-
terrain vehicles, windshield and headlamp washer systems for automobiles and selective catalytic reduction systems used to reduce
emissions from diesel engines. Kautex serves the global automobile market, with operating facilities near its major customers
around the world. In addition, Kautex produces cast iron engine camshafts in North America. From facilities in Germany and
Poland, Kautex develops and produces plastic bottles and containers for food, household, laboratory and industrial uses. Revenues
of Kautex accounted for approximately 15%, 15% and 16% of our total revenues in 2013, 2012 and 2011, respectively.

Our automotive products have several major competitors worldwide, some of which are affiliated with the original equipment
manufacturers that comprise our targeted customer base. Competition typically is based on a number of factors including price,
technology, environmental performance, product quality and reliability, prior experience and available manufacturing capacity.

Textron Inc. Annual Report • 2013 4

Golf, Turf Care and Light Transportation Vehicles
Our Golf, Turf Care and Light Transportation Vehicles product line includes the products designed, manufactured and sold by our
E-Z-GO and Jacobsen business units.

E-Z-GO designs, manufactures and sells golf cars, off-road utility vehicles and light transportation vehicles under the E-Z-GO,
Cushman and Bad Boy Buggies brand names. Although E-Z-GO is best known for its electric-vehicle technology, it also
manufactures and sells models powered by internal combustion engines. E-Z-GO’s diversified customer base includes golf
courses and resorts, government agencies and municipalities, consumers, and commercial and industrial users such as factories,
warehouses, airports and educational and corporate campuses. Sales are made through a combination of factory direct resources
and a network of independent distributors and dealers worldwide. E-Z-GO has two major competitors for golf cars and several
other competitors for off-road and light transportation vehicles. Competition is based primarily on price, product quality and
reliability, product support and reputation.

Jacobsen designs, manufactures and sells professional turf-maintenance equipment, as well as specialized turf-care vehicles.
Brand names include Ransomes, Jacobsen and Cushman. Jacobsen’s customers include golf courses, resort communities, sporting
venues and municipalities. Products are sold primarily through a worldwide network of distributors and dealers, as well as factory
direct. Jacobsen has two major competitors for professional turf-maintenance equipment and several other major competitors for
specialized turf-care products. Competition is based primarily on price, product features, product quality and reliability and
product support.

Powered Tools, Testing and Measurement Equipment
Our Greenlee business unit designs and manufactures powered equipment, electrical test and measurement instruments,
mechanical and hydraulic tools, cable connectors, and fiber optic assemblies under the Greenlee, Klauke, Paladin Tools and
Tempo brand names. These products are used principally in the construction, maintenance, telecommunications, data
communications, utility and plumbing industries. During 2013, our Greenlee business acquired Sherman & Reilly, Inc., a
manufacturer of underground and aerial transmission and distribution products, and HD Electric Company, a designer and
manufacturer of power utility products. Greenlee distributes its products through a global network of sales representatives and
distributors and also sells its products directly to home improvement retailers and original equipment manufacturers. Through
joint ventures in North America and China, Greenlee also sells its products to the plumbing, industrial manufacturing and related
industries. Greenlee faces competition from numerous manufacturers based primarily on price, delivery lead time, product quality
and reliability.

Finance Segment
Our Finance segment, or the Finance group, is a commercial finance business that consists of Textron Financial Corporation (TFC)
and its consolidated subsidiaries. The Finance segment provides financing primarily to purchasers of new Cessna aircraft and Bell
helicopters as well as pre-owned Cessna aircraft and Bell helicopters on a limited basis. The majority of new finance receivables
are cross-border transactions for aircraft sold outside of the U.S. New originations in the U.S. are primarily for purchasers who
had difficulty in accessing other sources of financing for the purchase of Textron-manufactured products. In 2013, 2012 and 2011,
our Finance group paid our Manufacturing group $248 million, $309 million and $284 million, respectively, related to the sale of
Textron-manufactured products to third parties that were financed by the Finance group.

The commercial finance business traditionally is extremely competitive. Our Finance segment is subject to competition from
various types of financing institutions, including banks, leasing companies, commercial finance companies and finance operations
of equipment vendors. Competition within the commercial finance industry primarily is focused on price, term, structure and
service.

Our Finance segment’s largest business risk is the collectability of its finance receivable portfolio. See “Finance Portfolio
Quality” in “Management’s Discussion and Analysis of Financial Condition and Results of Operations” on page 28 for
information about the Finance segment’s credit performance.

5 Textron Inc. Annual Report • 2013

Backlog
Our backlog at the end of 2013 and 2012 is summarized below:

(In millions)
U.S. Government:

Bell
Textron Systems

Total U.S. Government backlog
Commercial:

Bell
Cessna
Textron Systems
Industrial

Total commercial backlog
Total

December 28,
2013

December 29,
2012

$ 5,509
1,905
7,414

$ 6,382
2,037
8,419

941
1,018
898
2
2,859
$ 10,273

1,087
1,062
882
13
3,044
$ 11,463

Approximately 43% of our total backlog at December 28, 2013 represents orders that are not expected to be filled in 2014. Orders
from Cessna customers, which cover a wide spectrum of industries and individuals worldwide, are included in backlog when the
customer enters into a definitive purchase agreement and the initial customer deposit is received. We work with our customers to
provide estimated delivery dates, which may be adjusted based on customer needs or our production schedule, but do not establish
definitive delivery dates until approximately six months before expected delivery. There is considerable uncertainty as to when or
whether backlog will convert to revenues as the conversion depends on production capacity, customer needs and credit
availability; these factors also may be impacted by the economy and public perceptions of private corporate jet usage. While
backlog is an indicator of future revenues, we cannot reasonably estimate the year each order in backlog ultimately will result in
revenues and cash flows. Orders remain in backlog until the aircraft is delivered or upon cancellation by the customer. Upon
cancellation, deposits are used to defray costs, including remarketing fees, cost to reconfigure the aircraft and other costs incurred
as a result of the cancellation. Remaining deposits, if any, may be retained or refunded at our discretion.

Backlog with the U.S. Government in the above table includes only funded amounts as the U.S. Government is obligated only up
to the amount of funding formally appropriated for a contract. Bell’s backlog includes $2.7 billion related to a multi-year
procurement contract with the U.S. Government for the purchase of V-22 tiltrotor aircraft.

U.S. Government Contracts
In 2013, approximately 30% of our consolidated revenues were generated by or resulted from contracts with the U.S. Government.
This business is subject to competition, changes in procurement policies and regulations, the continuing availability of funding,
which is dependent upon congressional appropriations, national and international priorities for defense spending, world events, and
the size and timing of programs in which we may participate.

Our contracts with the U.S. Government generally may be terminated by the U.S. Government for convenience or if we default in
whole or in part by failing to perform under the terms of the applicable contract. If the U.S. Government terminates a contract for
convenience, we normally will be entitled to payment for the cost of contract work performed before the effective date of
termination, including, if applicable, reasonable profit on such work, as well as reasonable termination costs. If, however, the U.S.
Government terminates a contract for default, generally: (a) we will be paid the contract price for completed supplies delivered and
accepted and services rendered, an agreed-upon amount for manufacturing materials delivered and accepted and for the protection
and preservation of property, and an amount for partially completed products accepted by the U.S. Government; (b) the U.S.
Government may not be liable for our costs with respect to unaccepted items and may be entitled to repayment of advance
payments and progress payments related to the terminated portions of the contract; (c) the U.S. Government may not be liable for
assets we own and utilize to provide services under the “fee-for-service” contracts; and (d) we may be liable for excess costs
incurred by the U.S. Government in procuring undelivered items from another source.

Research and Development
Information regarding our research and development expenditures is contained in Note 1 to the Consolidated Financial Statements
on page 53 of this Annual Report on Form 10-K.

Textron Inc. Annual Report • 2013

Patents and Trademarks
We own, or are licensed under, numerous patents throughout the world relating to products, services and methods of
manufacturing. Patents developed while under contract with the U.S. Government may be subject to use by the U.S. Government.
We also own or license active trademark registrations and pending trademark applications in the U.S. and in various foreign
countries or regions, as well as trade names and service marks. While our intellectual property rights in the aggregate are important
to the operation of our business, we do not believe that any existing patent, license, trademark or other intellectual property right is
of such importance that its loss or termination would have a material adverse effect on our business taken as a whole. Some of
these trademarks, trade names and service marks are used in this Annual Report on Form 10-K and other reports, including:
Aeronautical Accessories; AAI; acAlert; Ascent; Aerosonde; AH-1Z; Ambush; Arc Horizon; Bad Boy Buggies; BattleHawk; Bell;
Bell Helicopter; Bravo; Cadillac Gage; Caravan; Caravan Amphibian; Caravan 675; Cessna; Cessna 350; Cessna 400; Cessna
Corvalis TTX; Cessna Turbo Skylane JT-A; Citation; CITATION ALPINE EDITION; CitationAir; CitationAir Jetcard; Citation
Encore+; Citation Latitude; Citation Longitude; Citation M2; Citation Sovereign; Citation TEN; Citation X; Citation XLS+; CJ1+;
CJ2+; CJ3; CJ4; Clairity; CLAW; Commando; Corvalis; Cushman; Eclipse; Excel; Extreme; Extreme Ti-METAL; E-Z-GO; Gator
Eye; Gator Grips; Grand Caravan; Greenlee; H-1; HDE; Huey; Huey II; iCommand; IE2; Instinct; Integrated Command Suite;
Jacobsen; Kautex; Kiowa Warrior; Klauke; LF; Lycoming; M1117 ASV; McCauley; Mechtronix; Millenworks; Mustang; Next
Generation Fuel System; NGFS; Odyssey; On a Mission; OPINICUS; Overwatch; PDCue; Power Advantage; Pro-Fit; ProParts;
Ransomes; REALCue; REALFeel; Recoil; Relentless; Rothenberger LLC; RT2; RXV; Sensor Fuzed Weapon; ServiceDirect;
Shadow; Shadow Knight; Shadow Master; SkyBOOKS; Skycatcher; Skyhawk; Skyhawk SP; Skylane; SkyPLUS; Sovereign;
Speed Punch; Spider; Stationair; ST 4X4; Super Cargomaster; Super Medium; SuperCobra; SYMTX; TDCue; Textron; Textron
Defense Systems; Textron Financial Corporation; Textron Marine & Land Systems; Textron Systems; TRUESET; Turbo Skylane;
Turbo Stationair; UH-1Y; VALOR; V-22 Osprey; V-280; 2FIVE; 206; 407; 407GT; 407GX; 412, 429, 525 and 525 Relentless.
These marks and their related trademark designs and logotypes (and variations of the foregoing) are trademarks, trade names or
service marks of Textron Inc., its subsidiaries, affiliates or joint ventures.

Environmental Considerations
Our operations are subject to numerous laws and regulations designed to protect the environment. Compliance with these laws and
expenditures for environmental control facilities has not had a material effect on our capital expenditures, earnings or competitive
position. Additional information regarding environmental matters is contained in Note 13 to the Consolidated Financial Statements
on page 74 of this Annual Report on Form 10-K.

We do not believe that existing or pending climate change legislation, regulation, or international treaties or accords are reasonably
likely to have a material effect in the foreseeable future on our business or markets nor on our results of operations, capital
expenditures or financial position. We will continue to monitor emerging developments in this area.

Employees
At December 28, 2013, we had approximately 32,000 employees.

Executive Officers of the Registrant
The following table sets forth certain information concerning our executive officers as of February 14, 2014.

Name
Scott C. Donnelly
Frank T. Connor
Cheryl H. Johnson
E. Robert Lupone

Age
52
54
53
54

Current Position with Textron Inc.
Chairman, President and Chief Executive Officer
Executive Vice President and Chief Financial Officer
Executive Vice President, Human Resources

Executive Vice President, General Counsel, Secretary and Chief
Compliance Officer

Mr. Donnelly joined Textron in June 2008 as Executive Vice President and Chief Operating Officer and was promoted to President
and Chief Operating Officer in January 2009. He was appointed to the Board of Directors in October 2009 and became Chief
Executive Officer of Textron in December 2009, at which time the Chief Operating Officer position was eliminated. In July 2010,
Mr. Donnelly was appointed Chairman of the Board of Directors effective September 1, 2010. Previously, Mr. Donnelly was the
President and CEO of General Electric Company's Aviation business unit, a position he had held since July 2005. GE’s Aviation
business unit is a $16 billion maker of commercial and military jet engines and components, as well as integrated digital, electric
power and mechanical systems for aircraft. Prior to July 2005, Mr. Donnelly served as Senior Vice President of GE Global
Research, one of the world’s largest and most diversified industrial research organizations with facilities in the U.S., India, China
and Germany and held various other management positions since joining General Electric in 1989.

7 Textron Inc. Annual Report • 2013

Mr. Connor joined Textron in August 2009 as Executive Vice President and Chief Financial Officer. Previously, Mr. Connor was
head of Telecom Investment Banking at Goldman, Sachs & Co from 2003 to 2008. Prior to that position, he served as Chief
Operating Officer of Telecom, Technology and Media Investment Banking at Goldman, Sachs from 1998 to 2003. Mr. Connor
joined the Corporate Finance Department of Goldman, Sachs in 1986 and became a Vice President in 1990 and a Managing
Director in 1996.

Ms. Johnson was named Executive Vice President, Human Resources in July 2012. Ms. Johnson joined Textron in 1996 and has
held various human resources leadership positions across Textron's businesses, including Senior Human Resources Business
Partner for Greenlee and Vice President of Human Resources for E-Z-GO, a position she held from 2006 until joining Bell in
2009. At Bell, she most recently served as Director of Talent and Organizational Development. Prior to Textron, Ms. Johnson
held roles in human resources, marketing and sales, and finance disciplines at several organizations, including IBM and Hamilton
Sundstrand, a United Technologies Company.

Mr. Lupone joined Textron in February 2012 as Executive Vice President, General Counsel, Secretary and Chief Compliance
Officer. Previously, he was senior vice president and general counsel of Siemens Corporation (U.S.) since 1999 and general
counsel of Siemens AG for the Americas since 2008. Prior to joining Siemens in 1992, Mr. Lupone was vice president and
general counsel of Price Communications Corporation.

Available Information
We make available free of charge on our Internet Web site (www.textron.com) our Annual Report on Form 10-K, Quarterly
Reports on Form 10-Q, Current Reports on Form 8-K and amendments to those reports filed or furnished pursuant to Section 13(a)
or 15(d) of the Securities Exchange Act of 1934 as soon as reasonably practicable after we electronically file such material with, or
furnish it to, the Securities and Exchange Commission.

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

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

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

foreign countries;

• Our ability to perform as anticipated and to control costs under contracts with the U.S. Government;
• The U.S. Government’s ability to unilaterally modify or terminate its contracts with us for the U.S. Government’s
convenience or for our failure to perform, to change applicable procurement and accounting policies, or, under certain
circumstances, to withhold payment or suspend or debar us as a contractor eligible to receive future contract awards;
• Changes in foreign military funding priorities or budget constraints and determinations, or changes in government

regulations or policies on the export and import of military and commercial products;

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

products;

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

• Our Finance segment’s ability to maintain portfolio credit quality or to realize full value of receivables;
• Performance issues with key suppliers or subcontractors;
• Legislative or regulatory actions, both domestic and foreign, impacting our operations or demand for our products;
• Our ability to control costs and successfully implement various cost-reduction activities;
• The efficacy of research and development investments to develop new products or unanticipated expenses in connection

with the launching of significant new products or programs;

Textron Inc. Annual Report • 2013

• The timing of our new product launches or certifications of our new aircraft products;
• Our ability to keep pace with our competitors in the introduction of new products and upgrades with features and

technologies desired by our customers;
Increases in pension expense or employee and retiree medical benefits;

•
• Continued demand softness or volatility in the markets in which we do business;
• The inability to complete announced acquisitions;
• Difficulty or unanticipated expenses in connection with integrating acquired businesses; and
• The risk that anticipated synergies and opportunities as a result of acquisitions will not be realized or the risk that
acquisitions do not perform as planned, including, for example, the risk that acquired businesses will not achieve revenue
projections.

Item 1A. RISK FACTORS

Our business, financial condition and results of operations are subject to various risks, including those discussed below, which may
affect the value of our securities. The risks discussed below are those that we believe currently are the most significant to our
business.

We have customer concentration with the U.S. Government; reduction in U.S. Government defense spending may adversely
affect our results of operations and financial condition.
During 2013, we derived approximately 30% of our revenues from sales to a variety of U.S. Government entities. Our revenues
from the U.S. Government largely result from contracts awarded to us under various U.S. Government defense-related programs.
The funding of these programs is subject to congressional appropriation decisions. Although multiple-year contracts may be
planned in connection with major procurements, Congress generally appropriates funds on a fiscal year basis even though a
program may continue for several years. Consequently, programs often are only partially funded initially, and additional funds are
committed only as Congress makes further appropriations. If we incur costs in excess of funds committed on a contract, we are at
risk for non-reimbursement of those costs until additional funds are appropriated. The reduction, termination or delay in the
timing of funding for U.S. Government programs for which we currently provide or propose to provide products or services may
result in a loss of anticipated future revenues that could materially and adversely impact our results of operations and financial
condition. Significant changes in national and international priorities for defense spending could impact the funding, or the timing
of funding, of our programs, which could negatively impact our results of operations and financial condition.

Under the Budget Control Act of 2011, the U.S. Government committed to significantly reduce the federal deficit over ten years.
Notwithstanding the Bipartisan Budget Control Act of 2013, substantial spending cuts to the U.S. defense budget are likely in the
future. In addition, Congress and the Administration continue to debate the nation’s debt ceiling and other fiscal issues. The
outcome of that debate could have a significant impact on future defense spending plans. As a result, long-term funding for
various programs in which we participate, as well as future purchasing decisions by our U.S. Government customers, could be
reduced, delayed or cancelled. In addition, these cuts could adversely affect the viability of the suppliers and subcontractors under
our programs.

There are many variables in how these budget cuts could be implemented that make it difficult to determine specific impacts;
however, we expect that sequestration, as currently provided for under the Budget Control Act, would result in lower revenues,
profits and cash flows for our company. Such circumstances may also result in an impairment of our goodwill and intangible
assets. Because our Government contracts generally require us to continue to perform even if the U.S. Government is unable to
make timely payments; if the debt ceiling is not raised, and, as a result, the U.S. Government does not pay us on a timely basis, we
would need to finance our continued performance of the impacted contracts from our available cash resources, credit facilities
and/or access to the capital markets, if available. An extended delay in the timely payment by the U.S. Government could result in
a material adverse effect on our cash flows, results of operations and financial condition.

U.S. Government contracts may be terminated at any time and may contain other unfavorable provisions.
The U.S. Government typically can terminate or modify any of its contracts with us either for its convenience or if we default by
failing to perform under the terms of the applicable contract. In the event of termination for the U.S. Government’s convenience,
contractors are generally protected by provisions covering reimbursement for costs incurred on the contracts and profit on those
costs but not the anticipated profit that would have been earned had the contract been completed. A termination arising out of our
default for failure to perform could expose us to liability, including but not limited to, liability for re-procurement costs in excess
of the total original contract amount, net of the value of work performed and accepted by the customer under the contract. Such an
event could also have an adverse effect on our ability to compete for future contracts and orders. If any of our contracts are
terminated by the U.S. Government whether for convenience or default, our backlog and anticipated revenues would be reduced by
the expected value of the remaining work under such contracts. We also enter into “fee for service” contracts with the U.S.

9 Textron Inc. Annual Report • 2013

Government where we retain ownership of, and consequently the risk of loss on, aircraft and equipment supplied to perform under
these contracts. Termination of these contracts for convenience or default could materially and adversely impact our results of
operations. On contracts for which we are teamed with others and are not the prime contractor, the U.S. Government could
terminate a prime contract under which we are a subcontractor, irrespective of the quality of our products and services as a
subcontractor. In addition, in the event that the U.S. Government is unable to make timely payments, failure to continue contract
performance places the contractor at risk of termination for default. Any such event could result in a material adverse effect on our
cash flows, results of operations and financial condition.

As a U.S. Government contractor, we are subject to procurement rules and regulations as well as changes in the Department of
Defense (DoD) acquisition practices.
We must comply with and are affected by laws and regulations relating to the formation, administration and performance of U.S.
Government contracts. These laws and regulations, among other things, require certification and disclosure of all cost and pricing
data in connection with contract negotiation, define allowable and unallowable costs and otherwise govern our right to
reimbursement under certain cost-based U.S. Government contracts, and restrict the use and dissemination of classified
information and the exportation of certain products and technical data. Our U.S. Government contracts contain provisions that
allow the U.S. Government to unilaterally suspend or debar us from receiving new contracts for a period of time, reduce the value
of existing contracts, issue modifications to a contract, and control and potentially prohibit the export of our products, services and
associated materials. A number of our U.S. Government contracts contain provisions that require us to make disclosure to the
Inspector General of the agency that is our customer if we have credible evidence that we have violated U.S. criminal laws
involving fraud, conflict of interest, or bribery; the U.S. civil False Claims Act; or received a significant overpayment under a U.S.
Government contract. Failure to properly and timely make disclosures under these provisions may result in a termination for
default or cause, suspension and/or debarment, and potential fines.

In addition, the DoD’s “Better Buying Power Initiative,” which provides guidance for its acquisition workforce to obtain greater
efficiency and productivity in defense spending, significantly affects the contracting environment in which we do business with
our DoD customers and could have a significant impact on current programs, as well as new business opportunities. Changes to the
DoD acquisition system and contracting models could affect whether and, if so, how we pursue certain opportunities and the terms
under which we are able to do so.

As a U.S. Government contractor, our businesses and systems are subject to audit and review by the Defense Contract Audit
Agency (DCAA) and the Defense Contract Management Agency (DCMA).
We operate in a highly regulated environment and are routinely audited and reviewed by the U.S. Government and its agencies
such as DCAA and DCMA. These agencies review our performance under contracts, our cost structure and our compliance with
laws and regulations applicable to U.S. Government contractors. The systems that are subject to review include, but are not limited
to, our accounting, estimating, material management and accounting, earned value management, purchasing and government
property systems. If an audit uncovers improper or illegal activities we may be subject to civil and criminal penalties and
administrative sanctions that may include the termination of our contracts, forfeiture of profits, suspension of payments, fines, and,
under certain circumstances, suspension or debarment from future contracts for a period of time. Whether or not illegal activities
are alleged, the U.S. Government also has the ability to decrease or withhold certain payments when it deems systems subject to its
review to be inadequate. These laws and regulations affect how we conduct business with our customers and, in some instances,
impose added costs on our business.

Cost overruns on U.S. Government contracts could subject us to losses or adversely affect our future business.
Under fixed-price contracts, as a general rule, we receive a fixed price irrespective of the actual costs we incur, and, consequently,
any costs in excess of the fixed price are absorbed by us. Changes in underlying assumptions, circumstances or estimates used in
developing the pricing for such contracts may adversely affect our results of operations. Under time and materials contracts, we are
paid for labor at negotiated hourly billing rates and for certain expenses. Under cost-reimbursement contracts that are subject to a
contract-ceiling amount, we are reimbursed for allowable costs and paid a fee, which may be fixed or performance based,
however, if our costs exceed the contract ceiling or are not allowable under the provisions of the contract or applicable regulations,
we may not be able to obtain reimbursement for all such costs. Under each type of contract, if we are unable to control costs
incurred in performing under the contract, our cash flows, results of operations and financial condition could be adversely affected.
Cost overruns also may adversely affect our ability to sustain existing programs and obtain future contract awards.

Weak demand for our aircraft products may continue to adversely affect our financial results.
Continued worldwide economic softness has adversely impacted the business jet market in recent years. As a result, we have
experienced continued weak demand for our fixed-wing aircraft, particularly our business jets. Soft demand for our jets could
persist and could continue to adversely impact the pricing of new jets and the valuation of pre-owned jets, which comprise a
significant portion of our inventory. A prolonged weakness in the markets for our aircraft products could adversely impact our
results of operations and our future prospects.

Textron Inc. Annual Report • 2013 10

We may make acquisitions that increase the risks of our business.
We may enter into acquisitions in an effort to expand our business and enhance shareholder value. Acquisitions involve risks and
uncertainties that could result in our not achieving expected benefits. Such risks include difficulties in integrating newly acquired
businesses and operations in an efficient and cost-effective manner; challenges in achieving expected strategic objectives, cost
savings and other benefits; the risk that the acquired businesses’ markets do not evolve as anticipated and that the acquired
businesses’ products and technologies do not prove to be those needed to be successful in those markets; the risk that our due
diligence reviews of the acquired business do not identify or adequately assess all of the material issues which impact valuation of
the business or that may result in costs or liabilities in excess of what we anticipated; the risk that we pay a purchase price that
exceeds what the future results of operations would have merited; the risk that the acquired business may have significant internal
control deficiencies or exposure to regulatory sanctions; and the potential loss of key customers, suppliers and employees of the
acquired businesses. In addition, unanticipated delays or difficulties in effecting acquisitions may prevent the consummation of
the acquisition or divert the attention of our management and resources from our existing operations.

On December 26, 2013 we entered into an agreement and plan of merger pursuant to which we will acquire all outstanding equity
interests in Beech Holdings, LLC (“Beech”), the parent of Beechcraft Corporation, for approximately $1.4 billion in cash. Each of
the foregoing risks may impact the success of the Beech acquisition. We plan to finance the purchase of the equity in Beech and
the repayment of Beech’s outstanding debt, which is required at closing, through a combination of available cash at Beech and
Textron and up to $1.1 billion in new debt. While we believe that these sources of funds will be sufficient to complete the
transaction, it is possible that unanticipated cash requirements, for working capital or other business needs, either at Beech or at
Textron, could cause us to incur borrowings in excess of what we currently anticipate.

Difficult economic conditions could continue to affect the performance of our Finance segment and our losses may increase if
we are unable to successfully collect our finance receivables or realize sufficient value from collateral.
The financial performance of our Finance segment depends on the quality of loans, leases and other assets in its finance asset
portfolios. Portfolio quality may be adversely affected by several factors, including finance receivable underwriting procedures,
collateral value, geographic or industry concentrations, and the effect of general economic conditions on our customers’
businesses. Valuations of the types of collateral securing our finance asset portfolio, particularly valuations of pre-owned aircraft,
have decreased over recent years and may continue to decrease if weak economic conditions continue. Declining collateral values
could result in greater delinquencies, credit losses and foreclosures if customers elect to discontinue payments on loan balances
that exceed asset values. Bankruptcy proceedings involving our borrowers may prevent or delay our ability to exercise our rights
and remedies and realize the full value of our collateral.

We may need to obtain financing in the future; such financing may not be available to us on satisfactory terms, if at all.
We may periodically need to obtain financing in order to meet our debt obligations as they come due, to support our operations
and/or to make acquisitions. Although we currently have access to the capital markets, our access and the cost of borrowings are
affected by a number of factors including market conditions and the strength of our credit ratings. If we cannot obtain adequate
sources of credit on favorable terms, or at all, our business, operating results, and financial condition could be adversely affected.

Failure to perform by our subcontractors or suppliers could adversely affect our performance.
We rely on other companies to provide raw materials, major components and subsystems for our products. Subcontractors also
perform services that we provide to our customers in certain circumstances. We depend on these suppliers and subcontractors to
meet our contractual obligations to our customers and conduct our operations. Our ability to meet our obligations to our customers
may be adversely affected if suppliers or subcontractors do not provide the agreed-upon supplies or perform the agreed-upon
services in compliance with customer requirements and in a timely and cost-effective manner. Likewise, the quality of our
products may be adversely impacted if companies to whom we delegate manufacture of major components or subsystems for our
products, or from whom we acquire such items, do not provide components or subsystems which meet required specifications and
perform to our and our customers’ expectations. Our suppliers may be less likely than us to be able to quickly recover from natural
disasters and other events beyond their control and may be subject to additional risks such as financial problems that limit their
ability to conduct their operations. The risk of these adverse effects may be greater in circumstances where we rely on only one or
two subcontractors or suppliers for a particular raw material, product or service. In particular, in the aircraft industry, most vendor
parts are certified by the regulatory agencies as part of the overall Type Certificate for the aircraft being produced by the
manufacturer. If a vendor does not or cannot supply its parts, then the manufacturer’s production line may be stopped until the
manufacturer can design, manufacture and certify a similar part itself or identify and certify another similar vendor’s part, resulting
in significant delays in the completion of aircraft. Such events may adversely affect our financial results, damage our reputation
and relationships with our customers, and result in regulatory actions and/or litigation.

