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<SEC-DOCUMENT>0000217346-04-000076.txt : 20040810
<SEC-HEADER>0000217346-04-000076.hdr.sgml : 20040810
<ACCEPTANCE-DATETIME>20040810144819
ACCESSION NUMBER:		0000217346-04-000076
CONFORMED SUBMISSION TYPE:	10-Q
PUBLIC DOCUMENT COUNT:		10
CONFORMED PERIOD OF REPORT:	20040703
FILED AS OF DATE:		20040810

FILER:

	COMPANY DATA:	
		COMPANY CONFORMED NAME:			TEXTRON INC
		CENTRAL INDEX KEY:			0000217346
		STANDARD INDUSTRIAL CLASSIFICATION:	AIRCRAFT & PARTS [3720]
		IRS NUMBER:				050315468
		STATE OF INCORPORATION:			DE
		FISCAL YEAR END:			1231

	FILING VALUES:
		FORM TYPE:		10-Q
		SEC ACT:		1934 Act
		SEC FILE NUMBER:	001-05480
		FILM NUMBER:		04964229

	BUSINESS ADDRESS:	
		STREET 1:		40 WESTMINSTER ST
		CITY:			PROVIDENCE
		STATE:			RI
		ZIP:			02903
		BUSINESS PHONE:		4014212800

	MAIL ADDRESS:	
		STREET 1:		40 WESTMINSTER ST
		CITY:			PROVIDENCE
		STATE:			RI
		ZIP:			02903

	FORMER COMPANY:	
		FORMER CONFORMED NAME:	AMERICAN TEXTRON INC
		DATE OF NAME CHANGE:	19710510
</SEC-HEADER>
<DOCUMENT>
<TYPE>10-Q
<SEQUENCE>1
<FILENAME>tenq.htm
<TEXT>
<html>