11 Textron Inc. Annual Report • 2013

Our business could be negatively impacted by information technology disruptions and security threats.
Our information technology (IT) and related systems are critical to the smooth operation of our business and essential to our ability
to perform day to day operations. From time to time we update and/or replace IT systems used by our businesses. The
implementation of new systems can present temporary disruptions of business activities as existing processes are transitioned to
the new systems, resulting in productivity issues, delays in production, shipments or other business operations. In addition, we
outsource certain support functions, including certain global IT infrastructure services, to third-party service providers. Any
disruption of such outsourced processes or functions also could have a material adverse impact on our operations. In addition, as a
U.S. defense contractor, we face certain security threats, including threats to our IT infrastructure, unlawful attempts to gain access
to our proprietary or classified information and threats to the physical security of our facilities and employees, as do our customers,
suppliers, subcontractors and joint venture partners. Cybersecurity threats, such as malicious software, attempts to gain
unauthorized access to information, and other security breaches, are persistent, continue to evolve and require highly skilled IT
resources. While we have experienced cyber attacks, we have not suffered any material losses relating to such attacks, and we
believe our threat detection and mitigation processes and procedures are robust. Due to the evolving nature of these security
threats, the possibility of any future material incidents cannot be completely mitigated. An IT system failure, issues related to
implementation of new IT systems or breach of data security could disrupt our operations, cause the loss of business information
or compromise confidential information. Such an incident also could require significant management attention and resources and
increased costs, and could adversely affect our competitiveness and our results of operations.

Developing new products and technologies entails significant risks and uncertainties.
To continue to grow our revenues and segment profit, we must successfully develop new products and technologies or modify our
existing products and technologies for our current and future markets. Our future performance depends, in part, on our ability to
identify emerging technological trends and customer requirements and to develop and maintain competitive products and services.
Delays or cost overruns in the development and acceptance of new products, or certification of new aircraft and other products,
could affect our results of operations. These delays could be caused by unanticipated technological hurdles, production changes to
meet customer demands, unanticipated difficulties in obtaining required regulatory certifications of new aircraft or other products,
coordination with joint venture partners or failure on the part of our suppliers to deliver components as agreed. Changes in
environmental laws and regulations, for example, those enacted in response to climate change concerns and other actions known as
“green initiatives,” could lead to the necessity for new or additional investment in product designs or manufacturing processes and
could increase environmental compliance expenditures, including costs to defend regulatory reviews. We also could be adversely
affected if our research and development investments are less successful than expected or if we do not adequately protect the
intellectual property developed through these efforts. Likewise, new products and technologies could generate unanticipated safety
or other concerns resulting in expanded product liability risks, potential product recalls and other regulatory issues that could have
an adverse impact on us. Furthermore, because of the lengthy research and development cycle involved in bringing certain of our
products to market, we cannot predict the economic conditions that will exist when any new product is complete. A reduction in
capital spending in the aerospace or defense industries could have a significant effect on the demand for new products and
technologies under development, which could have an adverse effect on our financial condition and results of operations. In
addition, the market for our product offerings may not develop or continue to expand as we currently anticipate. Furthermore, we
cannot be sure that our competitors will not develop competing technologies which gain market acceptance in advance of our
products. A significant failure in our new product development efforts or the failure of our products or services to achieve market
acceptance more rapidly than our competitors could have an adverse effect on our financial condition and results of operations.

We are subject to the risks of doing business in foreign countries.
Conducting business internationally, including U.S. exports, exposes us to different and additional risks than if we conducted our
business solely within the U.S. Our exposure to such risks increases as our international business continues to grow. Our
international business is subject to U.S. and local government regulations and procurement policies and practices, which may
change from time to time, including regulations relating to import-export control; technology transfer; environmental, health and
safety; investments; exchange controls; and repatriation of earnings or cash settlement challenges, as well as to varying currency,
geopolitical and economic risks. These international risks may be especially significant with respect to aerospace and defense
products for which we sometimes initially must obtain licenses and authorizations from various U.S. Government agencies before
we are permitted to sell our products outside the U.S. Any significant impairment of our ability to sell products outside the U.S.
could negatively impact our results of operations. Additionally, some international government customers require contractors to
agree to specific in-country purchases, manufacturing agreements or financial support arrangements, known as offsets, as a
condition for a contract award. The contracts generally extend over several years and may include penalties if we fail to meet the
offset requirements, which could adversely impact our results of operations. Additionally, we are facing increasing competition in
our international markets from foreign and multinational firms that may have certain home country advantages over us; as a result,
our ability to compete successfully in those markets may be adversely affected, which could negatively impact our revenues and
profitability.

Textron Inc. Annual Report • 2013 12

We maintain manufacturing facilities, service centers, supply centers and other facilities worldwide, including in various emerging
market countries. We also have entered into, and expect to continue to enter into, joint venture arrangements in emerging market
countries, some of which may require capital investment, guaranties or other commitments. We expect that our investment in
emerging market countries will continue to increase. Emerging market operations can present many risks in addition to those
discussed above, including civil disturbances, economic and government instability, terrorism and related safety concerns, cultural
differences in employment and business practices, difficulties in protecting intellectual property, and the imposition of exchange
controls. The impact of any one or more of these or other factors could adversely affect our business, financial condition or
operating results.

We also are exposed to risks associated with using foreign representatives and consultants for international sales and operations
and teaming with international subcontractors and suppliers in connection with international programs. In many foreign countries,
particularly in those with developing economies, it is common to engage in business practices that are prohibited by laws and
regulations applicable to us, such as the Foreign Corrupt Practices Act. Although we maintain policies and procedures designed to
facilitate compliance with these laws, a violation of such laws by any of our international representatives, consultants, joint
ventures, business partners, subcontractors or suppliers, even if prohibited by our policies, could have an adverse effect on our
business and reputation.

We are subject to increasing compliance risks that could adversely affect our operating results.
As a global business, we are subject to laws and regulations in the U.S. and other countries in which we operate. Our increased
focus on international sales and global operations requires importing and exporting goods and technology, some of which have
military applications subjecting them to more stringent import-export controls across international borders on a regular basis. Both
U.S. and foreign laws and regulations applicable to us have been increasing in scope and complexity. For example, both U.S. and
foreign governments and government agencies regulate the aviation industry, and they may impose new regulations with
additional aircraft security or other requirements or restrictions, including, for example, restrictions and/or fees related to carbon
emissions levels. New or changing laws and regulations or related interpretation and policies could increase our costs of doing
business, affect how we conduct our operations, adversely impact demand for our products, and/or limit our ability to sell our
products and services. Compliance with laws and regulations of increasing scope and complexity is even more challenging in our
current business environment in which reducing our operating costs is often necessary to remain competitive. In addition, a
violation of U.S. and/or foreign laws by one of our employees or business partners could subject us or our employees to civil or
criminal penalties, including material monetary fines, or other adverse actions, including denial of import or export privileges and
debarment as a government contractor. These improper actions could damage our reputation and have an adverse effect on our
business.

We are subject to legal proceedings and other claims.
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. Due to the nature of our manufacturing business, we may be subject to liability claims arising from
accidents involving our products, including claims for serious personal injuries or death caused by weather or by pilot, driver or
user error. In the case of litigation matters for which reserves have not been established because the loss is not deemed probable, it
is reasonably possible that such claims could be decided against us and could require us to pay damages or make other
expenditures in amounts that are not presently estimable. In addition, we cannot be certain that our reserves are adequate and that
our insurance coverage will be sufficient to cover one or more substantial claims. Furthermore, we may not be able to obtain
insurance coverage at acceptable levels and costs in the future. Litigation is inherently unpredictable, and we could incur
judgments, receive adverse arbitration awards or enter into settlements for current or future claims that could adversely affect our
financial position or our results of operations in any particular period.

Intellectual property infringement claims of others and the inability to protect our intellectual property rights could harm our
business and our customers.
Intellectual property infringement claims may be asserted by third parties against us or our customers. Any related indemnification
payments or legal costs we may be obliged to pay on behalf of our businesses, our customers or other third parties could be costly.
In addition, we own the rights to many patents, trademarks, brand names, trade names and trade secrets that are important to our
business. The inability to enforce these intellectual property rights may have an adverse effect on our results of operations.
Additionally, our intellectual property could be at risk due to various cyber threats.

Certain of our products are subject to laws regulating consumer products and could be subject to repurchase or recall as a
result of safety issues.
As a distributor of consumer products in the U.S., certain of our products also are subject to the Consumer Product Safety Act,
which empowers the U.S. Consumer Product Safety Commission (CPSC) to exclude from the market products that are found to be

13 Textron Inc. Annual Report • 2013

unsafe or hazardous. Under certain circumstances, the CPSC could require us to repair, replace or refund the purchase price of one
or more of our products, or potentially even discontinue entire product lines, or we may voluntarily do so, but within strictures
recommended by the CPSC. The CPSC also can impose fines or penalties on a manufacturer for non-compliance with its
requirements. Furthermore, failure to timely notify the CPSC of a potential safety hazard can result in significant fines being
assessed against us. Any repurchases or recalls of our products or an imposition of fines or penalties could be costly to us and
could damage the reputation or the value of our brands. Additionally, laws regulating certain consumer products exist in some
states, as well as in other countries in which we sell our products, and more restrictive laws and regulations may be adopted in the
future.

The increasing costs of certain employee and retiree benefits could adversely affect our results.
Our earnings and cash flow may be adversely impacted by the amount of income or expense we expend or record for employee
benefit plans. This is particularly true for our defined benefit pension plans, where required contributions to those plans and related
expenses are driven by, among other things, our assumptions of the expected long-term rate of return on plan assets, the discount
rate used for future payment obligations and the rates of future cost growth. Additionally, as part of our annual evaluation of these
plans, significant changes in our assumptions, due to changes in economic, legislative and/or demographic experience or
circumstances, or changes in our actual investment returns could negatively impact the funded status of our plans requiring us to
substantially increase our pension liability with a resulting decrease in shareholders’ equity. Also, changes in pension legislation
and regulations could increase the cost associated with our defined benefit pension plans.

In addition, medical costs are rising at a rate faster than the general inflation rate. Continued medical cost inflation in excess of the
general inflation rate would increase the risk that we will not be able to mitigate the rising costs of medical benefits. Moreover, we
expect that some of the requirements of the new comprehensive healthcare law will increase our future costs. Increases to the costs
of pension and medical benefits could have an adverse effect on our results of operations.

Our business could be adversely affected by strikes or work stoppages and other labor issues.
Approximately 6,000 of our U.S. employees, or 26% of our total U.S. employees, are unionized, and approximately 2,900 of our
non-U.S. employees, or 32% of our total non-U.S. employees, are represented by organized councils. As a result, we may
experience work stoppages, which could negatively impact our ability to manufacture our products on a timely basis, resulting in
strain on our relationships with our customers and a loss of revenues. The presence of unions also may limit our flexibility in
responding to competitive pressures in the marketplace. In addition, the workforces of many of our suppliers and customers are
represented by labor unions. Work stoppages or strikes at the plants of our key suppliers could disrupt our manufacturing
processes; similar actions at the plants of our customers could result in delayed or canceled orders for our products. Any of these
events could adversely affect our results of operations.

Currency, raw material price and interest rate fluctuations may adversely affect our results.
We are exposed to a variety of market risks, including the effects of changes in foreign currency exchange rates, raw material
prices and interest rates. Currency variations also contribute to variations in sales of products and services in impacted
jurisdictions. Accordingly, fluctuations in foreign currency rates could adversely affect our profitability in future periods. We
monitor and manage these exposures as an integral part of our overall risk management program. In some cases, we purchase
derivatives or enter into contracts to insulate our results of operations from these fluctuations. Nevertheless, changes in currency
exchange rates, raw material prices and interest rates can have substantial adverse effects on our results of operations.

We may be unable to effectively mitigate pricing pressures.
In some markets, particularly where we deliver component products and services to original equipment manufacturers, we face
ongoing customer demands for price reductions, which sometimes are contractually obligated. However, if we are unable to
effectively mitigate future pricing pressures through technological advances or by lowering our cost base through improved
operating and supply chain efficiencies, our results of operations could be adversely affected.

Unanticipated changes in our tax rates or exposure to additional income tax liabilities could affect our profitability.
We are subject to income taxes in both the U.S. and various non-U.S. jurisdictions, and our domestic and international tax
liabilities are subject to the allocation of income among these different jurisdictions. Our effective tax rate could be adversely
affected by changes in the mix of earnings in countries with differing statutory tax rates, changes in the valuation of deferred tax
assets and liabilities, changes to unrecognized tax benefits or changes in tax laws, which could affect our profitability. In
particular, the carrying value of deferred tax assets is dependent on our ability to generate future taxable income, as well as
changes to applicable statutory tax rates. In addition, the amount of income taxes we pay is subject to audits in various
jurisdictions, and a material assessment by a tax authority could affect our profitability.

Textron Inc. Annual Report • 2013 14

Item 1B. Unresolved Staff Comments

None.

Item 2. Properties

On December 28, 2013, we operated a total of 52 plants located throughout the U.S. and 52 plants outside the U.S. We own 53
plants and lease the remainder for a total manufacturing space of approximately 21.1 million square feet. We consider the
productive capacity of the plants operated by each of our business segments to be adequate. We also own or lease offices,
warehouses, service centers and other space at various locations. In general, our facilities are in good condition, are considered to
be adequate for the uses to which they are being put and are substantially in regular use.

Item 3. Legal Proceedings

As previously reported in Textron’s Annual Report on Form 10-K for the fiscal year ended January 2, 2010, on August 21, 2009, a
purported class action lawsuit was filed in the United States District Court in Rhode Island by Dianne Leach, an alleged participant
in the Textron Savings Plan. Plaintiffs alleged that the company and certain of its present and former employees, officers and
directors had violated the United States Employee Retirement Income Security Act (ERISA) by imprudently permitting
participants in the Textron Savings Plan to invest in Textron common stock. The complaints sought equitable relief and
unspecified compensatory damages. As reported in Textron’s Annual Report on Form 10-K for the fiscal year ended December 29,
2012, on December 13, 2012, as a result of a mediation process overseen by an independent mediator, the parties reached an
agreement in principle, subject to settlement documentation and court approval, to settle the plaintiffs’ claims for an immaterial
amount. On August 21, 2013, the Court entered an order preliminarily approving the settlement, certifying a settlement class, and
approving the form and manner of class notice. On February 10, 2014, the Court entered an order giving final approval of the
settlement and final judgment in the case. Neither Textron nor any of the other defendants in the settlement admitted any
wrongdoing with respect to the allegations in the case.

We also are subject to other actual and threatened 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, health and safety 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.

Item 4. Mine Safety Disclosures

Not applicable.

15 Textron Inc. Annual Report • 2013

PART II

Item 5. Market for Registrant’s Common Equity, Related Stockholder Matters and Issuer Purchases of Equity
Securities

The principal market on which our common stock is traded is the New York Stock Exchange under the symbol “TXT.” At
December 28, 2013, there were approximately 11,500 record holders of Textron common stock. The high and low sales prices per
share of our common stock as reported on the New York Stock Exchange and the dividends paid per share are provided in the
following table:

First quarter
Second quarter
Third quarter
Fourth quarter

High

$ 31.30
30.22
29.81
37.43

2013

Low

$ 23.94
24.87
25.36
26.17

Dividends
per Share
$

0.02
0.02
0.02
0.02

High

$ 28.29
29.18
28.80
26.75

2012

Low

$ 18.37
21.97
22.15
22.84

Dividends
per Share
0.02
$
0.02
0.02
0.02

Issuer Repurchases of Equity Securities
On January 23, 2013, the company announced the adoption of a new plan authorizing the repurchase of up to 25 million shares of
Textron common stock. This plan has no expiration date. There were no shares purchased under the plan during 2013.

On February 5, 2014, we entered into an accelerated share repurchase agreement (ASR) with a counterparty to repurchase an
aggregate of 4.3 million shares of our outstanding common stock from the counterparty for $150 million. The ASR is scheduled to
expire in December 2014. Upon final settlement of the ASR, we may receive additional shares or pay additional cash or shares, at
our option, based on the daily volume weighted average market price of our common stock over the course of a calculation period,
less a discount.

Stock Performance Graph
The following graph compares the total return on a cumulative basis at the end of each year of $100 invested in our common stock
on December 31, 2008 with the Standard & Poor’s (S&P) 500 Stock Index, the S&P 500 Aerospace & Defense (A&D) Index and
the S&P Industrial Conglomerates (IC) Index. We are included in both the S&P 500 and the S&P IC indices. The values
calculated assume dividend reinvestment.

Textron

S&P 500

S&P 500 A&D

S&P 500 IC

Textron Inc.
S&P 500
S&P 500 A&D
S&P 500 IC

$300

$200

$100

2008

2009

2010

2013
$ 100.00 $ 136.71 $ 172.49 $ 135.46 $ 182.18 $ 269.78
227.30
267.33
237.88

172.37
173.04
180.48

148.59
151.04
157.26

145.51
143.47
149.20

126.46
124.64
128.92

100.00
100.00
100.00

2012

2011

Textron Inc. Annual Report • 2013 16

Item 6. Selected Financial Data

(Dollars in millions, except per share amounts)
Revenues
Cessna
Bell
Textron Systems
Industrial
Finance
Total revenues
Segment profit
Cessna
Bell
Textron Systems
Industrial
Finance (a)
Total segment profit
Special charges (b)
Corporate expenses and other, net
Interest expense, net for Manufacturing group
Income tax (expense) benefit
Income (loss) from continuing operations
Per share of common stock
Income (loss) from continuing operations — basic
Income (loss) from continuing operations — diluted (c)
Dividends declared
Book value at year-end
Common stock price: High
Low
Year-end

Common shares outstanding (In thousands)
Basic average
Diluted average (c)
Year-end
Financial position
Total assets
Manufacturing group debt
Finance group debt
Shareholders’ equity
Manufacturing group debt-to-capital (net of cash)
Manufacturing group debt-to-capital
Investment data
Capital expenditures
Depreciation

2013

2012

2011

2010

2009

$ 2,784
4,511
1,665
3,012
132
$ 12,104

$ 3,111
4,274
1,737
2,900
215
$ 12,237

$ 2,990
3,525
1,872
2,785
103
$ 11,275

$ 2,563
3,241
1,979
2,524
218
$ 10,525

$ 3,320
2,842
1,899
2,078
361
$ 10,500

(48) $
573
147
242
49
963
—
(166)
(123)
(176)
498

82
639
132
215
64
1,132
—
(148)
(143)
(260)
581

60
521
141
202
(333)
591
—
(114)
(140)
(95)
242

(29)
427
230
162
(237)
553
(190)
(137)
(140)
6
92

198
304
240
27
(294)
475
(317)
(164)
(143)
76
(73)

1.78
$
1.75
$
$
0.08
$ 15.54
$ 37.43
$ 23.94
$ 36.61

2.07
$
1.97
$
$
0.08
$ 11.03
$ 29.18
$ 18.37
$ 24.12

0.87
$
0.79
$
0.08
$
$
9.84
$ 28.87
$ 14.66
$ 18.49

0.33
$
0.30
$
$
0.08
$ 10.78
$ 25.30
$ 15.88
$ 23.64

(0.28)
$
(0.28)
$
$
0.08
$ 10.38
$ 21.00
$
3.57
$ 18.81

279,299
284,428
282,059

280,182
294,663
271,263

277,684
307,255
278,873

274,452
302,555
275,739

262,923
262,923
272,272

$ 12,944
$ 1,931
$ 1,256
$ 4,384
15%
31%

$ 13,033
$ 2,301
$ 1,686
$ 2,991
24%
44%

$ 13,615
$ 2,459
$ 1,974
$ 2,745

37%
47%

$ 15,282
$ 2,302
$ 3,660
$ 2,972
32%
44%

$ 18,940
$ 3,584
$ 5,667
$ 2,826
39%
56%

$
$

444
349

$
$

480
336

$
$

423
343

$
$

270
334

$
$

238
344

(a) For 2011, segment profit included a $186 million initial mark-to-market adjustment for finance receivables in the Golf Mortgage portfolio

that were transferred to the held for sale classification.

(b) Special charges include restructuring charges of $99 million and $237 million in 2010 and 2009, respectively, primarily related to
severance and asset impairment charges. In 2010, special charges also include a $91 million non-cash pre-tax charge to reclassify a
foreign exchange loss from equity to the income statement as a result of substantially liquidating a Finance segment entity. In 2009, special
charges include a goodwill impairment charge of $80 million in the Industrial segment.

(c) For 2009, the potential dilutive effect of stock options, restricted stock units and the shares that could have been issued upon the conversion
of our convertible notes and upon the exercise of the related warrants was excluded from the computation of diluted weighted-average
shares outstanding as the shares would have an anti-dilutive effect on the loss from continuing operations.

17 Textron Inc. Annual Report • 2013

Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations

Overview and Consolidated Results of Operations

For Textron, 2013 was an important year with significant new product introductions, strategic acquisitions and investments in the
future of our businesses. During 2013, we accomplished the following:

•

Invested $651 million in research and development costs, a 12% increase over the prior year, demonstrating our
commitment to expanding our current product lines across all of our businesses. As a result, we brought new products to
market in many of our businesses, including the certification of two new models of Cessna aircraft, the Citation M2 and
the Sovereign+ jet.

• Acquired six companies, including two flight simulation and aircraft training product companies for the Textron Systems
segment, two companies to augment our Greenlee business in the Industrial segment and two service centers at Cessna for
an aggregate cash payment of $196 million.

• Made $204 million in contributions to our pension plans and ended the year with an unfunded pension plan liability of

$199 million, compared to $1.3 billion at the end of 2012.

• Reduced our debt-to-capital, net of cash ratio to 15% from 24% in the prior year, in part due to the maturity of our

convertible senior notes and the settlement of the related call option and warrants.

An analysis of our consolidated operating results is set forth below. A more detailed analysis of our segments’ operating results is
provided in the Segment Analysis section on pages 20 to 28.

Revenues

(Dollars in millions)
Revenues
% change compared with prior period

2013
$ 12,104

2012
$ 12,237

2011
$ 11,275

(1)%

Revenues decreased $133 million, 1%, in 2013, compared with 2012, as revenue decreases in the Cessna, Finance, and Textron
Systems segments were partially offset by higher revenues in the Bell and Industrial segments. The net revenue decrease included
the following factors:

• Lower Cessna revenues of $327 million, primarily due to lower Citation jet volume of $384 million and CitationAir
volume of $114 million, partially offset by higher aftermarket volume of $65 million and higher pre-owned aircraft
volume of $53 million.

• Lower Finance revenues of $83 million, primarily attributable to an unfavorable impact of $46 million from lower
average finance receivables and a decrease of $25 million in revenues related to the resolution of a Timeshare account in
2012.

• Lower Textron Systems revenues of $72 million, largely due to lower volume of $51 million in the Marine & Land

product line and lower volume of $28 million in the UAS product line.

• Higher Bell revenues of $237 million, largely due to higher volume of $163 million in our military programs, primarily
reflecting higher V-22 deliveries and aftermarket volume, and $74 million of higher commercial revenues, largely due to
higher aircraft volume.

• Higher Industrial segment revenues of $112 million, primarily due to higher volume of $58 million and the impact of

acquisitions of $46 million.

Revenues increased $962 million, 9%, in 2012, compared with 2011, as increases in the Bell, Cessna, Industrial and Finance
segments were partially offset by a reduction in the Textron Systems segment. The net revenue increase included the following
factors:

• Higher Bell revenues of $749 million, primarily due to higher commercial aircraft volume of $476 million and an increase

in V-22 program volume of $231 million, largely due to higher deliveries.

• Higher Cessna revenues of $121 million, primarily due to higher pre-owned aircraft volume of $68 million and Citation

•

jet revenues of $57 million, reflecting a change in mix of jets sold during the period.
Increased Industrial segment revenues of $115 million, primarily due to higher volume of $171 million, primarily
reflecting higher market demand in the Fuel Systems and Functional Components and Golf, Turf Care and Light

Textron Inc. Annual Report • 2013 18

Transportation Vehicles product lines, partially offset by an unfavorable foreign exchange impact of $80 million,
primarily related to the weakening of the euro.

• Higher Finance revenues of $112 million as described more fully in the Segment Analysis below.
• Lower Textron Systems revenues of $135 million, primarily due to lower volume across all product lines.

Cost of Sales and Selling and Administrative Expense

(Dollars in millions)
Operating expenses
Cost of sales
% change compared with prior period
Gross margin as a percentage of Manufacturing revenues
Selling and administrative expenses
% change compared with prior period

2013
$ 11,257

2012
$ 11,184
10,019

2011
$ 10,503
9,308

10,131
1%
15.4%
1,126
(3)%

8%
16.7%
1,165

(3)%

16.7%
1,195

Manufacturing cost of sales and selling and administrative expenses together comprise our operating expenses. Changes in
operating expenses are more fully discussed in our Segment Analysis below.

Cost of sales as a percentage of manufacturing revenues was 84.6% in 2013, and 83.3% in both 2012 and 2011.

Consolidated manufacturing cost of sales increased $112 million, 1%, in 2013, compared with 2012, primarily due to higher sales
volume at Bell and the impact from businesses acquired in 2013, partially offset by lower sales at Cessna and Textron Systems. In
2013, gross margin as a percentage of manufacturing revenues decreased 130 basis points primarily due to unfavorable
performance at Bell, largely due to manufacturing inefficiencies associated with labor disruptions resulting from negotiations with
bargained employees and with the implementation of a new enterprise resource planning system in the first quarter of 2013, as
well as lower Citation jet and CitiationAir volume at Cessna.

Selling and administrative expenses decreased $39 million, 3%, in 2013 compared with 2012, largely due to a reduction in
administrative expenses of $26 million and lower provision for loan losses of $20 million at the Finance segment, both primarily
associated with the non-captive business. Selling and administrative expense was also impacted by $28 million in severance costs
incurred in 2013 at Cessna, which were largely offset by a $27 million charge from an unfavorable arbitration award incurred in
2012 at Cessna.

In 2012, consolidated manufacturing cost of sales increased $711 million, 8%, compared with 2011, principally due to higher net
sales volume. Cost of sales was reduced by $65 million in 2012 from foreign exchange fluctuations, primarily in the Industrial
segment due to the weakening of the euro. In addition, cost of sales included $37 million in charges related to our new UAS fee-
for-service contracts at Textron Systems, which were offset by the impact of 2011 charges at Textron Systems of $60 million
related to the impairment of intangible assets and severance costs. Selling and administrative expense decreased $30 million, 3%,
in 2012, compared with 2011. The decrease was largely driven by lower operating expenses of $56 million at the Finance segment
primarily associated with the exit of the non-captive business, partially offset by a $27 million charge at Cessna from an unfavorable
arbitration award described more fully in the Segment Analysis below.

Interest Expense

(Dollars in millions)
Interest expense
% change compared with prior period

2013
173
(18)%

2012
212
(14)%

2011
246

Interest expense on the Consolidated Statement of Operations includes interest for both the Finance and Manufacturing borrowing
groups with interest related to intercompany borrowings eliminated. Interest expense for the Finance segment is included within
segment profit and includes intercompany interest.

Consolidated interest expense decreased $39 million, 18%, in 2013, compared with 2012, and $34 million, 14%, in 2012 compared
with 2011, primarily due to lower average debt outstanding.

Valuation Allowance on Transfer of Golf Mortgage Portfolio to Held for Sale
In the fourth quarter of 2011, we determined that we no longer had the intent to hold the remaining Golf Mortgage portfolio for
investment for the foreseeable future, and, accordingly, transferred $458 million of the remaining Golf Mortgage finance
receivables, net of an $80 million allowance for loan losses, from the held for investment classification to the held for sale

19 Textron Inc. Annual Report • 2013

classification. These finance receivables were recorded at fair value at the time of the transfer, resulting in a $186 million charge
recorded to Valuation allowance on transfer of Golf Mortgage portfolio to held for sale.

Other Losses, net
In 2011, other losses, net included $55 million in losses on the early extinguishment of a portion of our convertible notes which
was largely offset by a $52 million gain from the collection on notes receivable in connection with the disposition of the Fluid &
Power business in 2008.

Income Tax Expense
Our effective tax rate was 26.1% in 2013, 30.9% in 2012 and 28.1% in 2011, and generally differs from the U.S. federal statutory
tax rate of 35% due to certain earnings from our operations in lower-tax jurisdictions throughout the world, as well as research
credits. The jurisdictions with favorable tax rates that have the most significant effective tax rate impact in the periods presented
include primarily Canada, Germany, Belgium and China. We have not provided for U.S. taxes for those earnings because we plan
to reinvest all of those earnings indefinitely outside of the U.S. Our effective tax rate will fluctuate based on the mix of earnings
from our U.S. and non-U.S. operations. In addition, the American Taxpayer Relief Act of 2012 was enacted on January 2, 2013 to
retroactively reinstate and extend the Federal Research and Development Tax Credit from January 1, 2012 to December 31, 2013.
As a result our income tax provision for 2013 includes a tax benefit that reduced the annual effective tax rate by approximately
four percent. We estimate our full year annual effective tax rate in 2014 to be approximately 31.5%. For a full reconciliation of
our effective tax rate to the U.S. federal statutory tax rate of 35% see Note 12 to the Consolidated Financial Statements.

Segment Analysis

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 and certain corporate expenses. The
measurement for the Finance segment includes interest income and expense along with intercompany interest expense.

In our discussion of comparative results for the Manufacturing group, changes in revenue and segment profit typically are
expressed for our commercial business in terms of volume, pricing, foreign exchange and acquisitions. Additionally, changes in
segment profit may be expressed in terms of mix, inflation and cost performance. Volume changes in revenue represent
increases/decreases in the number of units delivered or services provided. Pricing represents changes in unit pricing. Foreign
exchange is the change resulting from translating foreign-denominated amounts into U.S. dollars at exchange rates that are
different from the prior period. Acquisitions refer to the results generated from businesses that were acquired within the previous
12 months. For segment profit, mix represents a change due to the composition of products and/or services sold at different profit
margins. Inflation represents higher material, wages, benefits, pension or other costs. Cost performance reflects an increase or
decrease in research and development, depreciation, selling and administrative costs, warranty, product liability, quality/scrap,
labor efficiency, overhead, product line profitability, start-up, ramp up and cost-reduction initiatives or other manufacturing inputs.

Approximately 30% of our 2013 revenues were derived from contracts with the U.S. Government. For our segments that have
significant contracts with the U.S. Government, we typically express changes in segment profit related to the government business
in terms of volume, changes in program performance or changes in contract mix. Changes in volume that are discussed in net
sales typically drive corresponding changes in our segment profit based on the profit rate for a particular contract. Changes in
program performance typically relate to profit recognition associated with revisions to total estimated costs at completion that
reflect improved or deteriorated operating performance or award fee rates. Changes in contract mix refers to changes in operating
margin due to a change in the relative volume of contracts with higher or lower fee rates such that the overall average margin rate
for the segment changes.

Cessna

(Dollars in millions)
Revenues
Operating expenses
Segment (loss) profit
Profit margin
Backlog

2013
2,784
2,832

(48)
(2)%

2012
3,111
3,029
82
3%

2011
2,990
2,930
60
2%

% Change

2013
(11)%
(7)%

—

2012

4%
3%
37%

1,018

1,062

1,889

(4)%

(44)%

Textron Inc. Annual Report • 2013 20

Cessna Revenues and Operating Expenses
Factors contributing to the 2013 year-over-year revenue change are provided below:

(In millions)
Volume
Acquisitions
Other
Total change

2013 versus
2012
(373)
33
13
(327)

In 2013, Cessna’s revenues decreased $327 million, 11%, compared with 2012, primarily due to lower Citation jet volume of $384
million and lower CitationAir volume of $114 million, largely related to the wind-down of our fractional share business. These
decreases were partially offset by higher aftermarket volume of $65 million, largely due to increased service demand, and higher
pre-owned aircraft volume of $53 million. We delivered 139 Citation jets in 2013, compared with 181 jets in 2012. During 2013,
the portion of Cessna’s revenues derived from aftermarket sales and services increased to 33% of Cessna’s revenues, compared
with 25% in the corresponding period of 2012, due to higher aftermarket volume and the impact of lower Citation jet revenues.

Cessna’s operating expenses decreased $197 million, 7%, in 2013, compared with 2012, primarily due to lower sales volume as
discussed above. The volume-related decrease in operating expenses was partially offset by $37 million of operating costs
incurred by service centers acquired at the beginning of 2013 and $33 million of inflation, largely due to higher pension expense of
$17 million.

Operating expenses in 2013 were impacted by $28 million in severance costs incurred during the first half of the year in
connection with a voluntary separation program offered to qualifying salaried employees and a reduction of certain direct
production positions due to an adjustment of our production schedule. Operating expenses in 2012 included a $27 million charge
from an unfavorable arbitration award recorded in the fourth quarter.

Factors contributing to the 2012 year-over-year revenue change are provided below:

(In millions)
Volume and mix
Other
Total change

2012 versus
2011
126
(5)
121

Cessna delivered 181 Citation jets in 2012, compared with 183 jets in 2011, however revenues increased $121 million, 4%, in
2012, compared with 2011. The increase in revenues was primarily due to a $68 million impact from higher pre-owned aircraft
volume and $57 million of higher Citation jet revenues reflecting a change in mix of new jets sold during the period. During 2012,
the portion of Cessna’s revenues derived from aftermarket sales and services represented 25% of Cessna’s revenues, compared
with 24% in the corresponding period of 2011.

Cessna’s operating expenses increased by $99 million, 3%, in 2012, compared with 2011, primarily due to the following:

•

$93 million in higher direct material costs, resulting from increased pre-owned aircraft sales volume and a change in the
mix of jets sold during the period.
$35 million in cost inflation, largely reflecting a $22 million favorable benefit recorded in 2011 related to the last-in, first-
out (LIFO) method of accounting for inventories.
$27 million charge recorded in the fourth quarter of 2012 due to an unfavorable award an arbitration panel entered against
Cessna as a result of an alleged breach of a supply agreement.

These increases were partially offset by $33 million of cost reductions from improved factory efficiency and $24 million in lower
engineering and development expenses.

21 Textron Inc. Annual Report • 2013

Cessna Segment (Loss) Profit
Factors contributing to 2013 year-over-year segment (loss) profit change are provided below:

(In millions)
Volume
Inflation, net of pricing
Other
Total change

2013 versus
2012
(99)
(21)
(10)
(130)

Cessna’s segment profit decreased $130 million in 2013, compared with 2012, primarily due to a $99 million impact from lower
sales volume as described above and $21 million in inflation, net of pricing, largely due to higher pension expense of $17 million.
Segment profit was also impacted by $28 million in severance costs incurred in 2013, largely offset by a $27 million charge from
an unfavorable arbitration award incurred in 2012, as described above.

Factors contributing to 2012 year-over-year segment profit change are provided below:

(In millions)
Volume and mix
Performance
Inflation, net of pricing
Total change

2012 versus
2011
53
12
(43)
22

In 2012, Cessna’s segment profit increased $22 million, 37%, compared with 2011, primarily due to the change in mix of Citation
jets sold during the period. Improved performance included the following:

•
•
•
•

$33 million in improved factory efficiency.
$24 million in lower engineering and development expenses.
$(27) million unfavorable arbitration award as described above.
$(19) million of lower forfeiture income due to fewer order cancellations in 2012.

Inflation, net of pricing, included a $26 million unfavorable LIFO impact largely due to a $22 million LIFO benefit recorded in
2011.

Cessna Backlog
Cessna’s backlog decreased $44 million, 4%, in 2013 and $827 million, 44%, in 2012. The decrease in backlog in 2012 was
mainly attributable to deliveries in excess of new orders and canceled Citation jet orders.

Bell

(Dollars in millions)
Revenues:
V-22 program
Other military
Commercial
Total revenues
Operating expenses
Segment profit
Profit margin
Backlog

2013

2012

2011

2013

2012

% Change

$ 1,755
959
1,797
4,511
3,938
573
13%

$ 6,450

$ 1,611
940
1,723
4,274
3,635
639
15%

$ 7,469

$ 1,380
919
1,226
3,525
3,004
521
15%

$ 7,346

9%
2%
4%
6%
8%
(10)%

17%
2%
41%
21%
21%
23%

(14)%

Bell’s major U.S. Government programs at this time are the V-22 tiltrotor aircraft and the H-1 helicopter platforms, which are both
in the production stage and represent a significant portion of Bell’s revenues from the U.S. Government. During the second
quarter of 2013, we signed the second multi-year V-22 contract for production and delivery of 99 units beginning in late 2014 with
options for 23 additional aircraft.

Textron Inc. Annual Report • 2013 22

Bell Revenues and Operating Expenses
Factors contributing to the 2013 year-over-year revenue change are provided below:

(In millions)
Volume
Other
Total change

2013 versus
2012
193
44
237

Bell’s revenues increased $237 million, 6% in 2013, compared with 2012, due to the following factors:

•

$144 million increase in V-22 program volume largely due to higher aircraft deliveries, as we delivered 41 V-22 aircraft
in 2013, compared with 39 aircraft in 2012. In addition, military aftermarket volume was higher by $35 million, reflecting
increased support of fielded aircraft.
$74 million increase in commercial revenues, largely due to higher aircraft volume, as we delivered 213 aircraft in 2013,
compared to 188 aircraft in 2012. This increase was partially offset by lower commercial aftermarket revenue of $50
million, largely due to lower volume, which in part, resulted from the conversion to a new enterprise resource planning
system in the first quarter of 2013.
$19 million increase in other military volume, reflecting higher H-1 deliveries. We delivered 25 H-1 aircraft in 2013,
compared with 24 H-1 aircraft in 2012.

Bell’s operating expenses increased $303 million, 8%, in 2013, respectively, compared with 2012, largely due to higher volume as
described above and $68 million in unfavorable performance, which included $27 million in lower favorable profit adjustments on
its long-term contracts. The unfavorable performance was largely due to manufacturing inefficiencies associated with labor
disruptions resulting from negotiations with bargained employees and with the implementation of a new enterprise resource
planning system in the first quarter of 2013. On October 13, 2013, Bell reached a new five-year collective bargaining agreement
with the United Automobile, Aerospace and Agricultural Implement Workers of America (UAW) and UAW Local 218 which
represents these employees. The impact of these disruptions is expected to continue to depress Bell’s margins in 2014 as the costs
for inventories manufactured in 2013 are realized as products are delivered.

Factors contributing to the 2012 year-over-year revenue change are provided below:

(In millions)
Volume
Other
Total change

2012 versus
2011
728
21
749

Bell’s revenues increased $749 million, 21%, in 2012, compared with 2011, primarily due to higher volume, which included the
following factors:

•

$476 million increase in commercial volume, largely related to higher deliveries reflecting our investment in new
products and increased focus on commercial markets. Bell delivered 188 commercial aircraft in 2012, compared with 125
aircraft in 2011.
$231 million increase in volume related to the V-22 program, primarily reflecting higher deliveries based on schedule
requirements and higher revenues related to the support of fielded aircraft. Bell delivered 39 V-22 aircraft in 2012,
compared with 34 deliveries in 2011.
$21 million increase in other military volume resulting from higher deliveries and services rendered under several
programs, partially offset by lower spares and aftermarket volume. Bell delivered 24 H-1 aircraft in 2012, compared with
25 aircraft in 2011.

Bell’s operating expenses increased $631 million, 21%, in 2012, compared with 2011, primarily due to higher sales volume
discussed above.

23 Textron Inc. Annual Report • 2013

Bell Segment Profit
Factors contributing to 2013 year-over-year segment profit change are provided below:

(In millions)
Performance
Volume and Mix
Other
Total change

2013 versus
2012
(68)
(10)
12
(66)

Bell’s segment profit decreased $66 million, 10%, in 2013, respectively, compared with 2012, primarily due to unfavorable
performance discussed above. Segment profit was also impacted by an unfavorable mix of commercial aircraft deliveries.

Factors contributing to 2012 year-over-year segment profit change are provided below:

(In millions)
Volume and mix
Performance
Other
Total change

2012 versus
2011
143
(18)
(7)
118

Bell’s segment profit increased $118 million, 23%, in 2012, compared with 2011, primarily due to the impact of higher volume in
our commercial aircraft and military businesses as described above. Performance reflects higher net research and development
expense in 2012 of $26 million due to the ramp-up of new product development and higher selling and administrative expenses
largely due to our investment in business system improvement and upgrade activities, which were partially offset by favorable
program performance in our military programs, reflecting improved manufacturing efficiencies.

Bell Backlog
Backlog decreased $1.0 billion, 14%, at Bell during 2013 primarily due to deliveries on the V-22 and H-1 programs that exceeded
orders. In 2012, Bell’s backlog increased $123 million, 2%, reflecting orders in excess of deliveries.

Textron Systems

(Dollars in millions)
Revenues
Operating expenses
Segment profit
Profit margin
Backlog

2013
$ 1,665
1,518
147

2012
$ 1,737
1,605
132

9%
$ 2,803

8%
$ 2,919

% Change

2013

2012

(4)%
(5)%
11%

(7)%
(7)%
(6)%

2011
$ 1,872
1,731
141

$ 1,337

(4)%

118%

Textron Systems Revenues and Operating Expenses
Factors contributing to the 2013 year-over-year revenue change are provided below:

(In millions)
Volume
Other
Total change

2013 versus
2012
(76)
4
(72)

Revenues at Textron Systems decreased $72 million, 4%, in 2013, compared with 2012, primarily due to lower volume in the
Marine & Land product line of $51 million and in the UAS product line of $28 million.

Textron Systems’ operating expenses decreased $87 million, 5%, in 2013, compared with 2012, primarily due to improved
performance reflecting the favorable impact of lower profit adjustments, including $22 million in lower UAS fee-for-service program
charges, along with cost reduction initiatives across most product lines Operating expenses were also impacted by the lower sales
volume described above.

Textron Inc. Annual Report • 2013 24

Factors contributing to the 2012 year-over-year revenue change are provided below:

(In millions)
Volume
Other
Total change

2012 versus
2011
(141)
6
(135)

Revenues at Textron Systems decreased $135 million, 7%, in 2012, compared with 2011, primarily due to lower volume in the
Marine & Land product line of $76 million, lower volume in the Mission Support and Other product line of $45 million and lower
volume in Weapons and Sensors of $13 million.

Textron Systems’ operating expenses decreased $126 million, 7%, in 2012, compared with 2011, primarily due to the lower
volume. Operating expenses for 2012 included $37 million in charges discussed below related to the UAS fee-for-service
program, which were offset by the impact of charges at Textron Systems of $60 million during 2011, related to the impairment of
intangible assets and severance costs.

UAS Fee-For-Service Program
In 2012, we were awarded two indefinite delivery, indefinite quantity (IDIQ) contracts with separate U.S. Government customers
for UAS fee-for-service activities. In the third quarter of 2012, we experienced start-up issues as we began deployment for the first
of these contracts, the MEUAS II program, which required us to augment training procedures, add resources and adjust certain
estimated costs. At that time, we took an $18 million charge reflecting our estimated loss on the awarded task orders under both
contracts based on our deployment experience, which resulted in changes to certain assumptions, and also reflected higher
subcontractor, up-front training and program management costs to support the ramp-up. In the fourth quarter of 2012, we
experienced propulsion performance issues with our systems, and as a result, we were not able to perform within our previous cost
estimates. Based on the issues we have encountered, we increased our estimate of the cost to complete the awarded task orders
under both contracts through completion of those orders and recorded a $19 million unfavorable program profit adjustment in the
fourth quarter of 2012.

In 2013, we recorded $15 million of charges for the UAS fee-for service program related to our estimate of costs to fulfill options
that were exercised by the customer during the third quarter; these options extended the period of performance on the initial task
orders under the contracts for one year. We continued to experience unacceptable quality from our engine supplier for this
program and decided in the third quarter to transition the manufacture of the engine to our Lycoming business. We believe this
change will allow us to improve performance.

Textron Systems Segment Profit
Factors contributing to 2013 year-over-year segment profit change are provided below:

(In millions)
Performance
Volume and mix
Other
Total change

2013 versus
2012
58
(33)
(10)
15

Segment profit at Textron Systems increased $15 million, 11% in 2013 compared with 2012, largely due to improved performance
reflecting the favorable impact of lower profit adjustments, including $22 million in lower UAS fee-for-service program charges, along
with cost reduction initiatives across most product lines. This improved performance was partially offset by the lower volume described
above.

25 Textron Inc. Annual Report • 2013

Factors contributing to 2012 year-over-year segment profit change are provided below:

(In millions)
Volume and mix
Impairment charge in 2011
Performance
Other
Total change

2012 versus
2011
(57)
41
4
3
(9)

Segment profit at Textron Systems decreased $9 million, 6%, in 2012, compared with 2011, reflecting the impact of lower volume
described above and deliveries on lower margin contracts during the current period. The favorable performance reflects a charge
in 2011 of $19 million primarily in severance costs related to workforce reductions, $9 million in lower amortization expense on
intangible assets and $8 million in lower net research and development costs, partially offset by the $37 million in charges related
to the UAS fee-for-service program described above.

Textron Systems Backlog
In 2013, Textron Systems backlog decreased $116 million, 4%, largely due to deliveries in excess of new orders. In 2012, Textron
Systems backlog increased $1.6 billion, 118%, largely due to additional orders in the UAS and Marine & Land product lines,
including the Canadian TAPV contract for $693 million.

Industrial

(Dollars in millions)
Revenues:
Fuel Systems and Functional Components
Other Industrial
Total revenues
Operating expenses
Segment profit
Profit margin

2013

2012

2011

2013

2012

% Change

$ 1,853
1,159
3,012
2,770
242

$ 1,842
1,058
2,900
2,685
215

$ 1,823
962
2,785
2,583
202

1%
10%
4%
3%
13%

1%
10%
4%
4%
6%

Industrial Revenues and Operating Expenses
Factors contributing to the 2013 year-over-year revenue change are provided below:

(In millions)
Volume
Acquisitions
Other
Total change

2013 versus
2012
58
46
8
112

Industrial segment revenues increased $112 million, 4%, in 2013, compared with 2012, largely due to higher volume of $58
million and the impact from newly acquired companies of $46 million within our Powered Tools, Testing and Measurement
Equipment product line. Higher volume resulted from a $32 million increase in the Other Industrial product lines, mostly due to
higher market demand in the Golf, Turf Care and Light Transportation Vehicle product line, and a $26 million increase in the Fuel
Systems and Functional Components line, reflecting higher automotive industry demand in North America.

Operating expenses for the Industrial segment increased $85 million, 3%, in 2013, compared with 2012, largely due to higher
volume and a $43 million impact from newly acquired companies. Operating expenses were also impacted by improved
performance of $27 million associated with the Fuel Systems and Functional Components product line, which was partially offset
by $16 million of inflation in this product line, reflecting higher compensation and material costs.

Textron Inc. Annual Report • 2013 26

Factors contributing to the 2012 year-over-year revenue change are provided below:

(In millions)
Volume
Foreign exchange
Other
Total change

2012 versus
2011
171
(80)
24
115

Industrial segment revenues increased $115 million, 4%, in 2012, compared with 2011. Higher volume resulted from a $93
million increase in the Fuel Systems and Functional Components product line, reflecting higher automotive industry demand in
North America, and a $78 million increase in the Other Industrial product lines, largely related to higher market demand in the
Golf, Turf Care and Light Transportation Vehicles product line. The unfavorable foreign exchange impact was mostly related to
the weakening of the euro, which primarily impacted the Fuel Systems and Functional Components product line.

Operating expenses for the Industrial segment increased $102 million, 4%, in 2012, compared with 2011, largely due to $130
million in higher direct material costs in support of higher sales volume. In 2012, operating expenses were also impacted by cost
inflation of $44 million, primarily due to higher material and overhead costs, partially offset by lower costs due to a favorable
foreign exchange impact of $70 million resulting from the weakening of the euro.

Industrial Segment Profit
Factors contributing to 2013 year-over-year segment profit change are provided below:

(In millions)
Performance
Volume
Inflation, net of pricing
Other
Total change

2013 versus
2012
39
9
(22)
1
27

Segment profit for the Industrial segment increased $27 million, 13%, in 2013, compared with 2012, primarily due to improved
performance of which $27 million was associated with the Fuel Systems and Functional Components product line. The $22
million unfavorable impact from inflation, net of pricing, was primarily in the Fuel Systems and Functional Components product
line, reflecting higher compensation and material costs.

Factors contributing to 2012 year-over-year segment profit change are provided below:

(In millions)
Volume
Inflation, net of pricing
Other
Total change

2012 versus
2011
31
(17)
(1)
13

Segment profit for the Industrial segment increased $13 million, 6%, in 2012, compared with 2011, primarily due to the impact
from higher volume as described above, partially offset by cost inflation that exceeded related price increases.

27 Textron Inc. Annual Report • 2013

Finance

(In millions)
Revenues
Segment profit (loss)

2013
132
49

2012
215
64

2011
103
(333)

Finance Revenues
Finance segment revenues decreased $83 million in 2013, compared with 2012, primarily attributable to an unfavorable impact of
$46 million, attributable to lower average finance receivables of $834 million. Revenues during 2013 were also lower by $25
million due to the resolution of a Timeshare account that returned to accrual status in 2012.

Finance segment revenues increased $112 million in 2012 compared with 2011, primarily attributable to the following factors:

•

$90 million increase related to the valuation of Golf Mortgage finance receivables held for sale. In 2012, we had $76
million in favorable valuation adjustments compared with unfavorable valuation adjustments of $14 million in 2011.
$42 million of lower portfolio losses, net of gains, primarily associated with the Structured Capital and Timeshare
portfolios.
$25 million increase due to the resolution of one significant Timeshare account that returned to accrual status and was
subsequently paid off during the third quarter of 2012.

• These increases were partially offset by a $61 million decrease attributable to lower average finance receivables of $1.2

billion.

Finance Segment Profit (Loss)
Finance segment profit decreased $15 million in 2013, compared with 2012, primarily resulting from the resolution of a Timeshare
account in 2012 as discussed above, as well as an unfavorable impact of $25 million in net interest margin from lower average
finance receivables. These decreases were partially offset by lower administrative expenses of $26 million and lower provision for
loan losses of $20 million, largely related to the downsizing of the non-captive business.

Finance segment profit increased $397 million in 2012, compared with 2011, primarily due to changes in valuation adjustments,
lower portfolio losses, net of gains, and the resolution of one significant Timeshare account discussed above, as well as lower
administrative expense of $56 million, primarily associated with the exit of the non-captive business. In addition, we recorded a
$186 million valuation allowance on the transfer of the Golf Mortgage portfolio from held for investment to the held for sale
classification during the fourth quarter of 2011. These increases were partially offset by a $27 million decrease in net interest
margin attributable to lower average finance receivables.

Finance Portfolio Quality
The following table reflects information about the Finance segment’s credit performance related to finance receivables that are
classified as held for investment.

(Dollars in millions)
Finance receivables
Nonaccrual finance receivables
Ratio of nonaccrual finance receivables to finance receivables
60+ days contractual delinquency
60+ days contractual delinquency as a percentage of finance receivables

December 28,
2013
$ 1,483
105
7.08%
$ 80
5.39%

December 29,
2012
$ 1,934
143
7.39%
$ 90
4.65%

Textron Inc. Annual Report • 2013 28

Liquidity and Capital Resources

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

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

(In millions)
Manufacturing group
Cash and equivalents
Debt
Shareholders’ equity
Capital (debt plus shareholders’ equity)
Net debt (net of cash and equivalents) to capital
Debt to capital
Finance group
Cash and equivalents
Debt

December 28,
2013

December 29,
2012

1,163
1,931
4,384
6,315
15%
31%

1,378
2,301
2,991
5,292
24%
44%

48
1,256

35
1,686

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

On October 4, 2013, Textron entered into a senior unsecured revolving credit facility for an aggregate principal amount of $1.0
billion, of which up to $100 million is available for the issuance of letters of credit. This facility expires in October 2018. At
December 28, 2013, there were no amounts borrowed against the facility, and there were $35 million of letters of credits issued
against it.

We maintain an effective shelf registration statement filed with the Securities and Exchange Commission that allows us to issue an
unlimited amount of public debt and other securities. On January 30, 2014, we issued $250 million in 3.65% notes due 2021 and
$350 million in 4.30% notes due 2024 under this registration statement. We plan to use the net proceeds of the issuance of these
notes to finance a portion of the acquisition of all outstanding equity interests in Beech Holdings, LLC, the parent of Beechcraft
Corporation, which we have agreed to purchase for approximately $1.4 billion in cash. The transaction is expected to close during
the first half of 2014, subject to customary closing conditions, including regulatory approvals. If the transaction is not completed,
or the related merger agreement is terminated, on or before December 31, 2014, we will be required to redeem all outstanding
2021 notes at a redemption price equal to 101% of the principal amount thereof, plus accrued and unpaid interest.

On January 24, 2014, in order to finance the Beechcraft acquisition, we also entered into a five-year term loan with a syndicate of
banks in the principal amount of $500 million which we intend to draw down upon the closing of the transaction.

29 Textron Inc. Annual Report • 2013

Manufacturing Group Cash Flows
Cash flows from continuing operations for the Manufacturing group as presented in our Consolidated Statement of Cash Flows are
summarized below:

(In millions)

Operating activities
Investing activities
Financing activities

2013

658
(624)
(240)

2012

958
(476)
29

2011

761
(423)
(360)

We generated $658 million in cash from operating activities in 2013 on $914 million in Manufacturing group segment profit and
$470 million of net income. The $300 million decrease in cash flows from operating activities from 2012 was largely due to a
$429 million impact related to working capital requirements and $64 million in lower income from continuing operations, which
were partially offset by $211 million in lower contributions to our pension plans in 2013. The most significant change within
working capital was a $230 million unfavorable impact resulting from net tax payments of $223 million in 2013, compared to net
tax refunds of $7 million in 2012. In addition, we had $165 million in cash inflows related to changes in inventory levels, largely
at Cessna, which was more than offset by $264 million of cash outflows from changes in accounts receivable and accounts
payable. The change in inventory levels at Cessna was primarily related to lower pre-owned inventory, partially offset by higher
inventory in support of new sales.

In 2012, we generated $958 million in cash from operating activities on $1.1 billion in Manufacturing group segment profit and
$534 million of Manufacturing group net income. The 26% increase in cash flows from operating activities from 2011 was largely
due to lower cash contributions of $237 million made to our pension plans in 2012. Within working capital, we had a $117 million
reduction in cash resulting from an increase in pre-owned inventory in at Cessna primarily due to higher trade-in activities, which
was largely offset by a reduction in net taxes paid.

Pension contributions were $194 million, $405 million and $642 million in 2013, 2012 and 2011, respectively.

Investing cash flows in 2013, 2012 and 2011 primarily included capital expenditures of $444 million, $480 million, and $423
million, respectively. Cash flows from investing activities also included $196 million of cash used in 2013 for acquisitions of four
businesses within our Textron Systems and Industrial segments and two service centers in our Cessna segment.

In 2013, financing activities primarily consisted of the repayment of $528 million of outstanding debt, including the settlement of
our convertible notes, which was partially offset by proceeds from a $150 million variable-rate term loan agreement. In 2012, we
generated cash from financing activities, largely due to the receipt of $490 million from the Finance group in payment of its
intergroup borrowing, partially offset by $272 million in share repurchases and $189 million in payments on our outstanding debt.
In 2011, financing activities primarily consisted of $580 million in payments related to the purchase and cancellation of
convertible notes and $175 million in intergroup financing for our Finance group, partially offset by $496 million in proceeds from
the issuance of notes.

Dividends
Dividend payments to shareholders totaled $22 million, $17 million and $22 million in 2013, 2012 and 2011, respectively.

Share Repurchases
In the fourth quarter of 2012, under a 2007 share repurchase authorization, we repurchased 11.1 million shares of our common
stock for a total cost of $272 million which fully utilized our available repurchase authorization. On January 23, 2013, our Board
of Directors approved a new authorization program for 25 million shares under which we intend to purchase shares of common
stock to offset the impact of dilution from share-based compensation plans beginning in 2014 and for opportunistic capital
management purposes.

Capital Contributions Paid To and Dividends Received From the Finance Group
Under a Support Agreement between Textron and TFC, Textron is required to maintain a controlling interest in TFC. The
agreement also requires Textron to ensure that TFC maintains fixed charge coverage of no less than 125% and consolidated

Textron Inc. Annual Report • 2013 30

shareholder’s equity of no less than $200 million. Cash contributions paid to TFC to maintain compliance with the Support
Agreement and dividends paid by TFC to Textron Inc. are detailed below:

(In millions)
Dividends paid by TFC to Textron
Capital contributions paid to TFC under Support Agreement

2013
175
—

2012
345
(240)

2011
179
(182)

During 2013, we also made a $1 million capital contribution to TFC to fund the repurchase of a portion of TFC’s 6% Fixed-to-
Floating Rate Junior Subordinated Notes.

Due to the nature of these contributions, we classify these contributions within cash flows used by operating activities for the
Manufacturing group in the Consolidated Statements of Cash Flows. Capital contributions to support Finance group growth in the
ongoing captive finance business are classified as cash flows from financing activities. The Finance group’s net income (loss) is
excluded from the Manufacturing group’s cash flows, while dividends from the Finance group are included within cash flows from
operating activities for the Manufacturing group as they represent a return on investment.

Finance Group Cash Flows
The cash flows from continuing operations for the Finance group are summarized below:

(In millions)
Operating activities
Investing activities
Financing activities

2013

66
624
(677)

2012

5
934
(918)

2011
65
1,453
(1,536)

In 2013 and 2012, the Finance group’s cash flows from operating activities were primarily impacted by changes in net taxes
received/paid and the impact of earnings. Net tax refunds/(payments) were $49 million, $(43) million and $65 million in 2013,
2012 and 2011, respectively. Net tax payments in 2012 included a settlement related to the Internal Revenue Service’s challenge of
tax deductions claimed in prior years for certain leveraged lease transactions.

Cash flows from investing activities primarily included collections on finance receivables and proceeds from sales of finance
receivables and other finance assets totaling $853 million in 2013, $1.3 billion in 2012 and $1.9 billion in 2011, partially offset by
financial receivable originations of $271 million in 2013, $331 million in 2012 and $471 million in 2011.