<head>
<title>SECURITIES AND EXCHANGE COMMISSION</title>
</head>

<body>

<b>
<p ALIGN="CENTER">SECURITIES AND EXCHANGE COMMISSION</p>
</b>
<p ALIGN="CENTER">Washington, DC 20549</p>
<p ALIGN="CENTER">&nbsp;</p>
<p ALIGN="CENTER">_______________</p>
<p ALIGN="CENTER">&nbsp;</p>
<b><font SIZE="5">
<p ALIGN="CENTER">FORM 10&#45;Q</p>
</font></b>
<p ALIGN="CENTER">&nbsp;</p>
<div align="center">
  <center>
<table CELLSPACING="0" WIDTH="660">
  <tr>
    <td WIDTH="6%" VALIGN="TOP"><font SIZE="3">
      <p>[X]</font></td>
    <td WIDTH="94%" VALIGN="TOP"><font SIZE="3">
      <p>QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15 (d) OF THE SECURITIES
      EXCHANGE ACT OF 1934<br>
      For the fiscal quarter ended July 3, 2004</font></td>
  </tr>
  <tr>
    <td WIDTH="6%" VALIGN="TOP">&nbsp;</td>
    <td WIDTH="94%" VALIGN="TOP"><font SIZE="3">
      <p>OR</font></td>
  </tr>
  <tr>
    <td WIDTH="6%" VALIGN="TOP"><font SIZE="3">
      <p>[&#160;&#160;]</font></td>
    <td WIDTH="94%" VALIGN="TOP"><font SIZE="3">
      <p>TRANSITION REPORT PURSUANT TO SECTION 13 OR 15 (d) OF THE SECURITIES
      EXCHANGE ACT OF 1934</font></td>
  </tr>
</table>
  </center>
</div>
<p ALIGN="CENTER">&nbsp;</p>
<p ALIGN="CENTER">Commission file number 1&#45;5480</p>
<p ALIGN="CENTER">&nbsp;</p>
<p ALIGN="CENTER">_______________</p>
<p ALIGN="CENTER">&nbsp;</p>
<b><font SIZE="5">
<p ALIGN="CENTER">TEXTRON INC.</p>
</font></b>
<p ALIGN="CENTER">&nbsp;</p>
<i>
<p ALIGN="CENTER">(Exact name of registrant as specified in its charter)</p>
</i>
<p ALIGN="CENTER">&nbsp;</p>
<p ALIGN="CENTER">_______________</p>
<p ALIGN="CENTER">&nbsp;</p>
<div align="center">
  <center>
<table CELLSPACING="0" WIDTH="683">
  <tr>
    <td WIDTH="46%" VALIGN="TOP" HEIGHT="54">
      <p ALIGN="CENTER">Delaware<br>
      (State or other jurisdiction of<br>
      incorporation or organization)</td>
    <td WIDTH="18%" VALIGN="TOP" HEIGHT="54">
      <p></p>
    </td>
    <td WIDTH="36%" VALIGN="TOP" HEIGHT="54">
      <p>05&#45;0315468<br>
      (I.R.S. Employer Identification No.)</td>
  </tr>
</table>
  </center>
</div>
<p ALIGN="CENTER">&nbsp;</p>
<p ALIGN="CENTER">40 Westminster Street, Providence, RI 02903<br>
401&#45;421&#45;2800<br>
<i>(Address and telephone number of principal executive offices)</p>
</i>
<p ALIGN="CENTER">&nbsp;</p>
<p ALIGN="CENTER">_______________</p>
<p ALIGN="CENTER">&nbsp;</p>
<p ALIGN="JUSTIFY">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.</p>
<p ALIGN="JUSTIFY">&nbsp;</p>
<p ALIGN="RIGHT">&nbsp;
<div align="right">
<table CELLSPACING="0" CELLPADDING="1" WIDTH="643">
  <tr>
    <td VALIGN="TOP">
      <p ALIGN="RIGHT">Yes <u>&#160;X&#160;</u> No<u>&#160;&#160;&#160;</u></td>
  </tr>
</table>
</div>
<p ALIGN="JUSTIFY">&nbsp;</p>
<p ALIGN="JUSTIFY">&nbsp;</p>
<p ALIGN="CENTER">Common stock outstanding at July 31, 2004 &#45;
138,595,235 shares</p>
<font SIZE="3">
<p ALIGN="right">2.</p>
<b>
<p ALIGN="CENTER">PART I. FINANCIAL INFORMATION</p>
<p>Item 1.</b></font><font SIZE="3"> <u>FINANCIAL STATEMENTS</p>
</u><b>
<p ALIGN="CENTER">TEXTRON INC.<br>
Consolidated <a NAME="_Hlk3276990">Statements of </a>Operations (unaudited)</b><br>
(Dollars in millions, except per share amounts)</p>
</font>
<div align="center">
  <center>
<table CELLSPACING="1" CELLPADDING="1" WIDTH="704">
  <tr>
    <td WIDTH="46%" VALIGN="TOP"><b><font SIZE="2">
      <p><br>
      </font></b></td>
    <td WIDTH="26%" VALIGN="TOP" COLSPAN="4"><font SIZE="2">
      <p ALIGN="CENTER"><br>
      Three Months Ended</font></td>
    <td WIDTH="26%" VALIGN="TOP" COLSPAN="4"><font SIZE="2">
      <p ALIGN="CENTER"><br>
      Six Months Ended</font></td>
    <td WIDTH="1%" VALIGN="TOP"><font SIZE="2">
      <p ALIGN="CENTER"><br>
      </font></td>
  </tr>
  <tr>
    <td WIDTH="46%" VALIGN="TOP" style="border-top-style: solid; border-top-width: 1; border-bottom-style: solid; border-bottom-width: 1">&nbsp;</td>
    <td WIDTH="13%" VALIGN="TOP" COLSPAN="2" style="border-top-style: solid; border-top-width: 1; border-bottom-style: solid; border-bottom-width: 1"><font SIZE="2">
      <p ALIGN="CENTER">July 3,<br>
      2004</font></td>
    <td WIDTH="13%" VALIGN="TOP" COLSPAN="2" style="border-top-style: solid; border-top-width: 1; border-bottom-style: solid; border-bottom-width: 1"><font SIZE="2">
      <p ALIGN="CENTER">June 28,<br>
      2003</font></td>
    <td WIDTH="13%" VALIGN="TOP" COLSPAN="2" style="border-top-style: solid; border-top-width: 1; border-bottom-style: solid; border-bottom-width: 1"><font SIZE="2">
      <p ALIGN="CENTER">July 3,<br>
      2004</font></td>
    <td WIDTH="13%" VALIGN="TOP" COLSPAN="2" style="border-top-style: solid; border-top-width: 1; border-bottom-style: solid; border-bottom-width: 1"><font SIZE="2">
      <p ALIGN="CENTER">June 28,<br>
      2003</font></td>
    <td WIDTH="1%" VALIGN="TOP">&nbsp;</td>
  </tr>
  <tr>
    <td WIDTH="46%" VALIGN="TOP"><b><font SIZE="2">
      <p>Revenues</font></b></td>
    <td WIDTH="3%" VALIGN="TOP">&nbsp;</td>
    <td WIDTH="10%" VALIGN="TOP">&nbsp;</td>
    <td WIDTH="3%" VALIGN="TOP">&nbsp;</td>
    <td WIDTH="10%" VALIGN="TOP">&nbsp;</td>
    <td WIDTH="3%" VALIGN="TOP">&nbsp;</td>
    <td WIDTH="10%" VALIGN="TOP">&nbsp;</td>
    <td WIDTH="3%" VALIGN="TOP">&nbsp;</td>
    <td WIDTH="10%" VALIGN="TOP">&nbsp;</td>
    <td WIDTH="1%" VALIGN="TOP">&nbsp;</td>
  </tr>
  <tr>
    <td WIDTH="46%" VALIGN="TOP"><font SIZE="2">
      <p>Manufacturing revenues</font></td>
    <td WIDTH="3%" VALIGN="TOP"><font SIZE="2">
      <p ALIGN="RIGHT">$</font></td>
    <td WIDTH="10%" VALIGN="TOP"><font SIZE="2">
      <p style="margin-right: 20" align="right">2,410</font></td>
    <td WIDTH="3%" VALIGN="TOP"><font SIZE="2">
      <p ALIGN="RIGHT">$</font></td>
    <td WIDTH="10%" VALIGN="TOP"><font SIZE="2">
      <p style="margin-right: 20" align="right">2,388</font></td>
    <td WIDTH="3%" VALIGN="TOP"><font SIZE="2">
      <p ALIGN="RIGHT">$</font></td>
    <td WIDTH="10%" VALIGN="TOP"><font SIZE="2">
      <p style="margin-right: 20" align="right">4,630</font></td>
    <td WIDTH="3%" VALIGN="TOP"><font SIZE="2">
      <p ALIGN="RIGHT">$</font></td>
    <td WIDTH="10%" VALIGN="TOP"><font SIZE="2">
      <p style="margin-right: 20" align="right">4,647</font></td>
    <td WIDTH="1%" VALIGN="TOP">&nbsp;</td>
  </tr>
  <tr>
    <td WIDTH="46%" VALIGN="TOP"><font SIZE="2">
      <p>Finance revenues</font></td>
    <td WIDTH="3%" VALIGN="TOP">&nbsp;</td>
    <td WIDTH="10%" VALIGN="TOP"><font SIZE="2">
      <p style="margin-right: 20" align="right">137</font></td>
    <td WIDTH="3%" VALIGN="TOP">&nbsp;</td>
    <td WIDTH="10%" VALIGN="TOP"><font SIZE="2">
      <p style="margin-right: 20" align="right">142</font></td>
    <td WIDTH="3%" VALIGN="TOP">&nbsp;</td>
    <td WIDTH="10%" VALIGN="TOP"><font SIZE="2">
      <p style="margin-right: 20" align="right">271</font></td>
    <td WIDTH="3%" VALIGN="TOP">&nbsp;</td>
    <td WIDTH="10%" VALIGN="TOP"><font SIZE="2">
      <p style="margin-right: 20" align="right">282</font></td>
    <td WIDTH="1%" VALIGN="TOP">&nbsp;</td>
  </tr>
  <tr>
    <td WIDTH="46%" VALIGN="TOP" style="border-top-style: solid; border-top-width: 1; border-bottom-style: solid; border-bottom-width: 1"><font SIZE="2">
      <p>&#160;&#160;&#160;&#160;&#160;Total revenues</font></td>
    <td WIDTH="3%" VALIGN="TOP" style="border-top-style: solid; border-top-width: 1; border-bottom-style: solid; border-bottom-width: 1">&nbsp;</td>
    <td WIDTH="10%" VALIGN="TOP" style="border-top-style: solid; border-top-width: 1; border-bottom-style: solid; border-bottom-width: 1"><font SIZE="2">
      <p style="margin-right: 20" align="right">2,547</font></td>
    <td WIDTH="3%" VALIGN="TOP" style="border-top-style: solid; border-top-width: 1; border-bottom-style: solid; border-bottom-width: 1">&nbsp;</td>
    <td WIDTH="10%" VALIGN="TOP" style="border-top-style: solid; border-top-width: 1; border-bottom-style: solid; border-bottom-width: 1"><font SIZE="2">
      <p style="margin-right: 20" align="right">2,530</font></td>
    <td WIDTH="3%" VALIGN="TOP" style="border-top-style: solid; border-top-width: 1; border-bottom-style: solid; border-bottom-width: 1">&nbsp;</td>
    <td WIDTH="10%" VALIGN="TOP" style="border-top-style: solid; border-top-width: 1; border-bottom-style: solid; border-bottom-width: 1"><font SIZE="2">
      <p style="margin-right: 20" align="right">4,901</font></td>
    <td WIDTH="3%" VALIGN="TOP" style="border-top-style: solid; border-top-width: 1; border-bottom-style: solid; border-bottom-width: 1">&nbsp;</td>
    <td WIDTH="10%" VALIGN="TOP" style="border-top-style: solid; border-top-width: 1; border-bottom-style: solid; border-bottom-width: 1"><font SIZE="2">
      <p style="margin-right: 20" align="right">4,929</font></td>
    <td WIDTH="1%" VALIGN="TOP">&nbsp;</td>
  </tr>
  <tr>
    <td WIDTH="46%" VALIGN="TOP"><b><font SIZE="2">
      <p>Costs, expenses and other</font></b></td>
    <td WIDTH="3%" VALIGN="TOP">&nbsp;</td>
    <td WIDTH="10%" VALIGN="TOP">
      <p style="margin-right: 20" align="right">&nbsp;</p>
    </td>
    <td WIDTH="3%" VALIGN="TOP">&nbsp;</td>
    <td WIDTH="10%" VALIGN="TOP">
      <p style="margin-right: 20" align="right">&nbsp;</p>
    </td>
    <td WIDTH="3%" VALIGN="TOP">&nbsp;</td>
    <td WIDTH="10%" VALIGN="TOP">
      <p style="margin-right: 20" align="right">&nbsp;</p>
    </td>
    <td WIDTH="3%" VALIGN="TOP">&nbsp;</td>
    <td WIDTH="10%" VALIGN="TOP">
      <p style="margin-right: 20" align="right">&nbsp;</p>
    </td>
    <td WIDTH="1%" VALIGN="TOP">&nbsp;</td>
  </tr>
  <tr>
    <td WIDTH="46%" VALIGN="TOP"><font SIZE="2">
      <p>Cost of sales</font></td>
    <td WIDTH="3%" VALIGN="TOP">&nbsp;</td>
    <td WIDTH="10%" VALIGN="TOP"><font SIZE="2">
      <p style="margin-right: 20" align="right">1,957</font></td>
    <td WIDTH="3%" VALIGN="TOP">&nbsp;</td>
    <td WIDTH="10%" VALIGN="TOP"><font SIZE="2">
      <p style="margin-right: 20" align="right">1,959</font></td>
    <td WIDTH="3%" VALIGN="TOP">&nbsp;</td>
    <td WIDTH="10%" VALIGN="TOP"><font SIZE="2">
      <p style="margin-right: 20" align="right">3,792</font></td>
    <td WIDTH="3%" VALIGN="TOP">&nbsp;</td>
    <td WIDTH="10%" VALIGN="TOP"><font SIZE="2">
      <p style="margin-right: 20" align="right">3,821</font></td>
    <td WIDTH="1%" VALIGN="TOP">&nbsp;</td>
  </tr>
  <tr>
    <td WIDTH="46%" VALIGN="TOP"><font SIZE="2">
      <p>Selling and administrative</font></td>
    <td WIDTH="3%" VALIGN="TOP">&nbsp;</td>
    <td WIDTH="10%" VALIGN="TOP"><font SIZE="2">
      <p style="margin-right: 20" align="right">342</font></td>
    <td WIDTH="3%" VALIGN="TOP">&nbsp;</td>
    <td WIDTH="10%" VALIGN="TOP"><font SIZE="2">
      <p style="margin-right: 20" align="right">323</font></td>
    <td WIDTH="3%" VALIGN="TOP">&nbsp;</td>
    <td WIDTH="10%" VALIGN="TOP"><font SIZE="2">
      <p style="margin-right: 20" align="right">665</font></td>
    <td WIDTH="3%" VALIGN="TOP">&nbsp;</td>
    <td WIDTH="10%" VALIGN="TOP"><font SIZE="2">
      <p style="margin-right: 20" align="right">650</font></td>
    <td WIDTH="1%" VALIGN="TOP">&nbsp;</td>
  </tr>
  <tr>
    <td WIDTH="46%" VALIGN="TOP"><font SIZE="2">
      <p>Interest, net</font></td>
    <td WIDTH="3%" VALIGN="TOP">&nbsp;</td>
    <td WIDTH="10%" VALIGN="TOP"><font SIZE="2">
      <p style="margin-right: 20" align="right">59</font></td>
    <td WIDTH="3%" VALIGN="TOP">&nbsp;</td>
    <td WIDTH="10%" VALIGN="TOP"><font SIZE="2">
      <p style="margin-right: 20" align="right">68</font></td>
    <td WIDTH="3%" VALIGN="TOP">&nbsp;</td>
    <td WIDTH="10%" VALIGN="TOP"><font SIZE="2">
      <p style="margin-right: 20" align="right">123</font></td>
    <td WIDTH="3%" VALIGN="TOP">&nbsp;</td>
    <td WIDTH="10%" VALIGN="TOP"><font SIZE="2">
      <p style="margin-right: 20" align="right">136</font></td>
    <td WIDTH="1%" VALIGN="TOP">&nbsp;</td>
  </tr>
  <tr>
    <td WIDTH="46%" VALIGN="TOP"><font SIZE="2">
      <p>Provision for losses on finance receivables</font></td>
    <td WIDTH="3%" VALIGN="TOP">&nbsp;</td>
    <td WIDTH="10%" VALIGN="TOP"><font SIZE="2">
      <p style="margin-right: 20" align="right">14</font></td>
    <td WIDTH="3%" VALIGN="TOP">&nbsp;</td>
    <td WIDTH="10%" VALIGN="TOP"><font SIZE="2">
      <p style="margin-right: 20" align="right">26</font></td>
    <td WIDTH="3%" VALIGN="TOP">&nbsp;</td>
    <td WIDTH="10%" VALIGN="TOP"><font SIZE="2">
      <p style="margin-right: 20" align="right">34</font></td>
    <td WIDTH="3%" VALIGN="TOP">&nbsp;</td>
    <td WIDTH="10%" VALIGN="TOP"><font SIZE="2">
      <p style="margin-right: 20" align="right">50</font></td>
    <td WIDTH="1%" VALIGN="TOP">&nbsp;</td>
  </tr>
  <tr>
    <td WIDTH="46%" VALIGN="TOP"><font SIZE="2">
      <p>Special charges</font></td>
    <td WIDTH="3%" VALIGN="TOP">&nbsp;</td>
    <td WIDTH="10%" VALIGN="TOP"><font SIZE="2">
      <p style="margin-right: 20" align="right">28</font></td>
    <td WIDTH="3%" VALIGN="TOP">&nbsp;</td>
    <td WIDTH="10%" VALIGN="TOP"><font SIZE="2">
      <p style="margin-right: 20" align="right">24</font></td>
    <td WIDTH="3%" VALIGN="TOP">&nbsp;</td>
    <td WIDTH="10%" VALIGN="TOP"><font SIZE="2">
      <p style="margin-right: 20" align="right">85</font></td>
    <td WIDTH="3%" VALIGN="TOP">&nbsp;</td>
    <td WIDTH="10%" VALIGN="TOP"><font SIZE="2">
      <p style="margin-right: 20" align="right">52</font></td>
    <td WIDTH="1%" VALIGN="TOP">&nbsp;</td>
  </tr>
  <tr>
    <td WIDTH="46%" VALIGN="TOP"><font SIZE="2">
      <p>Gain on sale of businesses, net</font></td>
    <td WIDTH="3%" VALIGN="TOP">&nbsp;</td>
    <td WIDTH="10%" VALIGN="TOP"><font SIZE="2">
      <p style="margin-right: 20" align="right">(7)</font></td>
    <td WIDTH="3%" VALIGN="TOP">&nbsp;</td>
    <td WIDTH="10%" VALIGN="TOP"><font SIZE="2">
      <p style="margin-right: 20" align="right">&#45;</font></td>
    <td WIDTH="3%" VALIGN="TOP">&nbsp;</td>
    <td WIDTH="10%" VALIGN="TOP"><font SIZE="2">
      <p style="margin-right: 20" align="right">(7)</font></td>
    <td WIDTH="3%" VALIGN="TOP">&nbsp;</td>
    <td WIDTH="10%" VALIGN="TOP"><font SIZE="2">
      <p style="margin-right: 20" align="right">(15)</font></td>
    <td WIDTH="1%" VALIGN="TOP">&nbsp;</td>
  </tr>
  <tr>
    <td WIDTH="46%" VALIGN="TOP" style="border-top-style: solid; border-top-width: 1; border-bottom-style: solid; border-bottom-width: 1"><font SIZE="2">
      <p>&#160;&#160;&#160;&#160;&#160;Total costs, expenses
      and other</font></td>
    <td WIDTH="3%" VALIGN="TOP" style="border-top-style: solid; border-top-width: 1; border-bottom-style: solid; border-bottom-width: 1">&nbsp;</td>
    <td WIDTH="10%" VALIGN="TOP" style="border-top-style: solid; border-top-width: 1; border-bottom-style: solid; border-bottom-width: 1"><font SIZE="2">
      <p style="margin-right: 20" align="right">2,393</font></td>
    <td WIDTH="3%" VALIGN="TOP" style="border-top-style: solid; border-top-width: 1; border-bottom-style: solid; border-bottom-width: 1">&nbsp;</td>
    <td WIDTH="10%" VALIGN="TOP" style="border-top-style: solid; border-top-width: 1; border-bottom-style: solid; border-bottom-width: 1"><font SIZE="2">
      <p style="margin-right: 20" align="right">2,400</font></td>
    <td WIDTH="3%" VALIGN="TOP" style="border-top-style: solid; border-top-width: 1; border-bottom-style: solid; border-bottom-width: 1">&nbsp;</td>
    <td WIDTH="10%" VALIGN="TOP" style="border-top-style: solid; border-top-width: 1; border-bottom-style: solid; border-bottom-width: 1"><font SIZE="2">
      <p style="margin-right: 20" align="right">4,692</font></td>
    <td WIDTH="3%" VALIGN="TOP" style="border-top-style: solid; border-top-width: 1; border-bottom-style: solid; border-bottom-width: 1">&nbsp;</td>
    <td WIDTH="10%" VALIGN="TOP" style="border-top-style: solid; border-top-width: 1; border-bottom-style: solid; border-bottom-width: 1"><font SIZE="2">
      <p style="margin-right: 20" align="right">4,694</font></td>
    <td WIDTH="1%" VALIGN="TOP">&nbsp;</td>
  </tr>
  <tr>
    <td WIDTH="46%" VALIGN="TOP"><font SIZE="2">
      <p>Income from continuing operations before income taxes<br>
      &#160;&#160;&#160;&#160;&#160;and distributions on
      preferred securities of subsidiary<br>
      &#160;&#160;&#160;&#160;&#160;trusts</font></td>
    <td WIDTH="3%" VALIGN="TOP"><font SIZE="2">
      <p ALIGN="RIGHT"><br>
      <br>
      </font></td>
    <td WIDTH="10%" VALIGN="TOP"><font SIZE="2">
      <p style="margin-right: 20" align="right"><br>
      <br>
      154</font></td>
    <td WIDTH="3%" VALIGN="TOP"><font SIZE="2">
      <p ALIGN="RIGHT"><br>
      <br>
      </font></td>
    <td WIDTH="10%" VALIGN="TOP"><font SIZE="2">
      <p style="margin-right: 20" align="right"><br>
      <br>
      130</font></td>
    <td WIDTH="3%" VALIGN="TOP"><font SIZE="2">
      <p ALIGN="RIGHT"><br>
      <br>
      </font></td>
    <td WIDTH="10%" VALIGN="TOP"><font SIZE="2">
      <p style="margin-right: 20" align="right"><br>
      <br>
      209</font></td>
    <td WIDTH="3%" VALIGN="TOP"><font SIZE="2">
      <p ALIGN="RIGHT"><br>
      <br>
      </font></td>
    <td WIDTH="10%" VALIGN="TOP"><font SIZE="2">
      <p style="margin-right: 20" align="right"><br>
      <br>
      235</font></td>
    <td WIDTH="1%" VALIGN="TOP"><font SIZE="2">
      <p><br>
      <br>
      </font></td>
  </tr>
  <tr>
    <td WIDTH="46%" VALIGN="TOP"><font SIZE="2">
      <p>Income taxes</font></td>
    <td WIDTH="3%" VALIGN="TOP">&nbsp;</td>
    <td WIDTH="10%" VALIGN="TOP"><font SIZE="2">
      <p style="margin-right: 20" align="right">(54)</font></td>
    <td WIDTH="3%" VALIGN="TOP">&nbsp;</td>
    <td WIDTH="10%" VALIGN="TOP"><font SIZE="2">
      <p style="margin-right: 20" align="right">(38)</font></td>
    <td WIDTH="3%" VALIGN="TOP">&nbsp;</td>
    <td WIDTH="10%" VALIGN="TOP"><font SIZE="2">
      <p style="margin-right: 20" align="right">(72)</font></td>
    <td WIDTH="3%" VALIGN="TOP">&nbsp;</td>
    <td WIDTH="10%" VALIGN="TOP"><font SIZE="2">
      <p style="margin-right: 20" align="right">(71)</font></td>
    <td WIDTH="1%" VALIGN="TOP">&nbsp;</td>
  </tr>
  <tr>
    <td WIDTH="46%" VALIGN="TOP" style="border-bottom-style: solid; border-bottom-width: 1"><font SIZE="2">
      <p>Distribution on preferred securities of<br>
      &#160;&#160;&#160;&#160;&#160;subsidiary trusts, net
      of income taxes</font></td>
    <td WIDTH="3%" VALIGN="TOP" style="border-bottom-style: solid; border-bottom-width: 1"><font SIZE="2">
      <p ALIGN="RIGHT"><br>
      </font></td>
    <td WIDTH="10%" VALIGN="TOP" style="border-bottom-style: solid; border-bottom-width: 1"><font SIZE="2">
      <p style="margin-right: 20" align="right"><br>
      &#45;</font></td>
    <td WIDTH="3%" VALIGN="TOP" style="border-bottom-style: solid; border-bottom-width: 1"><font SIZE="2">
      <p ALIGN="RIGHT"><br>
      </font></td>
    <td WIDTH="10%" VALIGN="TOP" style="border-bottom-style: solid; border-bottom-width: 1"><font SIZE="2">
      <p style="margin-right: 20" align="right"><br>
      (7)</font></td>
    <td WIDTH="3%" VALIGN="TOP" style="border-bottom-style: solid; border-bottom-width: 1"><font SIZE="2">
      <p ALIGN="RIGHT"><br>
      </font></td>
    <td WIDTH="10%" VALIGN="TOP" style="border-bottom-style: solid; border-bottom-width: 1"><font SIZE="2">
      <p style="margin-right: 20" align="right"><br>
      &#45;</font></td>
    <td WIDTH="3%" VALIGN="TOP" style="border-bottom-style: solid; border-bottom-width: 1">&nbsp;</td>
    <td WIDTH="10%" VALIGN="TOP" style="border-bottom-style: solid; border-bottom-width: 1"><font SIZE="2">
      <p style="margin-right: 20" align="right"><br>
      (13)</font></td>
    <td WIDTH="1%" VALIGN="TOP"><font SIZE="2">
      <p><br>
      </font></td>
  </tr>
  <tr>
    <td WIDTH="46%" VALIGN="TOP"><b><font SIZE="2">
      <p>Income from continuing operations</font></b></td>
    <td WIDTH="3%" VALIGN="TOP">&nbsp;</td>
    <td WIDTH="10%" VALIGN="TOP"><b><font SIZE="2">
      <p style="margin-right: 20" align="right">100</font></b></td>
    <td WIDTH="3%" VALIGN="TOP">&nbsp;</td>
    <td WIDTH="10%" VALIGN="TOP"><b><font SIZE="2">
      <p style="margin-right: 20" align="right">85</font></b></td>
    <td WIDTH="3%" VALIGN="TOP">&nbsp;</td>
    <td WIDTH="10%" VALIGN="TOP"><b><font SIZE="2">
      <p style="margin-right: 20" align="right">137</font></b></td>
    <td WIDTH="3%" VALIGN="TOP">&nbsp;</td>
    <td WIDTH="10%" VALIGN="TOP"><b><font SIZE="2">
      <p style="margin-right: 20" align="right">151</font></b></td>
    <td WIDTH="1%" VALIGN="TOP">&nbsp;</td>
  </tr>
  <tr>
    <td WIDTH="46%" VALIGN="TOP"><font SIZE="2">
      <p>Loss from discontinued operations, net of income taxes</font></td>
    <td WIDTH="3%" VALIGN="TOP">&nbsp;</td>
    <td WIDTH="10%" VALIGN="TOP"><font SIZE="2">
      <p style="margin-right: 20" align="right">&#45;</font></td>
    <td WIDTH="3%" VALIGN="TOP">&nbsp;</td>
    <td WIDTH="10%" VALIGN="TOP"><font SIZE="2">
      <p style="margin-right: 20" align="right">(22)</font></td>
    <td WIDTH="3%" VALIGN="TOP">&nbsp;</td>
    <td WIDTH="10%" VALIGN="TOP"><font SIZE="2">
      <p style="margin-right: 20" align="right">&#45;</font></td>
    <td WIDTH="3%" VALIGN="TOP">&nbsp;</td>
    <td WIDTH="10%" VALIGN="TOP"><font SIZE="2">
      <p style="margin-right: 20" align="right">(22)</font></td>
    <td WIDTH="1%" VALIGN="TOP">&nbsp;</td>
  </tr>
  <tr>
    <td WIDTH="46%" VALIGN="TOP" style="border-top-style: solid; border-top-width: 1; border-bottom-style: solid"><b><font SIZE="2">
      <p>Net income</font></b></td>
    <td WIDTH="3%" VALIGN="TOP" style="border-top-style: solid; border-top-width: 1; border-bottom-style: solid"><b><font SIZE="2">
      <p ALIGN="RIGHT">$</font></b></td>
    <td WIDTH="10%" VALIGN="TOP" style="border-top-style: solid; border-top-width: 1; border-bottom-style: solid"><b><font SIZE="2">
      <p style="margin-right: 20" align="right">100</font></b></td>
    <td WIDTH="3%" VALIGN="TOP" style="border-top-style: solid; border-top-width: 1; border-bottom-style: solid"><b><font SIZE="2">
      <p ALIGN="RIGHT">$</font></b></td>
    <td WIDTH="10%" VALIGN="TOP" style="border-top-style: solid; border-top-width: 1; border-bottom-style: solid"><b><font SIZE="2">
      <p style="margin-right: 20" align="right">63</font></b></td>
    <td WIDTH="3%" VALIGN="TOP" style="border-top-style: solid; border-top-width: 1; border-bottom-style: solid"><b><font SIZE="2">
      <p ALIGN="RIGHT">$</font></b></td>
    <td WIDTH="10%" VALIGN="TOP" style="border-top-style: solid; border-top-width: 1; border-bottom-style: solid"><b><font SIZE="2">
      <p style="margin-right: 20" align="right">137</font></b></td>
    <td WIDTH="3%" VALIGN="TOP" style="border-top-style: solid; border-top-width: 1; border-bottom-style: solid"><b><font SIZE="2">
      <p ALIGN="RIGHT">$</font></b></td>
    <td WIDTH="10%" VALIGN="TOP" style="border-top-style: solid; border-top-width: 1; border-bottom-style: solid"><b><font SIZE="2">
      <p style="margin-right: 20" align="right">129</font></b></td>
    <td WIDTH="1%" VALIGN="TOP">&nbsp;</td>
  </tr>
  <tr>
    <td WIDTH="46%" VALIGN="TOP"><font SIZE="2">
      <p>Per common share:</font></td>
    <td WIDTH="3%" VALIGN="TOP">&nbsp;</td>
    <td WIDTH="10%" VALIGN="TOP">
      <p style="margin-right: 20" align="right">&nbsp;</p>
    </td>
    <td WIDTH="3%" VALIGN="TOP">&nbsp;</td>
    <td WIDTH="10%" VALIGN="TOP">
      <p style="margin-right: 20" align="right">&nbsp;</p>
    </td>
    <td WIDTH="3%" VALIGN="TOP">&nbsp;</td>
    <td WIDTH="10%" VALIGN="TOP">
      <p style="margin-right: 20" align="right">&nbsp;</p>
    </td>
    <td WIDTH="3%" VALIGN="TOP">&nbsp;</td>
    <td WIDTH="10%" VALIGN="TOP">
      <p style="margin-right: 20" align="right">&nbsp;</p>
    </td>
    <td WIDTH="1%" VALIGN="TOP">&nbsp;</td>
  </tr>
  <tr>
    <td WIDTH="46%" VALIGN="TOP"><font SIZE="2">
      <p>&#160;&#160;&#160;&#160;&#160;Basic:</font></td>
    <td WIDTH="3%" VALIGN="TOP">&nbsp;</td>
    <td WIDTH="10%" VALIGN="TOP">
      <p style="margin-right: 20" align="right">&nbsp;</p>
    </td>
    <td WIDTH="3%" VALIGN="TOP">&nbsp;</td>
    <td WIDTH="10%" VALIGN="TOP">
      <p style="margin-right: 20" align="right">&nbsp;</p>
    </td>
    <td WIDTH="3%" VALIGN="TOP">&nbsp;</td>
    <td WIDTH="10%" VALIGN="TOP">
      <p style="margin-right: 20" align="right">&nbsp;</p>
    </td>
    <td WIDTH="3%" VALIGN="TOP">&nbsp;</td>
    <td WIDTH="10%" VALIGN="TOP">
      <p style="margin-right: 20" align="right">&nbsp;</p>
    </td>
    <td WIDTH="1%" VALIGN="TOP">&nbsp;</td>
  </tr>
  <tr>
    <td WIDTH="46%" VALIGN="TOP"><font SIZE="2">
      <p>&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;Income
      from continuing operations</font></td>
    <td WIDTH="3%" VALIGN="TOP"><font SIZE="2">
      <p ALIGN="RIGHT">$</font></td>
    <td WIDTH="10%" VALIGN="TOP"><font SIZE="2">
      <p style="margin-right: 20" align="right">.72</font></td>
    <td WIDTH="3%" VALIGN="TOP"><font SIZE="2">
      <p ALIGN="RIGHT">$</font></td>
    <td WIDTH="10%" VALIGN="TOP"><font SIZE="2">
      <p style="margin-right: 20" align="right">.63</font></td>
    <td WIDTH="3%" VALIGN="TOP"><font SIZE="2">
      <p ALIGN="RIGHT">$</font></td>
    <td WIDTH="10%" VALIGN="TOP"><font SIZE="2">
      <p style="margin-right: 20" align="right">.99</font></td>
    <td WIDTH="3%" VALIGN="TOP"><font SIZE="2">
      <p ALIGN="RIGHT">$</font></td>
    <td WIDTH="10%" VALIGN="TOP"><font SIZE="2">
      <p style="margin-right: 20" align="right">1.12</font></td>
    <td WIDTH="1%" VALIGN="TOP">&nbsp;</td>
  </tr>
  <tr>
    <td WIDTH="46%" VALIGN="TOP"><font SIZE="2">
      <p>&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;Loss
      from discontinued operations</font></td>
    <td WIDTH="3%" VALIGN="TOP">&nbsp;</td>
    <td WIDTH="10%" VALIGN="TOP"><font SIZE="2">
      <p style="margin-right: 20" align="right">&#45;</font></td>
    <td WIDTH="3%" VALIGN="TOP">&nbsp;</td>
    <td WIDTH="10%" VALIGN="TOP"><font SIZE="2">
      <p style="margin-right: 20" align="right">(.16)</font></td>
    <td WIDTH="3%" VALIGN="TOP">&nbsp;</td>
    <td WIDTH="10%" VALIGN="TOP"><font SIZE="2">
      <p style="margin-right: 20" align="right">&#45;</font></td>
    <td WIDTH="3%" VALIGN="TOP">&nbsp;</td>
    <td WIDTH="10%" VALIGN="TOP"><font SIZE="2">
      <p style="margin-right: 20" align="right">(.17)</font></td>
    <td WIDTH="1%" VALIGN="TOP">&nbsp;</td>
  </tr>
  <tr>
    <td WIDTH="46%" VALIGN="TOP" style="border-top-style: solid; border-top-width: 1; border-bottom-style: solid"><b><font SIZE="2">
      <p>&#160;&#160;&#160;&#160;&#160;Net income</font></b></td>
    <td WIDTH="3%" VALIGN="TOP" style="border-top-style: solid; border-top-width: 1; border-bottom-style: solid"><b><font SIZE="2">
      <p ALIGN="RIGHT">$</font></b></td>
    <td WIDTH="10%" VALIGN="TOP" style="border-top-style: solid; border-top-width: 1; border-bottom-style: solid"><b><font SIZE="2">
      <p style="margin-right: 20" align="right">.72</font></b></td>
    <td WIDTH="3%" VALIGN="TOP" style="border-top-style: solid; border-top-width: 1; border-bottom-style: solid"><b><font SIZE="2">
      <p ALIGN="RIGHT">$</font></b></td>
    <td WIDTH="10%" VALIGN="TOP" style="border-top-style: solid; border-top-width: 1; border-bottom-style: solid"><b><font SIZE="2">
      <p style="margin-right: 20" align="right">.47</font></b></td>
    <td WIDTH="3%" VALIGN="TOP" style="border-top-style: solid; border-top-width: 1; border-bottom-style: solid"><b><font SIZE="2">
      <p ALIGN="RIGHT">$</font></b></td>
    <td WIDTH="10%" VALIGN="TOP" style="border-top-style: solid; border-top-width: 1; border-bottom-style: solid"><b><font SIZE="2">
      <p style="margin-right: 20" align="right">.99</font></b></td>
    <td WIDTH="3%" VALIGN="TOP" style="border-top-style: solid; border-top-width: 1; border-bottom-style: solid"><b><font SIZE="2">
      <p ALIGN="RIGHT">$</font></b></td>
    <td WIDTH="10%" VALIGN="TOP" style="border-top-style: solid; border-top-width: 1; border-bottom-style: solid"><b><font SIZE="2">
      <p style="margin-right: 20" align="right">.95</font></b></td>
    <td WIDTH="1%" VALIGN="TOP">&nbsp;</td>
  </tr>
  <tr>
    <td WIDTH="46%" VALIGN="TOP"><font SIZE="2">
      <p>&#160;&#160;&#160;&#160;&#160;Diluted:</font></td>
    <td WIDTH="3%" VALIGN="TOP">&nbsp;</td>
    <td WIDTH="10%" VALIGN="TOP">
      <p style="margin-right: 20" align="right">&nbsp;</p>
    </td>
    <td WIDTH="3%" VALIGN="TOP">&nbsp;</td>
    <td WIDTH="10%" VALIGN="TOP">
      <p style="margin-right: 20" align="right">&nbsp;</p>
    </td>
    <td WIDTH="3%" VALIGN="TOP">&nbsp;</td>
    <td WIDTH="10%" VALIGN="TOP">
      <p style="margin-right: 20" align="right">&nbsp;</p>
    </td>
    <td WIDTH="3%" VALIGN="TOP">&nbsp;</td>
    <td WIDTH="10%" VALIGN="TOP">
      <p style="margin-right: 20" align="right">&nbsp;</p>
    </td>
    <td WIDTH="1%" VALIGN="TOP">&nbsp;</td>
  </tr>
  <tr>
    <td WIDTH="46%" VALIGN="TOP"><font SIZE="2">
      <p>&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;Income
      from continuing operations</font></td>
    <td WIDTH="3%" VALIGN="TOP"><font SIZE="2">
      <p ALIGN="RIGHT">$</font></td>
    <td WIDTH="10%" VALIGN="TOP"><font SIZE="2">
      <p style="margin-right: 20" align="right">.71</font></td>
    <td WIDTH="3%" VALIGN="TOP"><font SIZE="2">
      <p ALIGN="RIGHT">$</font></td>
    <td WIDTH="10%" VALIGN="TOP"><font SIZE="2">
      <p style="margin-right: 20" align="right">.62</font></td>
    <td WIDTH="3%" VALIGN="TOP"><font SIZE="2">
      <p ALIGN="RIGHT">$</font></td>
    <td WIDTH="10%" VALIGN="TOP"><font SIZE="2">
      <p style="margin-right: 20" align="right">.97</font></td>
    <td WIDTH="3%" VALIGN="TOP"><font SIZE="2">
      <p ALIGN="RIGHT">$</font></td>
    <td WIDTH="10%" VALIGN="TOP"><font SIZE="2">
      <p style="margin-right: 20" align="right">1.11</font></td>
    <td WIDTH="1%" VALIGN="TOP">&nbsp;</td>
  </tr>
  <tr>
    <td WIDTH="46%" VALIGN="TOP"><font SIZE="2">
      <p>&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;Loss
      from discontinued operations</font></td>
    <td WIDTH="3%" VALIGN="TOP">&nbsp;</td>
    <td WIDTH="10%" VALIGN="TOP"><font SIZE="2">
      <p style="margin-right: 20" align="right">&#45;</font></td>
    <td WIDTH="3%" VALIGN="TOP">&nbsp;</td>
    <td WIDTH="10%" VALIGN="TOP"><font SIZE="2">
      <p style="margin-right: 20" align="right">(.16)</font></td>
    <td WIDTH="3%" VALIGN="TOP">&nbsp;</td>
    <td WIDTH="10%" VALIGN="TOP"><font SIZE="2">
      <p style="margin-right: 20" align="right">&#45;</font></td>
    <td WIDTH="3%" VALIGN="TOP">&nbsp;</td>
    <td WIDTH="10%" VALIGN="TOP"><font SIZE="2">
      <p style="margin-right: 20" align="right">(.17)</font></td>
    <td WIDTH="1%" VALIGN="TOP">&nbsp;</td>
  </tr>
  <tr>
    <td WIDTH="46%" VALIGN="TOP" style="border-top-style: solid; border-top-width: 1; border-bottom-style: solid"><b><font SIZE="2">
      <p>&#160;&#160;&#160;&#160;&#160;Net income</font></b></td>
    <td WIDTH="3%" VALIGN="TOP" style="border-top-style: solid; border-top-width: 1; border-bottom-style: solid"><b><font SIZE="2">
      <p ALIGN="RIGHT">$</font></b></td>
    <td WIDTH="10%" VALIGN="TOP" style="border-top-style: solid; border-top-width: 1; border-bottom-style: solid"><b><font SIZE="2">
      <p style="margin-right: 20" align="right">.71</font></b></td>
    <td WIDTH="3%" VALIGN="TOP" style="border-top-style: solid; border-top-width: 1; border-bottom-style: solid"><b><font SIZE="2">
      <p ALIGN="RIGHT">$</font></b></td>
    <td WIDTH="10%" VALIGN="TOP" style="border-top-style: solid; border-top-width: 1; border-bottom-style: solid"><b><font SIZE="2">
      <p style="margin-right: 20" align="right">.46</font></b></td>
    <td WIDTH="3%" VALIGN="TOP" style="border-top-style: solid; border-top-width: 1; border-bottom-style: solid"><b><font SIZE="2">
      <p ALIGN="RIGHT">$</font></b></td>
    <td WIDTH="10%" VALIGN="TOP" style="border-top-style: solid; border-top-width: 1; border-bottom-style: solid"><b><font SIZE="2">
      <p style="margin-right: 20" align="right">.97</font></b></td>
    <td WIDTH="3%" VALIGN="TOP" style="border-top-style: solid; border-top-width: 1; border-bottom-style: solid"><b><font SIZE="2">
      <p ALIGN="RIGHT">$</font></b></td>
    <td WIDTH="10%" VALIGN="TOP" style="border-top-style: solid; border-top-width: 1; border-bottom-style: solid"><b><font SIZE="2">
      <p style="margin-right: 20" align="right">.94</font></b></td>
    <td WIDTH="1%" VALIGN="TOP">&nbsp;</td>
  </tr>
  <tr>
    <td WIDTH="46%" VALIGN="TOP"><font SIZE="2">
      <p>Average shares outstanding (in thousands):</font></td>
    <td WIDTH="3%" VALIGN="TOP">&nbsp;</td>
    <td WIDTH="10%" VALIGN="TOP">
      <p style="margin-right: 20" align="right">&nbsp;</p>
    </td>
    <td WIDTH="3%" VALIGN="TOP">&nbsp;</td>
    <td WIDTH="10%" VALIGN="TOP">
      <p style="margin-right: 20" align="right">&nbsp;</p>
    </td>
    <td WIDTH="3%" VALIGN="TOP">&nbsp;</td>
    <td WIDTH="10%" VALIGN="TOP">
      <p style="margin-right: 20" align="right">&nbsp;</p>
    </td>
    <td WIDTH="3%" VALIGN="TOP">&nbsp;</td>
    <td WIDTH="10%" VALIGN="TOP">
      <p style="margin-right: 20" align="right">&nbsp;</p>
    </td>
    <td WIDTH="1%" VALIGN="TOP">&nbsp;</td>
  </tr>
  <tr>
    <td WIDTH="46%" VALIGN="TOP"><font SIZE="2">
      <p>&#160;&#160;&#160;&#160;&#160;Basic</font></td>
    <td WIDTH="3%" VALIGN="TOP">&nbsp;</td>
    <td WIDTH="10%" VALIGN="TOP"><font SIZE="2">
      <p style="margin-right: 20" align="right">137,749</font></td>
    <td WIDTH="3%" VALIGN="TOP">&nbsp;</td>
    <td WIDTH="10%" VALIGN="TOP"><font SIZE="2">
      <p style="margin-right: 20" align="right">135,380</font></td>
    <td WIDTH="3%" VALIGN="TOP">&nbsp;</td>
    <td WIDTH="10%" VALIGN="TOP"><font SIZE="2">
      <p style="margin-right: 20" align="right">137,618</font></td>
    <td WIDTH="3%" VALIGN="TOP">&nbsp;</td>
    <td WIDTH="10%" VALIGN="TOP"><font SIZE="2">
      <p style="margin-right: 20" align="right">135,672</font></td>
    <td WIDTH="1%" VALIGN="TOP">&nbsp;</td>
  </tr>
  <tr>
    <td WIDTH="46%" VALIGN="TOP" style="border-bottom-style: solid; border-bottom-width: 1"><font SIZE="2">
      <p>&#160;&#160;&#160;&#160;&#160;Diluted</font></td>
    <td WIDTH="3%" VALIGN="TOP" style="border-bottom-style: solid; border-bottom-width: 1">&nbsp;</td>
    <td WIDTH="10%" VALIGN="TOP" style="border-bottom-style: solid; border-bottom-width: 1"><font SIZE="2">
      <p style="margin-right: 20" align="right">140,287</font></td>
    <td WIDTH="3%" VALIGN="TOP" style="border-bottom-style: solid; border-bottom-width: 1">&nbsp;</td>
    <td WIDTH="10%" VALIGN="TOP" style="border-bottom-style: solid; border-bottom-width: 1"><font SIZE="2">
      <p style="margin-right: 20" align="right">136,257</font></td>
    <td WIDTH="3%" VALIGN="TOP" style="border-bottom-style: solid; border-bottom-width: 1">&nbsp;</td>
    <td WIDTH="10%" VALIGN="TOP" style="border-bottom-style: solid; border-bottom-width: 1"><font SIZE="2">
      <p style="margin-right: 20" align="right">140,316</font></td>
    <td WIDTH="3%" VALIGN="TOP" style="border-bottom-style: solid; border-bottom-width: 1">&nbsp;</td>
    <td WIDTH="10%" VALIGN="TOP" style="border-bottom-style: solid; border-bottom-width: 1"><font SIZE="2">
      <p style="margin-right: 20" align="right">136,659</font></td>
    <td WIDTH="1%" VALIGN="TOP">&nbsp;</td>
  </tr>
  <tr>
    <td WIDTH="46%" VALIGN="TOP"><font SIZE="2">
      <p>Dividends per share:</font></td>
    <td WIDTH="3%" VALIGN="TOP">&nbsp;</td>
    <td WIDTH="10%" VALIGN="TOP">
      <p style="margin-right: 20" align="right">&nbsp;</p>
    </td>
    <td WIDTH="3%" VALIGN="TOP">&nbsp;</td>
    <td WIDTH="10%" VALIGN="TOP">
      <p style="margin-right: 20" align="right">&nbsp;</p>
    </td>
    <td WIDTH="3%" VALIGN="TOP">&nbsp;</td>
    <td WIDTH="10%" VALIGN="TOP">
      <p style="margin-right: 20" align="right">&nbsp;</p>
    </td>
    <td WIDTH="3%" VALIGN="TOP">&nbsp;</td>
    <td WIDTH="10%" VALIGN="TOP">
      <p style="margin-right: 20" align="right">&nbsp;</p>
    </td>
    <td WIDTH="1%" VALIGN="TOP">&nbsp;</td>
  </tr>
  <tr>
    <td WIDTH="46%" VALIGN="TOP"><font SIZE="2">
      <p>&#160;&#160;&#160;&#160;&#160;$2.08 Preferred
      stock, Series A</font></td>
    <td WIDTH="3%" VALIGN="TOP"><font SIZE="2">
      <p ALIGN="RIGHT">$</font></td>
    <td WIDTH="10%" VALIGN="TOP"><font SIZE="2">
      <p style="margin-right: 20" align="right">.52</font></td>
    <td WIDTH="3%" VALIGN="TOP"><font SIZE="2">
      <p ALIGN="RIGHT">$</font></td>
    <td WIDTH="10%" VALIGN="TOP"><font SIZE="2">
      <p style="margin-right: 20" align="right">.52</font></td>
    <td WIDTH="3%" VALIGN="TOP"><font SIZE="2">
      <p ALIGN="RIGHT">$</font></td>
    <td WIDTH="10%" VALIGN="TOP"><font SIZE="2">
      <p style="margin-right: 20" align="right">1.04</font></td>
    <td WIDTH="3%" VALIGN="TOP"><font SIZE="2">
      <p ALIGN="RIGHT">$</font></td>
    <td WIDTH="10%" VALIGN="TOP"><font SIZE="2">
      <p style="margin-right: 20" align="right">1.04</font></td>
    <td WIDTH="1%" VALIGN="TOP">&nbsp;</td>
  </tr>
  <tr>
    <td WIDTH="46%" VALIGN="TOP"><font SIZE="2">
      <p>&#160;&#160;&#160;&#160;&#160;$1.40 Preferred
      stock, Series B</font></td>
    <td WIDTH="3%" VALIGN="TOP"><font SIZE="2">
      <p ALIGN="RIGHT">$</font></td>
    <td WIDTH="10%" VALIGN="TOP"><font SIZE="2">
      <p style="margin-right: 20" align="right">.35</font></td>
    <td WIDTH="3%" VALIGN="TOP"><font SIZE="2">
      <p ALIGN="RIGHT">$</font></td>
    <td WIDTH="10%" VALIGN="TOP"><font SIZE="2">
      <p style="margin-right: 20" align="right">.35</font></td>
    <td WIDTH="3%" VALIGN="TOP"><font SIZE="2">
      <p ALIGN="RIGHT">$</font></td>
    <td WIDTH="10%" VALIGN="TOP"><font SIZE="2">
      <p style="margin-right: 20" align="right">.70</font></td>
    <td WIDTH="3%" VALIGN="TOP"><font SIZE="2">
      <p ALIGN="RIGHT">$</font></td>
    <td WIDTH="10%" VALIGN="TOP"><font SIZE="2">
      <p style="margin-right: 20" align="right">.70</font></td>
    <td WIDTH="1%" VALIGN="TOP">&nbsp;</td>
  </tr>
  <tr>
    <td WIDTH="46%" VALIGN="TOP" style="border-bottom-style: solid; border-bottom-width: 1"><font SIZE="2">
      <p>&#160;&#160;&#160;&#160;&#160;Common stock</font></td>
    <td WIDTH="3%" VALIGN="TOP" style="border-bottom-style: solid; border-bottom-width: 1"><font SIZE="2">
      <p ALIGN="RIGHT">$</font></td>
    <td WIDTH="10%" VALIGN="TOP" style="border-bottom-style: solid; border-bottom-width: 1"><font SIZE="2">
      <p style="margin-right: 20" align="right">.325</font></td>
    <td WIDTH="3%" VALIGN="TOP" style="border-bottom-style: solid; border-bottom-width: 1"><font SIZE="2">
      <p ALIGN="RIGHT">$</font></td>
    <td WIDTH="10%" VALIGN="TOP" style="border-bottom-style: solid; border-bottom-width: 1"><font SIZE="2">
      <p style="margin-right: 20" align="right">.325</font></td>
    <td WIDTH="3%" VALIGN="TOP" style="border-bottom-style: solid; border-bottom-width: 1"><font SIZE="2">
      <p ALIGN="RIGHT">$</font></td>
    <td WIDTH="10%" VALIGN="TOP" style="border-bottom-style: solid; border-bottom-width: 1"><font SIZE="2">
      <p style="margin-right: 20" align="right">.65</font></td>
    <td WIDTH="3%" VALIGN="TOP" style="border-bottom-style: solid; border-bottom-width: 1"><font SIZE="2">
      <p ALIGN="RIGHT">$</font></td>
    <td WIDTH="10%" VALIGN="TOP" style="border-bottom-style: solid; border-bottom-width: 1"><font SIZE="2">
      <p style="margin-right: 20" align="right">.65</font></td>
    <td WIDTH="1%" VALIGN="TOP">&nbsp;</td>
  </tr>
</table>
      </center>
    </div>
<i><font SIZE="3">
<blockquote>
  <blockquote>
<p>See notes to the consolidated financial statements.</p>
  </blockquote>
</blockquote>
</font></i>
<p align="right"><font size="3">3.</font></p>
<font SIZE="2">
<b>
<p>Item 1.</b></font><font SIZE="2">&#160;&#160;&#160;&#160;&#160;<u>FINANCIAL
STATEMENTS</u> (Continued)</p>
<b>
<p ALIGN="CENTER">TEXTRON INC.<br>
Consolidated <a NAME="_Hlk3277019">Balance Sheets</a> (unaudited)</b><br>
(Dollars in millions)</p>
</font>
      <div align="center">
        <center>
<table CELLSPACING="1" CELLPADDING="1" WIDTH="706">
  <tr>
    <td WIDTH="63%" VALIGN="TOP" style="border-bottom-style: solid; border-bottom-width: 1">&nbsp;</td>
    <td WIDTH="15%" VALIGN="TOP" COLSPAN="2" style="border-bottom-style: solid; border-bottom-width: 1"><font SIZE="2">
      <p ALIGN="CENTER">July 3,<br>
      2004</font></td>
    <td WIDTH="3%" VALIGN="TOP" style="border-bottom-style: solid; border-bottom-width: 1">&nbsp;</td>
    <td WIDTH="18%" VALIGN="TOP" COLSPAN="2" style="border-bottom-style: solid; border-bottom-width: 1"><font SIZE="2">
      <p ALIGN="CENTER">January 3,<br>
      2004</font></td>
    <td WIDTH="2%" VALIGN="TOP">&nbsp;</td>
  </tr>
  <tr>
    <td WIDTH="63%" VALIGN="TOP"><b><font SIZE="2">
      <p>Assets</font></b></td>
    <td WIDTH="2%" VALIGN="TOP">&nbsp;</td>
    <td WIDTH="12%" VALIGN="TOP">&nbsp;</td>
    <td WIDTH="3%" VALIGN="TOP">&nbsp;</td>
    <td WIDTH="3%" VALIGN="TOP">&nbsp;</td>
    <td WIDTH="14%" VALIGN="TOP">&nbsp;</td>
    <td WIDTH="2%" VALIGN="TOP">&nbsp;</td>
  </tr>
  <tr>
    <td WIDTH="63%" VALIGN="TOP"><b><font SIZE="2">
      <p>Textron Manufacturing</font></b></td>
    <td WIDTH="2%" VALIGN="TOP">&nbsp;</td>
    <td WIDTH="12%" VALIGN="TOP">&nbsp;</td>
    <td WIDTH="3%" VALIGN="TOP">&nbsp;</td>
    <td WIDTH="3%" VALIGN="TOP">&nbsp;</td>
    <td WIDTH="14%" VALIGN="TOP">&nbsp;</td>
    <td WIDTH="2%" VALIGN="TOP">&nbsp;</td>
  </tr>
  <tr>
    <td WIDTH="63%" VALIGN="TOP"><font SIZE="2">
      <p>Cash and cash equivalents</font></td>
    <td WIDTH="2%" VALIGN="TOP"><font SIZE="2">
      <p ALIGN="RIGHT">$</font></td>
    <td WIDTH="12%" VALIGN="TOP"><font SIZE="2">
      <p style="margin-right: 20" align="right">786</font></td>
    <td WIDTH="3%" VALIGN="TOP">&nbsp;</td>
    <td WIDTH="3%" VALIGN="TOP"><font SIZE="2">
      <p ALIGN="RIGHT">$</font></td>
    <td WIDTH="14%" VALIGN="TOP"><font SIZE="2">
      <p style="margin-right: 30" align="right">486</font></td>
    <td WIDTH="2%" VALIGN="TOP">&nbsp;</td>
  </tr>
  <tr>
    <td WIDTH="63%" VALIGN="TOP"><font SIZE="2">
      <p>Commercial and U.S. Government receivables (less allowance for<br>
      &#160;&#160;&#160;&#160;&#160;doubtful accounts of $67
      and $66)</font></td>
    <td WIDTH="2%" VALIGN="TOP"><font SIZE="2">
      <p><br>
      </font></td>
    <td WIDTH="12%" VALIGN="TOP"><font SIZE="2">
      <p style="margin-right: 20" align="right"><br>
      1,247</font></td>
    <td WIDTH="3%" VALIGN="TOP">&nbsp;</td>
    <td WIDTH="3%" VALIGN="TOP"><font SIZE="2">
      <p><br>
      </font></td>
    <td WIDTH="14%" VALIGN="TOP"><font SIZE="2">
      <p style="margin-right: 30" align="right"><br>
      1,135</font></td>
    <td WIDTH="2%" VALIGN="TOP">&nbsp;</td>
  </tr>
  <tr>
    <td WIDTH="63%" VALIGN="TOP"><font SIZE="2">
      <p>Inventories</font></td>
    <td WIDTH="2%" VALIGN="TOP">&nbsp;</td>
    <td WIDTH="12%" VALIGN="TOP"><font SIZE="2">
      <p style="margin-right: 20" align="right">1,648</font></td>
    <td WIDTH="3%" VALIGN="TOP">&nbsp;</td>
    <td WIDTH="3%" VALIGN="TOP">&nbsp;</td>
    <td WIDTH="14%" VALIGN="TOP"><font SIZE="2">
      <p style="margin-right: 30" align="right">1,439</font></td>
    <td WIDTH="2%" VALIGN="TOP">&nbsp;</td>
  </tr>
  <tr>
    <td WIDTH="63%" VALIGN="TOP"><font SIZE="2">
      <p>Other current assets</font></td>
    <td WIDTH="2%" VALIGN="TOP">&nbsp;</td>
    <td WIDTH="12%" VALIGN="TOP"><font SIZE="2">
      <p style="margin-right: 20" align="right">443</font></td>
    <td WIDTH="3%" VALIGN="TOP">&nbsp;</td>
    <td WIDTH="3%" VALIGN="TOP">&nbsp;</td>
    <td WIDTH="14%" VALIGN="TOP"><font SIZE="2">
      <p style="margin-right: 30" align="right">532</font></td>
    <td WIDTH="2%" VALIGN="TOP">&nbsp;</td>
  </tr>
  <tr>
    <td WIDTH="63%" VALIGN="TOP" style="border-top-style: solid; border-top-width: 1; border-bottom-style: solid; border-bottom-width: 1"><font SIZE="2">
      <p>&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;Total
      current assets</font></td>
    <td WIDTH="2%" VALIGN="TOP" style="border-top-style: solid; border-top-width: 1; border-bottom-style: solid; border-bottom-width: 1">&nbsp;</td>
    <td WIDTH="12%" VALIGN="TOP" style="border-top-style: solid; border-top-width: 1; border-bottom-style: solid; border-bottom-width: 1"><font SIZE="2">
      <p style="margin-right: 20" align="right">4,124</font></td>
    <td WIDTH="3%" VALIGN="TOP" style="border-top-style: solid; border-top-width: 1; border-bottom-style: solid; border-bottom-width: 1">&nbsp;</td>
    <td WIDTH="3%" VALIGN="TOP" style="border-top-style: solid; border-top-width: 1; border-bottom-style: solid; border-bottom-width: 1">&nbsp;</td>
    <td WIDTH="14%" VALIGN="TOP" style="border-top-style: solid; border-top-width: 1; border-bottom-style: solid; border-bottom-width: 1"><font SIZE="2">
      <p style="margin-right: 30" align="right">3,592</font></td>
    <td WIDTH="2%" VALIGN="TOP">&nbsp;</td>
  </tr>
  <tr>
    <td WIDTH="63%" VALIGN="TOP"><font SIZE="2">
      <p>Property, plant, and equipment, less accumulated<br>
      &#160;&#160;&#160;&#160;&#160;depreciation of $2,549
      and $2,448</font></td>
    <td WIDTH="2%" VALIGN="TOP"><font SIZE="2">
      <p><br>
      </font></td>
    <td WIDTH="12%" VALIGN="TOP"><font SIZE="2">
      <p style="margin-right: 20" align="right"><br>
      1,875</font></td>
    <td WIDTH="3%" VALIGN="TOP">&nbsp;</td>
    <td WIDTH="3%" VALIGN="TOP"><font SIZE="2">
      <p><br>
      </font></td>
    <td WIDTH="14%" VALIGN="TOP"><font SIZE="2">
      <p style="margin-right: 30" align="right"><br>
      1,925</font></td>
    <td WIDTH="2%" VALIGN="TOP">&nbsp;</td>
  </tr>
  <tr>
    <td WIDTH="63%" VALIGN="TOP"><font SIZE="2">
      <p>Goodwill</font></td>
    <td WIDTH="2%" VALIGN="TOP">&nbsp;</td>
    <td WIDTH="12%" VALIGN="TOP"><font SIZE="2">
      <p style="margin-right: 20" align="right">1,413</font></td>
    <td WIDTH="3%" VALIGN="TOP">&nbsp;</td>
    <td WIDTH="3%" VALIGN="TOP">&nbsp;</td>
    <td WIDTH="14%" VALIGN="TOP"><font SIZE="2">
      <p style="margin-right: 30" align="right">1,420</font></td>
    <td WIDTH="2%" VALIGN="TOP">&nbsp;</td>
  </tr>
  <tr>
    <td WIDTH="63%" VALIGN="TOP"><font SIZE="2">
      <p>Other intangible assets, net</font></td>
    <td WIDTH="2%" VALIGN="TOP">&nbsp;</td>
    <td WIDTH="12%" VALIGN="TOP"><font SIZE="2">
      <p style="margin-right: 20" align="right">37</font></td>
    <td WIDTH="3%" VALIGN="TOP">&nbsp;</td>
    <td WIDTH="3%" VALIGN="TOP">&nbsp;</td>
    <td WIDTH="14%" VALIGN="TOP"><font SIZE="2">
      <p style="margin-right: 30" align="right">40</font></td>
    <td WIDTH="2%" VALIGN="TOP">&nbsp;</td>
  </tr>
  <tr>
    <td WIDTH="63%" VALIGN="TOP"><font SIZE="2">
      <p>Other assets</font></td>
    <td WIDTH="2%" VALIGN="TOP">&nbsp;</td>
    <td WIDTH="12%" VALIGN="TOP"><font SIZE="2">
      <p style="margin-right: 20" align="right">1,769</font></td>
    <td WIDTH="3%" VALIGN="TOP">&nbsp;</td>
    <td WIDTH="3%" VALIGN="TOP">&nbsp;</td>
    <td WIDTH="14%" VALIGN="TOP"><font SIZE="2">
      <p style="margin-right: 30" align="right">1,780</font></td>
    <td WIDTH="2%" VALIGN="TOP">&nbsp;</td>
  </tr>
  <tr>
    <td WIDTH="63%" VALIGN="TOP" style="border-top-style: solid; border-top-width: 1; border-bottom-style: solid; border-bottom-width: 1"><font SIZE="2">
      <p>&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;Total
      Textron Manufacturing assets</font></td>
    <td WIDTH="2%" VALIGN="TOP" style="border-top-style: solid; border-top-width: 1; border-bottom-style: solid; border-bottom-width: 1">&nbsp;</td>
    <td WIDTH="12%" VALIGN="TOP" style="border-top-style: solid; border-top-width: 1; border-bottom-style: solid; border-bottom-width: 1"><font SIZE="2">
      <p style="margin-right: 20" align="right">9,218</font></td>
    <td WIDTH="3%" VALIGN="TOP" style="border-top-style: solid; border-top-width: 1; border-bottom-style: solid; border-bottom-width: 1">&nbsp;</td>
    <td WIDTH="3%" VALIGN="TOP" style="border-top-style: solid; border-top-width: 1; border-bottom-style: solid; border-bottom-width: 1">&nbsp;</td>
    <td WIDTH="14%" VALIGN="TOP" style="border-top-style: solid; border-top-width: 1; border-bottom-style: solid; border-bottom-width: 1"><font SIZE="2">
      <p style="margin-right: 30" align="right">8,757</font></td>
    <td WIDTH="2%" VALIGN="TOP">&nbsp;</td>
  </tr>
  <tr>
    <td WIDTH="63%" VALIGN="TOP"><b><font SIZE="2">
      <p>Textron Finance</font></b></td>
    <td WIDTH="2%" VALIGN="TOP">&nbsp;</td>
    <td WIDTH="12%" VALIGN="TOP">
      <p style="margin-right: 20" align="right">&nbsp;</p>
    </td>
    <td WIDTH="3%" VALIGN="TOP">&nbsp;</td>
    <td WIDTH="3%" VALIGN="TOP">&nbsp;</td>
    <td WIDTH="14%" VALIGN="TOP">
      <p style="margin-right: 30" align="right">&nbsp;</p>
    </td>
    <td WIDTH="2%" VALIGN="TOP">&nbsp;</td>
  </tr>
  <tr>
    <td WIDTH="63%" VALIGN="TOP"><font SIZE="2">
      <p>Cash</font></td>
    <td WIDTH="2%" VALIGN="TOP">&nbsp;</td>
    <td WIDTH="12%" VALIGN="TOP"><font SIZE="2">
      <p style="margin-right: 20" align="right">87</font></td>
    <td WIDTH="3%" VALIGN="TOP">&nbsp;</td>
    <td WIDTH="3%" VALIGN="TOP">&nbsp;</td>
    <td WIDTH="14%" VALIGN="TOP"><font SIZE="2">
      <p style="margin-right: 30" align="right">357</font></td>
    <td WIDTH="2%" VALIGN="TOP">&nbsp;</td>
  </tr>
  <tr>
    <td WIDTH="63%" VALIGN="TOP"><font SIZE="2">
      <p>Finance receivables, net</font></td>
    <td WIDTH="2%" VALIGN="TOP">&nbsp;</td>
    <td WIDTH="12%" VALIGN="TOP"><font SIZE="2">
      <p style="margin-right: 20" align="right">5,250</font></td>
    <td WIDTH="3%" VALIGN="TOP">&nbsp;</td>
    <td WIDTH="3%" VALIGN="TOP">&nbsp;</td>
    <td WIDTH="14%" VALIGN="TOP"><font SIZE="2">
      <p style="margin-right: 30" align="right">5,016</font></td>
    <td WIDTH="2%" VALIGN="TOP">&nbsp;</td>
  </tr>
  <tr>
    <td WIDTH="63%" VALIGN="TOP"><font SIZE="2">
      <p>Goodwill</font></td>
    <td WIDTH="2%" VALIGN="TOP">&nbsp;</td>
    <td WIDTH="12%" VALIGN="TOP"><font SIZE="2">
      <p style="margin-right: 20" align="right">169</font></td>
    <td WIDTH="3%" VALIGN="TOP">&nbsp;</td>
    <td WIDTH="3%" VALIGN="TOP">&nbsp;</td>
    <td WIDTH="14%" VALIGN="TOP"><font SIZE="2">
      <p style="margin-right: 30" align="right">169</font></td>
    <td WIDTH="2%" VALIGN="TOP">&nbsp;</td>
  </tr>
  <tr>
    <td WIDTH="63%" VALIGN="TOP"><font SIZE="2">
      <p>Other assets</font></td>
    <td WIDTH="2%" VALIGN="TOP">&nbsp;</td>
    <td WIDTH="12%" VALIGN="TOP"><font SIZE="2">
      <p style="margin-right: 20" align="right">712</font></td>
    <td WIDTH="3%" VALIGN="TOP">&nbsp;</td>
    <td WIDTH="3%" VALIGN="TOP">&nbsp;</td>
    <td WIDTH="14%" VALIGN="TOP"><font SIZE="2">
      <p style="margin-right: 30" align="right">791</font></td>
    <td WIDTH="2%" VALIGN="TOP">&nbsp;</td>
  </tr>
  <tr>
    <td WIDTH="63%" VALIGN="TOP" style="border-top-style: solid; border-top-width: 1; border-bottom-style: solid; border-bottom-width: 1"><font SIZE="2">
      <p>&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;Total
      Textron Finance assets</font></td>
    <td WIDTH="2%" VALIGN="TOP" style="border-top-style: solid; border-top-width: 1; border-bottom-style: solid; border-bottom-width: 1">&nbsp;</td>
    <td WIDTH="12%" VALIGN="TOP" style="border-top-style: solid; border-top-width: 1; border-bottom-style: solid; border-bottom-width: 1"><font SIZE="2">
      <p style="margin-right: 20" align="right">6,218</font></td>
    <td WIDTH="3%" VALIGN="TOP" style="border-top-style: solid; border-top-width: 1; border-bottom-style: solid; border-bottom-width: 1">&nbsp;</td>
    <td WIDTH="3%" VALIGN="TOP" style="border-top-style: solid; border-top-width: 1; border-bottom-style: solid; border-bottom-width: 1">&nbsp;</td>
    <td WIDTH="14%" VALIGN="TOP" style="border-top-style: solid; border-top-width: 1; border-bottom-style: solid; border-bottom-width: 1"><font SIZE="2">
      <p style="margin-right: 30" align="right">6,333</font></td>
    <td WIDTH="2%" VALIGN="TOP">&nbsp;</td>
  </tr>
  <tr>
    <td WIDTH="63%" VALIGN="TOP" style="border-bottom-style: solid"><font SIZE="2">
      <p>&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;Total
      assets</font></td>
    <td WIDTH="2%" VALIGN="TOP" style="border-bottom-style: solid"><font SIZE="2">
      <p ALIGN="RIGHT">$</font></td>
    <td WIDTH="12%" VALIGN="TOP" style="border-bottom-style: solid"><font SIZE="2">
      <p style="margin-right: 20" align="right">15,436</font></td>
    <td WIDTH="3%" VALIGN="TOP" style="border-bottom-style: solid">&nbsp;</td>
    <td WIDTH="3%" VALIGN="TOP" style="border-bottom-style: solid"><font SIZE="2">
      <p ALIGN="RIGHT">$</font></td>
    <td WIDTH="14%" VALIGN="TOP" style="border-bottom-style: solid"><font SIZE="2">
      <p style="margin-right: 30" align="right">15,090</font></td>
    <td WIDTH="2%" VALIGN="TOP">&nbsp;</td>
  </tr>
  <tr>
    <td WIDTH="63%" VALIGN="TOP"><b><font SIZE="2">
      <p>Liabilities and Shareholders&#39; Equity</font></b></td>
    <td WIDTH="2%" VALIGN="TOP">&nbsp;</td>
    <td WIDTH="12%" VALIGN="TOP">
      <p style="margin-right: 20" align="right">&nbsp;</p>
    </td>
    <td WIDTH="3%" VALIGN="TOP">&nbsp;</td>
    <td WIDTH="3%" VALIGN="TOP">&nbsp;</td>
    <td WIDTH="14%" VALIGN="TOP">
      <p style="margin-right: 30" align="right">&nbsp;</p>
    </td>
    <td WIDTH="2%" VALIGN="TOP">&nbsp;</td>
  </tr>
  <tr>
    <td WIDTH="63%" VALIGN="TOP"><b><font SIZE="2">
      <p>Liabilities</font></b></td>
    <td WIDTH="2%" VALIGN="TOP">&nbsp;</td>
    <td WIDTH="12%" VALIGN="TOP">
      <p style="margin-right: 20" align="right">&nbsp;</p>
    </td>
    <td WIDTH="3%" VALIGN="TOP">&nbsp;</td>
    <td WIDTH="3%" VALIGN="TOP">&nbsp;</td>
    <td WIDTH="14%" VALIGN="TOP">
      <p style="margin-right: 30" align="right">&nbsp;</p>
    </td>
    <td WIDTH="2%" VALIGN="TOP">&nbsp;</td>
  </tr>
  <tr>
    <td WIDTH="63%" VALIGN="TOP"><b><font SIZE="2">
      <p>Textron Manufacturing</font></b></td>
    <td WIDTH="2%" VALIGN="TOP">&nbsp;</td>
    <td WIDTH="12%" VALIGN="TOP">
      <p style="margin-right: 20" align="right">&nbsp;</p>
    </td>
    <td WIDTH="3%" VALIGN="TOP">&nbsp;</td>
    <td WIDTH="3%" VALIGN="TOP">&nbsp;</td>
    <td WIDTH="14%" VALIGN="TOP">
      <p style="margin-right: 30" align="right">&nbsp;</p>
    </td>
    <td WIDTH="2%" VALIGN="TOP">&nbsp;</td>
  </tr>
  <tr>
    <td WIDTH="63%" VALIGN="TOP"><font SIZE="2">
      <p>Current portion of long&#45;term debt and short&#45;term debt</font></td>
    <td WIDTH="2%" VALIGN="TOP"><font SIZE="2">
      <p ALIGN="RIGHT">$</font></td>
    <td WIDTH="12%" VALIGN="TOP"><font SIZE="2">
      <p style="margin-right: 20" align="right">688</font></td>
    <td WIDTH="3%" VALIGN="TOP">&nbsp;</td>
    <td WIDTH="3%" VALIGN="TOP"><font SIZE="2">
      <p ALIGN="RIGHT">$</font></td>
    <td WIDTH="14%" VALIGN="TOP"><font SIZE="2">
      <p style="margin-right: 30" align="right">316</font></td>
    <td WIDTH="2%" VALIGN="TOP">&nbsp;</td>
  </tr>
  <tr>
    <td WIDTH="63%" VALIGN="TOP"><font SIZE="2">
      <p>Accounts payable</font></td>
    <td WIDTH="2%" VALIGN="TOP">&nbsp;</td>
    <td WIDTH="12%" VALIGN="TOP"><font SIZE="2">
      <p style="margin-right: 20" align="right">926</font></td>
    <td WIDTH="3%" VALIGN="TOP">&nbsp;</td>
    <td WIDTH="3%" VALIGN="TOP">&nbsp;</td>
    <td WIDTH="14%" VALIGN="TOP"><font SIZE="2">
      <p style="margin-right: 30" align="right">702</font></td>
    <td WIDTH="2%" VALIGN="TOP">&nbsp;</td>
  </tr>
  <tr>
    <td WIDTH="63%" VALIGN="TOP"><font SIZE="2">
      <p>Accrued liabilities</font></td>
    <td WIDTH="2%" VALIGN="TOP">&nbsp;</td>
    <td WIDTH="12%" VALIGN="TOP"><font SIZE="2">
      <p style="margin-right: 20" align="right">1,364</font></td>
    <td WIDTH="3%" VALIGN="TOP">&nbsp;</td>
    <td WIDTH="3%" VALIGN="TOP">&nbsp;</td>
    <td WIDTH="14%" VALIGN="TOP"><font SIZE="2">
      <p style="margin-right: 30" align="right">1,238</font></td>
    <td WIDTH="2%" VALIGN="TOP">&nbsp;</td>
  </tr>
  <tr>
    <td WIDTH="63%" VALIGN="TOP" style="border-top-style: solid; border-top-width: 1; border-bottom-style: solid; border-bottom-width: 1"><font SIZE="2">
      <p>&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;Total
      current liabilities</font></td>
    <td WIDTH="2%" VALIGN="TOP" style="border-top-style: solid; border-top-width: 1; border-bottom-style: solid; border-bottom-width: 1">&nbsp;</td>
    <td WIDTH="12%" VALIGN="TOP" style="border-top-style: solid; border-top-width: 1; border-bottom-style: solid; border-bottom-width: 1"><font SIZE="2">
      <p style="margin-right: 20" align="right">2,978</font></td>
    <td WIDTH="3%" VALIGN="TOP" style="border-top-style: solid; border-top-width: 1; border-bottom-style: solid; border-bottom-width: 1">&nbsp;</td>
    <td WIDTH="3%" VALIGN="TOP" style="border-top-style: solid; border-top-width: 1; border-bottom-style: solid; border-bottom-width: 1">&nbsp;</td>
    <td WIDTH="14%" VALIGN="TOP" style="border-top-style: solid; border-top-width: 1; border-bottom-style: solid; border-bottom-width: 1"><font SIZE="2">
      <p style="margin-right: 30" align="right">2,256</font></td>
    <td WIDTH="2%" VALIGN="TOP">&nbsp;</td>
  </tr>
  <tr>
    <td WIDTH="63%" VALIGN="TOP"><font SIZE="2">
      <p>Accrued postretirement benefits other than pensions</font></td>
    <td WIDTH="2%" VALIGN="TOP">&nbsp;</td>
    <td WIDTH="12%" VALIGN="TOP"><font SIZE="2">
      <p style="margin-right: 20" align="right">579</font></td>
    <td WIDTH="3%" VALIGN="TOP">&nbsp;</td>
    <td WIDTH="3%" VALIGN="TOP">&nbsp;</td>
    <td WIDTH="14%" VALIGN="TOP"><font SIZE="2">
      <p style="margin-right: 30" align="right">590</font></td>
    <td WIDTH="2%" VALIGN="TOP">&nbsp;</td>
  </tr>
  <tr>
    <td WIDTH="63%" VALIGN="TOP"><font SIZE="2">
      <p>Other liabilities</font></td>
    <td WIDTH="2%" VALIGN="TOP">&nbsp;</td>
    <td WIDTH="12%" VALIGN="TOP"><font SIZE="2">
      <p style="margin-right: 20" align="right">1,554</font></td>
    <td WIDTH="3%" VALIGN="TOP">&nbsp;</td>
    <td WIDTH="3%" VALIGN="TOP">&nbsp;</td>
    <td WIDTH="14%" VALIGN="TOP"><font SIZE="2">
      <p style="margin-right: 30" align="right">1,519</font></td>
    <td WIDTH="2%" VALIGN="TOP">&nbsp;</td>
  </tr>
  <tr>
    <td WIDTH="63%" VALIGN="TOP"><font SIZE="2">
      <p>Long&#45;term debt</font></td>
    <td WIDTH="2%" VALIGN="TOP">&nbsp;</td>
    <td WIDTH="12%" VALIGN="TOP"><font SIZE="2">
      <p style="margin-right: 20" align="right">1,335</font></td>
    <td WIDTH="3%" VALIGN="TOP">&nbsp;</td>
    <td WIDTH="3%" VALIGN="TOP">&nbsp;</td>
    <td WIDTH="14%" VALIGN="TOP"><font SIZE="2">
      <p style="margin-right: 30" align="right">1,711</font></td>
    <td WIDTH="2%" VALIGN="TOP">&nbsp;</td>
  </tr>
  <tr>
    <td WIDTH="63%" VALIGN="TOP" style="border-top-style: solid; border-top-width: 1; border-bottom-style: solid; border-bottom-width: 1"><font SIZE="2">
      <p>&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;Total
      Textron Manufacturing liabilities</font></td>
    <td WIDTH="2%" VALIGN="TOP" style="border-top-style: solid; border-top-width: 1; border-bottom-style: solid; border-bottom-width: 1">&nbsp;</td>
    <td WIDTH="12%" VALIGN="TOP" style="border-top-style: solid; border-top-width: 1; border-bottom-style: solid; border-bottom-width: 1"><font SIZE="2">
      <p style="margin-right: 20" align="right">6,446</font></td>
    <td WIDTH="3%" VALIGN="TOP" style="border-top-style: solid; border-top-width: 1; border-bottom-style: solid; border-bottom-width: 1">&nbsp;</td>
    <td WIDTH="3%" VALIGN="TOP" style="border-top-style: solid; border-top-width: 1; border-bottom-style: solid; border-bottom-width: 1">&nbsp;</td>
    <td WIDTH="14%" VALIGN="TOP" style="border-top-style: solid; border-top-width: 1; border-bottom-style: solid; border-bottom-width: 1"><font SIZE="2">
      <p style="margin-right: 30" align="right">6,076</font></td>
    <td WIDTH="2%" VALIGN="TOP">&nbsp;</td>
  </tr>
  <tr>
    <td WIDTH="63%" VALIGN="TOP"><b><font SIZE="2">
      <p>Textron Finance</font></b></td>
    <td WIDTH="2%" VALIGN="TOP">&nbsp;</td>
    <td WIDTH="12%" VALIGN="TOP">
      <p style="margin-right: 20" align="right">&nbsp;</p>
    </td>
    <td WIDTH="3%" VALIGN="TOP">&nbsp;</td>
    <td WIDTH="3%" VALIGN="TOP">&nbsp;</td>
    <td WIDTH="14%" VALIGN="TOP">
      <p style="margin-right: 30" align="right">&nbsp;</p>
    </td>
    <td WIDTH="2%" VALIGN="TOP">&nbsp;</td>
  </tr>
  <tr>
    <td WIDTH="63%" VALIGN="TOP"><font SIZE="2">
      <p>Other liabilities</font></td>
    <td WIDTH="2%" VALIGN="TOP">&nbsp;</td>
    <td WIDTH="12%" VALIGN="TOP"><font SIZE="2">
      <p style="margin-right: 20" align="right">503</font></td>
    <td WIDTH="3%" VALIGN="TOP">&nbsp;</td>
    <td WIDTH="3%" VALIGN="TOP">&nbsp;</td>
    <td WIDTH="14%" VALIGN="TOP"><font SIZE="2">
      <p style="margin-right: 30" align="right">501</font></td>
    <td WIDTH="2%" VALIGN="TOP">&nbsp;</td>
  </tr>
  <tr>
    <td WIDTH="63%" VALIGN="TOP"><font SIZE="2">
      <p>Deferred income taxes</font></td>
    <td WIDTH="2%" VALIGN="TOP">&nbsp;</td>
    <td WIDTH="12%" VALIGN="TOP"><font SIZE="2">
      <p style="margin-right: 20" align="right">406</font></td>
    <td WIDTH="3%" VALIGN="TOP">&nbsp;</td>
    <td WIDTH="3%" VALIGN="TOP">&nbsp;</td>
    <td WIDTH="14%" VALIGN="TOP"><font SIZE="2">
      <p style="margin-right: 30" align="right">390</font></td>
    <td WIDTH="2%" VALIGN="TOP">&nbsp;</td>
  </tr>
  <tr>
    <td WIDTH="63%" VALIGN="TOP"><font SIZE="2">
      <p>Debt</font></td>
    <td WIDTH="2%" VALIGN="TOP">&nbsp;</td>
    <td WIDTH="12%" VALIGN="TOP"><font SIZE="2">
      <p style="margin-right: 20" align="right">4,330</font></td>
    <td WIDTH="3%" VALIGN="TOP">&nbsp;</td>
    <td WIDTH="3%" VALIGN="TOP">&nbsp;</td>
    <td WIDTH="14%" VALIGN="TOP"><font SIZE="2">
      <p style="margin-right: 30" align="right">4,407</font></td>
    <td WIDTH="2%" VALIGN="TOP">&nbsp;</td>
  </tr>
  <tr>
    <td WIDTH="63%" VALIGN="TOP"><font SIZE="2">
      <p>Junior subordinated debentures</font></td>
    <td WIDTH="2%" VALIGN="TOP">&nbsp;</td>
    <td WIDTH="12%" VALIGN="TOP"><font SIZE="2">
      <p style="margin-right: 20" align="right">&#45;</font></td>
    <td WIDTH="3%" VALIGN="TOP">&nbsp;</td>
    <td WIDTH="3%" VALIGN="TOP">&nbsp;</td>
    <td WIDTH="14%" VALIGN="TOP"><font SIZE="2">
      <p style="margin-right: 30" align="right">26</font></td>
    <td WIDTH="2%" VALIGN="TOP">&nbsp;</td>
  </tr>
  <tr>
    <td WIDTH="63%" VALIGN="TOP" style="border-top-style: solid; border-top-width: 1; border-bottom-style: solid; border-bottom-width: 1"><font SIZE="2">
      <p>&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;Total
      Textron Finance liabilities</font></td>
    <td WIDTH="2%" VALIGN="TOP" style="border-top-style: solid; border-top-width: 1; border-bottom-style: solid; border-bottom-width: 1">&nbsp;</td>
    <td WIDTH="12%" VALIGN="TOP" style="border-top-style: solid; border-top-width: 1; border-bottom-style: solid; border-bottom-width: 1"><font SIZE="2">
      <p style="margin-right: 20" align="right">5,239</font></td>
    <td WIDTH="3%" VALIGN="TOP" style="border-top-style: solid; border-top-width: 1; border-bottom-style: solid; border-bottom-width: 1">&nbsp;</td>
    <td WIDTH="3%" VALIGN="TOP" style="border-top-style: solid; border-top-width: 1; border-bottom-style: solid; border-bottom-width: 1">&nbsp;</td>
    <td WIDTH="14%" VALIGN="TOP" style="border-top-style: solid; border-top-width: 1; border-bottom-style: solid; border-bottom-width: 1"><font SIZE="2">
      <p style="margin-right: 30" align="right">5,324</font></td>
    <td WIDTH="2%" VALIGN="TOP">&nbsp;</td>
  </tr>
  <tr>
    <td WIDTH="63%" VALIGN="TOP" style="border-bottom-style: solid; border-bottom-width: 1"><font SIZE="2">
      <p>&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;Total
      liabilities</font></td>
    <td WIDTH="2%" VALIGN="TOP" style="border-bottom-style: solid; border-bottom-width: 1">&nbsp;</td>
    <td WIDTH="12%" VALIGN="TOP" style="border-bottom-style: solid; border-bottom-width: 1"><font SIZE="2">
      <p style="margin-right: 20" align="right">11,685</font></td>
    <td WIDTH="3%" VALIGN="TOP" style="border-bottom-style: solid; border-bottom-width: 1">&nbsp;</td>
    <td WIDTH="3%" VALIGN="TOP" style="border-bottom-style: solid; border-bottom-width: 1">&nbsp;</td>
    <td WIDTH="14%" VALIGN="TOP" style="border-bottom-style: solid; border-bottom-width: 1"><font SIZE="2">
      <p style="margin-right: 30" align="right">11,400</font></td>
    <td WIDTH="2%" VALIGN="TOP">&nbsp;</td>
  </tr>
  <tr>
    <td WIDTH="63%" VALIGN="TOP"><b><font SIZE="2">
      <p>Shareholders&#39; equity</font></b></td>
    <td WIDTH="2%" VALIGN="TOP">&nbsp;</td>
    <td WIDTH="12%" VALIGN="TOP">
      <p style="margin-right: 20" align="right">&nbsp;</p>
    </td>
    <td WIDTH="3%" VALIGN="TOP">&nbsp;</td>
    <td WIDTH="3%" VALIGN="TOP">&nbsp;</td>
    <td WIDTH="14%" VALIGN="TOP">
      <p style="margin-right: 30" align="right">&nbsp;</p>
    </td>
    <td WIDTH="2%" VALIGN="TOP">&nbsp;</td>
  </tr>
  <tr>
    <td WIDTH="63%" VALIGN="TOP"><font SIZE="2">
      <p>Capital stock:</font></td>
    <td WIDTH="2%" VALIGN="TOP">&nbsp;</td>
    <td WIDTH="12%" VALIGN="TOP">
      <p style="margin-right: 20" align="right">&nbsp;</p>
    </td>
    <td WIDTH="3%" VALIGN="TOP">&nbsp;</td>
    <td WIDTH="3%" VALIGN="TOP">&nbsp;</td>
    <td WIDTH="14%" VALIGN="TOP">
      <p style="margin-right: 30" align="right">&nbsp;</p>
    </td>
    <td WIDTH="2%" VALIGN="TOP">&nbsp;</td>
  </tr>
  <tr>
    <td WIDTH="63%" VALIGN="TOP"><font SIZE="2">
      <p>&#160;&#160;&#160;&#160;&#160;Preferred stock</font></td>
    <td WIDTH="2%" VALIGN="TOP">&nbsp;</td>
    <td WIDTH="12%" VALIGN="TOP"><font SIZE="2">
      <p style="margin-right: 20" align="right">10</font></td>
    <td WIDTH="3%" VALIGN="TOP">&nbsp;</td>
    <td WIDTH="3%" VALIGN="TOP">&nbsp;</td>
    <td WIDTH="14%" VALIGN="TOP"><font SIZE="2">
      <p style="margin-right: 30" align="right">10</font></td>
    <td WIDTH="2%" VALIGN="TOP">&nbsp;</td>
  </tr>
  <tr>
    <td WIDTH="63%" VALIGN="TOP"><font SIZE="2">
      <p>&#160;&#160;&#160;&#160;&#160;Common stock</font></td>
    <td WIDTH="2%" VALIGN="TOP">&nbsp;</td>
    <td WIDTH="12%" VALIGN="TOP"><font SIZE="2">
      <p style="margin-right: 20" align="right">25</font></td>
    <td WIDTH="3%" VALIGN="TOP">&nbsp;</td>
    <td WIDTH="3%" VALIGN="TOP">&nbsp;</td>
    <td WIDTH="14%" VALIGN="TOP"><font SIZE="2">
      <p style="margin-right: 30" align="right">25</font></td>
    <td WIDTH="2%" VALIGN="TOP">&nbsp;</td>
  </tr>
  <tr>
    <td WIDTH="63%" VALIGN="TOP"><font SIZE="2">
      <p>Capital surplus</font></td>
    <td WIDTH="2%" VALIGN="TOP">&nbsp;</td>
    <td WIDTH="12%" VALIGN="TOP"><font SIZE="2">
      <p style="margin-right: 20" align="right">1,256</font></td>
    <td WIDTH="3%" VALIGN="TOP">&nbsp;</td>
    <td WIDTH="3%" VALIGN="TOP">&nbsp;</td>
    <td WIDTH="14%" VALIGN="TOP"><font SIZE="2">
      <p style="margin-right: 30" align="right">1,148</font></td>
    <td WIDTH="2%" VALIGN="TOP">&nbsp;</td>
  </tr>
  <tr>
    <td WIDTH="63%" VALIGN="TOP"><font SIZE="2">
      <p>Retained earnings</font></td>
    <td WIDTH="2%" VALIGN="TOP">&nbsp;</td>
    <td WIDTH="12%" VALIGN="TOP"><font SIZE="2">
      <p style="margin-right: 20" align="right">5,656</font></td>
    <td WIDTH="3%" VALIGN="TOP">&nbsp;</td>
    <td WIDTH="3%" VALIGN="TOP">&nbsp;</td>
    <td WIDTH="14%" VALIGN="TOP"><font SIZE="2">
      <p style="margin-right: 30" align="right">5,606</font></td>
    <td WIDTH="2%" VALIGN="TOP">&nbsp;</td>
  </tr>
  <tr>
    <td WIDTH="63%" VALIGN="TOP" style="border-bottom-style: solid; border-bottom-width: 1"><font SIZE="2">
      <p>Accumulated other comprehensive loss</font></td>
    <td WIDTH="2%" VALIGN="TOP" style="border-bottom-style: solid; border-bottom-width: 1">&nbsp;</td>
    <td WIDTH="12%" VALIGN="TOP" style="border-bottom-style: solid; border-bottom-width: 1"><font SIZE="2">
      <p style="margin-right: 20" align="right">(99)</font></td>
    <td WIDTH="3%" VALIGN="TOP" style="border-bottom-style: solid; border-bottom-width: 1">&nbsp;</td>
    <td WIDTH="3%" VALIGN="TOP" style="border-bottom-style: solid; border-bottom-width: 1">&nbsp;</td>
    <td WIDTH="14%" VALIGN="TOP" style="border-bottom-style: solid; border-bottom-width: 1"><font SIZE="2">
      <p style="margin-right: 30" align="right">(64)</font></td>
    <td WIDTH="2%" VALIGN="TOP">&nbsp;</td>
  </tr>
  <tr>
    <td WIDTH="63%" VALIGN="TOP">&nbsp;</td>
    <td WIDTH="2%" VALIGN="TOP">&nbsp;</td>
    <td WIDTH="12%" VALIGN="TOP"><font SIZE="2">
      <p style="margin-right: 20" align="right">6,848</font></td>
    <td WIDTH="3%" VALIGN="TOP">&nbsp;</td>
    <td WIDTH="3%" VALIGN="TOP">&nbsp;</td>
    <td WIDTH="14%" VALIGN="TOP"><font SIZE="2">
      <p style="margin-right: 30" align="right">6,725</font></td>
    <td WIDTH="2%" VALIGN="TOP">&nbsp;</td>
  </tr>
  <tr>
    <td WIDTH="63%" VALIGN="TOP"><font SIZE="2">
      <p>&#160;&#160;&#160;&#160;&#160;Less cost of treasury
      shares</font></td>
    <td WIDTH="2%" VALIGN="TOP">&nbsp;</td>
    <td WIDTH="12%" VALIGN="TOP"><font SIZE="2">
      <p style="margin-right: 20" align="right">3,097</font></td>
    <td WIDTH="3%" VALIGN="TOP">&nbsp;</td>
    <td WIDTH="3%" VALIGN="TOP">&nbsp;</td>
    <td WIDTH="14%" VALIGN="TOP"><font SIZE="2">
      <p style="margin-right: 30" align="right">3,035</font></td>
    <td WIDTH="2%" VALIGN="TOP">&nbsp;</td>
  </tr>
  <tr>
    <td WIDTH="63%" VALIGN="TOP" style="border-top-style: solid; border-top-width: 1; border-bottom-style: solid; border-bottom-width: 1"><font SIZE="2">
      <p>&#160;&#160;&#160;&#160;&#160;Total
      shareholders&#39; equity</font></td>
    <td WIDTH="2%" VALIGN="TOP" style="border-top-style: solid; border-top-width: 1; border-bottom-style: solid; border-bottom-width: 1">&nbsp;</td>
    <td WIDTH="12%" VALIGN="TOP" style="border-top-style: solid; border-top-width: 1; border-bottom-style: solid; border-bottom-width: 1"><font SIZE="2">
      <p style="margin-right: 20" align="right">3,751</font></td>
    <td WIDTH="3%" VALIGN="TOP" style="border-top-style: solid; border-top-width: 1; border-bottom-style: solid; border-bottom-width: 1">&nbsp;</td>
    <td WIDTH="3%" VALIGN="TOP" style="border-top-style: solid; border-top-width: 1; border-bottom-style: solid; border-bottom-width: 1">&nbsp;</td>
    <td WIDTH="14%" VALIGN="TOP" style="border-top-style: solid; border-top-width: 1; border-bottom-style: solid; border-bottom-width: 1"><font SIZE="2">
      <p style="margin-right: 30" align="right">3,690</font></td>
    <td WIDTH="2%" VALIGN="TOP">&nbsp;</td>
  </tr>
  <tr>
    <td WIDTH="63%" VALIGN="TOP"><font SIZE="2">
      <p>&#160;&#160;&#160;&#160;&#160;Total liabilities and
      shareholders&#39; equity</font></td>
    <td WIDTH="2%" VALIGN="TOP"><font SIZE="2">
      <p>$</font></td>
    <td WIDTH="12%" VALIGN="TOP"><font SIZE="2">
      <p style="margin-right: 20" align="right">15,436</font></td>
    <td WIDTH="3%" VALIGN="TOP">&nbsp;</td>
    <td WIDTH="3%" VALIGN="TOP"><font SIZE="2">
      <p>$</font></td>
    <td WIDTH="14%" VALIGN="TOP"><font SIZE="2">
      <p style="margin-right: 30" align="right">15,090</font></td>
    <td WIDTH="2%" VALIGN="TOP">&nbsp;</td>
  </tr>
  <tr>
    <td WIDTH="63%" VALIGN="TOP" style="border-top-style: solid; border-bottom-style: solid"><font SIZE="2">
      <p>Common shares outstanding (in thousands)</font></td>
    <td WIDTH="2%" VALIGN="TOP" style="border-top-style: solid; border-bottom-style: solid">&nbsp;</td>
    <td WIDTH="12%" VALIGN="TOP" style="border-top-style: solid; border-bottom-style: solid"><font SIZE="2">
      <p style="margin-right: 20" align="right">138,344</font></td>
    <td WIDTH="3%" VALIGN="TOP" style="border-top-style: solid; border-bottom-style: solid">&nbsp;</td>
    <td WIDTH="3%" VALIGN="TOP" style="border-top-style: solid; border-bottom-style: solid">&nbsp;</td>
    <td WIDTH="14%" VALIGN="TOP" style="border-top-style: solid; border-bottom-style: solid"><font SIZE="2">
      <p style="margin-right: 30" align="right">137,238</font></td>
    <td WIDTH="2%" VALIGN="TOP">&nbsp;</td>
  </tr>
</table>
      </center>
    </div>
<i><font SIZE="2">
<blockquote>
  <blockquote>
<p>See notes to the consolidated financial statements.</p>
  </blockquote>
</blockquote>
</font></i><font SIZE="3">
<p ALIGN="right">4.</p>
<b>
<p ALIGN="JUSTIFY">Item 1.</b></font><font SIZE="3">&#160;&#160;&#160;&#160;&#160;<u>FINANCIAL
STATEMENTS</u> (Continued)</p>
<b>
<p ALIGN="CENTER">TEXTRON INC.<br>
<a NAME="_Hlk7415253">Consolidated
Statements of </a><a NAME="_Hlk3277069">Cash Flows</a> (unaudited)<br>
</b>(In millions)</p>
</font>
<div align="center">
  <center>
<table CELLSPACING="1" CELLPADDING="1" WIDTH="712">
  <tr>
    <td WIDTH="61%" VALIGN="TOP">&nbsp;</td>
    <td WIDTH="37%" VALIGN="TOP" COLSPAN="5"><font SIZE="3">
      <p ALIGN="CENTER">Six Months Ended</font></td>
    <td WIDTH="2%" VALIGN="TOP">&nbsp;</td>
  </tr>
  <tr>
    <td WIDTH="61%" VALIGN="TOP" style="border-top-style: solid; border-top-width: 1; border-bottom-style: solid; border-bottom-width: 1">&nbsp;</td>
    <td WIDTH="17%" VALIGN="TOP" COLSPAN="2" style="border-top-style: solid; border-top-width: 1; border-bottom-style: solid; border-bottom-width: 1"><font SIZE="3">
      <p ALIGN="CENTER">July 3,<br>
      2004</font></td>
    <td WIDTH="3%" VALIGN="TOP" style="border-top-style: solid; border-top-width: 1; border-bottom-style: solid; border-bottom-width: 1">&nbsp;</td>
    <td WIDTH="17%" VALIGN="TOP" COLSPAN="2" style="border-top-style: solid; border-top-width: 1; border-bottom-style: solid; border-bottom-width: 1"><font SIZE="3">
      <p ALIGN="CENTER">June 28,<br>
      2003</font></td>
    <td WIDTH="2%" VALIGN="TOP">&nbsp;</td>
  </tr>
  <tr>
    <td WIDTH="61%" VALIGN="TOP"><b><font SIZE="3">
      <p>Cash flows from operating activities:</font></b></td>
    <td WIDTH="17%" VALIGN="TOP" COLSPAN="2">&nbsp;</td>
    <td WIDTH="3%" VALIGN="TOP">&nbsp;</td>
    <td WIDTH="17%" VALIGN="TOP" COLSPAN="2">&nbsp;</td>
    <td WIDTH="2%" VALIGN="TOP">&nbsp;</td>
  </tr>
  <tr>
    <td WIDTH="61%" VALIGN="TOP"><font SIZE="3">
      <p>Income from continuing operations</font></td>
    <td WIDTH="3%" VALIGN="TOP"><font SIZE="3">
      <p ALIGN="RIGHT">$</font></td>
    <td WIDTH="13%" VALIGN="TOP"><font SIZE="3">
      <p ALIGN="right" style="margin-right: 30">137</font></td>
    <td WIDTH="3%" VALIGN="TOP">&nbsp;</td>
    <td WIDTH="3%" VALIGN="TOP"><font SIZE="3">
      <p ALIGN="RIGHT">$</font></td>
    <td WIDTH="13%" VALIGN="TOP"><font SIZE="3">
      <p ALIGN="right" style="margin-right: 30">151</font></td>
    <td WIDTH="2%" VALIGN="TOP">&nbsp;</td>
  </tr>
  <tr>
    <td WIDTH="61%" VALIGN="TOP"><font SIZE="3">
      <p>Adjustments to reconcile income from continuing operations to<br>
      &#160;&#160;&#160;&#160;&#160;net cash provided by
      operating activities:</font></td>
    <td WIDTH="3%" VALIGN="TOP"><font SIZE="3">
      <p ALIGN="JUSTIFY"><br>
      </font></td>
    <td WIDTH="13%" VALIGN="TOP"><font SIZE="3">
      <p ALIGN="right" style="margin-right: 30"><br>
      </font></td>
    <td WIDTH="3%" VALIGN="TOP"><font SIZE="3">
      <p ALIGN="JUSTIFY"><br>
      </font></td>
    <td WIDTH="3%" VALIGN="TOP"><font SIZE="3">
      <p ALIGN="JUSTIFY"><br>
      </font></td>
    <td WIDTH="13%" VALIGN="TOP"><font SIZE="3">
      <p ALIGN="right" style="margin-right: 30"><br>
      </font></td>
    <td WIDTH="2%" VALIGN="TOP">&nbsp;</td>
  </tr>
  <tr>
    <td WIDTH="61%" VALIGN="TOP"><font SIZE="3">
      <p>&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;Depreciation</font></td>
    <td WIDTH="3%" VALIGN="TOP">&nbsp;</td>
    <td WIDTH="13%" VALIGN="TOP"><font SIZE="3">
      <p ALIGN="right" style="margin-right: 30">164</font></td>
    <td WIDTH="3%" VALIGN="TOP">&nbsp;</td>
    <td WIDTH="3%" VALIGN="TOP">&nbsp;</td>
    <td WIDTH="13%" VALIGN="TOP"><font SIZE="3">
      <p ALIGN="right" style="margin-right: 30">166</font></td>
    <td WIDTH="2%" VALIGN="TOP">&nbsp;</td>
  </tr>
  <tr>
    <td WIDTH="61%" VALIGN="TOP"><font SIZE="3">
      <p>&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;Amortization</font></td>
    <td WIDTH="3%" VALIGN="TOP">&nbsp;</td>
    <td WIDTH="13%" VALIGN="TOP"><font SIZE="3">
      <p ALIGN="right" style="margin-right: 30">7</font></td>
    <td WIDTH="3%" VALIGN="TOP">&nbsp;</td>
    <td WIDTH="3%" VALIGN="TOP">&nbsp;</td>
    <td WIDTH="13%" VALIGN="TOP"><font SIZE="3">
      <p ALIGN="right" style="margin-right: 30">9</font></td>
    <td WIDTH="2%" VALIGN="TOP">&nbsp;</td>
  </tr>
  <tr>
    <td WIDTH="61%" VALIGN="TOP"><font SIZE="3">
      <p>&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;Provision
      for losses on finance receivables</font></td>
    <td WIDTH="3%" VALIGN="TOP">&nbsp;</td>
    <td WIDTH="13%" VALIGN="TOP"><font SIZE="3">
      <p ALIGN="right" style="margin-right: 30">34</font></td>
    <td WIDTH="3%" VALIGN="TOP">&nbsp;</td>
    <td WIDTH="3%" VALIGN="TOP">&nbsp;</td>
    <td WIDTH="13%" VALIGN="TOP"><font SIZE="3">
      <p ALIGN="right" style="margin-right: 30">50</font></td>
    <td WIDTH="2%" VALIGN="TOP">&nbsp;</td>
  </tr>
  <tr>
    <td WIDTH="61%" VALIGN="TOP"><font SIZE="3">
      <p>&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;Gain
      on sale of businesses</font></td>
    <td WIDTH="3%" VALIGN="TOP">&nbsp;</td>
    <td WIDTH="13%" VALIGN="TOP"><font SIZE="3">
      <p ALIGN="right" style="margin-right: 30">(7)</font></td>
    <td WIDTH="3%" VALIGN="TOP">&nbsp;</td>
    <td WIDTH="3%" VALIGN="TOP">&nbsp;</td>
    <td WIDTH="13%" VALIGN="TOP"><font SIZE="3">
      <p ALIGN="right" style="margin-right: 30">(15)</font></td>
    <td WIDTH="2%" VALIGN="TOP">&nbsp;</td>
  </tr>
  <tr>
    <td WIDTH="61%" VALIGN="TOP"><font SIZE="3">
      <p>&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;Special
      charges</font></td>
    <td WIDTH="3%" VALIGN="TOP">&nbsp;</td>
    <td WIDTH="13%" VALIGN="TOP"><font SIZE="3">
      <p ALIGN="right" style="margin-right: 30">85</font></td>
    <td WIDTH="3%" VALIGN="TOP">&nbsp;</td>
    <td WIDTH="3%" VALIGN="TOP">&nbsp;</td>
    <td WIDTH="13%" VALIGN="TOP"><font SIZE="3">
      <p ALIGN="right" style="margin-right: 30">52</font></td>
    <td WIDTH="2%" VALIGN="TOP">&nbsp;</td>
  </tr>
  <tr>
    <td WIDTH="61%" VALIGN="TOP"><font SIZE="3">
      <p>&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;Deferred
      income taxes</font></td>
    <td WIDTH="3%" VALIGN="TOP">&nbsp;</td>
    <td WIDTH="13%" VALIGN="TOP"><font SIZE="3">
      <p ALIGN="right" style="margin-right: 30">19</font></td>
    <td WIDTH="3%" VALIGN="TOP">&nbsp;</td>
    <td WIDTH="3%" VALIGN="TOP">&nbsp;</td>
    <td WIDTH="13%" VALIGN="TOP"><font SIZE="3">
      <p ALIGN="right" style="margin-right: 30">18</font></td>
    <td WIDTH="2%" VALIGN="TOP">&nbsp;</td>
  </tr>
  <tr>
    <td WIDTH="61%" VALIGN="TOP"><font SIZE="3">
      <p>&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;Changes
      in assets and liabilities excluding those related to<br>
      &#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;acquisitions
      and divestitures:</font></td>
    <td WIDTH="3%" VALIGN="TOP"><font SIZE="3">
      <p ALIGN="JUSTIFY"><br>
      </font></td>
    <td WIDTH="13%" VALIGN="TOP"><font SIZE="3">
      <p ALIGN="right" style="margin-right: 30"><br>
      </font></td>
    <td WIDTH="3%" VALIGN="TOP"><font SIZE="3">
      <p ALIGN="JUSTIFY"><br>
      </font></td>
    <td WIDTH="3%" VALIGN="TOP"><font SIZE="3">
      <p ALIGN="JUSTIFY"><br>
      </font></td>
    <td WIDTH="13%" VALIGN="TOP"><font SIZE="3">
      <p ALIGN="right" style="margin-right: 30"><br>
      </font></td>
    <td WIDTH="2%" VALIGN="TOP"><font SIZE="3">
      <p ALIGN="JUSTIFY"><br>
      </font></td>
  </tr>
  <tr>
    <td WIDTH="61%" VALIGN="TOP"><font SIZE="3">
      <p>&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;Commercial
      and U.S. Government receivables</font></td>
    <td WIDTH="3%" VALIGN="TOP">&nbsp;</td>
    <td WIDTH="13%" VALIGN="TOP"><font SIZE="3">
      <p ALIGN="right" style="margin-right: 30">(120)</font></td>
    <td WIDTH="3%" VALIGN="TOP">&nbsp;</td>
    <td WIDTH="3%" VALIGN="TOP">&nbsp;</td>
    <td WIDTH="13%" VALIGN="TOP"><font SIZE="3">
      <p ALIGN="right" style="margin-right: 30">(117)</font></td>
    <td WIDTH="2%" VALIGN="TOP">&nbsp;</td>
  </tr>
  <tr>
    <td WIDTH="61%" VALIGN="TOP"><font SIZE="3">
      <p>&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;Inventories</font></td>
    <td WIDTH="3%" VALIGN="TOP">&nbsp;</td>
    <td WIDTH="13%" VALIGN="TOP"><font SIZE="3">
      <p ALIGN="right" style="margin-right: 30">(183)</font></td>
    <td WIDTH="3%" VALIGN="TOP">&nbsp;</td>
    <td WIDTH="3%" VALIGN="TOP">&nbsp;</td>
    <td WIDTH="13%" VALIGN="TOP"><font SIZE="3">
      <p ALIGN="right" style="margin-right: 30">7</font></td>
    <td WIDTH="2%" VALIGN="TOP">&nbsp;</td>
  </tr>
  <tr>
    <td WIDTH="61%" VALIGN="TOP"><font SIZE="3">
      <p>&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;Other
      assets</font></td>
    <td WIDTH="3%" VALIGN="TOP">&nbsp;</td>
    <td WIDTH="13%" VALIGN="TOP"><font SIZE="3">
      <p ALIGN="right" style="margin-right: 30">38</font></td>
    <td WIDTH="3%" VALIGN="TOP">&nbsp;</td>
    <td WIDTH="3%" VALIGN="TOP">&nbsp;</td>
    <td WIDTH="13%" VALIGN="TOP"><font SIZE="3">
      <p ALIGN="right" style="margin-right: 30">100</font></td>
    <td WIDTH="2%" VALIGN="TOP">&nbsp;</td>
  </tr>
  <tr>
    <td WIDTH="61%" VALIGN="TOP"><font SIZE="3">
      <p>&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;Accounts
      payable</font></td>
    <td WIDTH="3%" VALIGN="TOP">&nbsp;</td>
    <td WIDTH="13%" VALIGN="TOP"><font SIZE="3">
      <p ALIGN="right" style="margin-right: 30">227</font></td>
    <td WIDTH="3%" VALIGN="TOP">&nbsp;</td>
    <td WIDTH="3%" VALIGN="TOP">&nbsp;</td>
    <td WIDTH="13%" VALIGN="TOP"><font SIZE="3">
      <p ALIGN="right" style="margin-right: 30">(119)</font></td>
    <td WIDTH="2%" VALIGN="TOP">&nbsp;</td>
  </tr>
  <tr>
    <td WIDTH="61%" VALIGN="TOP"><font SIZE="3">
      <p>&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;Accrued
      liabilities</font></td>
    <td WIDTH="3%" VALIGN="TOP">&nbsp;</td>
    <td WIDTH="13%" VALIGN="TOP"><font SIZE="3">
      <p ALIGN="right" style="margin-right: 30">(12)</font></td>
    <td WIDTH="3%" VALIGN="TOP">&nbsp;</td>
    <td WIDTH="3%" VALIGN="TOP">&nbsp;</td>
    <td WIDTH="13%" VALIGN="TOP"><font SIZE="3">
      <p ALIGN="right" style="margin-right: 30">(70)</font></td>
    <td WIDTH="2%" VALIGN="TOP">&nbsp;</td>
  </tr>
  <tr>
    <td WIDTH="61%" VALIGN="TOP"><font SIZE="3">
      <p>&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;Other
      operating activities, net</font></td>
    <td WIDTH="3%" VALIGN="TOP">&nbsp;</td>
    <td WIDTH="13%" VALIGN="TOP"><font SIZE="3">
      <p ALIGN="right" style="margin-right: 30">10</font></td>
    <td WIDTH="3%" VALIGN="TOP">&nbsp;</td>
    <td WIDTH="3%" VALIGN="TOP">&nbsp;</td>
    <td WIDTH="13%" VALIGN="TOP"><font SIZE="3">
      <p ALIGN="right" style="margin-right: 30">9</font></td>
    <td WIDTH="2%" VALIGN="TOP">&nbsp;</td>
  </tr>
  <tr>
    <td WIDTH="61%" VALIGN="TOP" style="border-top-style: solid; border-top-width: 1; border-bottom-style: solid; border-bottom-width: 1"><font SIZE="3">
      <p>&#160;&#160;&#160;&#160;&#160;Net cash provided by
      operating activities of continuing<br>
      &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; operations</font></td>
    <td WIDTH="3%" VALIGN="TOP" style="border-top-style: solid; border-top-width: 1; border-bottom-style: solid; border-bottom-width: 1">&nbsp;</td>
    <td WIDTH="13%" VALIGN="TOP" style="border-top-style: solid; border-top-width: 1; border-bottom-style: solid; border-bottom-width: 1"><font SIZE="3">
      <p ALIGN="right" style="margin-right: 30"><br>
      399</font></td>
    <td WIDTH="3%" VALIGN="TOP" style="border-top-style: solid; border-top-width: 1; border-bottom-style: solid; border-bottom-width: 1">&nbsp;</td>
    <td WIDTH="3%" VALIGN="TOP" style="border-top-style: solid; border-top-width: 1; border-bottom-style: solid; border-bottom-width: 1">&nbsp;</td>
    <td WIDTH="13%" VALIGN="TOP" style="border-top-style: solid; border-top-width: 1; border-bottom-style: solid; border-bottom-width: 1"><font SIZE="3">
      <p ALIGN="right" style="margin-right: 30"><br>
      241</font></td>
    <td WIDTH="2%" VALIGN="TOP">&nbsp;</td>
  </tr>
  <tr>
    <td WIDTH="61%" VALIGN="TOP"><b><font SIZE="3">
      <p>Cash flows from investing activities:</font></b></td>
    <td WIDTH="3%" VALIGN="TOP">&nbsp;</td>
    <td WIDTH="13%" VALIGN="TOP">
      <p ALIGN="right" style="margin-right: 30">&nbsp;</p>
    </td>
    <td WIDTH="3%" VALIGN="TOP">&nbsp;</td>
    <td WIDTH="3%" VALIGN="TOP">&nbsp;</td>
    <td WIDTH="13%" VALIGN="TOP">
      <p ALIGN="right" style="margin-right: 30">&nbsp;</p>
    </td>
    <td WIDTH="2%" VALIGN="TOP">&nbsp;</td>
  </tr>
  <tr>
    <td WIDTH="61%" VALIGN="TOP"><font SIZE="3">
      <p>Finance receivables:</font></td>
    <td WIDTH="3%" VALIGN="TOP">&nbsp;</td>
    <td WIDTH="13%" VALIGN="TOP">
      <p ALIGN="right" style="margin-right: 30">&nbsp;</p>
    </td>
    <td WIDTH="3%" VALIGN="TOP">&nbsp;</td>
    <td WIDTH="3%" VALIGN="TOP">&nbsp;</td>
    <td WIDTH="13%" VALIGN="TOP">
      <p ALIGN="right" style="margin-right: 30">&nbsp;</p>
    </td>
    <td WIDTH="2%" VALIGN="TOP">&nbsp;</td>
  </tr>
  <tr>
    <td WIDTH="61%" VALIGN="TOP"><font SIZE="3">
      <p>&#160;&#160;&#160;&#160;&#160;Originated or
      purchased</font></td>
    <td WIDTH="3%" VALIGN="TOP">&nbsp;</td>
    <td WIDTH="13%" VALIGN="TOP"><font SIZE="3">
      <p ALIGN="right" style="margin-right: 30">(5,130)</font></td>
    <td WIDTH="3%" VALIGN="TOP">&nbsp;</td>
    <td WIDTH="3%" VALIGN="TOP">&nbsp;</td>
    <td WIDTH="13%" VALIGN="TOP"><font SIZE="3">
      <p ALIGN="right" style="margin-right: 30">(4,200)</font></td>
    <td WIDTH="2%" VALIGN="TOP">&nbsp;</td>
  </tr>
  <tr>
    <td WIDTH="61%" VALIGN="TOP"><font SIZE="3">
      <p>&#160;&#160;&#160;&#160;&#160;Repaid</font></td>
    <td WIDTH="3%" VALIGN="TOP">&nbsp;</td>
    <td WIDTH="13%" VALIGN="TOP"><font SIZE="3">
      <p ALIGN="right" style="margin-right: 30">4,707</font></td>
    <td WIDTH="3%" VALIGN="TOP">&nbsp;</td>
    <td WIDTH="3%" VALIGN="TOP">&nbsp;</td>
    <td WIDTH="13%" VALIGN="TOP"><font SIZE="3">
      <p ALIGN="right" style="margin-right: 30">3,783</font></td>
    <td WIDTH="2%" VALIGN="TOP">&nbsp;</td>
  </tr>
  <tr>
    <td WIDTH="61%" VALIGN="TOP"><font SIZE="3">
      <p>&#160;&#160;&#160;&#160;&#160;Proceeds from
      receivables sales and securitization sales</font></td>
    <td WIDTH="3%" VALIGN="TOP">&nbsp;</td>
    <td WIDTH="13%" VALIGN="TOP"><font SIZE="3">
      <p ALIGN="right" style="margin-right: 30">248</font></td>
    <td WIDTH="3%" VALIGN="TOP">&nbsp;</td>
    <td WIDTH="3%" VALIGN="TOP">&nbsp;</td>
    <td WIDTH="13%" VALIGN="TOP"><font SIZE="3">
      <p ALIGN="right" style="margin-right: 30">450</font></td>
    <td WIDTH="2%" VALIGN="TOP">&nbsp;</td>
  </tr>
  <tr>
    <td WIDTH="61%" VALIGN="TOP"><font SIZE="3">
      <p>Capital expenditures</font></td>
    <td WIDTH="3%" VALIGN="TOP">&nbsp;</td>
    <td WIDTH="13%" VALIGN="TOP"><font SIZE="3">
      <p ALIGN="right" style="margin-right: 30">(130)</font></td>
    <td WIDTH="3%" VALIGN="TOP">&nbsp;</td>
    <td WIDTH="3%" VALIGN="TOP">&nbsp;</td>
    <td WIDTH="13%" VALIGN="TOP"><font SIZE="3">
      <p ALIGN="right" style="margin-right: 30">(123)</font></td>
    <td WIDTH="2%" VALIGN="TOP">&nbsp;</td>
  </tr>
  <tr>
    <td WIDTH="61%" VALIGN="TOP"><font SIZE="3">
      <p>Cash acquired, net of cash used for acquisitions</font></td>
    <td WIDTH="3%" VALIGN="TOP">&nbsp;</td>
    <td WIDTH="13%" VALIGN="TOP"><font SIZE="3">
      <p ALIGN="right" style="margin-right: 30">6</font></td>
    <td WIDTH="3%" VALIGN="TOP">&nbsp;</td>
    <td WIDTH="3%" VALIGN="TOP">&nbsp;</td>
    <td WIDTH="13%" VALIGN="TOP"><font SIZE="3">
      <p ALIGN="right" style="margin-right: 30">&#45;</font></td>
    <td WIDTH="2%" VALIGN="TOP">&nbsp;</td>
  </tr>
  <tr>
    <td WIDTH="61%" VALIGN="TOP"><font SIZE="3">
      <p>Net proceeds from sale of businesses</font></td>
    <td WIDTH="3%" VALIGN="TOP">&nbsp;</td>
    <td WIDTH="13%" VALIGN="TOP"><font SIZE="3">
      <p ALIGN="right" style="margin-right: 30">19</font></td>
    <td WIDTH="3%" VALIGN="TOP">&nbsp;</td>
    <td WIDTH="3%" VALIGN="TOP">&nbsp;</td>
    <td WIDTH="13%" VALIGN="TOP"><font SIZE="3">
      <p ALIGN="right" style="margin-right: 30">16</font></td>
    <td WIDTH="2%" VALIGN="TOP">&nbsp;</td>
  </tr>
  <tr>
    <td WIDTH="61%" VALIGN="TOP"><font SIZE="3">
      <p>Proceeds from sale of property, plant and equipment</font></td>
    <td WIDTH="3%" VALIGN="TOP">&nbsp;</td>
    <td WIDTH="13%" VALIGN="TOP"><font SIZE="3">
      <p ALIGN="right" style="margin-right: 30">27</font></td>
    <td WIDTH="3%" VALIGN="TOP">&nbsp;</td>
    <td WIDTH="3%" VALIGN="TOP">&nbsp;</td>
    <td WIDTH="13%" VALIGN="TOP"><font SIZE="3">
      <p ALIGN="right" style="margin-right: 30">78</font></td>
    <td WIDTH="2%" VALIGN="TOP">&nbsp;</td>
  </tr>
  <tr>
    <td WIDTH="61%" VALIGN="TOP"><font SIZE="3">
      <p>Proceeds from sale of investments</font></td>
    <td WIDTH="3%" VALIGN="TOP">&nbsp;</td>
    <td WIDTH="13%" VALIGN="TOP"><font SIZE="3">
      <p ALIGN="right" style="margin-right: 30">38</font></td>
    <td WIDTH="3%" VALIGN="TOP">&nbsp;</td>
    <td WIDTH="3%" VALIGN="TOP">&nbsp;</td>
    <td WIDTH="13%" VALIGN="TOP"><font SIZE="3">
      <p ALIGN="right" style="margin-right: 30">1</font></td>
    <td WIDTH="2%" VALIGN="TOP">&nbsp;</td>
  </tr>
  <tr>
    <td WIDTH="61%" VALIGN="TOP"><font SIZE="3">
      <p>Other investing activities, net</font></td>
    <td WIDTH="3%" VALIGN="TOP">&nbsp;</td>
    <td WIDTH="13%" VALIGN="TOP"><font SIZE="3">
      <p ALIGN="right" style="margin-right: 30">69</font></td>
    <td WIDTH="3%" VALIGN="TOP">&nbsp;</td>
    <td WIDTH="3%" VALIGN="TOP">&nbsp;</td>
    <td WIDTH="13%" VALIGN="TOP"><font SIZE="3">
      <p ALIGN="right" style="margin-right: 30">35</font></td>
    <td WIDTH="2%" VALIGN="TOP">&nbsp;</td>
  </tr>
  <tr>
    <td WIDTH="61%" VALIGN="TOP" style="border-top-style: solid; border-top-width: 1; border-bottom-style: solid; border-bottom-width: 1"><font SIZE="3">
      <p>&#160;&#160;&#160;&#160;&#160;Net cash (used)
      provided by investing activities of continuing<br>
      &#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;operations</font></td>
    <td WIDTH="3%" VALIGN="TOP" style="border-top-style: solid; border-top-width: 1; border-bottom-style: solid; border-bottom-width: 1"><font SIZE="3">
      <p ALIGN="JUSTIFY"><br>
      </font></td>
    <td WIDTH="13%" VALIGN="TOP" style="border-top-style: solid; border-top-width: 1; border-bottom-style: solid; border-bottom-width: 1"><font SIZE="3">
      <p ALIGN="right" style="margin-right: 30"><br>
      (146)</font></td>
    <td WIDTH="3%" VALIGN="TOP" style="border-top-style: solid; border-top-width: 1; border-bottom-style: solid; border-bottom-width: 1"><font SIZE="3">
      <p ALIGN="JUSTIFY"><br>
      </font></td>
    <td WIDTH="3%" VALIGN="TOP" style="border-top-style: solid; border-top-width: 1; border-bottom-style: solid; border-bottom-width: 1"><font SIZE="3">
      <p ALIGN="JUSTIFY"><br>
      </font></td>
    <td WIDTH="13%" VALIGN="TOP" style="border-top-style: solid; border-top-width: 1; border-bottom-style: solid; border-bottom-width: 1"><font SIZE="3">
      <p ALIGN="right" style="margin-right: 30"><br>
      40</font></td>
    <td WIDTH="2%" VALIGN="TOP"><font SIZE="3">
      <p ALIGN="JUSTIFY"><br>
      </font></td>
  </tr>
  <tr>
    <td WIDTH="61%" VALIGN="TOP"><b><font SIZE="3">
      <p>Cash flows from financing activities:</font></b></td>
    <td WIDTH="3%" VALIGN="TOP">&nbsp;</td>
    <td WIDTH="13%" VALIGN="TOP">
      <p ALIGN="right" style="margin-right: 30">&nbsp;</p>
    </td>
    <td WIDTH="3%" VALIGN="TOP">&nbsp;</td>
    <td WIDTH="3%" VALIGN="TOP">&nbsp;</td>
    <td WIDTH="13%" VALIGN="TOP">
      <p ALIGN="right" style="margin-right: 30">&nbsp;</p>
    </td>
    <td WIDTH="2%" VALIGN="TOP">&nbsp;</td>
  </tr>
  <tr>
    <td WIDTH="61%" VALIGN="TOP"><font SIZE="3">
      <p>Increase (decrease) in short&#45;term debt</font></td>
    <td WIDTH="3%" VALIGN="TOP">&nbsp;</td>
    <td WIDTH="13%" VALIGN="TOP"><font SIZE="3">
      <p ALIGN="right" style="margin-right: 30">62</font></td>
    <td WIDTH="3%" VALIGN="TOP">&nbsp;</td>
    <td WIDTH="3%" VALIGN="TOP">&nbsp;</td>
    <td WIDTH="13%" VALIGN="TOP"><font SIZE="3">
      <p ALIGN="right" style="margin-right: 30">(303)</font></td>
    <td WIDTH="2%" VALIGN="TOP">&nbsp;</td>
  </tr>
  <tr>
    <td WIDTH="61%" VALIGN="TOP"><font SIZE="3">
      <p>Proceeds from issuance of long&#45;term debt</font></td>
    <td WIDTH="3%" VALIGN="TOP">&nbsp;</td>
    <td WIDTH="13%" VALIGN="TOP"><font SIZE="3">
      <p ALIGN="right" style="margin-right: 30">445</font></td>
    <td WIDTH="3%" VALIGN="TOP">&nbsp;</td>
    <td WIDTH="3%" VALIGN="TOP">&nbsp;</td>
    <td WIDTH="13%" VALIGN="TOP"><font SIZE="3">
      <p ALIGN="right" style="margin-right: 30">814</font></td>
    <td WIDTH="2%" VALIGN="TOP">&nbsp;</td>
  </tr>
  <tr>
    <td WIDTH="61%" VALIGN="TOP"><font SIZE="3">
      <p>Principal payments and retirements on long&#45;term debt and<br>
      &#160;&#160;&#160;&#160;&#160;mandatorily redeemable
      preferred securities</font></td>
    <td WIDTH="3%" VALIGN="TOP"><font SIZE="3">
      <p ALIGN="JUSTIFY"><br>
      </font></td>
    <td WIDTH="13%" VALIGN="TOP"><font SIZE="3">
      <p ALIGN="right" style="margin-right: 30"><br>
      (668)</font></td>
    <td WIDTH="3%" VALIGN="TOP"><font SIZE="3">
      <p ALIGN="JUSTIFY"><br>
      </font></td>
    <td WIDTH="3%" VALIGN="TOP"><font SIZE="3">
      <p ALIGN="JUSTIFY"><br>
      </font></td>
    <td WIDTH="13%" VALIGN="TOP"><font SIZE="3">
      <p ALIGN="right" style="margin-right: 30"><br>
      (510)</font></td>
    <td WIDTH="2%" VALIGN="TOP"><font SIZE="3">
      <p ALIGN="JUSTIFY"><br>
      </font></td>
  </tr>
  <tr>
    <td WIDTH="61%" VALIGN="TOP"><font SIZE="3">
      <p>Proceeds from stock option exercises</font></td>
    <td WIDTH="3%" VALIGN="TOP">&nbsp;</td>
    <td WIDTH="13%" VALIGN="TOP"><font SIZE="3">
      <p ALIGN="right" style="margin-right: 30">92</font></td>
    <td WIDTH="3%" VALIGN="TOP">&nbsp;</td>
    <td WIDTH="3%" VALIGN="TOP">&nbsp;</td>
    <td WIDTH="13%" VALIGN="TOP"><font SIZE="3">
      <p ALIGN="right" style="margin-right: 30">3</font></td>
    <td WIDTH="2%" VALIGN="TOP">&nbsp;</td>
  </tr>
  <tr>
    <td WIDTH="61%" VALIGN="TOP"><font SIZE="3">
      <p>Purchases of Textron common stock</font></td>
    <td WIDTH="3%" VALIGN="TOP">&nbsp;</td>
    <td WIDTH="13%" VALIGN="TOP"><font SIZE="3">
      <p ALIGN="right" style="margin-right: 30">(71)</font></td>
    <td WIDTH="3%" VALIGN="TOP">&nbsp;</td>
    <td WIDTH="3%" VALIGN="TOP">&nbsp;</td>
    <td WIDTH="13%" VALIGN="TOP"><font SIZE="3">
      <p ALIGN="right" style="margin-right: 30">(65)</font></td>
    <td WIDTH="2%" VALIGN="TOP">&nbsp;</td>
  </tr>
  <tr>
    <td WIDTH="61%" VALIGN="TOP" style="border-bottom-style: solid; border-bottom-width: 1"><font SIZE="3">
      <p>Dividends paid</font></td>
    <td WIDTH="3%" VALIGN="TOP" style="border-bottom-style: solid; border-bottom-width: 1">&nbsp;</td>
    <td WIDTH="13%" VALIGN="TOP" style="border-bottom-style: solid; border-bottom-width: 1"><font SIZE="3">
      <p ALIGN="right" style="margin-right: 30">(90)</font></td>
    <td WIDTH="3%" VALIGN="TOP" style="border-bottom-style: solid; border-bottom-width: 1">&nbsp;</td>
    <td WIDTH="3%" VALIGN="TOP" style="border-bottom-style: solid; border-bottom-width: 1">&nbsp;</td>
    <td WIDTH="13%" VALIGN="TOP" style="border-bottom-style: solid; border-bottom-width: 1"><font SIZE="3">
      <p ALIGN="right" style="margin-right: 30">(89)</font></td>
    <td WIDTH="2%" VALIGN="TOP">&nbsp;</td>
  </tr>
  <tr>
    <td WIDTH="61%" VALIGN="TOP"><font SIZE="3">
      <p>&#160;&#160;&#160;&#160;&#160;Net cash used by
      financing activities of continuing operations</font></td>
    <td WIDTH="3%" VALIGN="TOP">&nbsp;</td>
    <td WIDTH="13%" VALIGN="TOP"><font SIZE="3">
      <p ALIGN="right" style="margin-right: 30">(230)</font></td>
    <td WIDTH="3%" VALIGN="TOP">&nbsp;</td>
    <td WIDTH="3%" VALIGN="TOP">&nbsp;</td>
    <td WIDTH="13%" VALIGN="TOP"><font SIZE="3">
      <p ALIGN="right" style="margin-right: 30">(150)</font></td>
    <td WIDTH="2%" VALIGN="TOP">&nbsp;</td>
  </tr>
  <tr>
    <td WIDTH="61%" VALIGN="TOP" style="border-bottom-style: solid; border-bottom-width: 1"><font SIZE="3">
      <p>Effect of exchange rate changes on cash and cash equivalents</font></td>
    <td WIDTH="3%" VALIGN="TOP" style="border-bottom-style: solid; border-bottom-width: 1">&nbsp;</td>
    <td WIDTH="13%" VALIGN="TOP" style="border-bottom-style: solid; border-bottom-width: 1"><font SIZE="3">
      <p ALIGN="right" style="margin-right: 30">(3)</font></td>
    <td WIDTH="3%" VALIGN="TOP" style="border-bottom-style: solid; border-bottom-width: 1">&nbsp;</td>
    <td WIDTH="3%" VALIGN="TOP" style="border-bottom-style: solid; border-bottom-width: 1">&nbsp;</td>
    <td WIDTH="13%" VALIGN="TOP" style="border-bottom-style: solid; border-bottom-width: 1"><font SIZE="3">
      <p ALIGN="right" style="margin-right: 30">16</font></td>
    <td WIDTH="2%" VALIGN="TOP">&nbsp;</td>
  </tr>
  <tr>
    <td WIDTH="61%" VALIGN="TOP"><font SIZE="3">
      <p>Net cash provided by continuing operations</font></td>
    <td WIDTH="3%" VALIGN="TOP">&nbsp;</td>
    <td WIDTH="13%" VALIGN="TOP"><font SIZE="3">
      <p ALIGN="right" style="margin-right: 30">20</font></td>
    <td WIDTH="3%" VALIGN="TOP">&nbsp;</td>
    <td WIDTH="3%" VALIGN="TOP">&nbsp;</td>
    <td WIDTH="13%" VALIGN="TOP"><font SIZE="3">
      <p ALIGN="right" style="margin-right: 30">147</font></td>
    <td WIDTH="2%" VALIGN="TOP">&nbsp;</td>
  </tr>
  <tr>
    <td WIDTH="61%" VALIGN="TOP" style="border-bottom-style: solid; border-bottom-width: 1"><font SIZE="3">
      <p>Net cash provided (used) by discontinued operations</font></td>
    <td WIDTH="3%" VALIGN="TOP" style="border-bottom-style: solid; border-bottom-width: 1">&nbsp;</td>
    <td WIDTH="13%" VALIGN="TOP" style="border-bottom-style: solid; border-bottom-width: 1"><font SIZE="3">
      <p ALIGN="right" style="margin-right: 30">10</font></td>
    <td WIDTH="3%" VALIGN="TOP" style="border-bottom-style: solid; border-bottom-width: 1">&nbsp;</td>
    <td WIDTH="3%" VALIGN="TOP" style="border-bottom-style: solid; border-bottom-width: 1">&nbsp;</td>
    <td WIDTH="13%" VALIGN="TOP" style="border-bottom-style: solid; border-bottom-width: 1"><font SIZE="3">
      <p ALIGN="right" style="margin-right: 30">(83)</font></td>
    <td WIDTH="2%" VALIGN="TOP">&nbsp;</td>
  </tr>
  <tr>
    <td WIDTH="61%" VALIGN="TOP"><b><font SIZE="3">
      <p>Net increase in cash and cash equivalents</font></b></td>
    <td WIDTH="3%" VALIGN="TOP">&nbsp;</td>
    <td WIDTH="13%" VALIGN="TOP"><font SIZE="3">
      <p ALIGN="right" style="margin-right: 30">30</font></td>
    <td WIDTH="3%" VALIGN="TOP">&nbsp;</td>
    <td WIDTH="3%" VALIGN="TOP">&nbsp;</td>
    <td WIDTH="13%" VALIGN="TOP"><font SIZE="3">
      <p ALIGN="right" style="margin-right: 30">64</font></td>
    <td WIDTH="2%" VALIGN="TOP">&nbsp;</td>
  </tr>
  <tr>
    <td WIDTH="61%" VALIGN="TOP" style="border-bottom-style: solid; border-bottom-width: 1"><font SIZE="3">
      <p>Cash and cash equivalents at beginning of period</font></td>
    <td WIDTH="3%" VALIGN="TOP" style="border-bottom-style: solid; border-bottom-width: 1">&nbsp;</td>
    <td WIDTH="13%" VALIGN="TOP" style="border-bottom-style: solid; border-bottom-width: 1"><font SIZE="3">
      <p ALIGN="right" style="margin-right: 30">843</font></td>
    <td WIDTH="3%" VALIGN="TOP" style="border-bottom-style: solid; border-bottom-width: 1">&nbsp;</td>
    <td WIDTH="3%" VALIGN="TOP" style="border-bottom-style: solid; border-bottom-width: 1">&nbsp;</td>
    <td WIDTH="13%" VALIGN="TOP" style="border-bottom-style: solid; border-bottom-width: 1"><font SIZE="3">
      <p ALIGN="right" style="margin-right: 30">307</font></td>
    <td WIDTH="2%" VALIGN="TOP">&nbsp;</td>
  </tr>
  <tr>
    <td WIDTH="61%" VALIGN="TOP" style="border-bottom-style: solid"><font SIZE="3">
      <p>Cash and cash equivalents at end of period</font></td>
    <td WIDTH="3%" VALIGN="TOP" style="border-bottom-style: solid"><font SIZE="3">
      <p ALIGN="RIGHT">$</font></td>
    <td WIDTH="13%" VALIGN="TOP" style="border-bottom-style: solid"><font SIZE="3">
      <p ALIGN="right" style="margin-right: 30">873</font></td>
    <td WIDTH="3%" VALIGN="TOP" style="border-bottom-style: solid">&nbsp;</td>
    <td WIDTH="3%" VALIGN="TOP" style="border-bottom-style: solid"><font SIZE="3">
      <p ALIGN="RIGHT">$</font></td>
    <td WIDTH="13%" VALIGN="TOP" style="border-bottom-style: solid"><font SIZE="3">
      <p ALIGN="right" style="margin-right: 30">371</font></td>
    <td WIDTH="2%" VALIGN="TOP">&nbsp;</td>
  </tr>
  <tr>
    <td WIDTH="61%" VALIGN="TOP"><b><font SIZE="3">
      <p>Supplemental schedule of non&#45;cash investing activities:</font></b></td>
    <td WIDTH="3%" VALIGN="TOP">&nbsp;</td>
    <td WIDTH="13%" VALIGN="TOP">
      <p ALIGN="right" style="margin-right: 30">&nbsp;</p>
    </td>
    <td WIDTH="3%" VALIGN="TOP">&nbsp;</td>
    <td WIDTH="3%" VALIGN="TOP">&nbsp;</td>
    <td WIDTH="13%" VALIGN="TOP">
      <p ALIGN="right" style="margin-right: 30">&nbsp;</p>
    </td>
    <td WIDTH="2%" VALIGN="TOP">&nbsp;</td>
  </tr>
  <tr>
    <td WIDTH="61%" VALIGN="TOP" style="border-bottom-style: solid"><font SIZE="3">
      <p>&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;Capital
      expenditures financed through capital leases</font></td>
    <td WIDTH="3%" VALIGN="TOP" style="border-bottom-style: solid"><font SIZE="3">
      <p ALIGN="RIGHT">$</font></td>
    <td WIDTH="13%" VALIGN="TOP" style="border-bottom-style: solid"><font SIZE="3">
      <p ALIGN="right" style="margin-right: 30">21</font></td>
    <td WIDTH="3%" VALIGN="TOP" style="border-bottom-style: solid">&nbsp;</td>
    <td WIDTH="3%" VALIGN="TOP" style="border-bottom-style: solid"><font SIZE="3">
      <p ALIGN="RIGHT">$</font></td>
    <td WIDTH="13%" VALIGN="TOP" style="border-bottom-style: solid"><font SIZE="3">
      <p ALIGN="right" style="margin-right: 30">4</font></td>
    <td WIDTH="2%" VALIGN="TOP">&nbsp;</td>
  </tr>
</table>
      </center>
    </div>
<i><font SIZE="3">
<blockquote>
  <blockquote>
<p>See notes to the consolidated financial statements</font><font SIZE="2">.</p>
  </blockquote>
</blockquote>
</font></i><font SIZE="3">
<p align="right">5.</p>
<b>
<p>Item 1.</b></font><font SIZE="3">&#160;&#160;&#160;&#160;&#160;<u>FINANCIAL
STATEMENTS</u> (Continued)</p>
<b>
<p ALIGN="CENTER">TEXTRON INC.<br>
</b><a NAME="_Hlk528634175">Notes</a> to Consolidated
Financial Statements (unaudited)</p>
<b>
<p>Note 1: Basis of Presentation and Summary of Certain Significant Accounting
Policies</p>
</b>
<p ALIGN="JUSTIFY">The consolidated financial statements should be read in
conjunction with the financial statements included in Textron&#39;s Annual
Report on Form 10&#45;K for the year ended January&#160;3, 2004. The
consolidated financial statements reflect all adjustments (consisting only of
normal recurring adjustments) which are, in the opinion of management, necessary
for a fair presentation of Textron&#39;s consolidated financial position at
July&#160;3, 2004, and its consolidated results of operations and cash flows
for each of the respective three&#45; and six&#45;month periods ended
July&#160;3, 2004 and June&#160;28, 2003. The results of operations for
the interim periods are not necessarily indicative of the results to be expected
for the full year. Certain prior year balances have been reclassified to conform
to the current year presentation.</p>
<p ALIGN="JUSTIFY">Textron&#39;s financings are conducted through two
borrowing groups, Textron Finance and Textron Manufacturing. This framework is
designed to enhance Textron&#39;s borrowing power by separating the Finance
segment. Textron Finance consists of Textron Financial Corporation consolidated
with its subsidiaries, which are the entities through which Textron operates its
Finance segment. Textron Finance finances its operations by borrowing from its
own group of external creditors. Textron Manufacturing is Textron Inc., the
parent company, consolidated with the entities that operate in the Bell, Cessna,
Fastening Systems and Industrial business segments. All significant intercompany
transactions are eliminated.</p>
<p ALIGN="JUSTIFY">Textron accounts for its interest in unconsolidated joint
ventures under the equity method of accounting. At July&#160;3, 2004 and
January&#160;3, 2004, other assets includes $21 million and $34 million,
respectively, attributable to investments in unconsolidated joint ventures.
Since Textron&#39;s equity in the losses of these joint ventures is not
material, this amount is reported in cost of sales rather than as a separate
line item. Textron&#39;s loss from unconsolidated joint ventures totaled $3
million and $6 million for the three and six months ended July&#160;3, 2004,
and $1 million and $4 million for the three and six months ended
June&#160;28, 2003, respectively.</p>
<p ALIGN="JUSTIFY">Bell Helicopter has a joint venture with The Boeing Company
(&quot;Boeing&quot;) to provide engineering, development and test services
related to the V&#45;22 aircraft, as well as to produce the V&#45;22
aircraft, under a number of separate contracts with the U.S. Government (the
&quot;V&#45;22 Contracts&quot;). Textron does not account for the joint
venture under the equity method of accounting as the joint venture agreement
creates contractual, rather than ownership, rights. Textron accounts for all of
Bell Helicopter&#39;s rights and obligations under the specific requirements
of the V&#45;22 Contracts allocated to Bell Helicopter under the joint
venture agreement. Revenues and cost of sales reflect Bell Helicopter&#39;s
performance under the V&#45;22 Contracts. All assets used in performance of
the V&#45;22 Contracts owned by Bell Helicopter, including inventory and
unpaid receivables, and all liabilities arising from Bell Helicopter&#39;s
obligations under the V&#45;22 Contracts, are included in the balance sheet.</p>
<b>
<p ALIGN="JUSTIFY">Summary of Certain Significant Accounting Policies</p>
</b>
<p ALIGN="JUSTIFY">A summary of all of the significant accounting policies is
provided in Textron&#39;s 2003 Annual Report.</p>
<i>
<p ALIGN="JUSTIFY">Revenue&#160;Recognition<br>
</i>Revenue is generally recognized when products are delivered or services are
performed. With respect to aircraft, delivery is upon completion of
manufacturing, customer acceptance and the transfer of the risk and rewards of
ownership.</p>
<p ALIGN="right">6.</p>
<p ALIGN="JUSTIFY">When a sale arrangement involves multiple elements, such as
sales of products that include customization services, the deliverables in the
arrangement are evaluated to determine whether they represent separate units of
accounting. This evaluation occurs at inception of the arrangement and as each
item in the arrangement is delivered. The total fee from the arrangement is
allocated to each unit of accounting based on its relative fair value, taking
into consideration any performance, cancellation, termination or refund type
provisions. Fair value for each element is established generally based on the
sales price charged when the same or similar element is sold separately. Revenue
is recognized when revenue recognition criteria for each unit of accounting are
met. The adoption of Emerging Issues Task Force (EITF)&#160;00&#45;21
&quot;Revenue Arrangements with Multiple Deliverables&quot; in the third quarter
of 2003 did not have a material impact on Textron&#39;s results of
operations or financial position.</p>
<p ALIGN="JUSTIFY">Revenue from certain qualifying noncancelable aircraft and
other product lease contracts are accounted for as sales&#45;type leases.
The present value of all payments (net of executory costs and any guaranteed
residual values) is recorded as revenue, and the related costs of the product
are charged to cost of sales. Generally, these leases are financed through
Textron Finance and the associated interest is recorded over the term of the
lease agreement using the interest method. Lease financing transactions that do
not qualify as sales&#45;type leases are accounted for under the operating
method wherein revenue is recorded as earned over the lease period.</p>
<u>
<p ALIGN="JUSTIFY">Long&#45;term Contracts<br>
</u>
Long&#45;term contracts are accounted for under AICPA
Statement of Position No. 81&#45;1, &quot;Accounting for Performance of
Construction&#45;Type and Certain Production&#45;Type Contracts&quot;.
Revenue under fixed&#45;price contracts is generally recorded as deliveries
are made under the units&#45;of&#45;delivery method. Certain
long&#45;term fixed&#45;price contracts provide for periodic delivery
after a lengthy period of time over which significant costs are incurred or
require a significant amount of development effort in relation to total contract
volume. Revenues under those contracts and all
cost&#45;reimbursement&#45;type contracts are recorded as costs are
incurred under the cost&#45;to&#45;cost method. Certain contracts are
awarded with fixed&#45;price incentive fees. Incentive fees are considered
when estimating revenues and profit rates, and are recorded when these amounts
are reasonably determined. Long&#45;term contract profits are based on
estimates of total sales value and costs at completion. Such estimates are
reviewed and revised periodically throughout the contract life. Revisions to
contract profits are recorded when the revisions to estimated sales value or
costs are made. Estimated contract losses are recorded when identified.</p>
<p ALIGN="JUSTIFY">The V&#45;22 Contracts include the development contract
and various production release contracts (i.e., lots) that may run concurrently
with multiple earlier lots still being produced as new lots are started. The
development contract and the first three production lots are under
cost&#45;reimbursement&#45;type contracts, while subsequent lots are
under fixed&#45;price incentive contracts. The first three lots under
fixed&#45;price incentive contracts have been accounted for under the
cost&#45;to&#45;cost method, primarily as a result of the significant
engineering effort required over a lengthy period of time during the initial
development phase in relation to total contract volume. The production releases
on the first six production lots include separately contracted modifications to
meet the additional requirements of the U.S. Government&#39;s Blue Ribbon
Panel. In 2003, the development effort was considered substantially complete for
the new production releases beginning in 2003 and management believed a
consistent production specification had been met as these units incorporate many
of these modifications on the production line. Accordingly, revenue on the new
production releases that began in 2003 is recognized under the
units&#45;of&#45;delivery method.</p>
<u>
<p ALIGN="JUSTIFY">Finance&#160;Revenues<br>
</u>Finance revenues include interest on finance receivables, which is
recognized using the interest method to provide a constant rate of return over
the terms of the receivables. Finance revenues also include direct loan
origination costs and fees received, which are deferred and amortized over the
contractual lives of the respective receivables using the interest method.
Unamortized amounts are recognized in revenues when receivables are sold or
pre&#45;paid. Accrual of interest income is suspended for accounts that are
contractually delinquent by more than three months, unless collection is not
doubtful. In addition, detailed reviews of loans may result in earlier
suspension if collection is doubtful. Accrual of interest is resumed when the
loan becomes contractually current, and suspended interest income is recognized
at that time.</p>
<p ALIGN="right">7.</p>
<b>
<p ALIGN="JUSTIFY">Note 2: Acquisitions and Dispositions</p>
</b>
<p ALIGN="JUSTIFY">Textron has a joint venture (&quot;CitationShares&quot;) with
TAG Aviation USA (&quot;TAG&quot;) to sell fractional share interests in
business jets. On June 30, 2004, Textron acquired an additional 25% interest in
CitationShares from TAG for cash and the assumption of debt guarantees
previously provided by TAG. Additional cash consideration may also be payable to
TAG based on CitationShares&#39; future operating results. TAG has the right
to sell its remaining 25% interest to Textron in the years 2009 through 2011,
and Textron has the right to purchase the remaining interest in 2010 or 2011,
for an amount based on a multiple of earnings.</p>
<p ALIGN="JUSTIFY">As a result of this transaction, Textron owns 75% of
CitationShares and has consolidated its financial results prospectively as of
June 30, 2004. Assets acquired of $47 million included $22 million of inventory,
primarily Citation jets, and liabilities acquired of $59 million included $47
million of third&#45;party debt that was immediately repaid. Additionally,
CitationShares has approximately $31 million of operating lease obligations
which Textron has fully guaranteed.</p>
<p ALIGN="JUSTIFY">On May 20, 2004, Textron sold its Energy Manufacturing and
Williams Machine and Tool business (&quot;E&W&quot;). There was no gain or
loss on the sale, as the proceeds received approximated the book value,
including goodwill.</p>
<p ALIGN="JUSTIFY">On June 3, 2004, Textron sold its interest in two
Brazilian&#45;based joint ventures in the Industrial segment to its joint
venture partner, and realized a gain of $7 million (approximately $1 million
after&#45;tax).</p>
<b>
<p ALIGN="JUSTIFY">Note 3: Inventories</p>
</b></font>
    <div align="center">
      <center>
<table CELLSPACING="1" WIDTH="678">
  <tr>
    <td WIDTH="330" VALIGN="TOP" style="border-bottom-style: solid; border-bottom-width: 1"><font SIZE="3">
      <p><br>
      <br>
      <i>(In millions)</i></font></td>
    <td WIDTH="129" VALIGN="TOP" COLSPAN="2" style="border-bottom-style: solid; border-bottom-width: 1"><font SIZE="3">
      <p ALIGN="CENTER"><br>
      July 3,<br>
      2004</font></td>
    <td WIDTH="14" VALIGN="TOP" style="border-bottom-style: solid; border-bottom-width: 1">&nbsp;</td>
    <td WIDTH="140" VALIGN="TOP" COLSPAN="2" style="border-bottom-style: solid; border-bottom-width: 1"><font SIZE="3">
      <p ALIGN="CENTER"><br>
      January 3,<br>
      2004</font></td>
    <td WIDTH="33" VALIGN="TOP">&nbsp;</td>
  </tr>
  <tr>
    <td WIDTH="330" VALIGN="TOP"><font SIZE="3">
      <p>Finished goods</font></td>
    <td WIDTH="35" VALIGN="TOP"><font SIZE="3">
      <p ALIGN="RIGHT">$</font></td>
    <td WIDTH="88" VALIGN="TOP"><font SIZE="3">
      <p style="margin-right: 30" align="right">705</font></td>
    <td WIDTH="14" VALIGN="TOP">&nbsp;</td>
    <td WIDTH="47" VALIGN="TOP"><font SIZE="3">
      <p ALIGN="RIGHT">$</font></td>
    <td WIDTH="87" VALIGN="TOP"><font SIZE="3">
      <p style="margin-right: 30" align="right">688</font></td>
    <td WIDTH="33" VALIGN="TOP">&nbsp;</td>
  </tr>
  <tr>
    <td WIDTH="330" VALIGN="TOP"><font SIZE="3">
      <p>Work in process</font></td>
    <td WIDTH="35" VALIGN="TOP">&nbsp;</td>
    <td WIDTH="88" VALIGN="TOP"><font SIZE="3">
      <p style="margin-right: 30" align="right">1,070</font></td>
    <td WIDTH="14" VALIGN="TOP">&nbsp;</td>
    <td WIDTH="47" VALIGN="TOP">&nbsp;</td>
    <td WIDTH="87" VALIGN="TOP"><font SIZE="3">
      <p style="margin-right: 30" align="right">681</font></td>
    <td WIDTH="33" VALIGN="TOP">&nbsp;</td>
  </tr>
  <tr>
    <td WIDTH="330" VALIGN="TOP" style="border-bottom-style: solid; border-bottom-width: 1"><font SIZE="3">
      <p>Raw materials</font></td>
    <td WIDTH="35" VALIGN="TOP" style="border-bottom-style: solid; border-bottom-width: 1">&nbsp;</td>
    <td WIDTH="88" VALIGN="TOP" style="border-bottom-style: solid; border-bottom-width: 1"><font SIZE="3">
      <p style="margin-right: 30" align="right">218</font></td>
    <td WIDTH="14" VALIGN="TOP" style="border-bottom-style: solid; border-bottom-width: 1">&nbsp;</td>
    <td WIDTH="47" VALIGN="TOP" style="border-bottom-style: solid; border-bottom-width: 1">&nbsp;</td>
    <td WIDTH="87" VALIGN="TOP" style="border-bottom-style: solid; border-bottom-width: 1"><font SIZE="3">
      <p style="margin-right: 30" align="right">209</font></td>
    <td WIDTH="33" VALIGN="TOP">&nbsp;</td>
  </tr>
  <tr>
    <td WIDTH="330" VALIGN="TOP">&nbsp;</td>
    <td WIDTH="35" VALIGN="TOP">&nbsp;</td>
    <td WIDTH="88" VALIGN="TOP"><font SIZE="3">
      <p style="margin-right: 30" align="right">1,993</font></td>
    <td WIDTH="14" VALIGN="TOP">&nbsp;</td>
    <td WIDTH="47" VALIGN="TOP">&nbsp;</td>
    <td WIDTH="87" VALIGN="TOP"><font SIZE="3">
      <p style="margin-right: 30" align="right">1,578</font></td>
    <td WIDTH="33" VALIGN="TOP">&nbsp;</td>
  </tr>
  <tr>
    <td WIDTH="330" VALIGN="TOP"><font SIZE="3">
      <p>Less progress payments and customer deposits</font></td>
    <td WIDTH="35" VALIGN="TOP">&nbsp;</td>
    <td WIDTH="88" VALIGN="TOP"><font SIZE="3">
      <p style="margin-right: 30" align="right">345</font></td>
    <td WIDTH="14" VALIGN="TOP">&nbsp;</td>
    <td WIDTH="47" VALIGN="TOP">&nbsp;</td>
    <td WIDTH="87" VALIGN="TOP"><font SIZE="3">
      <p style="margin-right: 30" align="right">139</font></td>
    <td WIDTH="33" VALIGN="TOP">&nbsp;</td>
  </tr>
  <tr>
    <td WIDTH="330" VALIGN="TOP" style="border-top-style: solid; border-top-width: 1; border-bottom-style: solid">&nbsp;</td>
    <td WIDTH="35" VALIGN="TOP" style="border-top-style: solid; border-top-width: 1; border-bottom-style: solid"><font SIZE="3">
      <p ALIGN="RIGHT">$</font></td>
    <td WIDTH="88" VALIGN="TOP" style="border-top-style: solid; border-top-width: 1; border-bottom-style: solid"><font SIZE="3">
      <p style="margin-right: 30" align="right">1,648</font></td>
    <td WIDTH="14" VALIGN="TOP" style="border-top-style: solid; border-top-width: 1; border-bottom-style: solid">&nbsp;</td>
    <td WIDTH="47" VALIGN="TOP" style="border-top-style: solid; border-top-width: 1; border-bottom-style: solid"><font SIZE="3">
      <p ALIGN="RIGHT">$</font></td>
    <td WIDTH="87" VALIGN="TOP" style="border-top-style: solid; border-top-width: 1; border-bottom-style: solid"><font SIZE="3">
      <p style="margin-right: 30" align="right">1,439</font></td>
    <td WIDTH="33" VALIGN="TOP">&nbsp;</td>
  </tr>
</table>
      </center>
    </div>
<font SIZE="3">
<p ALIGN="right">8.</p>
<b>
<p ALIGN="JUSTIFY">Note 4: Goodwill and Other Intangible Assets</p>
</b>
</font><font SIZE="3">
<p ALIGN="JUSTIFY">A summary of changes in goodwill is as follows:</p>
</font>
    <div align="center">
      <center>
<table CELLSPACING="1" CELLPADDING="1" WIDTH="667">
  <tr>
    <td WIDTH="33%" VALIGN="TOP" style="border-bottom-style: solid; border-bottom-width: 1"><font SIZE="3">
      <p ALIGN="JUSTIFY"><br>
      <br>
      <i>(In millions)</i></font></td>
    <td WIDTH="5%" VALIGN="TOP" style="border-bottom-style: solid; border-bottom-width: 1">&nbsp;</td>
    <td WIDTH="13%" VALIGN="TOP" style="border-bottom-style: solid; border-bottom-width: 1"><font SIZE="3">
      <p ALIGN="CENTER">Balance<br>
      January 3,<br>
      2004</font></td>
    <td WIDTH="14%" VALIGN="TOP" style="border-bottom-style: solid; border-bottom-width: 1"><font SIZE="3">
      <p ALIGN="CENTER"><br>
      Acquisitions/<br>
      Dispositions</font></td>
    <td WIDTH="13%" VALIGN="TOP" style="border-bottom-style: solid; border-bottom-width: 1"><font SIZE="3">
      <p ALIGN="CENTER">Foreign<br>
      Currency<br>
      Translation</font></td>
    <td WIDTH="10%" VALIGN="TOP" style="border-bottom-style: solid; border-bottom-width: 1"><font SIZE="3">
      <p ALIGN="CENTER"><br>
      <br>
      Other</font></td>
    <td WIDTH="11%" VALIGN="TOP" style="border-bottom-style: solid; border-bottom-width: 1"><font SIZE="3">
      <p ALIGN="CENTER">Balance<br>
      July 3,<br>
      2004</font></td>
  </tr>
  <tr>
    <td WIDTH="33%" VALIGN="TOP"><font SIZE="3">
      <p ALIGN="JUSTIFY">Bell</font></td>
    <td WIDTH="5%" VALIGN="TOP">&nbsp;</td>
    <td WIDTH="13%" VALIGN="TOP"><font SIZE="3">
      <p ALIGN="right" style="margin-right: 20">$&nbsp; 101</font></td>
    <td WIDTH="14%" VALIGN="TOP"><font SIZE="3">
      <p ALIGN="right" style="margin-right: 20">$&nbsp;&nbsp;&nbsp; &#45;</font></td>
    <td WIDTH="13%" VALIGN="TOP"><font SIZE="3">
      <p ALIGN="right" style="margin-right: 20">$&nbsp;&nbsp;&nbsp; &#45;</font></td>
    <td WIDTH="10%" VALIGN="TOP"><font SIZE="3">
      <p ALIGN="right" style="margin-right: 20">$&nbsp; &#45;</font></td>
    <td WIDTH="11%" VALIGN="TOP"><font SIZE="3">
      <p ALIGN="right" style="margin-right: 20">$&nbsp;&nbsp; 101</font></td>
  </tr>
  <tr>
    <td WIDTH="33%" VALIGN="TOP"><font SIZE="3">
      <p ALIGN="JUSTIFY">Cessna</font></td>
    <td WIDTH="5%" VALIGN="TOP">&nbsp;</td>
    <td WIDTH="13%" VALIGN="TOP"><font SIZE="3">
      <p ALIGN="right" style="margin-right: 20">306</font></td>
    <td WIDTH="14%" VALIGN="TOP"><font SIZE="3">
      <p ALIGN="right" style="margin-right: 20">16</font></td>
    <td WIDTH="13%" VALIGN="TOP"><font SIZE="3">
      <p ALIGN="right" style="margin-right: 20">&#45;</font></td>
    <td WIDTH="10%" VALIGN="TOP"><font SIZE="3">
      <p ALIGN="right" style="margin-right: 20">&#45;</font></td>
    <td WIDTH="11%" VALIGN="TOP"><font SIZE="3">
      <p ALIGN="right" style="margin-right: 20">322</font></td>
  </tr>
  <tr>
    <td WIDTH="33%" VALIGN="TOP"><font SIZE="3">
      <p ALIGN="JUSTIFY">Fastening Systems</font></td>
    <td WIDTH="5%" VALIGN="TOP">&nbsp;</td>
    <td WIDTH="13%" VALIGN="TOP"><font SIZE="3">
      <p ALIGN="right" style="margin-right: 20">420</font></td>
    <td WIDTH="14%" VALIGN="TOP"><font SIZE="3">
      <p ALIGN="right" style="margin-right: 20">&#45;</font></td>
    <td WIDTH="13%" VALIGN="TOP"><font SIZE="3">
      <p ALIGN="right" style="margin-right: 20">1</font></td>
    <td WIDTH="10%" VALIGN="TOP"><font SIZE="3">
      <p ALIGN="right" style="margin-right: 20">(1)</font></td>
    <td WIDTH="11%" VALIGN="TOP"><font SIZE="3">
      <p ALIGN="right" style="margin-right: 20">420</font></td>
  </tr>
  <tr>
    <td WIDTH="33%" VALIGN="TOP"><font SIZE="3">
      <p ALIGN="JUSTIFY">Industrial</font></td>
    <td WIDTH="5%" VALIGN="TOP">&nbsp;</td>
    <td WIDTH="13%" VALIGN="TOP"><font SIZE="3">
      <p ALIGN="right" style="margin-right: 20">593</font></td>
    <td WIDTH="14%" VALIGN="TOP"><font SIZE="3">
      <p ALIGN="right" style="margin-right: 20">(20)</font></td>
    <td WIDTH="13%" VALIGN="TOP"><font SIZE="3">
      <p ALIGN="right" style="margin-right: 20">(3)</font></td>
    <td WIDTH="10%" VALIGN="TOP"><font SIZE="3">
      <p ALIGN="right" style="margin-right: 20">&#45;</font></td>
    <td WIDTH="11%" VALIGN="TOP"><font SIZE="3">
      <p ALIGN="right" style="margin-right: 20">570</font></td>
  </tr>
  <tr>
    <td WIDTH="33%" VALIGN="TOP"><font SIZE="3">
      <p ALIGN="JUSTIFY">Finance</font></td>
    <td WIDTH="5%" VALIGN="TOP">&nbsp;</td>
    <td WIDTH="13%" VALIGN="TOP"><font SIZE="3">
      <p ALIGN="right" style="margin-right: 20">169</font></td>
    <td WIDTH="14%" VALIGN="TOP"><font SIZE="3">
      <p ALIGN="right" style="margin-right: 20">&#45;</font></td>
    <td WIDTH="13%" VALIGN="TOP"><font SIZE="3">
      <p ALIGN="right" style="margin-right: 20">&#45;</font></td>
    <td WIDTH="10%" VALIGN="TOP"><font SIZE="3">
      <p ALIGN="right" style="margin-right: 20">&#45;</font></td>
    <td WIDTH="11%" VALIGN="TOP"><font SIZE="3">
      <p ALIGN="right" style="margin-right: 20">169</font></td>
  </tr>
  <tr>
    <td WIDTH="33%" VALIGN="TOP" style="border-top-style: solid; border-top-width: 1; border-bottom-style: solid"><font SIZE="3">
      <p ALIGN="JUSTIFY">Total</font></td>
    <td WIDTH="5%" VALIGN="TOP" style="border-top-style: solid; border-top-width: 1; border-bottom-style: solid">&nbsp;</td>
    <td WIDTH="13%" VALIGN="TOP" style="border-top-style: solid; border-top-width: 1; border-bottom-style: solid"><font SIZE="3">
      <p ALIGN="right" style="margin-right: 20">$1,589</font></td>
    <td WIDTH="14%" VALIGN="TOP" style="border-top-style: solid; border-top-width: 1; border-bottom-style: solid"><font SIZE="3">
      <p ALIGN="right" style="margin-right: 20">$ (4)</font></td>
    <td WIDTH="13%" VALIGN="TOP" style="border-top-style: solid; border-top-width: 1; border-bottom-style: solid"><font SIZE="3">
      <p ALIGN="right" style="margin-right: 20">$ (2)</font></td>
    <td WIDTH="10%" VALIGN="TOP" style="border-top-style: solid; border-top-width: 1; border-bottom-style: solid"><font SIZE="3">
      <p ALIGN="right" style="margin-right: 20">$(1)</font></td>
    <td WIDTH="11%" VALIGN="TOP" style="border-top-style: solid; border-top-width: 1; border-bottom-style: solid"><font SIZE="3">
      <p ALIGN="right" style="margin-right: 20">$1,582</font></td>
  </tr>
</table>
    </center>
      </div>
<font SIZE="3">
<p ALIGN="JUSTIFY">All of Textron&#39;s acquired intangible assets are
subject to amortization and are comprised of the following as of
July&#160;3, 2004:</p>
</font>
      <div align="center">
        <center>
<table CELLSPACING="1" CELLPADDING="1" WIDTH="669">
  <tr>
    <td WIDTH="23%" VALIGN="TOP" style="border-bottom-style: solid; border-bottom-width: 1"><font SIZE="3">
      <p ALIGN="JUSTIFY"><br>
      <br>
      <br>
      <i>(Dollars in millions)</i></font></td>
    <td WIDTH="24%" VALIGN="TOP" style="border-bottom-style: solid; border-bottom-width: 1"><font SIZE="3">
      <p ALIGN="CENTER"><br>
      Weighted Average<br>
      Amortization Period<br>
      (in years)</font></td>
    <td WIDTH="18%" VALIGN="TOP" COLSPAN="2" style="border-bottom-style: solid; border-bottom-width: 1"><font SIZE="3">
      <p ALIGN="CENTER"><br>
      Gross<br>
      Carrying<br>
      Amount</font></td>
    <td WIDTH="17%" VALIGN="TOP" COLSPAN="2" style="border-bottom-style: solid; border-bottom-width: 1"><font SIZE="3">
      <p ALIGN="CENTER"><br>
      <br>
      Accumulated<br>
      Amortization</font></td>
    <td WIDTH="14%" VALIGN="TOP" COLSPAN="2" style="border-bottom-style: solid; border-bottom-width: 1"><font SIZE="3">
      <p ALIGN="CENTER"><br>
      <br>
      <br>
      Net</font></td>
    <td WIDTH="4%" VALIGN="TOP">&nbsp;</td>
  </tr>
  <tr>
    <td WIDTH="23%" VALIGN="TOP"><font SIZE="3">
      <p ALIGN="JUSTIFY">&#160;&#160;&#160;&#160;&#160;Trademarks</font></td>
    <td WIDTH="24%" VALIGN="TOP"><font SIZE="3">
      <p ALIGN="right" style="margin-right: 60">20</font></td>
    <td WIDTH="7%" VALIGN="TOP"><font SIZE="3">
      <p ALIGN="RIGHT">$</font></td>
    <td WIDTH="11%" VALIGN="TOP"><font SIZE="3">
      <p ALIGN="right" style="margin-right: 20">28</font></td>
    <td WIDTH="5%" VALIGN="TOP"><font SIZE="3">
      <p ALIGN="RIGHT">$</font></td>
    <td WIDTH="12%" VALIGN="TOP"><font SIZE="3">
      <p style="margin-right: 30" align="right">4</font></td>
    <td WIDTH="6%" VALIGN="TOP"><font SIZE="3">
      <p ALIGN="RIGHT">$</font></td>
    <td WIDTH="8%" VALIGN="TOP"><font SIZE="3">
      <p style="margin-right: 20" align="right">24</font></td>
    <td WIDTH="4%" VALIGN="TOP">&nbsp;</td>
  </tr>
  <tr>
    <td WIDTH="23%" VALIGN="TOP"><font SIZE="3">
      <p ALIGN="JUSTIFY">&#160;&#160;&#160;&#160;&#160;Patents</font></td>
    <td WIDTH="24%" VALIGN="TOP"><font SIZE="3">
      <p ALIGN="right" style="margin-right: 60">8</font></td>
    <td WIDTH="7%" VALIGN="TOP">&nbsp;</td>
    <td WIDTH="11%" VALIGN="TOP"><font SIZE="3">
      <p ALIGN="right" style="margin-right: 20">12</font></td>
    <td WIDTH="5%" VALIGN="TOP">&nbsp;</td>
    <td WIDTH="12%" VALIGN="TOP"><font SIZE="3">
      <p style="margin-right: 30" align="right">7</font></td>
    <td WIDTH="6%" VALIGN="TOP">&nbsp;</td>
    <td WIDTH="8%" VALIGN="TOP"><font SIZE="3">
      <p style="margin-right: 20" align="right">5</font></td>
    <td WIDTH="4%" VALIGN="TOP">&nbsp;</td>
  </tr>
  <tr>
    <td WIDTH="23%" VALIGN="TOP"><font SIZE="3">
      <p ALIGN="JUSTIFY">&#160;&#160;&#160;&#160;&#160;Other</font></td>
    <td WIDTH="24%" VALIGN="TOP"><font SIZE="3">
      <p ALIGN="right" style="margin-right: 60">5</font></td>
    <td WIDTH="7%" VALIGN="TOP">&nbsp;</td>
    <td WIDTH="11%" VALIGN="TOP"><font SIZE="3">
      <p ALIGN="right" style="margin-right: 20">15</font></td>