Cash used in financing activities included principal payments on long-term debt of $743 million, $426 million and $756 million in
2013, 2012 and 2011, respectively. These cash outflows were partially offset by proceeds from long term debt of $298 million,
$106 million and $430 million, respectively. In 2012, the Finance group also made cash payments totaling $493 million to the
Manufacturing group related to intergroup borrowings. In 2011, the Finance group paid $1.4 billion against the outstanding
balance on its bank line of credit.

Consolidated Cash Flows
The consolidated cash flows from continuing operations, after elimination of activity between the borrowing groups, are
summarized below:

(In millions)

Operating activities
Investing activities
Financing activities

2013

813
(264)
(742)

2012

935
378
(781)

2011

1,068
843
(1,951)

31 Textron Inc. Annual Report • 2013

Cash flows from operating activities decreased $122 million during 2013 as compared with 2012, largely due to a $133 million
impact related to working capital requirements and lower earnings, which were partially offset by a $206 million impact of lower
contributions to our pension plans in 2013. Significant changes within working capital included a $138 million unfavorable
impact resulting from net taxes paid between the periods as net tax payments were $174 million and $36 million in 2013 and 2012,
respectively, and $264 million of cash outflows related to changes in accounts receivable and accounts payable. These cash
outflows were partially offset by $198 million of cash inflows related to changes in inventory levels, largely at Cessna, and a $141
million impact from lower captive finance receivables.

Cash flows from operating activities decreased during 2012 as compared with 2011, as higher earnings were offset by changes in
working capital, which included lower net cash receipts from our captive financing activities of $140 million and an increase in
pre-owned inventory in the Cessna segment largely due to higher trade-in activities, resulting in a cash reduction of $117 million.
Our use of cash for working capital requirements was partially offset by $237 million in lower cash pension contributions made in
2012.

Cash flows from investing activities included capital expenditures of $444 million, $480 million, and $423 million in 2013, 2012
and 2011, respectively. Collections on finance receivables and proceeds from sales of finance receivables and other finance assets
totaled $368 million in 2013, $848 million in 2012 and $1.4 billion in 2011. Cash flows from investing activities also included
$196 million of cash used in 2013 for acquisitions of four businesses within our Textron Systems and Industrial segments and two
service centers in our Cessna segment.

Financing activities primarily consisted of the repayment of outstanding long-term debt of $1.3 billion, $0.6 billion and $1.4
billion in 2013, 2012 and 2011, respectively, partially offset by proceeds from the issuance of long-term debt of $448 million,
$106 million and $926 million, in 2013, 2012 and 2011, respectively. Cash used in financing activities also included $272 million
of share repurchases in 2012 and repayments of $1.4 billion against the outstanding balance on our bank credit lines in 2011.

Captive Financing and Other Intercompany Transactions
The Finance group finances retail purchases and leases for new and used aircraft and equipment manufactured by our
Manufacturing group, otherwise known as captive financing. In the Consolidated Statements of Cash Flows, cash received from
customers or from the sale of receivables is reflected as operating activities when received from third parties. However, in the
cash flow information provided for the separate borrowing groups, cash flows related to captive financing activities are reflected
based on the operations of each group. For example, when product is sold by our Manufacturing group to a customer and is
financed by the Finance group, the origination of the finance receivable is recorded within investing activities as a cash outflow in
the Finance group’s statement of cash flows. Meanwhile, in the Manufacturing group’s statement of cash flows, the cash received
from the Finance group on the customer’s behalf is recorded within operating cash flows as a cash inflow. Although cash is
transferred between the two borrowing groups, there is no cash transaction reported in the consolidated cash flows at the time of
the original financing. These captive financing activities, along with all significant intercompany transactions, are reclassified or
eliminated from the Consolidated Statements of Cash Flows.

Reclassification and elimination adjustments included in the Consolidated Statement of Cash Flows are summarized below:

(In millions)
Reclassifications from investing activities:
Finance receivable originations for Manufacturing group inventory sales
Cash received from customers and the sale of receivables
Other capital contributions made to Finance group
Other
Total reclassifications from investing activities
Reclassifications from financing activities:
Capital contribution paid by Manufacturing group to Finance group
Dividends received by Manufacturing group from Finance group
Other capital contributions made to Finance group
Other
Total reclassifications from financing activities
Total reclassifications and adjustments to cash flow from operating activities

2013

2012

2011

(248)
485
—
27
264

1
(175)
—
(1)
(175)
89

(309)
405
—
(16)
80

240
(345)
—
(3)
(108)
(28)

(284)
520
(60)
11
187

182
(179)
60
(8)
55
242

Textron Inc. Annual Report • 2013 32

Contractual Obligations

Manufacturing Group
The following table summarizes the known contractual obligations, as defined by reporting regulations, of our Manufacturing
group as of December 28, 2013:

(In millions)
Liabilities reflected in balance sheet:

Long-term debt
Interest on borrowings
Pension benefits for unfunded plans (1)
Postretirement benefits other than pensions (1)
Other long-term liabilities (2)

Liabilities not reflected in balance sheet:

Operating leases (3)
Purchase obligations (4)
Total Manufacturing group

Total

Less than 1
Year

1-3 Years

4-5 Years

More Than 5
Years

Payments Due by Period

$ 1,936
509
359
445
549

8
108
26
48
123

765
183
48
85
147

342
3,264
$ 7,404

63
2,492
$ 2,868

82
742
$ 2,052

365
122
43
71
65

49
18
733

798
96
242
241
214

148
12
$ 1,751

(1) We maintain defined benefit pension plans and postretirement benefit plans other than pensions as discussed in Note 11 to the
Consolidated Financial Statements. Included in the above table are discounted estimated benefit payments we expect to make
related to unfunded pension and other postretirement benefit plans. Actual benefit payments are dependent on a number of
factors, including mortality assumptions, expected retirement age, rate of compensation increases and medical trend rates,
which are subject to change in future years. Our policy for funding pension plans is to make contributions annually,
consistent with applicable laws and regulations; however, future contributions to our pension plans are not included in the
above table. In 2014, we expect to make contributions to our funded pension plans of approximately $33 million and
approximately $19 million in the Retirement Account Plan. Based on our current assumptions, which may change with
changes in market conditions, our current contribution estimates for each of the years from 2015 through 2018 are estimated
to be in the range of approximately $75 million to $130 million under the plan provisions in place at this time.

(2) Other long-term liabilities included in the table consist primarily of undiscounted amounts in the Consolidated Balance Sheet
as of December 28, 2013, representing obligations under deferred compensation arrangements and estimated environmental
remediation costs. Payments under deferred compensation arrangements have been estimated based on management’s
assumptions of expected retirement age, mortality, stock price and rates of return on participant deferrals. The timing of cash
flows associated with environmental remediation costs is largely based on historical experience. Other long-term liabilities,
such as deferred taxes, unrecognized tax benefits and product liability, warranty and litigation reserves, have been excluded
from the table due to the uncertainty of the timing of payments combined with the absence of historical trends to be used as a
predictor for such payments.

(3) Operating leases represent undiscounted obligations under noncancelable leases.

(4) Purchase obligations include undiscounted amounts committed under legally enforceable contracts or purchase orders for
goods and services with defined terms as to price, quantity and delivery dates. Approximately 40% of the purchase
obligations we disclose represent purchase orders issued for goods and services to be delivered under firm contracts with the
U.S. Government for which we have full recourse under customary contract termination clauses.

33 Textron Inc. Annual Report • 2013

Finance Group
The following table summarizes the known contractual obligations, as defined by reporting regulations, of our Finance group as of
December 28, 2013:

(In millions)
Liabilities reflected in balance sheet:
Term debt
Securitized debt (1)
Subordinated debt
Interest on borrowings (2)
Total Finance group

Total

Less than 1
Year

Payments Due by Period

1-3 Years

4-5 Years

783
172
299
260
1,514

174
49
—
40
263

357
93
—
67
517

133
26
—
24
183

More Than 5
Years

119
4
299
129
551

(1) Securitized debt payments do not represent contractual obligations of the Finance group, and we do not provide legal
recourse to investors who purchase interests in the securitizations beyond the credit enhancement inherent in the retained
subordinate interests.

(2) Interest payments reflect the current interest rate paid on the related debt. They do not include anticipated changes in market

interest rates, which could have an impact on the interest rate according to the terms of the related debt.

At December 28, 2013, the Finance group also had $93 million in other liabilities, primarily accounts payable and accrued
expenses, that are payable within the next 12 months.

Critical Accounting Estimates

To prepare our Consolidated Financial Statements to be in conformity with generally accepted accounting principles, we must
make complex and subjective judgments in the selection and application of accounting policies. The accounting policies that we
believe are most critical to the portrayal of our financial condition and results of operations are listed below. We believe these
policies require our most difficult, subjective and complex judgments in estimating the effect of inherent uncertainties. This
section should be read in conjunction with Note 1 to the Consolidated Financial Statements, which includes other significant
accounting policies.

Long-Term Contracts
We make a substantial portion of our sales to government customers pursuant to long-term contracts. These contracts require
development and delivery of products over multiple years and may contain fixed-price purchase options for additional products.
We account for these long-term contracts under the percentage-of-completion method of accounting. Under this method, we
estimate profit as the difference between total estimated revenues and cost of a contract. The percentage-of-completion method of
accounting involves the use of various estimating techniques to project costs at completion and, in some cases, includes estimates
of recoveries asserted against the customer for changes in specifications. Due to the size, length of time and nature of many of our
contracts, the estimation of total contract costs and revenues through completion is complicated and subject to many variables
relative to the outcome of future events over a period of several years. We are required to make numerous assumptions and
estimates relating to items such as expected engineering requirements, complexity of design and related development costs,
product performance, performance of subcontractors, availability and cost of materials, labor productivity and cost, overhead and
capital costs, manufacturing efficiencies and the achievement of contract milestones, including product deliveries, technical
requirements, or schedule.

Our cost estimation process is based on the professional knowledge and experience of engineers and program managers along with
finance professionals. We update our projections of costs at least semiannually or when circumstances significantly change.
Adjustments to projected costs are recognized in earnings when determinable. Anticipated losses on contracts are recognized in
full in the period in which the losses become probable and estimable. Due to the significance of judgment in the estimation
process described above, it is likely that materially different revenues and/or cost of sales amounts could be recorded if we used
different assumptions or if the underlying circumstances were to change. Our earnings could be reduced by a material amount
resulting in a charge to earnings if (a) total estimated contract costs are significantly higher than expected due to changes in
customer specifications prior to contract amendment, (b) total estimated contract costs are significantly higher than previously
estimated due to cost overruns or inflation, (c) there is a change in engineering efforts required during the development stage of the
contract or (d) we are unable to meet contract milestones.

Textron Inc. Annual Report • 2013 34

At the outset of each contract, we estimate the initial profit booking rate. The initial profit booking rate of each contract considers
risks surrounding the ability to achieve the technical requirements (for example, a newly-developed product versus a mature
product), schedule (for example, the number and type of milestone events), and costs by contract requirements in the initial
estimated costs at completion. Profit booking rates may increase during the performance of the contract if we successfully retire
risks surrounding the technical, schedule, and costs aspects of the contract. Likewise, the profit booking rate may decrease if we
are not successful in retiring the risks; and, as a result, our estimated costs at completion increase. All of the estimates are subject
to change during the performance of the contract and, therefore, may affect the profit booking rate. When adjustments are required,
any changes from prior estimates are recognized using the cumulative catch-up method with the impact of the change from
inception-to-date recorded in the current period.

The following table sets forth the aggregate gross amount of all program profit adjustments that are included within segment profit
for the three years ended December 28, 2013:

(In millions)
Gross favorable
Gross unfavorable
Net adjustments

2013

51
(22)
29

2012

88
(73)
15

2011
83
(29)
54

Goodwill
We evaluate the recoverability of goodwill annually in the fourth quarter or more frequently if events or changes in circumstances,
such as declines in sales, earnings or cash flows, or material adverse changes in the business climate, indicate that the carrying
value of a reporting unit might be impaired. The reporting unit represents the operating segment unless discrete financial
information is prepared and reviewed by segment management for businesses one level below that operating segment, in which
case such component is the reporting unit. In certain instances, we have aggregated components of an operating segment into a
single reporting unit based on similar economic characteristics.

We calculate the fair value of each reporting unit, primarily using discounted cash flows. These cash flows incorporate
assumptions for short- and long-term revenue growth rates, operating margins and discount rates that represent our best estimates
of current and forecasted market conditions, cost structure, anticipated net cost reductions, and the implied rate of return that we
believe a market participant would require for an investment in a business having similar risks and business characteristics to the
reporting unit being assessed. The revenue growth rates and operating margins used in our discounted cash flow analysis are
based on our strategic plans and long-range planning forecasts. The long-term growth rate we use to determine the terminal value
of the business is based on our assessment of its minimum expected terminal growth rate, as well as its past historical growth and
broader economic considerations such as gross domestic product, inflation and the maturity of the markets we serve. We utilize a
weighted-average cost of capital in our impairment analysis that makes assumptions about the capital structure that we believe a
market participant would make and include a risk premium based on an assessment of risks related to the projected cash flows of
each reporting unit. We believe this approach yields a discount rate that is consistent with an implied rate of return that an
independent investor or market participant would require for an investment in a company having similar risks and business
characteristics to the reporting unit being assessed.

If the reporting unit’s estimated fair value exceeds its carrying value, the reporting unit is not impaired, and no further analysis is
performed. Otherwise, the amount of the impairment must be determined by comparing the carrying amount of the reporting
unit’s goodwill to the implied fair value of that goodwill. The implied fair value of goodwill is determined by assigning a fair
value to all of the reporting unit’s assets and liabilities, including any unrecognized intangible assets, as if the reporting unit had
been acquired in a business combination. If the carrying amount of the goodwill exceeds the implied fair value, an impairment
loss would be recognized in an amount equal to that excess.

Based on our annual impairment review, the fair value of all of our reporting units exceeded their carrying values, and we do not
believe that there is a reasonable possibility that any units might fail the initial step of the impairment test in the foreseeable future.

Retirement Benefits
We maintain various pension and postretirement plans for our employees globally. These plans include significant pension and
postretirement benefit obligations, which are calculated based on actuarial valuations. Key assumptions used in determining these
obligations and related expenses include expected long-term rates of return on plan assets, discount rates and healthcare cost
projections. We also make assumptions regarding employee demographic factors such as retirement patterns, mortality, turnover
and rate of compensation increases. We evaluate and update these assumptions annually.

35 Textron Inc. Annual Report • 2013

To determine the weighted-average expected long-term rate of return on plan assets, we consider the current and expected asset
allocation, as well as historical and expected returns on each plan asset class. A lower expected rate of return on plan assets will
increase pension expense. For 2013, the assumed expected long-term rate of return on plan assets used in calculating pension
expense was 7.56%, compared with 7.58% in 2012. In 2013 and 2012, the assumed rate of return for our domestic plans, which
represent approximately 90% of our total pension assets, was 7.75%. A 50-basis-point decrease in this long-term rate of return in
2013 would have increased pension expense for our domestic plans by approximately $25 million.

The discount rate enables us to state expected future benefit payments as a present value on the measurement date, reflecting the
current rate at which the pension liabilities could be effectively settled. This rate should be in line with rates for high-quality fixed
income investments available for the period to maturity of the pension benefits, which fluctuate as long-term interest rates change.
A lower discount rate increases the present value of the benefit obligations and increases pension expense. In 2013, the weighted-
average discount rate used in calculating pension expense was 4.23%, compared with 4.94% in 2012. For our domestic plans, the
assumed discount rate was 4.25% in 2013, compared with 5.00% for 2012. A 50-basis-point decrease in this discount rate in 2013
would have increased pension expense for our domestic plans by approximately $31 million.

The trend in healthcare costs is difficult to estimate, and it has an important effect on postretirement liabilities. The 2013 medical
and prescription drug healthcare cost trend rates represent the weighted-average annual projected rate of increase in the per capita
cost of covered benefits. The 2013 medical rate of 7.20% is assumed to decrease to 5.00% by 2021 and then remain at that level.
The 2013 prescription drug rate of 7.20% is assumed to decrease to 5.00% by 2021 and then remain at that level. See Note 11 to
the Consolidated Financial Statements for the impact of a one-percentage-point change in the cost trend rate.

Warranty Liabilities
We provide limited warranty and product maintenance programs, including parts and labor, for certain products for periods
ranging from one to five years. A significant portion of these liabilities arises from our commercial aircraft businesses. We also
may incur costs related to product recalls. 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 costs per claim, contractual recoveries from vendors, and historical and anticipated rates of warranty
claims, including production and warranty patterns for new models. During our initial aircraft model launches, we typically incur
higher warranty-related costs until the production process matures, at which point warranty costs moderate. We assess the
adequacy of our recorded warranty and product maintenance liabilities periodically and adjust the amounts as necessary.
Adjustments are made to accruals as claim data and actual experience warrant. Should future warranty experience differ materially
from our historical experience, we may be required to record additional warranty liabilities, which could have a material adverse
effect on our results of operations and cash flows in the period in which these additional liabilities are required.

Finance Receivables
Finance receivables are generally recorded at the amount of outstanding principal less allowance for losses. We maintain the
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, including large accounts in
homogeneous portfolios, 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.

Textron Inc. Annual Report • 2013

Income Taxes
Deferred income tax balances reflect the effects of temporary differences between the financial reporting carrying amounts of
assets and liabilities and their tax bases, as well as from net operating losses and tax credit carryforwards, and are stated at enacted
tax rates in effect for the year taxes are expected to be paid or recovered. Deferred income tax assets represent amounts available
to reduce income taxes payable on taxable income in future years. We evaluate the recoverability of these future tax deductions
and credits by assessing the adequacy of future expected taxable income from all sources, including the future reversal of existing
taxable temporary differences, taxable income in carryback years, available tax planning strategies and estimated future taxable
income.

The amount of income taxes we pay is subject to ongoing audits by federal, state and foreign tax authorities, which may result in
proposed assessments. Our estimate of the potential outcome for any uncertain tax issue is highly judgmental. We assess our
income tax positions and record tax benefits for all years subject to examination based upon our evaluation of the facts,
circumstances and information available at the reporting date. For those tax positions for which it is more likely than not that a tax
benefit will be sustained, we record the largest amount of tax benefit with a greater than 50% likelihood of being realized upon
settlement with a taxing authority that has full knowledge of all relevant information. Interest and penalties are accrued, where
applicable. We recognize net tax-related interest and penalties for continuing operations in income tax expense. If we do not
believe that it is more likely than not that a tax benefit will be sustained, no tax benefit is recognized. However, our future results
may include favorable or unfavorable adjustments to our estimated tax liabilities due to settlement of income tax examinations,
new regulatory or judicial pronouncements, or other relevant events. As a result, our effective tax rate may fluctuate significantly
on a quarterly and annual basis.

Item 7A. Quantitative and Qualitative Disclosures about Market Risk

Foreign Exchange Risks
Our financial results are affected by changes in foreign currency exchange rates in the various countries in which our products are
manufactured and/or sold. For our manufacturing operations, we manage exposures to foreign currency assets and earnings
primarily by funding certain foreign currency-denominated assets with liabilities in the same currency so that certain exposures are
naturally offset. We primarily use borrowings denominated in euro and British pound sterling for these purposes. In managing
our foreign currency transaction exposures, we also enter into foreign currency forward exchange and option contracts. These
contracts generally are used to fix the local currency cost of purchased goods or services or selling prices denominated in
currencies other than the functional currency. The notional amount of outstanding foreign exchange contracts and foreign
currency options was approximately $636 million and $664 million at the end of 2013 and 2012, respectively.

The impact of foreign exchange rate changes for 2013 and 2012 from the prior year for each period is provided below:

(In millions)
Impact of foreign exchange rates increased (decreased):
Revenues
Segment profit

2013

2012

6
(1)

(80)
(10)

Interest Rate Risks
Our financial results are affected by changes in interest rates. As part of managing this risk, we seek to achieve a prudent balance
between floating- and fixed-rate exposures. We continually monitor our mix of these exposures and adjust the mix, as necessary.
For our Finance group, we limit our risk to changes in interest rates with a strategy of matching floating-rate assets with floating-
rate liabilities that includes the use of interest rate exchange agreements.

37 Textron Inc. Annual Report • 2013

Quantitative Risk Measures
In the normal course of business, we enter into financial instruments for purposes other than trading. To quantify the market risk
inherent in our financial instruments, we utilize a sensitivity analysis. The financial instruments that are subject to market risk
(interest rate risk and foreign exchange rate risk) include finance receivables (excluding lease receivables), debt (excluding lease
obligations), interest rate exchange agreements and foreign currency exchange contracts.

Presented below is a sensitivity analysis of the fair value of financial instruments outstanding at year-end. We estimate the fair
value of the financial instruments using discounted cash flow analysis and indicative market pricing as reported by leading
financial news and data providers. This sensitivity analysis is most likely not indicative of actual results in the future. The
following table illustrates the sensitivity to a hypothetical change in the fair value of the financial instruments assuming a 10%
decrease in interest rates and a 10% strengthening in exchange rates against the U.S. dollar:

(In millions)
Manufacturing group
Foreign exchange rate risk

Debt
Foreign currency exchange contracts

Interest rate risk

Debt

Finance group
Interest rate risk

Finance receivables
Debt, including intergroup

* The value represents an asset or (liability).

2013

2012

Carrying
Value*

Fair
Value*

Sensitivity of
Fair Value
to a 10%
Change

Carrying
Value*

Fair
Value*

Sensitivity of
Fair Value
to a 10%
Change

(249)
(12)
(261)

(275)
(12)
(287)

$ (1,854)

$ (2,027)

$ 1,296
(1,256)
40

$ 1,356
(1,244)
112

(27)
33
6

(564)
6
(558)

(598)
6
(592)

(60)
34
(26)

(13)

$ (2,225)

$ (2,636)

(9)

24
(4)
20

$ 1,766
(1,687)
79

$ 1,793
(1,678)
115

36
(13)
23

Textron Inc. Annual Report • 2013

Item 8. Financial Statements and Supplementary Data

Our Consolidated Financial Statements and the related reports of our independent registered public accounting firm thereon are included in this
Annual Report on Form 10-K on the pages indicated below:

Report of Management

Reports of Independent Registered Public Accounting Firm

Consolidated Statements of Operations for each of the years in the three-year period ended December 28, 2013

Consolidated Statements of Comprehensive Income (Loss) for each of the years in the three-year period ended December 28, 2013

Consolidated Balance Sheets as of December 28, 2013 and December 29, 2012

Consolidated Statements of Shareholders’ Equity for each of the years in the three-year period ended December 28, 2013

Consolidated Statements of Cash Flows for each of the years in the three-year period ended December 28, 2013

Notes to the Consolidated Financial Statements

Summary of Significant Accounting Policies
Business Acquisitions, Goodwill and Intangible Assets
Accounts Receivable and Finance Receivables
Inventories
Property, Plant and Equipment, Net
Accrued Liabilities
Debt and Credit Facilities
Derivative Instruments and Fair Value Measurements
Shareholders’ Equity
Share-Based Compensation

Note 1.
Note 2.
Note 3.
Note 4.
Note 5.
Note 6.
Note 7.
Note 8.
Note 9.
Note 10.
Note 11. Retirement Plans
Note 12.
Note 13. Contingencies and Commitments
Note 14.
Note 15.

Supplemental Cash Flow Information
Segment and Geographic Data

Income Taxes

Supplementary Information:

Quarterly Data for 2013 and 2012 (Unaudited)

Schedule II – Valuation and Qualifying Accounts

Page
40

49
53
55
58
58
58
59
60
62
65
67
71
74
74
75

All other schedules are omitted either because they are not applicable or not required or because the required information is included in the
financial statements or notes thereto.

39 Textron Inc. Annual Report • 2013

Report of Management

Management is responsible for the integrity and objectivity of the financial data presented in this Annual Report on Form 10-K.
The Consolidated Financial Statements have been prepared in conformity with U.S. generally accepted accounting principles and
include amounts based on management’s best estimates and judgments. Management also is responsible for establishing and
maintaining adequate internal control over financial reporting for Textron Inc. as such term is defined in Exchange Act Rules 13a-
15(f). With the participation of our management, we conducted an evaluation of the effectiveness of our internal control over
financial reporting based on the framework in Internal Control – Integrated Framework issued by the Committee of Sponsoring
Organizations of the Treadway Commission (1992 Framework). Based on our evaluation under the framework in Internal Control
– Integrated Framework, we have concluded that Textron Inc. maintained, in all material respects, effective internal control over
financial reporting as of December 28, 2013.

The independent registered public accounting firm, Ernst & Young LLP, has audited the Consolidated Financial Statements of
Textron Inc. and has issued an attestation report on Textron’s internal controls over financial reporting as of December 28, 2013,
as stated in its reports, which are included herein.

We conduct our business in accordance with the standards outlined in the Textron Business Conduct Guidelines, which are
communicated to all employees. Honesty, integrity and high ethical standards are the core values of how we conduct business.
Every Textron business prepares and carries out an annual Compliance Plan to ensure these values and standards are maintained.
Our internal control structure is designed to provide reasonable assurance, at appropriate cost, that assets are safeguarded and that
transactions are properly executed and recorded. The internal control structure includes, among other things, established policies
and procedures, an internal audit function, and the selection and training of qualified personnel. Textron’s management is
responsible for implementing effective internal control systems and monitoring their effectiveness, as well as developing and
executing an annual internal control plan.

The Audit Committee of our Board of Directors, on behalf of the shareholders, oversees management’s financial reporting
responsibilities. The Audit Committee consists of six directors who are not officers or employees of Textron and meets regularly
with the independent auditors, management and our internal auditors to review matters relating to financial reporting, internal
accounting controls and auditing.

/s/ Scott C. Donnelly

/s/ Frank T. Connor

Scott C. Donnelly
Chairman, President and Chief Executive Officer

Frank T. Connor
Executive Vice President and Chief Financial Officer

February 14, 2014

Textron Inc. Annual Report • 2013

Report of Independent Registered Public Accounting Firm

The Board of Directors and Shareholders of Textron Inc.

We have audited Textron Inc.’s internal control over financial reporting as of December 28, 2013, based on criteria established in
Internal Control – Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission
(1992 Framework) (the COSO criteria). Textron Inc.’s management is responsible for maintaining effective internal control over
financial reporting, and for its assessment of the effectiveness of internal control over financial reporting included in the
accompanying Report of Management. Our responsibility is to express an opinion on the company’s internal control over
financial reporting based on our audit.

We conducted our audit in accordance with the standards of the Public Company Accounting Oversight Board (United States).
Those standards require that we plan and perform the audit to obtain reasonable assurance about whether effective internal control
over financial reporting was maintained in all material respects. Our audit included obtaining an understanding of internal control
over financial reporting, assessing the risk that a material weakness exists, testing and evaluating the design and operating
effectiveness of internal control based on the assessed risk, and performing such other procedures as we considered necessary in
the circumstances. We believe that our audit provides a reasonable basis for our opinion.

A company’s internal control over financial reporting is a process designed to provide reasonable assurance regarding the
reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally
accepted accounting principles. A company’s internal control over financial reporting includes those policies and procedures that
(1) pertain to the maintenance of records that, in reasonable detail, accurately and fairly reflect the transactions and dispositions of
the assets of the company; (2) provide reasonable assurance that transactions are recorded as necessary to permit preparation of
financial statements in accordance with generally accepted accounting principles, and that receipts and expenditures of the
company are being made only in accordance with authorizations of management and directors of the company; and (3) provide
reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use, or disposition of the company’s
assets that could have a material effect on the financial statements.

Because of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements. Also,
projections of any evaluation of effectiveness to future periods are subject to the risk that controls may become inadequate because
of changes in conditions, or that the degree of compliance with the policies or procedures may deteriorate.

In our opinion, Textron Inc. maintained, in all material respects, effective internal control over financial reporting as of December
28, 2013, based on the COSO criteria.

We also have audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States), the
Consolidated Balance Sheets of Textron Inc. as of December 28, 2013 and December 29, 2012, and the related Consolidated
Statements of Operations, Comprehensive Income (Loss), Shareholders’ Equity and Cash Flows for each of the three years in the
period ended December 28, 2013 of Textron Inc. and our report dated February 14, 2014 expressed an unqualified opinion thereon.

/s/ Ernst & Young LLP

Boston, Massachusetts
February 14, 2014

41 Textron Inc. Annual Report • 2013

Report of Independent Registered Public Accounting Firm

To the Board of Directors and Shareholders of Textron Inc.

We have audited the accompanying Consolidated Balance Sheets of Textron Inc. as of December 28, 2013 and December 29,
2012, and the related Consolidated Statements of Operations, Comprehensive Income (Loss), Shareholders’ Equity and Cash
Flows for each of the three years in the period ended December 28, 2013. Our audits also included the financial statement
schedule contained on page 78. These financial statements and schedule are the responsibility of the Company’s management.
Our responsibility is to express an opinion on these financial statements and schedule based on our audits.

We conducted our audits in accordance with the standards of the Public Company Accounting Oversight Board (United States).
Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements
are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures
in the financial statements. An audit also includes assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation. We believe that our audits provide a reasonable
basis for our opinion.

In our opinion, the financial statements referred to above present fairly, in all material respects, the consolidated financial position
of Textron Inc. at December 28, 2013 and December 29, 2012 and the consolidated results of its operations and its cash flows for
each of the three years in the period ended December 28, 2013, in conformity with U.S. generally accepted accounting principles.
Also, in our opinion, the related financial statement schedule, when considered in relation to the basic financial statements taken as
a whole, presents fairly in all material respects the information set forth therein.

We also have audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States),
Textron Inc.’s internal control over financial reporting as of December 28, 2013, based on criteria established in Internal Control –
Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission (1992 Framework) and
our report dated February 14, 2014 expressed an unqualified opinion thereon.

/s/ Ernst & Young LLP

Boston, Massachusetts
February 14, 2014

Textron Inc. Annual Report • 2013 42

2013

2012

2011

$ 11,972
132
12,104

$ 12,022
215
12,237

$ 11,172
103
11,275

10,131
1,126
173
—
—
11,430
674
176
498
—
498

10,019
1,165
212
—
—
11,396
841
260
581
8
589

9,308
1,195
246
186
3
10,938
337
95
242
—
242

1.78

—

1.78

1.75

—

1.75

2.07

0.87
$
0.03 —
0.87
$

2.10

1.97

$
0.03
$

2.00

0.79
—
0.79

Consolidated Statements of Operations

For each of the years in the three-year period ended December 28, 2013

(In millions, except per share data)
Revenues
Manufacturing revenues
Finance revenues
Total revenues

Costs, expenses and other
Cost of sales
Selling and administrative expense
Interest expense
Valuation allowance on transfer of Golf Mortgage portfolio to held for sale
Other losses, net

Total costs, expenses and other

Income from continuing operations before income taxes
Income tax expense
Income from continuing operations
Income from discontinued operations, net of income taxes
Net income

Basic earnings per share
Continuing operations
Discontinued operations

Basic earnings per share
Diluted earnings per share
Continuing operations
Discontinued operations

Diluted earnings per share

See Notes to the Consolidated Financial Statements.

43 Textron Inc. Annual Report • 2013

Consolidated Statements of Comprehensive Income (Loss)

For each of the years in the three-year period ended December 28, 2013

(In millions)
Net income
Other comprehensive income (loss), net of tax:
Pension and postretirement benefits adjustments, net of reclassifications
Deferred gains/losses on hedge contracts, net of reclassifications
Foreign currency translation adjustments
Other comprehensive income (loss)
Comprehensive income (loss)

See Notes to the Consolidated Financial Statements.

2013
498

2012
589

2011
242

747
(16)
12
743
$ 1,241

(146)
(1)
2
(145)
444

(286)
(20)
(3)
(309)
(67)

Textron Inc. Annual Report • 2013

December 28,
2013

December 29,
2012

$ 1,163
979
2,963
467
5,572
2,215
1,735
1,697
11,219

48
1,493
184
1,725
$ 12,944

$ 1,378
829
2,712
470
5,389
2,149
1,649
1,524
10,711

35
1,990
297
2,322
$ 13,033

8
1,107
1,888
3,003
2,118
1,923
7,044

260
1,256
1,516
8,560

535
1,021
1,956
3,512
2,798
1,766
8,076

280
1,686
1,966
10,042

35
1,331
4,045
(1,027)
4,384
—
4,384
$ 12,944

35
1,177
3,824
(1,770)
3,266
275
2,991
$ 13,033

Consolidated Balance Sheets

(In millions, except share data)
Assets
Manufacturing group
Cash and equivalents
Accounts receivable, net
Inventories
Other current assets
Total current assets
Property, plant and equipment, net
Goodwill
Other assets

Total Manufacturing group assets

Finance group
Cash and equivalents
Finance receivables, net
Other assets

Total Finance group assets

Total assets
Liabilities and shareholders’ equity
Liabilities
Manufacturing group
Current portion of long-term debt
Accounts payable
Accrued liabilities
Total current liabilities
Other liabilities
Long-term debt

Total Manufacturing group liabilities

Finance group
Other liabilities
Debt

Total Finance group liabilities

Total liabilities
Shareholders’ equity
Common stock (282.1 million and 282.6 million shares issued, respectively,
and 282.1 million and 271.3 million shares outstanding, respectively)
Capital surplus
Retained earnings
Accumulated other comprehensive loss

Less cost of treasury shares
Total shareholders’ equity
Total liabilities and shareholders’ equity

See Notes to the Consolidated Financial Statements.

45 Textron Inc. Annual Report • 2013

Consolidated Statements of Shareholders’ Equity

(In millions, except per share data)
Balance at January 1, 2011
Net income
Other comprehensive loss
Dividends declared ($0.08 per share)
Purchases/conversions of convertible notes
Amendment of call option/warrant
transactions and purchase of capped call
Share-based compensation activity
Balance at December 31, 2011
Net income
Other comprehensive loss
Dividends declared ($0.08 per share)
Share-based compensation activity
Purchases of common stock
Balance at December 29, 2012
Net income
Other comprehensive income
Dividends declared ($0.08 per share)
Share-based compensation activity
Purchases/conversions of convertible notes
Settlement of capped call
Retirement of treasury stock
Balance at December 28, 2013

Common
Stock

Capital
Surplus
$ 1,301

Retained
Earnings
$ 3,037 $

(179)

(30)
(11)
1,081

1,177

242

(22)

3,257
589

(22)

3,824
498

(22)

99
39
75
(59)
$ 1,331

(2)
35

(255)
$ 4,045 $

Accumulated
Other
Comprehensive
Loss

Treasury
Stock

(85)

$ (1,316)

(309)

(3)

85
(3)

(272)
(275)

(41)

316
—

(1,625)

(145)

(1,770)

743

$ (1,027)

Total
Shareholders’
Equity
$ 2,972
242
(309)
(22)
(182)

(30)
74
2,745
589
(145)
(22)
96
(272)
2,991
498
743
(22)
99
—
75
—
$ 4,384

See Notes to the Consolidated Financial Statements.

Textron Inc. Annual Report • 2013

Consolidated Statements of Cash Flows

For each of the years in the three-year period ended December 28, 2013

(In millions)
Cash flows from operating activities
Net income (loss)
Less: Income from discontinued operations
Income (loss) from continuing operations
Adjustments to reconcile income (loss) from continuing operations to net cash

provided by operating activities:

Dividends received from Finance group
Capital contributions paid to Finance group
Non-cash items:
Depreciation and amortization
Deferred income taxes
Portfolio losses on finance receivables
Valuation allowance on finance receivables held for sale
Goodwill and other asset impairment charges
Other, net
Changes in assets and liabilities:
Accounts receivable, net
Inventories
Other assets
Accounts payable
Accrued and other liabilities
Income taxes, net
Pension, net
Captive finance receivables, net

Other operating activities, net

Net cash provided by operating activities of continuing operations
Net cash used in operating activities of discontinued operations
Net cash provided by operating activities
Cash flows from investing activities
Capital expenditures
Net cash used in acquisitions
Finance receivables repaid
Proceeds from sales of receivables and other finance assets
Finance receivables originated or purchased
Proceeds from collection on notes receivable from a prior disposition
Other investing activities, net
Net cash provided by (used in) investing activities
Cash flows from financing activities
Principal payments on long-term debt and nonrecourse debt
Proceeds from long-term debt
Settlement of convertible notes
Proceeds from settlement of capped call
Amendment of call option/warrant transactions and purchase of capped call
Payments on long-term lines of credit
Purchases of Textron common stock
Proceeds from exercise of stock options
Dividends paid
Intergroup financing
Capital contributions paid to Finance group
Capital contributions paid to Cessna Export Finance Corp.
Other financing activities
Net cash provided by (used in) financing activities
Effect of exchange rate changes on cash and equivalents
Net increase (decrease) in cash and equivalents
Cash and equivalents at beginning of year
Cash and equivalents at end of year

See Notes to the Consolidated Financial Statements.

47 Textron Inc. Annual Report • 2013

2013

Consolidated
2012

2011

498
—
498

—
—

389
86
29
(31)
—
63

(118)
(118)
(42)
65
(182)
(84)
17
237
4
813
(3)
810

(444)
(196)
190
178
(10)
—
18
(264)

(1,056)
448
(215)
75
—
—
—
31
(22)
—
—
—
(3)
(742)
(6)
(202)
1,413
1,211

589
8
581

—
—

383
171
68
(76)
—
94

32
(316)
7
179
(96)
52
(240)
96
—
935
(8)
927

(480)
(11)
599
249
(22)
—
43
378

(615)
106
(2)
—
—
—
(272)
19
(17)
—
—
—
—
(781)
4
528
885
1,413

242
—
242

—
—

403
81
102
202
59
178

36
(127)
98
211
(175)
48
(474)
236
(52)
1,068
(5)
1,063

(423)
(14)
824
530
(187)
58
55
843

(785)
926
(580)
—
(30)
(1,440)
—
3
(22)
—
—
—
(23)
(1,951)
(1)
(46)
931
885

Manufacturing Group

2013

2012

2011

Finance Group
2012

2013

470

—
470

542
8
534

175
(1)

371
51
—
—
—
86

(118)
(135)
(41)
65
(171)
(119)
21
—
4
658
(3)
655

(444)
(196)
—
—
—
—
16
(624)

(313)
150
(215)
75
—
—
—
31
(22)
57
—
—
(3)
(240)
(6)
(215)
1,378
1,163

345
(240)

358
102
—
—
—
97

32
(300)
21
179
(77)
148
(241)
—
—
958
(8)
950

(480)
(11)
—
—
—
—
15
(476)

(189)
—
(2)
—
—
—
(272)
19
(17)
490
—
—
—
29
4
507
871
1,378

464
—
464

179
(182)

371
197
—
—
57
166

36
(132)
92
211
(149)
(22)
(475)
—
(52)
761
(5)
756

(423)
(14)
—
—
—
58
(44)
(423)

(29)
496
(580)
—
(30)
—
—
3
(22)
(175)
—
—
(23)
(360)
—
(27)
898
871

28
—
28

47
—
47

—
—

18
35
29
(31)
—
(23)

—
—
—
—
(21)
35
(4)
—
—
66
—
66

—
—
675
178
(271)
—
42
624

(743)
298
—
—
—
—
—
—
(175)
(57)
1
—
(1)
(677)
—
13
35
48

—
—

25
69
68
(76)
—
(3)

—
—
(11)
—
(19)
(96)
1
—
—
5
—
5

—
—
1,004
249
(331)
—
12
934

(426)
106
—
—
—
—
—
—
(345)
(493)
240
—
—
(918)
—
21
14
35

2011

(222)
—
(222)

—
—

32
(116)
102
202
—
12

—
—
10
—
(26)
70
1
—
—
65
—
65

—
—
1,289
585
(471)
—
50
1,453

(756)
430
—
—
—
(1,440)
—
—
(179)
167
182
60
—
(1,536)
(1)
(19)
33
14

Textron Inc. Annual Report • 2013

Notes to the Consolidated Financial Statements

Note 1. Summary of Significant Accounting Policies

Principles of Consolidation and Financial Statement Presentation
Our Consolidated Financial Statements include the accounts of Textron Inc. and its majority-owned subsidiaries. Our financings
are conducted through two separate borrowing groups. The Manufacturing group consists of Textron Inc. consolidated with its
majority-owned subsidiaries that operate in the Cessna, Bell, Textron Systems and Industrial segments. The Finance group, which
also is the Finance segment, consists of Textron Financial Corporation (TFC) 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.

Our Finance group provides captive financing for retail purchases and leases for new and used aircraft and equipment
manufactured by our Manufacturing group. In the Consolidated Statements of Cash Flows, cash received from customers or from
the sale of receivables is reflected as operating activities when received from third parties. However, in the cash flow information
provided for the separate borrowing groups, cash flows related to captive financing activities are reflected based on the operations
of each group. For example, when product is sold by our Manufacturing group to a customer and is financed by the Finance
group, the origination of the finance receivable is recorded within investing activities as a cash outflow in the Finance group’s
statement of cash flows. Meanwhile, in the Manufacturing group’s statement of cash flows, the cash received from the Finance
group on the customer’s behalf is recorded within operating cash flows as a cash inflow. Although cash is transferred between the
two borrowing groups, there is no cash transaction reported in the consolidated cash flows at the time of the original financing.
These captive financing activities, along with all significant intercompany transactions, are reclassified or eliminated in
consolidation.

Collaborative Arrangements
Our Bell segment has a strategic alliance agreement with The Boeing Company (Boeing) to provide engineering, development and
test services related to the V-22 aircraft, as well as to produce the V-22 aircraft, under a number of separate contracts with the U.S.
Government (V-22 Contracts). The alliance created by this agreement is not a legal entity and has no employees, no assets and no
true operations. This agreement creates contractual rights and does not represent an entity in which we have an equity interest.
We account for this alliance as a collaborative arrangement with Bell and Boeing reporting costs incurred and revenues generated
from transactions with the U.S. Government in each company’s respective income statement. Neither Bell nor Boeing is
considered to be the principal participant for the transactions recorded under this agreement. Profits on cost-plus contracts are
allocated between Bell and Boeing on a 50%-50% basis. Negotiated profits on fixed-price contracts are also allocated 50%-50%;
however, Bell and Boeing are each responsible for their own cost overruns and are entitled to retain any cost underruns. Based on
the contractual arrangement established under the alliance, Bell accounts for its rights and obligations under the specific
requirements of the V-22 Contracts allocated to Bell under the work breakdown structure. We account for all of our rights and
obligations, including warranty, product and any contingent liabilities, under the specific requirements of the V-22 Contracts
allocated to us under the agreement. Revenues and cost of sales reflect our performance under the V-22 Contracts with revenues
recognized using the units-of-delivery method. We include all assets used in performance of the V-22 Contracts that we own,
including inventory and unpaid receivables and all liabilities arising from our obligations under the V-22 Contracts in our
Consolidated Balance Sheets.

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 2013, 2012 and 2011, 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 2013, 2012 and 2011 by $29 million, $15 million and $54 million, respectively, ($18 million, $9
million and $34 million after tax, or $0.06, $0.03 and $0.11 per diluted share, respectively). For 2013, 2012 and 2011, the gross
favorable program profit adjustments totaled $51 million, $88 million and $83 million, respectively. For 2013, 2012 and 2011, the
gross unfavorable program profit adjustments totaled $22 million, $73 million and $29 million, respectively.

49 Textron Inc. Annual Report • 2013

Revenue Recognition
We generally recognize revenue for the sale of products, which are not under long-term contracts, upon delivery. For commercial
aircraft, delivery is upon completion of manufacturing, customer acceptance, and the transfer of the risk and rewards of ownership.
Taxes collected from customers and remitted to government authorities are recorded on a net basis.

When a sale arrangement involves multiple deliverables, such as sales of products that include customization and other services,
we evaluate the arrangement to determine whether there are separate items that are required to be delivered under the arrangement
that qualify as separate units of accounting. These arrangements typically involve the customization services we offer to
customers who purchase Bell helicopters, and the services generally are provided within the first six months after the customer
accepts the aircraft and assumes risk of loss. We consider the aircraft and the customization services to be separate units of
accounting and allocate contract price between the two on a relative selling price basis using the best evidence of selling price for
each of the arrangement deliverables, typically by reference to the price charged when the same or similar items are sold separately
by us, taking into consideration any performance, cancellation, termination or refund-type provisions. We recognize revenue when
the recognition criteria for each unit of accounting are met.

Long-Term Contracts — Revenues under long-term contracts are accounted for under the percentage-of-completion method of
accounting. Under this method, we estimate profit as the difference between the total estimated revenues and cost of a contract.
We then recognize that estimated profit over the contract term based on either the units-of-delivery method or the cost-to-cost
method (which typically is used for development effort as costs are incurred), as appropriate under the circumstances. Revenues
under fixed-price contracts generally are recorded using the units-of-delivery method. Revenues under cost-reimbursement
contracts are recorded using the cost-to-cost method.

Long-term contract profits are based on estimates of total contract cost and revenues utilizing current contract specifications,
expected engineering requirements, the achievement of contract milestones and product deliveries. Certain contracts are awarded
with fixed-price incentive fees that also are considered when estimating revenues and profit rates. Contract costs typically are
incurred over a period of several years, and the estimation of these costs requires substantial judgment. Our cost estimation
process is based on the professional knowledge and experience of engineers and program managers along with finance
professionals. We update our projections of costs at least semiannually or when circumstances significantly change. When
adjustments are required, any changes from prior estimates are recognized using the cumulative catch-up method with the impact
of the change from inception-to-date recorded in the current period. Anticipated losses on contracts are recognized in full in the
period in which the losses become probable and estimable.

Finance Revenues — Finance revenues include interest on finance receivables, direct loan origination costs and fees received, and
capital and leveraged lease earnings, as well as portfolio gains/losses. Portfolio gains/losses include impairment charges related to
repossessed assets and properties and gains/losses on the sale or early termination of finance assets. Revenues on direct loan
origination costs and fees received are deferred and amortized to finance revenues over the contractual lives of the respective
receivables and credit lines using the interest method. When receivables are sold or prepaid, unamortized amounts are recognized
in finance revenues.

We recognize interest using the interest method, which provides a constant rate of return over the terms of the receivables.
Accrual of interest income is suspended if credit quality indicators suggest full collection of principal and interest is doubtful. In
addition, we automatically suspend the accrual of interest income for accounts that are contractually delinquent by more than three
months unless collection is not doubtful. Cash payments on nonaccrual accounts, including finance charges, generally are applied
to reduce the net investment balance. We resume the accrual of interest when the loan becomes contractually current through
payment according to the original terms of the loan or, if a loan has been modified, following a period of performance under the
terms of the modification, provided we conclude that collection of all principal and interest is no longer doubtful. Previously
suspended interest income is recognized at that time.

Cash and Equivalents
Cash and equivalents consist of cash and short-term, highly liquid investments with original maturities of three months or less.

Textron Inc. Annual Report • 2013

Inventories
Inventories are stated at the lower of cost or estimated net realizable value. We value our inventories generally using the first-in,
first-out (FIFO) method or the last-in, first-out (LIFO) method for certain qualifying inventories where LIFO provides a better
matching of costs and revenues. We determine costs for our commercial helicopters on an average cost basis by model considering
the expended and estimated costs for the current production release. Inventoried costs related to long-term contracts are stated at
actual production costs, including allocable operating overhead, advances to suppliers, and, in the case of contracts with the U.S.
Government, allocable research and development and general and administrative expenses. Since our inventoried costs include
amounts related to contracts with long production cycles, a portion of these costs is not expected to be realized within one year.
Pursuant to contract provisions, agencies of the U.S. Government have title to, or security interest in, inventories related to such
contracts as a result of advances, performance-based payments and progress payments. Such advances and payments are reflected
as an offset against the related inventory balances. Customer deposits are recorded against inventory when the right of offset
exists. All other customer deposits are recorded in accrued liabilities.

Property, Plant and Equipment
Property, plant and equipment are recorded at cost and are depreciated primarily using the straight-line method. We capitalize
expenditures for improvements that increase asset values and extend useful lives.

We calculate the fair value of each reporting unit, primarily using discounted cash flows. The discounted cash flows incorporate
assumptions for short- and long-term revenue growth rates, operating margins and discount rates, which represent our best
estimates of current and forecasted market conditions, cost structure, anticipated net cost reductions, and the implied rate of return
that we believe a market participant would require for an investment in a business having similar risks and business characteristics
to the reporting unit being assessed. If the reporting unit’s estimated fair value exceeds its carrying value, the reporting unit is not
impaired, and no further analysis is performed. Otherwise, the amount of the impairment must be determined by comparing the
carrying amount of the reporting unit’s goodwill to the implied fair value of that goodwill. The implied fair value of goodwill is
determined by assigning a fair value to all of the reporting unit’s assets and liabilities, including any unrecognized intangible
assets, as if the reporting unit had been acquired in a business combination. If the carrying amount of the goodwill exceeds the
implied fair value, an impairment loss would be recognized in an amount equal to that excess.

Intangible and Other Long-Lived Assets
At acquisition, we estimate and record the fair value of purchased intangible assets primarily using a discounted cash flow analysis
of anticipated cash flows reflecting incremental revenues and/or cost savings resulting from the acquired intangible asset using
market participant assumptions. Amortization of intangible assets with finite lives is recognized over their estimated useful lives
using a method of amortization that reflects the pattern in which the economic benefits of the intangible assets are consumed or
otherwise realized. Approximately 64% of our gross intangible assets are amortized based on the cash flow streams used to value
the assets, with the remaining assets amortized using the straight-line method. Long-lived assets, including intangible assets
subject to amortization, are reviewed for impairment whenever events or changes in circumstances indicate that the carrying
amount of the asset may not be recoverable. If the carrying value of the asset held for use exceeds the sum of the undiscounted
expected future cash flows, the carrying value of the asset generally is written down to fair value. Long-lived assets held for sale
are stated at the lower of cost or fair value less cost to sell. Fair value is determined using pertinent market information, including
estimated future discounted cash flows.

Finance Receivables
Finance receivables primarily include finance receivables classified as held for investment, and also include finance receivables
classified as held for sale. Finance receivables are classified as held for investment when we have the intent and the ability to hold
the receivable for the foreseeable future or until maturity or payoff. Finance receivables held for investment are generally recorded
at the amount of outstanding principal less allowance for losses.

51 Textron Inc. Annual Report • 2013

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, including large accounts in
homogeneous portfolios, 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. Repossessed assets are recorded at their fair value, less estimated cost to sell.

Finance receivables are classified as held for sale based on the determination that we no longer intend to hold the receivables for
the foreseeable future, until maturity or payoff, or we no longer have the ability to hold to maturity. Our decision to classify
certain finance receivables as held for sale is based on a number of factors, including, but not limited to, contractual duration, type
of collateral, credit strength of the borrowers, interest rates and perceived marketability of the receivables. These receivables are
carried at the lower of cost or fair value. At the time of transfer to the held for sale classification, we establish a valuation
allowance for any shortfall between the carrying value and fair value. In addition, any allowance for loan losses previously
allocated to these finance receivables is transferred to the valuation allowance account and adjusted quarterly. Fair value changes
can occur based on market interest rates, market liquidity, and changes in the credit quality of the borrower and value of
underlying loan collateral.

Pension and Postretirement Benefit Obligations
We maintain various pension and postretirement plans for our employees globally. These plans include significant pension and
postretirement benefit obligations, which are calculated based on actuarial valuations. Key assumptions used in determining these
obligations and related expenses include expected long-term rates of return on plan assets, discount rates and healthcare cost
projections. We evaluate and update these assumptions annually in consultation with third-party actuaries and investment
advisors. We also make assumptions regarding employee demographic factors such as retirement patterns, mortality, turnover and
rate of compensation increases. We recognize the overfunded or underfunded status of our pension and postretirement plans in the
Consolidated Balance Sheets and recognize changes in the funded status of our defined benefit plans in comprehensive income in
the year in which they occur. Actuarial gains and losses that are not immediately recognized as net periodic pension cost are
recognized as a component of other comprehensive income (loss) (OCI) and are amortized into net periodic pension cost in future
periods.

Derivative Financial Instruments
We are exposed to market risk primarily from changes in currency exchange rates and interest rates. We do not hold or issue
derivative financial instruments for trading or speculative purposes. To manage the volatility relating to our exposures, we net
these exposures on a consolidated basis to take advantage of natural offsets. For the residual portion, we enter into various
derivative transactions pursuant to our policies in areas such as counterparty exposure and hedging practices. All derivative
instruments are reported at fair value in the Consolidated Balance Sheets. Designation to support hedge accounting is performed
on a specific exposure basis. For financial instruments qualifying as fair value hedges, we record changes in fair value in earnings,
offset, in part or in whole, by corresponding changes in the fair value of the underlying exposures being hedged. For cash flow
hedges, we record changes in the fair value of derivatives (to the extent they are effective as hedges) in OCI, net of deferred taxes.
Changes in fair value of derivatives not qualifying as hedges are recorded in earnings.

Foreign currency denominated assets and liabilities are translated into U.S. dollars. Adjustments from currency rate changes are
recorded in the cumulative translation adjustment account in shareholders’ equity until the related foreign entity is sold or
substantially liquidated. We use foreign currency financing transactions to effectively hedge long-term investments in foreign
operations with the same corresponding currency. Foreign currency gains and losses on the hedge of the long-term investments
are recorded in the cumulative translation adjustment account.

Textron Inc. Annual Report • 2013

Product Liabilities
We accrue for product liability claims and related defense costs when a loss is probable and reasonably estimable. Our estimates
are generally based on the specifics of each claim or incident and our best estimate of the probable loss using historical experience.

Environmental Liabilities and Asset Retirement Obligations
Liabilities for environmental matters are recorded on a site-by-site basis when it is probable that an obligation has been incurred
and the cost can be reasonably estimated. We estimate our accrued environmental liabilities using currently available facts,
existing technology, and presently enacted laws and regulations, all of which are subject to a number of factors and uncertainties.
Our environmental liabilities are not discounted and do not take into consideration possible future insurance proceeds or
significant amounts from claims against other third parties.

We have incurred asset retirement obligations primarily related to costs to remove and dispose of underground storage tanks and
asbestos materials used in insulation, adhesive fillers and floor tiles. There is no legal requirement to remove these items, and
there currently is no plan to remodel the related facilities or otherwise cause the impacted items to require disposal. Since these
asset retirement obligations are not estimable, there is no related liability recorded in the Consolidated Balance Sheets.

Warranty and Product Maintenance Contracts
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 revenues are recognized. Factors that affect this liability include the number of products
sold, historical costs per claim, contractual recoveries from vendors and historical and anticipated rates of warranty claims,
including production and warranty patterns for new models. We assess the adequacy of our recorded warranty and product
maintenance liabilities periodically and adjust the amounts as necessary. Additionally, we may establish warranty liabilities
related to the issuance of aircraft service bulletins for aircraft no longer covered under the limited warranty programs.

Research and Development Costs
Our customer-funded research and development costs are charged directly to the related contracts, which primarily consist of U.S.
Government contracts. In accordance with government regulations, we recover a portion of company-funded research and
development costs through overhead rate charges on our U.S. Government contracts. Research and development costs that are not
reimbursable under a contract with the U.S. Government or another customer are charged to expense as incurred. Company-
funded research and development costs were $651 million, $584 million, and $525 million in 2013, 2012 and 2011, respectively,
and are included in cost of sales.

Note 2. Business Acquisitions, Goodwill and Intangible Assets

Pending Business Acquisition
On December 26, 2013, we entered into an agreement and plan of merger pursuant to which we will acquire all outstanding equity
interests in Beech Holdings, LLC (“Beech”), the parent of Beechcraft Corporation, for approximately $1.4 billion in cash. Beech
designs, builds and supports aircraft, including the King Air turboprops, piston-engine Baron and Bonanza, and the T-6 trainer and
AT-6 light attack military aircraft. Beech also has a global network of both factory-owned and authorized service centers. We plan
to finance the purchase of the equity in Beech and the repayment of Beech’s outstanding debt, which is required at closing,
through a combination of available cash at Beech and Textron and up to $1.1 billion in new debt. The transaction is expected to
close during the first half of 2014, subject to customary closing conditions, including regulatory approvals.

2013 Business Acquisitions
In 2013, we acquired the following businesses for an aggregate cash payment of $196 million:

Textron Systems

• Mechtronix, Inc. and OPINICUS Corporation, both acquired on December 6, 2013, design, develop, install and provide

maintenance of advanced full flight simulators for both rotary- and fixed-wing aircraft.

53 Textron Inc. Annual Report • 2013

Industrial

• Sherman & Reilly, Inc., a manufacturer of underground and aerial transmission and distribution products was acquired by

our Greenlee business on May 1, 2013.

• HD Electric Company, a designer and manufacturer of power utility products that test, measure and control electric power

was also acquired by our Greenlee business on December 18, 2013.

Cessna

• Two service centers located in Zurich, Switzerland and Düsseldorf, Germany were acquired on December 31, 2012.

The consideration paid for each of these businesses was allocated to the tangible and intangible assets acquired and liabilities
assumed based on their estimated fair values at the acquisition date. We assigned $75 million to identifiable intangible assets,
which primarily include platform technology and trade names. For the three acquisitions that were closed in December 2013, we
made preliminary estimates of the fair value of certain assets and we expect to complete the valuation of the assets in the first
quarter of 2014. The acquired intangible assets will be amortized over their estimate lives, which range from 7 to 11 years,
primarily using accelerated amortization methods based on the cash flow streams used to value those assets. The excess of the
purchase price over the estimated fair value of the net assets acquired totaled $82 million, which was recorded as goodwill, and
reflects the expected revenue, assembled workforce and going concern nature of the businesses. Approximately $52 million of the
goodwill is deductible for tax purposes.

The operating results for these acquisitions have been included in the Consolidated Statement of Operations since their respective
closing dates. Pro forma information has not been included for these business acquisitions as the results would not be materially
different from our consolidated results.