    <td WIDTH="5%" VALIGN="TOP">&nbsp;</td>
    <td WIDTH="12%" VALIGN="TOP"><font SIZE="3">
      <p style="margin-right: 30" align="right">7</font></td>
    <td WIDTH="6%" VALIGN="TOP">&nbsp;</td>
    <td WIDTH="8%" VALIGN="TOP"><font SIZE="3">
      <p style="margin-right: 20" align="right">8</font></td>
    <td WIDTH="4%" VALIGN="TOP">&nbsp;</td>
  </tr>
  <tr>
    <td WIDTH="23%" VALIGN="TOP" style="border-top-style: solid; border-top-width: 1; border-bottom-style: solid">&nbsp;</td>
    <td WIDTH="24%" VALIGN="TOP" style="border-top-style: solid; border-top-width: 1; border-bottom-style: solid">
      <p ALIGN="right" style="margin-right: 60">&nbsp;</p>
    </td>
    <td WIDTH="7%" VALIGN="TOP" style="border-top-style: solid; border-top-width: 1; border-bottom-style: solid"><font SIZE="3">
      <p ALIGN="RIGHT">$</font></td>
    <td WIDTH="11%" VALIGN="TOP" style="border-top-style: solid; border-top-width: 1; border-bottom-style: solid"><font SIZE="3">
      <p ALIGN="right" style="margin-right: 20">55</font></td>
    <td WIDTH="5%" VALIGN="TOP" style="border-top-style: solid; border-top-width: 1; border-bottom-style: solid"><font SIZE="3">
      <p ALIGN="RIGHT">$</font></td>
    <td WIDTH="12%" VALIGN="TOP" style="border-top-style: solid; border-top-width: 1; border-bottom-style: solid"><font SIZE="3">
      <p style="margin-right: 30" align="right">18</font></td>
    <td WIDTH="6%" VALIGN="TOP" style="border-top-style: solid; border-top-width: 1; border-bottom-style: solid"><font SIZE="3">
      <p ALIGN="RIGHT">$</font></td>
    <td WIDTH="8%" VALIGN="TOP" style="border-top-style: solid; border-top-width: 1; border-bottom-style: solid"><font SIZE="3">
      <p style="margin-right: 20" align="right">37</font></td>
    <td WIDTH="4%" VALIGN="TOP">&nbsp;</td>
  </tr>
</table>
    </center>
      </div>
<font SIZE="3">
<p ALIGN="JUSTIFY">Amortization expense for the three and six months ended
July&#160;3, 2004 totaled $1 million and $3 million, respectively, and is
expected to be approximately $3 million for the remainder of 2004. Amortization
expense for the three and six months ended June&#160;28, 2003 totaled $2
million and $4 million, respectively.</p>
<b>
<p ALIGN="JUSTIFY">Note 5: Junior Subordinated Debentures</p>
</b>
<p ALIGN="JUSTIFY">On June 30, 2004 Textron Financial Corporation redeemed all
of its $26 million Litchfield 10% Series A Junior Subordinated Debentures, due
2029. The debentures were held by a trust sponsored and wholly&#45;owned by
Litchfield Financial Corporation, a subsidiary of Textron Financial Corporation.
The proceeds from the redemption were used to redeem all of the $26 million
Litchfield Capital Trust I 10% Series A Trust Preferred Securities at par value
of $10 per share. There was no gain or loss on the redemption.</p>
<p ALIGN="right">9.</p>
<b>
<p ALIGN="JUSTIFY">Note 6: Accumulated Other Comprehensive Loss and
Comprehensive Income</p>
</b>
<p ALIGN="JUSTIFY">The components of accumulated other comprehensive loss, net
of related taxes, are as follows:</p>
</font>
      <div align="center">
        <center>
<table CELLSPACING="1" CELLPADDING="1" WIDTH="699">
  <tr>
    <td WIDTH="55%" VALIGN="TOP">&nbsp;</td>
    <td WIDTH="4%" VALIGN="TOP">&nbsp;</td>
    <td WIDTH="38%" VALIGN="TOP" COLSPAN="3"><font SIZE="3">
      <p ALIGN="CENTER">Six Months Ended</font></td>
    <td WIDTH="4%" VALIGN="TOP">&nbsp;</td>
  </tr>
  <tr>
    <td WIDTH="55%" VALIGN="TOP" style="border-top-style: solid; border-top-width: 1; border-bottom-style: solid; border-bottom-width: 1"><font SIZE="3">
      <p><br>
      <i>(In millions)</i></font></td>
    <td WIDTH="4%" VALIGN="TOP" style="border-top-style: solid; border-top-width: 1; border-bottom-style: solid; border-bottom-width: 1">&nbsp;</td>
    <td WIDTH="15%" VALIGN="TOP" style="border-top-style: solid; border-top-width: 1; border-bottom-style: solid; border-bottom-width: 1"><font SIZE="3">
      <p ALIGN="CENTER">July 3,<br>
      2004</font></td>
    <td WIDTH="8%" VALIGN="TOP" style="border-top-style: solid; border-top-width: 1; border-bottom-style: solid; border-bottom-width: 1">&nbsp;</td>
    <td WIDTH="15%" VALIGN="TOP" style="border-top-style: solid; border-top-width: 1; border-bottom-style: solid; border-bottom-width: 1"><font SIZE="3">
      <p ALIGN="CENTER">June 28,<br>
      2003</font></td>
    <td WIDTH="4%" VALIGN="TOP">&nbsp;</td>
  </tr>
  <tr>
    <td WIDTH="55%" VALIGN="TOP" style="border-bottom-style: solid; border-bottom-width: 1"><font SIZE="3">
      <p>Beginning of period</font></td>
    <td WIDTH="4%" VALIGN="TOP" style="border-bottom-style: solid; border-bottom-width: 1">&nbsp;</td>
    <td WIDTH="15%" VALIGN="TOP" style="border-bottom-style: solid; border-bottom-width: 1"><font SIZE="3">
      <p style="margin-right: 30" align="right">$(64)</font></td>
    <td WIDTH="8%" VALIGN="TOP" style="border-bottom-style: solid; border-bottom-width: 1">&nbsp;</td>
    <td WIDTH="15%" VALIGN="TOP" style="border-bottom-style: solid; border-bottom-width: 1"><font SIZE="3">
      <p style="margin-right: 30" align="right">$(225)</font></td>
    <td WIDTH="4%" VALIGN="TOP">&nbsp;</td>
  </tr>
  <tr>
    <td WIDTH="55%" VALIGN="TOP"><font SIZE="3">
      <p>Currency translation adjustment</font></td>
    <td WIDTH="4%" VALIGN="TOP">&nbsp;</td>
    <td WIDTH="15%" VALIGN="TOP"><font SIZE="3">
      <p style="margin-right: 30" align="right">(20)</font></td>
    <td WIDTH="8%" VALIGN="TOP">&nbsp;</td>
    <td WIDTH="15%" VALIGN="TOP"><font SIZE="3">
      <p style="margin-right: 30" align="right">100</font></td>
    <td WIDTH="4%" VALIGN="TOP">&nbsp;</td>
  </tr>
  <tr>
    <td WIDTH="55%" VALIGN="TOP"><font SIZE="3">
      <p>Net deferred (loss) gain on hedge contracts</font></td>
    <td WIDTH="4%" VALIGN="TOP">&nbsp;</td>
    <td WIDTH="15%" VALIGN="TOP"><font SIZE="3">
      <p style="margin-right: 30" align="right">(6)</font></td>
    <td WIDTH="8%" VALIGN="TOP">&nbsp;</td>
    <td WIDTH="15%" VALIGN="TOP"><font SIZE="3">
      <p style="margin-right: 30" align="right">27</font></td>
    <td WIDTH="4%" VALIGN="TOP">&nbsp;</td>
  </tr>
  <tr>
    <td WIDTH="55%" VALIGN="TOP"><font SIZE="3">
      <p>Net deferred (loss) gain on interest&#45;only securities</font></td>
    <td WIDTH="4%" VALIGN="TOP">&nbsp;</td>
    <td WIDTH="15%" VALIGN="TOP"><font SIZE="3">
      <p style="margin-right: 30" align="right">(6)</font></td>
    <td WIDTH="8%" VALIGN="TOP">&nbsp;</td>
    <td WIDTH="15%" VALIGN="TOP"><font SIZE="3">
      <p style="margin-right: 30" align="right">13</font></td>
    <td WIDTH="4%" VALIGN="TOP">&nbsp;</td>
  </tr>
  <tr>
    <td WIDTH="55%" VALIGN="TOP"><font SIZE="3">
      <p>Net unrealized losses on securities</font></td>
    <td WIDTH="4%" VALIGN="TOP">&nbsp;</td>
    <td WIDTH="15%" VALIGN="TOP"><font SIZE="3">
      <p style="margin-right: 30" align="right">(3)</font></td>
    <td WIDTH="8%" VALIGN="TOP">&nbsp;</td>
    <td WIDTH="15%" VALIGN="TOP"><font SIZE="3">
      <p style="margin-right: 30" align="right">(5)</font></td>
    <td WIDTH="4%" VALIGN="TOP">&nbsp;</td>
  </tr>
  <tr>
    <td WIDTH="55%" VALIGN="TOP" style="border-top-style: solid; border-top-width: 1; border-bottom-style: solid; border-bottom-width: 1"><font SIZE="3">
      <p>Other comprehensive (loss) income</font></td>
    <td WIDTH="4%" VALIGN="TOP" style="border-top-style: solid; border-top-width: 1; border-bottom-style: solid; border-bottom-width: 1">&nbsp;</td>
    <td WIDTH="15%" VALIGN="TOP" style="border-top-style: solid; border-top-width: 1; border-bottom-style: solid; border-bottom-width: 1"><font SIZE="3">
      <p style="margin-right: 30" align="right">(35)</font></td>
    <td WIDTH="8%" VALIGN="TOP" style="border-top-style: solid; border-top-width: 1; border-bottom-style: solid; border-bottom-width: 1">&nbsp;</td>
    <td WIDTH="15%" VALIGN="TOP" style="border-top-style: solid; border-top-width: 1; border-bottom-style: solid; border-bottom-width: 1"><font SIZE="3">
      <p style="margin-right: 30" align="right">135</font></td>
    <td WIDTH="4%" VALIGN="TOP">&nbsp;</td>
  </tr>
  <tr>
    <td WIDTH="55%" VALIGN="TOP" style="border-bottom-style: solid"><font SIZE="3">
      <p>End of period</font></td>
    <td WIDTH="4%" VALIGN="TOP" style="border-bottom-style: solid">&nbsp;</td>
    <td WIDTH="15%" VALIGN="TOP" style="border-bottom-style: solid"><font SIZE="3">
      <p style="margin-right: 30" align="right">$(99)</font></td>
    <td WIDTH="8%" VALIGN="TOP" style="border-bottom-style: solid">&nbsp;</td>
    <td WIDTH="15%" VALIGN="TOP" style="border-bottom-style: solid"><font SIZE="3">
      <p style="margin-right: 30" align="right">$ (90)</font></td>
    <td WIDTH="4%" VALIGN="TOP">&nbsp;</td>
  </tr>
</table>
    </center>
      </div>
<font SIZE="3">
<p ALIGN="JUSTIFY">Comprehensive income is summarized below:</p>
</font>
      <div align="center">
        <center>
<table CELLSPACING="1" CELLPADDING="1" WIDTH="698">
  <tr>
    <td WIDTH="36%" VALIGN="TOP"><font SIZE="3">
      <p ALIGN="JUSTIFY"><br>
      </font></td>
    <td WIDTH="3%" VALIGN="TOP" style="border-bottom-style: solid; border-bottom-width: 1"><font SIZE="3">
      <p ALIGN="RIGHT"><br>
      </font></td>
    <td WIDTH="28%" VALIGN="TOP" COLSPAN="3" style="border-bottom-style: solid; border-bottom-width: 1"><font SIZE="3">
      <p ALIGN="CENTER"><br>
      Three Months Ended</font></td>
    <td WIDTH="2%" VALIGN="TOP" style="border-bottom-style: solid; border-bottom-width: 1"><font SIZE="3">
      <p ALIGN="CENTER"><br>
      </font></td>
    <td WIDTH="27%" VALIGN="TOP" COLSPAN="3" style="border-bottom-style: solid; border-bottom-width: 1"><font SIZE="3">
      <p ALIGN="CENTER"><br>
      Six Months Ended</font></td>
    <td WIDTH="4%" VALIGN="TOP">&nbsp;</td>
  </tr>
  <tr>
    <td WIDTH="36%" VALIGN="TOP" style="border-bottom-style: solid; border-bottom-width: 1"><i><font SIZE="3">
      <p ALIGN="JUSTIFY"><br>
      (In millions)</font></i></td>
    <td WIDTH="3%" VALIGN="TOP" style="border-bottom-style: solid; border-bottom-width: 1">&nbsp;</td>
    <td WIDTH="13%" VALIGN="TOP" style="border-bottom-style: solid; border-bottom-width: 1"><font SIZE="3">
      <p ALIGN="CENTER">July 3,<br>
      2004</font></td>
    <td WIDTH="3%" VALIGN="TOP" style="border-bottom-style: solid; border-bottom-width: 1">&nbsp;</td>
    <td WIDTH="12%" VALIGN="TOP" style="border-bottom-style: solid; border-bottom-width: 1"><font SIZE="3">
      <p ALIGN="CENTER">June 28,<br>
      2003</font></td>
    <td WIDTH="2%" VALIGN="TOP" style="border-bottom-style: solid; border-bottom-width: 1">&nbsp;</td>
    <td WIDTH="11%" VALIGN="TOP" style="border-bottom-style: solid; border-bottom-width: 1"><font SIZE="3">
      <p ALIGN="CENTER">July 3,<br>
      2004</font></td>
    <td WIDTH="4%" VALIGN="TOP" style="border-bottom-style: solid; border-bottom-width: 1">&nbsp;</td>
    <td WIDTH="11%" VALIGN="TOP" style="border-bottom-style: solid; border-bottom-width: 1"><font SIZE="3">
      <p ALIGN="CENTER">June 28,<br>
      2003</font></td>
    <td WIDTH="4%" VALIGN="TOP">&nbsp;</td>
  </tr>
  <tr>
    <td WIDTH="36%" VALIGN="TOP"><font SIZE="3">
      <p ALIGN="JUSTIFY">Net income</font></td>
    <td WIDTH="3%" VALIGN="TOP"><font SIZE="3">
      <p ALIGN="RIGHT">$</font></td>
    <td WIDTH="13%" VALIGN="TOP"><font SIZE="3">
      <p style="margin-right: 20" align="right">100</font></td>
    <td WIDTH="3%" VALIGN="TOP"><font SIZE="3">
      <p ALIGN="RIGHT">$</font></td>
    <td WIDTH="12%" VALIGN="TOP"><font SIZE="3">
      <p style="margin-right: 20" align="right">63</font></td>
    <td WIDTH="2%" VALIGN="TOP"><font SIZE="3">
      <p ALIGN="RIGHT">$</font></td>
    <td WIDTH="11%" VALIGN="TOP"><font SIZE="3">
      <p style="margin-right: 20" align="right">137</font></td>
    <td WIDTH="4%" VALIGN="TOP"><font SIZE="3">
      <p ALIGN="RIGHT">$</font></td>
    <td WIDTH="11%" VALIGN="TOP"><font SIZE="3">
      <p style="margin-right: 20" align="right">129</font></td>
    <td WIDTH="4%" VALIGN="TOP">&nbsp;</td>
  </tr>
  <tr>
    <td WIDTH="36%" VALIGN="TOP"><font SIZE="3">
      <p>Other comprehensive (loss) income</font></td>
    <td WIDTH="3%" VALIGN="TOP">&nbsp;</td>
    <td WIDTH="13%" VALIGN="TOP"><font SIZE="3">
      <p style="margin-right: 20" align="right">(19)</font></td>
    <td WIDTH="3%" VALIGN="TOP">&nbsp;</td>
    <td WIDTH="12%" VALIGN="TOP"><font SIZE="3">
      <p style="margin-right: 20" align="right">121</font></td>
    <td WIDTH="2%" VALIGN="TOP">&nbsp;</td>
    <td WIDTH="11%" VALIGN="TOP"><font SIZE="3">
      <p style="margin-right: 20" align="right">(35)</font></td>
    <td WIDTH="4%" VALIGN="TOP">&nbsp;</td>
    <td WIDTH="11%" VALIGN="TOP"><font SIZE="3">
      <p style="margin-right: 20" align="right">135</font></td>
    <td WIDTH="4%" VALIGN="TOP">&nbsp;</td>
  </tr>
  <tr>
    <td WIDTH="36%" VALIGN="TOP" style="border-top-style: solid; border-top-width: 1; border-bottom-style: solid"><font SIZE="3">
      <p>Comprehensive income</font></td>
    <td WIDTH="3%" VALIGN="TOP" style="border-top-style: solid; border-top-width: 1; border-bottom-style: solid"><font SIZE="3">
      <p ALIGN="RIGHT">$</font></td>
    <td WIDTH="13%" VALIGN="TOP" style="border-top-style: solid; border-top-width: 1; border-bottom-style: solid"><font SIZE="3">
      <p style="margin-right: 20" align="right">81</font></td>
    <td WIDTH="3%" VALIGN="TOP" style="border-top-style: solid; border-top-width: 1; border-bottom-style: solid"><font SIZE="3">
      <p ALIGN="RIGHT">$</font></td>
    <td WIDTH="12%" VALIGN="TOP" style="border-top-style: solid; border-top-width: 1; border-bottom-style: solid"><font SIZE="3">
      <p style="margin-right: 20" align="right">184</font></td>
    <td WIDTH="2%" VALIGN="TOP" style="border-top-style: solid; border-top-width: 1; border-bottom-style: solid"><font SIZE="3">
      <p ALIGN="RIGHT">$</font></td>
    <td WIDTH="11%" VALIGN="TOP" style="border-top-style: solid; border-top-width: 1; border-bottom-style: solid"><font SIZE="3">
      <p style="margin-right: 20" align="right">102</font></td>
    <td WIDTH="4%" VALIGN="TOP" style="border-top-style: solid; border-top-width: 1; border-bottom-style: solid"><font SIZE="3">
      <p ALIGN="RIGHT">$</font></td>
    <td WIDTH="11%" VALIGN="TOP" style="border-top-style: solid; border-top-width: 1; border-bottom-style: solid"><font SIZE="3">
      <p style="margin-right: 20" align="right">264</font></td>
    <td WIDTH="4%" VALIGN="TOP">&nbsp;</td>
  </tr>
</table>
      </center>
    </div>
<b><font SIZE="3">
<p ALIGN="JUSTIFY">Note 7: Earnings per Share</p>
</font></b><font SIZE="3">
<p ALIGN="JUSTIFY">The dilutive effect of convertible preferred shares and stock
options was approximately 2,538,000 and 877,000 shares for the three months
ended July&#160;3, 2004 and June&#160;28, 2003, respectively, and
approximately 2,698,000 and 987,000 shares for the six months ended
July&#160;3, 2004 and June&#160;28, 2003, respectively. Income available
to common shareholders used to calculate both basic and diluted earnings per
share approximated net income for both periods.</p>
<p ALIGN="right">10.</p>
<b>
<p ALIGN="JUSTIFY">Note 8: Stock&#45;Based Compensation</p>
</b>
<p ALIGN="JUSTIFY">The following table illustrates the effect on net income and
earnings per share if Textron had applied the fair&#45;value recognition
provisions of FASB Statement No. 123 &quot;Accounting for Stock&#45;Based
Compensation&quot; to stock&#45;based employee compensation.</p>
</font>
    <div align="center">
      <center>
<table CELLSPACING="1" CELLPADDING="1" WIDTH="684">
  <tr>
    <td WIDTH="301" VALIGN="TOP">&nbsp;</td>
    <td WIDTH="178" VALIGN="TOP" COLSPAN="4"><font SIZE="3">
      <p ALIGN="CENTER">Three Months Ended</font></td>
    <td WIDTH="37" VALIGN="TOP">&nbsp;</td>
    <td WIDTH="142" VALIGN="TOP" COLSPAN="3"><font SIZE="3">
      <p ALIGN="CENTER">Six Months Ended</font></td>
  </tr>
  <tr>
    <td WIDTH="303" VALIGN="TOP" style="border-top-style: solid; border-top-width: 1; border-bottom-style: solid; border-bottom-width: 1"><font SIZE="3">
      <p><br>
      <i>(Dollars in millions, except per share data)</i></font></td>
    <td WIDTH="11" VALIGN="TOP" style="border-top-style: solid; border-top-width: 1; border-bottom-style: solid; border-bottom-width: 1">&nbsp;</td>
    <td WIDTH="81" VALIGN="TOP" style="border-top-style: solid; border-top-width: 1; border-bottom-style: solid; border-bottom-width: 1"><font SIZE="3">
      <p ALIGN="CENTER">July 3,<br>
      2004</font></td>
    <td WIDTH="10" VALIGN="TOP" style="border-top-style: solid; border-top-width: 1; border-bottom-style: solid; border-bottom-width: 1">&nbsp;</td>
    <td WIDTH="66" VALIGN="TOP" style="border-top-style: solid; border-top-width: 1; border-bottom-style: solid; border-bottom-width: 1"><font SIZE="3">
      <p ALIGN="CENTER">June 28,<br>
      2003</font></td>
    <td WIDTH="39" VALIGN="TOP" style="border-top-style: solid; border-top-width: 1; border-bottom-style: solid; border-bottom-width: 1">&nbsp;</td>
    <td WIDTH="63" VALIGN="TOP" style="border-top-style: solid; border-top-width: 1; border-bottom-style: solid; border-bottom-width: 1"><font SIZE="3">
      <p ALIGN="CENTER">July 3,<br>
      2004</font></td>
    <td WIDTH="16" VALIGN="TOP" style="border-top-style: solid; border-top-width: 1; border-bottom-style: solid; border-bottom-width: 1">&nbsp;</td>
    <td WIDTH="57" VALIGN="TOP" style="border-top-style: solid; border-top-width: 1; border-bottom-style: solid; border-bottom-width: 1"><font SIZE="3">
      <p ALIGN="CENTER">June 28,<br>
      2003</font></td>
  </tr>
  <tr>
    <td WIDTH="301" VALIGN="TOP"><font SIZE="3">
      <p>Net income, as reported</font></td>
    <td WIDTH="9" VALIGN="TOP"><font SIZE="3">
      <p>$</font></td>
    <td WIDTH="79" VALIGN="TOP"><font SIZE="3">
      <p style="margin-right: 20" align="right">100</font></td>
    <td WIDTH="8" VALIGN="TOP"><font SIZE="3">
      <p>$</font></td>
    <td WIDTH="64" VALIGN="TOP"><font SIZE="3">
      <p style="margin-right: 20" align="right">63</font></td>
      </center>
    <td WIDTH="37" VALIGN="TOP" align="right"><font SIZE="3">
      <p ALIGN="right">$</font></td>
      <center>
    <td WIDTH="61" VALIGN="TOP"><font SIZE="3">
      <p style="margin-right: 20" align="right">137</font></td>
    <td WIDTH="14" VALIGN="TOP"><font SIZE="3">
      <p>$</font></td>
    <td WIDTH="55" VALIGN="TOP"><font SIZE="3">
      <p style="margin-right: 20" align="right">129</font></td>
  </tr>
  <tr>
    <td WIDTH="301" VALIGN="TOP"><font SIZE="3">
      <p>Add back: Stock&#45;based employee<br>
      &#160;&#160;&#160;&#160;&#160;compensation expense
      included in<br>
      &#160;&#160;&#160;&#160;&#160;reported net income*</font></td>
    <td WIDTH="9" VALIGN="TOP"><font SIZE="3">
      <p><br>
      <br>
      </font></td>
    <td WIDTH="79" VALIGN="TOP"><font SIZE="3">
      <p style="margin-right: 20" align="right"><br>
      <br>
      6</font></td>
    <td WIDTH="8" VALIGN="TOP">&nbsp;</td>
    <td WIDTH="64" VALIGN="TOP"><font SIZE="3">
      <p style="margin-right: 20" align="right"><br>
      <br>
      3</font></td>
    <td WIDTH="37" VALIGN="TOP" align="right"><font SIZE="3">
      <p ALIGN="JUSTIFY"><br>
      <br>
      </font></td>
    <td WIDTH="61" VALIGN="TOP"><font SIZE="3">
      <p style="margin-right: 20" align="right"><br>
      <br>
      9</font></td>
    <td WIDTH="14" VALIGN="TOP"><font SIZE="3">
      <p><br>
      <br>
      </font></td>
    <td WIDTH="55" VALIGN="TOP"><font SIZE="3">
      <p style="margin-right: 20" align="right"><br>
      <br>
      7</font></td>
  </tr>
  <tr>
    <td WIDTH="301" VALIGN="TOP"><font SIZE="3">
      <p>Deduct: Total stock&#45;based employee<br>
      &#160;&#160;&#160;&#160;&#160;compensation expense
      determined under<br>
      &#160;&#160;&#160;&#160;&#160;fair value based method
      for all awards*</font></td>
    <td WIDTH="9" VALIGN="TOP"><font SIZE="3">
      <p><br>
      <br>
      </font></td>
    <td WIDTH="79" VALIGN="TOP"><font SIZE="3">
      <p style="margin-right: 20" align="right"><br>
      <br>
      (7)</font></td>
    <td WIDTH="8" VALIGN="TOP"><font SIZE="3">
      <p ALIGN="JUSTIFY"><br>
      <br>
      </font></td>
    <td WIDTH="64" VALIGN="TOP"><font SIZE="3">
      <p style="margin-right: 20" align="right"><br>
      <br>
      (5)</font></td>
    <td WIDTH="37" VALIGN="TOP" align="right"><font SIZE="3">
      <p ALIGN="JUSTIFY"><br>
      <br>
      </font></td>
    <td WIDTH="61" VALIGN="TOP"><font SIZE="3">
      <p style="margin-right: 20" align="right"><br>
      <br>
      (14)</font></td>
    <td WIDTH="14" VALIGN="TOP"><font SIZE="3">
      <p><br>
      <br>
      </font></td>
    <td WIDTH="55" VALIGN="TOP"><font SIZE="3">
      <p style="margin-right: 20" align="right"><br>
      <br>
      (13)</font></td>
  </tr>
  <tr>
    <td WIDTH="303" VALIGN="TOP" style="border-top-style: solid; border-top-width: 1; border-bottom-style: solid; border-bottom-width: 1"><font SIZE="3">
      <p>Pro forma net income</font></td>
    <td WIDTH="11" VALIGN="TOP" style="border-top-style: solid; border-top-width: 1; border-bottom-style: solid; border-bottom-width: 1"><font SIZE="3">
      <p>$</font></td>
    <td WIDTH="81" VALIGN="TOP" style="border-top-style: solid; border-top-width: 1; border-bottom-style: solid; border-bottom-width: 1"><font SIZE="3">
      <p style="margin-right: 20" align="right">99</font></td>
    <td WIDTH="10" VALIGN="TOP" style="border-top-style: solid; border-top-width: 1; border-bottom-style: solid; border-bottom-width: 1"><font SIZE="3">
      <p ALIGN="JUSTIFY">$</font></td>
    <td WIDTH="66" VALIGN="TOP" style="border-top-style: solid; border-top-width: 1; border-bottom-style: solid; border-bottom-width: 1"><font SIZE="3">
      <p style="margin-right: 20" align="right">61</font></td>
      </center>
    <td WIDTH="39" VALIGN="TOP" style="border-top-style: solid; border-top-width: 1; border-bottom-style: solid; border-bottom-width: 1" align="right"><font SIZE="3">
      <p ALIGN="right">$</font></td>
      <center>
    <td WIDTH="63" VALIGN="TOP" style="border-top-style: solid; border-top-width: 1; border-bottom-style: solid; border-bottom-width: 1"><font SIZE="3">
      <p style="margin-right: 20" align="right">132</font></td>
    <td WIDTH="16" VALIGN="TOP" style="border-top-style: solid; border-top-width: 1; border-bottom-style: solid; border-bottom-width: 1"><font SIZE="3">
      <p>$</font></td>
    <td WIDTH="57" VALIGN="TOP" style="border-top-style: solid; border-top-width: 1; border-bottom-style: solid; border-bottom-width: 1"><font SIZE="3">
      <p style="margin-right: 20" align="right">123</font></td>
  </tr>
  <tr>
    <td WIDTH="301" VALIGN="TOP"><font SIZE="3">
      <p>Income per share:</font></td>
    <td WIDTH="9" VALIGN="TOP">&nbsp;</td>
    <td WIDTH="79" VALIGN="TOP">
      <p style="margin-right: 20" align="right">&nbsp;</p>
    </td>
    <td WIDTH="8" VALIGN="TOP">&nbsp;</td>
    <td WIDTH="64" VALIGN="TOP">
      <p style="margin-right: 20" align="right">&nbsp;</p>
    </td>
    <td WIDTH="37" VALIGN="TOP" align="right">&nbsp;</td>
    <td WIDTH="61" VALIGN="TOP">
      <p style="margin-right: 20" align="right">&nbsp;</p>
    </td>
    <td WIDTH="14" VALIGN="TOP">&nbsp;</td>
    <td WIDTH="55" VALIGN="TOP">
      <p style="margin-right: 20" align="right">&nbsp;</p>
    </td>
  </tr>
  <tr>
    <td WIDTH="301" VALIGN="TOP"><font SIZE="3">
      <p>&#160;&#160;&#160;&#160;&#160;Basic &#45; as
      reported</font></td>
    <td WIDTH="9" VALIGN="TOP"><font SIZE="3">
      <p>$</font></td>
    <td WIDTH="79" VALIGN="TOP"><font SIZE="3">
      <p style="margin-right: 20" align="right">.72</font></td>
    <td WIDTH="8" VALIGN="TOP"><font SIZE="3">
      <p>$</font></td>
    <td WIDTH="64" VALIGN="TOP"><font SIZE="3">
      <p style="margin-right: 20" align="right">.47</font></td>
    <td WIDTH="37" VALIGN="TOP" align="right"><font SIZE="3">
      <p>$</font></td>
    <td WIDTH="61" VALIGN="TOP"><font SIZE="3">
      <p style="margin-right: 20" align="right">.99</font></td>
    <td WIDTH="14" VALIGN="TOP"><font SIZE="3">
      <p>$</font></td>
    <td WIDTH="55" VALIGN="TOP"><font SIZE="3">
      <p style="margin-right: 20" align="right">.95</font></td>
  </tr>
  <tr>
    <td WIDTH="301" VALIGN="TOP"><font SIZE="3">
      <p>&#160;&#160;&#160;&#160;&#160;Basic &#45; pro
      forma</font></td>
    <td WIDTH="9" VALIGN="TOP"><font SIZE="3">
      <p>$</font></td>
    <td WIDTH="79" VALIGN="TOP"><font SIZE="3">
      <p style="margin-right: 20" align="right">.72</font></td>
    <td WIDTH="8" VALIGN="TOP"><font SIZE="3">
      <p>$</font></td>
    <td WIDTH="64" VALIGN="TOP"><font SIZE="3">
      <p style="margin-right: 20" align="right">.45</font></td>
    <td WIDTH="37" VALIGN="TOP" align="right"><font SIZE="3">
      <p>$</font></td>
    <td WIDTH="61" VALIGN="TOP"><font SIZE="3">
      <p style="margin-right: 20" align="right">.96</font></td>
    <td WIDTH="14" VALIGN="TOP"><font SIZE="3">
      <p>$</font></td>
    <td WIDTH="55" VALIGN="TOP"><font SIZE="3">
      <p style="margin-right: 20" align="right">.91</font></td>
  </tr>
  <tr>
    <td WIDTH="301" VALIGN="TOP"><font SIZE="3">
      <p>&#160;&#160;&#160;&#160;&#160;Diluted &#45; as
      reported</font></td>
    <td WIDTH="9" VALIGN="TOP"><font SIZE="3">
      <p>$</font></td>
    <td WIDTH="79" VALIGN="TOP"><font SIZE="3">
      <p style="margin-right: 20" align="right">.71</font></td>
    <td WIDTH="8" VALIGN="TOP"><font SIZE="3">
      <p>$</font></td>
    <td WIDTH="64" VALIGN="TOP"><font SIZE="3">
      <p style="margin-right: 20" align="right">.46</font></td>
    <td WIDTH="37" VALIGN="TOP" align="right"><font SIZE="3">
      <p>$</font></td>
    <td WIDTH="61" VALIGN="TOP"><font SIZE="3">
      <p style="margin-right: 20" align="right">.97</font></td>
    <td WIDTH="14" VALIGN="TOP"><font SIZE="3">
      <p>$</font></td>
    <td WIDTH="55" VALIGN="TOP"><font SIZE="3">
      <p style="margin-right: 20" align="right">.94</font></td>
  </tr>
  <tr>
    <td WIDTH="303" VALIGN="TOP" style="border-bottom-style: solid"><font SIZE="3">
      <p>&#160;&#160;&#160;&#160;&#160;Diluted &#45; pro
      forma</font></td>
    <td WIDTH="11" VALIGN="TOP" style="border-bottom-style: solid"><font SIZE="3">
      <p>$</font></td>
    <td WIDTH="81" VALIGN="TOP" style="border-bottom-style: solid"><font SIZE="3">
      <p style="margin-right: 20" align="right">.70</font></td>
    <td WIDTH="10" VALIGN="TOP" style="border-bottom-style: solid"><font SIZE="3">
      <p>$</font></td>
    <td WIDTH="66" VALIGN="TOP" style="border-bottom-style: solid"><font SIZE="3">
      <p style="margin-right: 20" align="right">.45</font></td>
    <td WIDTH="39" VALIGN="TOP" style="border-bottom-style: solid" align="right"><font SIZE="3">
      <p>$</font></td>
    <td WIDTH="63" VALIGN="TOP" style="border-bottom-style: solid"><font SIZE="3">
      <p style="margin-right: 20" align="right">.94</font></td>
    <td WIDTH="16" VALIGN="TOP" style="border-bottom-style: solid"><font SIZE="3">
      <p>$</font></td>
    <td WIDTH="57" VALIGN="TOP" style="border-bottom-style: solid"><font SIZE="3">
      <p style="margin-right: 20" align="right">.90</font></td>
  </tr>
</table>
      </center>
    </div>
<i><font SIZE="3">
<blockquote>
  <blockquote>
<p ALIGN="JUSTIFY">* Net of related cash settlement forward income or expense
and related tax effects.</p>
  </blockquote>
</blockquote>
</font></i><font SIZE="3">
<p ALIGN="JUSTIFY">Textron manages the expense related to stock&#45;based
compensation awards using cash settlement forward contracts on its common stock.
The use of these forward contracts modifies compensation expense exposure to
changes in the stock price with the intent to reduce potential variability. The
fair value of these instruments at July 3, 2004 and January 3, 2004 was a
receivable of $1 million and $25 million, respectively. Gains and losses on
these instruments are recorded as an adjustment to compensation expense when the
award is charged to expense. Cash received or paid on the contract settlement is
included in cash flows from operating activities, consistent with the
classification of the cash flows on the underlying hedged compensation expense.</p>
<b>
<p ALIGN="JUSTIFY">Note 9: Pension Benefits and Postretirement Benefits Other
Than Pensions</p>
</b>
<p ALIGN="JUSTIFY">The components of net periodic benefit cost for the three
months ended July&#160;3, 2004 and June&#160;28, 2003 are as follows:</p>
</font>
    <div align="center">
      <center>
<table CELLSPACING="1" CELLPADDING="1" WIDTH="681">
  <tr>
    <td WIDTH="46%" VALIGN="TOP"><i><font SIZE="3">
      <p><br>
      <br>
      (In millions)</font></i></td>
    <td WIDTH="27%" VALIGN="TOP" COLSPAN="3"><font SIZE="3">
      <p ALIGN="CENTER"><br>
      <br>
      Pension Benefits</font></td>
    <td WIDTH="27%" VALIGN="TOP" COLSPAN="3"><font SIZE="3">
      <p ALIGN="CENTER"><br>
      Postretirement Benefits<br>
      Other Than Pensions</font></td>
  </tr>
  <tr>
    <td WIDTH="46%" VALIGN="TOP" style="border-top-style: solid; border-top-width: 1; border-bottom-style: solid; border-bottom-width: 1">&nbsp;</td>
    <td WIDTH="13%" VALIGN="TOP" style="border-top-style: solid; border-top-width: 1; border-bottom-style: solid; border-bottom-width: 1"><font SIZE="3">
      <p ALIGN="CENTER">2004</font></td>
    <td WIDTH="12%" VALIGN="TOP" style="border-top-style: solid; border-top-width: 1; border-bottom-style: solid; border-bottom-width: 1"><font SIZE="3">
      <p ALIGN="CENTER">2003</font></td>
    <td WIDTH="2%" VALIGN="TOP" style="border-top-style: solid; border-top-width: 1; border-bottom-style: solid; border-bottom-width: 1">&nbsp;</td>
    <td WIDTH="13%" VALIGN="TOP" style="border-top-style: solid; border-top-width: 1; border-bottom-style: solid; border-bottom-width: 1"><font SIZE="3">
      <p ALIGN="CENTER">2004</font></td>
    <td WIDTH="10%" VALIGN="TOP" style="border-top-style: solid; border-top-width: 1; border-bottom-style: solid; border-bottom-width: 1"><font SIZE="3">
      <p ALIGN="CENTER">2003</font></td>
    <td WIDTH="4%" VALIGN="TOP" style="border-top-style: solid; border-top-width: 1; border-bottom-style: solid; border-bottom-width: 1">&nbsp;</td>
  </tr>
  <tr>
    <td WIDTH="46%" VALIGN="TOP"><font SIZE="3">
      <p>Service cost</font></td>
    <td WIDTH="13%" VALIGN="TOP"><font SIZE="3">
      <p style="margin-right: 20" align="right">$&nbsp;&nbsp;&nbsp; 29</font></td>
    <td WIDTH="12%" VALIGN="TOP"><font SIZE="3">
      <p style="margin-right: 20" align="right">$&nbsp;&nbsp; 28</font></td>
    <td WIDTH="2%" VALIGN="TOP">&nbsp;</td>
    <td WIDTH="13%" VALIGN="TOP"><font SIZE="3">
      <p style="margin-right: 20" align="right">$&nbsp;&nbsp;&nbsp; 2</font></td>
    <td WIDTH="10%" VALIGN="TOP"><font SIZE="3">
      <p style="margin-right: 20" align="right">$ 1</font></td>
    <td WIDTH="4%" VALIGN="TOP">&nbsp;</td>
  </tr>
  <tr>
    <td WIDTH="46%" VALIGN="TOP"><font SIZE="3">
      <p>Interest cost</font></td>
    <td WIDTH="13%" VALIGN="TOP"><font SIZE="3">
      <p style="margin-right: 20" align="right">72</font></td>
    <td WIDTH="12%" VALIGN="TOP"><font SIZE="3">
      <p style="margin-right: 20" align="right">70</font></td>
    <td WIDTH="2%" VALIGN="TOP">&nbsp;</td>
    <td WIDTH="13%" VALIGN="TOP"><font SIZE="3">
      <p style="margin-right: 20" align="right">10</font></td>
    <td WIDTH="10%" VALIGN="TOP"><font SIZE="3">
      <p style="margin-right: 20" align="right">11</font></td>
    <td WIDTH="4%" VALIGN="TOP">&nbsp;</td>
  </tr>
  <tr>
    <td WIDTH="46%" VALIGN="TOP"><font SIZE="3">
      <p>Expected return on plan assets</font></td>
    <td WIDTH="13%" VALIGN="TOP"><font SIZE="3">
      <p style="margin-right: 20" align="right">(107)</font></td>
    <td WIDTH="12%" VALIGN="TOP"><font SIZE="3">
      <p style="margin-right: 20" align="right">(108)</font></td>
    <td WIDTH="2%" VALIGN="TOP">&nbsp;</td>
    <td WIDTH="13%" VALIGN="TOP"><font SIZE="3">
      <p style="margin-right: 20" align="right">&#45;</font></td>
    <td WIDTH="10%" VALIGN="TOP"><font SIZE="3">
      <p style="margin-right: 20" align="right">&#45;</font></td>
    <td WIDTH="4%" VALIGN="TOP">&nbsp;</td>
  </tr>
  <tr>
    <td WIDTH="46%" VALIGN="TOP"><font SIZE="3">
      <p>Amortization of unrecognized transition asset</font></td>
    <td WIDTH="13%" VALIGN="TOP"><font SIZE="3">
      <p style="margin-right: 20" align="right">&#45;</font></td>
    <td WIDTH="12%" VALIGN="TOP"><font SIZE="3">
      <p style="margin-right: 20" align="right">(2)</font></td>
    <td WIDTH="2%" VALIGN="TOP">&nbsp;</td>
    <td WIDTH="13%" VALIGN="TOP"><font SIZE="3">
      <p style="margin-right: 20" align="right">&#45;</font></td>
    <td WIDTH="10%" VALIGN="TOP"><font SIZE="3">
      <p style="margin-right: 20" align="right">&#45;</font></td>
    <td WIDTH="4%" VALIGN="TOP">&nbsp;</td>
  </tr>
  <tr>
    <td WIDTH="46%" VALIGN="TOP"><font SIZE="3">
      <p>Amortization of prior service cost</font></td>
    <td WIDTH="13%" VALIGN="TOP"><font SIZE="3">
      <p style="margin-right: 20" align="right">4</font></td>
    <td WIDTH="12%" VALIGN="TOP"><font SIZE="3">
      <p style="margin-right: 20" align="right">4</font></td>
    <td WIDTH="2%" VALIGN="TOP">&nbsp;</td>
    <td WIDTH="13%" VALIGN="TOP"><font SIZE="3">
      <p style="margin-right: 20" align="right">(2)</font></td>
    <td WIDTH="10%" VALIGN="TOP"><font SIZE="3">
      <p style="margin-right: 20" align="right">&#45;</font></td>
    <td WIDTH="4%" VALIGN="TOP">&nbsp;</td>
  </tr>
  <tr>
    <td WIDTH="46%" VALIGN="TOP"><font SIZE="3">
      <p>Amortization of net gain</font></td>
    <td WIDTH="13%" VALIGN="TOP"><font SIZE="3">
      <p style="margin-right: 20" align="right">2</font></td>
    <td WIDTH="12%" VALIGN="TOP"><font SIZE="3">
      <p style="margin-right: 20" align="right">&#45;</font></td>
    <td WIDTH="2%" VALIGN="TOP">&nbsp;</td>
    <td WIDTH="13%" VALIGN="TOP"><font SIZE="3">
      <p style="margin-right: 20" align="right">3</font></td>
    <td WIDTH="10%" VALIGN="TOP"><font SIZE="3">
      <p style="margin-right: 20" align="right">1</font></td>
    <td WIDTH="4%" VALIGN="TOP">&nbsp;</td>
  </tr>
  <tr>
    <td WIDTH="46%" VALIGN="TOP" style="border-top-style: solid; border-top-width: 1; border-bottom-style: solid"><font SIZE="3">
      <p><br>
      Net periodic benefit costs</font></td>
    <td WIDTH="13%" VALIGN="TOP" style="border-top-style: solid; border-top-width: 1; border-bottom-style: solid"><font SIZE="3">
      <p style="margin-right: 20" align="right"><br>
      $&nbsp;&nbsp;&nbsp;&nbsp; &#45;</font></td>
    <td WIDTH="12%" VALIGN="TOP" style="border-top-style: solid; border-top-width: 1; border-bottom-style: solid"><font SIZE="3">
      <p style="margin-right: 20" align="right"><br>
      $&nbsp; (8)</font></td>
    <td WIDTH="2%" VALIGN="TOP" style="border-top-style: solid; border-top-width: 1; border-bottom-style: solid"><font SIZE="3">
      <p ALIGN="CENTER"><br>
      </font></td>
    <td WIDTH="13%" VALIGN="TOP" style="border-top-style: solid; border-top-width: 1; border-bottom-style: solid"><font SIZE="3">
      <p style="margin-right: 20" align="right"><br>
      $&nbsp;&nbsp; 13</font></td>
    <td WIDTH="10%" VALIGN="TOP" style="border-top-style: solid; border-top-width: 1; border-bottom-style: solid"><font SIZE="3">
      <p style="margin-right: 20" align="right"><br>
      $13</font></td>
    <td WIDTH="4%" VALIGN="TOP" style="border-top-style: solid; border-top-width: 1; border-bottom-style: solid"><font SIZE="3">
      <p><br>
      </font></td>
  </tr>
</table>
      </center>
      </div>
<font SIZE="3">
<p ALIGN="right">11.</p>
<p ALIGN="JUSTIFY">The components of net periodic benefit cost for the six
months ended July&#160;3, 2004 and June&#160;28, 2003 are as follows:</p>
</font>
      <div align="center">
        <center>
<table CELLSPACING="1" CELLPADDING="1" WIDTH="681">
  <tr>
    <td WIDTH="46%" VALIGN="TOP"><i><font SIZE="3">
      <p><br>
      <br>
      (In millions)</font></i></td>
    <td WIDTH="27%" VALIGN="TOP" COLSPAN="3"><font SIZE="3">
      <p ALIGN="CENTER"><br>
      <br>
      Pension Benefits</font></td>
    <td WIDTH="27%" VALIGN="TOP" COLSPAN="3"><font SIZE="3">
      <p ALIGN="CENTER"><br>
      Postretirement Benefits<br>
      Other Than Pensions</font></td>
  </tr>
  <tr>
    <td WIDTH="46%" VALIGN="TOP" style="border-top-style: solid; border-top-width: 1; border-bottom-style: solid; border-bottom-width: 1">&nbsp;</td>
    <td WIDTH="13%" VALIGN="TOP" style="border-top-style: solid; border-top-width: 1; border-bottom-style: solid; border-bottom-width: 1"><font SIZE="3">
      <p ALIGN="CENTER">2004</font></td>
    <td WIDTH="12%" VALIGN="TOP" style="border-top-style: solid; border-top-width: 1; border-bottom-style: solid; border-bottom-width: 1"><font SIZE="3">
      <p ALIGN="CENTER">2003</font></td>
    <td WIDTH="2%" VALIGN="TOP" style="border-top-style: solid; border-top-width: 1; border-bottom-style: solid; border-bottom-width: 1">&nbsp;</td>
    <td WIDTH="13%" VALIGN="TOP" style="border-top-style: solid; border-top-width: 1; border-bottom-style: solid; border-bottom-width: 1"><font SIZE="3">
      <p ALIGN="CENTER">2004</font></td>
    <td WIDTH="10%" VALIGN="TOP" style="border-top-style: solid; border-top-width: 1; border-bottom-style: solid; border-bottom-width: 1"><font SIZE="3">
      <p ALIGN="CENTER">2003</font></td>
    <td WIDTH="4%" VALIGN="TOP" style="border-top-style: solid; border-top-width: 1; border-bottom-style: solid; border-bottom-width: 1">&nbsp;</td>
  </tr>
  <tr>
    <td WIDTH="46%" VALIGN="TOP"><font SIZE="3">
      <p>Service cost</font></td>
    <td WIDTH="13%" VALIGN="TOP"><font SIZE="3">
      <p style="margin-right: 20" align="right">$&nbsp;&nbsp;&nbsp; 58</font></td>
    <td WIDTH="12%" VALIGN="TOP"><font SIZE="3">
      <p style="margin-right: 20" align="right">$&nbsp;&nbsp;&nbsp; 55</font></td>
    <td WIDTH="2%" VALIGN="TOP">&nbsp;</td>
    <td WIDTH="13%" VALIGN="TOP"><font SIZE="3">
      <p style="margin-right: 20" align="right">$&nbsp;&nbsp;&nbsp; 4</font></td>
    <td WIDTH="10%" VALIGN="TOP"><font SIZE="3">
      <p style="margin-right: 20" align="right">$&nbsp;&nbsp; 2</font></td>
    <td WIDTH="4%" VALIGN="TOP">&nbsp;</td>
  </tr>
  <tr>
    <td WIDTH="46%" VALIGN="TOP"><font SIZE="3">
      <p>Interest cost</font></td>
    <td WIDTH="13%" VALIGN="TOP"><font SIZE="3">
      <p style="margin-right: 20" align="right">144</font></td>
    <td WIDTH="12%" VALIGN="TOP"><font SIZE="3">
      <p style="margin-right: 20" align="right">139</font></td>
    <td WIDTH="2%" VALIGN="TOP">&nbsp;</td>
    <td WIDTH="13%" VALIGN="TOP"><font SIZE="3">
      <p style="margin-right: 20" align="right">20</font></td>
    <td WIDTH="10%" VALIGN="TOP"><font SIZE="3">
      <p style="margin-right: 20" align="right">22</font></td>
    <td WIDTH="4%" VALIGN="TOP">&nbsp;</td>
  </tr>
  <tr>
    <td WIDTH="46%" VALIGN="TOP"><font SIZE="3">
      <p>Expected return on plan assets</font></td>
    <td WIDTH="13%" VALIGN="TOP"><font SIZE="3">
      <p style="margin-right: 20" align="right">(214)</font></td>
    <td WIDTH="12%" VALIGN="TOP"><font SIZE="3">
      <p style="margin-right: 20" align="right">(216)</font></td>
    <td WIDTH="2%" VALIGN="TOP">&nbsp;</td>
    <td WIDTH="13%" VALIGN="TOP"><font SIZE="3">
      <p style="margin-right: 20" align="right">&#45;</font></td>
    <td WIDTH="10%" VALIGN="TOP"><font SIZE="3">
      <p style="margin-right: 20" align="right">&#45;</font></td>
    <td WIDTH="4%" VALIGN="TOP">&nbsp;</td>
  </tr>
  <tr>
    <td WIDTH="46%" VALIGN="TOP"><font SIZE="3">
      <p>Amortization of unrecognized transition asset</font></td>
    <td WIDTH="13%" VALIGN="TOP"><font SIZE="3">
      <p style="margin-right: 20" align="right">&#45;</font></td>
    <td WIDTH="12%" VALIGN="TOP"><font SIZE="3">
      <p style="margin-right: 20" align="right">(3)</font></td>
    <td WIDTH="2%" VALIGN="TOP">&nbsp;</td>
    <td WIDTH="13%" VALIGN="TOP"><font SIZE="3">
      <p style="margin-right: 20" align="right">&#45;</font></td>
    <td WIDTH="10%" VALIGN="TOP"><font SIZE="3">
      <p style="margin-right: 20" align="right">&#45;</font></td>
    <td WIDTH="4%" VALIGN="TOP">&nbsp;</td>
  </tr>
  <tr>
    <td WIDTH="46%" VALIGN="TOP"><font SIZE="3">
      <p>Amortization of prior service cost</font></td>
    <td WIDTH="13%" VALIGN="TOP"><font SIZE="3">
      <p style="margin-right: 20" align="right">8</font></td>
    <td WIDTH="12%" VALIGN="TOP"><font SIZE="3">
      <p style="margin-right: 20" align="right">8</font></td>
    <td WIDTH="2%" VALIGN="TOP">&nbsp;</td>
    <td WIDTH="13%" VALIGN="TOP"><font SIZE="3">
      <p style="margin-right: 20" align="right">(4)</font></td>
    <td WIDTH="10%" VALIGN="TOP"><font SIZE="3">
      <p style="margin-right: 20" align="right">&#45;</font></td>
    <td WIDTH="4%" VALIGN="TOP">&nbsp;</td>
  </tr>
  <tr>
    <td WIDTH="46%" VALIGN="TOP"><font SIZE="3">
      <p>Amortization of net gain</font></td>
    <td WIDTH="13%" VALIGN="TOP"><font SIZE="3">
      <p style="margin-right: 20" align="right">4</font></td>
    <td WIDTH="12%" VALIGN="TOP"><font SIZE="3">
      <p style="margin-right: 20" align="right">&#45;</font></td>
    <td WIDTH="2%" VALIGN="TOP">&nbsp;</td>
    <td WIDTH="13%" VALIGN="TOP"><font SIZE="3">
      <p style="margin-right: 20" align="right">6</font></td>
    <td WIDTH="10%" VALIGN="TOP"><font SIZE="3">
      <p style="margin-right: 20" align="right">2</font></td>
    <td WIDTH="4%" VALIGN="TOP">&nbsp;</td>
  </tr>
  <tr>
    <td WIDTH="46%" VALIGN="TOP" style="border-top-style: solid; border-top-width: 1; border-bottom-style: solid"><font SIZE="3">
      <p><br>
      Net periodic benefit costs</font></td>
    <td WIDTH="13%" VALIGN="TOP" style="border-top-style: solid; border-top-width: 1; border-bottom-style: solid"><font SIZE="3">
      <p style="margin-right: 20" align="right"><br>
      $&nbsp;&nbsp;&nbsp; &#45;</font></td>
    <td WIDTH="12%" VALIGN="TOP" style="border-top-style: solid; border-top-width: 1; border-bottom-style: solid"><font SIZE="3">
      <p style="margin-right: 20" align="right"><br>
      $ (17)</font></td>
    <td WIDTH="2%" VALIGN="TOP" style="border-top-style: solid; border-top-width: 1; border-bottom-style: solid"><font SIZE="3">
      <p ALIGN="CENTER"><br>
      </font></td>
    <td WIDTH="13%" VALIGN="TOP" style="border-top-style: solid; border-top-width: 1; border-bottom-style: solid"><font SIZE="3">
      <p style="margin-right: 20" align="right"><br>
      $ 26</font></td>
    <td WIDTH="10%" VALIGN="TOP" style="border-top-style: solid; border-top-width: 1; border-bottom-style: solid"><font SIZE="3">
      <p style="margin-right: 20" align="right"><br>
      $ 26</font></td>
    <td WIDTH="4%" VALIGN="TOP" style="border-top-style: solid; border-top-width: 1; border-bottom-style: solid"><font SIZE="3">
      <p><br>
      </font></td>
  </tr>
</table>
      </center>
    </div>
<font SIZE="3">
<p ALIGN="JUSTIFY">As discussed in Note 14, in May 2004, the Financial
Accounting Standards Board (FASB) issued FASB Staff Position (FSP)
106&#45;2, &quot;Accounting and Disclosure Requirements related to the
Medicare Prescription Drug, Improvement, and Modernization Act of 2003&quot;
(the &quot;Act&quot;) for employers that sponsor postretirement healthcare plans
that provide prescription drug benefits. The FSP is effective for the third
quarter of 2004. The net periodic benefit cost for postretirement benefits other
than pensions for the three and six month periods ended July&#160;3, 2004
and June&#160;28, 2003 do not include the effect of any future subsidy under
the Act.</p>
<p ALIGN="right">12.</p>
<b>
<p ALIGN="JUSTIFY">Note 10: Special Charges</p>
</b>
<p ALIGN="JUSTIFY">Textron recorded $28 million and $85 million in special
charges for the three and six months ended July&#160;3, 2004, respectively.
Special charges for the three and six months ended June&#160;28, 2003 were
$24 million and $52 million, respectively. These charges are summarized below
for the applicable segments:</p>
</font>
<div align="center">
  <center>
<table CELLSPACING="1" CELLPADDING="1" WIDTH="701">
  <tr>
    <td WIDTH="134" VALIGN="TOP">&nbsp;</td>
    <td WIDTH="411" VALIGN="TOP" COLSPAN="5"><font SIZE="3">
      <p ALIGN="CENTER" style="border-bottom-style: solid; border-bottom-width: 1">Restructuring Expenses</font></td>
    <td WIDTH="68" VALIGN="TOP">&nbsp;</td>
    <td WIDTH="62" VALIGN="TOP">&nbsp;</td>
  </tr>
  <tr>
    <td WIDTH="136" VALIGN="TOP" style="border-bottom-style: solid; border-bottom-width: 1"><b><font SIZE="3">
      <p><br>
      <br>
      </font></b><font SIZE="3"><i>(In millions)</i></font></td>
    <td WIDTH="75" VALIGN="TOP" style="border-bottom-style: solid; border-bottom-width: 1"><font SIZE="3">
      <p ALIGN="CENTER"><br>
      Severance<br>
      Costs</font></td>
    <td WIDTH="96" VALIGN="TOP" style="border-bottom-style: solid; border-bottom-width: 1"><font SIZE="3">
      <p ALIGN="CENTER"><br>
      Contractual<br>
      Obligations</font></td>
    <td WIDTH="89" VALIGN="TOP" style="border-bottom-style: solid; border-bottom-width: 1"><font SIZE="3">
      <p ALIGN="center">Fixed<br>
      Asset<br>
      Impairments</font></td>
    <td WIDTH="74" VALIGN="TOP" style="border-bottom-style: solid; border-bottom-width: 1"><font SIZE="3">
      <p ALIGN="CENTER">Other<br>
      Associated<br>
      Costs</font></td>
    <td WIDTH="63" VALIGN="TOP" style="border-bottom-style: solid; border-bottom-width: 1"><font SIZE="3">
      <p align="center"><br>
      <br>
      Total</font></td>
    <td WIDTH="70" VALIGN="TOP" style="border-bottom-style: solid; border-bottom-width: 1"><font SIZE="3">
      <p ALIGN="CENTER">Gain on<br>
      Sale of<br>
      Investment</font></td>
    <td WIDTH="64" VALIGN="TOP" style="border-bottom-style: solid; border-bottom-width: 1"><font SIZE="3">
      <p ALIGN="CENTER">Total<br>
      Special<br>
      Charges</font></td>
  </tr>
  <tr>
    <td VALIGN="TOP" COLSPAN="8" width="693"><b><font SIZE="3">
      <p>Three Months Ended July 3, 2004</font></b></td>
  </tr>
  <tr>
    <td WIDTH="134" VALIGN="TOP"><font SIZE="3">
      <p>Cessna</font></td>
    <td WIDTH="73" VALIGN="TOP"><font SIZE="3">
      <p ALIGN="right" style="margin-right: 20">$&nbsp; &#45;</font></td>
    <td WIDTH="94" VALIGN="TOP"><font SIZE="3">
      <p ALIGN="right" style="margin-right: 20">$&nbsp; &#45;</font></td>
    <td WIDTH="87" VALIGN="TOP"><font SIZE="3">
      <p ALIGN="right" style="margin-right: 20">$&nbsp; &#45;</font></td>
    <td WIDTH="72" VALIGN="TOP"><font SIZE="3">
      <p ALIGN="right" style="margin-right: 20">$&nbsp; &#45;</font></td>
    <td WIDTH="61" VALIGN="TOP"><font SIZE="3">
      <p ALIGN="right" style="margin-right: 20">$&nbsp; &#45;</font></td>
    <td WIDTH="68" VALIGN="TOP"><font SIZE="3">
      <p ALIGN="right" style="margin-right: 20">$&nbsp;&nbsp;&nbsp;&nbsp; &#45;</font></td>
    <td WIDTH="62" VALIGN="TOP"><font SIZE="3">
      <p ALIGN="right" style="margin-right: 20">$&nbsp; &#45;</font></td>
  </tr>
  <tr>
    <td WIDTH="134" VALIGN="TOP"><font SIZE="3">
      <p>Fastening Systems</font></td>
    <td WIDTH="73" VALIGN="TOP"><font SIZE="3">
      <p ALIGN="right" style="margin-right: 20">11</font></td>
    <td WIDTH="94" VALIGN="TOP"><font SIZE="3">
      <p ALIGN="right" style="margin-right: 20">&#45;</font></td>
    <td WIDTH="87" VALIGN="TOP"><font SIZE="3">
      <p ALIGN="right" style="margin-right: 20">&#45;</font></td>
    <td WIDTH="72" VALIGN="TOP"><font SIZE="3">
      <p ALIGN="right" style="margin-right: 20">5</font></td>
    <td WIDTH="61" VALIGN="TOP"><font SIZE="3">
      <p ALIGN="right" style="margin-right: 20">16</font></td>
    <td WIDTH="68" VALIGN="TOP"><font SIZE="3">
      <p ALIGN="right" style="margin-right: 20">&#45;</font></td>
    <td WIDTH="62" VALIGN="TOP"><font SIZE="3">
      <p ALIGN="right" style="margin-right: 20">16</font></td>
  </tr>
  <tr>
    <td WIDTH="134" VALIGN="TOP"><font SIZE="3">
      <p>Industrial</font></td>
    <td WIDTH="73" VALIGN="TOP"><font SIZE="3">
      <p ALIGN="right" style="margin-right: 20">1</font></td>
    <td WIDTH="94" VALIGN="TOP"><font SIZE="3">
      <p ALIGN="right" style="margin-right: 20">&#45;</font></td>
    <td WIDTH="87" VALIGN="TOP"><font SIZE="3">
      <p ALIGN="right" style="margin-right: 20">10</font></td>
    <td WIDTH="72" VALIGN="TOP"><font SIZE="3">
      <p ALIGN="right" style="margin-right: 20">1</font></td>
    <td WIDTH="61" VALIGN="TOP"><font SIZE="3">
      <p ALIGN="right" style="margin-right: 20">12</font></td>
    <td WIDTH="68" VALIGN="TOP"><font SIZE="3">
      <p ALIGN="right" style="margin-right: 20">&#45;</font></td>
    <td WIDTH="62" VALIGN="TOP"><font SIZE="3">
      <p ALIGN="right" style="margin-right: 20">12</font></td>
  </tr>
  <tr>
    <td WIDTH="134" VALIGN="TOP"><font SIZE="3">
      <p>Corporate</font></td>
    <td WIDTH="73" VALIGN="TOP"><font SIZE="3">
      <p ALIGN="right" style="margin-right: 20">&#45;</font></td>
    <td WIDTH="94" VALIGN="TOP"><font SIZE="3">
      <p ALIGN="right" style="margin-right: 20">&#45;</font></td>
    <td WIDTH="87" VALIGN="TOP"><font SIZE="3">
      <p ALIGN="right" style="margin-right: 20">&#45;</font></td>
    <td WIDTH="72" VALIGN="TOP"><font SIZE="3">
      <p ALIGN="right" style="margin-right: 20">&#45;</font></td>
    <td WIDTH="61" VALIGN="TOP"><font SIZE="3">
      <p ALIGN="right" style="margin-right: 20">&#45;</font></td>
    <td WIDTH="68" VALIGN="TOP"><font SIZE="3">
      <p ALIGN="right" style="margin-right: 20">&#45;</font></td>
    <td WIDTH="62" VALIGN="TOP"><font SIZE="3">
      <p ALIGN="right" style="margin-right: 20">&#45;</font></td>
  </tr>
  <tr>
    <td WIDTH="136" VALIGN="TOP" style="border-top-style: solid; border-top-width: 1; border-bottom-style: solid">&nbsp;</td>
    <td WIDTH="75" VALIGN="TOP" style="border-top-style: solid; border-top-width: 1; border-bottom-style: solid"><font SIZE="3">
      <p ALIGN="right" style="margin-right: 20">$12</font></td>
    <td WIDTH="96" VALIGN="TOP" style="border-top-style: solid; border-top-width: 1; border-bottom-style: solid"><font SIZE="3">
      <p ALIGN="right" style="margin-right: 20">$&nbsp; &#45;</font></td>
    <td WIDTH="89" VALIGN="TOP" style="border-top-style: solid; border-top-width: 1; border-bottom-style: solid"><font SIZE="3">
      <p ALIGN="right" style="margin-right: 20">$10</font></td>
    <td WIDTH="74" VALIGN="TOP" style="border-top-style: solid; border-top-width: 1; border-bottom-style: solid"><font SIZE="3">
      <p ALIGN="right" style="margin-right: 20">$&nbsp; 6</font></td>
    <td WIDTH="63" VALIGN="TOP" style="border-top-style: solid; border-top-width: 1; border-bottom-style: solid"><font SIZE="3">
      <p ALIGN="right" style="margin-right: 20">$28</font></td>
    <td WIDTH="70" VALIGN="TOP" style="border-top-style: solid; border-top-width: 1; border-bottom-style: solid"><font SIZE="3">
      <p ALIGN="right" style="margin-right: 20">$&nbsp;&nbsp;&nbsp;&nbsp; &#45;</font></td>
    <td WIDTH="64" VALIGN="TOP" style="border-top-style: solid; border-top-width: 1; border-bottom-style: solid"><font SIZE="3">
      <p ALIGN="right" style="margin-right: 20">$28</font></td>
  </tr>
  <tr>
    <td VALIGN="TOP" COLSPAN="8" width="693"><b><font SIZE="3">
      <p>Three Months Ended June 28, 2003</font></b></td>
  </tr>
  <tr>
    <td WIDTH="134" VALIGN="TOP"><font SIZE="3">
      <p>Cessna</font></td>
    <td WIDTH="73" VALIGN="TOP"><font SIZE="3">
      <p ALIGN="right" style="margin-right: 20">$&nbsp;&nbsp; &#45;</font></td>
    <td WIDTH="94" VALIGN="TOP"><font SIZE="3">
      <p ALIGN="right" style="margin-right: 20">$&nbsp; &#45;</font></td>
    <td WIDTH="87" VALIGN="TOP"><font SIZE="3">
      <p ALIGN="right" style="margin-right: 20">$&nbsp; &#45;</font></td>
    <td WIDTH="72" VALIGN="TOP"><font SIZE="3">
      <p ALIGN="right" style="margin-right: 20">$&nbsp; &#45;</font></td>
    <td WIDTH="61" VALIGN="TOP"><font SIZE="3">
      <p ALIGN="right" style="margin-right: 20">$&nbsp; &#45;</font></td>
    <td WIDTH="68" VALIGN="TOP"><font SIZE="3">
      <p ALIGN="right" style="margin-right: 20">$&nbsp;&nbsp;&nbsp;&nbsp; &#45;</font></td>
    <td WIDTH="62" VALIGN="TOP"><font SIZE="3">
      <p ALIGN="right" style="margin-right: 20">$&nbsp; &#45;</font></td>
  </tr>
  <tr>
    <td WIDTH="134" VALIGN="TOP"><font SIZE="3">
      <p>Fastening Systems</font></td>
    <td WIDTH="73" VALIGN="TOP"><font SIZE="3">
      <p ALIGN="right" style="margin-right: 20">11</font></td>
    <td WIDTH="94" VALIGN="TOP"><font SIZE="3">
      <p ALIGN="right" style="margin-right: 20">&#45;</font></td>
    <td WIDTH="87" VALIGN="TOP"><font SIZE="3">
      <p ALIGN="right" style="margin-right: 20">&#45;</font></td>
    <td WIDTH="72" VALIGN="TOP"><font SIZE="3">
      <p ALIGN="right" style="margin-right: 20">1</font></td>
    <td WIDTH="61" VALIGN="TOP"><font SIZE="3">
      <p ALIGN="right" style="margin-right: 20">12</font></td>
    <td WIDTH="68" VALIGN="TOP"><font SIZE="3">
      <p ALIGN="right" style="margin-right: 20">&#45;</font></td>
    <td WIDTH="62" VALIGN="TOP"><font SIZE="3">
      <p ALIGN="right" style="margin-right: 20">12</font></td>
  </tr>
  <tr>
    <td WIDTH="134" VALIGN="TOP"><font SIZE="3">
      <p>Industrial</font></td>
    <td WIDTH="73" VALIGN="TOP"><font SIZE="3">
      <p ALIGN="right" style="margin-right: 20">3</font></td>
    <td WIDTH="94" VALIGN="TOP"><font SIZE="3">
      <p ALIGN="right" style="margin-right: 20">&#45;</font></td>
    <td WIDTH="87" VALIGN="TOP"><font SIZE="3">
      <p ALIGN="right" style="margin-right: 20">3</font></td>
    <td WIDTH="72" VALIGN="TOP"><font SIZE="3">
      <p ALIGN="right" style="margin-right: 20">5</font></td>
    <td WIDTH="61" VALIGN="TOP"><font SIZE="3">
      <p ALIGN="right" style="margin-right: 20">11</font></td>
    <td WIDTH="68" VALIGN="TOP"><font SIZE="3">
      <p ALIGN="right" style="margin-right: 20">&#45;</font></td>
    <td WIDTH="62" VALIGN="TOP"><font SIZE="3">
      <p ALIGN="right" style="margin-right: 20">11</font></td>
  </tr>
  <tr>
    <td WIDTH="134" VALIGN="TOP"><font SIZE="3">
      <p>Corporate</font></td>
    <td WIDTH="73" VALIGN="TOP"><font SIZE="3">
      <p ALIGN="right" style="margin-right: 20">1</font></td>
    <td WIDTH="94" VALIGN="TOP"><font SIZE="3">
      <p ALIGN="right" style="margin-right: 20">&#45;</font></td>
    <td WIDTH="87" VALIGN="TOP"><font SIZE="3">
      <p ALIGN="right" style="margin-right: 20">&#45;</font></td>
    <td WIDTH="72" VALIGN="TOP"><font SIZE="3">
      <p ALIGN="right" style="margin-right: 20">&#45;</font></td>
    <td WIDTH="61" VALIGN="TOP"><font SIZE="3">
      <p ALIGN="right" style="margin-right: 20">1</font></td>
    <td WIDTH="68" VALIGN="TOP"><font SIZE="3">
      <p ALIGN="right" style="margin-right: 20">&#45;</font></td>
    <td WIDTH="62" VALIGN="TOP"><font SIZE="3">
      <p ALIGN="right" style="margin-right: 20">1</font></td>
  </tr>
  <tr>
    <td WIDTH="136" VALIGN="TOP" style="border-top-style: solid; border-top-width: 1; border-bottom-style: solid">&nbsp;</td>
    <td WIDTH="75" VALIGN="TOP" style="border-top-style: solid; border-top-width: 1; border-bottom-style: solid"><font SIZE="3">
      <p ALIGN="right" style="margin-right: 20">$15</font></td>
    <td WIDTH="96" VALIGN="TOP" style="border-top-style: solid; border-top-width: 1; border-bottom-style: solid"><font SIZE="3">
      <p ALIGN="right" style="margin-right: 20">$&nbsp; &#45;</font></td>
    <td WIDTH="89" VALIGN="TOP" style="border-top-style: solid; border-top-width: 1; border-bottom-style: solid"><font SIZE="3">
      <p ALIGN="right" style="margin-right: 20">$&nbsp; 3</font></td>
    <td WIDTH="74" VALIGN="TOP" style="border-top-style: solid; border-top-width: 1; border-bottom-style: solid"><font SIZE="3">
      <p ALIGN="right" style="margin-right: 20">$&nbsp; 6</font></td>
    <td WIDTH="63" VALIGN="TOP" style="border-top-style: solid; border-top-width: 1; border-bottom-style: solid"><font SIZE="3">
      <p ALIGN="right" style="margin-right: 20">$24</font></td>
    <td WIDTH="70" VALIGN="TOP" style="border-top-style: solid; border-top-width: 1; border-bottom-style: solid"><font SIZE="3">
      <p ALIGN="right" style="margin-right: 20">$&nbsp;&nbsp;&nbsp;&nbsp; &#45;</font></td>
    <td WIDTH="64" VALIGN="TOP" style="border-top-style: solid; border-top-width: 1; border-bottom-style: solid"><font SIZE="3">
      <p ALIGN="right" style="margin-right: 20">$24</font></td>
  </tr>
  <tr>
    <td VALIGN="TOP" COLSPAN="8" width="693"><b><font SIZE="3">
      <p>Six Months Ended July 3, 2004</font></b></td>
  </tr>
  <tr>
    <td WIDTH="134" VALIGN="TOP"><font SIZE="3">
      <p>Cessna</font></td>
    <td WIDTH="73" VALIGN="TOP"><font SIZE="3">
      <p ALIGN="right" style="margin-right: 20">$&nbsp; &#45;</font></td>
    <td WIDTH="94" VALIGN="TOP"><font SIZE="3">
      <p ALIGN="right" style="margin-right: 20">$&nbsp; &#45;</font></td>
    <td WIDTH="87" VALIGN="TOP"><font SIZE="3">
      <p ALIGN="right" style="margin-right: 20">$&nbsp; &#45;</font></td>
    <td WIDTH="72" VALIGN="TOP"><font SIZE="3">
      <p ALIGN="right" style="margin-right: 20">$&nbsp; &#45;</font></td>
    <td WIDTH="61" VALIGN="TOP"><font SIZE="3">
      <p ALIGN="right" style="margin-right: 20">$&nbsp; &#45;</font></td>
    <td WIDTH="68" VALIGN="TOP"><font SIZE="3">
      <p ALIGN="right" style="margin-right: 20">$&nbsp;&nbsp;&nbsp;&nbsp; &#45;</font></td>
    <td WIDTH="62" VALIGN="TOP"><font SIZE="3">
      <p ALIGN="right" style="margin-right: 20">$&nbsp; &#45;</font></td>
  </tr>
  <tr>
    <td WIDTH="134" VALIGN="TOP"><font SIZE="3">
      <p>Fastening Systems</font></td>
    <td WIDTH="73" VALIGN="TOP"><font SIZE="3">
      <p ALIGN="right" style="margin-right: 20">24</font></td>
    <td WIDTH="94" VALIGN="TOP"><font SIZE="3">
      <p ALIGN="right" style="margin-right: 20">&#45;</font></td>
    <td WIDTH="87" VALIGN="TOP"><font SIZE="3">
      <p ALIGN="right" style="margin-right: 20">2</font></td>
    <td WIDTH="72" VALIGN="TOP"><font SIZE="3">
      <p ALIGN="right" style="margin-right: 20">8</font></td>
    <td WIDTH="61" VALIGN="TOP"><font SIZE="3">
      <p ALIGN="right" style="margin-right: 20">34</font></td>
    <td WIDTH="68" VALIGN="TOP"><font SIZE="3">
      <p ALIGN="right" style="margin-right: 20">&#45;</font></td>
    <td WIDTH="62" VALIGN="TOP"><font SIZE="3">
      <p ALIGN="right" style="margin-right: 20">34</font></td>
  </tr>
  <tr>
    <td WIDTH="134" VALIGN="TOP"><font SIZE="3">
      <p>Industrial</font></td>
    <td WIDTH="73" VALIGN="TOP"><font SIZE="3">
      <p ALIGN="right" style="margin-right: 20">11</font></td>
    <td WIDTH="94" VALIGN="TOP"><font SIZE="3">
      <p ALIGN="right" style="margin-right: 20">36</font></td>
    <td WIDTH="87" VALIGN="TOP"><font SIZE="3">
      <p ALIGN="right" style="margin-right: 20">13</font></td>
    <td WIDTH="72" VALIGN="TOP"><font SIZE="3">
      <p ALIGN="right" style="margin-right: 20">3</font></td>
    <td WIDTH="61" VALIGN="TOP"><font SIZE="3">
      <p ALIGN="right" style="margin-right: 20">63</font></td>
    <td WIDTH="68" VALIGN="TOP"><font SIZE="3">
      <p ALIGN="right" style="margin-right: 20">&#45;</font></td>
    <td WIDTH="62" VALIGN="TOP"><font SIZE="3">
      <p ALIGN="right" style="margin-right: 20">63</font></td>
  </tr>
  <tr>
    <td WIDTH="134" VALIGN="TOP"><font SIZE="3">
      <p>Corporate</font></td>
    <td WIDTH="73" VALIGN="TOP"><font SIZE="3">
      <p ALIGN="right" style="margin-right: 20">&#45;</font></td>
    <td WIDTH="94" VALIGN="TOP"><font SIZE="3">
      <p ALIGN="right" style="margin-right: 20">&#45;</font></td>
    <td WIDTH="87" VALIGN="TOP"><font SIZE="3">
      <p ALIGN="right" style="margin-right: 20">&#45;</font></td>
    <td WIDTH="72" VALIGN="TOP"><font SIZE="3">
      <p ALIGN="right" style="margin-right: 20">&#45;</font></td>
    <td WIDTH="61" VALIGN="TOP"><font SIZE="3">
      <p ALIGN="right" style="margin-right: 20">&#45;</font></td>
    <td WIDTH="68" VALIGN="TOP"><font SIZE="3">
      <p ALIGN="right" style="margin-right: 20">(12)</font></td>
    <td WIDTH="62" VALIGN="TOP"><font SIZE="3">
      <p ALIGN="right" style="margin-right: 20">(12)</font></td>
  </tr>
  <tr>
    <td WIDTH="136" VALIGN="TOP" style="border-top-style: solid; border-top-width: 1; border-bottom-style: solid">&nbsp;</td>
    <td WIDTH="75" VALIGN="TOP" style="border-top-style: solid; border-top-width: 1; border-bottom-style: solid"><font SIZE="3">
      <p ALIGN="right" style="margin-right: 20">$35</font></td>
    <td WIDTH="96" VALIGN="TOP" style="border-top-style: solid; border-top-width: 1; border-bottom-style: solid"><font SIZE="3">
      <p ALIGN="right" style="margin-right: 20">$36</font></td>
    <td WIDTH="89" VALIGN="TOP" style="border-top-style: solid; border-top-width: 1; border-bottom-style: solid"><font SIZE="3">
      <p ALIGN="right" style="margin-right: 20">$15</font></td>
    <td WIDTH="74" VALIGN="TOP" style="border-top-style: solid; border-top-width: 1; border-bottom-style: solid"><font SIZE="3">
      <p ALIGN="right" style="margin-right: 20">$11</font></td>
    <td WIDTH="63" VALIGN="TOP" style="border-top-style: solid; border-top-width: 1; border-bottom-style: solid"><font SIZE="3">
      <p ALIGN="right" style="margin-right: 20">$97</font></td>
    <td WIDTH="70" VALIGN="TOP" style="border-top-style: solid; border-top-width: 1; border-bottom-style: solid"><font SIZE="3">
      <p ALIGN="right" style="margin-right: 20">$(12)</font></td>
    <td WIDTH="64" VALIGN="TOP" style="border-top-style: solid; border-top-width: 1; border-bottom-style: solid"><font SIZE="3">
      <p ALIGN="right" style="margin-right: 20">$85</font></td>
  </tr>
  <tr>
    <td VALIGN="TOP" COLSPAN="8" width="693"><b><font SIZE="3">
      <p>Six Months Ended June 28, 2003</font></b></td>
  </tr>
  <tr>
    <td WIDTH="134" VALIGN="TOP"><font SIZE="3">
      <p>Cessna</font></td>
    <td WIDTH="73" VALIGN="TOP"><font SIZE="3">
      <p ALIGN="right" style="margin-right: 20">$&nbsp; 4</font></td>
    <td WIDTH="94" VALIGN="TOP"><font SIZE="3">
      <p ALIGN="right" style="margin-right: 20">$&nbsp;&nbsp;&nbsp; &#45;</font></td>
    <td WIDTH="87" VALIGN="TOP"><font SIZE="3">
      <p ALIGN="right" style="margin-right: 20">$&nbsp; &#45;</font></td>
    <td WIDTH="72" VALIGN="TOP"><font SIZE="3">
      <p ALIGN="right" style="margin-right: 20">$&nbsp; &#45;</font></td>
    <td WIDTH="61" VALIGN="TOP"><font SIZE="3">
      <p ALIGN="right" style="margin-right: 20">$&nbsp; 4</font></td>
    <td WIDTH="68" VALIGN="TOP"><font SIZE="3">
      <p ALIGN="right" style="margin-right: 20">$&nbsp;&nbsp;&nbsp; &#45;</font></td>
    <td WIDTH="62" VALIGN="TOP"><font SIZE="3">
      <p ALIGN="right" style="margin-right: 20">$ 4</font></td>
  </tr>
  <tr>
    <td WIDTH="134" VALIGN="TOP"><font SIZE="3">
      <p>Fastening Systems</font></td>
    <td WIDTH="73" VALIGN="TOP"><font SIZE="3">
      <p ALIGN="right" style="margin-right: 20">15</font></td>
    <td WIDTH="94" VALIGN="TOP"><font SIZE="3">
      <p ALIGN="right" style="margin-right: 20">&#45;</font></td>
    <td WIDTH="87" VALIGN="TOP"><font SIZE="3">
      <p ALIGN="right" style="margin-right: 20">&#45;</font></td>
    <td WIDTH="72" VALIGN="TOP"><font SIZE="3">
      <p ALIGN="right" style="margin-right: 20">1</font></td>
    <td WIDTH="61" VALIGN="TOP"><font SIZE="3">
      <p ALIGN="right" style="margin-right: 20">16</font></td>
    <td WIDTH="68" VALIGN="TOP"><font SIZE="3">
      <p ALIGN="right" style="margin-right: 20">&#45;</font></td>
    <td WIDTH="62" VALIGN="TOP"><font SIZE="3">
      <p ALIGN="right" style="margin-right: 20">16</font></td>
  </tr>
  <tr>
    <td WIDTH="134" VALIGN="TOP"><font SIZE="3">
      <p>Industrial</font></td>
    <td WIDTH="73" VALIGN="TOP"><font SIZE="3">
      <p ALIGN="right" style="margin-right: 20">12</font></td>
    <td WIDTH="94" VALIGN="TOP"><font SIZE="3">
      <p ALIGN="right" style="margin-right: 20">(1)</font></td>
    <td WIDTH="87" VALIGN="TOP"><font SIZE="3">
      <p ALIGN="right" style="margin-right: 20">9</font></td>
    <td WIDTH="72" VALIGN="TOP"><font SIZE="3">
      <p ALIGN="right" style="margin-right: 20">9</font></td>
    <td WIDTH="61" VALIGN="TOP"><font SIZE="3">
      <p ALIGN="right" style="margin-right: 20">29</font></td>
    <td WIDTH="68" VALIGN="TOP"><font SIZE="3">
      <p ALIGN="right" style="margin-right: 20">&#45;</font></td>
    <td WIDTH="62" VALIGN="TOP"><font SIZE="3">
      <p ALIGN="right" style="margin-right: 20">29</font></td>