The changes in the carrying amount of goodwill by segment are as follows:

(In millions)
Balance at January 1, 2011
Acquisitions
Foreign currency translation
Balance at December 31, 2011
Acquisitions
Foreign currency translation
Balance at December 29, 2012
Acquisitions
Foreign currency translation
Balance at December 28, 2013

Our intangible assets are summarized below:

Cessna

322
—
—
322
4
—
326
—
—
326

Bell
31
—
—
31
—
—
31
—
—
31

Textron
Systems

974
—
—
974
—
—
974
52
—
$ 1,026

Industrial
$

305
5
(2)
308
6
4
318
30
4
352

Total
$ 1,632
5
(2)
1,635
10
4
1,649
82
4
$ 1,735

(Dollars in millions)
Customer agreements and
contractual relationships

Patents and technology
Trademarks
Other
Total

Weighted-Average
Amortization
Period (in years)

Gross
Carrying
Amount

Accumulated
Amortization

December 28, 2013

December 29, 2012

Gross
Carrying
Amount

Accumulated
Amortization

Net

15
10
15
9

331 $
142
49
23
545 $

(165) $
(63)
(24)
(17)
(269) $

166 $
79
25
6

276 $

330 $
84
36
20
470 $

(139) $
(55)
(22)
(16)
(232) $

Net

191
29
14
4
238

Amortization expense totaled $37 million, $40 million and $51 million in 2013, 2012 and 2011, respectively. Amortization
expense is estimated to be approximately $43 million, $42 million, $36 million, $32 million and $25 million in 2014, 2015, 2016,
2017 and 2018, respectively.

Textron Inc. Annual Report • 2013

Note 3. Accounts Receivable and Finance Receivables

Accounts Receivable
Accounts receivable is composed of the following:

(In millions)
Commercial
U.S. Government contracts

Allowance for doubtful accounts
Total

December 28,
2013
654
347
1,001
(22)
979

December 29,
2012
$ 534
314
848
(19)
$ 829

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 $163 million at December 28, 2013 and $149 million at December 29, 2012.

Finance Receivables
Finance receivables by classification are presented in the following table.

(In millions)
Finance receivables held for investment
Allowance for losses
Total finance receivables held for investment, net
Finance receivables held for sale
Total finance receivables, net

December 28,
2013

$ 1,483
(55)
1,428
65
$ 1,493

December 29,
2012
$ 1,934
(84)
1,850
140
$ 1,990

Finance receivables held for investment primarily includes loans and finance leases provided to purchasers of new and used
Cessna aircraft and Bell helicopters and also includes loans and finance leases secured by used aircraft produced by other
manufacturers. These agreements typically have initial terms ranging from five to ten years and amortization terms ranging from
eight to fifteen years. The average balance of loans and finance leases was $1 million at December 28, 2013. Loans generally
require the customer to pay a significant down payment, along with periodic scheduled principal payments that reduce the
outstanding balance through the term of the loan. Finance leases with no significant residual value at the end of the contractual
term are classified as loans, as their legal and economic substance is more equivalent to a secured borrowing than a finance lease
with a significant residual value. Finance receivables held for investment also includes leveraged leases secured by the ownership
of the leased equipment and real property.

Finance receivables held for sale includes the non-captive loan portfolio at December 28, 2013. These finance receivables are
carried at the lower of cost or fair value and are not included in the credit performance tables below. During 2013, we determined
that we no longer had the intent to hold the remaining non-captive loan portfolio for the foreseeable future and, accordingly,
transferred $34 million of the remaining non-captive loans, net of a $1 million allowance for losses, from the held for investment
classification to the held for sale classification. We received total proceeds of $64 million and $109 million in 2013 and 2012,
respectively, from the sale of finance receivables held for sale and $76 million and $207 million, respectively, from payoffs and
collections.

Our finance receivables are diversified across geographic region and borrower industry. At December 28, 2013, 41% of our
finance receivables were distributed throughout the U.S. compared with 45% at the end of 2012. At December 28, 2013 and
December 29, 2012, finance receivables included $200 million and $341 million, respectively, of receivables that have been
legally sold to a special purpose entity (SPE), which is a consolidated subsidiary of TFC. The assets of the SPE are pledged as
collateral for its debt, which is reflected as securitized on-balance sheet debt in Note 7. Third-party investors have no legal
recourse to TFC beyond the credit enhancement provided by the assets of the SPE.

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.

55 Textron Inc. Annual Report • 2013

We classify finance receivables as nonaccrual if credit quality indicators suggest full collection of principal and interest is
doubtful. In addition, we automatically classify accounts as nonaccrual once they are contractually delinquent by more than three
months unless collection of principal and interest is not doubtful. Recognition of interest income is suspended for these accounts
and all cash collections are used to reduce the net investment balance. We resume the accrual of interest when the loan becomes
contractually current through payment according to the original terms of the loan or, if a loan has been modified, following a
period of performance under the terms of the modification, provided we conclude that collection of all principal and interest is no
longer doubtful. Previously suspended interest income is recognized at that time. 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.

A summary of finance receivables categorized based on the credit quality indicators discussed above is as follows:

(In millions)
Performing
Watchlist
Nonaccrual
Total
Nonaccrual as a percentage of total finance receivables

December 28,
2013

$ 1,285
93
105
$ 1,483
7.08%

December 29,
2012
$ 1,661
130
143
$ 1,934
7.39%

We measure delinquency based on the contractual payment terms of our loans and leases. 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 by delinquency aging category are summarized in the table below:

(In millions)
Less than 31 days past due
31-60 days past due
61-90 days past due
Over 90 days past due
Total

December 28,
2013

$ 1,295
108
37
43
$ 1,483

December 29,
2012
$ 1,757
87
56
34
$ 1,934

Accrual status loans that were greater than 90 days past due totaled $5 million at December 28, 2013. There were no accrual status
loans that were greater than 90 days past due at December 29, 2012. At December 28, 2013 and December 29, 2012, 60+ days
contractual delinquency as a percentage of finance receivables was 5.39% and 4.65%, respectively.

Loan Modifications
Troubled debt restructurings occur when we have either modified the contract terms of finance receivables for borrowers
experiencing financial difficulties or accepted a transfer of assets in full or partial satisfaction of the loan balance. The types of
modifications we typically make include extensions of the original maturity date of the contract, extensions of revolving borrowing
periods, delays in the timing of required principal payments, deferrals of interest payments, advances to protect the value of our
collateral and principal reductions contingent on full repayment prior to the maturity date. The changes effected by modifications
made during 2013 and 2012 to finance receivables held for investment were not material.

Impaired Loans
On a quarterly basis, we evaluate individual finance receivables for impairment in non-homogeneous portfolios and larger
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 discussed 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. There was no significant interest
income recognized on impaired loans in 2013 or 2012.

Textron Inc. Annual Report • 2013

A summary of impaired finance receivables, excluding leveraged leases, at year end and the average recorded investment for the
year is provided below:

(In millions)
Recorded investment:
Impaired loans with no related allowance for credit losses
Impaired loans with related allowance for credit losses
Total
Unpaid principal balance
Allowance for losses on impaired loans
Average recorded investment

December 28,
2013

December 29,
2012

$
$

78
59
137
141
14
155

$ 72
99
$ 171
$ 187
27
270

Allowance for Losses
A rollforward of the allowance for losses on finance receivables and a summary of its composition, based on how the underlying
finance receivables are evaluated for impairment, is provided below. The finance receivables reported in this table specifically
exclude $120 million and $122 million of leveraged leases at December 28, 2013 and December 29, 2012, respectively, in
accordance with authoritative accounting standards.

(In millions)
Balance at beginning of period
Provision for losses
Charge-offs
Recoveries
Transfers
Balance at end of period
Allowance based on collective evaluation
Allowance based on individual evaluation
Finance receivables evaluated collectively
Finance receivables evaluated individually

December 28,
2013
84
(23)
(17)
12

December 29,
2012
$ 156
(3)
(84)
15
(1) —
$ 84
$ 57
27
$ 1,641
171

$ 55
$ 41
14
$ 1,226
137

Our Finance group provides financing for retail purchases and leases for new and used aircraft and equipment manufactured by our
Manufacturing group. The finance receivables for these inventory sales that are included in the Finance group’s balance sheets are
summarized below:

(In millions)
Loans
Finance leases
Total

December 28,
2013

$ 1,121
80
$ 1,201

December 29,
2012
$ 1,389
107
$ 1,496

In 2013, 2012 and 2011, our Finance group paid our Manufacturing group $248 million, $309 million and $284 million,
respectively, related to the sale of Textron-manufactured products to third parties that were financed by the Finance group.
Operating agreements specify that our Finance group has recourse to our Manufacturing group for certain uncollected amounts
related to these transactions. At December 28, 2013 and December 29, 2012, finance receivables and operating leases subject to
recourse to the Manufacturing group totaled $75 million and $83 million, respectively. Our Manufacturing group has established
reserves for losses on its balance sheet within accrued and other liabilities for the amounts it guarantees.

57 Textron Inc. Annual Report • 2013

Note 4. Inventories

Inventories are composed of the following:

(In millions)
Finished goods
Work in process
Raw materials and components

Progress/milestone payments
Total

December 28,
2013

$ 1,276
2,477
407
4,160
(1,197)
$ 2,963

December 29,
2012
$ 1,329
2,247
437
4,013
(1,301)
$ 2,712

Inventories valued by the LIFO method totaled $1.3 billion and $1.1 billion at the end of 2013 and 2012, respectively, and the
carrying values of these inventories would have been higher by approximately $461 million and $435 million, respectively, had
our LIFO inventories been valued at current costs. Inventories related to long-term contracts, net of progress/milestone payments,
were $359 million and $382 million at the end of 2013 and 2012, respectively.

Note 5. Property, Plant and Equipment, Net

Our Manufacturing group’s property, plant and equipment, net are composed of the following:

(Dollars in millions)
Land and buildings
Machinery and equipment

Accumulated depreciation and amortization
Total

Useful Lives
(in years)
3 - 40
1 - 20

December 28,
2013

$ 1,636
4,042
5,678
(3,463)
$ 2,215

December 29,
2012
$ 1,604
3,822
5,426
(3,277)
$ 2,149

At the end of 2013 and 2012, assets under capital leases totaled $247 million and $251 million and had accumulated amortization
of $56 million and $51 million, respectively. The Manufacturing group’s depreciation expense, which included amortization
expense on capital leases, totaled $335 million, $315 million and $317 million in 2013, 2012 and 2011, respectively.

Note 6. Accrued Liabilities

The accrued liabilities of our Manufacturing group are summarized below:

(In millions)
Customer deposits
Salaries, wages and employer taxes
Current portion of warranty and product maintenance contracts
Retirement plans
Other
Total

Changes in our warranty and product maintenance contract liability are as follows:

December 28,
2013
888
246
142
74
538
$ 1,888

December 29,
2012
725
282
180
80
689
$ 1,956

(In millions)
Accrual at beginning of year
Provision
Settlements
Adjustments to prior accrual estimates*
Accrual at end of year
* Adjustments include changes to prior year estimates, new issues on prior year sales and currency translation adjustments.

2013
222
299
(293)
(5)
223

2012
224
255
(250)
(7)
222

2011
242
223
(223)
(18)
224

Textron Inc. Annual Report • 2013

Note 7. Debt and Credit Facilities

Our debt is summarized in the table below:

(In millions)
Manufacturing group
Long-term senior debt:
3.875% due 2013
4.50% convertible senior notes due 2013
6.20% due 2015
4.625% due 2016
Variable-rate note due 2016 (average rate of 1.54%)
5.60% due 2017
7.25% due 2019
6.625% due 2020
5.95% due 2021
Other (weighted-average rate of 1.57% and 1.52%, respectively)

Less: Current portion of long-term debt
Total Long-term debt

Total Manufacturing group debt

Finance group
Fixed-rate notes due 2013 (weighted-average rate of 5.28%)
Variable-rate note due 2013 (weighted-average rate of 1.21%)
Fixed-rate note due 2014 (5.13%)
Fixed-rate notes due 2013-2017* (weighted-average rate of 4.59% and 4.88%, respectively)
Variable-rate notes due 2016 (weighted-average rate of 1.78%)
Fixed-rate notes due 2017-2023* (weighted-average rate of 2.67% and 2.70%, respectively)
Variable-rate notes due 2015-2020* (weighted-average rate of 1.19% and 1.09%, respectively)
Securitized debt (weighted-average rate of 1.50% and 1.55%, respectively)
6% Fixed-to-Floating Rate Junior Subordinated Notes
Fair value adjustments and unamortized discount

Total Finance group debt

* Notes amortize on a quarterly or semi-annual basis.

December 28,
2013

December 29,
2012

—
—
350
250
150
350
250
246
250
85
1,931
(8)
1,923
$ 1,931

—
—
100
42
200
378
63
172
299
2
$ 1,256

318
210
350
250
—
350
250
242
250
81
2,301
(535)
1,766
$ 2,301

400
48
100
102
—
382
64
282
300
8
$ 1,686

The following table shows required payments during the next five years on debt outstanding at December 28, 2013:

(In millions)
Manufacturing group
Finance group
Total

2014

8
223
230

2015
357
148
505

2016
408
302
710

2017
358
92
450

2018
7
67
74

During the fourth quarter of 2013, Textron entered into a senior unsecured revolving credit facility for an aggregate principal
amount of $1.0 billion, of which up to $100 million is available for the issuance of letters of credit. This facility expires in October
2018. At December 28, 2013, there were no amounts borrowed against the facility, and there were $35 million of letters of credit
issued against it.

On January 30, 2014, we issued $250 million in 3.65% notes due 2021 and $350 million in 4.30% notes due 2024 under our shelf
registration statement. We plan to use the net proceeds of the issuance of these notes to finance a portion of the acquisition of all
outstanding equity interests in Beech Holdings, LLC, the parent of Beechcraft Corporation, which we have agreed to purchase for
approximately $1.4 billion in cash. The transaction is expected to close during the first half of 2014, subject to customary closing
conditions, including regulatory approvals. If the transaction is not completed, or the related merger agreement is terminated, on
or before December 31, 2014, we will be required to redeem all outstanding 2021 notes at a redemption price equal to 101% of the
principal amount thereof, plus accrued and unpaid interest.

59 Textron Inc. Annual Report • 2013

4.50% Convertible Senior Notes and Related Transactions
On May 5, 2009, we issued $600 million of convertible senior notes with a maturity date of May 1, 2013 and interest payable
semiannually. The convertible notes were accounted for in accordance with generally accepted accounting principles, which
required us to separately account for the liability (debt) and the equity (conversion option) components of the convertible notes in a
manner that reflected our non-convertible debt borrowing rate at time of issuance. Accordingly, we recorded a debt discount and
corresponding increase to additional paid-in capital of $134 million at the issuance date. We amortized the debt discount utilizing
the effective interest method over the life of the notes, which increased the effective interest rate of the convertible notes from its
coupon rate of 4.50% to 11.72%. We incurred cash and non-cash interest expenses of $9 million in 2013, $25 million in 2012 and
$58 million in 2011 for these notes.

On May 1, 2013, our remaining convertible senior notes matured, and we paid the holders of the notes $215 million in settlement
of the face value of the notes. In addition, we issued 8.9 million shares of our common stock to converting holders in settlement of
the excess of the conversion value over the face value of the notes; however, after giving effect to the exercise of the related call
options and warrants discussed below, the incremental share settlement in excess of the face value of the notes resulted in a 7.4
million net share issuance.

Concurrently with the pricing of the convertible notes in May 2009, we entered into transactions with two counterparties, pursuant
to which we purchased from the counterparties call options to acquire our common stock and sold to the counterparties warrants to
purchase our common stock. The call options settled on May 1, 2013, while the warrants settled daily over a 45-day period
beginning on February 27, 2013. We acquired 8.9 million shares of our common stock upon the settlement of the call options and
issued an aggregate of 7.4 million shares of our common stock in connection with the settlement of the warrants during the first
half of 2013. The settlement of the call options and warrants resulted in a $41 million net increase in treasury stock during 2013.

On October 25, 2011, we entered into capped call transactions with the counterparties that covered an aggregate of 28.7 million
shares of our common stock as of the end of 2012. The capped calls had a strike price of $13.125 per share and a cap price of
$15.75 per share, which entitled us to receive the per share value of our stock price in excess of $13.125 up to a maximum stock
price of $15.75 at the expiration date. Upon expiration of the capped calls, the market price of our common stock exceeded the
maximum stock price, and we received $75 million in cash from the counterparties in the second quarter of 2013.

6% Fixed-to-Floating Rate Junior Subordinated Notes
The Finance group’s $299 million of 6% Fixed-to-Floating Rate Junior Subordinated Notes are unsecured and rank junior to all of
its existing and future senior debt. The notes mature on February 15, 2067; however, we have the right to redeem the notes at par
on or after February 15, 2017 and are obligated to redeem the notes beginning on February 15, 2042. The Finance group has
agreed in a replacement capital covenant that it will not redeem the notes on or before February 15, 2047 unless it receives a
capital contribution from the Manufacturing group and/or net proceeds from the sale of certain replacement capital securities at
specified amounts. During 2013, the Manufacturing group made a capital contribution to TFC for the repurchase of $1 million of
these notes. Interest on the notes is fixed at 6% until February 15, 2017 and floats at the three-month London Interbank Offered
Rate + 1.735% thereafter.

Support Agreement
Under a Support Agreement, Textron Inc. is required to ensure that TFC maintains fixed charge coverage of no less than 125% and
consolidated shareholder’s equity of no less than $200 million. Cash payments of $240 million and $182 million were made to
TFC in 2012 and 2011, respectively, to maintain compliance with the fixed charge coverage ratio.

Note 8. 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.

Textron Inc. Annual Report • 2013

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 utilize foreign currency exchange contracts to manage this volatility. 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 December 28, 2013 and December
29, 2012, we had foreign currency exchange contracts with notional amounts upon which the contracts were based of $636 million
and $664 million, respectively. At December 28, 2013, the fair value amounts of our foreign currency exchange contracts were a
$2 million asset and a $15 million liability. At December 29, 2012, the fair value amounts of our foreign currency exchange
contracts were a $9 million asset and a $5 million liability.

We primarily utilize forward exchange contracts which have maturities of no more than three years. 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. At December 28, 2013, we had a net deferred loss of $10 million in Accumulated other comprehensive loss
related to these cash flow hedges. Net gains and losses recognized in earnings and Accumulated other comprehensive loss on
these cash flow hedges, including gains and losses related to hedge ineffectiveness, amounted to a $16 million net loss in 2013 and
were not significant in 2012. We expect to reclassify a $10 million net loss from Accumulated other comprehensive loss to
earnings in the next twelve months.

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, produced a $2 million
after-tax gain in 2013, resulting in an accumulated net gain balance of $6 million at December 28, 2013. There was no
ineffectiveness recorded related to these hedges during 2013.

Our Finance group has entered 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. These interest rate exchange contracts are not exchange traded and
are measured at fair value utilizing widely accepted, third-party developed valuation models. The actual terms of each individual
contract are entered into a valuation model, along with interest rate data, which is based on readily observable market data
published by third-party leading financial news and data providers. At December 28, 2013 and December 29, 2012, we had
interest rate exchange contracts with notional amounts upon which the contracts were based of $229 million and $671 million,
respectively. The fair value amounts of our interest rate exchange contracts recorded at December 28, 2013, were a $2 million
asset and a $5 million liability. At December 29, 2012, the fair value amounts of our interest rate exchange contracts were an $8
million asset and an $8 million liability.

Our exposure to loss from nonperformance by the counterparties to our derivative agreements at the end of 2013 was minimal. We
do not anticipate nonperformance by counterparties in the periodic settlements of amounts due. We historically have 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 credit risk generally is limited to the amount by which the counterparties’ contractual obligations
exceed our obligations to the counterparty. We continuously monitor our exposures to ensure that we limit our risks.

Assets Recorded at Fair Value on a Nonrecurring Basis
During 2013 and 2012, certain assets in the Finance Group were measured at fair value on a nonrecurring basis using significant
unobservable inputs (Level 3). The table below sets forth the balance of those assets at the end of the year in which a fair value
adjustment was taken.

(In millions)
Finance receivables held for sale
Impaired finance receivables
Other assets

61 Textron Inc. Annual Report • 2013

December 28,
2013
65
45
35

December 29,
2012
140
72
76

The following table represents the fair value adjustments recorded for each asset class measured at fair value on a non-recurring
basis during 2013 and 2012.

(In millions)
Finance receivables held for sale
Impaired finance receivables
Other assets

Gain (Loss)
2013
31
(7)
(14)

2012
76
(11)
(51)

Finance receivables held for sale are recorded at fair value on a nonrecurring basis during periods in which the fair value is lower
than the cost value. There are no active, quoted market prices for these finance receivables. At December 28, 2013, our finance
receivables held for sale included the non-captive loan portfolio. Fair values of each loan in this portfolio were determined based
on a combination of discounted cash flow models and recent third-party offers to estimate the price we expect to receive in the
principal market for each loan, in an orderly transaction. The gains on finance receivables held for sale during 2013 and 2012 were
primarily the result of the payoff of loans in amounts, and sale of loans at prices, in excess of the values established in previous
periods.

Impaired nonaccrual finance receivables represent assets recorded at fair value on a nonrecurring basis since the measurement of
required reserves on our impaired finance receivables is significantly dependent on the fair value of the underlying collateral. For
impaired nonaccrual finance receivables secured by aviation assets, the fair values of collateral are determined primarily based on
the use of industry pricing guides. Fair value measurements recorded on impaired finance receivables resulted in charges to
provision for loan losses and primarily related to initial fair value adjustments.

Other assets in the table above primarily include aviation assets and repossessed golf and hotel properties. The fair value of our
aviation assets was largely determined based on the use of industry pricing guides. The fair value of our golf and hotel properties
was determined based on the use of discounted cash flow models, bids from prospective buyers or inputs from market participants.
If the carrying amount of these assets is higher than their estimated fair value, we record a corresponding charge to income for the
difference.

Assets and Liabilities Not Recorded at Fair Value
The carrying value and estimated fair values of our financial instruments that are not reflected in the financial statements at fair
value are as follows:

(In millions)
Manufacturing group
Long-term debt, excluding leases
Finance group
Finance receivables held for investment, excluding leases
Debt

December 28, 2013

Carrying
Value

Estimated
Fair Value

December 29, 2012

Carrying
Value

Estimated
Fair Value

$ (1,854)

$ (2,027)

$ (2,225)

$ (2,636)

1,231
(1,256)

1,290
(1,244)

1,625
(1,686)

1,653
(1,678)

Fair value for the Manufacturing group debt is determined using market observable data for similar transactions or Level 2 inputs.
At December 28, 2013 and December 29, 2012, approximately 30% and 46%, respectively, of the fair value of term debt for the
Finance group was determined based on observable market transactions (Level 1). The remaining Finance group debt was
determined based on discounted cash flow analyses using observable market inputs from debt with similar duration, subordination
and credit default expectations (Level 2). Fair value estimates for finance receivables held for investment 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.

Note 9. Shareholders’ Equity

Capital Stock
We have authorization for 15 million shares of preferred stock with a par value of $0.01 and 500 million shares of common stock
with a par value of $0.125. Outstanding common stock activity for the three years ended December 28, 2013 is presented below:

Textron Inc. Annual Report • 2013

(In thousands)
Beginning balance

Exercise of stock options
Issued to Textron Savings Plan
Exercise of warrants
Stock repurchases
Other

Ending balance

2013
271,263
1,333
1,921
7,435
—
107
282,059

2012
278,873
1,159
2,159
—
(11,103)
175
271,263

2011
275,739
177
2,686
—
—
271
278,873

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, restricted stock units and, prior to the maturity of our convertible notes on May 1, 2013, the shares that
could have been issued upon the conversion of the notes and upon the exercise of the related warrants.

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

(In thousands)
Basic weighted-average shares outstanding
Dilutive effect of:
Convertible notes and warrants
Stock options and restricted stock units
Diluted weighted-average shares outstanding

2013
279,299

2012
280,182

2011
277,684

4,801
328
284,428

14,053
428
294,663

28,869
702
307,255

The dilutive effect of the convertible notes and warrants decreased significantly in 2013 from prior years due to the maturity of our
convertible notes as described in Note 7. We intended to settle the face value of the notes in cash and the excess of the conversion
value over the face value in cash and/or shares of our common stock; accordingly, only the shares of our common stock potentially
issuable with respect to the excess of the notes’ conversion value over the face amount were considered in calculating diluted EPS.
The call options purchased in connection with the issuance of the convertible notes and the capped call transaction were excluded
from the calculation of diluted EPS as their impact was always anti-dilutive.

In 2013, 2012 and 2011, stock options to purchase 5 million, 7 million and 5 million shares, respectively, of common stock
outstanding are excluded from our calculation of diluted weighted-average shares outstanding as their effect would have been anti-
dilutive.

Accumulated Other Comprehensive Loss
The components of Accumulated Other Comprehensive Loss are presented below:

(In millions)
Balance at December 31, 2011
Other comprehensive loss before reclassifications
Amounts reclassified from Accumulated Other
Comprehensive Loss
Other comprehensive loss
Balance at December 29, 2012
Other comprehensive income before reclassifications
Amounts reclassified from Accumulated Other
Comprehensive Loss
Other comprehensive income
Balance at December 28, 2013

63 Textron Inc. Annual Report • 2013

Foreign
Currency
Translation
Adjustments
$

79
2

Pension and
Postretirement
Benefits
Adjustments
$ (1,711)
(230)

Deferred
Gains/Losses
on Hedge
Contracts

—
2
81
12

—
12
93

84
(146)
(1,857)
626

121
747
$ (1,110)

Accumulated
Other
Comprehensive
Loss
$ (1,625)
(217)

72
(145)
(1,770)
623

120
743
$ (1,027)

7
11

(12)
(1)
6
(15)

(1)
(16)
(10)

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

Pre-Tax
Amount

Tax
(Expense)
Benefit

After-Tax
Amount

189

29
1,235

(15)
(1)
(16)
12
743

5
—
5
(1)
(484)

(20)
(1)
(21)
13
1,227

$ 609
122
(1)
17
747

$ 1,019 $ (410)
(67)
(2) 1
(12)
(488)

(In millions)
2013
Pension and postretirement benefits adjustments:
Unrealized gains
Amortization of net actuarial loss*
Amortization of prior service cost*
Recognition of prior service cost
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
2012
Pension and postretirement benefits adjustments:
Unrealized losses
Amortization of net actuarial loss*
Amortization of prior service cost*
Recognition of prior service cost
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
2011
Pension and postretirement benefits adjustments:
Unrealized losses
Amortization of net actuarial loss *
Amortization of prior service cost*
Recognition of prior service cost
Pension and postretirement benefits adjustments, net
Deferred gains on hedge contracts
(5)
Current deferrals
(15)
Reclassification adjustments
(20)
Deferred gains/losses on hedge contracts, net
(3)
Foreign currency translation adjustments
(309)
Total
*These components of other comprehensive income are included in the computation of net periodic pension cost. See Note 11 for additional
information.

$ (231)
81
(2) 3
1
(146)

$ (417) $ 186
(43)

$ (360)
59
5
10
(286)

$ (542)
89
8
15
(430)

124
5
2
(286)

$ 182
(30)
(3)
(5)
144

14
(15)
(1)
(6)
(293)

(7)
(22)
(29)
(1)
(460)

11
(12)
(1)
2
(145)

2
7
9
(2)
151

(3)
3
—
8
148

(1)
140

Textron Inc. Annual Report • 2013

Note 10. Share-Based Compensation

Our 2007 Long-Term Incentive Plan (Plan) authorizes awards to our key employees in the form of options to purchase our shares,
restricted stock, restricted stock units, stock appreciation rights, performance stock awards and other awards. A maximum of 12
million shares is authorized for issuance for all purposes under the Plan plus any shares that become available upon cancellation,
forfeiture or expiration of awards granted under the 1999 Long-Term Incentive Plan. No more than 12 million shares may be
awarded pursuant to incentive stock options, and no more than 3 million shares may be awarded pursuant to restricted stock units
or other awards intended to be paid in shares. The Plan also authorizes performance share units to be paid in cash based upon the
value of our common stock.

Through our Deferred Income Plan for Textron Executives (DIP), we provide certain executives the opportunity to voluntarily
defer up to 25% of their base salary and up to 80% of annual, long-term incentive and other compensation. Elective deferrals may
be put into either a stock unit account or an interest-bearing account. Executives who are eligible to participate in the DIP and
have not achieved and/or maintained the required minimum stock ownership level are required to defer part of each subsequent
long-term incentive compensation cash payout into the DIP stock unit account until the ownership requirements are satisfied.
Participants cannot move amounts between the two accounts while actively employed by us and cannot receive distributions until
termination of employment. The intrinsic value of amounts paid under the DIP totaled $1 million in each of the three years ended
December 28, 2013.

Share-based compensation costs are reflected primarily in selling and administrative expenses. The compensation expense that has
been recorded in net income for our share-based compensation plans is as follows:

(In millions)
Compensation expense
Income tax benefit
Total net compensation cost included in net income

2013

86
(32)
54

2012

71
(26)
45

2011
50
(18)
32

Compensation expense included approximately $26 million, $23 million and $17 million in 2013, 2012 and 2011, respectively, for
a portion of the fair value of options issued and the portion of previously granted options for which the requisite service has been
rendered.