  </tr>
  <tr>
    <td WIDTH="134" VALIGN="TOP"><font SIZE="3">
      <p>Corporate</font></td>
    <td WIDTH="73" VALIGN="TOP"><font SIZE="3">
      <p ALIGN="right" style="margin-right: 20">3</font></td>
    <td WIDTH="94" VALIGN="TOP"><font SIZE="3">
      <p ALIGN="right" style="margin-right: 20">&#45;</font></td>
    <td WIDTH="87" VALIGN="TOP"><font SIZE="3">
      <p ALIGN="right" style="margin-right: 20">&#45;</font></td>
    <td WIDTH="72" VALIGN="TOP"><font SIZE="3">
      <p ALIGN="right" style="margin-right: 20">&#45;</font></td>
    <td WIDTH="61" VALIGN="TOP"><font SIZE="3">
      <p ALIGN="right" style="margin-right: 20">3</font></td>
    <td WIDTH="68" VALIGN="TOP"><font SIZE="3">
      <p ALIGN="right" style="margin-right: 20">&#45;</font></td>
    <td WIDTH="62" VALIGN="TOP"><font SIZE="3">
      <p ALIGN="right" style="margin-right: 20">3</font></td>
  </tr>
  <tr>
    <td WIDTH="136" VALIGN="TOP" style="border-top-style: solid; border-top-width: 1; border-bottom-style: solid">&nbsp;</td>
    <td WIDTH="75" VALIGN="TOP" style="border-top-style: solid; border-top-width: 1; border-bottom-style: solid"><font SIZE="3">
      <p ALIGN="right" style="margin-right: 20">$34</font></td>
    <td WIDTH="96" VALIGN="TOP" style="border-top-style: solid; border-top-width: 1; border-bottom-style: solid"><font SIZE="3">
      <p ALIGN="right" style="margin-right: 20">$(1)</font></td>
    <td WIDTH="89" VALIGN="TOP" style="border-top-style: solid; border-top-width: 1; border-bottom-style: solid"><font SIZE="3">
      <p ALIGN="right" style="margin-right: 20">$&nbsp; 9</font></td>
    <td WIDTH="74" VALIGN="TOP" style="border-top-style: solid; border-top-width: 1; border-bottom-style: solid"><font SIZE="3">
      <p ALIGN="right" style="margin-right: 20">$10</font></td>
    <td WIDTH="63" VALIGN="TOP" style="border-top-style: solid; border-top-width: 1; border-bottom-style: solid"><font SIZE="3">
      <p ALIGN="right" style="margin-right: 20">$52</font></td>
    <td WIDTH="70" VALIGN="TOP" style="border-top-style: solid; border-top-width: 1; border-bottom-style: solid"><font SIZE="3">
      <p ALIGN="right" style="margin-right: 20">$&nbsp;&nbsp;&nbsp; &#45;</font></td>
    <td WIDTH="64" VALIGN="TOP" style="border-top-style: solid; border-top-width: 1; border-bottom-style: solid"><font SIZE="3">
      <p ALIGN="right" style="margin-right: 20">$52</font></td>
  </tr>
</table>
      </center>
      </div>
<font SIZE="3">
<p ALIGN="JUSTIFY">To improve returns at core businesses and to complete the
integration of certain acquisitions, Textron approved and committed to a
restructuring program in the fourth quarter of 2000 based upon targeted cost
reductions. This program was expanded in 2001, and in October 2002, Textron
announced a further expansion of the program as part of its strategic effort to
improve operating efficiencies, primarily in its industrial businesses.
Textron&#39;s restructuring program includes corporate and segment direct
and indirect workforce reductions, consolidation of facilities primarily in the
United States and Europe, rationalization of certain product lines, outsourcing
of non&#45;core production activity, the divestiture of non&#45;core
businesses, and streamlining of sales and administrative overhead. Under this
restructuring program, Textron has reduced its workforce by approximately 10,000
employees and has closed 105 facilities, including 45 manufacturing plants,
primarily in the Industrial and Fastening Systems segments. Textron expects a
total reduction of about 10,000 employees, excluding approximately 700 Trim
employees and 1,000 OmniQuip employees, representing approximately 18% of its
global workforce since the restructuring was first announced.</p>
<p ALIGN="JUSTIFY">As of July&#160;3, 2004, $486 million of cost has been
incurred relating to continuing operations (including $11&#160;million
related to Trim), with $217 million in the Industrial segment, $181 million in
the Fastening Systems segment, $38 million in the Cessna segment, $30 million in
the Bell segment, $9 million in the Finance segment and $11
</font>
&nbsp;</p>
<p ALIGN="right">13.</p>
<p ALIGN="JUSTIFY">
<font SIZE="3">
million at
Corporate. Costs incurred through July&#160;3, 2004 include $244 million in
severance costs, $111 million in asset impairment charges, $46 million in
contract termination costs and $87 million in other associated costs, net of
gains on sales of assets of $2 million.
</font>
      </p>
<font SIZE="3">
<p ALIGN="JUSTIFY">Textron estimates that approximately $50 million in
additional program costs will be incurred primarily in the Fastening Systems and
Industrial segments. In total, Textron estimates that the entire program for
continuing operations will be approximately $536 million (including
$11&#160;million related to Trim) and will be substantially complete by the
end of 2004. This estimate includes amounts for projects that have not been
formally approved and initiated as of July&#160;3, 2004. For projects that
have been formally approved and initiated as of July&#160;3, 2004, Textron
expects to incur approximately $16 million in additional severance costs, $12
million in other associated costs and $5 million in contract termination costs.</p>
<p ALIGN="JUSTIFY">An analysis of the restructuring program and related reserve
accounts is summarized below:</p>
</font>
      <div align="center">
        <center>
<table CELLSPACING="1" CELLPADDING="1" WIDTH="681">
  <tr>
    <td WIDTH="33%" VALIGN="TOP" style="border-bottom-style: solid; border-bottom-width: 1"><i><font SIZE="3">
      <p><br>
      <br>
      <br>
      (In millions)</font></i></td>
    <td WIDTH="13%" VALIGN="TOP" style="border-bottom-style: solid; border-bottom-width: 1"><font SIZE="3">
      <p ALIGN="CENTER"><br>
      <br>
      Severance<br>
      Costs</font></td>
    <td WIDTH="15%" VALIGN="TOP" style="border-bottom-style: solid; border-bottom-width: 1"><font SIZE="3">
      <p ALIGN="CENTER"><br>
      <br>
      Contractual<br>
      Obligations</font></td>
    <td WIDTH="14%" VALIGN="TOP" style="border-bottom-style: solid; border-bottom-width: 1"><font SIZE="3">
      <p ALIGN="CENTER"><br>
      Fixed<br>
      Asset<br>
      Impairments</font></td>
    <td WIDTH="13%" VALIGN="TOP" style="border-bottom-style: solid; border-bottom-width: 1"><font SIZE="3">
      <p ALIGN="CENTER"><br>
      Other<br>
      Associated<br>
      Costs</font></td>
    <td WIDTH="12%" VALIGN="TOP" style="border-bottom-style: solid; border-bottom-width: 1"><font SIZE="3">
      <p ALIGN="CENTER"><br>
      <br>
      <br>
      Total</font></td>
  </tr>
  <tr>
    <td WIDTH="33%" VALIGN="TOP"><font SIZE="3">
      <p>Balance at January 3, 2004</font></td>
    <td WIDTH="13%" VALIGN="TOP"><font SIZE="3">
      <p style="margin-right: 30" align="right">$&nbsp; 32</font></td>
    <td WIDTH="15%" VALIGN="TOP"><font SIZE="3">
      <p style="margin-right: 30" align="right">$3</font></td>
    <td WIDTH="14%" VALIGN="TOP"><font SIZE="3">
      <p style="margin-right: 30" align="right">$&nbsp;&nbsp;&nbsp; &#45;</font></td>
    <td WIDTH="13%" VALIGN="TOP"><font SIZE="3">
      <p style="margin-right: 30" align="right">$&nbsp;&nbsp;&nbsp; &#45;</font></td>
    <td WIDTH="12%" VALIGN="TOP"><font SIZE="3">
      <p style="margin-right: 30" align="right">$ 35</font></td>
  </tr>
  <tr>
    <td WIDTH="33%" VALIGN="TOP"><font SIZE="3">
      <p>Additions</font></td>
    <td WIDTH="13%" VALIGN="TOP"><font SIZE="3">
      <p align="right" style="margin-right: 30">36</font></td>
    <td WIDTH="15%" VALIGN="TOP"><font SIZE="3">
      <p align="right" style="margin-right: 30">36</font></td>
    <td WIDTH="14%" VALIGN="TOP"><font SIZE="3">
      <p style="margin-right: 30" align="right">15</font></td>
    <td WIDTH="13%" VALIGN="TOP"><font SIZE="3">
      <p style="margin-right: 30" align="right">11</font></td>
    <td WIDTH="12%" VALIGN="TOP"><font SIZE="3">
      <p align="right" style="margin-right: 30">98</font></td>
  </tr>
  <tr>
    <td WIDTH="33%" VALIGN="TOP"><font SIZE="3">
      <p>Reserves deemed unnecessary</font></td>
    <td WIDTH="13%" VALIGN="TOP"><font SIZE="3">
      <p align="right" style="margin-right: 30">(1)</font></td>
    <td WIDTH="15%" VALIGN="TOP"><font SIZE="3">
      <p align="right" style="margin-right: 30">&#45;</font></td>
    <td WIDTH="14%" VALIGN="TOP"><font SIZE="3">
      <p align="right" style="margin-right: 30">&#45;</font></td>
    <td WIDTH="13%" VALIGN="TOP"><font SIZE="3">
      <p align="right" style="margin-right: 30">&#45;</font></td>
    <td WIDTH="12%" VALIGN="TOP"><font SIZE="3">
      <p align="right" style="margin-right: 30">(1)</font></td>
  </tr>
  <tr>
    <td WIDTH="33%" VALIGN="TOP"><font SIZE="3">
      <p>Non&#45;cash utilization</font></td>
    <td WIDTH="13%" VALIGN="TOP"><font SIZE="3">
      <p align="right" style="margin-right: 30">&#45;</font></td>
    <td WIDTH="15%" VALIGN="TOP"><font SIZE="3">
      <p align="right" style="margin-right: 30">&#45;</font></td>
    <td WIDTH="14%" VALIGN="TOP"><font SIZE="3">
      <p align="right" style="margin-right: 30">(15)</font></td>
    <td WIDTH="13%" VALIGN="TOP"><font SIZE="3">
      <p align="right" style="margin-right: 30">&#45;</font></td>
    <td WIDTH="12%" VALIGN="TOP"><font SIZE="3">
      <p align="right" style="margin-right: 30">(15)</font></td>
  </tr>
  <tr>
    <td WIDTH="33%" VALIGN="TOP"><font SIZE="3">
      <p>Cash Paid</font></td>
    <td WIDTH="13%" VALIGN="TOP"><font SIZE="3">
      <p align="right" style="margin-right: 30">(36)</font></td>
    <td WIDTH="15%" VALIGN="TOP"><font SIZE="3">
      <p align="right" style="margin-right: 30">(2)</font></td>
    <td WIDTH="14%" VALIGN="TOP"><font SIZE="3">
      <p align="right" style="margin-right: 30">&#45;</font></td>
    <td WIDTH="13%" VALIGN="TOP"><font SIZE="3">
      <p align="right" style="margin-right: 30">(11)</font></td>
    <td WIDTH="12%" VALIGN="TOP"><font SIZE="3">
      <p align="right" style="margin-right: 30">(49)</font></td>
  </tr>
  <tr>
    <td WIDTH="33%" VALIGN="TOP" style="border-top-style: solid; border-top-width: 1; border-bottom-style: solid"><font SIZE="3">
      <p ALIGN="JUSTIFY">Balance at July 3, 2004</font></td>
    <td WIDTH="13%" VALIGN="TOP" style="border-top-style: solid; border-top-width: 1; border-bottom-style: solid"><font SIZE="3">
      <p align="right" style="margin-right: 30">$31</font></td>
    <td WIDTH="15%" VALIGN="TOP" style="border-top-style: solid; border-top-width: 1; border-bottom-style: solid"><font SIZE="3">
      <p align="right" style="margin-right: 30">$37</font></td>
    <td WIDTH="14%" VALIGN="TOP" style="border-top-style: solid; border-top-width: 1; border-bottom-style: solid"><font SIZE="3">
      <p align="right" style="margin-right: 30">$&nbsp;&nbsp;&nbsp; &#45;</font></td>
    <td WIDTH="13%" VALIGN="TOP" style="border-top-style: solid; border-top-width: 1; border-bottom-style: solid"><font SIZE="3">
      <p align="right" style="margin-right: 30">$&nbsp;&nbsp;&nbsp; &#45;</font></td>
    <td WIDTH="12%" VALIGN="TOP" style="border-top-style: solid; border-top-width: 1; border-bottom-style: solid"><font SIZE="3">
      <p align="right" style="margin-right: 30">$ 68</font></td>
  </tr>
</table>
      </center>
      </div>
<font SIZE="3">
<p ALIGN="JUSTIFY">The specific restructuring measures and associated estimated
costs are based on Textron&#39;s best judgment under prevailing
circumstances. Textron believes that the restructuring reserve balance of $68
million is adequate to cover the costs presently accruable for accounting
purposes relating to activities formally identified and committed to under
approved plans as of July&#160;3, 2004 and anticipates that all actions
related to these liabilities will be completed within a twelve&#45;month
period. Approximately $35 million of this reserve represents the present value
of contractual obligations related to one lease that, under the terms of the
lease, will be paid over the remaining lease term through March 2019.</p>
<p ALIGN="JUSTIFY">During the first quarter of 2004, Textron sold its remaining
investment in Collins & Aikman common stock for cash proceeds of $34
million, resulting in a pre&#45;tax gain of $12 million that is included in
special charges.</p>
<b>
<p ALIGN="JUSTIFY">Note 11: Transactions between Finance and Manufacturing
Groups</p>
</b>
<p ALIGN="JUSTIFY">A portion of Textron Finance&#39;s business involves
financing retail purchases and leases for new and used aircraft and equipment
manufactured by Textron Manufacturing&#39;s Bell, Cessna and Industrial
segments. The related finance receivables are recorded on Textron
Finance&#39;s balance sheet. For those receivables for which collection has
been guaranteed by Textron Manufacturing, we have established reserves for
losses on Textron Manufacturing&#39;s balance sheet that are recorded in
other current or long&#45;term liabilities. We establish these reserves for
amounts that are potentially uncollectible or if the collateral values may be
insufficient to cover the outstanding receivable. If an account is deemed
uncollectible and the collateral is repossessed, Textron Finance will charge
Textron Manufacturing for any deficiency. In some cases, the collateral is not
repossessed by Textron Finance and the receivable is transferred to Textron
Manufacturing&#39;s balance sheet for additional collection efforts. When
this occurs, any related reserve previously established is transferred from
Textron Manufacturing&#39;s other liabilities to its allowance for doubtful
accounts to offset the transferred account receivable.</p>
<p ALIGN="right">14.</p>
<p ALIGN="JUSTIFY">The activity in the reserves recorded by Textron
Manufacturing for finance receivables held by Textron Finance with recourse is
as follows:</p>
</font>
      <div align="center">
        <center>
<table CELLSPACING="1" CELLPADDING="1" WIDTH="663">
  <tr>
    <td WIDTH="62%" VALIGN="TOP"><i><font SIZE="3">
      <p><br>
      </font></i></td>
    <td WIDTH="38%" VALIGN="TOP" COLSPAN="2"><font SIZE="3">
      <p ALIGN="CENTER"><br>
      Six Months Ended</font></td>
  </tr>
  <tr>
    <td WIDTH="62%" VALIGN="TOP" style="border-top-style: solid; border-top-width: 1; border-bottom-style: solid; border-bottom-width: 1"><i><font SIZE="3">
      <p><br>
      (In millions)</font></i></td>
    <td WIDTH="20%" VALIGN="TOP" style="border-top-style: solid; border-top-width: 1; border-bottom-style: solid; border-bottom-width: 1"><font SIZE="3">
      <p ALIGN="CENTER">July 3,<br>
      2004</font></td>
    <td WIDTH="18%" VALIGN="TOP" style="border-top-style: solid; border-top-width: 1; border-bottom-style: solid; border-bottom-width: 1"><font SIZE="3">
      <p ALIGN="CENTER">June 28,<br>
      2003</font></td>
  </tr>
  <tr>
    <td WIDTH="62%" VALIGN="TOP"><font SIZE="3">
      <p>Balance at the beginning of the year</font></td>
    <td WIDTH="20%" VALIGN="TOP"><font SIZE="3">
      <p style="margin-right: 40" align="right">$ 64</font></td>
    <td WIDTH="18%" VALIGN="TOP"><font SIZE="3">
      <p style="margin-right: 40" align="right">$ 59</font></td>
  </tr>
  <tr>
    <td WIDTH="62%" VALIGN="TOP"><font SIZE="3">
      <p>Provision for losses</font></td>
    <td WIDTH="20%" VALIGN="TOP"><font SIZE="3">
      <p style="margin-right: 40" align="right">9</font></td>
    <td WIDTH="18%" VALIGN="TOP"><font SIZE="3">
      <p style="margin-right: 40" align="right">6</font></td>
  </tr>
  <tr>
    <td WIDTH="62%" VALIGN="TOP"><font SIZE="3">
      <p>Reclassifications to allowance for doubtful accounts</font></td>
    <td WIDTH="20%" VALIGN="TOP"><font SIZE="3">
      <p style="margin-right: 40" align="right">(12)</font></td>
    <td WIDTH="18%" VALIGN="TOP"><font SIZE="3">
      <p style="margin-right: 40" align="right">(3)</font></td>
  </tr>
  <tr>
    <td WIDTH="62%" VALIGN="TOP"><font SIZE="3">
      <p>Charge&#45;offs</font></td>
    <td WIDTH="20%" VALIGN="TOP"><font SIZE="3">
      <p style="margin-right: 40" align="right">(5)</font></td>
    <td WIDTH="18%" VALIGN="TOP"><font SIZE="3">
      <p style="margin-right: 40" align="right">(19)</font></td>
  </tr>
  <tr>
    <td WIDTH="62%" VALIGN="TOP" style="border-top-style: solid; border-top-width: 1; border-bottom-style: solid"><font SIZE="3">
      <p>Balance at the end of the second quarter</font></td>
    <td WIDTH="20%" VALIGN="TOP" style="border-top-style: solid; border-top-width: 1; border-bottom-style: solid"><font SIZE="3">
      <p style="margin-right: 40" align="right">$ 56</font></td>
    <td WIDTH="18%" VALIGN="TOP" style="border-top-style: solid; border-top-width: 1; border-bottom-style: solid"><font SIZE="3">
      <p style="margin-right: 40" align="right">$ 43</font></td>
  </tr>
</table>
      </center>
    </div>
<b><font SIZE="3">
<p ALIGN="JUSTIFY">Note 12: Commitments and Contingencies</p>
</font></b><font SIZE="3">
<p ALIGN="JUSTIFY">Textron is subject to legal proceedings and other claims
arising out of the conduct of Textron&#39;s business, including proceedings
and claims relating to private sector transactions; government contracts;
production partners; product liability; employment; and environmental, safety
and health matters. Some of these legal proceedings and claims seek damages,
fines or penalties in substantial amounts or remediation of environmental
contamination. Under federal government procurement regulations, certain claims
brought by the U.S. Government could result in Textron&#39;s suspension or
debarment from U.S. Government contracting for a period of time. On the basis of
information presently available, Textron believes that these proceedings and
claims will not have a material effect on Textron&#39;s financial position
or results of operations.</p>
<p ALIGN="JUSTIFY">During 2002, the Lycoming aircraft engine business, in
conjunction with the Federal Aviation Administration, recalled approximately 950
turbocharged airplane engines and mandated the inspection of another 736 engines
to replace potentially faulty crankshafts manufactured by a third&#45;party
supplier. Lycoming initiated a comprehensive customer care program to replace
the defective crankshafts, make any necessary related repairs, and compensate
its customers for the loss of use of their aircraft during the recall. This
program is substantially complete. It is possible, however, that additional
engines outside of the current recall could potentially be affected.
Accordingly, Textron has continued to monitor the performance of the crankshafts
previously supplied by the third party to ensure that the reserve adequately
covers all engines with potentially faulty crankshafts. Textron has reserves of
$11 million for costs directly related to potential crankshaft issues that may
not specifically be a part of the recall program. Lycoming&#39;s program for
the inspection and replacement of potentially defective zinc&#45;plated
bolts manufactured by a third&#45;party supplier for use in certain aircraft
engines has been completed and there are no remaining reserves for this recall
as of July&#160;3, 2004.</p>
<p ALIGN="JUSTIFY">On a periodic basis, Bell Helicopter&#39;s overhead cost
rates are audited by the Defense Contract Audit Agency (DCAA). In 1998, Bell
received a payment of $100 million from its joint venture partner,</font><font SIZE="3" COLOR="#0000ff">
</font><font SIZE="3">the Agusta Division of Finmeccanica S.p.A., now
AgustaWestland NV (Agusta)<b>,</b> as consideration for Agusta&#39;s access
to Bell&#39;s worldwide marketing and distribution network for the Agusta
139 model and for the opportunity to participate with Bell in the BA609 project.
Bell notified the government of the payment and the basis on which it was made
in a timely manner. In November 2001, a DCAA audit report recommended that the
payment from Agusta should be credited against Bell&#39;s overhead costs,
retroactive to 1998. At the request of the cognizant contracting officer at the
Defense Contract Management Agency (DCMA), Bell responded to the audit report.
The DCMA contracting officer took the issue under advisement. On April 17, 2003,
the DCMA sent Bell an &quot;initial finding&quot; letter requesting Bell to
respond to the finding. Bell responded to this letter in August 2003. The
initial finding indicates the contracting officer&#39;s preliminary
agreement with the audit report and begins a contractual process that could
potentially lead to a government claim against the Company if the contracting
officer makes a final decision in agreement with the audit report. Management
believes that it has no obligation to credit any portion of the $100 million
payment to Bell&#39;s overhead pools, however; Textron accrued $8 million in
the first quarter of 2004 related to the net financial statement impact of a
proposed settlement with the U.S. Government.&nbsp;</font>
    </p>
<p ALIGN="right">15.</p>
<p ALIGN="JUSTIFY"><font SIZE="3"> Discussions between Bell and the
U.S. Government related to a potential settlement have continued, and management
has accrued for its best estimate of the net financial statement impact of a
potential settlement. Should Textron be unable to reach an acceptable
settlement, management will continue to contest the initial finding, as well as
any claim that may be asserted by the U.S. Government.</font>
    </p>
    <font SIZE="3">
<b>
<p ALIGN="JUSTIFY">Note 13: Variable Interest Entities</p>
</b>
<p ALIGN="JUSTIFY">In January 2003, the Financial Accounting Standards Board
(FASB)&#160;issued Interpretation No.&#160;46 (&quot;FIN 46&quot; or the
&quot;Interpretation&quot;), &quot;Consolidation of Variable Interest Entities,
an Interpretation of ARB No.&#160;51.&quot; The Interpretation requires the
consolidation of variable interest entities in which an enterprise absorbs a
majority of the entity&#39;s expected losses, receives a majority of the
entity&#39;s expected residual returns, or both, as a result of ownership,
contractual or other financial interests in the entity. Entities were previously
consolidated by an enterprise that has a controlling financial interest through
ownership of a majority voting interest in the entity.</p>
<p ALIGN="JUSTIFY">Subsequent to the original issuance of the Interpretation,
the effective date for entities created or interests obtained prior to
February&#160;1, 2003 was deferred, and in December 2003, the FASB issued a
revised version of FIN 46 that provided clarification of the original
Interpretation and excluded certain operating entities from its scope. Public
companies were required to apply the provisions of this Interpretation
specifically to entities commonly referred to as special&#45;purpose
entities (SPE) in financial statement periods ending after December&#160;15,
2003. The effective date for all other types of entities within the scope of the
Interpretation is for financial statement periods ending after
March&#160;15, 2004.</p>
<p ALIGN="JUSTIFY">Textron Manufacturing and Textron Finance adopted the revised
FIN 46 in the first quarter of 2004. The adoption did not have a material impact
on its results of operations or financial position. In the normal course of
business, Textron has entered into various joint venture agreements that qualify
as operating businesses. The majority of these ventures meet the criteria for
exclusion from the scope of FIN 46. As discussed below, Textron does participate
in certain variable interest entities that it is not required to consolidate.</p>
<p ALIGN="JUSTIFY">Textron entered into an agreement with Agusta Aerospace
Corporation (&quot;Agusta&quot;) in November 1998 to share certain costs and
profits for the joint design, development, manufacture, marketing, sale,
customer training and product support of Bell Agusta Aerospace&#39;s BA609,
the commercial tiltrotor, and the AB139. These programs have been in the
development stage, and only certain marketing and administrative costs are
charged to the venture. Bell&#39;s share of the development costs are
charged to Textron&#39;s earnings as a period expense. This venture is a
variable interest entity as it relies on its partners to fund the development
and provide services for substantially all of the venture&#39;s operations.
Since Bell does not absorb more than half of this venture&#39;s expected
losses or residual returns, it is not the primary beneficiary and cannot
consolidate this venture. Bell is not obligated to continue funding this venture
other than to execute existing contracts. As of July&#160;3, 2004, this
venture had total assets of $6 million and no debt.</p>
<p ALIGN="JUSTIFY">Bell Helicopter and Boeing entered into a joint venture
agreement in December 1995 to perform the V&#45;22 EMD contract and
subsequent new production contracts for the performance of engineering studies,
preliminary design, full&#45;scale development and engineering and
manufacturing development for the V&#45;22 aircraft. The contractual
arrangement created under the joint venture agreement defines the collaboration
between the two companies to perform the work under the contracts. The joint
venture has no employees and owns no property as all venture functions are
performed by either Bell Helicopter or Boeing. The work under the V&#45;22
Contracts is allocated evenly between Bell Helicopter and Boeing.</p>
<p ALIGN="JUSTIFY">Profits on cost&#45;plus contracts are allocated equally
between Bell Helicopter and Boeing. Profits on fixed price contracts are also
shared equally with profits determined based on the estimated profit at the
inception of the contract. Bell Helicopter and Boeing are each responsible for
their own cost overruns, and are entitled to retain any cost underruns, on
fixed&#45;price contracts. Under the joint venture agreement, Bell
Helicopter and Boeing are each responsible for 50% of any obligations arising
from the performance of the V&#45;22 Contracts.</p>
<p ALIGN="right">16.</p>
<p ALIGN="JUSTIFY">The agreement has been assessed under Financial Accounting
Standards Board Interpretation No. 46 (&quot;FIN 46&quot;), and since Bell
Helicopter does not absorb more than half of this venture&#39;s expected
losses or residual returns, it is not the primary beneficiary and cannot
consolidate this venture. As the joint venture establishes contractual rights
rather than a legal entity, no capital contributions have been required and Bell
Helicopter is not obligated to any future funding or requirements other than
execution of existing contracts.</p>
<b>
<p ALIGN="JUSTIFY">Note 14: Recently Issued Accounting Pronouncements</p>
</b>
<p ALIGN="JUSTIFY">In May 2004, the FASB issued FSP 106&#45;2, which
provides guidance on the accounting effects of the Medicare Prescription Drug,
Improvement and Modernization Act of 2003 (the &quot;Act&quot;), and as requires
employers to provide certain disclosures regarding the effect of the federal
subsidy provided by the Act (the &quot;subsidy&quot;). FSP 106&#45;2 is
effective for interim periods beginning after June 15, 2004, and provides a
deferral election until such time when the effect of the subsidy on net periodic
benefit cost can be fully evaluated. Textron has elected to defer accounting for
the Act until the third quarter of 2004 when we anticipate that final guidelines
on the eligibility rules for the subsidy will be available. Accordingly, net
periodic benefit cost for the periods reported does not reflect any amount
associated with the subsidy under the Act. Textron has initiated the process of
determining the effect of the Act and the related subsidy on the net periodic
benefit cost, and believes that the subsidy will not have a material impact on
Textron&#39;s financial position or results of operations.</p>
<b>
<p ALIGN="JUSTIFY">Note 15: Textron Manufacturing Statements of Cash Flows</p>
</b>
<p ALIGN="JUSTIFY">The Statements of Cash Flows for Textron Manufacturing, which
include distributions received from Textron Finance but exclude the net income
of Textron Finance, are provided on page 17. Textron&#39;s Consolidated
Statements of Cash Flows are provided on page 4.</p>
<p ALIGN="right">17.</p>
<b>
<p ALIGN="JUSTIFY">Note 15: <a NAME="_Hlk3277156">Textron Manufacturing</a>
Statements of Cash Flows (Continued)</p>
</b></font>
    <div align="center">
      <center>
<table CELLSPACING="1" CELLPADDING="1" WIDTH="745" height="1099">
  <tr>
    <td WIDTH="65%" VALIGN="TOP" height="21">&nbsp;</td>
    <td WIDTH="32%" VALIGN="TOP" COLSPAN="5" height="21"><font SIZE="3">
      <p ALIGN="CENTER">Six Months Ended</font></td>
    <td WIDTH="2%" VALIGN="TOP" height="21">&nbsp;</td>
  </tr>
  <tr>
    <td WIDTH="65%" VALIGN="TOP" style="border-top-style: solid; border-top-width: 1; border-bottom-style: solid; border-bottom-width: 1" height="40"><i><font SIZE="3">
      <p><br>
      (Unaudited) (In millions)</font></i></td>
    <td WIDTH="15%" VALIGN="TOP" COLSPAN="2" style="border-top-style: solid; border-top-width: 1; border-bottom-style: solid; border-bottom-width: 1" height="40"><font SIZE="3">
      <p ALIGN="CENTER">July 3,<br>
      2004</font></td>
    <td WIDTH="3%" VALIGN="TOP" style="border-top-style: solid; border-top-width: 1; border-bottom-style: solid; border-bottom-width: 1" height="40">&nbsp;</td>
    <td WIDTH="14%" VALIGN="TOP" COLSPAN="2" style="border-top-style: solid; border-top-width: 1; border-bottom-style: solid; border-bottom-width: 1" height="40"><font SIZE="3">
      <p ALIGN="CENTER">June 28,<br>
      2003</font></td>
    <td WIDTH="2%" VALIGN="TOP" height="40">&nbsp;</td>
  </tr>
  <tr>
    <td WIDTH="65%" VALIGN="TOP" height="21"><b><font SIZE="3">
      <p>Cash flows from operating activities:</font></b></td>
    <td WIDTH="15%" VALIGN="TOP" COLSPAN="2" height="21">&nbsp;</td>
    <td WIDTH="3%" VALIGN="TOP" height="21">&nbsp;</td>
    <td WIDTH="14%" VALIGN="TOP" COLSPAN="2" height="21">&nbsp;</td>
    <td WIDTH="2%" VALIGN="TOP" height="21">&nbsp;</td>
  </tr>
  <tr>
    <td WIDTH="65%" VALIGN="TOP" height="21"><font SIZE="3">
      <p>Income from continuing operations</font></td>
    <td WIDTH="4%" VALIGN="TOP" height="21"><font SIZE="3">
      <p ALIGN="RIGHT">$</font></td>
    <td WIDTH="11%" VALIGN="TOP" height="21"><font SIZE="3">
      <p ALIGN="right" style="margin-right: 20">137</font></td>
    <td WIDTH="3%" VALIGN="TOP" height="21">&nbsp;</td>
    <td WIDTH="4%" VALIGN="TOP" height="21"><font SIZE="3">
      <p ALIGN="RIGHT">$</font></td>
    <td WIDTH="10%" VALIGN="TOP" height="21"><font SIZE="3">
      <p ALIGN="right" style="margin-right: 20">151</font></td>
    <td WIDTH="2%" VALIGN="TOP" height="21">&nbsp;</td>
  </tr>
  <tr>
    <td WIDTH="65%" VALIGN="TOP" height="40"><font SIZE="3">
      <p>Adjustments to reconcile income from continuing operations to<br>
      &#160;&#160;&#160;&#160;&#160;net cash provided by
      operating activities:</font></td>
    <td WIDTH="4%" VALIGN="TOP" height="40"><font SIZE="3">
      <p ALIGN="JUSTIFY"><br>
      </font></td>
    <td WIDTH="11%" VALIGN="TOP" height="40"><font SIZE="3">
      <p ALIGN="right" style="margin-right: 20"><br>
      </font></td>
    <td WIDTH="3%" VALIGN="TOP" height="40"><font SIZE="3">
      <p ALIGN="JUSTIFY"><br>
      </font></td>
    <td WIDTH="4%" VALIGN="TOP" height="40"><font SIZE="3">
      <p ALIGN="JUSTIFY"><br>
      </font></td>
    <td WIDTH="10%" VALIGN="TOP" height="40">
      <p ALIGN="right" style="margin-right: 20">&nbsp;</p>
      </td>
    <td WIDTH="2%" VALIGN="TOP" height="40"><font SIZE="3">
      <p ALIGN="CENTER"><br>
      </font></td>
  </tr>
  <tr>
    <td WIDTH="65%" VALIGN="TOP" height="40"><font SIZE="3">
      <p>&#160;&#160;&#160;&#160;&#160;Earnings of Textron
      Finance less than distributions to Textron<br>
      &#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;Manufacturing</font></td>
    <td WIDTH="4%" VALIGN="TOP" height="40"><font SIZE="3">
      <p ALIGN="JUSTIFY"><br>
      </font></td>
    <td WIDTH="11%" VALIGN="TOP" height="40"><font SIZE="3">
      <p ALIGN="right" style="margin-right: 20"><br>
      22</font></td>
    <td WIDTH="3%" VALIGN="TOP" height="40">&nbsp;</td>
    <td WIDTH="4%" VALIGN="TOP" height="40"><font SIZE="3">
      <p ALIGN="JUSTIFY"><br>
      </font></td>
    <td WIDTH="10%" VALIGN="TOP" height="40"><font SIZE="3">
      <p ALIGN="right" style="margin-right: 20"><br>
      2</font></td>
    <td WIDTH="2%" VALIGN="TOP" height="40">&nbsp;</td>
  </tr>
  <tr>
    <td WIDTH="65%" VALIGN="TOP" height="21"><font SIZE="3">
      <p>&#160;&#160;&#160;&#160;&#160;Depreciation</font></td>
    <td WIDTH="4%" VALIGN="TOP" height="21">&nbsp;</td>
    <td WIDTH="11%" VALIGN="TOP" height="21"><font SIZE="3">
      <p ALIGN="right" style="margin-right: 20">146</font></td>
    <td WIDTH="3%" VALIGN="TOP" height="21">&nbsp;</td>
    <td WIDTH="4%" VALIGN="TOP" height="21">&nbsp;</td>
    <td WIDTH="10%" VALIGN="TOP" height="21"><font SIZE="3">
      <p ALIGN="right" style="margin-right: 20">150</font></td>
    <td WIDTH="2%" VALIGN="TOP" height="21">&nbsp;</td>
  </tr>
  <tr>
    <td WIDTH="65%" VALIGN="TOP" height="21"><font SIZE="3">
      <p>&#160;&#160;&#160;&#160;&#160;Amortization</font></td>
    <td WIDTH="4%" VALIGN="TOP" height="21">&nbsp;</td>
    <td WIDTH="11%" VALIGN="TOP" height="21"><font SIZE="3">
      <p ALIGN="right" style="margin-right: 20">1</font></td>
    <td WIDTH="3%" VALIGN="TOP" height="21">&nbsp;</td>
    <td WIDTH="4%" VALIGN="TOP" height="21">&nbsp;</td>
    <td WIDTH="10%" VALIGN="TOP" height="21"><font SIZE="3">
      <p ALIGN="right" style="margin-right: 20">4</font></td>
    <td WIDTH="2%" VALIGN="TOP" height="21">&nbsp;</td>
  </tr>
  <tr>
    <td WIDTH="65%" VALIGN="TOP" height="21"><font SIZE="3">
      <p>&#160;&#160;&#160;&#160;&#160;Gain on sale of
      businesses</font></td>
    <td WIDTH="4%" VALIGN="TOP" height="21">&nbsp;</td>
    <td WIDTH="11%" VALIGN="TOP" height="21"><font SIZE="3">
      <p ALIGN="right" style="margin-right: 20">(7)</font></td>
    <td WIDTH="3%" VALIGN="TOP" height="21">&nbsp;</td>
    <td WIDTH="4%" VALIGN="TOP" height="21">&nbsp;</td>
    <td WIDTH="10%" VALIGN="TOP" height="21"><font SIZE="3">
      <p ALIGN="right" style="margin-right: 20">(15)</font></td>
    <td WIDTH="2%" VALIGN="TOP" height="21">&nbsp;</td>
  </tr>
  <tr>
    <td WIDTH="65%" VALIGN="TOP" height="21"><font SIZE="3">
      <p>&#160;&#160;&#160;&#160;&#160;Special charges</font></td>
    <td WIDTH="4%" VALIGN="TOP" height="21">&nbsp;</td>
    <td WIDTH="11%" VALIGN="TOP" height="21"><font SIZE="3">
      <p ALIGN="right" style="margin-right: 20">85</font></td>
    <td WIDTH="3%" VALIGN="TOP" height="21">&nbsp;</td>
    <td WIDTH="4%" VALIGN="TOP" height="21">&nbsp;</td>
    <td WIDTH="10%" VALIGN="TOP" height="21"><font SIZE="3">
      <p ALIGN="right" style="margin-right: 20">52</font></td>
    <td WIDTH="2%" VALIGN="TOP" height="21">&nbsp;</td>
  </tr>
  <tr>
    <td WIDTH="65%" VALIGN="TOP" height="21"><font SIZE="3">
      <p>&#160;&#160;&#160;&#160;&#160;Deferred income taxes</font></td>
    <td WIDTH="4%" VALIGN="TOP" height="21">&nbsp;</td>
    <td WIDTH="11%" VALIGN="TOP" height="21"><font SIZE="3">
      <p ALIGN="right" style="margin-right: 20">(3)</font></td>
    <td WIDTH="3%" VALIGN="TOP" height="21">&nbsp;</td>
    <td WIDTH="4%" VALIGN="TOP" height="21">&nbsp;</td>
    <td WIDTH="10%" VALIGN="TOP" height="21"><font SIZE="3">
      <p ALIGN="right" style="margin-right: 20">(4)</font></td>
    <td WIDTH="2%" VALIGN="TOP" height="21">&nbsp;</td>
  </tr>
  <tr>
    <td WIDTH="65%" VALIGN="TOP" height="40"><font SIZE="3">
      <p>&#160;&#160;&#160;&#160;&#160;Changes in assets and
      liabilities excluding those related to<br>
      &#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;acquisitions
      and divestitures:</font></td>
    <td WIDTH="4%" VALIGN="TOP" height="40"><font SIZE="3">
      <p ALIGN="JUSTIFY"><br>
      </font></td>
    <td WIDTH="11%" VALIGN="TOP" height="40"><font SIZE="3">
      <p ALIGN="right" style="margin-right: 20"><br>
      </font></td>
    <td WIDTH="3%" VALIGN="TOP" height="40"><font SIZE="3">
      <p ALIGN="JUSTIFY"><br>
      </font></td>
    <td WIDTH="4%" VALIGN="TOP" height="40"><font SIZE="3">
      <p ALIGN="JUSTIFY"><br>
      </font></td>
    <td WIDTH="10%" VALIGN="TOP" height="40"><font SIZE="3">
      <p ALIGN="right" style="margin-right: 20"><br>
      </font></td>
    <td WIDTH="2%" VALIGN="TOP" height="40"><font SIZE="3">
      <p ALIGN="CENTER"><br>
      </font></td>
  </tr>
  <tr>
    <td WIDTH="65%" VALIGN="TOP" height="21"><font SIZE="3">
      <p>&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;Commercial
      and U.S. Government receivables</font></td>
    <td WIDTH="4%" VALIGN="TOP" height="21">&nbsp;</td>
    <td WIDTH="11%" VALIGN="TOP" height="21"><font SIZE="3">
      <p ALIGN="right" style="margin-right: 20">(120)</font></td>
    <td WIDTH="3%" VALIGN="TOP" height="21">&nbsp;</td>
    <td WIDTH="4%" VALIGN="TOP" height="21">&nbsp;</td>
    <td WIDTH="10%" VALIGN="TOP" height="21"><font SIZE="3">
      <p ALIGN="right" style="margin-right: 20">(117)</font></td>
    <td WIDTH="2%" VALIGN="TOP" height="21">&nbsp;</td>
  </tr>
  <tr>
    <td WIDTH="65%" VALIGN="TOP" height="21"><font SIZE="3">
      <p>&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;Inventories</font></td>
    <td WIDTH="4%" VALIGN="TOP" height="21">&nbsp;</td>
    <td WIDTH="11%" VALIGN="TOP" height="21"><font SIZE="3">
      <p ALIGN="right" style="margin-right: 20">(183)</font></td>
    <td WIDTH="3%" VALIGN="TOP" height="21">&nbsp;</td>
    <td WIDTH="4%" VALIGN="TOP" height="21">&nbsp;</td>
    <td WIDTH="10%" VALIGN="TOP" height="21"><font SIZE="3">
      <p ALIGN="right" style="margin-right: 20">7</font></td>
    <td WIDTH="2%" VALIGN="TOP" height="21">&nbsp;</td>
  </tr>
  <tr>
    <td WIDTH="65%" VALIGN="TOP" height="21"><font SIZE="3">
      <p>&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;Other
      assets</font></td>
    <td WIDTH="4%" VALIGN="TOP" height="21">&nbsp;</td>
    <td WIDTH="11%" VALIGN="TOP" height="21"><font SIZE="3">
      <p ALIGN="right" style="margin-right: 20">36</font></td>
    <td WIDTH="3%" VALIGN="TOP" height="21">&nbsp;</td>
    <td WIDTH="4%" VALIGN="TOP" height="21">&nbsp;</td>
    <td WIDTH="10%" VALIGN="TOP" height="21"><font SIZE="3">
      <p ALIGN="right" style="margin-right: 20">104</font></td>
    <td WIDTH="2%" VALIGN="TOP" height="21">&nbsp;</td>
  </tr>
  <tr>
    <td WIDTH="65%" VALIGN="TOP" height="21"><font SIZE="3">
      <p>&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;Accounts
      payable</font></td>
    <td WIDTH="4%" VALIGN="TOP" height="21">&nbsp;</td>
    <td WIDTH="11%" VALIGN="TOP" height="21"><font SIZE="3">
      <p ALIGN="right" style="margin-right: 20">231</font></td>
    <td WIDTH="3%" VALIGN="TOP" height="21">&nbsp;</td>
    <td WIDTH="4%" VALIGN="TOP" height="21">&nbsp;</td>
    <td WIDTH="10%" VALIGN="TOP" height="21"><font SIZE="3">
      <p ALIGN="right" style="margin-right: 20">(135)</font></td>
    <td WIDTH="2%" VALIGN="TOP" height="21">&nbsp;</td>
  </tr>
  <tr>
    <td WIDTH="65%" VALIGN="TOP" height="21"><font SIZE="3">
      <p>&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;Accrued
      liabilities</font></td>
    <td WIDTH="4%" VALIGN="TOP" height="21">&nbsp;</td>
    <td WIDTH="11%" VALIGN="TOP" height="21"><font SIZE="3">
      <p ALIGN="right" style="margin-right: 20">85</font></td>
    <td WIDTH="3%" VALIGN="TOP" height="21">&nbsp;</td>
    <td WIDTH="4%" VALIGN="TOP" height="21">&nbsp;</td>
    <td WIDTH="10%" VALIGN="TOP" height="21"><font SIZE="3">
      <p ALIGN="right" style="margin-right: 20">(60)</font></td>
    <td WIDTH="2%" VALIGN="TOP" height="21">&nbsp;</td>
  </tr>
  <tr>
    <td WIDTH="65%" VALIGN="TOP" height="21"><font SIZE="3">
      <p>&#160;&#160;&#160;&#160;&#160;Other operating
      activities, net</font></td>
    <td WIDTH="4%" VALIGN="TOP" height="21">&nbsp;</td>
    <td WIDTH="11%" VALIGN="TOP" height="21"><font SIZE="3">
      <p ALIGN="right" style="margin-right: 20">15</font></td>
    <td WIDTH="3%" VALIGN="TOP" height="21">&nbsp;</td>
    <td WIDTH="4%" VALIGN="TOP" height="21">&nbsp;</td>
    <td WIDTH="10%" VALIGN="TOP" height="21"><font SIZE="3">
      <p ALIGN="right" style="margin-right: 20">16</font></td>
    <td WIDTH="2%" VALIGN="TOP" height="21">&nbsp;</td>
  </tr>
  <tr>
    <td WIDTH="65%" VALIGN="TOP" style="border-top-style: solid; border-top-width: 1; border-bottom-style: solid; border-bottom-width: 1" height="21"><font SIZE="3">
      <p>&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;Net
      cash provided by operating activities of continuing operations</font></td>
    <td WIDTH="4%" VALIGN="TOP" style="border-top-style: solid; border-top-width: 1; border-bottom-style: solid; border-bottom-width: 1" height="21">&nbsp;</td>
    <td WIDTH="11%" VALIGN="TOP" style="border-top-style: solid; border-top-width: 1; border-bottom-style: solid; border-bottom-width: 1" height="21"><font SIZE="3">
      <p ALIGN="right" style="margin-right: 20">445</font></td>
    <td WIDTH="3%" VALIGN="TOP" style="border-top-style: solid; border-top-width: 1; border-bottom-style: solid; border-bottom-width: 1" height="21">&nbsp;</td>
    <td WIDTH="4%" VALIGN="TOP" style="border-top-style: solid; border-top-width: 1; border-bottom-style: solid; border-bottom-width: 1" height="21">&nbsp;</td>
    <td WIDTH="10%" VALIGN="TOP" style="border-top-style: solid; border-top-width: 1; border-bottom-style: solid; border-bottom-width: 1" height="21"><font SIZE="3">
      <p ALIGN="right" style="margin-right: 20">155</font></td>
    <td WIDTH="2%" VALIGN="TOP" height="21">&nbsp;</td>
  </tr>
  <tr>
    <td WIDTH="65%" VALIGN="TOP" height="21"><b><font SIZE="3">
      <p>Cash flows from investing activities:</font></b></td>
    <td WIDTH="4%" VALIGN="TOP" height="21">&nbsp;</td>
    <td WIDTH="11%" VALIGN="TOP" height="21">
      <p ALIGN="right" style="margin-right: 20">&nbsp;</p>
    </td>
    <td WIDTH="3%" VALIGN="TOP" height="21">&nbsp;</td>
    <td WIDTH="4%" VALIGN="TOP" height="21">&nbsp;</td>
    <td WIDTH="10%" VALIGN="TOP" height="21">
      <p ALIGN="right" style="margin-right: 20">&nbsp;</p>
    </td>
    <td WIDTH="2%" VALIGN="TOP" height="21">&nbsp;</td>
  </tr>
  <tr>
    <td WIDTH="65%" VALIGN="TOP" height="21"><font SIZE="3">
      <p>Capital expenditures</font></td>
    <td WIDTH="4%" VALIGN="TOP" height="21">&nbsp;</td>
    <td WIDTH="11%" VALIGN="TOP" height="21"><font SIZE="3">
      <p ALIGN="right" style="margin-right: 20">(125)</font></td>
    <td WIDTH="3%" VALIGN="TOP" height="21">&nbsp;</td>
    <td WIDTH="4%" VALIGN="TOP" height="21">&nbsp;</td>
    <td WIDTH="10%" VALIGN="TOP" height="21"><font SIZE="3">
      <p ALIGN="right" style="margin-right: 20">(114)</font></td>
    <td WIDTH="2%" VALIGN="TOP" height="21">&nbsp;</td>
  </tr>
  <tr>
    <td WIDTH="65%" VALIGN="TOP" height="21"><font SIZE="3">
      <p>Cash acquired, net of cash used for acquisitions</font></td>
    <td WIDTH="4%" VALIGN="TOP" height="21">&nbsp;</td>
    <td WIDTH="11%" VALIGN="TOP" height="21"><font SIZE="3">
      <p ALIGN="right" style="margin-right: 20">6</font></td>
    <td WIDTH="3%" VALIGN="TOP" height="21">&nbsp;</td>
    <td WIDTH="4%" VALIGN="TOP" height="21">&nbsp;</td>
    <td WIDTH="10%" VALIGN="TOP" height="21"><font SIZE="3">
      <p ALIGN="right" style="margin-right: 20">&#45;</font></td>
    <td WIDTH="2%" VALIGN="TOP" height="21">&nbsp;</td>
  </tr>
  <tr>
    <td WIDTH="65%" VALIGN="TOP" height="21"><font SIZE="3">
      <p>Net proceeds from sale of businesses</font></td>
    <td WIDTH="4%" VALIGN="TOP" height="21">&nbsp;</td>
    <td WIDTH="11%" VALIGN="TOP" height="21"><font SIZE="3">
      <p ALIGN="right" style="margin-right: 20">19</font></td>
    <td WIDTH="3%" VALIGN="TOP" height="21">&nbsp;</td>
    <td WIDTH="4%" VALIGN="TOP" height="21">&nbsp;</td>
    <td WIDTH="10%" VALIGN="TOP" height="21"><font SIZE="3">
      <p ALIGN="right" style="margin-right: 20">16</font></td>
    <td WIDTH="2%" VALIGN="TOP" height="21">&nbsp;</td>
  </tr>
  <tr>
    <td WIDTH="65%" VALIGN="TOP" height="21"><font SIZE="3">
      <p>Proceeds from sale of property, plant and equipment</font></td>
    <td WIDTH="4%" VALIGN="TOP" height="21">&nbsp;</td>
    <td WIDTH="11%" VALIGN="TOP" height="21"><font SIZE="3">
      <p ALIGN="right" style="margin-right: 20">27</font></td>
    <td WIDTH="3%" VALIGN="TOP" height="21">&nbsp;</td>
    <td WIDTH="4%" VALIGN="TOP" height="21">&nbsp;</td>
    <td WIDTH="10%" VALIGN="TOP" height="21"><font SIZE="3">
      <p ALIGN="right" style="margin-right: 20">29</font></td>
    <td WIDTH="2%" VALIGN="TOP" height="21">&nbsp;</td>
  </tr>
  <tr>
    <td WIDTH="65%" VALIGN="TOP" height="21"><font SIZE="3">
      <p>Proceeds from the sale of investments</font></td>
    <td WIDTH="4%" VALIGN="TOP" height="21">&nbsp;</td>
    <td WIDTH="11%" VALIGN="TOP" height="21"><font SIZE="3">
      <p ALIGN="right" style="margin-right: 20">38</font></td>
    <td WIDTH="3%" VALIGN="TOP" height="21">&nbsp;</td>
    <td WIDTH="4%" VALIGN="TOP" height="21">&nbsp;</td>
    <td WIDTH="10%" VALIGN="TOP" height="21"><font SIZE="3">
      <p ALIGN="right" style="margin-right: 20">1</font></td>
    <td WIDTH="2%" VALIGN="TOP" height="21">&nbsp;</td>
  </tr>
  <tr>
    <td WIDTH="65%" VALIGN="TOP" style="border-top-style: solid; border-top-width: 1; border-bottom-style: solid; border-bottom-width: 1" height="21"><font SIZE="3">
      <p>&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;Net
      cash used by investing activities of continuing operations</font></td>
    <td WIDTH="4%" VALIGN="TOP" style="border-top-style: solid; border-top-width: 1; border-bottom-style: solid; border-bottom-width: 1" height="21">&nbsp;</td>
    <td WIDTH="11%" VALIGN="TOP" style="border-top-style: solid; border-top-width: 1; border-bottom-style: solid; border-bottom-width: 1" height="21"><font SIZE="3">
      <p ALIGN="right" style="margin-right: 20">(35)</font></td>
    <td WIDTH="3%" VALIGN="TOP" style="border-top-style: solid; border-top-width: 1; border-bottom-style: solid; border-bottom-width: 1" height="21">&nbsp;</td>
    <td WIDTH="4%" VALIGN="TOP" style="border-top-style: solid; border-top-width: 1; border-bottom-style: solid; border-bottom-width: 1" height="21">&nbsp;</td>
    <td WIDTH="10%" VALIGN="TOP" style="border-top-style: solid; border-top-width: 1; border-bottom-style: solid; border-bottom-width: 1" height="21"><font SIZE="3">
      <p ALIGN="right" style="margin-right: 20">(68)</font></td>
    <td WIDTH="2%" VALIGN="TOP" height="21">&nbsp;</td>
  </tr>
  <tr>
    <td WIDTH="65%" VALIGN="TOP" height="21"><b><font SIZE="3">
      <p>Cash flows from financing activities:</font></b></td>
    <td WIDTH="4%" VALIGN="TOP" height="21">&nbsp;</td>
    <td WIDTH="11%" VALIGN="TOP" height="21">
      <p ALIGN="right" style="margin-right: 20">&nbsp;</p>
    </td>
    <td WIDTH="3%" VALIGN="TOP" height="21">&nbsp;</td>
    <td WIDTH="4%" VALIGN="TOP" height="21">&nbsp;</td>
    <td WIDTH="10%" VALIGN="TOP" height="21">
      <p ALIGN="right" style="margin-right: 20">&nbsp;</p>
    </td>
    <td WIDTH="2%" VALIGN="TOP" height="21">&nbsp;</td>
  </tr>
  <tr>
    <td WIDTH="65%" VALIGN="TOP" height="21"><font SIZE="3">
      <p>Increase in short&#45;term debt</font></td>
    <td WIDTH="4%" VALIGN="TOP" height="21">&nbsp;</td>
    <td WIDTH="11%" VALIGN="TOP" height="21"><font SIZE="3">
      <p ALIGN="right" style="margin-right: 20">4</font></td>
    <td WIDTH="3%" VALIGN="TOP" height="21">&nbsp;</td>
    <td WIDTH="4%" VALIGN="TOP" height="21">&nbsp;</td>
    <td WIDTH="10%" VALIGN="TOP" height="21"><font SIZE="3">
      <p ALIGN="right" style="margin-right: 20">2</font></td>
    <td WIDTH="2%" VALIGN="TOP" height="21">&nbsp;</td>
  </tr>
  <tr>
    <td WIDTH="65%" VALIGN="TOP" height="21"><font SIZE="3">
      <p>Principal payments and retirements on long&#45;term debt</font></td>
    <td WIDTH="4%" VALIGN="TOP" height="21">&nbsp;</td>
    <td WIDTH="11%" VALIGN="TOP" height="21"><font SIZE="3">
      <p ALIGN="right" style="margin-right: 20">(52)</font></td>
    <td WIDTH="3%" VALIGN="TOP" height="21">&nbsp;</td>
    <td WIDTH="4%" VALIGN="TOP" height="21">&nbsp;</td>
    <td WIDTH="10%" VALIGN="TOP" height="21"><font SIZE="3">
      <p ALIGN="right" style="margin-right: 20">(5)</font></td>
    <td WIDTH="2%" VALIGN="TOP" height="21">&nbsp;</td>
  </tr>
  <tr>
    <td WIDTH="65%" VALIGN="TOP" height="21"><font SIZE="3">
      <p>Proceeds from stock option plans</font></td>
    <td WIDTH="4%" VALIGN="TOP" height="21">&nbsp;</td>
    <td WIDTH="11%" VALIGN="TOP" height="21"><font SIZE="3">
      <p ALIGN="right" style="margin-right: 20">92</font></td>
    <td WIDTH="3%" VALIGN="TOP" height="21">&nbsp;</td>
    <td WIDTH="4%" VALIGN="TOP" height="21">&nbsp;</td>
    <td WIDTH="10%" VALIGN="TOP" height="21"><font SIZE="3">
      <p ALIGN="right" style="margin-right: 20">3</font></td>
    <td WIDTH="2%" VALIGN="TOP" height="21">&nbsp;</td>
  </tr>
  <tr>
    <td WIDTH="65%" VALIGN="TOP" height="21"><font SIZE="3">
      <p>Purchases of Textron common stock</font></td>
    <td WIDTH="4%" VALIGN="TOP" height="21">&nbsp;</td>
    <td WIDTH="11%" VALIGN="TOP" height="21"><font SIZE="3">
      <p ALIGN="right" style="margin-right: 20">(71)</font></td>
    <td WIDTH="3%" VALIGN="TOP" height="21">&nbsp;</td>
    <td WIDTH="4%" VALIGN="TOP" height="21">&nbsp;</td>
    <td WIDTH="10%" VALIGN="TOP" height="21"><font SIZE="3">
      <p ALIGN="right" style="margin-right: 20">(65)</font></td>
    <td WIDTH="2%" VALIGN="TOP" height="21">&nbsp;</td>
  </tr>
  <tr>
    <td WIDTH="65%" VALIGN="TOP" style="border-bottom-style: solid; border-bottom-width: 1" height="20"><font SIZE="3">
      <p>Dividends paid</font></td>
    <td WIDTH="4%" VALIGN="TOP" style="border-bottom-style: solid; border-bottom-width: 1" height="20">&nbsp;</td>
    <td WIDTH="11%" VALIGN="TOP" style="border-bottom-style: solid; border-bottom-width: 1" height="20"><font SIZE="3">
      <p ALIGN="right" style="margin-right: 20">(90)</font></td>
    <td WIDTH="3%" VALIGN="TOP" style="border-bottom-style: solid; border-bottom-width: 1" height="20">&nbsp;</td>
    <td WIDTH="4%" VALIGN="TOP" style="border-bottom-style: solid; border-bottom-width: 1" height="20">&nbsp;</td>
    <td WIDTH="10%" VALIGN="TOP" style="border-bottom-style: solid; border-bottom-width: 1" height="20"><font SIZE="3">
      <p ALIGN="right" style="margin-right: 20">(89)</font></td>
    <td WIDTH="2%" VALIGN="TOP" height="20">&nbsp;</td>
  </tr>
  <tr>
    <td WIDTH="65%" VALIGN="TOP" height="19"><font SIZE="3">
      <p>&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;Net
      cash used by financing activities of continuing operations</font></td>
    <td WIDTH="4%" VALIGN="TOP" height="19">&nbsp;</td>
    <td WIDTH="11%" VALIGN="TOP" height="19"><font SIZE="3">
      <p ALIGN="right" style="margin-right: 20">(117)</font></td>
    <td WIDTH="3%" VALIGN="TOP" height="19">&nbsp;</td>
    <td WIDTH="4%" VALIGN="TOP" height="19">&nbsp;</td>
    <td WIDTH="10%" VALIGN="TOP" height="19"><font SIZE="3">
      <p ALIGN="right" style="margin-right: 20">(154)</font></td>
    <td WIDTH="2%" VALIGN="TOP" height="19">&nbsp;</td>
  </tr>
  <tr>
    <td WIDTH="65%" VALIGN="TOP" style="border-bottom-style: solid; border-bottom-width: 1" height="20"><font SIZE="3">
      <p>Effect of exchange rate changes on cash and cash equivalents</font></td>
    <td WIDTH="4%" VALIGN="TOP" style="border-bottom-style: solid; border-bottom-width: 1" height="20">&nbsp;</td>
    <td WIDTH="11%" VALIGN="TOP" style="border-bottom-style: solid; border-bottom-width: 1" height="20"><font SIZE="3">
      <p ALIGN="right" style="margin-right: 20">(3)</font></td>
    <td WIDTH="3%" VALIGN="TOP" style="border-bottom-style: solid; border-bottom-width: 1" height="20">&nbsp;</td>
    <td WIDTH="4%" VALIGN="TOP" style="border-bottom-style: solid; border-bottom-width: 1" height="20">&nbsp;</td>
    <td WIDTH="10%" VALIGN="TOP" style="border-bottom-style: solid; border-bottom-width: 1" height="20"><font SIZE="3">
      <p ALIGN="right" style="margin-right: 20">16</font></td>
    <td WIDTH="2%" VALIGN="TOP" height="20">&nbsp;</td>
  </tr>
  <tr>
    <td WIDTH="65%" VALIGN="TOP" height="21"><font SIZE="3">
      <p>Net cash provided (used) by continuing operations</font></td>
    <td WIDTH="4%" VALIGN="TOP" height="21">&nbsp;</td>
    <td WIDTH="11%" VALIGN="TOP" height="21"><font SIZE="3">
      <p ALIGN="right" style="margin-right: 20">290</font></td>
    <td WIDTH="3%" VALIGN="TOP" height="21">&nbsp;</td>
    <td WIDTH="4%" VALIGN="TOP" height="21">&nbsp;</td>
    <td WIDTH="10%" VALIGN="TOP" height="21"><font SIZE="3">
      <p ALIGN="right" style="margin-right: 20">(51)</font></td>
    <td WIDTH="2%" VALIGN="TOP" height="21">&nbsp;</td>
  </tr>
  <tr>
    <td WIDTH="65%" VALIGN="TOP" style="border-bottom-style: solid; border-bottom-width: 1" height="20"><font SIZE="3">
      <p>Net cash provided by discontinued operations</font></td>
    <td WIDTH="4%" VALIGN="TOP" style="border-bottom-style: solid; border-bottom-width: 1" height="20">&nbsp;</td>
    <td WIDTH="11%" VALIGN="TOP" style="border-bottom-style: solid; border-bottom-width: 1" height="20"><font SIZE="3">
      <p ALIGN="right" style="margin-right: 20">10</font></td>
    <td WIDTH="3%" VALIGN="TOP" style="border-bottom-style: solid; border-bottom-width: 1" height="20">&nbsp;</td>
    <td WIDTH="4%" VALIGN="TOP" style="border-bottom-style: solid; border-bottom-width: 1" height="20">&nbsp;</td>
    <td WIDTH="10%" VALIGN="TOP" style="border-bottom-style: solid; border-bottom-width: 1" height="20"><font SIZE="3">
      <p ALIGN="right" style="margin-right: 20">90</font></td>
    <td WIDTH="2%" VALIGN="TOP" height="20">&nbsp;</td>
  </tr>
  <tr>
    <td WIDTH="65%" VALIGN="TOP" height="21"><b><font SIZE="3">
      <p>Net increase in cash and cash equivalents</font></b></td>
    <td WIDTH="4%" VALIGN="TOP" height="21">&nbsp;</td>
    <td WIDTH="11%" VALIGN="TOP" height="21"><font SIZE="3">
      <p ALIGN="right" style="margin-right: 20">300</font></td>
    <td WIDTH="3%" VALIGN="TOP" height="21">&nbsp;</td>
    <td WIDTH="4%" VALIGN="TOP" height="21">&nbsp;</td>
    <td WIDTH="10%" VALIGN="TOP" height="21"><font SIZE="3">
      <p ALIGN="right" style="margin-right: 20">39</font></td>
    <td WIDTH="2%" VALIGN="TOP" height="21">&nbsp;</td>
  </tr>
  <tr>
    <td WIDTH="65%" VALIGN="TOP" style="border-bottom-style: solid; border-bottom-width: 1" height="20"><font SIZE="3">
      <p>Cash and cash equivalents at beginning of period</font></td>
    <td WIDTH="4%" VALIGN="TOP" style="border-bottom-style: solid; border-bottom-width: 1" height="20">&nbsp;</td>
    <td WIDTH="11%" VALIGN="TOP" style="border-bottom-style: solid; border-bottom-width: 1" height="20"><font SIZE="3">
      <p ALIGN="right" style="margin-right: 20">486</font></td>
    <td WIDTH="3%" VALIGN="TOP" style="border-bottom-style: solid; border-bottom-width: 1" height="20">&nbsp;</td>
    <td WIDTH="4%" VALIGN="TOP" style="border-bottom-style: solid; border-bottom-width: 1" height="20">&nbsp;</td>
    <td WIDTH="10%" VALIGN="TOP" style="border-bottom-style: solid; border-bottom-width: 1" height="20"><font SIZE="3">
      <p ALIGN="right" style="margin-right: 20">286</font></td>
    <td WIDTH="2%" VALIGN="TOP" height="20">&nbsp;</td>
  </tr>
  <tr>
    <td WIDTH="65%" VALIGN="TOP" style="border-bottom-style: solid" height="23"><font SIZE="3">
      <p>Cash and cash equivalents at end of period</font></td>
    <td WIDTH="4%" VALIGN="TOP" style="border-bottom-style: solid" height="23"><font SIZE="3">
      <p ALIGN="RIGHT">$</font></td>
    <td WIDTH="11%" VALIGN="TOP" style="border-bottom-style: solid" height="23"><font SIZE="3">
      <p ALIGN="right" style="margin-right: 20">786</font></td>
    <td WIDTH="3%" VALIGN="TOP" style="border-bottom-style: solid" height="23">&nbsp;</td>
    <td WIDTH="4%" VALIGN="TOP" style="border-bottom-style: solid" height="23"><font SIZE="3">
      <p ALIGN="RIGHT">$</font></td>
    <td WIDTH="10%" VALIGN="TOP" style="border-bottom-style: solid" height="23"><font SIZE="3">
      <p ALIGN="right" style="margin-right: 20">325</font></td>
    <td WIDTH="2%" VALIGN="TOP" height="23">&nbsp;</td>
  </tr>
  <tr>
    <td WIDTH="65%" VALIGN="TOP" height="21"><b><font SIZE="3">
      <p>Supplemental schedule of non&#45;cash investing activities:</font></b></td>
    <td WIDTH="4%" VALIGN="TOP" height="21">&nbsp;</td>
    <td WIDTH="11%" VALIGN="TOP" height="21">
      <p ALIGN="right" style="margin-right: 20">&nbsp;</p>
    </td>
    <td WIDTH="3%" VALIGN="TOP" height="21">&nbsp;</td>
    <td WIDTH="4%" VALIGN="TOP" height="21">&nbsp;</td>
    <td WIDTH="10%" VALIGN="TOP" height="21">
      <p ALIGN="right" style="margin-right: 20">&nbsp;</p>
    </td>
    <td WIDTH="2%" VALIGN="TOP" height="21">&nbsp;</td>
  </tr>
  <tr>
    <td WIDTH="65%" VALIGN="TOP" style="border-bottom-style: solid" height="23"><font SIZE="3">
      <p>&#160;&#160;&#160;&#160;&#160;Capital expenditures
      financed through capital leases</font></td>
    <td WIDTH="4%" VALIGN="TOP" style="border-bottom-style: solid" height="23"><font SIZE="3">
      <p ALIGN="RIGHT">$</font></td>
    <td WIDTH="11%" VALIGN="TOP" style="border-bottom-style: solid" height="23"><font SIZE="3">
      <p ALIGN="right" style="margin-right: 20">21</font></td>
    <td WIDTH="3%" VALIGN="TOP" style="border-bottom-style: solid" height="23">&nbsp;</td>
    <td WIDTH="4%" VALIGN="TOP" style="border-bottom-style: solid" height="23"><font SIZE="3">
      <p ALIGN="RIGHT">$</font></td>
    <td WIDTH="10%" VALIGN="TOP" style="border-bottom-style: solid" height="23"><font SIZE="3">
      <p ALIGN="right" style="margin-right: 20">4</font></td>
    <td WIDTH="2%" VALIGN="TOP" height="23">&nbsp;</td>
  </tr>
</table>
      </center>
    </div>
    <font SIZE="3">
<p ALIGN="right">18.</p>
<b>
<p ALIGN="JUSTIFY">Note
16:&#160;Segment Information</p>
</b>
<p ALIGN="JUSTIFY">Textron reports under the following segments: Bell, Cessna,
Fastening Systems, Industrial and Finance. Textron evaluates segment operating
performance based on segment profit. Segment profit for manufacturing segments
does not include interest, certain corporate expenses, special charges and gains
and losses from the disposition of significant business units. The measurement
for the Finance segment includes interest income, interest expense and
distributions on preferred securities of Finance subsidiary trust, and excludes
special charges.</p>
<p ALIGN="JUSTIFY">A summary of continuing operations by segment for the
three&#45; and six&#45;month periods ended July&#160;3, 2004 and
June&#160;28, 2003 is as follows:</p>
</font>
    <div align="center">
      <center>
<table CELLSPACING="1" CELLPADDING="1" WIDTH="729">
  <tr>
    <td WIDTH="268" VALIGN="TOP">&nbsp;</td>
    <td WIDTH="191" VALIGN="TOP" COLSPAN="5"><font SIZE="3">
      <p ALIGN="CENTER">Three Months Ended</font></td>
    <td WIDTH="8" VALIGN="TOP">&nbsp;</td>
    <td WIDTH="216" VALIGN="TOP" COLSPAN="5"><font SIZE="3">
      <p ALIGN="CENTER">Six Months Ended</font></td>
    <td WIDTH="14" VALIGN="TOP">&nbsp;</td>
  </tr>
  <tr>
    <td WIDTH="270" VALIGN="TOP" style="border-top-style: solid; border-top-width: 1; border-bottom-style: solid; border-bottom-width: 1"><i><font SIZE="3">
      <p><br>
      (In millions)</font></i></td>
    <td WIDTH="85" VALIGN="TOP" COLSPAN="2" style="border-top-style: solid; border-top-width: 1; border-bottom-style: solid; border-bottom-width: 1"><font SIZE="3">
      <p ALIGN="CENTER">July 3,<br>
      2004</font></td>
    <td WIDTH="10" VALIGN="TOP" style="border-top-style: solid; border-top-width: 1; border-bottom-style: solid; border-bottom-width: 1">&nbsp;</td>
    <td WIDTH="90" VALIGN="TOP" COLSPAN="2" style="border-top-style: solid; border-top-width: 1; border-bottom-style: solid; border-bottom-width: 1"><font SIZE="3">
      <p ALIGN="CENTER">June 28,<br>
      2003</font></td>
    <td WIDTH="10" VALIGN="TOP" style="border-top-style: solid; border-top-width: 1; border-bottom-style: solid; border-bottom-width: 1">&nbsp;</td>
    <td WIDTH="90" VALIGN="TOP" COLSPAN="2" style="border-top-style: solid; border-top-width: 1; border-bottom-style: solid; border-bottom-width: 1"><font SIZE="3">
      <p ALIGN="CENTER">July 3,<br>
      2004</font></td>
    <td WIDTH="17" VALIGN="TOP" style="border-top-style: solid; border-top-width: 1; border-bottom-style: solid; border-bottom-width: 1">&nbsp;</td>
    <td WIDTH="103" VALIGN="TOP" COLSPAN="2" style="border-top-style: solid; border-top-width: 1; border-bottom-style: solid; border-bottom-width: 1"><font SIZE="3">
      <p ALIGN="CENTER">June 28,<br>
      2003</font></td>
    <td WIDTH="14" VALIGN="TOP">&nbsp;</td>
  </tr>
  <tr>
    <td WIDTH="268" VALIGN="TOP"><b><font SIZE="3">
      <p>REVENUES</font></b></td>
    <td WIDTH="11" VALIGN="TOP">&nbsp;</td>
    <td WIDTH="66" VALIGN="TOP">&nbsp;</td>
    <td WIDTH="8" VALIGN="TOP">&nbsp;</td>
    <td WIDTH="16" VALIGN="TOP">&nbsp;</td>
    <td WIDTH="66" VALIGN="TOP">&nbsp;</td>
    <td WIDTH="8" VALIGN="TOP">&nbsp;</td>
    <td WIDTH="16" VALIGN="TOP">&nbsp;</td>
    <td WIDTH="66" VALIGN="TOP">&nbsp;</td>
    <td WIDTH="15" VALIGN="TOP">&nbsp;</td>
    <td WIDTH="16" VALIGN="TOP">&nbsp;</td>
    <td WIDTH="79" VALIGN="TOP">&nbsp;</td>
    <td WIDTH="14" VALIGN="TOP">&nbsp;</td>
  </tr>
  <tr>
    <td WIDTH="268" VALIGN="TOP"><font SIZE="3">
      <p>MANUFACTURING:</font></td>
    <td WIDTH="11" VALIGN="TOP">&nbsp;</td>
    <td WIDTH="66" VALIGN="TOP">&nbsp;</td>
    <td WIDTH="8" VALIGN="TOP">&nbsp;</td>
    <td WIDTH="16" VALIGN="TOP">&nbsp;</td>
    <td WIDTH="66" VALIGN="TOP">&nbsp;</td>
    <td WIDTH="8" VALIGN="TOP">&nbsp;</td>
    <td WIDTH="16" VALIGN="TOP">&nbsp;</td>
    <td WIDTH="66" VALIGN="TOP">&nbsp;</td>
    <td WIDTH="15" VALIGN="TOP">&nbsp;</td>
    <td WIDTH="16" VALIGN="TOP">&nbsp;</td>
    <td WIDTH="79" VALIGN="TOP">&nbsp;</td>
    <td WIDTH="14" VALIGN="TOP">&nbsp;</td>
  </tr>
  <tr>
    <td WIDTH="268" VALIGN="TOP"><font SIZE="3">
      <p>&#160;&#160;&#160;&#160;&#160;Bell</font></td>
    <td WIDTH="11" VALIGN="TOP"><font SIZE="3">
      <p ALIGN="RIGHT">$</font></td>
    <td WIDTH="66" VALIGN="TOP"><font SIZE="3">
      <p style="margin-right: 20" align="right">587</font></td>
    <td WIDTH="8" VALIGN="TOP">&nbsp;</td>
    <td WIDTH="16" VALIGN="TOP"><font SIZE="3">
      <p ALIGN="RIGHT">$</font></td>
    <td WIDTH="66" VALIGN="TOP"><font SIZE="3">
      <p style="margin-right: 20" align="right">616</font></td>
    <td WIDTH="8" VALIGN="TOP">&nbsp;</td>
    <td WIDTH="16" VALIGN="TOP"><font SIZE="3">
      <p ALIGN="RIGHT">$</font></td>
    <td WIDTH="66" VALIGN="TOP"><font SIZE="3">
      <p style="margin-right: 20" align="right">1,094</font></td>
    <td WIDTH="15" VALIGN="TOP">&nbsp;</td>
    <td WIDTH="16" VALIGN="TOP"><font SIZE="3">
      <p ALIGN="RIGHT">$</font></td>
    <td WIDTH="79" VALIGN="TOP"><font SIZE="3">
      <p style="margin-right: 20" align="right">1,152</font></td>
    <td WIDTH="14" VALIGN="TOP">&nbsp;</td>
  </tr>
  <tr>
    <td WIDTH="268" VALIGN="TOP"><font SIZE="3">
      <p>&#160;&#160;&#160;&#160;&#160;Cessna</font></td>
    <td WIDTH="11" VALIGN="TOP">&nbsp;</td>
    <td WIDTH="66" VALIGN="TOP"><font SIZE="3">
      <p style="margin-right: 20" align="right">500</font></td>
    <td WIDTH="8" VALIGN="TOP">&nbsp;</td>
    <td WIDTH="16" VALIGN="TOP">&nbsp;</td>
    <td WIDTH="66" VALIGN="TOP"><font SIZE="3">
      <p style="margin-right: 20" align="right">575</font></td>
    <td WIDTH="8" VALIGN="TOP">&nbsp;</td>
    <td WIDTH="16" VALIGN="TOP">&nbsp;</td>
    <td WIDTH="66" VALIGN="TOP"><font SIZE="3">
      <p style="margin-right: 20" align="right">918</font></td>
    <td WIDTH="15" VALIGN="TOP">&nbsp;</td>
    <td WIDTH="16" VALIGN="TOP">&nbsp;</td>
    <td WIDTH="79" VALIGN="TOP"><font SIZE="3">
      <p style="margin-right: 20" align="right">1,163</font></td>
    <td WIDTH="14" VALIGN="TOP">&nbsp;</td>
  </tr>
  <tr>
    <td WIDTH="268" VALIGN="TOP"><font SIZE="3">
      <p>&#160;&#160;&#160;&#160;&#160;Fastening Systems</font></td>
    <td WIDTH="11" VALIGN="TOP">&nbsp;</td>
    <td WIDTH="66" VALIGN="TOP"><font SIZE="3">
      <p style="margin-right: 20" align="right">494</font></td>
    <td WIDTH="8" VALIGN="TOP">&nbsp;</td>
    <td WIDTH="16" VALIGN="TOP">&nbsp;</td>
    <td WIDTH="66" VALIGN="TOP"><font SIZE="3">
      <p style="margin-right: 20" align="right">447</font></td>
    <td WIDTH="8" VALIGN="TOP">&nbsp;</td>
    <td WIDTH="16" VALIGN="TOP">&nbsp;</td>
    <td WIDTH="66" VALIGN="TOP"><font SIZE="3">
      <p style="margin-right: 20" align="right">991</font></td>
    <td WIDTH="15" VALIGN="TOP">&nbsp;</td>
    <td WIDTH="16" VALIGN="TOP">&nbsp;</td>
    <td WIDTH="79" VALIGN="TOP"><font SIZE="3">
      <p style="margin-right: 20" align="right">876</font></td>
    <td WIDTH="14" VALIGN="TOP">&nbsp;</td>
  </tr>
  <tr>
    <td WIDTH="270" VALIGN="TOP" style="border-bottom-style: solid; border-bottom-width: 1"><font SIZE="3">
      <p>&#160;&#160;&#160;&#160;&#160;Industrial</font></td>
    <td WIDTH="13" VALIGN="TOP" style="border-bottom-style: solid; border-bottom-width: 1">&nbsp;</td>
    <td WIDTH="68" VALIGN="TOP" style="border-bottom-style: solid; border-bottom-width: 1"><font SIZE="3">
      <p style="margin-right: 20" align="right">829</font></td>
    <td WIDTH="10" VALIGN="TOP" style="border-bottom-style: solid; border-bottom-width: 1">&nbsp;</td>
    <td WIDTH="18" VALIGN="TOP" style="border-bottom-style: solid; border-bottom-width: 1">&nbsp;</td>
    <td WIDTH="68" VALIGN="TOP" style="border-bottom-style: solid; border-bottom-width: 1"><font SIZE="3">
      <p style="margin-right: 20" align="right">750</font></td>
    <td WIDTH="10" VALIGN="TOP" style="border-bottom-style: solid; border-bottom-width: 1">&nbsp;</td>
    <td WIDTH="18" VALIGN="TOP" style="border-bottom-style: solid; border-bottom-width: 1">&nbsp;</td>
    <td WIDTH="68" VALIGN="TOP" style="border-bottom-style: solid; border-bottom-width: 1"><font SIZE="3">
      <p style="margin-right: 20" align="right">1,627</font></td>
    <td WIDTH="17" VALIGN="TOP" style="border-bottom-style: solid; border-bottom-width: 1">&nbsp;</td>
    <td WIDTH="18" VALIGN="TOP" style="border-bottom-style: solid; border-bottom-width: 1">&nbsp;</td>
    <td WIDTH="81" VALIGN="TOP" style="border-bottom-style: solid; border-bottom-width: 1"><font SIZE="3">
      <p style="margin-right: 20" align="right">1,456</font></td>
    <td WIDTH="14" VALIGN="TOP">&nbsp;</td>
  </tr>
  <tr>
    <td WIDTH="268" VALIGN="TOP">&nbsp;</td>
    <td WIDTH="11" VALIGN="TOP">&nbsp;</td>
    <td WIDTH="66" VALIGN="TOP"><font SIZE="3">
      <p style="margin-right: 20" align="right">2,410</font></td>
    <td WIDTH="8" VALIGN="TOP">&nbsp;</td>
    <td WIDTH="16" VALIGN="TOP">&nbsp;</td>
    <td WIDTH="66" VALIGN="TOP"><font SIZE="3">
      <p style="margin-right: 20" align="right">2,388</font></td>
    <td WIDTH="8" VALIGN="TOP">&nbsp;</td>
    <td WIDTH="16" VALIGN="TOP">&nbsp;</td>
    <td WIDTH="66" VALIGN="TOP"><font SIZE="3">
      <p style="margin-right: 20" align="right">4,630</font></td>
    <td WIDTH="15" VALIGN="TOP">&nbsp;</td>
    <td WIDTH="16" VALIGN="TOP">&nbsp;</td>
    <td WIDTH="79" VALIGN="TOP"><font SIZE="3">
      <p style="margin-right: 20" align="right">4,647</font></td>
    <td WIDTH="14" VALIGN="TOP">&nbsp;</td>
  </tr>
  <tr>
    <td WIDTH="268" VALIGN="TOP"><font SIZE="3">
      <p>FINANCE</font></td>
    <td WIDTH="11" VALIGN="TOP">&nbsp;</td>
    <td WIDTH="66" VALIGN="TOP"><font SIZE="3">
      <p style="margin-right: 20" align="right">137</font></td>
    <td WIDTH="8" VALIGN="TOP">&nbsp;</td>
    <td WIDTH="16" VALIGN="TOP">&nbsp;</td>
    <td WIDTH="66" VALIGN="TOP"><font SIZE="3">
      <p style="margin-right: 20" align="right">142</font></td>
    <td WIDTH="8" VALIGN="TOP">&nbsp;</td>
    <td WIDTH="16" VALIGN="TOP">&nbsp;</td>
    <td WIDTH="66" VALIGN="TOP"><font SIZE="3">
      <p style="margin-right: 20" align="right">271</font></td>
    <td WIDTH="15" VALIGN="TOP">&nbsp;</td>
    <td WIDTH="16" VALIGN="TOP">&nbsp;</td>
    <td WIDTH="79" VALIGN="TOP"><font SIZE="3">
      <p style="margin-right: 20" align="right">282</font></td>
    <td WIDTH="14" VALIGN="TOP">&nbsp;</td>
  </tr>
  <tr>
    <td WIDTH="270" VALIGN="TOP" style="border-top-style: solid; border-top-width: 1; border-bottom-style: solid"><font SIZE="3">
      <p>Total revenues</font></td>
    <td WIDTH="13" VALIGN="TOP" style="border-top-style: solid; border-top-width: 1; border-bottom-style: solid"><font SIZE="3">
      <p ALIGN="RIGHT">$</font></td>
    <td WIDTH="68" VALIGN="TOP" style="border-top-style: solid; border-top-width: 1; border-bottom-style: solid"><font SIZE="3">
      <p style="margin-right: 20" align="right">2,547</font></td>
    <td WIDTH="10" VALIGN="TOP" style="border-top-style: solid; border-top-width: 1; border-bottom-style: solid">&nbsp;</td>
    <td WIDTH="18" VALIGN="TOP" style="border-top-style: solid; border-top-width: 1; border-bottom-style: solid"><font SIZE="3">
      <p ALIGN="RIGHT">$</font></td>
    <td WIDTH="68" VALIGN="TOP" style="border-top-style: solid; border-top-width: 1; border-bottom-style: solid"><font SIZE="3">
      <p style="margin-right: 20" align="right">2,530</font></td>
    <td WIDTH="10" VALIGN="TOP" style="border-top-style: solid; border-top-width: 1; border-bottom-style: solid">&nbsp;</td>
    <td WIDTH="18" VALIGN="TOP" style="border-top-style: solid; border-top-width: 1; border-bottom-style: solid"><font SIZE="3">
      <p ALIGN="RIGHT">$</font></td>
    <td WIDTH="68" VALIGN="TOP" style="border-top-style: solid; border-top-width: 1; border-bottom-style: solid"><font SIZE="3">
      <p style="margin-right: 20" align="right">4,901</font></td>
    <td WIDTH="17" VALIGN="TOP" style="border-top-style: solid; border-top-width: 1; border-bottom-style: solid">&nbsp;</td>
    <td WIDTH="18" VALIGN="TOP" style="border-top-style: solid; border-top-width: 1; border-bottom-style: solid"><font SIZE="3">
      <p ALIGN="RIGHT">$</font></td>
    <td WIDTH="81" VALIGN="TOP" style="border-top-style: solid; border-top-width: 1; border-bottom-style: solid"><font SIZE="3">
      <p style="margin-right: 20" align="right">4,929</font></td>
    <td WIDTH="14" VALIGN="TOP">&nbsp;</td>
  </tr>
  <tr>
    <td WIDTH="268" VALIGN="TOP"><b><font SIZE="3">
      <p>SEGMENT OPERATING PROFIT</font></b></td>
    <td WIDTH="11" VALIGN="TOP">&nbsp;</td>
    <td WIDTH="66" VALIGN="TOP">
      <p style="margin-right: 20" align="right">&nbsp;</p>
    </td>
    <td WIDTH="8" VALIGN="TOP">&nbsp;</td>
    <td WIDTH="16" VALIGN="TOP">&nbsp;</td>
    <td WIDTH="66" VALIGN="TOP">
      <p style="margin-right: 20" align="right">&nbsp;</p>
    </td>
    <td WIDTH="8" VALIGN="TOP">&nbsp;</td>
    <td WIDTH="16" VALIGN="TOP">&nbsp;</td>
    <td WIDTH="66" VALIGN="TOP">
      <p style="margin-right: 20" align="right">&nbsp;</p>
    </td>
    <td WIDTH="15" VALIGN="TOP">&nbsp;</td>
    <td WIDTH="16" VALIGN="TOP">&nbsp;</td>
    <td WIDTH="79" VALIGN="TOP">
      <p style="margin-right: 20" align="right">&nbsp;</p>
    </td>
    <td WIDTH="14" VALIGN="TOP">&nbsp;</td>
  </tr>
  <tr>
    <td WIDTH="268" VALIGN="TOP"><font SIZE="3">
      <p>MANUFACTURING:</font></td>
    <td WIDTH="11" VALIGN="TOP">&nbsp;</td>
    <td WIDTH="66" VALIGN="TOP">
      <p style="margin-right: 20" align="right">&nbsp;</p>
    </td>
    <td WIDTH="8" VALIGN="TOP">&nbsp;</td>
    <td WIDTH="16" VALIGN="TOP">&nbsp;</td>
    <td WIDTH="66" VALIGN="TOP">
      <p style="margin-right: 20" align="right">&nbsp;</p>
    </td>
    <td WIDTH="8" VALIGN="TOP">&nbsp;</td>
    <td WIDTH="16" VALIGN="TOP">&nbsp;</td>
    <td WIDTH="66" VALIGN="TOP">
      <p style="margin-right: 20" align="right">&nbsp;</p>
    </td>
    <td WIDTH="15" VALIGN="TOP">&nbsp;</td>
    <td WIDTH="16" VALIGN="TOP">&nbsp;</td>
    <td WIDTH="79" VALIGN="TOP">
      <p style="margin-right: 20" align="right">&nbsp;</p>
    </td>
    <td WIDTH="14" VALIGN="TOP">&nbsp;</td>
  </tr>
  <tr>
    <td WIDTH="268" VALIGN="TOP"><font SIZE="3">
      <p>&#160;&#160;&#160;&#160;&#160;Bell</font></td>
    <td WIDTH="11" VALIGN="TOP"><font SIZE="3">
      <p ALIGN="RIGHT">$</font></td>
    <td WIDTH="66" VALIGN="TOP"><font SIZE="3">
      <p style="margin-right: 20" align="right">71</font></td>
    <td WIDTH="8" VALIGN="TOP">&nbsp;</td>
    <td WIDTH="16" VALIGN="TOP"><font SIZE="3">
      <p ALIGN="RIGHT">$</font></td>
    <td WIDTH="66" VALIGN="TOP"><font SIZE="3">
      <p style="margin-right: 20" align="right">56</font></td>
    <td WIDTH="8" VALIGN="TOP">&nbsp;</td>
    <td WIDTH="16" VALIGN="TOP"><font SIZE="3">
      <p ALIGN="RIGHT">$</font></td>
    <td WIDTH="66" VALIGN="TOP"><font SIZE="3">
      <p style="margin-right: 20" align="right">123</font></td>
    <td WIDTH="15" VALIGN="TOP">&nbsp;</td>
    <td WIDTH="16" VALIGN="TOP"><font SIZE="3">
      <p ALIGN="RIGHT">$</font></td>
    <td WIDTH="79" VALIGN="TOP"><font SIZE="3">
      <p style="margin-right: 20" align="right">96</font></td>
    <td WIDTH="14" VALIGN="TOP">&nbsp;</td>
  </tr>
  <tr>
    <td WIDTH="268" VALIGN="TOP"><font SIZE="3">
      <p>&#160;&#160;&#160;&#160;&#160;Cessna</font></td>
    <td WIDTH="11" VALIGN="TOP">&nbsp;</td>
    <td WIDTH="66" VALIGN="TOP"><font SIZE="3">
      <p style="margin-right: 20" align="right">44</font></td>
    <td WIDTH="8" VALIGN="TOP">&nbsp;</td>
    <td WIDTH="16" VALIGN="TOP">&nbsp;</td>
    <td WIDTH="66" VALIGN="TOP"><font SIZE="3">
      <p style="margin-right: 20" align="right">66</font></td>
    <td WIDTH="8" VALIGN="TOP">&nbsp;</td>
    <td WIDTH="16" VALIGN="TOP">&nbsp;</td>
    <td WIDTH="66" VALIGN="TOP"><font SIZE="3">
      <p style="margin-right: 20" align="right">66</font></td>
    <td WIDTH="15" VALIGN="TOP">&nbsp;</td>
    <td WIDTH="16" VALIGN="TOP">&nbsp;</td>
    <td WIDTH="79" VALIGN="TOP"><font SIZE="3">
      <p style="margin-right: 20" align="right">125</font></td>
    <td WIDTH="14" VALIGN="TOP">&nbsp;</td>
  </tr>
  <tr>
    <td WIDTH="268" VALIGN="TOP"><font SIZE="3">
      <p>&#160;&#160;&#160;&#160;&#160;Fastening Systems</font></td>
    <td WIDTH="11" VALIGN="TOP">&nbsp;</td>
    <td WIDTH="66" VALIGN="TOP"><font SIZE="3">
      <p style="margin-right: 20" align="right">24</font></td>
    <td WIDTH="8" VALIGN="TOP">&nbsp;</td>
    <td WIDTH="16" VALIGN="TOP">&nbsp;</td>
    <td WIDTH="66" VALIGN="TOP"><font SIZE="3">
      <p style="margin-right: 20" align="right">21</font></td>
    <td WIDTH="8" VALIGN="TOP">&nbsp;</td>
    <td WIDTH="16" VALIGN="TOP">&nbsp;</td>
    <td WIDTH="66" VALIGN="TOP"><font SIZE="3">
      <p style="margin-right: 20" align="right">44</font></td>
    <td WIDTH="15" VALIGN="TOP">&nbsp;</td>
    <td WIDTH="16" VALIGN="TOP">&nbsp;</td>
    <td WIDTH="79" VALIGN="TOP"><font SIZE="3">
      <p style="margin-right: 20" align="right">39</font></td>
    <td WIDTH="14" VALIGN="TOP">&nbsp;</td>
  </tr>
  <tr>
    <td WIDTH="270" VALIGN="TOP" style="border-bottom-style: solid; border-bottom-width: 1"><font SIZE="3">
      <p>&#160;&#160;&#160;&#160;&#160;Industrial</font></td>
    <td WIDTH="13" VALIGN="TOP" style="border-bottom-style: solid; border-bottom-width: 1">&nbsp;</td>
    <td WIDTH="68" VALIGN="TOP" style="border-bottom-style: solid; border-bottom-width: 1"><font SIZE="3">
      <p style="margin-right: 20" align="right">61</font></td>
    <td WIDTH="10" VALIGN="TOP" style="border-bottom-style: solid; border-bottom-width: 1">&nbsp;</td>
    <td WIDTH="18" VALIGN="TOP" style="border-bottom-style: solid; border-bottom-width: 1">&nbsp;</td>
    <td WIDTH="68" VALIGN="TOP" style="border-bottom-style: solid; border-bottom-width: 1"><font SIZE="3">
      <p style="margin-right: 20" align="right">40</font></td>
    <td WIDTH="10" VALIGN="TOP" style="border-bottom-style: solid; border-bottom-width: 1">&nbsp;</td>
    <td WIDTH="18" VALIGN="TOP" style="border-bottom-style: solid; border-bottom-width: 1">&nbsp;</td>
    <td WIDTH="68" VALIGN="TOP" style="border-bottom-style: solid; border-bottom-width: 1"><font SIZE="3">
      <p style="margin-right: 20" align="right">108</font></td>
    <td WIDTH="17" VALIGN="TOP" style="border-bottom-style: solid; border-bottom-width: 1">&nbsp;</td>
    <td WIDTH="18" VALIGN="TOP" style="border-bottom-style: solid; border-bottom-width: 1">&nbsp;</td>
    <td WIDTH="81" VALIGN="TOP" style="border-bottom-style: solid; border-bottom-width: 1"><font SIZE="3">
      <p style="margin-right: 20" align="right">74</font></td>
    <td WIDTH="14" VALIGN="TOP">&nbsp;</td>
  </tr>
  <tr>
    <td WIDTH="268" VALIGN="TOP">&nbsp;</td>
    <td WIDTH="11" VALIGN="TOP">&nbsp;</td>
    <td WIDTH="66" VALIGN="TOP"><font SIZE="3">
      <p style="margin-right: 20" align="right">200</font></td>
    <td WIDTH="8" VALIGN="TOP">&nbsp;</td>
    <td WIDTH="16" VALIGN="TOP">&nbsp;</td>
    <td WIDTH="66" VALIGN="TOP"><font SIZE="3">
      <p style="margin-right: 20" align="right">183</font></td>
    <td WIDTH="8" VALIGN="TOP">&nbsp;</td>
    <td WIDTH="16" VALIGN="TOP">&nbsp;</td>
    <td WIDTH="66" VALIGN="TOP"><font SIZE="3">
      <p style="margin-right: 20" align="right">341</font></td>
    <td WIDTH="15" VALIGN="TOP">&nbsp;</td>
    <td WIDTH="16" VALIGN="TOP">&nbsp;</td>
    <td WIDTH="79" VALIGN="TOP"><font SIZE="3">
      <p style="margin-right: 20" align="right">334</font></td>
    <td WIDTH="14" VALIGN="TOP">&nbsp;</td>
  </tr>
  <tr>
    <td WIDTH="270" VALIGN="TOP" style="border-bottom-style: solid; border-bottom-width: 1"><font SIZE="3">
      <p>FINANCE</font></td>
    <td WIDTH="13" VALIGN="TOP" style="border-bottom-style: solid; border-bottom-width: 1">&nbsp;</td>
    <td WIDTH="68" VALIGN="TOP" style="border-bottom-style: solid; border-bottom-width: 1"><font SIZE="3">
      <p style="margin-right: 20" align="right">36</font></td>
    <td WIDTH="10" VALIGN="TOP" style="border-bottom-style: solid; border-bottom-width: 1">&nbsp;</td>
    <td WIDTH="18" VALIGN="TOP" style="border-bottom-style: solid; border-bottom-width: 1">&nbsp;</td>
    <td WIDTH="68" VALIGN="TOP" style="border-bottom-style: solid; border-bottom-width: 1"><font SIZE="3">
      <p style="margin-right: 20" align="right">23</font></td>
    <td WIDTH="10" VALIGN="TOP" style="border-bottom-style: solid; border-bottom-width: 1">&nbsp;</td>
    <td WIDTH="18" VALIGN="TOP" style="border-bottom-style: solid; border-bottom-width: 1">&nbsp;</td>
    <td WIDTH="68" VALIGN="TOP" style="border-bottom-style: solid; border-bottom-width: 1"><font SIZE="3">
      <p style="margin-right: 20" align="right">67</font></td>
    <td WIDTH="17" VALIGN="TOP" style="border-bottom-style: solid; border-bottom-width: 1">&nbsp;</td>
    <td WIDTH="18" VALIGN="TOP" style="border-bottom-style: solid; border-bottom-width: 1">&nbsp;</td>
    <td WIDTH="81" VALIGN="TOP" style="border-bottom-style: solid; border-bottom-width: 1"><font SIZE="3">
      <p style="margin-right: 20" align="right">46</font></td>
    <td WIDTH="14" VALIGN="TOP">&nbsp;</td>
  </tr>
  <tr>
    <td WIDTH="268" VALIGN="TOP"><font SIZE="3">
      <p>Segment profit</font></td>
    <td WIDTH="11" VALIGN="TOP">&nbsp;</td>
    <td WIDTH="66" VALIGN="TOP"><font SIZE="3">
      <p style="margin-right: 20" align="right">236</font></td>
    <td WIDTH="8" VALIGN="TOP">&nbsp;</td>
    <td WIDTH="16" VALIGN="TOP">&nbsp;</td>
    <td WIDTH="66" VALIGN="TOP"><font SIZE="3">
      <p style="margin-right: 20" align="right">206</font></td>
    <td WIDTH="8" VALIGN="TOP">&nbsp;</td>
    <td WIDTH="16" VALIGN="TOP">&nbsp;</td>
    <td WIDTH="66" VALIGN="TOP"><font SIZE="3">
      <p style="margin-right: 20" align="right">408</font></td>
    <td WIDTH="15" VALIGN="TOP">&nbsp;</td>
    <td WIDTH="16" VALIGN="TOP">&nbsp;</td>
    <td WIDTH="79" VALIGN="TOP"><font SIZE="3">
      <p style="margin-right: 20" align="right">380</font></td>
    <td WIDTH="14" VALIGN="TOP">&nbsp;</td>
  </tr>
  <tr>
    <td WIDTH="270" VALIGN="TOP" style="border-bottom-style: solid; border-bottom-width: 1"><font SIZE="3">
      <p>Special charges</font></td>
    <td WIDTH="13" VALIGN="TOP" style="border-bottom-style: solid; border-bottom-width: 1">&nbsp;</td>
    <td WIDTH="68" VALIGN="TOP" style="border-bottom-style: solid; border-bottom-width: 1"><font SIZE="3">
      <p style="margin-right: 20" align="right">(28)</font></td>
    <td WIDTH="10" VALIGN="TOP" style="border-bottom-style: solid; border-bottom-width: 1">&nbsp;</td>
    <td WIDTH="18" VALIGN="TOP" style="border-bottom-style: solid; border-bottom-width: 1">&nbsp;</td>
    <td WIDTH="68" VALIGN="TOP" style="border-bottom-style: solid; border-bottom-width: 1"><font SIZE="3">
      <p style="margin-right: 20" align="right">(24)</font></td>
    <td WIDTH="10" VALIGN="TOP" style="border-bottom-style: solid; border-bottom-width: 1">&nbsp;</td>
    <td WIDTH="18" VALIGN="TOP" style="border-bottom-style: solid; border-bottom-width: 1">&nbsp;</td>
    <td WIDTH="68" VALIGN="TOP" style="border-bottom-style: solid; border-bottom-width: 1"><font SIZE="3">
      <p style="margin-right: 20" align="right">(85)</font></td>
    <td WIDTH="17" VALIGN="TOP" style="border-bottom-style: solid; border-bottom-width: 1">&nbsp;</td>
    <td WIDTH="18" VALIGN="TOP" style="border-bottom-style: solid; border-bottom-width: 1">&nbsp;</td>
    <td WIDTH="81" VALIGN="TOP" style="border-bottom-style: solid; border-bottom-width: 1"><font SIZE="3">
      <p style="margin-right: 20" align="right">(52)</font></td>
    <td WIDTH="14" VALIGN="TOP">&nbsp;</td>
  </tr>
  <tr>
    <td WIDTH="268" VALIGN="TOP"><font SIZE="3">
      <p>Segment operating income</font></td>
    <td WIDTH="11" VALIGN="TOP">&nbsp;</td>
    <td WIDTH="66" VALIGN="TOP"><font SIZE="3">
      <p style="margin-right: 20" align="right">208</font></td>
    <td WIDTH="8" VALIGN="TOP">&nbsp;</td>
    <td WIDTH="16" VALIGN="TOP">&nbsp;</td>
    <td WIDTH="66" VALIGN="TOP"><font SIZE="3">
      <p style="margin-right: 20" align="right">182</font></td>
    <td WIDTH="8" VALIGN="TOP">&nbsp;</td>
    <td WIDTH="16" VALIGN="TOP">&nbsp;</td>
    <td WIDTH="66" VALIGN="TOP"><font SIZE="3">
      <p style="margin-right: 20" align="right">323</font></td>
    <td WIDTH="15" VALIGN="TOP">&nbsp;</td>
    <td WIDTH="16" VALIGN="TOP">&nbsp;</td>
    <td WIDTH="79" VALIGN="TOP"><font SIZE="3">
      <p style="margin-right: 20" align="right">328</font></td>
    <td WIDTH="14" VALIGN="TOP">&nbsp;</td>
  </tr>
  <tr>
    <td WIDTH="268" VALIGN="TOP"><font SIZE="3">
      <p>Gain on sale of businesses, net</font></td>
    <td WIDTH="11" VALIGN="TOP">&nbsp;</td>
    <td WIDTH="66" VALIGN="TOP"><font SIZE="3">
      <p style="margin-right: 20" align="right">7</font></td>
    <td WIDTH="8" VALIGN="TOP">&nbsp;</td>
    <td WIDTH="16" VALIGN="TOP">&nbsp;</td>
    <td WIDTH="66" VALIGN="TOP"><font SIZE="3">
      <p style="margin-right: 20" align="right">&#45;</font></td>
    <td WIDTH="8" VALIGN="TOP">&nbsp;</td>
    <td WIDTH="16" VALIGN="TOP">&nbsp;</td>
    <td WIDTH="66" VALIGN="TOP"><font SIZE="3">
      <p style="margin-right: 20" align="right">7</font></td>
    <td WIDTH="15" VALIGN="TOP">&nbsp;</td>
    <td WIDTH="16" VALIGN="TOP">&nbsp;</td>
    <td WIDTH="79" VALIGN="TOP"><font SIZE="3">
      <p style="margin-right: 20" align="right">15</font></td>
    <td WIDTH="14" VALIGN="TOP">&nbsp;</td>
  </tr>
  <tr>
    <td WIDTH="268" VALIGN="TOP"><font SIZE="3">
      <p>Corporate expenses and other, net</font></td>
    <td WIDTH="11" VALIGN="TOP">&nbsp;</td>
    <td WIDTH="66" VALIGN="TOP"><font SIZE="3">
      <p style="margin-right: 20" align="right">(36)</font></td>
    <td WIDTH="8" VALIGN="TOP">&nbsp;</td>
    <td WIDTH="16" VALIGN="TOP">&nbsp;</td>
    <td WIDTH="66" VALIGN="TOP"><font SIZE="3">
      <p style="margin-right: 20" align="right">(30)</font></td>
    <td WIDTH="8" VALIGN="TOP">&nbsp;</td>
    <td WIDTH="16" VALIGN="TOP">&nbsp;</td>
    <td WIDTH="66" VALIGN="TOP"><font SIZE="3">
      <p style="margin-right: 20" align="right">(71)</font></td>
    <td WIDTH="15" VALIGN="TOP">&nbsp;</td>
    <td WIDTH="16" VALIGN="TOP">&nbsp;</td>
    <td WIDTH="79" VALIGN="TOP"><font SIZE="3">
      <p style="margin-right: 20" align="right">(62)</font></td>
    <td WIDTH="14" VALIGN="TOP">&nbsp;</td>
  </tr>
  <tr>
    <td WIDTH="268" VALIGN="TOP"><font SIZE="3">
      <p>Interest expense, net</font></td>
    <td WIDTH="11" VALIGN="TOP">&nbsp;</td>
    <td WIDTH="66" VALIGN="TOP"><font SIZE="3">
      <p style="margin-right: 20" align="right">(25)</font></td>
    <td WIDTH="8" VALIGN="TOP">&nbsp;</td>
    <td WIDTH="16" VALIGN="TOP">&nbsp;</td>
    <td WIDTH="66" VALIGN="TOP"><font SIZE="3">
      <p style="margin-right: 20" align="right">(22)</font></td>
    <td WIDTH="8" VALIGN="TOP">&nbsp;</td>
    <td WIDTH="16" VALIGN="TOP">&nbsp;</td>
    <td WIDTH="66" VALIGN="TOP"><font SIZE="3">
      <p style="margin-right: 20" align="right">(50)</font></td>
    <td WIDTH="15" VALIGN="TOP">&nbsp;</td>
    <td WIDTH="16" VALIGN="TOP">&nbsp;</td>
    <td WIDTH="79" VALIGN="TOP"><font SIZE="3">
      <p style="margin-right: 20" align="right">(46)</font></td>
    <td WIDTH="14" VALIGN="TOP">&nbsp;</td>
  </tr>
  <tr>
    <td WIDTH="270" VALIGN="TOP" style="border-top-style: solid; border-top-width: 1; border-bottom-style: solid"><font SIZE="3">
      <p>Income from continuing operations<br>
      &nbsp;&nbsp;&nbsp;&nbsp; before&#160;income taxes and
      distributions<br>
      &nbsp;&nbsp;&nbsp;&nbsp; on&#160;preferred securities of
      subsidiary<br>
      &nbsp;&nbsp;&nbsp;&nbsp; trusts</font></td>
    <td WIDTH="13" VALIGN="TOP" style="border-top-style: solid; border-top-width: 1; border-bottom-style: solid"><font SIZE="3">
      <p ALIGN="RIGHT"><br>
      <br>
      <br>
      $</font></td>
    <td WIDTH="68" VALIGN="TOP" style="border-top-style: solid; border-top-width: 1; border-bottom-style: solid"><font SIZE="3">
      <p style="margin-right: 20" align="right"><br>
      <br>
      <br>
      154</font></td>
    <td WIDTH="10" VALIGN="TOP" style="border-top-style: solid; border-top-width: 1; border-bottom-style: solid">&nbsp;</td>
    <td WIDTH="18" VALIGN="TOP" style="border-top-style: solid; border-top-width: 1; border-bottom-style: solid"><font SIZE="3">
      <p ALIGN="RIGHT"><br>
      <br>
      <br>
      $</font></td>
    <td WIDTH="68" VALIGN="TOP" style="border-top-style: solid; border-top-width: 1; border-bottom-style: solid"><font SIZE="3">
      <p style="margin-right: 20" align="right"><br>
      <br>
      <br>
      130</font></td>
    <td WIDTH="10" VALIGN="TOP" style="border-top-style: solid; border-top-width: 1; border-bottom-style: solid">&nbsp;</td>
    <td WIDTH="18" VALIGN="TOP" style="border-top-style: solid; border-top-width: 1; border-bottom-style: solid"><font SIZE="3">
      <p ALIGN="RIGHT"><br>
      <br>
      <br>
      $</font></td>
    <td WIDTH="68" VALIGN="TOP" style="border-top-style: solid; border-top-width: 1; border-bottom-style: solid"><font SIZE="3">
      <p style="margin-right: 20" align="right"><br>
      <br>
      <br>
      209</font></td>
    <td WIDTH="17" VALIGN="TOP" style="border-top-style: solid; border-top-width: 1; border-bottom-style: solid">&nbsp;</td>
    <td WIDTH="18" VALIGN="TOP" style="border-top-style: solid; border-top-width: 1; border-bottom-style: solid"><font SIZE="3">
      <p ALIGN="RIGHT"><br>
      <br>
      <br>
      $</font></td>
    <td WIDTH="81" VALIGN="TOP" style="border-top-style: solid; border-top-width: 1; border-bottom-style: solid"><font SIZE="3">
      <p style="margin-right: 20" align="right"><br>
      <br>
      <br>
      235</font></td>
    <td WIDTH="14" VALIGN="TOP">&nbsp;</td>
  </tr>
</table>
      </center>
    </div>
    <p align="right">19.</p>
<table CELLSPACING="0" CELLPADDING="1" WIDTH="805">
  <tr>
    <td WIDTH="72" VALIGN="TOP"><i><font FACE="Verdana" SIZE="2">
      </font></i><b><font SIZE="3">
      <p ALIGN="JUSTIFY">Item 2.</font></b></td>
    <td WIDTH="725" VALIGN="TOP"><b><u><font SIZE="3">
      <p ALIGN="JUSTIFY">MANAGEMENT&#39;S DISCUSSION AND ANALYSIS OF
      FINANCIAL CONDITION AND RESULTS OF OPERATIONS</font></u></b></td>
  </tr>
</table>
<b><font SIZE="4">
<p>Business Overview</font></b></p>
<font SIZE="3">
<p ALIGN="JUSTIFY">Textron Inc. is a multi&#45;industry company that
leverages its global network of businesses to provide customers with innovative
solutions and services in five business segments: Bell, Cessna, Fastening
Systems, Industrial and Finance. Textron is known around the world for its
powerful brands spanning the business jet, aerospace and defense, fastening
systems, plastic fuel systems and golf car and turf&#45;care markets, among
others.</p>
<p ALIGN="JUSTIFY">During the second quarter, the economy continued to improve
as most of Textron&#39;s end markets showed good growth or signs of solid
recovery with volume increases in the Fastening Systems and Industrial segments.
At Cessna and Bell, year&#45;to&#45;date orders for Citation business
jets and commercial helicopters, respectively, are at least double what they
were at this time last year.</p>
<p ALIGN="JUSTIFY">Segment profit for the second quarter of 2004 increased due
to cost improvements from enterprise management initiatives, higher pricing and
improved credit quality, which more than offset other factors affecting
operating results, including increased costs for steel and steel components,
lower pension income and higher healthcare costs.</p>
</font><b><font SIZE="4">
<p>Consolidated Results of Continuing Operations</font></b></p>
<b><font SIZE="3">
<p>Revenues</p>
</font></b><font SIZE="3">
<p ALIGN="JUSTIFY">Revenues were $2.55&#160;billion in the second quarter of
2004, compared with $2.53&#160;billion in 2003. The increase was largely
driven by higher volume of $68 million and favorable foreign exchange of
$57&#160;million in the Fastening Systems and Industrial segments, partially
offset by lower revenue of $54 million from the V&#45;22 program at Bell and
lower Citation business jet volume of $35 million at Cessna.</p>
<p ALIGN="JUSTIFY">Revenues were $4.90&#160;billion in the first half of
2004, compared with $4.93&#160;billion in 2003. The decrease was largely
driven by lower Citation business jet volume of $243&#160;million at Cessna,
principally due to production schedule changes in 2003 to reflect lower demand
due to soft market conditions at that time, and lower revenue of $51 million
from the V&#45;22 program at Bell. These decreases were partially offset by
favorable foreign exchange of $153&#160;million and increased volume of $137
million in the Fastening Systems and Industrial segments.</p>
<b>
<p ALIGN="JUSTIFY">Segment&#160;Profit</p>
</b>
<p ALIGN="JUSTIFY">Segment profit was $236 million in the second quarter of
2004, compared with $206 million in 2003. The increase of $30 million was
largely due to higher profit of $21 million in the Industrial segment, primarily
as a result of improved cost performance of $33 million, $15 million in the Bell
segment, mainly in its commercial helicopter business, and $13 million in the
Finance segment, principally due to a lower loan loss provision. These increases
were partially offset by lower profit of $22 million at Cessna largely due to
lower business jet volume.</p>
<p ALIGN="JUSTIFY">Segment profit was $408 million for the first half of 2004,
compared with $380 million in 2003. The increase of $28 million was due to
higher profit of $34 million in the Industrial segment, primarily as a result of
improved cost performance of $55 million and a lower fair market value
adjustment of $9 million for used golf car inventory, partially offset by
unfavorable performance of $17 million at a North American Kautex plant. Segment
profit also increased $27 million in the Bell segment, primarily in its
commercial helicopter business, and $21 million in the Finance segment largely
due to a lower loan loss provision. These increases were partially offset by
lower profit of $59 million at Cessna largely due to lower business jet volume.</p>
<p ALIGN="right">20.</p>
<b>
<p ALIGN="JUSTIFY">Special&#160;Charges</p>
</b>
<p ALIGN="JUSTIFY">Textron recorded special charges related to restructuring of
$28 million and $24 million in the second quarter of 2004 and 2003,
respectively. Special charges totaled $85 million and $52 million for the six
months ended July&#160;3, 2004 and June&#160;28, 2003, respectively. The
$85 million of special charges for the six months ended July&#160;3, 2004
includes $97 million of restructuring costs and a $12 million pre&#45;tax
gain on the sale of Collins & Aikman (C&A) common stock for $34 million
in cash. Special charges of $52 million for the six months ended
June&#160;28, 2003 were for restructuring.</p>
<i>
<p ALIGN="JUSTIFY">Restructuring&#160;Program<br>
</i>To improve returns at core businesses and to complete the integration of
certain acquisitions, Textron approved and committed to a restructuring program
in the fourth quarter of 2000 based upon targeted cost reductions. This program
was expanded in 2001, and in October 2002, Textron announced a further expansion
of the program as part of its strategic effort to improve operating
efficiencies, primarily in its industrial businesses. Textron&#39;s
restructuring program includes corporate and segment direct and indirect
workforce reductions, consolidation of facilities primarily in the United States
and Europe, rationalization of certain product lines, outsourcing of
non&#45;core production activity, the divestiture of non&#45;core
businesses, and streamlining of sales and administrative overhead. Under this
restructuring program, Textron has reduced its workforce by approximately 10,000
employees and has closed 105 facilities, including 45 manufacturing plants,
primarily in the Industrial and Fastening Systems segments. Textron expects a
total reduction of about 10,000 employees, excluding approximately 700 Trim
employees and 1,000 OmniQuip employees, representing approximately 18% of its
global workforce since the restructuring was first announced.</p>
<p ALIGN="JUSTIFY">As of July&#160;3, 2004, $486 million of cost has been
incurred relating to continuing operations (including $11 million related to
Trim), consisting of $244 million in severance costs, $111 million in asset
impairment charges, $46 million in contract termination costs and $87 million in
other associated costs, net of gains on sales of assets of $2 million. Textron
estimates that approximately $50 million in additional program costs will be
incurred primarily in the Fastening Systems and Industrial segments. In total,
Textron estimates that the entire program for continuing operations will be
approximately $536 million (including $11 million related to Trim) and will be
substantially complete by the end of 2004.</p>
<b>
<p ALIGN="JUSTIFY">Income&#160;from&#160;Continuing&#160;Operations</p>
</b>
<p ALIGN="JUSTIFY">Income from continuing operations was $100 million in the
second quarter of 2004 compared with $85 million in 2003. The increase was
primarily due to higher segment profit and a $7 million pre&#45;tax gain on
the sale of Textron&#39;s interest in two Brazilian&#45;based joint
ventures in the Industrial segment to its joint venture partner.</p>
<p ALIGN="JUSTIFY">Income from continuing operations was $137&#160;million
in the first half of 2004, compared with $151 million in 2003, primarily due to
the increase in restructuring charges. Textron also recorded a $12 million
pre&#45;tax gain on the sale of its remaining shares of C&A common stock
in the first quarter of 2004 and a $7 million pre&#45;tax gain on the sale
of its interest in two Brazilian&#45;based joint ventures in the Industrial
segment in the second quarter of 2004 compared with a pre&#45;tax gain of
$15&#160;million on the sale of its remaining interest in an Italian
automotive joint venture to C&A in the first quarter of 2003.</p>
<p ALIGN="right">21.</p>
<p ALIGN="JUSTIFY">The following items are considered by management to affect
the comparability of operating results to normal ongoing operations:</p>
</font>
    <div align="center">
      <center>
<table CELLSPACING="1" CELLPADDING="1" WIDTH="727">
  <tr>
    <td WIDTH="296" VALIGN="TOP">&nbsp;</td>
    <td WIDTH="6" VALIGN="TOP">&nbsp;</td>
    <td WIDTH="159" VALIGN="TOP" COLSPAN="2"><font SIZE="3">
      <p ALIGN="CENTER">Three Months Ended</font></td>
    <td WIDTH="30" VALIGN="TOP">&nbsp;</td>
    <td WIDTH="204" VALIGN="TOP" COLSPAN="2"><font SIZE="3">
      <p ALIGN="CENTER">Six Months Ended</font></td>
  </tr>
  <tr>
    <td WIDTH="298" VALIGN="TOP" style="border-top-style: solid; border-top-width: 1; border-bottom-style: solid; border-bottom-width: 1"><i><font SIZE="3">
      <p><br>
      (In millions)</font></i></td>
    <td WIDTH="8" VALIGN="TOP" style="border-top-style: solid; border-top-width: 1; border-bottom-style: solid; border-bottom-width: 1">&nbsp;</td>
    <td WIDTH="72" VALIGN="TOP" style="border-top-style: solid; border-top-width: 1; border-bottom-style: solid; border-bottom-width: 1"><font SIZE="3">
      <p ALIGN="CENTER">July 3,<br>
      2004</font></td>
    <td WIDTH="85" VALIGN="TOP" style="border-top-style: solid; border-top-width: 1; border-bottom-style: solid; border-bottom-width: 1"><font SIZE="3">
      <p ALIGN="CENTER">June 28,<br>
      2003</font></td>
    <td WIDTH="32" VALIGN="TOP" style="border-top-style: solid; border-top-width: 1; border-bottom-style: solid; border-bottom-width: 1">&nbsp;</td>
    <td WIDTH="105" VALIGN="TOP" style="border-top-style: solid; border-top-width: 1; border-bottom-style: solid; border-bottom-width: 1"><font SIZE="3">
      <p ALIGN="CENTER">July 3,<br>
      2004</font></td>
    <td WIDTH="97" VALIGN="TOP" style="border-top-style: solid; border-top-width: 1; border-bottom-style: solid; border-bottom-width: 1"><font SIZE="3">
      <p ALIGN="CENTER">June 28<br>
      2003</font></td>
  </tr>
  <tr>
    <td WIDTH="296" VALIGN="TOP"><font SIZE="3">
      <p>Restructuring</font></td>
    <td WIDTH="6" VALIGN="TOP">&nbsp;</td>
    <td WIDTH="70" VALIGN="TOP"><font SIZE="3">
      <p style="margin-right: 20" align="right">$28</font></td>
    <td WIDTH="83" VALIGN="TOP"><font SIZE="3">
      <p style="margin-right: 40" align="right">$24</font></td>
    <td WIDTH="30" VALIGN="TOP">&nbsp;</td>
    <td WIDTH="103" VALIGN="TOP"><font SIZE="3">
      <p style="margin-right: 40" align="right">$97</font></td>
    <td WIDTH="95" VALIGN="TOP"><font SIZE="3">
      <p style="margin-right: 40" align="right">$52</font></td>
  </tr>
  <tr>
    <td WIDTH="296" VALIGN="TOP"><font SIZE="3">
      <p>Gain on sale of investment</font></td>
    <td WIDTH="6" VALIGN="TOP">&nbsp;</td>
    <td WIDTH="70" VALIGN="TOP"><font SIZE="3">
      <p style="margin-right: 20" align="right">&#45;</font></td>
    <td WIDTH="83" VALIGN="TOP"><font SIZE="3">
      <p style="margin-right: 40" align="right">&#45;</font></td>
    <td WIDTH="30" VALIGN="TOP">&nbsp;</td>
    <td WIDTH="103" VALIGN="TOP"><font SIZE="3">
      <p style="margin-right: 40" align="right">(12)</font></td>
    <td WIDTH="95" VALIGN="TOP"><font SIZE="3">
      <p style="margin-right: 40" align="right">&#45;</font></td>
  </tr>
  <tr>
    <td WIDTH="298" VALIGN="TOP" style="border-bottom-style: solid; border-bottom-width: 1"><font SIZE="3">
      <p>Gain on sale of businesses</font></td>
    <td WIDTH="8" VALIGN="TOP" style="border-bottom-style: solid; border-bottom-width: 1">&nbsp;</td>
    <td WIDTH="72" VALIGN="TOP" style="border-bottom-style: solid; border-bottom-width: 1"><font SIZE="3">
      <p style="margin-right: 20" align="right">(7)</font></td>
    <td WIDTH="85" VALIGN="TOP" style="border-bottom-style: solid; border-bottom-width: 1"><font SIZE="3">
      <p style="margin-right: 40" align="right">&#45;</font></td>
    <td WIDTH="32" VALIGN="TOP" style="border-bottom-style: solid; border-bottom-width: 1">&nbsp;</td>
    <td WIDTH="105" VALIGN="TOP" style="border-bottom-style: solid; border-bottom-width: 1"><font SIZE="3">
      <p style="margin-right: 40" align="right">(7)</font></td>
    <td WIDTH="97" VALIGN="TOP" style="border-bottom-style: solid; border-bottom-width: 1"><font SIZE="3">
      <p style="margin-right: 40" align="right">(15)</font></td>
  </tr>
  <tr>
    <td WIDTH="296" VALIGN="TOP">&nbsp;</td>
    <td WIDTH="6" VALIGN="TOP">&nbsp;</td>
    <td WIDTH="70" VALIGN="TOP"><font SIZE="3">
      <p style="margin-right: 20" align="right">21</font></td>
    <td WIDTH="83" VALIGN="TOP"><font SIZE="3">
      <p style="margin-right: 40" align="right">24</font></td>
    <td WIDTH="30" VALIGN="TOP">&nbsp;</td>
    <td WIDTH="103" VALIGN="TOP"><font SIZE="3">
      <p style="margin-right: 40" align="right">78</font></td>
    <td WIDTH="95" VALIGN="TOP"><font SIZE="3">
      <p style="margin-right: 40" align="right">37</font></td>
  </tr>
  <tr>
    <td WIDTH="296" VALIGN="TOP"><font SIZE="3">
      <p>Income tax expense (benefit) on above items</font></td>
    <td WIDTH="6" VALIGN="TOP">&nbsp;</td>
    <td WIDTH="70" VALIGN="BOTTOM"><font SIZE="3">
      <p style="margin-right: 20" align="right">1</font></td>
    <td WIDTH="83" VALIGN="BOTTOM"><font SIZE="3">
      <p style="margin-right: 40" align="right">(8)</font></td>
    <td WIDTH="30" VALIGN="BOTTOM">&nbsp;</td>
    <td WIDTH="103" VALIGN="BOTTOM"><font SIZE="3">
      <p style="margin-right: 40" align="right">(14)</font></td>
    <td WIDTH="95" VALIGN="BOTTOM"><font SIZE="3">
      <p style="margin-right: 40" align="right">(13)</font></td>
  </tr>
  <tr>
    <td WIDTH="298" VALIGN="TOP" style="border-top-style: solid; border-top-width: 1; border-bottom-style: solid">&nbsp;</td>
    <td WIDTH="8" VALIGN="TOP" style="border-top-style: solid; border-top-width: 1; border-bottom-style: solid">&nbsp;</td>
    <td WIDTH="72" VALIGN="TOP" style="border-top-style: solid; border-top-width: 1; border-bottom-style: solid"><font SIZE="3">
      <p style="margin-right: 20" align="right">$22</font></td>
    <td WIDTH="85" VALIGN="TOP" style="border-top-style: solid; border-top-width: 1; border-bottom-style: solid"><font SIZE="3">
      <p style="margin-right: 40" align="right">$16</font></td>
    <td WIDTH="32" VALIGN="TOP" style="border-top-style: solid; border-top-width: 1; border-bottom-style: solid">&nbsp;</td>
    <td WIDTH="105" VALIGN="TOP" style="border-top-style: solid; border-top-width: 1; border-bottom-style: solid"><font SIZE="3">
      <p style="margin-right: 40" align="right">$64</font></td>
    <td WIDTH="97" VALIGN="TOP" style="border-top-style: solid; border-top-width: 1; border-bottom-style: solid"><font SIZE="3">
      <p style="margin-right: 40" align="right">$24</font></td>
  </tr>
</table>
      </center>
    </div>
<b><font SIZE="3">
<p>Income&#160;Taxes</p>
</font></b><font SIZE="3">
<p>A reconciliation of the federal statutory income tax rate to the effective
income tax rate is provided below:</p>
</font>
    <div align="center">
      <center>
<table CELLSPACING="1" CELLPADDING="1" WIDTH="734">
  <tr>
    <td WIDTH="39%" VALIGN="TOP">&nbsp;</td>
    <td WIDTH="2%" VALIGN="TOP">&nbsp;</td>
    <td WIDTH="26%" VALIGN="TOP" COLSPAN="2"><font SIZE="3">
      <p ALIGN="CENTER">Three Months Ended</font></td>
    <td WIDTH="5%" VALIGN="TOP">&nbsp;</td>
    <td WIDTH="28%" VALIGN="TOP" COLSPAN="2"><font SIZE="3">
      <p ALIGN="CENTER">Six Months Ended</font></td>
  </tr>
  <tr>
    <td WIDTH="39%" VALIGN="TOP" style="border-top-style: solid; border-top-width: 1; border-bottom-style: solid; border-bottom-width: 1">&nbsp;</td>
    <td WIDTH="2%" VALIGN="TOP" style="border-top-style: solid; border-top-width: 1; border-bottom-style: solid; border-bottom-width: 1">&nbsp;</td>
    <td WIDTH="13%" VALIGN="TOP" style="border-top-style: solid; border-top-width: 1; border-bottom-style: solid; border-bottom-width: 1"><font SIZE="3">
      <p ALIGN="CENTER">July 3,<br>
      2004</font></td>
    <td WIDTH="13%" VALIGN="TOP" style="border-top-style: solid; border-top-width: 1; border-bottom-style: solid; border-bottom-width: 1"><font SIZE="3">
      <p ALIGN="CENTER">June 28,<br>
      2003</font></td>
    <td WIDTH="5%" VALIGN="TOP" style="border-top-style: solid; border-top-width: 1; border-bottom-style: solid; border-bottom-width: 1">&nbsp;</td>
    <td WIDTH="14%" VALIGN="TOP" style="border-top-style: solid; border-top-width: 1; border-bottom-style: solid; border-bottom-width: 1"><font SIZE="3">
      <p ALIGN="CENTER">July 3,<br>
      2004</font></td>
    <td WIDTH="14%" VALIGN="TOP" style="border-top-style: solid; border-top-width: 1; border-bottom-style: solid; border-bottom-width: 1"><font SIZE="3">
      <p ALIGN="CENTER">June 28,<br>
      2003</font></td>
  </tr>
  <tr>
    <td WIDTH="39%" VALIGN="TOP"><font SIZE="3">
      <p>Federal statutory income tax rate</font></td>
    <td WIDTH="2%" VALIGN="TOP">&nbsp;</td>
    <td WIDTH="13%" VALIGN="TOP"><font SIZE="3">
      <p style="margin-right: 20" align="right">35.0%</font></td>
    <td WIDTH="13%" VALIGN="TOP"><font SIZE="3">
      <p style="margin-right: 20" align="right">35.0%</font></td>
    <td WIDTH="5%" VALIGN="TOP">
      <p style="margin-right: 20" align="right">&nbsp;</p>
      </td>
    <td WIDTH="14%" VALIGN="TOP"><font SIZE="3">
      <p style="margin-right: 20" align="right">35.0%</font></td>
    <td WIDTH="14%" VALIGN="TOP"><font SIZE="3">
      <p style="margin-right: 20" align="right">35.0%</font></td>
  </tr>
  <tr>
    <td WIDTH="39%" VALIGN="TOP"><font SIZE="3">
      <p>Increase (decrease) in taxes resulting from:</font></td>
    <td WIDTH="2%" VALIGN="TOP">&nbsp;</td>
    <td WIDTH="13%" VALIGN="TOP">
      <p style="margin-right: 20" align="right">&nbsp;</p>
    </td>
    <td WIDTH="13%" VALIGN="TOP">
      <p style="margin-right: 20" align="right">&nbsp;</p>
    </td>
    <td WIDTH="5%" VALIGN="TOP">
      <p style="margin-right: 20" align="right">&nbsp;</p>
    </td>
    <td WIDTH="14%" VALIGN="TOP">
      <p style="margin-right: 20" align="right">&nbsp;</p>
    </td>
    <td WIDTH="14%" VALIGN="TOP">
      <p style="margin-right: 20" align="right">&nbsp;</p>
    </td>
  </tr>
  <tr>
    <td WIDTH="39%" VALIGN="TOP"><font SIZE="3">
      <p>&#160;&#160;&#160;&#160;&#160;State income taxes</font></td>
    <td WIDTH="2%" VALIGN="TOP">&nbsp;</td>
    <td WIDTH="13%" VALIGN="TOP"><font SIZE="3">
      <p style="margin-right: 20" align="right">2.1</font></td>
    <td WIDTH="13%" VALIGN="TOP"><font SIZE="3">
      <p style="margin-right: 20" align="right">2.7</font></td>
    <td WIDTH="5%" VALIGN="TOP">
      <p style="margin-right: 20" align="right">&nbsp;</p>
      </td>
    <td WIDTH="14%" VALIGN="TOP"><font SIZE="3">
      <p style="margin-right: 20" align="right">2.1</font></td>
    <td WIDTH="14%" VALIGN="TOP"><font SIZE="3">
      <p style="margin-right: 20" align="right">2.7</font></td>
  </tr>
  <tr>
    <td WIDTH="39%" VALIGN="TOP"><font SIZE="3">
      <p>&#160;&#160;&#160;&#160;&#160;ESOP dividends</font></td>
    <td WIDTH="2%" VALIGN="TOP">&nbsp;</td>
    <td WIDTH="13%" VALIGN="TOP"><font SIZE="3">
      <p style="margin-right: 20" align="right">(1.7)</font></td>
    <td WIDTH="13%" VALIGN="TOP"><font SIZE="3">
      <p style="margin-right: 20" align="right">(2.0)</font></td>
    <td WIDTH="5%" VALIGN="TOP">
      <p style="margin-right: 20" align="right">&nbsp;</p>
      </td>
    <td WIDTH="14%" VALIGN="TOP"><font SIZE="3">
      <p style="margin-right: 20" align="right">(1.7)</font></td>
    <td WIDTH="14%" VALIGN="TOP"><font SIZE="3">
      <p style="margin-right: 20" align="right">(2.0)</font></td>
  </tr>
  <tr>
    <td WIDTH="39%" VALIGN="TOP"><font SIZE="3">
      <p>&#160;&#160;&#160;&#160;&#160;Foreign tax rate
      differential</font></td>
    <td WIDTH="2%" VALIGN="TOP">&nbsp;</td>
    <td WIDTH="13%" VALIGN="TOP"><font SIZE="3">
      <p style="margin-right: 20" align="right">(1.2)</font></td>
    <td WIDTH="13%" VALIGN="TOP"><font SIZE="3">
      <p style="margin-right: 20" align="right">(1.8)</font></td>
    <td WIDTH="5%" VALIGN="TOP">
      <p style="margin-right: 20" align="right">&nbsp;</p>
      </td>
    <td WIDTH="14%" VALIGN="TOP"><font SIZE="3">
      <p style="margin-right: 20" align="right">(1.2)</font></td>
    <td WIDTH="14%" VALIGN="TOP"><font SIZE="3">
      <p style="margin-right: 20" align="right">(1.8)</font></td>
  </tr>
  <tr>
    <td WIDTH="39%" VALIGN="TOP"><font SIZE="3">
      <p>&#160;&#160;&#160;&#160;&#160;Export sales benefit</font></td>
    <td WIDTH="2%" VALIGN="TOP">&nbsp;</td>
    <td WIDTH="13%" VALIGN="TOP"><font SIZE="3">
      <p style="margin-right: 20" align="right">(1.0)</font></td>
    <td WIDTH="13%" VALIGN="TOP"><font SIZE="3">
      <p style="margin-right: 20" align="right">(1.3)</font></td>
    <td WIDTH="5%" VALIGN="TOP">
      <p style="margin-right: 20" align="right">&nbsp;</p>
      </td>
    <td WIDTH="14%" VALIGN="TOP"><font SIZE="3">
      <p style="margin-right: 20" align="right">(1.0)</font></td>
    <td WIDTH="14%" VALIGN="TOP"><font SIZE="3">
      <p style="margin-right: 20" align="right">(1.3)</font></td>
  </tr>
  <tr>
    <td WIDTH="39%" VALIGN="TOP"><font SIZE="3">
      <p>&#160;&#160;&#160;&#160;&#160;Other, net</font></td>
    <td WIDTH="2%" VALIGN="TOP">&nbsp;</td>
    <td WIDTH="13%" VALIGN="TOP"><font SIZE="3">
      <p style="margin-right: 20" align="right">1.9</font></td>
    <td WIDTH="13%" VALIGN="TOP"><font SIZE="3">
      <p style="margin-right: 20" align="right">(3.4)</font></td>
    <td WIDTH="5%" VALIGN="TOP">
      <p style="margin-right: 20" align="right">&nbsp;</p>
      </td>
    <td WIDTH="14%" VALIGN="TOP"><font SIZE="3">
      <p style="margin-right: 20" align="right">1.2</font></td>
    <td WIDTH="14%" VALIGN="TOP"><font SIZE="3">
      <p style="margin-right: 20" align="right">(2.4)</font></td>
  </tr>
  <tr>
    <td WIDTH="39%" VALIGN="TOP" style="border-top-style: solid; border-top-width: 1; border-bottom-style: solid"><font SIZE="3">
      <p>Effective income tax rate</font></td>
    <td WIDTH="2%" VALIGN="TOP" style="border-top-style: solid; border-top-width: 1; border-bottom-style: solid">&nbsp;</td>
    <td WIDTH="13%" VALIGN="TOP" style="border-top-style: solid; border-top-width: 1; border-bottom-style: solid"><font SIZE="3">
      <p style="margin-right: 20" align="right">35.1%</font></td>
    <td WIDTH="13%" VALIGN="TOP" style="border-top-style: solid; border-top-width: 1; border-bottom-style: solid"><font SIZE="3">
      <p style="margin-right: 20" align="right">29.2%</font></td>
    <td WIDTH="5%" VALIGN="TOP" style="border-top-style: solid; border-top-width: 1; border-bottom-style: solid">
      <p style="margin-right: 20" align="right">&nbsp;</p>
      </td>
    <td WIDTH="14%" VALIGN="TOP" style="border-top-style: solid; border-top-width: 1; border-bottom-style: solid"><font SIZE="3">
      <p style="margin-right: 20" align="right">34.4%</font></td>
    <td WIDTH="14%" VALIGN="TOP" style="border-top-style: solid; border-top-width: 1; border-bottom-style: solid"><font SIZE="3">
      <p style="margin-right: 20" align="right">30.2%</font></td>
  </tr>
</table>
      </center>
    </div>
<font SIZE="3">
<p ALIGN="JUSTIFY">Other, net includes the impact of Textron&#39;s sale of
its interest in two Brazilian&#45;based joint ventures in the Industrial
segment during the second quarter of 2004 and the sale of its interest in an
Italian automotive joint venture in the first quarter of 2003.</p>
<p ALIGN="JUSTIFY">The full year 2004 effective tax rate is now expected to be
approximately 33%.</p>
<b>
<p ALIGN="JUSTIFY">Discontinued Operations</p>
</b>
<p ALIGN="JUSTIFY">Discontinued operations in the second quarter and first half
of 2003 resulted in a net loss of $22 million, primarily due to a
pre&#45;tax asset impairment charge of $30 million at OmniQuip.</p>
<b>
<p>Outlook</p>
</b>
<p ALIGN="JUSTIFY">We experienced improvements in manufacturing volume in
certain non&#45;aircraft businesses and stronger commercial aircraft orders
in the first half of 2004, reflecting good growth or signs of solid recovery in
most of our end markets. At Cessna, the estimated sale of jets in 2004 has been
increased to about 180 jets from the previous estimate of between 170 to 175
jets. Total 2004 revenues for Textron are now expected to increase more than 4%
compared to 2003. Continued improvement is expected in overall segment profit
and margins as a result of the impact from the higher volumes and the benefits
of restructuring and other cost reduction initiatives.</p>
<p ALIGN="JUSTIFY">On June 30, 2004, Textron acquired an additional 25% interest
in CitationShares, its joint venture with TAG Aviation USA (&quot;TAG&quot;),
for cash and the assumption of debt guarantees previously provided by TAG. As a
result of this&nbsp;</p>
<p ALIGN="right">22.</p>
<p ALIGN="JUSTIFY"> transaction, Textron owns 75% of CitationShares and has
consolidated its financial results prospectively as of&nbsp;
</font>
<font SIZE="3">
June&#160;30, 2004.
CitationShares sells fractional share interests in business jets in addition to
offering a non&#45;equity jet card service. Due to the consolidation,
Citation jet orders received from CitationShares, which amount to approximately
$416 million at July 3, 2004, have been removed from Textron&#39;s backlog.
The expected financial statement impact of this consolidation on
full&#45;year 2004 revenue is anticipated to be an increase of approximately
$75 million, while the impact on segment profit is not anticipated to be
material.</p>
</font><b><font SIZE="4">
<p style="border-bottom-style: solid">&nbsp;</p>
<p>Segment Analysis</font></b></p>
<b><font SIZE="3">
<p ALIGN="JUSTIFY">Bell&#160;Revenues</p>
</font></b><font SIZE="3">
<p ALIGN="JUSTIFY">The Bell segment&#39;s revenues decreased
$29&#160;million in the second quarter of 2004 compared to 2003 due to lower
revenue of $31 million in the U.S. Government business partially offset by
higher sales volume of $2 million in the commercial business. U.S. Government
revenues decreased due to lower revenue of $54 million on the V&#45;22
program, partially offset by higher revenue of $14 million on the H&#45;1
upgrade program and higher sales of $12 million for air&#45;launched
weapons. The lower V&#45;22 revenue was primarily due to the decreasing
development effort of $38 million and $20 million of lower effort on production
lots three through six as these contracts near completion. Revenue for the
development contracts and production lots through lot six is recognized as costs
are incurred. For production lots that began in 2003 and all subsequent
production lots, the policy is to recognize revenue on an as&#45;delivered
basis. This transition has resulted in lower overall V&#45;22 production
revenue as no units from these lots were delivered in the period. Commercial
revenues increased modestly as higher foreign military sales of $44 million were
largely offset by lower sales of $42 million of other commercial helicopters,
primarily due to the allocation of seven model 412s to meet the foreign military
deliveries. Additionally, $7 million of lower Huey II kit sales were offset by
higher volume in the aircraft engine business.</p>
<p ALIGN="JUSTIFY">The Bell segment&#39;s revenues decreased
$58&#160;million in the first half of 2004 compared to 2003 due to lower
revenue of $30 million in the U.S. Government business and lower commercial
sales of $28 million. U.S. Government sales decreased primarily due to lower
revenue of $51 million on the V&#45;22 program and an $8 million reduction
in revenue recorded in the first quarter of 2004 as a result of a proposed
settlement between Bell and the U.S. Government to resolve a potential claim.
(See Note 12 to the financial statement for details regarding the proposed
settlement.) These decreases were partially offset by $18 million of higher
military spares volume to support the war in Iraq and higher H&#45;1 revenue
of $6 million. Commercial revenues decreased primarily due to lower helicopter
sales to commercial customers of $60 million and lower Huey II kit sales of $6
million, partially offset by higher foreign military sales of
$22&#160;million and higher revenue of $13 million in the aircraft engine
business.</p>
<b>
<p ALIGN="JUSTIFY">Bell&#160;Segment&#160;Profit</p>
</b>
<p ALIGN="JUSTIFY">Segment profit in the second quarter of 2004 was $15 million
greater than in 2003 due to higher profit of $11&#160;million in the
commercial business and higher profit of $4 million in the U.S. Government
business. Higher profit in the commercial business was primarily due to the $15
million impact of the higher foreign military sales volume and the favorable
resolution of a $6 million warranty issue, partially offset by the $9 million
impact of lower sales volume of other commercial helicopters. U.S. Government
profit increased primarily due to the $3 million impact of higher volume and a
favorable mix on air&#45;launched weapons.</p>
<p ALIGN="JUSTIFY">Segment profit in the first half of 2004 was $27 million
greater than in 2003 primarily due to higher profit of $22&#160;million in
the commercial business and $5 million in the U.S. Government business.
Commercial profit increased primarily due to the $16 million impact of the
higher foreign military sales, the favorable resolution of a $6 million warranty
issue and the $5 million favorable impact of a nonrecurring 2003 charge related
to a recall, inspection and customer care program at the aircraft engine
business. Profit in the U.S. Government business increased $7 million primarily
due to the $7 million impact of higher volume and a favorable mix on
air&#45;launched weapons and $4 million of higher spares profit, partially
offset by $8 million accrued in the first quarter for a proposed settlement
between Bell and the U.S. Government to resolve a potential claim.</p>
<p align="right">23.</p>
<b>
<p>Bell&#160;Backlog</p>
</b>
<p>Backlog at Bell Helicopter of $2.5&#160;billion was up $1.1 billion from
the first quarter of 2004. The increase was primarily due to signed contracts
for production lots seven and eight for the V&#45;22 program.</p>
<b>
<p ALIGN="JUSTIFY">Cessna&#160;Revenues</p>
</b>
<p ALIGN="JUSTIFY">The Cessna segment revenues decreased $75&#160;million in
the second quarter of 2004 compared to 2003, primarily due to lower used
aircraft volume of $48 million, lower Citation business jet volume of $35
million, and lower single engine aircraft sales of $20 million. The lower
business jet revenue was principally due to the actions taken during 2003 to
adjust production schedules to decreased demand, while delayed certification of
the Garmin 1000 avionics contributed to the lower sales of single engine
aircraft. Jet sales declined to 36 jets in the second quarter of 2004 from 57
jets in the second quarter of 2003. Since the business jet production cycle
averages 9 to 12 months, the reduced production schedule in 2003 continued to
impact jet sales through the second quarter of 2004. The lower jet volume was
partially offset by $11 million of higher pricing.</p>
<p ALIGN="JUSTIFY">The Cessna segment revenues decreased $245&#160;million
in the first half of 2004 compared to 2003, primarily due to lower Citation
business jet volume of $243 million, principally due to the actions taken during
2003 to adjust production schedules to decreased demand. Jet sales declined to
70 jets in the first half of 2004 from 107 jets in the first half of 2003. In
addition, lower single engine aircraft sales of $22 million and lower used
aircraft sales of $20 million, were partially offset by higher pricing of $16
million and an $8 million benefit from lower used aircraft overtrade allowances.</p>
<b>
<p ALIGN="JUSTIFY">Cessna&#160;Segment&#160;Profit</p>
</b>
<p ALIGN="JUSTIFY">Segment profit decreased $22&#160;million in the second
quarter of 2004 compared to 2003 largely due to reduced margin of
$23&#160;million from lower volume and $18 million from inflation. These
decreases were partially offset by higher pricing of $11 million, lower used
aircraft valuation adjustments of $6 million, improved cost performance of $5
million and a $4 million benefit due to prior year provisions for residual value
guarantees. The decrease in used aircraft valuation adjustments was primarily
due to the stabilization of market values for used jets in 2004, in comparison
to 2003 when market values were declining.</p>
<p ALIGN="JUSTIFY">Segment profit decreased $59&#160;million in the first
half of 2004 compared to 2003, largely due to reduced margin of
$81&#160;million from lower volume and $31 million from inflation. These
decreases were partially offset by improved cost performance of $24 million, $16
million of higher pricing, a $13 million benefit related to prior year
provisions for residual value guarantees, lower used aircraft valuation
adjustments of $8 million and a $7 million benefit from lower used aircraft
overtrade allowances. The benefit from lower used aircraft overtrade allowances
and valuation adjustments were primarily due to fewer trade&#45;ins and the
stabilization of market values for used jets in 2004, in comparison to 2003 when
market values were declining.</p>
<b>
<p ALIGN="JUSTIFY">Cessna&#160;Backlog</p>
</b>
<p ALIGN="JUSTIFY">Backlog from unaffiliated customers of $4.8&#160;billion
was up from $4.3 billion in the first quarter of 2004. A significant portion of
Cessna&#39;s backlog represents orders from a major fractional shares
aircraft operator.</p>
<p ALIGN="right">24.</p>
<b>
<p ALIGN="JUSTIFY">Fastening&#160;Systems&#160;Revenues</p>
</b>
<p ALIGN="JUSTIFY">The Fastening Systems segment&#39;s revenues increased
$47&#160;million in the second quarter of 2004 compared to 2003, primarily
due to higher volume of $23 million, largely due to improvements in several of
its end markets and a favorable foreign exchange impact of $25 million.</p>
<p ALIGN="JUSTIFY">The Fastening Systems segment&#39;s revenues increased
$115&#160;million in the first half of 2004 compared to 2003, primarily due
to higher volume of $66 million, largely due to improvements in several of its
end markets and a favorable foreign exchange impact of $57 million.</p>
<b>
<p ALIGN="JUSTIFY">Fastening&#160;Systems&#160;Segment&#160;Profit</p>
</b>
<p ALIGN="JUSTIFY">During the first half of 2004, an increase in the global
demand for steel resulted in significantly higher prices for materials used in
the manufacturing process at Fastening Systems, which is a major supplier of
steel fasteners. As a result, Fastening Systems took action to raise prices and
impose surcharges on its steel products to mitigate the impact of higher raw
material costs.</p>
<p ALIGN="JUSTIFY">Segment profit increased $3 million in the second quarter of
2004 compared to 2003 due to $12 million of improved cost performance, the
impact of the higher sales volume of $4 million and favorable foreign exchange
of $2 million. These increases were partially offset by inflation of $16
million. The impact of higher steel prices was $9 million ($4 million, net of
price increases and surcharges to our customers) in the second quarter of 2004.</p>
<p ALIGN="JUSTIFY">Segment profit increased $5 million in the first half of 2004
compared to 2003 due to $20 million of improved cost performance, the impact of
the higher sales volume of $11 million and favorable foreign exchange of $5
million. These increases were partially offset by inflation of $29 million and
lower pricing of $3 million. The impact of higher steel prices was $13 million
($7 million, net of price increases and surcharges to our customers) in the
first half of 2004.</p>
<b>
<p ALIGN="JUSTIFY">Industrial&#160;Revenues</p>
</b>
<p ALIGN="JUSTIFY">The Industrial segment&#39;s revenues increased
$79&#160;million in the second quarter of 2004 compared to 2003, primarily
due to higher sales volume of $45&#160;million, a favorable foreign exchange
impact of $32 million and higher pricing of $7 million. The higher sales volume
primarily reflects increases at Kautex, largely due to new product launches and
growth in its international markets, and to a lesser degree increases at
E&#45;Z&#45;GO and Greenlee in North America.</p>
<p ALIGN="JUSTIFY">The Industrial segment&#39;s revenues increased
$171&#160;million in the first half of 2004 compared to 2003, primarily due
to a favorable foreign exchange impact of $96 million, higher sales volume of
$72&#160;million and higher pricing of $8 million. The higher sales volume
primarily reflects increases at Kautex, largely due to new product launches and
growth in its international markets, and to a lesser degree increases at
E&#45;Z&#45;GO and Greenlee in North America.</p>
<b>
<p ALIGN="JUSTIFY">Industrial&#160;Segment&#160;Profit</p>
</b>
<p ALIGN="JUSTIFY">Segment profit increased $21&#160;million in the second
quarter of 2004 compared to 2003 primarily due to $27 million of improved cost
performance, the $7 million impact of higher volume, higher pricing of $7
million, lower fair market value adjustments of $5 million for used golf cars
and improved credit performance of $2 million. These increases were partially
offset by inflation of $15 million, lower profit of $7 million at a North
American Kautex plant due to increased cost from manufacturing inefficiencies,
and higher warranty costs of $4 million at Kautex.</p>
<p ALIGN="JUSTIFY">Segment profit increased $34&#160;million in the first
half of 2004 compared to 2003 primarily due to $55 million of improved cost
performance, the $9 million impact of higher volume, higher pricing of $9
million, lower fair market value adjustments of $9 million for used golf cars
and improved credit performance of $4 million. These increases were&nbsp;</p>
<p ALIGN="right">25.</p>
<p ALIGN="JUSTIFY"> partially
offset by inflation of $25 million, lower profit of $17 million at a North
American Kautex plant due to increased cost from manufacturing inefficiencies,
and higher warranty costs of $7 million at Kautex.</p>
<p ALIGN="JUSTIFY"><b>Finance&#160;Revenues</p>
</b>
<p ALIGN="JUSTIFY">The Finance segment&#39;s revenues decreased
$5&#160;million in the second quarter of 2004 compared to 2003. The decrease
was primarily due to lower finance charges and discounts of $19 million from
lower average finance receivables of $712 million reflecting the continued
liquidation of non&#45;core assets. The decrease was partially offset by
higher other income of $13 million primarily due to higher securitization and
syndication gains of $8 million.</p>
<p ALIGN="JUSTIFY">The Finance segment&#39;s revenues decreased
$11&#160;million in the first half of 2004 compared to 2003. The decrease
was primarily due to lower finance charges and discounts of $29 million from
lower average finance receivables of $602 million as a result of continued
liquidation of non&#45;core assets. The decrease was partially offset by
higher other income of $18 million primarily due to higher securitization and
syndication gains of $17 million.</p>
<b>
<p ALIGN="JUSTIFY">Finance&#160;Segment&#160;Profit</p>
</b>
<p ALIGN="JUSTIFY">Segment profit increased $13&#160;million in the second
quarter of 2004 compared to 2003 primarily due to a lower provision for loan
losses of $12&#160;million reflecting an improvement in portfolio
performance, and improved net interest margin of $5 million, partially offset by
higher operating expenses of $5 million principally due to higher legal and
collections expense.</p>
<p ALIGN="JUSTIFY">Segment profit increased $21&#160;million in the first
half of 2004 compared to 2003 primarily due to a lower provision for loan losses
of $16&#160;million reflecting an improvement in portfolio performance, and
improved net interest margin of $4 million.</p>
<b>
<p>Finance&#160;Portfolio&#160;Quality</p>
</b>
<p ALIGN="JUSTIFY">The Finance segment&#39;s nonperforming assets include
nonaccrual accounts that are not guaranteed by Textron Manufacturing, for which
interest has been suspended, and repossessed assets. Nonperforming assets
decreased to $148&#160;million in the second quarter of 2004, compared to
$162&#160;million at January 3, 2004, representing 2.5% and 2.8% of finance
assets, respectively. The allowance for losses on receivables as a percentage of
nonaccrual finance receivables was 78.5% at the end of the second quarter of
2004 compared to 78.4% at the end of 2003. Net charge&#45;offs decreased $6
million primarily due to a $16 million decrease in other non&#45;core
portfolios and a $3 million decrease at aircraft finance, reflecting an
improvement in general economic conditions and aircraft values, partially offset
by a $13 million increase in the resort finance business primarily related to
two accounts for which reserves had been previously established.</p>
</font>
<p align="right">26.
</p>
    <font SIZE="3">
<b>
<p>Special Charges by Segment</p>
</b>
<p ALIGN="JUSTIFY">Special charges were $85 million and $52 million in the first
half of 2004 and 2003, respectively, and are summarized below by segment:</p>
</font>
    <div align="center">
      <center>
<table CELLSPACING="1" CELLPADDING="1" WIDTH="701">
  <tr>
    <td WIDTH="134" VALIGN="TOP"><font SIZE="3">