Compensation cost for awards subject only to service conditions that vest ratably are recognized on a straight-line basis over the
requisite service period for each separately vesting portion of the award. As of December 28, 2013, we had not recognized $61
million of total compensation costs associated with unvested awards subject only to service conditions. We expect to recognize
compensation expense for these awards over a weighted-average period of approximately two years.

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

The weighted-average fair value of options granted during the past three years and the assumptions used in our option-pricing
model for such grants are as follows:

Fair value of options at grant date
Dividend yield
Expected volatility
Risk-free interest rate
Expected term (in years)

2013
9.69
0.3%
37.0%
0.9%
5.5

2012
10.19
0.3%
40.0%
0.9%
5.5

2011
9.84
0.3%
38.0%
2.4%
5.5

65 Textron Inc. Annual Report • 2013

The stock option activity under the Plan in 2013 is provided below:

(Options in thousands)
Outstanding at beginning of year
Granted
Exercised
Canceled, expired or forfeited
Outstanding at end of year
Exercisable at end of year

Number of
Options

9,484
2,169
(1,408)
(1,227)
9,018
4,362

Weighted-
Average
Exercise
Price
27.98
28.47
(23.38)
(37.13)
27.57
27.23

$
$

At December 28, 2013, our outstanding options had an aggregate intrinsic value of $88 million and a weighted-average remaining
contractual life of six years. Our exercisable options had an aggregate intrinsic value of $47 million and a weighted-average
remaining contractual life of five years at December 28, 2013. The total intrinsic value of options exercised during 2013, 2012 and
2011 amounted to $10 million, $11 million and $2 million, respectively.

Restricted Stock Units
In 2013 and 2012, we issued restricted stock units settled in both cash and stock (vesting one-third each in the third, fourth and
fifth year following the year of the grant), which included the right to receive dividend equivalents. The fair value of these units is
based solely on the trading price of our common stock on the grant date and is recognized ratably over the vesting period. During
2009 through 2011, we issued restricted stock units settled in cash that vested in equal installments over five years. In 2008,
restricted stock unit awards generally were payable in shares of common stock (vesting one-third each in the third, fourth and fifth
year following the year of the grant). The 2013 activity for restricted stock units is provided below:

Units Payable in Stock

Units Payable in Cash

(Shares/Units in thousands)
Outstanding at beginning of year, nonvested
Granted
Vested
Forfeited
Outstanding at end of year, nonvested

Number of
Shares

710
257
(146)
(41)
780

Weighted-
Average Grant
Date Fair Value
29.94
28.47
(40.36)
(27.87)
27.56

Number of
Units
2,540
596
(720)
(391)

2,025

Weighted-
Average Grant
Date Fair Value
20.79
28.43
(17.19)
(23.85)
23.73

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

(In millions)
Fair value of awards vested
Cash paid

2013

26
23

2012

35
25

2011
41
23

Performance Share Units
The fair value of share-based compensation awards accounted for as liabilities includes performance share units, which are paid in
cash in the first quarter of the year following vesting. Payouts under performance share units vary based on certain performance
criteria generally set for each year of a three-year performance period. The performance share units vest at the end of three years.
The fair value of these awards is based on the trading price of our common stock and is remeasured at each reporting period date.
The 2013 activity for our performance share units is as follows:

(Units in thousands)
Outstanding at beginning of year, nonvested
Granted
Vested
Forfeited
Outstanding at end of year, nonvested

Number of
Units
875
421
(344)
(57)
895

Weighted-
Average
Grant Date
Fair Value
$ 27.14
28.47
(26.25)
(27.44)
28.08

Textron Inc. Annual Report • 2013

The fair value of the performance share units that vested and/or amounts paid under these awards during the respective periods is
as follows:

(In millions)
Fair value of awards vested
Cash paid

Note 11. Retirement Plans

2013

2012
$ 13 $ 10
52

2011
$ 33
1

Our defined benefit and defined contribution plans cover substantially all of our employees. A significant number of our U.S.-
based employees participate in the Textron Retirement Plan, which is designed to be a “floor-offset” arrangement with both a
defined benefit component and a defined contribution component. The defined benefit component of the arrangement includes the
Textron Master Retirement Plan (TMRP) and the Bell Helicopter Textron Master Retirement Plan (BHTMRP), and the defined
contribution component is the Retirement Account Plan (RAP). The defined benefit component provides a minimum guaranteed
benefit (or “floor” benefit). Under the RAP, participants are eligible to receive contributions from Textron of 2% of their eligible
compensation but may not make contributions to the plan. Upon retirement, participants receive the greater of the floor benefit or
the value of the RAP. Both the TMRP and the BHTMRP are subject to the provisions of the Employee Retirement Income
Security Act of 1974 (ERISA). Effective on January 1, 2010, the Textron Retirement Plan was closed to new participants, and
employees hired after that date receive an additional 4% annual cash contribution to their Textron Savings Plan account based on
their eligible compensation.

We also have domestic and foreign funded and unfunded defined benefit pension plans that cover certain of our U.S. and foreign
employees. In addition, several defined contribution plans are sponsored by our various businesses, of which the largest plan is the
Textron Savings Plan, which is a qualified 401(k) plan subject to ERISA. Our defined contribution plans cost approximately $93
million, $88 million and $85 million in 2013, 2012 and 2011, respectively; these amounts include $19 million, $21 million and $23
million, respectively, in contributions to the RAP. We also provide postretirement benefits other than pensions for certain retired
employees in the U.S., which include healthcare, dental care, Medicare Part B reimbursement and life insurance benefits.

Periodic Benefit Cost
The components of our net periodic benefit cost and other amounts recognized in OCI are as follows:

Pension Benefits

Postretirement Benefits
Other than Pensions

2013

2012

2011

2013

2012

2011

133 $
290
(418)
15
183
—
203 $

119 $
305
(407)
16
118
—
151 $

129 $
327
(393)
16
75
(1)

153 $

(964) $
16
(183)
(15)
—

$ (1,146) $
(943) $
$

402 $
—
(118)
(16)
—
268 $
419 $

556 $
7
(75)
(16)
1
473 $
626 $

6 $

19
—
(17)
6
—
14 $

(55) $
(45)
(6)
17
—
(89) $
(75) $

6 $
25
—
(11)
7
—
27 $

15 $
(2)
(7)
11
—
17 $
44 $

8
33
—
(8)
11
—
44

(17)
(23)
(11)
8
—
(43)
1

(In millions)
Net periodic benefit cost
Service cost
Interest cost
Expected return on plan assets
Amortization of prior service cost (credit)
Amortization of net actuarial loss
Curtailment and special termination charges
Net periodic benefit cost
Other changes in plan assets and benefit obligations
recognized in OCI
Current year actuarial loss (gain)
Current year prior service cost (credit)
Amortization of net actuarial loss
Amortization of prior service credit (cost)
Curtailments and settlements
Total recognized in OCI, before taxes
Total recognized in net periodic benefit cost and OCI

67 Textron Inc. Annual Report • 2013

The estimated amount that will be amortized from Accumulated other comprehensive loss into net periodic pension costs in 2014
is as follows:

(In millions)
Net actuarial loss
Prior service cost (credit)

Postretirement
Benefits
Other than
Pensions
2
(22)
(20)

Pension
Benefits

112
15
127

Obligations and Funded Status
All of our plans are measured as of our fiscal year-end. The changes in the projected benefit obligation and in the fair value of
plan assets, along with our funded status, are as follows:

(In millions)
Change in benefit obligation
Benefit obligation at beginning of year
Service cost
Interest cost
Amendments
Plan participants’ contributions
Actuarial losses (gains)
Benefits paid
Foreign exchange rate changes
Other

Benefit obligation at end of year
Change in fair value of plan assets
Fair value of plan assets at beginning of year
Actual return on plan assets
Employer contributions
Benefits paid
Foreign exchange rate changes

Fair value of plan assets at end of year

Funded status at end of year

Amounts recognized in our balance sheets are as follows:

(In millions)
Non-current assets
Current liabilities
Non-current liabilities
Recognized in Accumulated other comprehensive loss, pre-tax:

Net loss
Prior service cost (credit)

Pension Benefits

Postretirement Benefits
Other than Pensions

2013

2012

2013

2012

$ 7,053

133
290
16
—
(566)
(373)
(13)
4

$ 6,544

$ 5,715

819
185
(373)
(1)

$ 6,345
(199)
$

$ 6,325
119
305
—
—
644
(360)
29
(9)
$ 7,053

$ 5,013
649
389
(360)
24
$ 5,715
$ (1,338)

564
6
19
(45)
4
(55)
(48)
—
—
445

561
6
25
(2)
5
15
(52)
—
6
564

(445)

(564)

Pension Benefits

Postretirement Benefits
Other than Pensions

2013
413
(26)
(586)

1,596
114

2012
61
(26)
(1,373)

2013
$ —
(48)
(397)

2012
$ —
(52)
(512)

2,750
113

38
(69)

99
(41)

The accumulated benefit obligation for all defined benefit pension plans was $6.1 billion and $6.6 billion at December 28, 2013
and December 29, 2012, respectively, which included $359 million and $388 million, respectively, in accumulated benefit
obligations for unfunded plans where funding is not permitted or in foreign environments where funding is not feasible.

Textron Inc. Annual Report • 2013

Pension plans with accumulated benefit obligations exceeding the fair value of plan assets are as follows:

(In millions)
Projected benefit obligation
Accumulated benefit obligation
Fair value of plan assets

2013
$ 2,828
2,629
2,215

2012
$ 6,869
6,404
5,470

Assumptions
The weighted-average assumptions we use for our pension and postretirement plans are as follows:

Pension Benefits

Postretirement Benefits
Other than Pensions

2013

2012

2011

2013

2012

2011

Net periodic benefit cost
Discount rate
Expected long-term rate of return on assets
Rate of compensation increase
Benefit obligations at year-end
Discount rate
Rate of compensation increases

4.23%
7.56%
3.31%

4.94%
3.34%

4.94%
7.58%
3.49%

4.23%
3.48%

5.71%
7.84%
3.99%

4.95%
3.49%

3.75%

4.75%

5.50%

4.50%

3.75%

4.75%

Assumed healthcare cost trend rates are as follows:

Medical cost trend rate
Prescription drug cost trend rate
Rate to which medical and prescription drug cost trend rates will gradually decline
Year that the rates reach the rate where we assume they will remain

2013
7.2%
7.2%
5.0%
2021

2012
8.4%
8.4%
5.0%
2021

These assumed healthcare cost trend rates have a significant effect on the amounts reported for the postretirement benefits other
than pensions. A one-percentage-point change in these assumed healthcare cost trend rates would have the following effects:

(In millions)
Effect on total of service and interest cost components
Effect on postretirement benefit obligations other than pensions

One-
Percentage-
Point
Increase

2
23

One-
Percentage-
Point
Decrease
(2)
(21)

Pension Assets
The expected long-term rate of return on plan assets is determined based on a variety of considerations, including the established
asset allocation targets and expectations for those asset classes, historical returns of the plans’ assets and other market
considerations. We invest our pension assets with the objective of achieving a total rate of return, over the long term, sufficient to
fund future pension obligations and to minimize future pension contributions. We are willing to tolerate a commensurate level of
risk to achieve this objective based on the funded status of the plans and the long-term nature of our pension liability. Risk is
controlled by maintaining a portfolio of assets that is diversified across a variety of asset classes, investment styles and investment
managers. All of the assets are managed by external investment managers, and the majority of the assets are actively managed.
Where possible, investment managers are prohibited from owning our stock in the portfolios that they manage on our behalf.

69 Textron Inc. Annual Report • 2013

For U.S. plan assets, which represent the majority of our plan assets, asset allocation target ranges are established consistent with
our investment objectives, and the assets are rebalanced periodically. For foreign plan assets, allocations are based on expected
cash flow needs and assessments of the local practices and markets. Our target allocation ranges are as follows:

U.S. Plan Assets
Domestic equity securities
International equity securities
Debt securities
Private equity partnerships
Real estate
Hedge funds
Foreign Plan Assets
Equity securities
Debt securities
Real estate

26% to 40%
11% to 22%
25% to 35%
5% to 11%
7% to 13%
0% to 5%

38% to 65%
29% to 38%
3% to 14%

The fair value of total pension plan assets by major category and level in the fair value hierarchy as defined in Note 8 is as follows:

(In millions)
Cash and equivalents
Equity securities:

Domestic
International
Debt securities:

National, state and local governments
Corporate debt
Asset-backed securities
Private equity partnerships
Real estate
Hedge funds
Total

December 28, 2013

December 29, 2012

Level 1

Level 2

Level 3

Level 1

Level 2

144

—

157

Level 3
—

1,179
1,140

506
—
—
—
—
—
$ 2,842

866
258

411
638
153
—
—
—

$ 2,470

—

1,149

560

—

—
—
—
305
553
175
$ 1,033

594
13
1
—
—
—
$ 2,754

318
647
91
—
—
—

$ 2,041

—
—
—
308
508
104
920

Cash equivalents and equity and debt securities include comingled funds, which represent investments in funds offered to
institutional investors that are similar to mutual funds in that they provide diversification by holding various equity and debt
securities. Since these comingled funds are not quoted on any active market, they are priced based on the relative value of the
underlying equity and debt investments and their individual prices at any given time; accordingly, they are classified as Level 2.
Debt securities are valued based on same day actual trading prices, if available. If such prices are not available, we use a matrix
pricing model with historical prices, trends and other factors.

Private equity partnerships represent investments in funds, which, in turn, invest in stocks and debt securities of companies that, in
most cases, are not publicly traded. These partnerships are valued using income and market methods that include cash flow
projections and market multiples for various comparable companies. Real estate includes owned properties and investments in
partnerships. Owned properties are valued using certified appraisals at least every three years, which then are updated at least
annually by the real estate investment manager based on current market trends and other available information. These appraisals
generally use the standard methods for valuing real estate, including forecasting income and identifying current transactions for
comparable real estate to arrive at a fair value. Real estate partnerships are valued similar to private equity partnerships, with the
general partner using standard real estate valuation methods to value the real estate properties and securities held within their fund
portfolios. We believe these assumptions are consistent with assumptions that market participants would use in valuing these
investments.

Hedge funds represent an investment in a diversified fund of hedge funds of which we are the sole investor. The fund invests in
portfolio funds that are not publicly traded and are managed by various portfolio managers. Investments in portfolio funds are
typically valued on the basis of the most recent price or valuation provided by the relevant fund’s administrator. The administrator
for the fund aggregates these valuations with the other assets and liabilities to calculate the net asset value of the fund.

Textron Inc. Annual Report • 2013

The table below presents a reconciliation of the beginning and ending balances for fair value measurements that use significant
unobservable inputs (Level 3) by major category:

(In millions)
Balance at beginning of year
Actual return on plan assets:
Related to assets still held at reporting date
Related to assets sold during the period
Purchases, sales and settlements, net
Balance at end of year

Hedge Funds

Private Equity
Partnerships

104

308

Real Estate
508
$

16
—
55
175

(5)
44
(42)
305

26
23
(4)
553

Estimated Future Cash Flow Impact
Defined benefits under salaried plans are based on salary and years of service. Hourly plans generally provide benefits based on
stated amounts for each year of service. Our funding policy is consistent with applicable laws and regulations. In 2014, we expect
to contribute approximately $58 million to fund non-qualified plans and foreign plans, and $19 million to the RAP. We do not
expect to contribute to our qualified pension plans or our other postretirement benefit plans. Benefit payments provided below
reflect expected future employee service, as appropriate, and are expected to be paid, net of estimated participant contributions.
These payments are based on the same assumptions used to measure our benefit obligation at the end of fiscal 2013. While
pension benefit payments primarily will be paid out of qualified pension trusts, we will pay postretirement benefits other than
pensions out of our general corporate assets. Benefit payments that we expect to pay are as follows:

(In millions)
Pension benefits
Post-retirement benefits other than pensions

2014
367
49

2015
369
48

2016
373
46

2017
378
44

2018
384
42

2019-2023
$ 2,047
171

Note 12. Income Taxes

We conduct business globally and, as a result, file numerous consolidated and separate income tax returns within and outside the
U.S. For all of our U.S. subsidiaries, we file a consolidated federal income tax return. Income from continuing operations before
income taxes is as follows:

(In millions)
U.S.
Non-U.S.
Total income from continuing operations before income taxes

Income tax expense for continuing operations is summarized as follows:

(In millions)
Current:

Federal
State
Non-U.S.

Deferred:
Federal
State
Non-U.S.

Income tax expense

2013
454
220
674

2012
644
197
841

2011
137
200
337

2013

2012

2011

23
10
56
89

91
13
(17)
87
176

40
9
29
78

169
23
(10)
182
260

(23)
15
29
21

67
1
6
74
95

The current federal and state provisions for 2012 and 2011 included $25 million and $37 million, respectively, of tax related to the
sale of certain leveraged leases in the Finance segment for which we had previously recorded significant deferred tax liabilities.

71 Textron Inc. Annual Report • 2013

The following table reconciles the federal statutory income tax rate to our effective income tax rate for continuing operations:

Federal statutory income tax rate
Increase (decrease) in taxes resulting from:

State income taxes
Non-U.S. tax rate differential and foreign tax credits
Research credit
Other, net
Effective rate

2013
35.0%

2.4
(7.2)
(3.8)
(0.3)
26.1%

2012
35.0%

2.2
(5.4)
—
(0.9)
30.9%

2011
35.0%

3.1
(9.4)
(2.5)
1.9
28.1%

The amount of income taxes we pay is subject to ongoing audits by U.S. federal, state and non-U.S. tax authorities, which may
result in proposed assessments. Our estimate for the potential outcome for any uncertain tax issue is highly judgmental. We
assess our income tax positions and record tax benefits for all years subject to examination based upon management’s evaluation
of the facts, circumstances and information available at the reporting date. For those tax positions for which it is more likely than
not that a tax benefit will be sustained, we record the largest amount of tax benefit with a greater than 50% likelihood of being
realized upon settlement with a taxing authority that has full knowledge of all relevant information. Interest and penalties are
accrued, where applicable. If we do not believe that it is not more likely than not that a tax benefit will be sustained, no tax benefit
is recognized.

Our future results may include favorable or unfavorable adjustments to our estimated tax liabilities due to settlement of income tax
examinations, new regulatory or judicial pronouncements, expiration of statutes of limitations or other relevant events. As a result,
our effective tax rate may fluctuate significantly on a quarterly and annual basis.

Our unrecognized tax benefits represent tax positions for which reserves have been established. Unrecognized state tax benefits
and interest related to unrecognized tax benefits are reflected net of applicable tax benefits. A reconciliation of our unrecognized
tax benefits, excluding accrued interest, is as follows:

(In millions)
Balance at beginning of year
Additions for tax positions related to current year
Additions for tax positions of prior years
Reductions for tax positions of prior years
Reductions for expiration of statute of limitations and settlements
Balance at end of year

December 28,
2013
290
15
1
(17)
(5)
284

December 29,
2012
294
5
2
(3)
(8)
290

At both December 28, 2013 and December 29, 2012, approximately $204 million of these unrecognized tax benefits, if recognized,
would favorably affect our effective tax rate in a future period. The remaining $80 million in unrecognized tax benefits were
related to discontinued operations.

It is reasonably possible that within the next 12 months our unrecognized tax benefits, exclusive of interest, may decrease in the
range of $0 to $213 million, as a result of the conclusion of audits and any related appeals or review processes, the expiration of
statutes of limitations and additional worldwide uncertain tax positions. This potential decrease primarily relates to uncertainties
with respect to prior dispositions and research tax credits. However, based on the process of finalizing audits and any required
review process by relevant authorities, it is difficult to estimate the timing and amount of potential changes to our unrecognized
tax benefits. Although the outcome of these matters cannot be determined, we believe adequate provision has been made for any
potential unfavorable financial statement impact.

In the normal course of business, we are subject to examination by taxing authorities throughout the world, including major
jurisdictions such as Canada, China, Germany, Japan, Mexico and the U.S. With few exceptions, we no longer are subject to U.S.
federal, state and local income tax examinations for years before 1997. We are no longer subject to non-U.S. income tax
examinations in our major jurisdictions for years before 2005.

During 2013, 2012 and 2011, we recognized net tax-related interest expense totaling approximately $6 million, $9 million and $10
million, respectively, in the Consolidated Statements of Operations. At December 28, 2013 and December 29, 2012, we had a total
of $126 million and $134 million, respectively, of net accrued interest expense included in our Consolidated Balance Sheets.

Textron Inc. Annual Report • 2013

The tax effects of temporary differences that give rise to significant portions of our net deferred tax assets and liabilities are as
follows:

(In millions)
Deferred tax assets

Obligation for pension and postretirement benefits
Accrued expenses*
Deferred compensation
Loss carryforwards
Allowance for credit losses
Inventory
Deferred income
Valuation allowance on finance receivables held for sale
Other, net
Total deferred tax assets

Valuation allowance for deferred tax assets

Deferred tax liabilities
Leasing transactions
Property, plant and equipment, principally depreciation
Prepaid pension and postretirement benefits
Amortization of goodwill and other intangibles
Total deferred tax liabilities

Net deferred tax asset
* Accrued expenses includes warranty and product maintenance reserves, self-insured liabilities and interest.

December 28,
2013

December 29,
2012

358
182
161
84
29
18
14
7
123
976
(166)
810

(184)
(174)
(143)
(109)
(610)
200

643
205
180
81
39
30
29
40
168
1,415
(165)
$ 1,250

(217)
(138)
—
(110)
(465)
785

We believe that our earnings during the periods when the temporary differences become deductible will be sufficient to realize the
related future income tax benefits. For those jurisdictions where the expiration date of tax carryforwards or the projected operating
results indicate that realization is not more than likely, a valuation allowance is provided.

The following table presents the breakdown between current and long-term net deferred tax assets:

(In millions)
Manufacturing group:
Other current assets
Other assets
Other liabilities
Finance group - Other liabilities
Net deferred tax asset

December 28,
2013

December 29,
2012

206
270
(147)
(129)
200

256
591
—
(62)
785

95
53
55

Our net operating loss and credit carryforwards at December 28, 2013 are as follows:

(In millions)
Non-U.S. net operating loss with no expiration
Non-U.S. net operating loss expiring through 2033
State net operating loss and tax credits, net of tax benefits, expiring through 2033

The undistributed earnings of our non-U.S. subsidiaries approximated $778 million at December 28, 2013. We consider the
undistributed earnings to be indefinitely reinvested; therefore, we have not provided a deferred tax liability for any residual U.S.
tax that may be due upon repatriation of these earnings. Because of the effect of U.S. foreign tax credits, it is not practicable to
estimate the amount of tax that might be payable on these earnings in the event they no longer are indefinitely reinvested.

73 Textron Inc. Annual Report • 2013

Note 13. Contingencies and Commitments

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.

In the ordinary course of business, we enter into standby letter of credit agreements and surety bonds with financial institutions to
meet various performance and other obligations. These outstanding letter of credit arrangements and surety bonds aggregated to
approximately $298 million and $323 million at December 28, 2013 and December 29, 2012, respectively.

Environmental Remediation
As with other industrial enterprises engaged in similar businesses, we are involved in a number of remedial actions under various
federal and state laws and regulations relating to the environment that impose liability on companies to clean up, or contribute to
the cost of cleaning up, sites on which hazardous wastes or materials were disposed or released. Our accrued environmental
liabilities relate to installation of remediation systems, disposal costs, U.S. Environmental Protection Agency oversight costs, legal
fees, and operating and maintenance costs for both currently and formerly owned or operated facilities. Circumstances that can
affect the reliability and precision of the accruals include the identification of additional sites, environmental regulations, level of
cleanup required, technologies available, number and financial condition of other contributors to remediation and the time period
over which remediation may occur. We believe that any changes to the accruals that may result from these factors and
uncertainties will not have a material effect on our financial position or results of operations.

Based upon information currently available, we estimate that our potential environmental liabilities are within the range of $40
million to $170 million. At December 28, 2013, environmental reserves of approximately $74 million have been established to
address these specific estimated liabilities. We estimate that we will likely pay our accrued environmental remediation liabilities
over the next five to ten years and have classified $21 million as current liabilities. Expenditures to evaluate and remediate
contaminated sites approximated $12 million, $15 million and $9 million in 2013, 2012 and 2011, respectively.

Leases
Rental expense approximated $95 million, $97 million and $93 million in 2013, 2012 and 2011, respectively. Future minimum
rental commitments for noncancelable operating leases in effect at December 28, 2013 approximated $64 million for 2014, $46
million for 2015, $36 million for 2016, $28 million for 2017, $21 million for 2018 and a total of $148 million thereafter.

Note 14. Supplemental Cash Flow Information

We have made the following cash payments:

(In millions)
Interest paid:

Manufacturing group
Finance group

Net taxes paid /(received):
Manufacturing group
Finance group

2013

2012

2011

124
46

223
(49)

135
64

(7)
43

135
89

30
(65)

Cash paid for interest by the Finance group included amounts paid to the Manufacturing group of $11 million and $26 million in
2012 and 2011, respectively. Cash paid for interest by the Finance group to the Manufacturing group was not significant in 2013.

In 2012, net taxes paid by the Finance group included a payment of $111 million primarily from a settlement related to the IRS’s
challenge of tax deductions claimed in prior years for certain leveraged lease transactions.

Textron Inc. Annual Report • 2013

Note 15. Segment and Geographic Data

We operate in, and report financial information for, the following five business segments: Cessna, Bell, Textron Systems,
Industrial and Finance. The accounting policies of the segments are the same as those described in Note 1.

Cessna products include Citation jets, Caravan single-engine utility turboprops, single-engine utility and high-performance piston
aircraft, and aftermarket services sold to a diverse base of corporate and individual buyers.

Bell products include military and commercial helicopters, tiltrotor aircraft and related spare parts and services. Bell supplies
military helicopters and, in association with The Boeing Company, military tiltrotor aircraft, and aftermarket services to the U.S.
and non-U.S. governments. Bell also supplies commercial helicopters and aftermarket services to corporate, offshore petroleum
exploration and development, utility, charter, police, fire, rescue, emergency medical helicopter operators and foreign
governments.

Textron Systems products include unmanned aircraft systems, marine and land systems, weapons and sensors and a variety of
defense and aviation mission support products and services primarily for U.S. and non-U.S. governments. In December 2013, we
acquired two flight simulation and aircraft training product businesses.

Industrial products and markets include the following:

• Kautex products include blow-molded plastic fuel systems, windshield and headlamp washer systems, selective catalytic
reduction systems and engine camshafts that are marketed primarily to automobile original equipment manufacturers, as
well as plastic bottles and containers for various uses;

• Greenlee products include powered equipment, electrical test and measurement instruments, mechanical and hydraulic
tools, cable connectors, and
the construction, maintenance,
fiber optic assemblies, principally used
telecommunications, data communications, utility and plumbing industries. During 2013, we acquired two businesses, a
manufacturer of underground and aerial transmission and distribution products, and a designer and manufacturer of power
utility products; and

• E-Z-GO and Jacobsen products include golf cars; off-road, utility and light transportation vehicles; professional turf-
maintenance equipment and specialized turf-care vehicles that are marketed primarily to golf courses, resort communities,
municipalities, sporting venues, consumers, and commercial and industrial users.

The Finance segment provides commercial loans and leases primarily for new Cessna aircraft and Bell helicopters as well as pre-
owned Cessna aircraft and Bell helicopters on a limited basis.

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 along with intercompany interest expense. Provisions for losses on finance receivables
involving the sale or lease of our products are recorded by the selling manufacturing segment when our Finance group has recourse
to the Manufacturing group.

Our revenues by segment, along with a reconciliation of segment profit (loss) to income from continuing operations before income
taxes, are as follows:

Revenues
2012

2013

2011

$ 2,784 $ 3,111 $ 2,990 $
3,525
1,872
2,785
103
$ 12,104 $ 12,237 $ 11,275 $

4,274
1,737
2,900
215

4,511
1,665
3,012
132

Segment Profit (Loss)

2012

2013
82 $
(48) $
639
573
132
147
215
242
64
49
963 $ 1,132 $
(148)
(166)
(143)
(123)
841 $
674 $

2011
60
521
141
202
(333)
591
(114)
(140)
337

(In millions)
Cessna
Bell
Textron Systems
Industrial
Finance
Total
Corporate expenses and other, net
Interest expense, net for Manufacturing group
Income from continuing operations before income taxes

75 Textron Inc. Annual Report • 2013

Revenues by major product type are summarized below:

(In millions)
Rotor aircraft
Fixed-wing aircraft
Unmanned aircraft systems, armored vehicles, precision weapons and other
Fuel systems and functional components
Powered equipment, testing and measurement instruments
Golf, turf-care, and light transportation vehicles
Finance
Total

2013

$ 4,511
2,784
1,665
1,853
446
713
132
$ 12,104

Revenues

2012

$ 4,274
3,111
1,737
1,842
398
660
215
$ 12,237

2011
$ 3,525
2,990
1,872
1,823
402
560
103
$ 11,275

Our revenues included sales to the U.S. Government of approximately $3.7 billion, $3.6 billion and $3.5 billion in 2013, 2012 and
2011, respectively, primarily in the Bell and Textron Systems segments.