      <p>&nbsp;</p>
      </font></td>
    <td WIDTH="406" VALIGN="TOP" COLSPAN="5"><font SIZE="3">
      <p ALIGN="CENTER" style="border-bottom-style: solid; border-bottom-width: 1">Restructuring Expenses</font></td>
    <td WIDTH="65" VALIGN="TOP">&nbsp;</td>
    <td WIDTH="70" VALIGN="TOP">&nbsp;</td>
  </tr>
  <tr>
    <td WIDTH="136" VALIGN="TOP" style="border-bottom-style: solid; border-bottom-width: 1"><b><font SIZE="3">
      <p><br>
      <br>
      </font></b><font SIZE="3"><i>(In millions)</i></font></td>
    <td WIDTH="75" VALIGN="TOP" style="border-bottom-style: solid; border-bottom-width: 1"><font SIZE="3">
      <p ALIGN="CENTER"><br>
      Severance<br>
      Costs</font></td>
    <td WIDTH="96" VALIGN="TOP" style="border-bottom-style: solid; border-bottom-width: 1"><font SIZE="3">
      <p ALIGN="CENTER"><br>
      Contractual<br>
      Obligations</font></td>
    <td WIDTH="89" VALIGN="TOP" style="border-bottom-style: solid; border-bottom-width: 1"><font SIZE="3">
      <p ALIGN="center">Fixed<br>
      Asset<br>
      Impairments</font></td>
    <td WIDTH="74" VALIGN="TOP" style="border-bottom-style: solid; border-bottom-width: 1"><font SIZE="3">
      <p ALIGN="CENTER">Other<br>
      Associated<br>
      Costs</font></td>
    <td WIDTH="58" VALIGN="TOP" style="border-bottom-style: solid; border-bottom-width: 1"><font SIZE="3">
      <p align="center"><br>
      <br>
      Total</font></td>
    <td WIDTH="67" VALIGN="TOP" style="border-bottom-style: solid; border-bottom-width: 1"><font SIZE="3">
      <p ALIGN="CENTER">Gain on<br>
      Sale of<br>
      Investment</font></td>
    <td WIDTH="72" VALIGN="TOP" style="border-bottom-style: solid; border-bottom-width: 1"><font SIZE="3">
      <p ALIGN="CENTER">Total<br>
      Special<br>
      Charges</font></td>
  </tr>
  <tr>
    <td VALIGN="TOP" COLSPAN="8" width="693"><b><font SIZE="3">
      <p>2004</font></b></td>
  </tr>
  <tr>
    <td WIDTH="134" VALIGN="TOP"><font SIZE="3">
      <p>Cessna</font></td>
    <td WIDTH="73" VALIGN="TOP"><font SIZE="3">
      <p ALIGN="right" style="margin-right: 20">$&nbsp; &#45;</font></td>
    <td WIDTH="94" VALIGN="TOP"><font SIZE="3">
      <p ALIGN="right" style="margin-right: 20">$&nbsp; &#45;</font></td>
    <td WIDTH="87" VALIGN="TOP"><font SIZE="3">
      <p ALIGN="right" style="margin-right: 20">$&nbsp; &#45;</font></td>
    <td WIDTH="72" VALIGN="TOP"><font SIZE="3">
      <p ALIGN="right" style="margin-right: 20">$&nbsp; &#45;</font></td>
    <td WIDTH="56" VALIGN="TOP"><font SIZE="3">
      <p ALIGN="right" style="margin-right: 20">$&nbsp; &#45;</font></td>
    <td WIDTH="65" VALIGN="TOP"><font SIZE="3">
      <p ALIGN="right" style="margin-right: 20">$&nbsp;&nbsp;&nbsp;&nbsp; &#45;</font></td>
    <td WIDTH="70" VALIGN="TOP"><font SIZE="3">
      <p ALIGN="right" style="margin-right: 20">$&nbsp;&nbsp; &#45;</font></td>
  </tr>
  <tr>
    <td WIDTH="134" VALIGN="TOP"><font SIZE="3">
      <p>Fastening Systems</font></td>
    <td WIDTH="73" VALIGN="TOP"><font SIZE="3">
      <p ALIGN="right" style="margin-right: 20">24</font></td>
    <td WIDTH="94" VALIGN="TOP"><font SIZE="3">
      <p ALIGN="right" style="margin-right: 20">&#45;</font></td>
    <td WIDTH="87" VALIGN="TOP"><font SIZE="3">
      <p ALIGN="right" style="margin-right: 20">2</font></td>
    <td WIDTH="72" VALIGN="TOP"><font SIZE="3">
      <p ALIGN="right" style="margin-right: 20">8</font></td>
    <td WIDTH="56" VALIGN="TOP"><font SIZE="3">
      <p ALIGN="right" style="margin-right: 20">34</font></td>
    <td WIDTH="65" VALIGN="TOP"><font SIZE="3">
      <p ALIGN="right" style="margin-right: 20">&#45;</font></td>
    <td WIDTH="70" VALIGN="TOP"><font SIZE="3">
      <p ALIGN="right" style="margin-right: 20">34</font></td>
  </tr>
  <tr>
    <td WIDTH="134" VALIGN="TOP"><font SIZE="3">
      <p>Industrial</font></td>
    <td WIDTH="73" VALIGN="TOP"><font SIZE="3">
      <p ALIGN="right" style="margin-right: 20">11</font></td>
    <td WIDTH="94" VALIGN="TOP"><font SIZE="3">
      <p ALIGN="right" style="margin-right: 20">36</font></td>
    <td WIDTH="87" VALIGN="TOP"><font SIZE="3">
      <p ALIGN="right" style="margin-right: 20">13</font></td>
    <td WIDTH="72" VALIGN="TOP"><font SIZE="3">
      <p ALIGN="right" style="margin-right: 20">3</font></td>
    <td WIDTH="56" VALIGN="TOP"><font SIZE="3">
      <p ALIGN="right" style="margin-right: 20">63</font></td>
    <td WIDTH="65" VALIGN="TOP"><font SIZE="3">
      <p ALIGN="right" style="margin-right: 20">&#45;</font></td>
    <td WIDTH="70" VALIGN="TOP"><font SIZE="3">
      <p ALIGN="right" style="margin-right: 20">63</font></td>
  </tr>
  <tr>
    <td WIDTH="134" VALIGN="TOP"><font SIZE="3">
      <p>Corporate</font></td>
    <td WIDTH="73" VALIGN="TOP"><font SIZE="3">
      <p ALIGN="right" style="margin-right: 20">&#45;</font></td>
    <td WIDTH="94" VALIGN="TOP"><font SIZE="3">
      <p ALIGN="right" style="margin-right: 20">&#45;</font></td>
    <td WIDTH="87" VALIGN="TOP"><font SIZE="3">
      <p ALIGN="right" style="margin-right: 20">&#45;</font></td>
    <td WIDTH="72" VALIGN="TOP"><font SIZE="3">
      <p ALIGN="right" style="margin-right: 20">&#45;</font></td>
    <td WIDTH="56" VALIGN="TOP"><font SIZE="3">
      <p ALIGN="right" style="margin-right: 20">&#45;</font></td>
    <td WIDTH="65" VALIGN="TOP"><font SIZE="3">
      <p ALIGN="right" style="margin-right: 20">(12)</font></td>
    <td WIDTH="70" VALIGN="TOP"><font SIZE="3">
      <p ALIGN="right" style="margin-right: 20">(12)</font></td>
  </tr>
  <tr>
    <td WIDTH="136" VALIGN="TOP" style="border-top-style: solid; border-top-width: 1; border-bottom-style: solid">&nbsp;</td>
    <td WIDTH="75" VALIGN="TOP" style="border-top-style: solid; border-top-width: 1; border-bottom-style: solid"><font SIZE="3">
      <p ALIGN="right" style="margin-right: 20">$35</font></td>
    <td WIDTH="96" VALIGN="TOP" style="border-top-style: solid; border-top-width: 1; border-bottom-style: solid"><font SIZE="3">
      <p ALIGN="right" style="margin-right: 20">$36</font></td>
    <td WIDTH="89" VALIGN="TOP" style="border-top-style: solid; border-top-width: 1; border-bottom-style: solid"><font SIZE="3">
      <p ALIGN="right" style="margin-right: 20">$15</font></td>
    <td WIDTH="74" VALIGN="TOP" style="border-top-style: solid; border-top-width: 1; border-bottom-style: solid"><font SIZE="3">
      <p ALIGN="right" style="margin-right: 20">$11</font></td>
    <td WIDTH="58" VALIGN="TOP" style="border-top-style: solid; border-top-width: 1; border-bottom-style: solid"><font SIZE="3">
      <p ALIGN="right" style="margin-right: 20">$97</font></td>
    <td WIDTH="67" VALIGN="TOP" style="border-top-style: solid; border-top-width: 1; border-bottom-style: solid"><font SIZE="3">
      <p ALIGN="right" style="margin-right: 20">$(12)</font></td>
    <td WIDTH="72" VALIGN="TOP" style="border-top-style: solid; border-top-width: 1; border-bottom-style: solid"><font SIZE="3">
      <p ALIGN="right" style="margin-right: 20">$ 85</font></td>
  </tr>
  <tr>
    <td VALIGN="TOP" COLSPAN="8" width="693"><b><font SIZE="3">
      <p>2003</font></b></td>
  </tr>
  <tr>
    <td WIDTH="134" VALIGN="TOP"><font SIZE="3">
      <p>Cessna</font></td>
    <td WIDTH="73" VALIGN="TOP"><font SIZE="3">
      <p ALIGN="right" style="margin-right: 20">$&nbsp; 4</font></td>
    <td WIDTH="94" VALIGN="TOP"><font SIZE="3">
      <p ALIGN="right" style="margin-right: 20">$&nbsp; &#45;</font></td>
    <td WIDTH="87" VALIGN="TOP"><font SIZE="3">
      <p ALIGN="right" style="margin-right: 20">$&nbsp; &#45;</font></td>
    <td WIDTH="72" VALIGN="TOP"><font SIZE="3">
      <p ALIGN="right" style="margin-right: 20">$&nbsp; &#45;</font></td>
    <td WIDTH="56" VALIGN="TOP"><font SIZE="3">
      <p ALIGN="right" style="margin-right: 20">$ 4</font></td>
    <td WIDTH="65" VALIGN="TOP"><font SIZE="3">
      <p ALIGN="right" style="margin-right: 20">$&nbsp;&nbsp;&nbsp; &#45;</font></td>
    <td WIDTH="70" VALIGN="TOP"><font SIZE="3">
      <p ALIGN="right" style="margin-right: 20">$&nbsp;&nbsp; 4</font></td>
  </tr>
  <tr>
    <td WIDTH="134" VALIGN="TOP"><font SIZE="3">
      <p>Fastening Systems</font></td>
    <td WIDTH="73" VALIGN="TOP"><font SIZE="3">
      <p ALIGN="right" style="margin-right: 20">15</font></td>
    <td WIDTH="94" VALIGN="TOP"><font SIZE="3">
      <p ALIGN="right" style="margin-right: 20">&#45;</font></td>
    <td WIDTH="87" VALIGN="TOP"><font SIZE="3">
      <p ALIGN="right" style="margin-right: 20">&#45;</font></td>
    <td WIDTH="72" VALIGN="TOP"><font SIZE="3">
      <p ALIGN="right" style="margin-right: 20">1</font></td>
    <td WIDTH="56" VALIGN="TOP"><font SIZE="3">
      <p ALIGN="right" style="margin-right: 20">16</font></td>
    <td WIDTH="65" VALIGN="TOP"><font SIZE="3">
      <p ALIGN="right" style="margin-right: 20">&#45;</font></td>
    <td WIDTH="70" VALIGN="TOP"><font SIZE="3">
      <p ALIGN="right" style="margin-right: 20">16</font></td>
  </tr>
  <tr>
    <td WIDTH="134" VALIGN="TOP"><font SIZE="3">
      <p>Industrial</font></td>
    <td WIDTH="73" VALIGN="TOP"><font SIZE="3">
      <p ALIGN="right" style="margin-right: 20">12</font></td>
    <td WIDTH="94" VALIGN="TOP"><font SIZE="3">
      <p ALIGN="right" style="margin-right: 20">(1)</font></td>
    <td WIDTH="87" VALIGN="TOP"><font SIZE="3">
      <p ALIGN="right" style="margin-right: 20">9</font></td>
    <td WIDTH="72" VALIGN="TOP"><font SIZE="3">
      <p ALIGN="right" style="margin-right: 20">9</font></td>
    <td WIDTH="56" VALIGN="TOP"><font SIZE="3">
      <p ALIGN="right" style="margin-right: 20">29</font></td>
    <td WIDTH="65" VALIGN="TOP"><font SIZE="3">
      <p ALIGN="right" style="margin-right: 20">&#45;</font></td>
    <td WIDTH="70" VALIGN="TOP"><font SIZE="3">
      <p ALIGN="right" style="margin-right: 20">29</font></td>
  </tr>
  <tr>
    <td WIDTH="134" VALIGN="TOP"><font SIZE="3">
      <p>Corporate</font></td>
    <td WIDTH="73" VALIGN="TOP"><font SIZE="3">
      <p ALIGN="right" style="margin-right: 20">3</font></td>
    <td WIDTH="94" VALIGN="TOP"><font SIZE="3">
      <p ALIGN="right" style="margin-right: 20">&#45;</font></td>
    <td WIDTH="87" VALIGN="TOP"><font SIZE="3">
      <p ALIGN="right" style="margin-right: 20">&#45;</font></td>
    <td WIDTH="72" VALIGN="TOP"><font SIZE="3">
      <p ALIGN="right" style="margin-right: 20">&#45;</font></td>
    <td WIDTH="56" VALIGN="TOP"><font SIZE="3">
      <p ALIGN="right" style="margin-right: 20">3</font></td>
    <td WIDTH="65" VALIGN="TOP"><font SIZE="3">
      <p ALIGN="right" style="margin-right: 20">&#45;</font></td>
    <td WIDTH="70" VALIGN="TOP"><font SIZE="3">
      <p ALIGN="right" style="margin-right: 20">3</font></td>
  </tr>
  <tr>
    <td WIDTH="136" VALIGN="TOP" style="border-top-style: solid; border-top-width: 1; border-bottom-style: solid">&nbsp;</td>
    <td WIDTH="75" VALIGN="TOP" style="border-top-style: solid; border-top-width: 1; border-bottom-style: solid"><font SIZE="3">
      <p ALIGN="right" style="margin-right: 20">$34</font></td>
    <td WIDTH="96" VALIGN="TOP" style="border-top-style: solid; border-top-width: 1; border-bottom-style: solid"><font SIZE="3">
      <p ALIGN="right" style="margin-right: 20">$(1)</font></td>
    <td WIDTH="89" VALIGN="TOP" style="border-top-style: solid; border-top-width: 1; border-bottom-style: solid"><font SIZE="3">
      <p ALIGN="right" style="margin-right: 20">$ 9</font></td>
    <td WIDTH="74" VALIGN="TOP" style="border-top-style: solid; border-top-width: 1; border-bottom-style: solid"><font SIZE="3">
      <p ALIGN="right" style="margin-right: 20">$10</font></td>
    <td WIDTH="58" VALIGN="TOP" style="border-top-style: solid; border-top-width: 1; border-bottom-style: solid"><font SIZE="3">
      <p ALIGN="right" style="margin-right: 20">$52</font></td>
    <td WIDTH="67" VALIGN="TOP" style="border-top-style: solid; border-top-width: 1; border-bottom-style: solid"><font SIZE="3">
      <p ALIGN="right" style="margin-right: 20">$&nbsp;&nbsp;&nbsp; &#45;</font></td>
    <td WIDTH="72" VALIGN="TOP" style="border-top-style: solid; border-top-width: 1; border-bottom-style: solid"><font SIZE="3">
      <p ALIGN="right" style="margin-right: 20">$52</font></td>
  </tr>
</table>
      </center>
      </div>
<b><font SIZE="4">
<p ALIGN="JUSTIFY">Liquidity and Capital Resources</p>
</font></b><font SIZE="3">
<p ALIGN="JUSTIFY">The Statements of Cash Flows for Textron Inc. and for the
independent borrowing group, Textron Manufacturing, are provided on pages 4 and
17, respectively. Textron Manufacturing&#39;s operating cash flow includes
dividends received from Textron Finance of $67 million and $35 million in the
first half of 2004 and 2003, respectively. At July&#160;3, 2004, Textron
Finance had $1.7 billion in debt, $394 million in other liabilities and $34
million of deferred income taxes that are due within the next twelve months.</p>
<p ALIGN="JUSTIFY">Textron Manufacturing&#39;s debt (net of cash) to total
capital ratio as of July&#160;3, 2004 was 24.8%, compared with 29.5% at
January 3, 2004.</p>
<p ALIGN="JUSTIFY">For liquidity purposes, Textron Manufacturing and Textron
Finance have a policy of maintaining sufficient unused lines of credit to
support their outstanding commercial paper. Textron Manufacturing has primary
revolving credit facilities of $1.25 billion, of which $1.0 billion will expire
in 2007. In the first quarter of 2004, Textron Manufacturing renegotiated its
$500 million credit facility to reduce it to $250 million and extended the
expiration to 2005. The $250 million facility includes a one&#45;year term
out option, effectively extending its expiration into 2006. Textron Finance also
has bank lines of credit of $1.5 billion of which $500 million was extended to
2005, effective July&#160;26, 2004, and $1.0 billion expires in 2008. The
$500 million facility includes a one&#45;year term out option, effectively
extending its expiration into 2006. Neither Textron Manufacturing nor Textron
Finance had used these lines of credit at July&#160;3, 2004 or at
June&#160;28, 2003. During the first quarter of 2004, Textron Finance
established an Australian dollar (AUD) 100 million facility that expires in
2005, of which AUD 74 million remained unused at July&#160;3, 2004. At
July&#160;3, 2004, the lines of credit not reserved as support for
commercial paper and letters of credit were $1.2 billion for Textron
Manufacturing and $918 million for Textron Finance, compared to $1.5 billion and
$966 million, respectively, at January 3, 2004.</p>
<b>
<p ALIGN="JUSTIFY">Operating&#160;Cash&#160;Flows</p>
</b>
<p ALIGN="JUSTIFY">Cash provided by operating activities of continuing
operations totaled $399 million and $241 million in the first half of 2004 and
2003, respectively. A significant portion of the increase in 2004 related to a
$511 million increase in Textron Manufacturing&#39;s accounts payable and
accrued expenses, largely due to production volume increases at the Cessna and&nbsp;</p>
<p ALIGN="right">27.</p>
<p ALIGN="JUSTIFY">
Bell segments, offset by an increase in inventories of $190 million, primarily
due to increased production of new model aircraft. This increase was partially
offset by a $132 million decrease at Textron Finance primarily due to the timing
of payments of accrued interest and other liabilities, which included an income
tax payment of $60 million in the first quarter of 2004.</p>
<b>
<p ALIGN="JUSTIFY">Investing&#160;Cash&#160;Flows</p>
</b>
<p ALIGN="JUSTIFY">Cash (used) provided by investing activities of continuing
operations totaled $(146) million and $40 million in the first half of 2004 and
2003, respectively. These cash flows largely resulted from the origination,
purchase, repayment and sales, including securitizations, of finance receivables
at Textron Finance. The decrease in cash flows largely resulted from a decrease
in proceeds from receivable sales, including securitizations. The reduction in
proceeds is primarily attributable to the sale of a $95 million franchise
portfolio in the first six months of 2003 as well as $75 million of higher
utilization of the Distribution Finance conduit in 2003.</p>
<p ALIGN="JUSTIFY">C<i>apital&#160;Expenditures</i><br>
Capital expenditures for Textron Manufacturing totaled $146 million and $118
million in the first half of 2004 and 2003, respectively. This includes assets
purchased through capital leases of $21 million and $4 million, respectively.</p>
<b>
<p ALIGN="JUSTIFY">Financing&#160;Cash&#160;Flows</p>
</b>
<p ALIGN="JUSTIFY">Cash used by financing activities of continuing operations
totaled $230 million and $150 million in the first half of 2004 and 2003,
respectively. The increase principally reflects a net reduction of debt
outstanding as a result of cash on&#45;hand from the sale of discontinued
operations at the end of 2003 by Textron Finance. In addition, on July 15, 2004,
Textron Manufacturing paid off a $300 million 6.375% note using cash and
proceeds from commercial paper issuances.</p>
<p ALIGN="JUSTIFY">Under a shelf registration statement filed with the
Securities and Exchange Commission, Textron Finance may issue public debt
securities in one or more offerings up to a total maximum offering of $4
billion. Under this registration statement, Textron Finance issued a $45 million
term note during the first quarter of 2004. The proceeds from this issuance were
used to refinance maturing debt. At July&#160;3, 2004, Textron Finance had
$3.6 billion available under this registration statement. Under a shelf
registration filed with the Securities and Exchange Commission that became
effective August&#160;4, 2004, Textron Manufacturing had $2 billion
available.</p>
<i>
<p ALIGN="JUSTIFY">Principal&#160;Payments&#160;on&#160;Long&#45;Term&#160;Debt<br>
</i>In the first half of 2004 and 2003, Textron Manufacturing made principal
payments of $52 million and $5 million, respectively. In the first half of 2004
and 2003, Textron Finance made principal payments of $616 million and $505
million, respectively. The increase in the first half of 2004 at Textron
Manufacturing is the result of the repayment of $47 million of
CitationShares&#39; debt upon the acquisition of an additional 25% interest
in CitationShares.</p>
<i>
<p ALIGN="JUSTIFY">Stock&#160;Repurchases<br>
</i>In the first half of 2004 and 2003, Textron repurchased 1,302,600 and
1,951,100 shares of common stock, respectively, under its Board authorized share
repurchase program for an aggregate cost of $71 million and $66 million,
respectively. Proceeds from the exercise of stock options increased $89 million
in the first half of 2004 as more options were exercised due to the increasing
stock price.</p>
<i>
<p ALIGN="JUSTIFY">Dividends<br>
</i>Textron&#39;s Board of Directors approved a quarterly dividend per
common share of $.325 in the first and second quarters of 2004 and 2003.
Dividend payments to shareholders totaled $90 million and $89 million in the
first half of 2004 and 2003, respectively.</p>
<p ALIGN="right">28.</p>
<b>
<p ALIGN="JUSTIFY">Discontinued&#160;Operations&#160;Cash&#160;Flows</p>
</b>
<p ALIGN="JUSTIFY">Cash provided (used) by discontinued operations totaled $10
million and $(83) million in the first half of 2004 and 2003, respectively. The
net cash used by Textron Finance discontinued operations totaled $(173) million
in the first half of 2003 and represents the operating and investing activities
of the small business direct portfolio that was sold in December 2003. This is
offset by the cash provided by Textron Manufacturing&#39;s discontinued
operations of $90 million representing the operating and investing activities of
the OmniQuip business that was sold in the third quarter of 2003.</p>
<b>
<p ALIGN="JUSTIFY">Off&#45;Balance&#160;Sheet&#160;Arrangements</p>
</b>
<p ALIGN="JUSTIFY">Textron Manufacturing enters into a forward contract in
Textron common stock on an annual basis. The contract is intended to hedge the
earnings and cash volatility of stock&#45;based incentive compensation
indexed to Textron stock. The forward contract requires annual cash settlement
between the counter parties based upon a number of shares multiplied by the
difference between the strike price and the prevailing Textron common stock
price. A cash payment was received of approximately $26 million on January 22,
2004 upon the settlement of the contract held at year&#45;end. As of
July&#160;3, 2004, the contract was for approximately 2 million shares with
a strike price of $57.51. The market price of the stock was $58.09 at
July&#160;3, 2004 resulting in a receivable of $1 million.</p>
<p ALIGN="JUSTIFY">Textron Finance sells finance receivables utilizing both
securitizations and whole&#45;loan sales. As a result of these transactions,
finance receivables are removed from the balance sheet and the proceeds received
are used to reduce the recorded debt levels. Despite the reduction in the
recorded balance sheet position, Textron Finance generally retains a
subordinated interest in the finance receivables sold through securitizations,
which may affect operating results through periodic fair value adjustments.
Textron Finance utilizes these off&#45;balance sheet financing arrangements
(primarily asset&#45;backed securitizations) to further diversify funding
alternatives. These arrangements are an important source of funding that
provided net proceeds from continuing operations of $248 million in the first
half of 2004, compared with $450 million proceeds in the first half of 2003.</p>
</font><b><font SIZE="4">
<p ALIGN="JUSTIFY">Foreign Exchange Risks</p>
</font></b><font SIZE="3">
<p ALIGN="JUSTIFY">Textron&#39;s financial results are affected by changes
in foreign currency exchange rates and economic conditions in the foreign
markets in which products are manufactured and/or sold. For the first half of
2004, the impact of foreign exchange rate changes from the first half of 2003
increased revenues by approximately $153 million (3.1%) and increased segment
profit by approximately $13 million (3.6%).</p>
</font><b><font SIZE="4">
<p ALIGN="JUSTIFY">Recently Issued Accounting Pronouncements</p>
</font></b><font SIZE="3">
<p ALIGN="JUSTIFY">In May 2004, the FASB issued FSP 106&#45;2, which
provides guidance on the accounting effects of the Medicare Prescription Drug,
Improvement and Modernization Act of 2003 (the &quot;Act&quot;), and as requires
employers to provide certain disclosures regarding the effect of the federal
subsidy provided by the Act (the &quot;subsidy&quot;). FSP 106&#45;2 is
effective for interim periods beginning after June 15, 2004, and provides a
deferral election until such time when the effect of the subsidy on net periodic
benefit cost can be fully evaluated. Textron has elected to defer accounting for
the Act until the third quarter of 2004 when we anticipate that final guidelines
on the eligibility rules for the subsidy will be available. Accordingly, net
periodic benefit cost for the periods reported does not reflect any amount
associated with the subsidy under the Act. Textron has initiated the process of
determining the effect of the Act and the related subsidy on the net periodic
benefit cost, and believes that the subsidy will not have a material impact on
Textron&#39;s financial position or results of operations.</p>
<i>
<p ALIGN="JUSTIFY">Forward&#45;looking Information: Certain statements in
this quarterly report on Form 10&#45;Q and other oral and written statements
made by Textron from time to time are forward&#45;looking statements,
including those that discuss strategies,&nbsp;goals, outlook or other
non&#45;historical matters; or project revenues, income, returns or other
financial measures. These forward&#45;looking statements speak only as of
the date on which they are made, and we undertake no obligation to update&nbsp;</p>
</i>
<p ALIGN="right">29.</p>
<i>
<p ALIGN="JUSTIFY"> or
revise any forward&#45;looking statements. These forward&#45;looking
statements are subject to risks and uncertainties that may cause actual results
to differ materially from those contained in the statements, including the
following: (a) the extent to which Textron is able to achieve savings from its
restructuring plans; (b)&#160;uncertainty in estimating the amount and
timing of restructuring charges and related costs; (c)&#160;changes in
worldwide economic and political conditions that impact interest and foreign
exchange rates; (d)&#160;the occurrence of work stoppages and strikes at key
facilities of Textron or Textron&#39;s customers or suppliers; (e)
government funding and program approvals affecting products being developed or
sold under government programs; (f)&#160;cost and delivery performance under
various program and development contracts; (g)&#160;the adequacy of cost
estimates for various customer care programs including servicing warranties;
(h)&#160;the ability to control costs and successful implementation of
various cost reduction programs; (i)&#160;the timing of certifications of
new aircraft products; (j)&#160;the occurrence of downturns in customer
markets to which Textron products are sold or supplied or where Textron Finance
offers financing; (k)&#160;changes in aircraft delivery schedules or
cancellation of orders; (l)&#160;the impact of changes in tax legislation
(including the expiration of &quot;bonus depreciation&quot; provisions scheduled
to end in 2004); (m)&#160;Textron&#39;s ability to offset, through cost
reductions, raw material price increases and pricing pressure brought by
original equipment manufacturer customers; (n)&#160;the availability and
cost of insurance; (o)&#160;pension plan income falling below current
forecasts; (p)&#160;Textron Finance&#39;s ability to maintain portfolio
credit quality; (q)&#160;Textron Finance&#39;s access to debt financing
at competitive rates; and (r)&#160;uncertainty in estimating contingent
liabilities and establishing reserves tailored to address such contingencies.</p>
</i>
<p ALIGN="right">30.</p>
      </font>
<table CELLSPACING="0" CELLPADDING="1" WIDTH="839">
  <tr>
    <td WIDTH="62" VALIGN="TOP"><b><font SIZE="3">
      <p><a NAME="_Hlk3280111">Item 3.</a></font></b></td>
    <td WIDTH="743" VALIGN="TOP"><b><u><font SIZE="3">
      <p>QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK</font></u></b></td>
    <td WIDTH="22" VALIGN="TOP">&nbsp;</td>
  </tr>
  <tr>
    <td WIDTH="62" VALIGN="TOP">&nbsp;</td>
    <td WIDTH="743" VALIGN="TOP"><font SIZE="3">
      <p ALIGN="JUSTIFY" style="margin-top: 12">There has been no significant change in
      Textron&#39;s exposure to market risk during the first half of 2004.
      For discussion of Textron&#39;s exposure to market risk, refer to Item
      7A, Quantitative and Qualitative Disclosures about Market Risk contained
      in Textron&#39;s Annual Report incorporated by reference in Form
      10&#45;K for the fiscal year 2003.</font></td>
    <td WIDTH="22" VALIGN="TOP">&nbsp;</td>
  </tr>
  <tr>
    <td WIDTH="62" VALIGN="TOP"><b><font SIZE="3">
      <p>Item 4.</font></b></td>
    <td WIDTH="743" VALIGN="TOP"><b><u><font SIZE="3">
      <p ALIGN="JUSTIFY" style="margin-top: 12">CONTROLS AND PROCEDURES</font></u></b></td>
    <td WIDTH="22" VALIGN="TOP">&nbsp;</td>
  </tr>
  <tr>
    <td WIDTH="62" VALIGN="TOP">&nbsp;</td>
    <td WIDTH="743" VALIGN="TOP"><font SIZE="3">
      <p ALIGN="JUSTIFY" style="margin-top: 12">We have carried out an evaluation, under the
      supervision and with the participation of our management, including our
      Chairman, President and Chief Executive Officer (the &quot;CEO&quot;) and
      our Executive Vice President and Chief Financial Officer (the
      &quot;CFO&quot;), of the effectiveness of the design and operation of our
      disclosure controls and procedures (as defined in Rule 13a&#45;15(e)
      and 15d&#45;15(e) under the Securities Exchange Act of 1934, as
      amended (the &quot;Act&quot;)) as of the end of the fiscal quarter 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&#39;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.</font></td>
    <td WIDTH="22" VALIGN="TOP">&nbsp;</td>
  </tr>
  <tr>
    <td WIDTH="62" VALIGN="TOP">&nbsp;</td>
    <td WIDTH="743" VALIGN="TOP"><font SIZE="3">
      <p ALIGN="JUSTIFY" style="margin-top: 12">There has been no change in our internal control over
      financial reporting during the fiscal quarter covered by this report that
      has materially affected, or is reasonably likely to materially affect, our
      internal control over financial reporting.</font></td>
    <td WIDTH="22" VALIGN="TOP">&nbsp;</td>
  </tr>
</table>
    <font SIZE="3">
<p ALIGN="right">31.</p>
<b>
<p ALIGN="CENTER">PART II. OTHER INFORMATION</p>
</b>
</font>
<table CELLSPACING="0" CELLPADDING="1" WIDTH="837">
  <tr>
    <td WIDTH="60" VALIGN="TOP"><b><font SIZE="3">
      <p style="margin-top: 12">Item 1.</font></b></td>
    <td WIDTH="745" VALIGN="TOP"><b><u><font SIZE="3">
      <p ALIGN="JUSTIFY" style="margin-top: 12">LEGAL PROCEEDINGS</font></u></b></td>
    <td WIDTH="20" VALIGN="TOP">
      <p style="margin-top: 12">&nbsp;</p>
      </td>
  </tr>
  <tr>
    <td WIDTH="60" VALIGN="TOP">
      <p style="margin-top: 12">&nbsp;</p>
    </td>
    <td WIDTH="745" VALIGN="TOP"><font SIZE="3">
      <p ALIGN="JUSTIFY" style="margin-top: 12">As previously reported in Textron&#39;s Annual
      Report on Form 10&#45;K for the fiscal year ended January 3, 2004, two
      identical lawsuits purporting to be class actions were filed in 2002 in
      the United States District Court in Rhode Island against Textron and
      certain present and former officers of Textron and Bell Helicopter by
      Textron shareholders suing on their own behalf and on behalf of a
      purported class of Textron shareholders. A consolidated amended complaint
      alleges that the defendants failed to make certain accounting adjustments
      in response to alleged problems with Bell Helicopter&#39;s
      V&#45;22 and H&#45;1 programs and that the company failed to
      timely write down certain assets of its OmniQuip unit. The complaint seeks
      unspecified compensatory damages. On June 15, 2004, the District Court
      ruled that plaintiffs could not maintain the claims that were based on
      allegations relating to the H&#45;1 program or to OmniQuip, and also
      ruled that all claims against one of the individual defendants should be
      dismissed. The lawsuit will continue with respect to the remaining claims.
      Textron believes the lawsuit is without merit and intends to continue to
      defend it vigorously.</font></td>
    <td WIDTH="20" VALIGN="TOP">
      <p style="margin-top: 12">&nbsp;</p>
      </td>
  </tr>
  <tr>
    <td WIDTH="60" VALIGN="TOP">
      <p style="margin-top: 12">&nbsp;</p>
    </td>
    <td WIDTH="745" VALIGN="TOP"><font SIZE="3">
      <p ALIGN="JUSTIFY" style="margin-top: 12">As previously reported in Textron&#39;s Annual
      Report on Form 10&#45;K for the fiscal year ended January 3, 2004, two
      identical lawsuits, purporting to be class actions on behalf of Textron
      benefit plans and participants and beneficiaries of those plans during
      2000 and 2001, were filed in 2002 in the United States District Court in
      Rhode Island against Textron, the Textron Savings Plan and the
      Plan&#39;s trustee. A consolidated amended complaint alleges breach of
      certain fiduciary duties under ERISA, based on the amount of Plan assets
      invested in Textron stock during 2000 and 2001. The complaint seeks
      equitable relief and compensatory damages on behalf of various Textron
      benefit plans and the participants and beneficiaries of those plans during
      2000 and 2001 to compensate for alleged losses relating to Textron stock
      held as an asset of those plans. Textron&#39;s Motion to Dismiss the
      consolidated amended complaint was granted on June 24, 2003. On May 7,
      2004, the United States Court of Appeals for the First Circuit affirmed
      dismissal of all claims against the Plan&#39;s trustee and against the
      Plan itself, and also affirmed dismissal of certain other claims against
      Textron. However, the Court of Appeals ruled that plaintiffs should be
      permitted to attempt to develop their breach of fiduciary duty claims, and
      remanded those claims to the District Court. On June 19, 2004, Textron
      filed a petition for rehearing <i>en banc</i> with the First Circuit Court
      of Appeals, and that petition is pending. Textron believes the lawsuit is
      without merit and intends to continue to defend it vigorously.</font></td>
    <td WIDTH="20" VALIGN="TOP">
      <p style="margin-top: 12">&nbsp;</p>
      </td>
  </tr>
  <tr>
    <td WIDTH="60" VALIGN="TOP"><b><font SIZE="3">
      <p style="margin-top: 12">Item 2.</font></b></td>
    <td WIDTH="745" VALIGN="TOP"><b><u>
      <p ALIGN="JUSTIFY" style="margin-top: 12">CHANGES IN SECURITIES, USE OF PROCEEDS AND ISSUER
      PURCHASES OF EQUITY SECURITIES</u></b></td>
    <td WIDTH="20" VALIGN="TOP">
      <p style="margin-top: 12">&nbsp;</p>
      </td>
  </tr>
</table>
<b><font SIZE="3">
<p ALIGN="CENTER">ISSUER REPURCHASES OF EQUITY SECURITIES*</p>
</font></b>
      <div align="center">
        <center>
<table CELLSPACING="1" CELLPADDING="1" WIDTH="708">
  <tr>
    <td WIDTH="33%" VALIGN="TOP" style="border-bottom-style: solid; border-bottom-width: 1"><b><font SIZE="3">
      <p ALIGN="CENTER"><br>
      <br>
      </font></b><font SIZE="3"><br>
      <br>
      <br>
      </font></td>
    <td WIDTH="12%" VALIGN="TOP" style="border-bottom-style: solid; border-bottom-width: 1"><font SIZE="3">
      <p ALIGN="CENTER"><br>
      <br>
      Total<br>
      Number of<br>
      Shares Purchased</font></td>
    <td WIDTH="2%" VALIGN="TOP" style="border-bottom-style: solid; border-bottom-width: 1">&nbsp;</td>
    <td WIDTH="14%" VALIGN="TOP" style="border-bottom-style: solid; border-bottom-width: 1"><font SIZE="3">
      <p ALIGN="CENTER"><br>
      Average Price<br>
      Paid per<br>
      Share<br>
      (Excluding<br>
      Commissions)</font></td>
    <td WIDTH="21%" VALIGN="TOP" style="border-bottom-style: solid; border-bottom-width: 1"><font SIZE="3">
      <p ALIGN="CENTER"><br>
      <br>
      Total Number of<br>
      Shares Purchased as<br>
      Part of Publicly<br>
      Announced Plan</font></td>
    <td WIDTH="18%" VALIGN="TOP" style="border-bottom-style: solid; border-bottom-width: 1"><font SIZE="3">
      <p ALIGN="CENTER"><br>
      Maximum<br>
      Number of Shares<br>
      that May Yet Be<br>
      Purchased<br>
      Under the Plan</font></td>
  </tr>
  <tr>
    <td WIDTH="33%" VALIGN="TOP"><font SIZE="3">
      <p ALIGN="JUSTIFY">April 4, 2004 &#45; May 8, 2004</font></td>
    <td WIDTH="12%" VALIGN="TOP"><font SIZE="3">
      <p style="margin-right: 10" align="right">&#160;&#160;&#160;&#160;&#160;&#45;</font></td>
    <td WIDTH="2%" VALIGN="TOP">&nbsp;</td>
    <td WIDTH="14%" VALIGN="TOP"><font SIZE="3">
      <p>&#160;&#160;&#160;&#160;&#160;$&#160;&#160;&#160;&#160;&nbsp; &#160;&#45;</font></td>
    <td WIDTH="21%" VALIGN="TOP"><font SIZE="3">
      <p style="margin-right: 50" align="right">&#160;&#160;&#160;&#160;&#160;&#45;</font></td>
    <td WIDTH="18%" VALIGN="TOP"><font SIZE="3">
      <p ALIGN="CENTER">2,764,501</font></td>
  </tr>
  <tr>
    <td WIDTH="33%" VALIGN="TOP"><font SIZE="3">
      <p ALIGN="JUSTIFY">May 9, 2004 &#45; June 5, 2004</font></td>
    <td WIDTH="12%" VALIGN="TOP"><font SIZE="3">
      <p style="margin-right: 10" align="right">&#160;&#160;&#160;&#160;&#160;15,600</font></td>
    <td WIDTH="2%" VALIGN="TOP">&nbsp;</td>
    <td WIDTH="14%" VALIGN="TOP"><font SIZE="3">
      <p>&#160;&#160;&#160;&#160;&nbsp;$53.16</font></td>
    <td WIDTH="21%" VALIGN="TOP"><font SIZE="3">
      <p style="margin-right: 50" align="right">&#160;&#160;&#160;&#160;&#160;15,600</font></td>
    <td WIDTH="18%" VALIGN="TOP"><font SIZE="3">
      <p ALIGN="CENTER">2,748,901</font></td>
  </tr>
  <tr>
    <td WIDTH="33%" VALIGN="TOP" style="border-bottom-style: solid; border-bottom-width: 1"><font SIZE="3">
      <p ALIGN="JUSTIFY">June 6, 2004 &#45; July 3, 2004</font></td>
    <td WIDTH="12%" VALIGN="TOP" style="border-bottom-style: solid; border-bottom-width: 1"><font SIZE="3">
      <p style="margin-right: 10" align="right">&#160;&#160;&#160;&#160;&#160;&#45;</font></td>
    <td WIDTH="2%" VALIGN="TOP" style="border-bottom-style: solid; border-bottom-width: 1">&nbsp;</td>
    <td WIDTH="14%" VALIGN="TOP" style="border-bottom-style: solid; border-bottom-width: 1"><font SIZE="3">
      <p>&#160;&#160;&#160;&#160;&#160;$&#160;&#160;&#160;&#160;&nbsp; &#160;&#45;</font></td>
    <td WIDTH="21%" VALIGN="TOP" style="border-bottom-style: solid; border-bottom-width: 1"><font SIZE="3">
      <p style="margin-right: 50" align="right">&#160;&#160;&#160;&#160;&#160;&#45;</font></td>
    <td WIDTH="18%" VALIGN="TOP" style="border-bottom-style: solid; border-bottom-width: 1"><font SIZE="3">
      <p ALIGN="CENTER">2,748,901</font></td>
  </tr>
  <tr>
    <td WIDTH="33%" VALIGN="TOP" style="border-bottom-style: solid"><font SIZE="3">
      <p ALIGN="JUSTIFY">&#160;&#160;&#160;&#160;&#160;Total</font></td>
    <td WIDTH="12%" VALIGN="TOP" style="border-bottom-style: solid"><font SIZE="3">
      <p style="margin-right: 10" align="right">&#160;&#160;&#160;&#160;&#160;15,600</font></td>
    <td WIDTH="2%" VALIGN="TOP" style="border-bottom-style: solid">&nbsp;</td>
    <td WIDTH="14%" VALIGN="TOP" style="border-bottom-style: solid"><font SIZE="3">
      <p>&#160;&#160;&#160;&#160;&#160;$53.16</font></td>
    <td WIDTH="21%" VALIGN="TOP" style="border-bottom-style: solid"><font SIZE="3">
      <p style="margin-right: 50" align="right">&#160;&#160;&#160;&#160;&#160;15,600</font></td>
    <td WIDTH="18%" VALIGN="TOP" style="border-bottom-style: solid">&nbsp;</td>
  </tr>
</table>
      </center>
    </div>
<blockquote>
  <font SIZE="3">
  <p ALIGN="JUSTIFY">*Textron
  is authorized to repurchase up to 12 million shares of common stock under its
  current repurchase plan. This plan was announced on August&#160;3, 2001
  and has no expiration date.</p>
  </blockquote>
  <p ALIGN="right" style="margin-left: 0; margin-right: 0">32.</p>
  <b>
  </b></font>
    <div align="center">
      <center>
<table CELLSPACING="0" CELLPADDING="1" WIDTH="726">
  <tr>
    <td WIDTH="52" VALIGN="TOP"><b><font SIZE="3">
      <p ALIGN="JUSTIFY">Item 4.</font></b></td>
    <td WIDTH="666" VALIGN="TOP" COLSPAN="7"><b><font SIZE="3">
      <p>SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS</font></b></td>
  </tr>
  <tr>
    <td WIDTH="52" VALIGN="TOP">
      <p style="margin-top: 12">&nbsp;</p>
    </td>
    <td WIDTH="666" VALIGN="TOP" COLSPAN="7"><font SIZE="3">
      <p style="margin-top: 12">At Textron&#39;s annual meeting of shareholders held on April 28,
      2004, the following items were voted upon:</font></td>
  </tr>
  <tr>
    <td WIDTH="52" VALIGN="TOP">
      <p style="margin-top: 12">&nbsp;</p>
    </td>
    <td WIDTH="36" VALIGN="TOP"><font SIZE="3">
      <p ALIGN="JUSTIFY" style="margin-top: 12">1.</font></td>
    <td WIDTH="626" VALIGN="TOP" COLSPAN="6"><font SIZE="3">
      <p style="margin-top: 12">The following persons were elected to serve as directors in Class II
      for three year terms expiring in 2007 and received the votes listed.</font></td>
  </tr>
  <tr>
    <td WIDTH="52" VALIGN="TOP">&nbsp;</td>
    <td WIDTH="36" VALIGN="TOP">&nbsp;</td>
    <td WIDTH="294" VALIGN="TOP" COLSPAN="2"><u><font SIZE="3">
      <p ALIGN="CENTER">Name</font></u></td>
    <td WIDTH="144" VALIGN="TOP" COLSPAN="3"><u><font SIZE="3">
      <p ALIGN="CENTER">For</font></u></td>
    <td WIDTH="180" VALIGN="TOP"><u><font SIZE="3">
      <p ALIGN="CENTER">Withheld</font></u></td>
  </tr>
  <tr>
    <td WIDTH="52" VALIGN="TOP" HEIGHT="19"><font SIZE="3">
      <p ALIGN="JUSTIFY"><br>
      </font></td>
    <td WIDTH="36" VALIGN="TOP" HEIGHT="19"><font SIZE="3">
      <p ALIGN="JUSTIFY"><br>
      </font></td>
    <td WIDTH="294" VALIGN="TOP" COLSPAN="2" HEIGHT="19"><font SIZE="3">
      <p><br>
      Kathleen M. Bader</font></td>
    <td WIDTH="144" VALIGN="TOP" COLSPAN="3" HEIGHT="19"><font SIZE="3">
      <p ALIGN="CENTER"><br>
      110,813,114</font></td>
    <td WIDTH="180" VALIGN="TOP" HEIGHT="19"><font SIZE="3">
      <p ALIGN="CENTER"><br>
      6,474,661</font></td>
  </tr>
  <tr>
    <td WIDTH="52" VALIGN="TOP">&nbsp;</td>
    <td WIDTH="36" VALIGN="TOP">&nbsp;</td>
    <td WIDTH="294" VALIGN="TOP" COLSPAN="2"><font SIZE="3">
      <p>R. Kerry Clark</font></td>
    <td WIDTH="144" VALIGN="TOP" COLSPAN="3"><font SIZE="3">
      <p ALIGN="CENTER">109,828,708</font></td>
    <td WIDTH="180" VALIGN="TOP"><font SIZE="3">
      <p ALIGN="CENTER">7,459,067</font></td>
  </tr>
  <tr>
    <td WIDTH="52" VALIGN="TOP">&nbsp;</td>
    <td WIDTH="36" VALIGN="TOP">&nbsp;</td>
    <td WIDTH="294" VALIGN="TOP" COLSPAN="2"><font SIZE="3">
      <p ALIGN="JUSTIFY">Ivor J. Evans</font></td>
    <td WIDTH="144" VALIGN="TOP" COLSPAN="3"><font SIZE="3">
      <p ALIGN="CENTER">111,031,515</font></td>
    <td WIDTH="180" VALIGN="TOP"><font SIZE="3">
      <p ALIGN="CENTER">6,256,260</font></td>
  </tr>
  <tr>
    <td WIDTH="52" VALIGN="TOP">&nbsp;</td>
    <td WIDTH="36" VALIGN="TOP">&nbsp;</td>
      </center>
    <td WIDTH="294" VALIGN="TOP" COLSPAN="2"><font SIZE="3">
      <p ALIGN="left">Lord Powell of Bayswater KCMG</font></td>
      <center>
    <td WIDTH="144" VALIGN="TOP" COLSPAN="3"><font SIZE="3">
      <p ALIGN="CENTER">110,794,390</font></td>
    <td WIDTH="180" VALIGN="TOP"><font SIZE="3">
      <p ALIGN="CENTER">6,493,385</font></td>
  </tr>
  <tr>
    <td WIDTH="52" VALIGN="TOP">
      <p style="margin-top: 12">&nbsp;</p>
    </td>
    <td WIDTH="36" VALIGN="TOP">
      <p style="margin-top: 12">&nbsp;</p>
    </td>
    <td WIDTH="626" VALIGN="TOP" COLSPAN="6"><font SIZE="3">
      <p style="margin-top: 12">The following directors have terms of office which continued after the
      meeting: H. Jesse Arnelle, Lewis B. Campbell, Lawrence K. Fish, Joe T.
      Ford, Paul E. Gagn&#233;, Brian H. Rowe, Martin D. Walker and Thomas
      B. Wheeler.</font></td>
  </tr>
  <tr>
    <td WIDTH="52" VALIGN="TOP">
      <p style="margin-top: 12">&nbsp;</p>
    </td>
    <td WIDTH="36" VALIGN="TOP"><font SIZE="3">
      <p ALIGN="JUSTIFY" style="margin-top: 12">2.</font></td>
    <td WIDTH="626" VALIGN="TOP" COLSPAN="6"><font SIZE="3">
      <p style="margin-top: 12">An amendment to the Textron 1999 Long&#45;Term Incentive Plan was
      approved by the following vote:</font></td>
  </tr>
      <tr>
    <td WIDTH="52" VALIGN="TOP">
      <p style="margin-top: 12">&nbsp;</p>
    </td>
    <td WIDTH="36" VALIGN="TOP">
      <p style="margin-top: 12">&nbsp;</p>
    </td>
    <td WIDTH="188" VALIGN="TOP"><u><font SIZE="3">
      <p ALIGN="CENTER" style="margin-top: 12">For</font></u></td>
    <td WIDTH="152" VALIGN="TOP" COLSPAN="2"><u><font SIZE="3">
      <p ALIGN="CENTER" style="margin-top: 12">Against</font></u></td>
    <td WIDTH="94" VALIGN="TOP"><u><font SIZE="3">
      <p ALIGN="CENTER" style="margin-top: 12">Abstain</font></u></td>
    <td WIDTH="180" VALIGN="TOP" COLSPAN="2"><u><font SIZE="3">
      <p ALIGN="CENTER" style="margin-top: 12">Broker Non&#45;Votes</font></u></td>
      </tr>
      <tr>
    <td WIDTH="52" VALIGN="TOP"><font SIZE="3">
      <p ALIGN="JUSTIFY"><br>
      </font></td>
    <td WIDTH="36" VALIGN="TOP"><font SIZE="3">
      <p ALIGN="JUSTIFY"><br>
      </font></td>
    <td WIDTH="188" VALIGN="TOP"><font SIZE="3">
      <p ALIGN="CENTER"><br>
      76,322,258</font></td>
    <td WIDTH="152" VALIGN="TOP" COLSPAN="2"><font SIZE="3">
      <p ALIGN="CENTER"><br>
      22,771,333</font></td>
    <td WIDTH="94" VALIGN="TOP"><font SIZE="3">
      <p ALIGN="CENTER"><br>
      1,564,993</font></td>
    <td WIDTH="180" VALIGN="TOP" COLSPAN="2"><font SIZE="3">
      <p ALIGN="CENTER"><br>
      0</font></td>
      </tr>
  <tr>
    <td WIDTH="52" VALIGN="TOP">
      <p style="margin-top: 12">&nbsp;</p>
    </td>
    <td WIDTH="36" VALIGN="TOP"><font SIZE="3">
      <p ALIGN="JUSTIFY" style="margin-top: 12">3.</font></td>
    <td WIDTH="626" VALIGN="TOP" COLSPAN="6"><font SIZE="3">
      <p ALIGN="JUSTIFY" style="margin-top: 12">A proposal to approve the director stock awards was
      approved by the following vote:</font></td>
  </tr>
  <tr>
    <td WIDTH="52" VALIGN="TOP">
      <p style="margin-top: 12">&nbsp;</p>
    </td>
    <td WIDTH="36" VALIGN="TOP">
      <p style="margin-top: 12">&nbsp;</p>
    </td>
    <td WIDTH="188" VALIGN="TOP"><u><font SIZE="3">
      <p ALIGN="CENTER" style="margin-top: 12">For</font></u></td>
    <td WIDTH="152" VALIGN="TOP" COLSPAN="2"><u><font SIZE="3">
      <p ALIGN="CENTER" style="margin-top: 12">Against</font></u></td>
    <td WIDTH="94" VALIGN="TOP"><u><font SIZE="3">
      <p ALIGN="CENTER" style="margin-top: 12">Abstain</font></u></td>
    <td WIDTH="180" VALIGN="TOP" COLSPAN="2"><u><font SIZE="3">
      <p ALIGN="CENTER" style="margin-top: 12">Broker Non&#45;Votes</font></u></td>
  </tr>
  <tr>
    <td WIDTH="52" VALIGN="TOP"><font SIZE="3">
      <p ALIGN="JUSTIFY"><br>
      </font></td>
    <td WIDTH="36" VALIGN="TOP"><font SIZE="3">
      <p ALIGN="JUSTIFY"><br>
      </font></td>
    <td WIDTH="188" VALIGN="TOP"><font SIZE="3">
      <p ALIGN="CENTER"><br>
      80,933,259</font></td>
    <td WIDTH="152" VALIGN="TOP" COLSPAN="2"><font SIZE="3">
      <p ALIGN="CENTER"><br>
      18,232,764</font></td>
    <td WIDTH="94" VALIGN="TOP"><font SIZE="3">
      <p ALIGN="CENTER"><br>
      1,492,561</font></td>
    <td WIDTH="180" VALIGN="TOP" COLSPAN="2"><font SIZE="3">
      <p ALIGN="CENTER"><br>
      0</font></td>
  </tr>
  <tr>
    <td WIDTH="52" VALIGN="TOP">
      <p style="margin-top: 12">&nbsp;</p>
    </td>
    <td WIDTH="36" VALIGN="TOP"><font SIZE="3">
      <p ALIGN="JUSTIFY" style="margin-top: 12">4.</font></td>
    <td WIDTH="626" VALIGN="TOP" COLSPAN="6"><font SIZE="3">
      <p style="margin-top: 12">The appointment of Ernst & Young LLP as Textron&#39;s
      independent auditors for 2004 was ratified by the following vote:</font></td>
  </tr>
  <tr>
    <td WIDTH="52" VALIGN="TOP">
      <p style="margin-top: 12">&nbsp;</p>
    </td>
    <td WIDTH="36" VALIGN="TOP">
      <p style="margin-top: 12">&nbsp;</p>
    </td>
    <td WIDTH="188" VALIGN="TOP"><u><font SIZE="3">
      <p ALIGN="CENTER" style="margin-top: 12">For</font></u></td>
    <td WIDTH="152" VALIGN="TOP" COLSPAN="2"><u><font SIZE="3">
      <p ALIGN="CENTER" style="margin-top: 12">Against</font></u></td>
    <td WIDTH="94" VALIGN="TOP"><u><font SIZE="3">
      <p ALIGN="CENTER" style="margin-top: 12">Abstain</font></u></td>
    <td WIDTH="180" VALIGN="TOP" COLSPAN="2"><u><font SIZE="3">
      <p ALIGN="CENTER" style="margin-top: 12">Broker Non&#45;Votes</font></u></td>
  </tr>
  <tr>
    <td WIDTH="52" VALIGN="TOP"><font SIZE="3">
      <p ALIGN="JUSTIFY"><br>
      </font></td>
    <td WIDTH="36" VALIGN="TOP"><font SIZE="3">
      <p ALIGN="JUSTIFY"><br>
      </font></td>
    <td WIDTH="188" VALIGN="TOP"><font SIZE="3">
      <p ALIGN="CENTER"><br>
      111,766,197</font></td>
    <td WIDTH="152" VALIGN="TOP" COLSPAN="2"><font SIZE="3">
      <p ALIGN="CENTER"><br>
      4,389,799</font></td>
    <td WIDTH="94" VALIGN="TOP"><font SIZE="3">
      <p ALIGN="CENTER"><br>
      1,131,779</font></td>
    <td WIDTH="180" VALIGN="TOP" COLSPAN="2"><font SIZE="3">
      <p ALIGN="CENTER"><br>
      0</font></td>
  </tr>
  <tr>
    <td WIDTH="52" VALIGN="TOP">
      <p style="margin-top: 12">&nbsp;</p>
    </td>
    <td WIDTH="36" VALIGN="TOP"><font SIZE="3">
      <p ALIGN="JUSTIFY" style="margin-top: 12">5.</font></td>
    <td WIDTH="626" VALIGN="TOP" COLSPAN="6"><font SIZE="3">
      <p ALIGN="JUSTIFY" style="margin-top: 12">A shareholder proposal regarding Textron&#39;s
      military sales was rejected by the following vote:</font></td>
  </tr>
  <tr>
    <td WIDTH="52" VALIGN="TOP">
      <p style="margin-top: 12">&nbsp;</p>
    </td>
    <td WIDTH="36" VALIGN="TOP">
      <p style="margin-top: 12">&nbsp;</p>
    </td>
    <td WIDTH="188" VALIGN="TOP"><u><font SIZE="3">
      <p ALIGN="CENTER" style="margin-top: 12">For</font></u></td>
    <td WIDTH="152" VALIGN="TOP" COLSPAN="2"><u><font SIZE="3">
      <p ALIGN="CENTER" style="margin-top: 12">Against</font></u></td>
    <td WIDTH="94" VALIGN="TOP"><u><font SIZE="3">
      <p ALIGN="CENTER" style="margin-top: 12">Abstain</font></u></td>
    <td WIDTH="180" VALIGN="TOP" COLSPAN="2"><u><font SIZE="3">
      <p ALIGN="CENTER" style="margin-top: 12">Broker Non&#45;Votes</font></u></td>
  </tr>
  <tr>
    <td WIDTH="52" VALIGN="TOP"><font SIZE="3">
      <p ALIGN="JUSTIFY"><br>
      </font></td>
    <td WIDTH="36" VALIGN="TOP"><font SIZE="3">
      <p ALIGN="JUSTIFY"><br>
      </font></td>
    <td WIDTH="188" VALIGN="TOP"><font SIZE="3">
      <p ALIGN="CENTER"><br>
      10,222,942</font></td>
    <td WIDTH="152" VALIGN="TOP" COLSPAN="2"><font SIZE="3">
      <p ALIGN="CENTER"><br>
      80,847,060</font></td>
    <td WIDTH="94" VALIGN="TOP"><font SIZE="3">
      <p ALIGN="CENTER"><br>
      9,588,582</font></td>
    <td WIDTH="180" VALIGN="TOP" COLSPAN="2"><font SIZE="3">
      <p ALIGN="CENTER"><br>
      16,629,191</font></td>
  </tr>
  <tr>
    <td WIDTH="52" VALIGN="TOP">
      <p style="margin-top: 12">&nbsp;</p>
    </td>
    <td WIDTH="36" VALIGN="TOP"><font SIZE="3">
      <p ALIGN="JUSTIFY" style="margin-top: 12">6.</font></td>
    <td WIDTH="626" VALIGN="TOP" COLSPAN="6">
      <p style="margin-top: 12">A shareholder proposal relating to Political Contributions was rejected
      by the following vote:</td>
  </tr>
  <tr>
    <td WIDTH="52" VALIGN="TOP">
      <p style="margin-top: 12">&nbsp;</p>
    </td>
    <td WIDTH="36" VALIGN="TOP">
      <p style="margin-top: 12">&nbsp;</p>
    </td>
    <td WIDTH="188" VALIGN="TOP"><u><font SIZE="3">
      <p ALIGN="CENTER" style="margin-top: 12">For</font></u></td>
    <td WIDTH="152" VALIGN="TOP" COLSPAN="2"><u><font SIZE="3">
      <p ALIGN="CENTER" style="margin-top: 12">Against</font></u></td>
    <td WIDTH="94" VALIGN="TOP"><u><font SIZE="3">
      <p ALIGN="CENTER" style="margin-top: 12">Abstain</font></u></td>
    <td WIDTH="180" VALIGN="TOP" COLSPAN="2"><u><font SIZE="3">
      <p ALIGN="CENTER" style="margin-top: 12">Broker Non&#45;Votes</font></u></td>
  </tr>
  <tr>
    <td WIDTH="52" VALIGN="TOP"><font SIZE="3">
      <p ALIGN="JUSTIFY"><br>
      </font></td>
    <td WIDTH="36" VALIGN="TOP"><font SIZE="3">
      <p ALIGN="JUSTIFY"><br>
      </font></td>
    <td WIDTH="188" VALIGN="TOP"><font SIZE="3">
      <p ALIGN="CENTER"><br>
      13,999,176</font></td>
    <td WIDTH="152" VALIGN="TOP" COLSPAN="2"><font SIZE="3">
      <p ALIGN="CENTER"><br>
      76,842,445</font></td>
    <td WIDTH="94" VALIGN="TOP"><font SIZE="3">
      <p ALIGN="CENTER"><br>
      9,816,963</font></td>
    <td WIDTH="180" VALIGN="TOP" COLSPAN="2"><font SIZE="3">
      <p ALIGN="CENTER"><br>
      16,629,191</font></td>
  </tr>
  <tr>
    <td WIDTH="52" VALIGN="TOP">
      <p style="margin-top: 12">&nbsp;</p>
    </td>
    <td WIDTH="36" VALIGN="TOP"><font SIZE="3">
      <p ALIGN="JUSTIFY" style="margin-top: 12">7.</font></td>
    <td WIDTH="626" VALIGN="TOP" COLSPAN="6">
      <p style="margin-top: 12">A shareholder proposal relating to Charitable Contributions was
      rejected by the following vote:</td>
  </tr>
  <tr>
    <td WIDTH="52" VALIGN="TOP">
      <p style="margin-top: 12">&nbsp;</p>
    </td>
    <td WIDTH="36" VALIGN="TOP">
      <p style="margin-top: 12">&nbsp;</p>
    </td>
    <td WIDTH="188" VALIGN="TOP"><u><font SIZE="3">
      <p ALIGN="CENTER" style="margin-top: 12">For</font></u></td>
    <td WIDTH="152" VALIGN="TOP" COLSPAN="2"><u><font SIZE="3">
      <p ALIGN="CENTER" style="margin-top: 12">Against</font></u></td>
    <td WIDTH="94" VALIGN="TOP"><u><font SIZE="3">
      <p ALIGN="CENTER" style="margin-top: 12">Abstain</font></u></td>
    <td WIDTH="180" VALIGN="TOP" COLSPAN="2"><u><font SIZE="3">
      <p ALIGN="CENTER" style="margin-top: 12">Broker Non&#45;Votes</font></u></td>
  </tr>
  <tr>
    <td WIDTH="52" VALIGN="TOP"><font SIZE="3">
      <p ALIGN="JUSTIFY"><br>
      </font></td>
    <td WIDTH="36" VALIGN="TOP"><font SIZE="3">
      <p ALIGN="JUSTIFY"><br>
      </font></td>
    <td WIDTH="188" VALIGN="TOP"><font SIZE="3">
      <p ALIGN="CENTER"><br>
      6,481,279</font></td>
    <td WIDTH="152" VALIGN="TOP" COLSPAN="2"><font SIZE="3">
      <p ALIGN="CENTER"><br>
      84,034,438</font></td>
    <td WIDTH="94" VALIGN="TOP"><font SIZE="3">
      <p ALIGN="CENTER"><br>
      10,142,867</font></td>
    <td WIDTH="180" VALIGN="TOP" COLSPAN="2"><font SIZE="3">
      <p ALIGN="CENTER"><br>
      16,629,191</font></td>
  </tr>
</table>
      </center>
      </div>
      <font SIZE="3">
<p ALIGN="right">33.</p>
<b></b>
</font>
<table CELLSPACING="0" CELLPADDING="1" WIDTH="806">
  <tr>
    <td WIDTH="64" VALIGN="TOP"><b><font SIZE="3">
      <p ALIGN="JUSTIFY" style="margin-top: 12">Item 6.</font></b></td>
    <td WIDTH="734" VALIGN="TOP" COLSPAN="3"><b><u><font SIZE="3">
      <p ALIGN="JUSTIFY" style="margin-top: 12">EXHIBITS AND REPORTS ON FORM 8&#45;K</font></u></b></td>
  </tr>
  <tr>
    <td WIDTH="64" VALIGN="TOP">
      <p style="margin-top: 12">&nbsp;</p>
    </td>
    <td WIDTH="37" VALIGN="TOP"><font SIZE="3">
      <p ALIGN="JUSTIFY" style="margin-top: 12">(a)</font></td>
    <td WIDTH="693" VALIGN="TOP" COLSPAN="2"><u><font SIZE="3">
      <p ALIGN="JUSTIFY" style="margin-top: 12">Exhibits</font></u></td>
  </tr>
  <tr>
    <td WIDTH="64" VALIGN="TOP">
      <p style="margin-top: 12">&nbsp;</p>
    </td>
    <td WIDTH="37" VALIGN="TOP">
      <p style="margin-top: 12">&nbsp;</p>
    </td>
    <td WIDTH="64" VALIGN="TOP"><font SIZE="3">
      <p style="margin-top: 12">10.1</font></td>
    <td WIDTH="625" VALIGN="TOP"><font SIZE="3">
      <p ALIGN="JUSTIFY" style="margin-top: 12">Form of Non&#45;Qualified Stock Option Agreement</font></td>
  </tr>
  <tr>
    <td WIDTH="64" VALIGN="TOP">
      <p style="margin-top: 12">&nbsp;</p>
    </td>
    <td WIDTH="37" VALIGN="TOP">
      <p style="margin-top: 12">&nbsp;</p>
    </td>
    <td WIDTH="64" VALIGN="TOP"><font SIZE="3">
      <p style="margin-top: 12">10.2</font></td>
    <td WIDTH="625" VALIGN="TOP"><font SIZE="3">
      <p ALIGN="JUSTIFY" style="margin-top: 12">Form of Incentive Stock Option Agreement</font></td>
  </tr>
  <tr>
    <td WIDTH="64" VALIGN="TOP">
      <p style="margin-top: 12">&nbsp;</p>
    </td>
    <td WIDTH="37" VALIGN="TOP">
      <p style="margin-top: 12">&nbsp;</p>
    </td>
    <td WIDTH="64" VALIGN="TOP"><font SIZE="3">
      <p style="margin-top: 12">10.3</font></td>
    <td WIDTH="625" VALIGN="TOP"><font SIZE="3">
      <p ALIGN="JUSTIFY" style="margin-top: 12">Form of Restricted Stock Grant Agreement</font></td>
  </tr>
  <tr>
    <td WIDTH="64" VALIGN="TOP">
      <p style="margin-top: 12">&nbsp;</p>
    </td>
    <td WIDTH="37" VALIGN="TOP">
      <p style="margin-top: 12">&nbsp;</p>
    </td>
    <td WIDTH="64" VALIGN="TOP"><font SIZE="3">
      <p style="margin-top: 12">12.1</font></td>
    <td WIDTH="625" VALIGN="TOP"><font SIZE="3">
      <p ALIGN="JUSTIFY" style="margin-top: 12">Computation of ratio of income to fixed charges of
      Textron Manufacturing</font></td>
  </tr>
  <tr>
    <td WIDTH="64" VALIGN="TOP">
      <p style="margin-top: 12">&nbsp;</p>
    </td>
    <td WIDTH="37" VALIGN="TOP">
      <p style="margin-top: 12">&nbsp;</p>
    </td>
    <td WIDTH="64" VALIGN="TOP"><font SIZE="3">
      <p style="margin-top: 12">12.2</font></td>
    <td WIDTH="625" VALIGN="TOP"><font SIZE="3">
      <p ALIGN="JUSTIFY" style="margin-top: 12">Computation of ratio of income to fixed charges of
      Textron Inc. including all majority&#45;owned subsidiaries</font></td>
  </tr>
  <tr>
    <td WIDTH="64" VALIGN="TOP">
      <p style="margin-top: 12">&nbsp;</p>
    </td>
    <td WIDTH="37" VALIGN="TOP">
      <p style="margin-top: 12">&nbsp;</p>
    </td>
    <td WIDTH="64" VALIGN="TOP"><font SIZE="3">
      <p style="margin-top: 12">31.1</font></td>
    <td WIDTH="625" VALIGN="TOP"><font SIZE="3">
      <p ALIGN="JUSTIFY" style="margin-top: 12">Certification of Chief Executive Officer Pursuant to
      Rule 13a&#45;14(a)</font></td>
  </tr>
  <tr>
    <td WIDTH="64" VALIGN="TOP">
      <p style="margin-top: 12">&nbsp;</p>
    </td>
    <td WIDTH="37" VALIGN="TOP">
      <p style="margin-top: 12">&nbsp;</p>
    </td>
    <td WIDTH="64" VALIGN="TOP"><font SIZE="3">
      <p style="margin-top: 12">31.2</font></td>
    <td WIDTH="625" VALIGN="TOP"><font SIZE="3">
      <p ALIGN="JUSTIFY" style="margin-top: 12">Certification of Chief Financial Officer Pursuant to
      Rule 13a&#45;14(a)</font></td>
  </tr>
  <tr>
    <td WIDTH="64" VALIGN="TOP">
      <p style="margin-top: 12">&nbsp;</p>
    </td>
    <td WIDTH="37" VALIGN="TOP">
      <p style="margin-top: 12">&nbsp;</p>
    </td>
    <td WIDTH="64" VALIGN="TOP"><font SIZE="3">
      <p style="margin-top: 12">32.1</font></td>
    <td WIDTH="625" VALIGN="TOP"><font SIZE="3">
      <p ALIGN="JUSTIFY" style="margin-top: 12">Certification of Chief Executive Officer Pursuant to
      Rule 13a&#45;14(b) and 18 U.S.C. 1350</font></td>
  </tr>
  <tr>
    <td WIDTH="64" VALIGN="TOP">
      <p style="margin-top: 12">&nbsp;</p>
    </td>
    <td WIDTH="37" VALIGN="TOP">
      <p style="margin-top: 12">&nbsp;</p>
    </td>
    <td WIDTH="64" VALIGN="TOP"><font SIZE="3">
      <p style="margin-top: 12">32.2</font></td>
    <td WIDTH="625" VALIGN="TOP"><font SIZE="3">
      <p ALIGN="JUSTIFY" style="margin-top: 12">Certification of Chief Financial Officer Pursuant to
      Rule 13a&#45;14(b) and 18 U.S.C. 1350</font></td>
  </tr>
  <tr>
    <td WIDTH="64" VALIGN="TOP">
      <p style="margin-top: 12">&nbsp;</p>
    </td>
    <td WIDTH="37" VALIGN="TOP"><font SIZE="3">
      <p ALIGN="JUSTIFY" style="margin-top: 12">(b)</font></td>
    <td WIDTH="693" VALIGN="TOP" COLSPAN="2"><u><font SIZE="3">
      <p ALIGN="JUSTIFY" style="margin-top: 12">Reports on Form 8&#45;K</font></u></td>
  </tr>
  <tr>
    <td WIDTH="64" VALIGN="TOP">
      <p style="margin-top: 12">&nbsp;</p>
    </td>
    <td WIDTH="37" VALIGN="TOP">
      <p style="margin-top: 12">&nbsp;</p>
    </td>
    <td WIDTH="693" VALIGN="TOP" COLSPAN="2"><font SIZE="3">
      <p ALIGN="JUSTIFY" style="margin-top: 12">On April 22, 2004, Textron submitted a Report on Form
      8&#45;K incorporating, under Items 7 and 12, Textron&#39;s press
      release announcing Textron&#39;s first quarter 2004 earnings.</font></td>
  </tr>
  <tr>
    <td WIDTH="64" VALIGN="TOP">
      <p style="margin-top: 12">&nbsp;</p>
    </td>
    <td WIDTH="37" VALIGN="TOP">
      <p style="margin-top: 12">&nbsp;</p>
    </td>
    <td WIDTH="693" VALIGN="TOP" COLSPAN="2"><font SIZE="3">
      <p ALIGN="JUSTIFY" style="margin-top: 12">On June 28, 2004, Textron submitted a Report on Form
      8&#45;K reporting, under Item 5, the resignation of Steven R. Loranger
      as Textron&#39;s Executive Vice President and Chief Operating Officer.</font></td>
  </tr>
</table>
    <font SIZE="3">
<b>
<p ALIGN="JUSTIFY">&nbsp;</p>
</b>
<p ALIGN="right">34.</p>
<blockquote>
</font><font SIZE="3"><u>
<p ALIGN="CENTER"><a NAME="_Hlk3280745">SIGNATURES</a></p>
</blockquote>
</u>
<p ALIGN="JUSTIFY">&#160;&#160;&#160;&#160;&#160;Pursuant to
the requirements of the Securities Exchange Act of 1934, the registrant has duly
caused this report to be signed on its behalf by the undersigned thereunto duly
authorized.</p>
<p ALIGN="JUSTIFY">&nbsp;</p>
</font>
<table CELLSPACING="1" WIDTH="842">
  <tr>
    <td WIDTH="51" VALIGN="TOP">&nbsp;</td>
    <td WIDTH="186" VALIGN="TOP">&nbsp;</td>
    <td WIDTH="225" VALIGN="TOP">&nbsp;</td>
    <td WIDTH="354" VALIGN="TOP"><font SIZE="3">
      <p>TEXTRON INC.<br>
      </font></td>
  </tr>
  <tr>
    <td WIDTH="51" VALIGN="TOP"><font SIZE="3">
      <p>Date:</font></td>
    <td WIDTH="186" VALIGN="TOP"><font SIZE="3">
      <p style="border-bottom-style: solid; border-bottom-width: 1">&#160;August 10, 2004</font></td>
    <td WIDTH="225" VALIGN="TOP">&nbsp;</td>
    <td WIDTH="354" VALIGN="TOP"><font SIZE="3">
      <p style="border-bottom-style: solid; border-bottom-width: 1">/s/R. L. Yates</font></td>
  </tr>
  <tr>
    <td WIDTH="51" VALIGN="TOP"><font SIZE="3">
      <p><br>
      <br>
      <br>
      </font></td>
    <td WIDTH="186" VALIGN="TOP"><font SIZE="3">
      <p><br>
      <br>
      <br>
      </font></td>
    <td WIDTH="225" VALIGN="TOP"><font SIZE="3">
      <p><br>
      <br>
      <br>
      </font></td>
    <td WIDTH="354" VALIGN="TOP"><font SIZE="3">
      <p>R. L. Yates<br>
      Vice President and Controller<br>
      (principal accounting officer)</font></td>
  </tr>
</table>
    <font SIZE="3">
<p ALIGN="right">35.</p>
<b>
<p ALIGN="CENTER">LIST OF EXHIBITS</p>
</b>
</font><font SIZE="3">
<p>The following exhibits are filed as part of this report on Form 10&#45;Q:</p>
</font><u>
<p ALIGN="CENTER">Name of Exhibit</p>
</u>
<table CELLSPACING="0" CELLPADDING="1" WIDTH="726">
  <tr>
    <td WIDTH="9%" VALIGN="TOP"><font SIZE="3">
      <p style="margin-top: 12">10.1</font></td>
    <td WIDTH="89%" VALIGN="TOP"><font SIZE="3">
      <p style="margin-top: 12">Form of Non&#45;Qualified Stock Option Agreement</font></td>
    <td WIDTH="2%" VALIGN="TOP">
      <p style="margin-top: 12">&nbsp;</p>
      </td>
  </tr>
  <tr>
    <td WIDTH="9%" VALIGN="TOP"><font SIZE="3">
      <p style="margin-top: 12">10.2</font></td>
    <td WIDTH="89%" VALIGN="TOP"><font SIZE="3">
      <p style="margin-top: 12">Form of Incentive Stock Option Agreement</font></td>
    <td WIDTH="2%" VALIGN="TOP">
      <p style="margin-top: 12">&nbsp;</p>
      </td>
  </tr>
  <tr>
    <td WIDTH="9%" VALIGN="TOP"><font SIZE="3">
      <p style="margin-top: 12">10.3</font></td>
    <td WIDTH="89%" VALIGN="TOP"><font SIZE="3">
      <p style="margin-top: 12">Form of Restricted Stock Grant Agreement</font></td>
    <td WIDTH="2%" VALIGN="TOP">
      <p style="margin-top: 12">&nbsp;</p>
      </td>
  </tr>
  <tr>
    <td WIDTH="9%" VALIGN="TOP"><font SIZE="3">
      <p style="margin-top: 12">12.1</font></td>
    <td WIDTH="89%" VALIGN="TOP"><font SIZE="3">
      <p style="margin-top: 12">Computation of ratio of income to fixed charges of Textron
      Manufacturing</font></td>
    <td WIDTH="2%" VALIGN="TOP">
      <p style="margin-top: 12">&nbsp;</p>
      </td>
  </tr>
  <tr>
    <td WIDTH="9%" VALIGN="TOP"><font SIZE="3">
      <p style="margin-top: 12">12.2</font></td>
    <td WIDTH="89%" VALIGN="TOP"><font SIZE="3">
      <p style="margin-top: 12">Computation of ratio of income to fixed charges of Textron Inc.
      including all majority&#45;owned subsidiaries</font></td>
    <td WIDTH="2%" VALIGN="TOP">
      <p style="margin-top: 12">&nbsp;</p>
      </td>
  </tr>
  <tr>
    <td WIDTH="9%" VALIGN="TOP"><font SIZE="3">
      <p style="margin-top: 12">31.1</font></td>
    <td WIDTH="89%" VALIGN="TOP"><font SIZE="3">
      <p ALIGN="JUSTIFY" style="margin-top: 12">Certification of Chief Executive Officer Pursuant to
      Rule 13a&#45;14(a)</font></td>
    <td WIDTH="2%" VALIGN="TOP">
      <p style="margin-top: 12">&nbsp;</p>
      </td>
  </tr>
  <tr>
    <td WIDTH="9%" VALIGN="TOP"><font SIZE="3">
      <p style="margin-top: 12">31.2</font></td>
    <td WIDTH="89%" VALIGN="TOP"><font SIZE="3">
      <p ALIGN="JUSTIFY" style="margin-top: 12">Certification of Chief Financial Officer Pursuant to
      Rule 13a&#45;14(a)</font></td>
    <td WIDTH="2%" VALIGN="TOP">
      <p style="margin-top: 12">&nbsp;</p>
      </td>
  </tr>
  <tr>
    <td WIDTH="9%" VALIGN="TOP"><font SIZE="3">
      <p style="margin-top: 12">32.1</font></td>
    <td WIDTH="89%" VALIGN="TOP"><font SIZE="3">
      <p ALIGN="JUSTIFY" style="margin-top: 12">Certification of Chief Executive Officer Pursuant to
      Rule 13a&#45;14(b) and 18 U.S.C. 1350</font></td>
    <td WIDTH="2%" VALIGN="TOP">
      <p style="margin-top: 12">&nbsp;</p>
      </td>
  </tr>
  <tr>
    <td WIDTH="9%" VALIGN="TOP"><font SIZE="3">
      <p style="margin-top: 12">32.2</font></td>
    <td WIDTH="89%" VALIGN="TOP"><font SIZE="3">
      <p ALIGN="JUSTIFY" style="margin-top: 12">Certification of Chief Financial Officer Pursuant to
      Rule 13a&#45;14(b) and 18 U.S.C. 1350</font></td>
    <td WIDTH="2%" VALIGN="TOP">
      <p style="margin-top: 12">&nbsp;</p>
      </td>
  </tr>
</table>