Other information by segment is provided below:

(In millions)
Cessna
Bell
Textron Systems
Industrial
Finance
Corporate
Total

Assets

Capital Expenditures

Depreciation and Amortization

December 28,
2013

December 29,
2012

$ 2,260 $ 2,224 $
2,399
1,987
1,755
2,322
2,346
$ 12,944 $ 13,033 $

2,899
2,106
1,956
1,725
1,998

2013

72 $
197
66
89
—
20
444 $

2012

93 $
172
108
97
—
10
480 $

2011
101 $
184
37
94
—
7
423 $

2013

87 $
116
89
72
18
7
389 $

2012
102 $
102
75
70
25
9
383 $

2011
109
95
85
72
32
10
403

Geographic Data
Presented below is selected financial information of our continuing operations by geographic area:

Revenues*

Property, Plant and Equipment,
net**

2013

(In millions)
United States
Europe
Canada
Latin America and Mexico
Asia and Australia
Middle East and Africa
Total
* Revenues are attributed to countries based on the location of the customer.
** Property, plant and equipment, net are based on the location of the asset.

$ 7,512
1,535
375
878
1,111
693
$ 12,104

2012

2011

December 28,
2013

$ 7,586
1,655
447
893
1,264
392
$ 12,237

$ 7,138
1,577
289
820
1,032
419
$ 11,275

$ 1,701
288
101
45
80
—
$ 2,215

December 29,
2012
$ 1,644
275
106
43
82
—
$ 2,150

Textron Inc. Annual Report • 2013

Quarterly Data

(Unaudited)

2013

2012

(Dollars in millions, except per share amounts)

Revenues
Cessna
Bell
Textron Systems
Industrial
Finance

Total revenues

Segment profit
Cessna (a)
Bell
Textron Systems
Industrial
Finance

Total segment profit
Corporate expenses and other, net
Interest expense, net for Manufacturing group
Income tax expense

Income from continuing operations
Income (loss) from discontinued operations, net of income taxes

Net income

Basic earnings per share
Continuing operations
Discontinued operations

Basic earnings per share

708 $
949
429
727
42

560 $

593 $

923 $

1,025
422
801
31

1,162
405
711
33

1,375
409
773
26

669 $
994
377
755
61

763 $

778 $

1,056
389
756
55

1,075
400
683
64

901
1,149
571
706
35

2,855 $

2,839 $

2,904 $

3,506 $

2,856 $

3,019 $

3,000 $

3,362

(8) $

129
38
57
19

235
(55)
(37)
(28)

115
4

(50) $
135
34
79
15

213
(20)
(30)
(49)

114
(1)

(23) $
131
35
52
13

208
(34)
(29)
(47)

98
1

33 $

(6) $

35 $

30 $

178
40
54
2

307
(57)
(27)
(52)

171
(4)

145
35
73
12

259
(47)
(35)
(57)

120
(2)

152
40
61
22

310
(20)
(35)
(82)

173
(1)

165
21
38
28

282
(38)
(35)
(67)

142
9

119 $

113 $

99 $

167 $

118 $

172 $

151 $

0.42 $
0.02

0.41 $
(0.01)

0.35 $
—

0.60 $
(0.01)

0.43 $
(0.01)

0.61 $
—

0.51 $
0.03

0.44 $

0.40 $

0.35 $

0.59 $

0.42 $

0.61 $

0.54 $

23
177
36
43
2

281
(43)
(38)
(54)

146
2

148

0.52
0.01

0.53

Basic average shares outstanding (In thousands)

273,200

280,163 281,525 282,308

280,022

281,114 281,813

277,780

Diluted earnings per share
Continuing operations
Discontinued operations

Diluted earnings per share

0.40 $
0.01

0.40 $

—

0.35 $
—

0.60 $
(0.01)

0.41 $
(0.01)

0.58 $

—

0.48 $
0.03

0.41 $

0.40 $

0.35 $

0.59 $

0.40 $

0.58 $

0.51 $

0.50
0.01

0.51

Diluted average shares outstanding (In thousands)

288,978

283,824

281,710

282,707

294,632

295,547

296,920

291,562

Segment profit margins
Cessna
Bell
Textron Systems
Industrial
Finance

Segment profit margin

(1.1)%
13.6
8.9
7.8
45.2

8.2%

(8.9)%
13.2
8.1
9.9
48.4

7.5%

(3.9)%
11.3
8.6
7.3
39.4

7.2%

3.6%

12.9
9.8
7.0
7.7

(0.9)%
14.6
9.3
9.7
19.7

4.6%

3.9%

2.6%

14.4
10.3
8.1
40.0

15.3
5.3
5.6
43.8

15.4
6.3
6.1
5.7

8.8%

9.1%

10.3%

9.4%

8.4%

Common stock information
26.75
Price range: High
22.84
Low
Dividends declared per share
0.02
(a) The second quarter of 2013 included $28 million in severance costs. The fourth quarter of 2012 included a $27 million charge related to an

29.81 $
25.36 $
0.02 $

31.30 $
23.94 $
0.02 $

30.22 $
24.87 $
0.02 $

28.80 $
22.15 $
0.02 $

29.18 $
21.97 $
0.02 $

28.29 $
18.37 $
0.02 $

37.43 $
26.17 $
0.02 $

$
$
$

award against Cessna in an arbitration proceeding.

77 Textron Inc. Annual Report • 2013

Schedule II — Valuation and Qualifying Accounts

(In millions)
Allowance for doubtful accounts
Balance at beginning of year

Charged to costs and expenses
Deductions from reserves*

Balance at end of year
Inventory FIFO reserves
Balance at beginning of year

Charged to costs and expenses
Deductions from reserves*

2013

2012

2011

19
7
(4)
22

136
54
(40)
150

18
4
(3)
19

134
42
(40)
136

20
7
(9)
18

133
35
(34)
134

Balance at end of year
* Deductions primarily include amounts written off on uncollectable accounts (less recoveries), inventory disposals and

currency translation adjustments.

Textron Inc. Annual Report • 2013

Item 9. Changes In and Disagreements With Accountants on Accounting and Financial Disclosure

None.

Item 9A. Controls and Procedures

Disclosure Controls and Procedures — We have carried out an evaluation, under the supervision and with the participation of our
management, including our Chairman, President and Chief Executive Officer (CEO) and our Executive Vice President and Chief
Financial Officer (CFO), of the effectiveness of the design and operation of our disclosure controls and procedures (as defined in
Rules 13a-15(e) and 15d-15(e) under the Securities Exchange Act of 1934, as amended (the “Act”)) as of the end of the fiscal year
covered by this report. Based upon that evaluation, our CEO and CFO concluded that our disclosure controls and procedures are
effective in providing reasonable assurance that (a) the information required to be disclosed by us in the reports that we file or
submit under the Act is recorded, processed, summarized and reported within the time periods specified in the Securities and
Exchange Commission’s rules and forms, and (b) such information is accumulated and communicated to our management,
including our CEO and CFO, as appropriate to allow timely decisions regarding required disclosure.

Report of Management — See page 40.

Report of Independent Registered Public Accounting Firm on Internal Control over Financial Reporting — See page 41.

Changes in Internal Controls — There have been no changes in our internal control over financial reporting during the fourth
quarter of the fiscal year covered by this report that have materially affected, or are reasonably likely to materially affect, our
internal control over financial reporting.

Item 10. Directors, Executive Officers and Corporate Governance

PART III

The information appearing under “ELECTION OF DIRECTORS— Nominees for Director,” “—The Board of Directors—
Corporate Governance,” “—The Board of Directors— Code of Ethics,” “–Board Committees— Audit Committee,” and
“SECTION 16(a) BENEFICIAL OWNERSHIP REPORTING COMPLIANCE” in the Proxy Statement for our Annual Meeting of
Shareholders to be held on April 23, 2014 is incorporated by reference into this Annual Report on Form 10-K.

Information regarding our executive officers is contained in Part I of this Annual Report on Form 10-K.

Item 11. Executive Compensation

The information appearing under “ELECTION OF DIRECTORS — The Board of Directors-- Compensation of Directors,”
“ELECTION OF DIRECTORS — Board Committees-- Compensation Committee Interlocks and Insider Participation,”
“COMPENSATION COMMITTEE REPORT,” “COMPENSATION DISCUSSION AND ANALYSIS” and “EXECUTIVE
COMPENSATION” in the Proxy Statement for our Annual Meeting of Shareholders to be held on April 23, 2014 is incorporated
by reference into this Annual Report on Form 10-K.

Item 12. Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters

The information appearing under “SECURITY OWNERSHIP” and “EXECUTIVE COMPENSATION – Equity Compensation
Plan Information” in the Proxy Statement for our Annual Meeting of Shareholders to be held on April 23, 2014 is incorporated by
reference into this Annual Report on Form 10-K.

Item 13. Certain Relationships and Related Transactions and Director Independence

The information appearing under “ELECTION OF DIRECTORS — The Board of Directors--Director Independence” and
“EXECUTIVE COMPENSATION — Transactions with Related Persons” in the Proxy Statement for our Annual Meeting of
Shareholders to be held on April 23, 2014 is incorporated by reference into this Annual Report on Form 10-K.

79 Textron Inc. Annual Report • 2013

Item 14. Principal Accountant Fees and Services

The information appearing under “RATIFICATION OF APPOINTMENT OF INDEPENDENT REGISTERED PUBLIC
ACCOUNTING FIRM — Fees to Independent Auditors” in the Proxy Statement for our Annual Meeting of Shareholders to be
held on April 23, 2014 is incorporated by reference into this Annual Report on Form 10-K.

Item 15. Exhibits and Financial Statement Schedules

Financial Statements and Schedules — See Index on Page 39.

PART IV

Exhibits

3.1A

3.1B

3.2

4.1

NOTE:

10.1A

10.1B

10.1C

10.1D

10.1E

10.1F

Restated Certificate of Incorporation of Textron as filed with the Secretary of State of Delaware on April 29,
2010. Incorporated by reference to Exhibit 3.1 to Textron’s Quarterly Report on Form 10-Q for the fiscal
quarter ended April 3, 2010.

Certificate of Amendment of Restated Certificate of Incorporation of Textron Inc., filed with the Secretary of
State of Delaware on April 27, 2011. Incorporated by reference to Exhibit 3.1 to Textron’s Quarterly Report
on Form 10-Q for the fiscal quarter ended April 2, 2011.

Amended and Restated By-Laws of Textron Inc., effective April 28, 2010 and further amended April 27,
2011 and July 23, 2013. Incorporated by reference to Exhibit 3.2 to Textron’s Quarterly Report on Form 10-
Q for the fiscal quarter ended June 29, 2013.

Support Agreement dated as of May 25, 1994, between Textron Inc. and Textron Financial Corporation.
Incorporated by reference to Exhibit 4.1 to Textron’s Annual Report on Form 10-K for the fiscal year ended
December 31, 2011.

Instruments defining the rights of holders of certain issues of long-term debt of Textron have not been filed
as exhibits because the authorized principal amount of any one of such issues does not exceed 10% of the
total assets of Textron and its subsidiaries on a consolidated basis. Textron agrees to furnish a copy of each
such instrument to the Commission upon request.

Exhibits 10.1 through 10.16 below are management contracts or compensatory plans, contracts or
agreements.

Textron Inc. 2007 Long-Term Incentive Plan (Amended and Restated as of April 28, 2010). Incorporated by
reference to Exhibit 10.1 to Textron’s Quarterly Report on Form 10-Q for the fiscal quarter ended March 31,
2012.

Form of Non-Qualified Stock Option Agreement. Incorporated by reference to Exhibit 10.2 to Textron’s
Quarterly Report on Form 10-Q for the fiscal quarter ended June 30, 2007.

Form of Incentive Stock Option Agreement. Incorporated by reference to Exhibit 10.3 to Textron’s Quarterly
Report on Form 10-Q for the fiscal quarter ended June 30, 2007.

Form of Restricted Stock Unit Grant Agreement. Incorporated by reference to Exhibit 10.4 to Textron’s
Quarterly Report on Form 10-Q for the fiscal quarter ended June 30, 2007.

Form of Restricted Stock Unit Grant Agreement with Dividend Equivalents. Incorporated by reference to
Exhibit 10.2 to Textron’s Quarterly Report on Form 10-Q for the fiscal quarter ended March 29, 2008.

Form of Cash-Settled Restricted Stock Unit Grant Agreement with Dividend Equivalents. Incorporated by
reference to Exhibit 10.1G to Textron’s Annual Report on Form 10-K for the fiscal year ended January 3,
2009.

Textron Inc. Annual Report • 2013

10.1G

10.1H

10.2

10.3A

10.3B

10.3C

10.4A

10.4B

10.4C

10.5A

Form of Performance Share Unit Grant Agreement. Incorporated by reference to Exhibit 10.1H to Textron’s
Annual Report on Form 10-K for the fiscal year ended January 3, 2009.

Form of Performance Cash Unit Grant Agreement. Incorporated by reference to Exhibit 10.2 to Textron’s
Quarterly Report on Form 10-Q for the fiscal quarter ended July 4, 2009.

Textron Inc. Short-Term Incentive Plan (As amended and restated effective January 3, 2010). Incorporated
by reference to Exhibit 10.1 to Textron’s Quarterly Report on Form 10-Q for the fiscal quarter ended April 3,
2010.

Textron Inc. 1999 Long-Term Incentive Plan for Textron Employees (Amended and Restated Effective April
28, 2010). Incorporated by reference to Exhibit 10.1 to Textron’s Quarterly Report on Form 10-Q for the
fiscal quarter ended July 3, 2010.

Form of Non-Qualified Stock Option Agreement. Incorporated by reference to Exhibit 10.1 to Textron’s
Quarterly Report on Form 10-Q for the fiscal quarter ended July 3, 2004. (SEC File No. 001-05480)

Form of Incentive Stock Option Agreement. Incorporated by reference to Exhibit 10.2 to Textron’s Quarterly
Report on Form 10-Q for the fiscal quarter ended July 3, 2004. (SEC File No. 001-05480)

Textron Spillover Savings Plan, effective January 3, 2010, including Appendix A, Defined Contribution
Provisions of the Supplemental Benefits Plan for Textron Key Executives (As in effect before January 1,
2008). Incorporated by reference to Exhibit 10.3 to Textron’s Quarterly Report on Form 10-Q for the fiscal
quarter ended April 3, 2010.

Second Amendment to the Textron Spillover Savings Plan, dated December 21, 2012. Incorporated by
reference to Exhibit 10.4B to Textron’s Annual Report on Form 10-K for the fiscal year ended December 29,
2012.

Third Amendment to the Textron Spillover Savings Plan, dated October 7, 2013.

Textron Spillover Pension Plan, As Amended and Restated Effective January 3, 2010, including Appendix A
(as amended and restated effective January 3, 2010), Defined Benefit Provisions of the Supplemental
Benefits Plan for Textron Key Executives (As in effect before January 1, 2007). Incorporated by reference to
Exhibit 10.4 to Textron’s Quarterly Report on Form 10-Q for the fiscal quarter ended April 3, 2010.

10.5B

Amendments to the Textron Spillover Pension Plan, dated October 12, 2011. Incorporated by reference to

Exhibit 10.5B to Textron’s Annual Report on Form 10-K for the fiscal year ended December 31, 2011.

10.5C

10.6A

10.6B

10.7A

Second Amendment to the Textron Spillover Pension Plan, dated October 7, 2013.

Deferred Income Plan for Textron Executives, Effective January 3, 2010, including Appendix A, Provisions
of the Deferred Income Plan for Textron Key Executives (As in effect before January 1, 2008). Incorporated
by reference to Exhibit 10.2 to Textron’s Quarterly Report on Form 10-Q for the fiscal quarter ended April 3,
2010.

First Amendment to the Deferred Income Plan for Textron Executives, dated November 7, 2013.

Deferred Income Plan for Non-Employee Directors, As Amended and Restated Effective January 1, 2009,
including Appendix A, Prior Plan Provisions (As in effect before January 1, 2008). Incorporated by reference
to Exhibit 10.9 to Textron’s Annual Report on Form 10-K for the fiscal year ended January 3, 2009.

81 Textron Inc. Annual Report • 2013

10.7B

10.8A

10.8B

10.9

10.10

10.11A

10.11B

10.11C

10.11D

10.12A

10.12B

Amendment No. 1 to Deferred Income Plan for Non-Employee Directors, as Amended and Restated
Effective January 1, 2009, dated as of November 6, 2012. Incorporated by reference to Exhibit 10.8B to
Textron’s Annual Report on Form 10-K for the fiscal year ended December 29, 2012.

Severance Plan for Textron Key Executives, As Amended and Restated Effective January 1, 2010.
Incorporated by reference to Exhibit 10.10 to Textron’s Annual Report on Form 10-K for the fiscal year
ended January 2, 2010.

First Amendment to the Severance Plan for Textron Key Executives, dated October 26, 2010. Incorporated
by reference to Exhibit 10.10B to Textron’s Annual Report on Form 10-K for the fiscal year ended January
1, 2011.

Form of Indemnity Agreement between Textron and its executive officers. Incorporated by reference to
Exhibit A to Textron’s Proxy Statement for its Annual Meeting of Shareholders on April 29, 1987. (SEC File
No. 001-05480)

Form of Indemnity Agreement between Textron and its non-employee directors (approved by the
Nominating and Corporate Governance Committee of the Board of Directors on July 21, 2009 and entered
into with all non-employee directors, effective as of August 1, 2009). Incorporated by reference to Exhibit
10.1 to Textron’s Quarterly Report on Form 10-Q for the fiscal quarter ended October 3, 2009.

Letter Agreement between Textron and Scott C. Donnelly, dated June 26, 2008. Incorporated by reference to
Exhibit 10.1 to Textron’s Quarterly Report on Form 10-Q for the fiscal quarter ended June 28, 2008.

Amendment to Letter Agreement between Textron and Scott C. Donnelly, dated December 16, 2008,
together with Addendum No.1 thereto, dated December 23, 2008. Incorporated by reference to Exhibit
10.15B to Textron’s Annual Report on Form 10-K for the fiscal year ended January 3, 2009.

Agreement between Textron and Scott C. Donnelly, dated May 1, 2009, related to Mr. Donnelly’s personal
use of a portion of hangar space at T.F. Green Airport which is leased by Textron. Incorporated by reference
to Exhibit 10.1 to Textron’s Quarterly Report on Form 10-Q for the fiscal quarter ended July 4, 2009.

Hangar License and Services Agreement made and entered into on April 25, 2011 to be effective as of
December 5, 2010, between Textron Inc. and Mr. Donnelly’s limited liability company. Incorporated by
reference to Exhibit 10.1 to Textron’s Quarterly Report on Form 10-Q for the fiscal quarter ended April 2,
2011.

Letter Agreement between Textron and Frank Connor, dated July 27, 2009. Incorporated by reference to
Exhibit 10.2 to Textron’s Quarterly Report on Form 10-Q for the fiscal quarter ended October 3, 2009.

Hangar License and Services Agreement made and entered into on April 25, 2011 to be effective as of
December 5, 2010, between Textron Inc. and Mr. Connor’s limited liability company. Incorporated by
reference to Exhibit 10.2 to Textron’s Quarterly Report on Form 10-Q for the fiscal quarter ended April 2,
2011.

10.13

Letter Agreement between Textron and Cheryl H. Johnson, dated June 12, 2012. Incorporated by reference to

Exhibit 10.2 to Textron’s Quarterly Report on Form 10-Q for the fiscal quarter ended June 30, 2012.

10.14A

10.14B

Letter Agreement between Textron and E. Robert Lupone, dated December 22, 2011. Incorporated by
reference to Exhibit 10.17 to Textron’s Annual Report on Form 10-K for the fiscal year ended December 31,
2011.

Amendment to letter agreement between Textron and E. Robert Lupone, dated July 27, 2012. Incorporated
by reference to Exhibit 10.5 to Textron’s Quarterly Report on Form 10-Q for the fiscal quarter ended
September 29, 2012.

Textron Inc. Annual Report • 2013

10.15

10.16

10.17

10.18A

10.18B

10.18C

10.18D

10.18E

Director Compensation. Incorporated by reference to Exhibit 10.21 to Textron’s Annual Report on Form 10-
K for the fiscal year ended December 29, 2007. (SEC File No. 001-05480)

Form of Aircraft Time Sharing Agreement between Textron and its executive officers. Incorporated by
reference to Exhibit 10.3 to Textron’s Quarterly Report on Form 10-Q for the fiscal quarter ended September
27, 2008.

Credit Agreement, dated as of October 4, 2013, among Textron, the Lenders listed therein, JPMorgan Chase
Bank, N.A., as Administrative Agent, Citibank, N.A. and Bank of America, N.A., as Syndication Agents,
and The Bank of Tokyo-Mitsubishi UFJ, Ltd., as Documentation Agent. Incorporated by reference to
Exhibit 10.1 to Textron’s Current Report on Form 8-K filed on October 4, 2013.

Master Services Agreement between Textron Inc. and Computer Sciences Corporation dated October 27,
2004. Incorporated by reference to Exhibit 10.26 to Textron’s Annual Report on Form 10-K for the fiscal
year ended January 1, 2005. * (SEC File No. 001-05480)

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

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

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

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

10.19

Agreement and Plan of Merger among Beech Holdings, LLC, Sky Intermediate Merger Sub, LLC, Textron

Inc. and Textron Acquisition LLC, dated as of December 26, 2013.

10.20

12.1

12.2

31.1

31.2

32.1

32.2

Term Credit Agreement, dated as of January 24, 2014 Among Textron, JPMorgan Chase Bank, N.A., as
administrative agent, Citibank, N.A. and Bank of America, N.A., as syndication agents, The Bank of Tokyo-
Mitsubishi UFJ, Ltd., as documentation agent, and other lenders named therein.

Computation of ratio of income to fixed charges of Textron Inc.’s Manufacturing group.

Computation of ratio of income to fixed charges of Textron Inc., including all majority-owned subsidiaries.

Certain subsidiaries of Textron. Other subsidiaries, which considered in the aggregate do not constitute a
significant subsidiary, are omitted from such list.

Consent of Independent Registered Public Accounting Firm.

Power of attorney.

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

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

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

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

83 Textron Inc. Annual Report • 2013

101

The following materials from Textron Inc.’s Annual Report on Form 10-K for the year ended December 28,
2013, formatted in XBRL (eXtensible Business Reporting Language): (i) the Consolidated Statements of
Operations, (ii) the Consolidated Statements of Comprehensive Income (Loss), (iii) the Consolidated
Balance Sheets, (iv) the Consolidated Statements of Shareholders’ Equity, (v) the Consolidated Statements of
Cash Flows, (vi) the Notes to the Consolidated Financial Statements, and (vii) Schedule II – Valuation and
Qualifying Accounts.

* Confidential Treatment has been requested for portions of this document.

Textron Inc. Annual Report • 2013

Signatures

Pursuant to the requirement of Section 13 or 15(d) of the Securities Exchange Act of 1934, the registrant has duly caused this
Annual Report on Form 10-K to be signed on its behalf by the undersigned, thereunto duly authorized on this 14th day of February
2014.

TEXTRON INC.
Registrant

By:

/s/ Frank T. Connor
Frank T. Connor
Executive Vice President and Chief Financial Officer

85 Textron Inc. Annual Report • 2013

Pursuant to the requirements of the Securities Exchange Act of 1934, this Annual Report on Form 10-K has been signed below on
this 14th day of February 2014 by the following persons on behalf of the registrant and in the capacities indicated:

Name

Title

/s/ Scott C. Donnelly
Scott C. Donnelly

*
Kathleen M. Bader

*
R. Kerry Clark

*
James T. Conway

*
Ivor J. Evans

*
Lawrence K. Fish

*
Paul E. Gagné

*
Dain M. Hancock

*
Lord Powell of Bayswater KCMG

*
Lloyd G. Trotter

*
James L. Ziemer

/s/ Frank T. Connor
Frank T. Connor

/s/ Richard L. Yates
Richard L. Yates

*By:

/s/ Jayne M. Donegan
Jayne M. Donegan, Attorney-in-fact

Chairman, President and Chief Executive Officer

(principal executive officer)

Director

Executive Vice President and Chief Financial Officer

(principal financial officer)

Senior Vice President and Corporate Controller

(principal accounting officer)

Textron Inc. Annual Report • 2013

CORPORATE INFORMATION

Corporate Headquarters
Textron Inc.
40 Westminster Street
Providence, RI 02903
(401) 421-2800
www.textron.com

Annual Meeting
Textron’s annual meeting of shareholders will be held
on Wednesday, April 23, 2014, at 11 a.m. EDT at the
Omni Providence Hotel, 1 West Exchange Street, Providence,
RI, 02903.

Transfer Agent, Registrar and Dividend Paying Agent
For shareholder services such as change of address,
lost certificates or dividend checks, change in registered
ownership or the Dividend Reinvestment Plan,
write or call:

American Stock Transfer & Trust Company, LLC
Operations Center
6201 15th Avenue
Brooklyn, NY 11219
phone: (866) 621-2790
email: info@amstock.com

Stock Exchange Information
(Symbol: TXT)

Textron common stock is listed on the New York Stock Exchange.

Investor Relations
Textron Inc.
Investor Relations
40 Westminster Street
Providence, RI 02903

Investor Relations line:
phone: (401) 457-2288
News media phone line:
phone: (401) 457-2362

For more information, visit our web site at www.textron.com.

Company Publications and General Information
To receive a copy of Textron’s Forms 10-K and 10-Q, Proxy
Statement or Annual Report without charge, visit our web site
at www.textron.com or send a written request to Textron Investor
Relations at the address listed above. For the most recent
company news and earnings press releases, visit our web site
at www.textron.com.

Textron is an Equal Opportunity Employer.

Textron Board of Directors
To contact the Textron Board of Directors or to report concerns
or complaints about accounting, internal accounting controls
or auditing matters, you may write to Board of Directors,
Textron Inc., 40 Westminster Street, Providence, RI 02903;
call (866) 698-6655 or (401) 457-2269; or send an email
to textrondirectors@textron.com.

Textron Inc. Annual Report ‰ 2013

1 3

INNO

TION

Innovation Realized

It ends with a product. With talent,
hard work and commitment, we
put new products in the hands of
our customers. Here are some
of the innovative products we
delivered in 2013:

Kautex Next Generation
Carbon Canister™
meets the challenges
of more stringent
environmental
regulations.

Cessna TTx is the world’s
fastest commercially
produced ﬁ xed-gear
piston aircraft, made from
all-composite materials
and delivering advanced
technology and comfort.

Cushman Hauler
PRO™ is a silent,
zero-emissions
electric vehicle with
the range and power
once exclusive to gas-
powered machines.

Citation Sovereign+
is a visionary midsize
jet featuring state-of-
the-art cockpit, all-new
interior and extended
range.

Innovation Born

It starts with an idea. A group of
talented people then take this idea
to places that most of us can’t
imagine. Here are some of the
major innovations we
announced in 2013:

Bell Helicopter’s V-280
B
Valor is next generation
V
tiltrotor technology
that offers the defense
industry unparalleled
speed and agility for
tomorrow’s missions.

Bell Helicopter’s
505 Jet Ranger X TM
reclaims a market the
cco
company pioneered nearly
50 years ago, delivering a
550
n
new design and features
that customers want.

Scorpion pushes the
performance envelope
and redeﬁ nes what
it takes to own and
operate a military
tactical jet.

JJaannuarryy

FFeebbrrruuuaaarrryy

March

April

MMayy

June

July

August

September

October

NNNooovembeerrr

D
December

Bell Helicopter’s 412EPITM, announced in
March and delivered in December, offers
greater situational awareness and improved
performance in hot temperatures and at
higher altitudes.

Citation M2 is the upgrade
every jet-aspiring aviator dreams
of—with exceptional power and beauty in
an efﬁ cient, entry-level jet.

TEXTRON’S DIVERSE PRODUCT PORTFOLIO

BELL HELICOPTER

CESSNA

INDUSTRIAL

TEXTRON SYSTEMS

BELL-BOEING V-22 OSPREY

CESSNA CITATION X+

KAUTEX GENERATION II SCR SYSTEM™

COMMANDO ™ ELITE

BELL 429™

CESSNA CJ4

CUSHMAN TITAN HD™

SHIP-TO-SHORE CONNECTOR

BELL 412™

CESSNA CITATION LATITUDE

GREENLEE G3 TUGGER™

AEROSONDE®

BELL 407™

CESSNA TTX

E-Z-GO TXT™

MAST

BELL AH-1Z

CESSNA TURBO STATIONAIR

JACOBSEN LF510™

G-CLAW™

TEXTRON AIRLAND SCORPION JET

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40 WESTMINSTER STREET

PROVIDENCE, RI 02903

(401) 421-2800

WWW.TEXTRON.COM

T
E
X
T
R
O
N
2
0
1
3

A
N
N
U
A
L
R
E
P
O
R
T

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