</body>

</html>

</TEXT>
</DOCUMENT>
<DOCUMENT>
<TYPE>EX-10.1
<SEQUENCE>2
<FILENAME>tenone.htm
<TEXT>
<html>

<head>
<title>Exhibit 10</title>
</head>

<body>

<font FACE="Garamond">
<p ALIGN="RIGHT">Exhibit 10.1</p>
</font><b>
<p ALIGN="CENTER"><font face="Garamond" size="4">TEXTRON</font>
</p>
<p ALIGN="CENTER"><font FACE="Garamond" SIZE="4">Notice of Grant of Stock Options<br>
and Option Agreement
</p>
<p ALIGN="CENTER">&nbsp;Non&#45;Qualified Stock Options</p>
</font></b>
<div align="center">
  <center>
<table CELLSPACING="0" CELLPADDING="1" WIDTH="616">
  <tr>
    <td WIDTH="48%" VALIGN="TOP" style="border-top-style: solid">&nbsp;</td>
    <td WIDTH="52%" VALIGN="TOP" style="border-top-style: solid"><b><font FACE="Garamond">
      <p>Option No.:</font></b></td>
  </tr>
  <tr>
    <td WIDTH="48%" VALIGN="TOP"><b><font FACE="Garamond">
      <p>Name</font></b></td>
    <td WIDTH="52%" VALIGN="TOP"><b><font FACE="Garamond">
      <p>Plan:&#160;&#160;&#160;&#160;&#160;1999</font></b></td>
  </tr>
  <tr>
    <td WIDTH="48%" VALIGN="TOP"><b><font FACE="Garamond">
      <p>Address</font></b></td>
    <td WIDTH="52%" VALIGN="TOP"><b><font FACE="Garamond">
      <p>ID:</font></b></td>
  </tr>
  <tr>
    <td WIDTH="48%" VALIGN="TOP" style="border-bottom-style: solid">&nbsp;</td>
    <td WIDTH="52%" VALIGN="TOP" style="border-bottom-style: solid"><b><font FACE="Garamond">
      <p>Location:</font></b></td>
  </tr>
</table>
  </center>
</div>
<p><font FACE="Garamond">Effective <b>[Grant Date]</b> (&quot;Date of Grant&quot;),
you have been granted a Non&#45;Qualified Stock Option to buy <b>[Shares]</b>
shares of Textron Inc. (the &quot;Company&quot;) stock at <b>[Price]</b> per
share. The total option price of the shares granted is <b>[Value]</b>. This
grant is subject to the Non&#45;Qualified Stock Option Terms and Conditions
(1/2004 version) which are available on the Textron Enterprise Intranet and the
Stock Option Non&#45;Competition Agreement (1/2002 version) attached hereto.</p>
<p>Shares will become exercisable and will expire on the dates shown below,
subject to earlier expiration or termination as provided in the Terms and
Conditions:</p>
</font>
<p ALIGN="LEFT">&nbsp;
<div align="center">
  <center>
<table CELLSPACING="1" CELLPADDING="1" WIDTH="444">
  <tr>
    <td WIDTH="31%" VALIGN="MIDDLE" style="border-style: solid; border-width: 1"><b><font FACE="Garamond">
      <p ALIGN="CENTER">Shares</font></b></td>
    <td WIDTH="30%" VALIGN="TOP" style="border-style: solid; border-width: 1"><b><font FACE="Garamond">
      <p ALIGN="CENTER">Date Exercisable</font></b></td>
    <td WIDTH="39%" VALIGN="TOP" style="border-style: solid; border-width: 1"><b><font FACE="Garamond">
      <p ALIGN="CENTER">Expiration Date</font></b></td>
  </tr>
  <tr>
    <td WIDTH="31%" VALIGN="MIDDLE" style="border-style: solid; border-width: 1"><font FACE="Garamond">
      <p ALIGN="CENTER">[SharesVest 1]</font></td>
    <td WIDTH="30%" VALIGN="TOP" style="border-style: solid; border-width: 1"><font FACE="Garamond">
      <p ALIGN="CENTER">[Vest Date 1]</font></td>
    <td WIDTH="39%" VALIGN="TOP" style="border-style: solid; border-width: 1"><font FACE="Garamond">
      <p ALIGN="CENTER">[Expire Date 1]</font></td>
  </tr>
  <tr>
    <td WIDTH="31%" VALIGN="TOP" style="border-style: solid; border-width: 1"><font FACE="Garamond">
      <p ALIGN="CENTER">[SharesVest 2]</font></td>
    <td WIDTH="30%" VALIGN="TOP" style="border-style: solid; border-width: 1"><font FACE="Garamond">
      <p ALIGN="CENTER">[Vest Date 2]</font></td>
    <td WIDTH="39%" VALIGN="TOP" style="border-style: solid; border-width: 1"><font FACE="Garamond">
      <p ALIGN="CENTER">[Expire Date 2]</font></td>
  </tr>
  <tr>
    <td WIDTH="31%" VALIGN="TOP" style="border-style: solid; border-width: 1"><font FACE="Garamond">
      <p ALIGN="CENTER">[SharesVest 3]</font></td>
    <td WIDTH="30%" VALIGN="TOP" style="border-style: solid; border-width: 1"><font FACE="Garamond">
      <p ALIGN="CENTER">[Vest Date 3]</font></td>
    <td WIDTH="39%" VALIGN="TOP" style="border-style: solid; border-width: 1"><font FACE="Garamond">
      <p ALIGN="CENTER">[Expire Date 3]</font></td>
  </tr>
  <tr>
    <td WIDTH="31%" VALIGN="TOP"><font FACE="Garamond">
      <p ALIGN="CENTER" style="border-style: solid">[Shares Granted]</font></td>
    <td WIDTH="30%" VALIGN="TOP">&nbsp;</td>
    <td WIDTH="39%" VALIGN="TOP">&nbsp;</td>
  </tr>
</table>
  </center>
</div>
<font FACE="Garamond">
<p ALIGN="JUSTIFY">By your signature and the Company&#39;s signature below,
you and the Company agree that these options are governed by Textron&#39;s
Non&#45;Qualified Stock Option Terms and Conditions (1/2004 version) which
are available on the Textron Enterprise Intranet and subject to the
Non&#45;Competition Agreement (1/2002 version), which is attached hereto and
made a part of this document.</p>
<p ALIGN="JUSTIFY"><br>
<br>
<b>TEXTRON INC.</p>
</b></font>
<table CELLSPACING="1" CELLPADDING="1" WIDTH="841" height="126">
  <tr>
    <td WIDTH="42" VALIGN="TOP" height="22"><b><font FACE="Garamond">
      <p ALIGN="JUSTIFY">By:</font></b></td>
    <td WIDTH="400" VALIGN="TOP" height="22">
      <p style="border-bottom-style: solid; border-bottom-width: 1">&nbsp;</p>
    </td>
    <td WIDTH="120" VALIGN="TOP" height="22">&nbsp;</td>
    <td WIDTH="253" VALIGN="TOP" height="22">
      <p style="border-bottom-style: solid; border-bottom-width: 1">&nbsp;</p>
    </td>
  </tr>
  <tr>
    <td WIDTH="42" VALIGN="TOP" height="21">&nbsp;</td>
    <td WIDTH="400" VALIGN="TOP" height="21">&nbsp;</td>
    <td WIDTH="120" VALIGN="TOP" height="21">&nbsp;</td>
    <td WIDTH="253" VALIGN="TOP" height="21"><b><font FACE="Garamond">
      <p ALIGN="CENTER">Date</font></b></td>
  </tr>
  <tr>
    <td WIDTH="42" VALIGN="TOP" height="21">&nbsp;</td>
    <td WIDTH="400" VALIGN="TOP" height="21">&nbsp;</td>
    <td WIDTH="120" VALIGN="TOP" height="21">&nbsp;</td>
    <td WIDTH="253" VALIGN="TOP" height="21">&nbsp;</td>
  </tr>
  <tr>
    <td WIDTH="42" VALIGN="TOP" height="21">&nbsp;</td>
    <td WIDTH="400" VALIGN="TOP" height="21">
      <p style="border-bottom-style: solid; border-bottom-width: 1">&nbsp;</p>
    </td>
    <td WIDTH="120" VALIGN="TOP" height="21">&nbsp;</td>
    <td WIDTH="253" VALIGN="TOP" height="21">
      <p style="border-bottom-style: solid; border-bottom-width: 1">&nbsp;</p>
    </td>
  </tr>
  <tr>
    <td WIDTH="42" VALIGN="TOP" height="21">&nbsp;</td>
    <td WIDTH="400" VALIGN="TOP" height="21"><b><font FACE="Garamond">
      <p ALIGN="CENTER">&lt;Optionee&gt;</font></b></td>
    <td WIDTH="120" VALIGN="TOP" height="21">&nbsp;</td>
    <td WIDTH="253" VALIGN="TOP" height="21"><b><font FACE="Garamond">
      <p ALIGN="CENTER">Date</font></b></td>
  </tr>
</table>
<font FACE="Garamond">
<p ALIGN="JUSTIFY">&nbsp;</p>
<b>
<p ALIGN="CENTER">Please retain a copy of this signed agreement and return the
original to<br>
your Human Resources Department within 60 days of receipt of
this grant.</p>
</b></font><b><font FACE="CG Times (WN)">
<p ALIGN="CENTER">&nbsp;</p>
<p ALIGN="CENTER">TEXTRON INC.<br>
<br>
</font><font FACE="CG Times (WN)" SIZE="3">NON&#45;QUALIFIED STOCK OPTION
TERMS AND CONDITIONS<br>
<br>
UNDER TEXTRON 1999 LONG&#45;TERM INCENTIVE PLAN<br>
<br>
(1/2004)</p>
</font></b>
  <center>
<table CELLSPACING="2" CELLPADDING="1" WIDTH="252">
  <tr>
    <td VALIGN="TOP" style="border-top-style: solid">&nbsp;</td>
  </tr>
</table>
</center><font FACE="CG Times (WN)">
<p ALIGN="JUSTIFY">&#160;&#160;&#160;&#160;&#160;1.&#160;&#160;&#160;&#160;&#160;<i>Grant
of Options</i>. Pursuant to instructions of the Organization and Compensation
Committee (the &quot;Committee&quot;) of the Board, Textron has granted to
Optionee the right and option (the &quot;Option&quot;) to purchase all or any
part of the number of shares of Common Stock (the &quot;Option Shares&quot;) set
forth on the applicable Notice of Grant signed by Textron and Optionee (the
&quot;Notice of Grant&quot;) on the terms and conditions herein set forth.</p>
<p ALIGN="JUSTIFY">&#160;&#160;&#160;&#160;&#160;2.&#160;&#160;&#160;&#160;&#160;<i>
Purchase Price. </i>The purchase price of the Option Shares shall be the price
set forth on the Notice of Grant, which is the fair market value of a share of
Common Stock on the Date of Grant.</p>
<p ALIGN="JUSTIFY">&#160;&#160;&#160;&#160;&#160;3.&#160;&#160;&#160;&#160;&#160;<i>Term
of Option and Period of Exercise</i>. The Option shall expire on the date set
forth on the Notice of Grant (ten years from the Date of Grant), subject to
earlier expiration or termination as hereinafter provided. Except as provided in
Section 6(c), (d) or (e) or Section 9, the Option may not be exercised for one
year from the Date of Grant; after one year from the Date of Grant, the Option
may be exercised for up to one&#45;third of the Option Shares; after two
years from the Date of Grant, the Option may be exercised for up to
two&#45;thirds of the Option shares; and after three years from the Date of
Grant, the Option may be exercised as to all remaining Option Shares. The Option
shall not be exercisable for less than 50 Option Shares (or the remaining number
of Option Shares if that number is less than 50) or after it shall have expired
or terminated.</p>
<p ALIGN="JUSTIFY">&#160;&#160;&#160;&#160;&#160;4.&#160;&#160;&#160;&#160;&#160;<i>Exercise
of Option</i>.</p>
<p ALIGN="JUSTIFY">&#160;&#160;&#160;&#160;&#160;(a)&#160;&#160;&#160;&#160;&#160;Subject
to these terms and conditions and the Non&#45;Competition Agreement
applicable to this option, the Option may be exercised by written notice to
Textron, at its principal office, at 40 Westminster Street, Providence, Rhode
Island 02903, attention of its Secretary. Such notice shall state the election
to exercise the Option and the number of Option Shares in respect of which it is
being exercised, and shall be signed by the person or person so exercising the
Option. Such notice shall be accompanied by payment of the full purchase price
of said Option Shares, upon the receipt of which Textron shall issue and deliver
as soon as practicable a certificate or certificates representing said Option
Shares. The certificate or certificates for said Option Shares shall be
registered in the name of the person or persons so exercising the Option (or, if
the Option shall be exercised by Optionee and if Optionee shall so request in
the notice exercising the Option, shall be registered in the name of Optionee
and another person jointly, with right of survivorship) and shall be delivered
as aforesaid to or upon the written order of the person or persons exercising
the Option. During the life of the optionee, an option shall be exercisable only
by the optionee or by the optionee&#39;s guardian or legal representative.
In the event the Option is being exercised pursuant to Sections 5 or 6(d) by any
person or persons other than Optionee, the notice shall be accompanied by
appropriate proof of the right of such person or persons to exercise the Option.
All Option Shares issued as provided herein will be fully paid and nonassessable.
Textron shall pay all original issue taxes, if any, with respect to the issuance
thereof.</p>
<p ALIGN="JUSTIFY">&nbsp;&#160;&#160;&#160;&#160;&#160;(b)&#160;&#160;&#160;&#160;&#160;The
purchase price of the Option Shares shall be paid in full at the time of
exercise at the election of Optionee (1) in cash, (2) by tendering to Textron
shares of Common Stock then owned by Optionee having a fair market value equal
to such purchase price on the date of exercise or (3) partly in cash and partly
in shares of Common Stock valued at fair market value on the date of exercise.
To the extent that payment is made in shares of Common Stock, the number of
shares shall be determined by dividing the amount of such payment by the fair
market value of a share of Common Stock on the date of payment. Except as
provided in Section 6, the Option may not be exercised unless Optionee was an
optionee of either Textron or a related company at all times from the Date of
Grant through the date of exercise. Optionee shall have no rights as a
shareholder of Textron unless and until a certificate for shares of Common Stock
shall have been issued to Optionee.</p>
<p ALIGN="JUSTIFY">&#160;&#160;&#160;&#160;&#160;5.&#160;&#160;&#160;&#160;&#160;<i>Non&#45;Assignability
of Option</i>. The Option shall not be assignable or transferable by Optionee
except by will or the laws of descent and distribution.</p>
<p ALIGN="JUSTIFY">&#160;&#160;&#160;&#160;&#160;6.&#160;&#160;&#160;&#160;&#160;<i>Termination
of Employment</i>.</p>
<p ALIGN="JUSTIFY">&#160;&#160;&#160;&#160;&#160;(a)&#160;&#160;&#160;&#160;&#160;If
Optionee&#39;s employment with Textron or a related company shall terminate
for cause, as determined by the Committee, all Option(s) held by the Optionee
shall expire immediately.</p>
<p ALIGN="JUSTIFY">&#160;&#160;&#160;&#160;&#160;(b)&#160;&#160;&#160;&#160;&#160;If
Optionee&#39;s employment with Textron or a related company shall terminate
after Optionee has become eligible for normal or early retirement, and if
Section&#160;6(a) does not apply, Optionee shall have the right to exercise
the Option within 36 months after termination to the extent the Option is
exercisable at the time of exercise. Early Retirement with Textron is defined as
attainment of age 60, the completion of 20 years of vesting service, or the
attainment of age 55 with the completion of 10 years of vesting service. Normal
Retirement with Textron is age 65.</p>
<p ALIGN="JUSTIFY">&#160;&#160;&#160;&#160;&#160;(c)&#160;&#160;&#160;&#160;&#160;If
Optionee&#39;s employment with Textron or a related company shall terminate
as a result of Optionee&#39;s total disability, Optionee shall have the
right to exercise the Option as to all unexercised Option Shares until the
expiration of its term. For purposes of the foregoing sentence, &quot;total
disability&quot; shall mean a permanent mental or physical disability as
determined by the Committee.</p>
<p ALIGN="JUSTIFY">&#160;&#160;&#160;&#160;&#160;(d)&#160;&#160;&#160;&#160;&#160;If
Optionee shall die while employed by Textron or a related company or while the
Option is still exercisable under Section 6(b), (c) or (e), the Option may be
exercised as to all unexercised Option Shares within a period of one year from
the date of Optionee&#39;s death by the executor or administrator of
Optionee&#39;s estate or by the person or persons to whom Optionee shall
have transferred such right by will or by the laws of descent and distribution.</p>
<p ALIGN="JUSTIFY">&#160;&#160;&#160;&#160;&#160;(e)&#160;&#160;&#160;&#160;&#160;If
Optionee&#39;s employment with Textron and its related companies shall
terminate for any reason not specified in Sections 6(a), (b), (c) or (d),
Optionee shall have the right to exercise each Option granted to the Optionee
within three months after Optionee&#39;s termination (or within such later
time, up to 36 months after his or her termination of employment, as the
Committee may determine) but, unless otherwise determined by the Committee, only
to the extent the Option is exercisable at the time of such termination of
employment. In no event, however, shall an option be exercisable under this
Section 6(e) for six months from the Date of Grant.</p>
<p ALIGN="JUSTIFY">&#160;&#160;&#160;&#160;&#160;(f)&#160;&#160;&#160;&#160;&#160;Notwithstanding
anything to the contrary in this Section 6, in no event shall the Option be
exercisable after the expiration of its term.</p>
<p ALIGN="JUSTIFY">&#160;&#160;&#160;&#160;&#160;7.&#160;&#160;&#160;&#160;&#160;<i>No
Right to Employment</i>. Nothing in this document shall confer upon Optionee the
right to continue in the employment of Textron or a related company or affect
any right which Textron or a related company may have to terminate the
employment of Optionee.</p>
<p ALIGN="JUSTIFY">&#160;&#160;&#160;&#160;&#160;8.&#160;&#160;&#160;&#160;&#160;<i>Corporate
Changes</i>. The number of Option Shares and the purchase price thereof shall
both be proportionately adjusted for any increase or decrease in the number of
issued shares of Common Stock resulting from a stock split, stock dividend or
any other increase or decrease in such shares effective without receipt of
consideration by Textron.</p>
<p ALIGN="JUSTIFY">&#160;&#160;&#160;&#160;&#160;9.&#160;&#160;&#160;&#160;&#160;<i>Change
in Control</i>. In the event of a change in control of Textron as defined in
Section 7.10(b) of the Plan, and except as otherwise determined by the Committee
prior to the change in control, each unexpired Option shall be exercisable,
beginning immediately, as to all remaining Option Shares subject to the Option.</p>
<p ALIGN="JUSTIFY">&#160;&#160;&#160;&#160;&#160;10.&#160;&#160;&#160;&#160;&#160;<i>Definition
of Certain Terms</i>. As used herein &quot;related company&quot; means any
corporation in which Textron at the time in question owns, directly or
indirectly, stock possessing 50 percent or more of the total combined voting
power of all classes of stock and any corporation which at the time in question
owns, directly or indirectly, a similar interest in Textron; and &quot;fair
market value&quot; on any date shall be the simple average of the high and low
prices of Common Stock on the New York Stock Exchange Composite Transactions
Listing on such date.</p>
<p ALIGN="JUSTIFY">&#160;&#160;&#160;&#160;&#160;11.&#160;&#160;&#160;&#160;&#160;<i>Option
Subject to Plan</i>. The Option is in all respects subject to the terms and
conditions of the Plan as in effect from time to time; provided, however, that
termination or amendment of the Plan (except amendments as required by technical
corrections of the Code) shall not, without the consent of Optionee, adversely
affect Optionee&#39;s rights under the Option.</p>
<p ALIGN="JUSTIFY">&#160;&#160;&#160;&#160;&#160;12.&#160;&#160;&#160;&#160;&#160;<i>Non&#45;Qualified
Option</i>. The Option is a &quot;Non&#45;Qualified Option&quot; as defined
in the Plan and not an &quot;incentive stock option&quot; under Section 422A of
the Internal Revenue Code of 1986, as it may be amended.</p>
<p ALIGN="JUSTIFY">&#160;&#160;&#160;&#160;&#160;13.&#160;&#160;&#160;&#160;&#160;<i>Administration</i>.
Pursuant to Section 1.2(c) of the Plan, the Board at any time may designate one
or more officers or committees of Textron to act in place of the Committee in
making certain determinations under the Plan.</p>
<p ALIGN="JUSTIFY">&#160;&#160;&#160;&#160;&#160;14.&#160;&#160;&#160;&#160;&#160;<i>Withholding
Taxes</i>: Whenever Textron proposes or is required to issue or transfer Option
Shares, Textron shall have the right to withhold or to require the optionee to
remit to Textron an amount sufficient to satisfy any Federal, state and local
withholding tax requirements. Whenever under the Plan payments by Textron are to
be made in cash, such payments shall be net of an amount sufficient to satisfy
any Federal, state and local withholding tax requirements.</p>
<p ALIGN="CENTER">&nbsp;</p>
</font><b>
<p ALIGN="CENTER"><font face="Garamond" size="3">TEXTRON INC.</font></p>
<p ALIGN="CENTER"><font face="Garamond" size="3">STOCK OPTION NON&#45;COMPETITION AGREEMENT</font></p>
<p ALIGN="CENTER"><font face="Garamond" size="3">(1/2002)</font></p>
</b><font FACE="Garamond">
<p ALIGN="JUSTIFY"><font size="3">&nbsp;The purpose of Textron&#39;s grant of this Option under
the Textron 1999 Long&#45;Term Incentive Plan (&quot;the Plan&quot;) is to
attract, retain and reward employees, to increase stock ownership and
identification with Textron&#39;s interests, and to provide incentive for
remaining with and enhancing the value of Textron over the long&#45;term. In
return for granting this Option to you, please acknowledge by signing the
attached Notice of Grant of Stock Options and Option Agreement that you have
read and agree to the following:</font></p>
  </font><b>
  <p ALIGN="JUSTIFY" style="margin-bottom: 0"><font FACE="Garamond" size="3">
  1.
  &#160;&#160;&#160;&#160;&#160;<u> Forfeiture of unexercised
  options if you engage in certain competitive activities</u>
  </font></p>
</b>
<blockquote>
  <p ALIGN="JUSTIFY" style="margin-top: 0"><font size="3">If at any time during the term of this Option while you are
  a Company employee, or within two years after the termination of your
  employment, you do any of the following activities:</font></p>
  <p ALIGN="JUSTIFY"><font size="3">(a)&#160;&#160;&#160;&#160;&#160;engage
    in any business which competes with the Company&#39;s business (as
    defined in Paragraph 2) within the Restricted Territory (as defined in
    Paragraph 3); or</font></p>
  <font FACE="Garamond">
  <p ALIGN="JUSTIFY"><font size="3">(b)&#160;&#160;&#160;&#160;&#160;solicit
  customers, business or orders for or sell any products and services (i)&#160;in
  competition with the Company&#39;s business within the Restricted
  Territory or (ii) for any business, wherever located, that competes with the
  Company&#39;s business within the Restricted Territory; or</font></p>
  </font>
  <p ALIGN="JUSTIFY"><font size="3">(c)&#160;&#160;&#160;&#160;&#160;divert,
  entice or otherwise take away customers, business or orders of the Company
  within the Restricted Territory, or attempt to do so; or</font></p>
  <p ALIGN="JUSTIFY"><font size="3">(d)&#160;&#160;&#160;&#160;&#160;promote
  or assist, financially or otherwise, any firm, corporation or other entity
  engaged in any business which competes with the Company&#39;s business
  within the Restricted Territory;</font></p>
</blockquote>
<p ALIGN="JUSTIFY"><font size="3">then this Option shall terminate effective the date you enter
into such activity, unless terminated sooner by operation of another term or
condition of this Option or the Plan. You will be in violation of Paragraph 1 if
you engage in any or all of the activities discussed in this Paragraph directly
as an individual or indirectly as an employee, representative, consultant or in
any other capacity on behalf of any firm, corporation or other entity.</font></p>
<b><font FACE="Garamond">
<p ALIGN="JUSTIFY" style="margin-bottom: 0"><font size="3">2. &#160;&#160;&#160;&#160;&#160;</font><u><font size="3">Company&#39;s
business &#45; defined</font></p>
<blockquote>
  </u></font></b>
<p ALIGN="JUSTIFY" style="margin-top: 0"><font size="3">For the purpose of this Agreement:</font></p>
  <p ALIGN="JUSTIFY"><font size="3">(a)&#160;&#160;&#160;&#160;&#160;the
  Company shall include Textron and all subsidiary, affiliated or related
  companies or operations of Textron, and</font></p>
  <p ALIGN="JUSTIFY"><font size="3">(b)&#160;&#160;&#160;&#160;&#160;the
  Company&#39;s business shall include the products manufactured, marketed
  and sold and/or the services provided by any operation of the Company for
  which you have worked or to which you were assigned or had responsibility
  (either direct or supervisory), at the time of the termination of your
  employment and any time during the two&#45;year period prior to such
  termination.</font></p>
</blockquote>
<b><font FACE="Garamond">
<p ALIGN="JUSTIFY" style="margin-bottom: 0"><font size="3">3. &#160;&#160;&#160;&#160;&#160;</font><u><font size="3">Restricted
Territory &#45;&#45; defined</font></p>
<blockquote>
  </u></font></b>
<p ALIGN="JUSTIFY" style="margin-top: 0"><font size="3">For the purpose of Paragraph 1, the Restricted Territory
shall be defined as and limited to:</font></p>
  <p ALIGN="JUSTIFY"><font size="3">(a)&#160;&#160;&#160;&#160;&#160;the
  geographic area(s) within a one hundred (100) mile radius of any and all
  Company location(s) in or for which you have worked or to which you were
  assigned or had responsibility (either direct or supervisory), at the time of
  the termination of your employment and at any time during the two&#45;year
  period prior to such termination; and</font></p>
  <p ALIGN="JUSTIFY"><font size="3">(b)&#160;&#160;&#160;&#160;&#160;all of
  the specific customer accounts, whether within or outside of the geographic
  area described in (a) above, with which you have had any contact or for which
  you have had any responsibility (either direct or supervisory), at the time of
  termination of your employment and at any time during the two&#45;year
  period prior to such termination.</font></p>
  <blockquote>
<blockquote>
  <b><font FACE="Garamond">
</blockquote>
</blockquote>
</blockquote>
<p ALIGN="JUSTIFY"><font size="3">Page 2</font></p>
</font></b><b><font FACE="Garamond">
<p ALIGN="JUSTIFY" style="margin-bottom: 0"><font size="3">4.&#160;&#160;&#160;&#160;&#160;<u>Forfeiture
of unexercised options if you engage in certain solicitation activities
</u></font></p>
<blockquote>
<p ALIGN="JUSTIFY" style="margin-top: 0"></font></b><font FACE="Garamond"><font size="3">If at any time while you have any rights
under this Option, either during or any time after your employment with the
Company, you directly or indirectly solicit or induce or attempt to solicit or
induce any employee(s), sales representative(s), agent(s) or consultant(s) of
the Company to terminate their employment, representation or other association
with the Company, then your rights under this Option shall terminate
immediately, unless terminated sooner by operation of another term or condition
of this Option or the Plan.</font></p>
<b>
</blockquote>
<p style="margin-bottom: 0"><font size="3">5. &#160;&#160;&#160;&#160;&#160;<u>Forfeiture of
unexercised options if you disclose confidential information</u></font></p>
<blockquote>
<p style="margin-top: 0"></b><font size="3">You specifically acknowledge that any trade secrets or confidential
business and technical information of the Company or its suppliers or customers,
whether reduced to writing, maintained on any form of electronic media, or
maintained in your mind or memory and whether compiled by you or the Company,
derives independent economic value from not being readily known to or
ascertainable by proper means by others who can obtain economic value from its
disclosure or use; that reasonable efforts have been made by the Company to
maintain the secrecy of such information; that such information is the sole
property of the Company or its suppliers or customers and that any retention,
use or disclosure of such information by you during your employment (except in
the course of performing your duties and obligations of employment with the
Company) or after termination thereof, shall constitute a misappropriation of
the trade secrets of the Company or its suppliers or customers. If at any time
while you have any rights under this Option, either during or any time after
your employment with the Company, you directly or indirectly misappropriate any
such trade secrets, then your rights under this Option shall terminate
immediately, unless terminated sooner by operation of another term or condition
of this Option or the Plan.</font></p>
</font>

<font FACE="Garamond">
<b>
</blockquote>
<p style="margin-bottom: 0"><font size="3" face="Garamond">6. &#160;&#160;&#160;&#160;&#160;Organization and
Compensation Committee Discretion</font></p>
</b>
</font>

<blockquote>
  <font FACE="Garamond">
<p style="margin-top: 0"><font size="3">You may be released from your obligations under Paragraph 1, 4 and 5
above only if the Organization and Compensation Committee of the Board of
Directors (or its duly appointed agent) determines in its sole discretion that
such action is in the best interests of Textron.</font></p>
  </blockquote>
</font>

</body>

</html>

</TEXT>
</DOCUMENT>
<DOCUMENT>
<TYPE>EX-10.2
<SEQUENCE>3
<FILENAME>tentwo.htm
<TEXT>
<html>

<head>
<title>TEXTRON&nbsp; Notice of Grant of Stock Options and Option Agreement&nbsp;
Incentive Stock Options</title>
</head>

<body>

<font FACE="Garamond" SIZE="3">
<p ALIGN="right">Exibit 10.2</p>

<b>
<p ALIGN="CENTER">TEXTRON<br>
<br>
Notice of Grant of Stock Options<br>
and Option Agreement<br>
<br>
Incentive Stock Options</p>
</b>
</font>
<table CELLSPACING="0" CELLPADDING="1" WIDTH="855">
  <tr>
    <td WIDTH="443" VALIGN="TOP" style="border-top-style: solid"><b><font FACE="Garamond" SIZE="3">
      <p>Name</font></b></td>
    <td WIDTH="404" VALIGN="TOP" style="border-top-style: solid"><b><font FACE="Garamond" SIZE="3">
      <p>Option No.:</font></b></td>
  </tr>
  <tr>
    <td WIDTH="443" VALIGN="TOP"><b><font FACE="Garamond" SIZE="3">
      <p>Address</font></b></td>
    <td WIDTH="404" VALIGN="TOP"><b><font FACE="Garamond" SIZE="3">
      <p>Plan:&#160;&#160;&#160;&#160;&#160;1999</font></b></td>
  </tr>
  <tr>
    <td WIDTH="443" VALIGN="TOP">&nbsp;</td>
    <td WIDTH="404" VALIGN="TOP"><b><font FACE="Garamond" SIZE="3">
      <p>ID:</font></b></td>
  </tr>
  <tr>
    <td WIDTH="443" VALIGN="TOP" style="border-bottom-style: solid">&nbsp;</td>
    <td WIDTH="404" VALIGN="TOP" style="border-bottom-style: solid"><b><font FACE="Garamond" SIZE="3">
      <p>Location:</font></b></td>
  </tr>
</table>
<font FACE="Garamond" SIZE="3">
<p>
Effective <b>[Grant Date]</b> (&quot;Date of Grant&quot;), you have been granted
an Incentive Stock Option to buy <b>[Shares]</b> shares of Textron Inc. (the
&quot;Company&quot;) stock at <b>[Price]</b> per share. The total option price
of the shares granted is <b>[Value]</b>. This grant is subject to the Incentive
Stock Option Terms and Conditions (1/2004 version) which are available on the
Textron Enterprise Intranet and the Stock Option Non&#45;Competition
Agreement (1/2002 version) attached hereto.</p>
<p>Shares will become exercisable and will expire on the dates shown below,
subject to earlier expiration or termination as provided in the Terms and
Conditions:<br>
</p>
</font>
<p ALIGN="LEFT">&nbsp;
<div align="center">
  <center>
<table CELLSPACING="1" CELLPADDING="1" WIDTH="444">
  <tr>
    <td WIDTH="31%" VALIGN="MIDDLE" style="border-style: solid; border-width: 1"><b><font FACE="Garamond" SIZE="3">
      <p ALIGN="CENTER">Shares&nbsp;</font></b></td>
    <td WIDTH="30%" VALIGN="TOP" style="border-style: solid; border-width: 1"><b><font FACE="Garamond" SIZE="3">
      <p ALIGN="CENTER">Date Exercisable&nbsp;</font></b></td>
    <td WIDTH="39%" VALIGN="TOP" style="border-style: solid; border-width: 1"><b><font FACE="Garamond" SIZE="3">
      <p ALIGN="CENTER">Expiration Date&nbsp;</font></b></td>
  </tr>
  <tr>
    <td WIDTH="31%" VALIGN="MIDDLE" style="border-style: solid; border-width: 1"><font FACE="Garamond" SIZE="3">
      <p ALIGN="CENTER">&nbsp;[SharesVest 1]&nbsp;</font></td>
    <td WIDTH="30%" VALIGN="TOP" style="border-style: solid; border-width: 1"><font FACE="Garamond" SIZE="3">
      <p ALIGN="CENTER">&nbsp;[Vest Date 1]&nbsp;</font></td>
    <td WIDTH="39%" VALIGN="TOP" style="border-style: solid; border-width: 1"><font FACE="Garamond" SIZE="3">
      <p ALIGN="CENTER">&nbsp;[Expire Date 1]&nbsp;</font></td>
  </tr>
  <tr>
    <td WIDTH="31%" VALIGN="TOP" style="border-style: solid; border-width: 1"><font FACE="Garamond" SIZE="3">
      <p ALIGN="CENTER">&nbsp;[Shares Vest 2]&nbsp;</font></td>
    <td WIDTH="30%" VALIGN="TOP" style="border-style: solid; border-width: 1"><font FACE="Garamond" SIZE="3">
      <p ALIGN="CENTER">&nbsp;[Vest Date 2]&nbsp;</font></td>
    <td WIDTH="39%" VALIGN="TOP" style="border-style: solid; border-width: 1"><font FACE="Garamond" SIZE="3">
      <p ALIGN="CENTER">&nbsp;[Expire Date 2]&nbsp;</font></td>
  </tr>
  <tr>
    <td WIDTH="31%" VALIGN="TOP" style="border-style: solid; border-width: 1"><font FACE="Garamond" SIZE="3">
      <p ALIGN="CENTER">&nbsp;[Shares Vest 3]&nbsp;</font></td>
    <td WIDTH="30%" VALIGN="TOP" style="border-style: solid; border-width: 1"><font FACE="Garamond" SIZE="3">
      <p ALIGN="CENTER">&nbsp;[Vest Date 3]&nbsp;</font></td>
    <td WIDTH="39%" VALIGN="TOP" style="border-style: solid; border-width: 1"><font FACE="Garamond" SIZE="3">
      <p ALIGN="CENTER">&nbsp;[Expire Date 3]&nbsp;</font></td>
  </tr>
  <tr>
    <td WIDTH="31%" VALIGN="TOP"><font FACE="Garamond" SIZE="3">
      <p ALIGN="CENTER" style="border-style: solid; border-width: 3">[Shares Granted]</font></td>
    <td WIDTH="30%" VALIGN="TOP">&nbsp;</td>
    <td WIDTH="39%" VALIGN="TOP">&nbsp;</td>
  </tr>
</table>
  </center>
</div>
<font FACE="Garamond" SIZE="3">
<p>&nbsp;</p>
<p ALIGN="JUSTIFY">By your signature and the Company&#39;s signature below,
you and the Company agree that these options are governed by Textron&#39;s
Incentive Stock Option Terms and Conditions (1/2004 version) which are available
on the Textron Enterprise Intranet and subject to the Non&#45;Competition
Agreement (1/2002 version), which is attached hereto and made a part of this
document.</p>
<b>
<p ALIGN="JUSTIFY">TEXTRON INC.</p>
</b></font>
<table CELLSPACING="1" CELLPADDING="1" WIDTH="726">
  <tr>
    <td WIDTH="42" VALIGN="TOP"><b><font FACE="Garamond" SIZE="3">
      <p ALIGN="JUSTIFY">By:</font></b></td>
    <td WIDTH="366" VALIGN="TOP">
      <p style="border-bottom-style: solid; border-bottom-width: 1">&nbsp;</p>
    </td>
    <td WIDTH="61" VALIGN="TOP">&nbsp;</td>
    <td WIDTH="231" VALIGN="TOP">
      <p style="border-bottom-style: solid; border-bottom-width: 1">&nbsp;</p>
    </td>
  </tr>
  <tr>
    <td WIDTH="42" VALIGN="TOP">&nbsp;</td>
    <td WIDTH="366" VALIGN="TOP">&nbsp;</td>
    <td WIDTH="61" VALIGN="TOP">&nbsp;</td>
    <td WIDTH="231" VALIGN="TOP"><b><font FACE="Garamond" SIZE="3">
      <p ALIGN="CENTER">Date</font></b></td>
  </tr>
  <tr>
    <td WIDTH="42" VALIGN="TOP">&nbsp;</td>
    <td WIDTH="366" VALIGN="TOP">&nbsp;</td>
    <td WIDTH="61" VALIGN="TOP">&nbsp;</td>
    <td WIDTH="231" VALIGN="TOP">&nbsp;</td>
  </tr>
  <tr>
    <td WIDTH="44" VALIGN="TOP" style="border-bottom-style: solid; border-bottom-width: 1">&nbsp;</td>
    <td WIDTH="368" VALIGN="TOP" style="border-bottom-style: solid; border-bottom-width: 1">&nbsp;</td>
    <td WIDTH="61" VALIGN="TOP">&nbsp;</td>
    <td WIDTH="231" VALIGN="TOP">
      <p style="border-bottom-style: solid; border-bottom-width: 1">&nbsp;</p>
    </td>
  </tr>
  <tr>
    <td WIDTH="42" VALIGN="TOP">&nbsp;</td>
    <td WIDTH="366" VALIGN="TOP"><b><font FACE="Garamond" SIZE="3">
      <p ALIGN="CENTER">&lt;Optionee&gt;</font></b></td>
    <td WIDTH="61" VALIGN="TOP">&nbsp;</td>
    <td WIDTH="231" VALIGN="TOP"><b><font FACE="Garamond" SIZE="3">
      <p ALIGN="CENTER">Date</font></b></td>
  </tr>
</table>
<font FACE="Garamond" SIZE="3">
<p ALIGN="JUSTIFY">&nbsp;</p>
<p ALIGN="JUSTIFY">&nbsp;</p>
<b>
<p ALIGN="CENTER">Please retain a copy of this signed agreement and return the
original to<br>
your Human Resources Department within 60 days of receipt of
this grant.</p>
</b></font><b><font FACE="CG Times (WN)" SIZE="3">
<p ALIGN="CENTER">&nbsp;</p>
<p ALIGN="CENTER">TEXTRON INC.
</p>
<p ALIGN="CENTER">INCENTIVE STOCK OPTION TERMS AND CONDITIONS
</p>
<p ALIGN="CENTER">UNDER TEXTRON 1999 LONG&#45;TERM INCENTIVE PLAN
</p>
<p ALIGN="CENTER">(1/2004)</p>
</font></b>
<center>
<table CELLSPACING="2" CELLPADDING="1" WIDTH="252">
  <tr>
    <td VALIGN="TOP" style="border-top-style: solid">&nbsp;</td>
  </tr>
</table>
</center><font FACE="CG Times (WN)" SIZE="3">
<p ALIGN="JUSTIFY">&#160;&#160;&#160;&#160;&#160;1.&#160;&#160;&#160;&#160;&#160;<i>Grant
of Options</i>. Pursuant to instructions of the Organization and Compensation
Committee (the &quot;Committee&quot;) of the Board, Textron has granted to
Optionee the right and option (the &quot;Option&quot;) to purchase all or any
part of the number of<b> </b>shares of Common Stock (the &quot;Option
Shares&quot;) set forth on the applicable Notice of Grant signed by<b> </b>Textron
and Optionee (the &quot;Notice of Grant&quot;) on the terms and conditions
herein set forth.</p>
<p ALIGN="JUSTIFY">&#160;&#160;&#160;&#160;&#160;2.&#160;&#160;&#160;&#160;&#160;<i>Purchase
Price</i>. The purchase price of the Option Shares shall be the price set forth
on the Notice of Grant, which is the fair market value of a share of Common
Stock on the Date of Grant.</p>
<p ALIGN="JUSTIFY">&#160;&#160;&#160;&#160;&#160;3.&#160;&#160;&#160;&#160;&#160;<i>Term
of Option and Period of Exercise</i>. The Option shall expire on the date set
forth on the Notice of Grant (ten years from the Date of Grant), subject to
earlier expiration or termination as hereinafter provided. Except as provided in
Section 6(c), (d) or (e) or Section 9, the Option may not be exercised for one
year from the Date of Grant; after one year from the Date of Grant, the Option
may be exercised for up to one&#45;third of the Option Shares; after two
years from the Date of Grant, the Option may be exercised for up to
two&#45;thirds of the Option shares; and after three years from the Date of
Grant, the Option may be exercised as to all remaining Option Shares. The Option
shall not be exercisable for less than 50 Option Shares (or the remaining number
of Option Shares if that number is less than 50) or after it shall have expired
or terminated.</p>
<p ALIGN="JUSTIFY">&#160;&#160;&#160;&#160;&#160;4.&#160;&#160;&#160;&#160;&#160;<i>Exercise
of Option</i>.</p>
<p ALIGN="JUSTIFY">&#160;&#160;&#160;&#160;&#160;(a)&#160;&#160;&#160;&#160;&#160;Subject
to these terms and conditions and the Non&#45;Competition Agreement
applicable to this Option, the Option may be exercised by written notice to
Textron, at its principal office, at 40 Westminster Street, Providence, Rhode
Island 02903, attention of its Secretary. Such notice shall state the election
to exercise the Option and the number of Option Shares in respect of which it is
being exercised, and shall be signed by the person or persons so exercising the
Option. Such notice shall be accompanied by payment of the full purchase price
of said Option Shares, upon the receipt of which Textron shall issue and deliver
as soon as practicable a certificate or certificates representing said Option
Shares. The certificate or certificates for said Option Shares shall be
registered in the name of the person or persons so exercising the Option (or, if
the Option shall be exercised by Optionee and if Optionee shall so request in
the notice exercising the Option, shall be registered in the name of Optionee
and another person jointly, with right of survivorship) and shall be delivered
as aforesaid to or upon the written order of the person or persons exercising
the Option. During the life of the optionee, an option shall be exercisable only
by the optionee or by the optionee&#39;s guardian or legal representative.
In the event the Option is being exercised pursuant to Sections 5 or 6(d) by any
person or persons other than Optionee, the notice shall be accompanied by
appropriate proof of the right of such person or persons to exercise the Option.
All Option Shares issued as provided herein will be fully paid and nonassessable.
Textron shall pay all original issue taxes, if any, with respect to the issuance
thereof.</p>
<p ALIGN="JUSTIFY">&#160;&#160;&#160;&#160;&#160;(b)&#160;&#160;&#160;&#160;&#160;The
purchase price of the Option Shares shall be paid in full at the time of
exercise at the election of Optionee (1) in cash, (2) by tendering to Textron
shares of Common Stock then owned by Optionee having a fair market value equal
to such purchase price on the date of exercise or (3) partly in cash and partly
in shares of Common Stock valued at fair market value on the date of exercise.
To the extent that payment is made in shares of Common Stock, the number of
shares shall be determined by dividing the amount of such payment by the fair
market value of a share of Common Stock on the date of payment. Except as
provided in Section 6, the Option may not be exercised unless Optionee was an
employee of either Textron or a related company at all times from the Date of
Grant through the date of exercise. Optionee shall have no rights as a
shareholder of Textron unless and until a certificate for shares of Common Stock
shall have been issued to Optionee.</p>
<p ALIGN="JUSTIFY">&#160;&#160;&#160;&#160;&#160;5.&#160;&#160;&#160;&#160;&#160;<i>Non&#45;Assignability
of Option</i>. The Option shall not be assignable or transferable by Optionee
except by will or the laws of descent and distribution.</p>
<p ALIGN="JUSTIFY">&#160;&#160;&#160;&#160;&#160;6.&#160;&#160;&#160;&#160;&#160;<i>Termination
of Employment</i>.</p>
<p ALIGN="JUSTIFY">&#160;&#160;&#160;&#160;&#160;(a)&#160;&#160;&#160;&#160;&#160;If
Optionee&#39;s employment with Textron or a related company shall terminate
for cause, as determined by the Committee, all Option(s) held by the optionee
shall expire immediately.</p>
<p ALIGN="JUSTIFY">&#160;&#160;&#160;&#160;&#160;(b)&#160;&#160;&#160;&#160;&#160;If
Optionee&#39;s employment with Textron or a related company shall terminate
after Optionee has become eligible for normal or early retirement, and if
Section 6(a) does not apply, Optionee shall have the right to exercise the
Option within 36 months after termination to the extent the Option is
exercisable at the time of exercise. Early Retirement with Textron is defined as
attainment of age 60, the completion of 20 years of vesting service, or the
attainment of age 55 with the completion of 10 years of vesting service. Normal
Retirement with Textron is age 65.</p>
<p ALIGN="JUSTIFY">&#160;&#160;&#160;&#160;&#160;(c)&#160;&#160;&#160;&#160;&#160;If
Optionee&#39;s employment with Textron or a related company shall terminate
as a result of Optionee&#39;s total disability, Optionee shall have the
right to exercise the Option as to all unexercised Option Shares until the
expiration of its term. For purposes of the foregoing sentence, &quot;total
disability&quot; shall mean a permanent mental or physical disability as
determined by the Committee.</p>
<p ALIGN="JUSTIFY">&#160;&#160;&#160;&#160;&#160;(d)&#160;&#160;&#160;&#160;&#160;If
Optionee shall die while employed by Textron or a related company or while the
Option is still exercisable under Sections 6(b), (c) or (e), the Option may be
exercised as to all unexercised Option Shares within a period of one year from
the date of Optionee&#39;s death by the executor or administrator of
Optionee&#39;s estate or by the person or persons to whom Optionee shall
have transferred such right by will or by the laws of descent and distribution.</p>
<p ALIGN="JUSTIFY">&#160;&#160;&#160;&#160;&#160;(e)&#160;&#160;&#160;&#160;&#160;If
Optionee&#39;s employment with Textron and its related companies shall
terminate for any reason not specified in Sections 6(a), (b), (c) or (d),
Optionee shall have the right to exercise each Option granted to the optionee
within three months after Optionee&#39;s termination (or within such later
time, up to 36 months after his or her termination of employment, as the
Committee may determine) but, unless otherwise determined by the Committee, only
to the extent the Option is exercisable at the time of such termination of
employment. In no event, however, shall an option be exercisable under this
Section 6(e) for six months from the Date of Grant.</p>
<p ALIGN="JUSTIFY">&#160;&#160;&#160;&#160;&#160;(f)&#160;&#160;&#160;&#160;&#160;Notwithstanding
anything to the contrary in this Section 6, in no event shall the Option be
exercisable after the expiration of its term.</p>
<p ALIGN="JUSTIFY">&#160;&#160;&#160;&#160;&#160;(g)&#160;&#160;&#160;&#160;&#160;<b>Notwithstanding
any longer period provided above for exercise of the Option, to be eligible for
treatment as an &quot;incentive stock option&quot; under Section 422A of the
Internal Revenue Code of 1986, as it may be amended (the &quot;Code&quot;), the
Option must be exercised within three months of Optionee&#39;s termination
of employment (other than by death or as a result of disability) with Textron or
a related company, and in the case of Optionee&#39;s disability (within the
meaning of Section 422A(c)(9) of the Code) within one year of such termination.
Exercise of the Option after the applicable period specified in the foregoing
sentence may result in less favorable tax treatment.</p>
</b>
<p ALIGN="JUSTIFY">&#160;&#160;&#160;&#160;&#160;7.&#160;&#160;&#160;&#160;&#160;<i>No
Right to Employment</i>. Nothing in this document shall confer upon Optionee the
right to continue in the employment of Textron or a related company or affect
any right which Textron or a related company may have to terminate the
employment of Optionee.</p>
<p ALIGN="JUSTIFY">&#160;&#160;&#160;&#160;&#160;8.&#160;&#160;&#160;&#160;&#160;<i>Corporate
Changes</i>. The number of Option Shares and the purchase price thereof shall
both be proportionately adjusted for any increase or decrease in the number of
issued shares of Common Stock resulting from a stock split, stock dividend or
any other increase or decrease in such shares effective without receipt of
consideration by Textron.</p>
<p ALIGN="JUSTIFY">&#160;&#160;&#160;&#160;&#160;9.&#160;&#160;&#160;&#160;&#160;<i>Change
in Control</i>. In the event of a change in control as defined in Section
7.10&#160;(b) of the Plan, and except as otherwise determined by the
Committee prior to the change in control, each unexpired Option shall be
exercisable, beginning immediately, as to all remaining Option Shares subject to
the Option.</p>
<p ALIGN="JUSTIFY">&#160;&#160;&#160;&#160;&#160;10.&#160;&#160;&#160;&#160;&#160;<i>Definition
of Certain Terms</i>. As used herein &quot;related company&quot; means any
corporation in which Textron at the time in question owns, directly or
indirectly, stock possessing 50 percent or more of the total combined voting
power of all classes of stock and any corporation which at the time in question
owns, directly or indirectly, a similar interest in Textron; and &quot;fair
market value&quot; on any date shall be the simple average of the high and low
prices of Common Stock on the New York Stock Exchange Composite Transactions
Listing on such date.</p>
<p ALIGN="JUSTIFY">&#160;&#160;&#160;&#160;&#160;11.&#160;&#160;&#160;&#160;&#160;<i>Option
Subject to Plan</i>. The Option is in all respects subject to the terms and
conditions of the Plan as in effect from time to time; provided, however, that
termination or amendment of the Plan (except amendments as required by technical
corrections of the Code) shall not, without the consent of Optionee, adversely
affect Optionee&#39;s rights under the Option.</p>
<p ALIGN="JUSTIFY">&#160;&#160;&#160;&#160;&#160;12.&#160;&#160;&#160;&#160;&#160;<i>Incentive
Stock Option</i>.</p>
<p ALIGN="JUSTIFY">&#160;&#160;&#160;&#160;&#160;(a)&#160;&#160;&#160;&#160;&#160;The
Option is intended to be an &quot;incentive stock option&quot; under Section
422A of the Code, to the extent provided thereunder.</p>
<p ALIGN="JUSTIFY">&#160;&#160;&#160;&#160;&#160;(b)&#160;&#160;&#160;&#160;&#160;If
Optionee disposes of any Option Shares by sale, exchange, gift or other
disposition and described in Section 424(c) of the Code,
either(1)&#160;within two years after the date of the grant of the Option or
(2)&#160;within one year of the acquisition of such Option Shares, the
Optionee shall notify the Secretary of Textron at Textron&#39;s principal
office, at 40 Westminster Street, Providence, Rhode Island 02903, of such
disposition, the amount realized, the exercise price and the date of exercise of
such Option Shares. <b>Sale or exchange of Option Shares within the periods
specified in the foregoing sentence may result in less favorable tax treatment</b>.
Textron shall have the right to withhold from other sums which it may owe to the
Optionee, or to accept remittance by the Optionee of sums in lieu of, an amount
sufficient to satisfy any Federal, state and local withholding tax requirements
relating to such a disposition.</p>
<p ALIGN="JUSTIFY">&#160;&#160;&#160;&#160;&#160;(c)&#160;&#160;&#160;&#160;&#160;Optionee
represents that Optionee does not own stock possessing more than 10 percent of
the total combined voting power of all classes of stock of Textron or any
related company.</p>
<p ALIGN="JUSTIFY">&#160;&#160;&#160;&#160;&#160;13.&#160;&#160;&#160;&#160;&#160;<i>Administration</i>.
Pursuant to Section 1.2(c) of the Plan, the Board at any time may designate one
or more officers or committees of Textron to act in place of the Committee in
making certain determinations under the Plan.</p>
<p ALIGN="JUSTIFY">&#160;&#160;&#160;&#160;&#160;14.&#160;&#160;&#160;&#160;&#160;<i>Withholding
Taxes</i>: Whenever Textron proposes or is required to issue or transfer Option
Shares, Textron shall have the right to withhold or to require the optionee to
remit to Textron an amount sufficient to satisfy any Federal, state and local
withholding tax requirements. Whenever under the plan payments by Textron are to
be made in cash, such payments shall be net of an amount sufficient to satisfy
any Federal, state and local withholding tax requirements.</p>
</font><font FACE="Garamond" SIZE="3">
<p ALIGN="CENTER">&nbsp;<b>TEXTRON INC.</p>
<p ALIGN="CENTER">STOCK OPTION NON&#45;COMPETITION AGREEMENT</p>
<p ALIGN="CENTER">(1/2002)</p>
</b>
<p ALIGN="JUSTIFY">The purpose of Textron&#39;s grant of this Option under
the Textron 1999 Long&#45;Term Incentive Plan (&quot;the Plan&quot;) is to
attract, retain and reward employees, to increase stock ownership and
identification with Textron&#39;s interests, and to provide incentive for
remaining with and enhancing the value of Textron over the long&#45;term. In
return for granting this Option to you, please acknowledge by signing the
attached Notice of Grant of Stock Options and Option Agreement that you have
read and agree to the following:</p>
    <b>
    <p ALIGN="JUSTIFY" style="margin-bottom: 0">1.
    &#160;&#160;&#160;&#160;&#160;<u>Forfeiture of unexercised
    options if you engage in certain competitive activities</u></p>
    </b></font><font SIZE="3">
  <blockquote>
  <p ALIGN="JUSTIFY" style="margin-top: 0">If at any time during the term of this Option while you are
  a Company employee, or within two years after the termination of your
  employment, you do any of the following activities:</p>
    <p ALIGN="JUSTIFY">(a)&#160;&#160;&#160;&#160;&#160;engage
    in any business which competes with the Company&#39;s business (as
    defined in Paragraph 2) within the Restricted Territory (as defined in
    Paragraph 3); or</p>
  </font><font FACE="Garamond" SIZE="3">
  <p ALIGN="JUSTIFY">(b)&#160;&#160;&#160;&#160;&#160;solicit
  customers, business or orders for or sell any products and services (i)&#160;in
  competition with the Company&#39;s business within the Restricted
  Territory or (ii) for any business, wherever located, that competes with the
  Company&#39;s business within the Restricted Territory; or</p>
  </font><font SIZE="3">
  <p ALIGN="JUSTIFY">(c)&#160;&#160;&#160;&#160;&#160;divert,
  entice or otherwise take away customers, business or orders of the Company
  within the Restricted Territory, or attempt to do so; or</p>
  <p ALIGN="JUSTIFY">(d)&#160;&#160;&#160;&#160;&#160;promote
  or assist, financially or otherwise, any firm, corporation or other entity
  engaged in any business which competes with the Company&#39;s business
  within the Restricted Territory;</p>
  </blockquote>
<p ALIGN="JUSTIFY">then this Option shall terminate effective the date you enter
into such activity, unless terminated sooner by operation of another term or
condition of this Option or the Plan. You will be in violation of Paragraph 1 if
you engage in any or all of the activities discussed in this Paragraph directly
as an individual or indirectly as an employee, representative, consultant or in
any other capacity on behalf of any firm, corporation or other entity.</p>
</font><b><font FACE="Garamond" SIZE="3">
<p ALIGN="JUSTIFY" style="margin-top: 0; margin-bottom: 0">2. &#160;&#160;&#160;&#160;&#160;<u>Company&#39;s
business &#45; defined</p>
<blockquote>
  </u></font></b><font SIZE="3">
<p ALIGN="JUSTIFY" style="margin-top: 0; margin-bottom: 0">For the purpose of this Agreement:</p>
  <p ALIGN="JUSTIFY">(a)&#160;&#160;&#160;&#160;&#160;the
  Company shall include Textron and all subsidiary, affiliated or related
  companies or operations of Textron, and</p>
  <p ALIGN="JUSTIFY">(b)&#160;&#160;&#160;&#160;&#160;the
  Company&#39;s business shall include the products manufactured, marketed
  and sold and/or the services provided by any operation of the Company for
  which you have worked or to which you were assigned or had responsibility
  (either direct or supervisory), at the time of the termination of your
  employment and any time during the two&#45;year period prior to such
  termination.</p>
</blockquote>
</font><b><font FACE="Garamond" SIZE="3">
<p ALIGN="JUSTIFY" style="margin-top: 0; margin-bottom: 0">3. &#160;&#160;&#160;&#160;&#160;<u>Restricted
Territory &#45;&#45; defined</p>
<blockquote>
  </u></font></b><font SIZE="3">
<p ALIGN="JUSTIFY" style="margin-top: 0; margin-bottom: 0">For the purpose of Paragraph 1, the Restricted Territory
shall be defined as and limited to:</p>
  <p ALIGN="JUSTIFY">(a)&#160;&#160;&#160;&#160;&#160;the
  geographic area(s) within a one hundred (100) mile radius of any and all
  Company location(s) in or for which you have worked or to which you were
  assigned or had responsibility (either direct or supervisory), at the time of
  the termination of your employment and at any time during the two&#45;year
  period prior to such termination; and</p>
  <p ALIGN="JUSTIFY">(b)&#160;&#160;&#160;&#160;&#160;all of
  the specific customer accounts, whether within or outside of the geographic
  area described in (a) above, with which you have had any contact or for which
  you have had any responsibility (either direct or supervisory), at the time of
  termination of your employment and at any time during the two&#45;year
  period prior to such termination.</p>
  <blockquote>
<blockquote>
</font><b><font FACE="Garamond" SIZE="3">
</blockquote>
</blockquote>
</blockquote>
<p ALIGN="JUSTIFY">Page 2</p>
</font></b><b><font FACE="Garamond">
<p style="margin-bottom: 0">4.&#160;&#160;&#160;&#160;&#160;<u>Forfeiture of
unexercised options if you engage in certain solicitation activities
</u></p>
<blockquote>
<p style="margin-top: 0"></font></b><font FACE="Garamond">If at any time while you have any rights
under this Option, either during or any time after your employment with the
Company, you directly or indirectly solicit or induce or attempt to solicit or
induce any employee(s), sales representative(s), agent(s) or consultant(s) of
the Company to terminate their employment, representation or other association
with the Company, then your rights under this Option shall terminate
immediately, unless terminated sooner by operation of another term or condition
of this Option or the Plan.</p>
</blockquote>
</font><b><font FACE="Garamond" SIZE="3">
<p style="margin-top: 0; margin-bottom: 0">5. &#160;&#160;&#160;&#160;&#160;<u>Forfeiture of
unexercised options if you disclose confidential information</p>
<blockquote>
  </u></font></b><font FACE="Garamond" SIZE="3">
<p style="margin-top: 0; margin-bottom: 0">You specifically acknowledge that any trade secrets or confidential business
and technical information of the Company or its suppliers or customers, whether
reduced to writing, maintained on any form of electronic media, or maintained in
your mind or memory and whether compiled by you or the Company, derives
independent economic value from not being readily known to or ascertainable by
proper means by others who can obtain economic value from its disclosure or use;
that reasonable efforts have been made by the Company to maintain the secrecy of
such information; that such information is the sole property of the Company or
its suppliers or customers and that any retention, use or disclosure of such
information by you during your employment (except in the course of performing
your duties and obligations of employment with the Company) or after termination
thereof, shall constitute a misappropriation of the trade secrets of the Company
or its suppliers or customers. If at any time while you have any rights under
this Option, either during or any time after your employment with the Company,
you directly or indirectly misappropriate any such trade secrets, then your
rights under this Option shall terminate immediately, unless terminated sooner
by operation of another term or condition of this Option or the Plan.</p>
</blockquote>
<b>
<p ALIGN="JUSTIFY" style="margin-top: 0; margin-bottom: 0">6. &#160;&#160;&#160;&#160;&#160;<u>Organization
and Compensation Committee Discretion</p>
<blockquote>
  </u></b></font><font SIZE="3">
<p ALIGN="JUSTIFY" style="margin-top: 0; margin-bottom: 0">You may be released from your obligations under Paragraph 1,
4 and 5 above only if the Organization and Compensation Committee of the Board
of Directors (or its duly appointed agent) determines in its sole discretion
that such action is in the best interests of Textron.</p>
</blockquote>
</font>

</body>

</html>

</TEXT>
</DOCUMENT>
<DOCUMENT>
<TYPE>EX-10.3
<SEQUENCE>4
<FILENAME>tenthree.htm
<TEXT>
<html>

<head>
<title>Exhibit 10</title>
</head>

<body>

<p ALIGN="right"><font face="Garamond">Exhibit 10.3</font></p>

<b>
<p ALIGN="CENTER"><font face="Garamond" size="4">TEXTRON<br>
<br>
Notice of Grant of Restricted Stock<br>
and<br>
Restricted Stock Agreement</p>
<p ALIGN="CENTER">&nbsp;</p>
</font></b>
<div align="center">
  <center>
  <table CELLSPACING="0" CELLPADDING="1" WIDTH="768">
    <tr>
      <td WIDTH="355" VALIGN="TOP" style="border-top-style: solid; border-bottom-style: solid"><b><font FACE="Garamond">
        <p>[Name]<br>
        [Address]</p>
        </font></b></td>
      <td WIDTH="381" VALIGN="TOP" style="border-top-style: solid; border-bottom-style: solid"><b><font FACE="Garamond">
        <p>RS Number:<br>
        ID:<br>
        Location Code:<br>
        </font></b></td>
    </tr>
  </table>
  </center>
</div>
<font FACE="Garamond">
<p>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; Effective <b>[Grant Date]</b>, you have been granted<b> [# shares] </b>shares
of Restricted Stock (the &quot;Shares&quot;). This grant is governed by the
Restricted Stock Terms and Conditions (7/2003) (&quot;Terms and
Conditions&quot;) and the 1999 Long&#45;Term Incentive Plan Prospectus, both
of which are available on the Textron Enterprise Intranet and is subject to the
Restricted Stock Non&#45;Competition Agreement (7/2003)
(&quot;Non&#45;Competition Agreement&quot;) attached hereto.</p>
<p>The Shares will vest on the dates shown below, subject to earlier expiration
or termination as provided in the Terms and Conditions:</p>
</font>
<p ALIGN="CENTER"><center>
<table CELLSPACING="1" CELLPADDING="1" WIDTH="288">
  <tr>
    <td WIDTH="40%" VALIGN="TOP" style="border-style: solid; border-width: 1"><b><font FACE="Garamond">
      <p ALIGN="CENTER">Shares</font></b></td>
    <td WIDTH="60%" VALIGN="TOP" style="border-style: solid; border-width: 1"><b><font FACE="Garamond">
      <p ALIGN="CENTER">Vest Date</font></b></td>
  </tr>
  <tr>
    <td WIDTH="40%" VALIGN="TOP" style="border-style: solid; border-width: 1">&nbsp;</td>
    <td WIDTH="60%" VALIGN="TOP" style="border-style: solid; border-width: 1">&nbsp;</td>
  </tr>
  <tr>
    <td WIDTH="40%" VALIGN="TOP" style="border-style: solid; border-width: 1">&nbsp;</td>
    <td WIDTH="60%" VALIGN="TOP" style="border-style: solid; border-width: 1">&nbsp;</td>
  </tr>
  <tr>
    <td WIDTH="40%" VALIGN="TOP" style="border-style: solid; border-width: 1">&nbsp;</td>
    <td WIDTH="60%" VALIGN="TOP" style="border-style: solid; border-width: 1">&nbsp;</td>
  </tr>
  <tr>
    <td WIDTH="40%" VALIGN="TOP">
      <p style="border-style: solid">&nbsp;</p>
    </td>
    <td WIDTH="60%" VALIGN="TOP">&nbsp;</td>
  </tr>
</table>
</center><font FACE="Garamond">
<p style="border-bottom-style: solid">&nbsp;</p>
</font><font FACE="Garamond" SIZE="3">
<p>By your signature and the Company&#39;s signature below, you and the
Company agree that this grant is governed by the Terms and Conditions and 1999
Long&#45;Term Incentive Plan Prospectus, both of which are available on the
Textron Enterprise Intranet and is subject to the Non&#45;Competition
Agreement attached hereto.</p>
</font><b><font FACE="Garamond">
<p>TEXTRON INC.</p>
</font></b>
<div align="center">
  <center>
<table 1CELLSPACING="1" CELLPADDING="1" WIDTH="590">
  <tr>
    <td WIDTH="35" VALIGN="TOP"><b><font FACE="Garamond">
      <p>By:</font></b></td>
    <td WIDTH="288" VALIGN="TOP">
      <p style="border-bottom-style: solid; border-bottom-width: 1">&nbsp;</p>
    </td>
    <td WIDTH="18" VALIGN="TOP">&nbsp;</td>
    <td WIDTH="223" VALIGN="TOP">
      <p style="border-bottom-style: solid; border-bottom-width: 1">&nbsp;</p>
    </td>
  </tr>
  <tr>
    <td WIDTH="35" VALIGN="TOP">&nbsp;</td>
    <td WIDTH="288" VALIGN="TOP">&nbsp;</td>
    <td WIDTH="18" VALIGN="TOP">&nbsp;</td>
    <td WIDTH="223" VALIGN="TOP"><b><font FACE="Garamond" SIZE="3">
      <p ALIGN="CENTER">Date</font></b></td>
  </tr>
</table>
  </center>
</div>
<div align="center">
  <center>
<table CELLSPACING="1" CELLPADDING="1" WIDTH="590">
  <tr>
    <td WIDTH="76" VALIGN="TOP"><b><font FACE="Garamond">
      <p>Agreed by:</font></b></td>
    <td WIDTH="248" VALIGN="TOP">
      <p style="border-bottom-style: solid; border-bottom-width: 1">&nbsp;</p>
    </td>
    <td WIDTH="15" VALIGN="TOP">&nbsp;</td>
    <td WIDTH="225" VALIGN="TOP">
      <p style="border-bottom-style: solid; border-bottom-width: 1">&nbsp;</p>
    </td>
  </tr>
  <tr>
    <td WIDTH="76" VALIGN="TOP">&nbsp;</td>
    <td WIDTH="248" VALIGN="TOP"><font FACE="Garamond" SIZE="3">
      <p>&#160;&#160;&#160;&#160;&#160;[Optionee]</font></td>
    <td WIDTH="15" VALIGN="TOP">&nbsp;</td>
    <td WIDTH="225" VALIGN="TOP"><b><font FACE="Garamond">
      <p ALIGN="CENTER">Date</font></b></td>
  </tr>
</table>
  </center>
</div>
<b><font FACE="Garamond">
<p ALIGN="CENTER">Please retain a copy of this signed agreement and return the
original to<br>
your Human Resources Department within 60 days of receipt of this grant.</p>
</font></b><font FACE="Garamond">
<p ALIGN="CENTER">&nbsp;</p>
</font><b><font FACE="Arial" SIZE="3">
<p ALIGN="CENTER" style="margin-left: 20">T</font><font FACE="Arial" SIZE="2">EXTRON </font><font FACE="Arial" SIZE="3">I</font><font FACE="Arial" SIZE="2">NC</font><font FACE="Arial" SIZE="3">.<br>
T</font><font FACE="Arial" SIZE="2">EXTRON </font><font FACE="Arial" SIZE="3">1999
L</font><font FACE="Arial" SIZE="2">ONG</font><font FACE="Arial" SIZE="3">&#45;T</font><font FACE="Arial" SIZE="2">ERM
</font><font FACE="Arial" SIZE="3">I</font><font FACE="Arial" SIZE="2">NCENTIVE </font><font FACE="Arial" SIZE="3">P</font><font FACE="Arial" SIZE="2">LAN
FOR </font><font FACE="Arial" SIZE="3">T</font><font FACE="Arial" SIZE="2">EXTRON
</font><font FACE="Arial" SIZE="3">E</font><font FACE="Arial" SIZE="2">MPLOYEES<br>
</font><font FACE="Arial" SIZE="3">R</font><font FACE="Arial" SIZE="2">ESTRICTED
</font><font FACE="Arial" SIZE="3">S</font><font FACE="Arial" SIZE="2">TOCK </font><font FACE="Arial" SIZE="3">T</font><font FACE="Arial" SIZE="2">ERMS
AND </font><font FACE="Arial" SIZE="3">C</font><font FACE="Arial" SIZE="2">ONDITIONS<br>
</font><font FACE="Arial" SIZE="3">(7/2003)<br>
</font></b><font FACE="Garamond" SIZE="3">Textron has awarded a number of shares
of restricted stock to executive. As restrictions on particular shares lapse,
Textron will issue to the executive that number of shares less the number of
shares needed to satisfy required statutory withholding. Shares of Textron stock
may be issued in the form of a certificate or a notification to the executive
that the shares are held in a book&#45;entry account on the
executive&#39;s behalf.<br>
If the executive&#39;s employment with Textron shall terminate for
&quot;Cause,&quot; all shares of Restricted Stock awarded to the executive that
are still subject to the applicable &quot;Period of Restriction&quot; shall be
forfeited.<br>
Except as otherwise provided herein, the executive shall not be entitled to be
issued shares of Textron stock if the executive&#39;s employment with
Textron ends for any reason prior to the end of the Period of Restriction
applicable to such shares, provided that if the executive&#39;s employment
ends prior to such date and at least six months after the date of grant because
of &quot;Disability,&quot; death or after the executive has become eligible for
&quot;Early or Normal Retirement,&quot; the executive or the executive&#39;s
estate will receive a certificate for a &quot;Pro&#45;Rata Portion&quot; of
such award.<br>
Notwithstanding the above, the applicable Period of Restriction for the shares
of Restricted Stock shall end immediately upon a &quot;Change in Control&quot;
of Textron. In such instance, Textron shall issue the shares to the executive
(or to the executive&#39;s estate in the event of the executive&#39;s
death prior to payment) as soon as administratively practical after the Change
in Control. Note: Sale of a business unit usually does not constitute a Change
in Control as defined in these Terms and Conditions. If executive&#39;s
employment with Textron is involuntarily terminated due to the sale of a
business that does not constitute a Change in Control as herein defined,
executive&#39;s then&#45;unvested restricted shares will be forfeited.<br>
The number of shares of Restricted Stock awarded to the executive hereunder
shall be proportionately adjusted for any increase or decrease in the number of
issued shares of Textron&#39;s common stock resulting from a stock split,
stock divided or any other increase or decrease in such shares effective without
receipt of consideration by Textron.<br>
Nothing in this document shall confer upon the executive the right to continue
in the employment of Textron or affect any right that Textron may have to
terminate the employment of the executive.</font><font FACE="Arial" SIZE="2"><br>
</font><font FACE="Garamond" SIZE="3">The Restricted Stock shall not be
assignable or transferable by the executive until after the last day of the
applicable Period of Restriction.<br>
The executive shall not have voting rights nor will the executive qualify for
dividends with respect to the Restricted Stock during the Period of Restriction.</p>
</font><b>
<p ALIGN="CENTER" style="margin-left: 20; margin-top: 0; margin-bottom: 0">D<font SIZE="2">EFINITIONS<br>
</font></b>&quot;Cause&quot;</p>
<p ALIGN="left" style="margin-left: 20; margin-top: 0; margin-bottom: 0">&quot;Cause&quot; shall mean: (i) an act or acts of willful
misrepresentation, fraud or willful dishonesty (other than good faith expense
account disputes) by the Executive which in any case is intended to result in
his or another person or entity&#39;s substantial personal enrichment at the
expense of Textron; (ii) any willful misconduct by the Executive with regard to
Textron, its business, assets or employees that has, or was intended to have, a
material adverse impact (economic or otherwise) on Textron; (iii) any material,
willful and knowing violation by the Executive of (x) Textron&#39;s Business
Conduct Guidelines, or (y) any of his fiduciary duties to Textron which in
either case has, or was intended to have, a material adverse impact (economic or
otherwise) on Textron; (iv) the willful or reckless behavior of the Executive
with regard to a matter of a material nature which has a material adverse impact
(economic or otherwise) on Textron; (v) the executive&#39;s willful failure
to attempt to perform his duties or his willful failure to attempt to follow the
legal written direction of the Board, which in either case is not remedied
within ten (10) days after receipt by the Executive of a written notice from
Textron specifying the details thereof; or (vi) the Executive&#39;s
conviction of, or pleading nolo contendere or guilty to, a felony (other than
(x) a traffic infraction or (y) vicarious liability solely as a result of his
position provided the Executive did not have actual knowledge of the actions or
in actions creating the violation of the law or the Executive relied in good
faith on the advice of counsel with regard to the legality of such action or
inaction (or the advice of other specifically qualified professionals as to the
appropriate or proper action or inaction to take with regard to matters which
are not matters of legal interpretation); No action or inaction should be deemed
willful if not demonstrably willful and if taken or not taken by the Executive
in good faith as not being adverse to the best interests of Textron. Reference
in this paragraph to Textron shall also include direct and indirect subsidiaries
of Textron, and materiality and material adverse impact shall be measured based
on the action or inaction and the impact upon, and not the size of, Textron
taken as a whole, provided that after a Change in Control, the size of Textron,
taken as a whole, shall be a relevant factor in determining materiality and
material adverse impact.</p>
  <b><u><font SIZE="3">
  <p ALIGN="CENTER" style="margin-left: 20; margin-top: 0; margin-bottom: 0">&quot;Period of Restriction&quot;</p>
  </font></u></b><font FACE="Garamond" SIZE="3">
<p style="margin-left: 20; margin-top: 0; margin-bottom: 0">For the purposes of this grant, the Period of Restriction means, for any
share, the period prior to vesting.</p>
</font><b><u>
<p ALIGN="CENTER" style="margin-left: 20; margin-top: 0; margin-bottom: 0">&quot;Early or Normal Retirement&quot;</p>
</u></b><font FACE="Garamond">
<p ALIGN="JUSTIFY" style="margin-left: 20; margin-top: 0; margin-bottom: 0">&quot;Early retirement&quot; with Textron is defined as
attainment of age 60 or the completion of 20 years of vesting service or the
attainment of age 55 with the completion of 10 years of vesting service.
&quot;Normal retirement&quot; with Textron is age 65.</p>
</font><b><u>
<p ALIGN="CENTER" style="margin-left: 20; margin-top: 0; margin-bottom: 0">&quot;Disability&quot;</p>
</u></b><font FACE="Garamond">
<p ALIGN="JUSTIFY" style="margin-left: 20; margin-top: 0; margin-bottom: 0">&quot;Disability&quot; shall mean, for purposes of this
award, the inability of the Executive, due to injury, illness, disease or bodily
or mental infirmity, to engage in the performance of his material duties of
employment with Textron for a period of more than one hundred eighty (180)
consecutive days or for a period that is reasonably expected to exist for a
period of more than one hundred eighty (180) consecutive days, provided that
interim returns to work of less than ten (10) consecutive business days in
duration shall not be</p>
</font><font FACE="TimesNewRoman" SIZE="1">
<p style="margin-top: 0; margin-bottom: 0">2</p>
</font><font FACE="Garamond">
<p ALIGN="JUSTIFY" style="margin-left: 20; margin-top: 0; margin-bottom: 0">deemed to interfere with a determination of consecutive
absent days if the reason for absence before and after the interim return are
the same. The existence or non&#45;existence of a Disability shall be
determined by a physician whose selection is mutually agreed upon by the
Executive (or his representatives) and Textron.</p>
</font><b><u>
<p ALIGN="CENTER" style="margin-left: 20; margin-top: 0; margin-bottom: 0">&quot;Change in Control&quot;</p>
</u></b><font FACE="Garamond">
<p style="margin-left: 20; margin-top: 0; margin-bottom: 0">A &quot;Change in Control&quot; of Textron shall be deemed to have occurred
as of the first day any one or more of the following conditions shall have been
satisfied:</p>
<p style="margin-left: 20; margin-top: 0; margin-bottom: 0">(a) Any &quot;person&quot; or &quot;group&quot; (within the meaning of
Section 13(d) and 14(d)(2) of the Securities Exchange Act of 1934, as amended
(the &quot;Exchange Act&quot;)) other than Textron, any trustee or other
fiduciary holding Company common stock under an employee benefit plan of Textron
or a related company, or any corporation which is owned, directly or indirectly,
by the stockholders of Textron in substantially the same proportions as their
ownership of Textron&#39;s common stock, is or becomes the beneficial owner
(as defined in Rule 13d&#45;3 under the Exchange Act) of more than thirty
percent (30%) of the then outstanding voting stock;</p>
<p style="margin-left: 20; margin-top: 0; margin-bottom: 0">(b) During any period of two (2) consecutive years, individuals who at the
beginning of such period constitute the Board and any new director whose
election by the Board or nomination for election by Textron&#39;s
stockholders was approved by a vote of at least two&#45;thirds of the
directors then still in office who either were directors at the beginning of the
two year period or whose election or nomination for election was previously so
approved, cease for any reason to constitute at least a majority of the Board;</p>
<p style="margin-left: 20; margin-top: 0; margin-bottom: 0">(c) The consummation of a merger or consolidation of Textron with any other
corporation, other than a merger or consolidation which would result in the
voting securities of Textron outstanding immediately prior thereto continuing to
represent (either by remaining outstanding or being converted into voting
securities of the surviving entity) more than fifty percent (50%) of the
combined voting securities of Textron or such surviving entity outstanding
immediately after such merger or consolidation; or</p>
<p style="margin-left: 20; margin-top: 0; margin-bottom: 0">(d) The approval of the stockholders of Textron of a plan of complete
liquidation of Textron or an agreement for the sale or disposition by Textron of
all or substantially all of its assets.</p>
</font>
<p style="margin-top: 0; margin-bottom: 0"><font face="Garamond" size="1"><sup>34</sup></font></p>
<b><u>
<p ALIGN="CENTER" style="margin-left: 20; margin-top: 0; margin-bottom: 0">&quot;Pro&#45;Rata Portion&quot;</p>
</u></b><font FACE="Garamond" SIZE="3">
<p ALIGN="JUSTIFY" style="margin-left: 20; margin-top: 0; margin-bottom: 0">&quot;Pro&#45;Rata Portion&quot; shall mean the number of
complete or partial months of executive&#39;s active service to Textron
during the vesting period divided by the number of months in the vesting period.</p>
</font><b>
<p ALIGN="JUSTIFY" style="margin-left: 20; margin-top: 0; margin-bottom: 0">Example: </b><font FACE="Garamond">An executive was granted
2,400 shares of Restricted Stock on July 16, 2003 with the following vesting
schedule:</p>
</font>
<center>
<table CELLSPACING="1" CELLPADDING="1" WIDTH="276" height="97">
  <tr>
    <td WIDTH="50%" VALIGN="TOP" HEIGHT="21" style="border-style: solid; border-width: 1">
        <u>
        <p ALIGN="CENTER" style="margin-top: 0; margin-bottom: 0"><b>Shares</b>
      </u></td>
    <td WIDTH="50%" VALIGN="TOP" HEIGHT="21" style="border-style: solid; border-width: 1"><u>
      <p ALIGN="CENTER" style="margin-top: 0; margin-bottom: 0"><b>Vest Dates</b></u></td>
  </tr>
  <tr>
    <td WIDTH="50%" VALIGN="TOP" HEIGHT="20" style="border-style: solid; border-width: 1"><font FACE="Garamond" SIZE="3">
      <p>800</font></td>
    <td WIDTH="50%" VALIGN="TOP" HEIGHT="20" style="border-style: solid; border-width: 1"><font FACE="Garamond" SIZE="3">
      <p>July 16, 2006</font></td>
  </tr>
  <tr>
    <td WIDTH="50%" VALIGN="TOP" HEIGHT="20" style="border-style: solid; border-width: 1"><font FACE="Garamond" SIZE="3">
      <p>800</font></td>
    <td WIDTH="50%" VALIGN="TOP" HEIGHT="20" style="border-style: solid; border-width: 1"><font FACE="Garamond" SIZE="3">
      <p>July 16, 2007</font></td>
  </tr>
  <tr>
    <td WIDTH="50%" VALIGN="TOP" HEIGHT="20" style="border-style: solid; border-width: 1"><font FACE="Garamond" SIZE="3">
      <p>800</font></td>
    <td WIDTH="50%" VALIGN="TOP" HEIGHT="20" style="border-style: solid; border-width: 1"><font FACE="Garamond" SIZE="3">
      <p>July 16, 2008</font></td>
  </tr>
</table>
</center><font FACE="Garamond-Bold">
<blockquote>
</font><font FACE="Garamond">
<p ALIGN="JUSTIFY">The executive terminates employment with Textron on August
30, 2005 after having attained age 55 with the completion of 10 years of vesting
service.</p>
</blockquote>
</font><font FACE="Garamond" SIZE="3">
<p style="margin-left: 20">Because the executive&#39;s age and years of service qualify as
&#39;early retirement&#39;, the executive is eligible for prorate
vesting of the restricted share grant. The number of pro&#45;rata shares
earned would be calculated as follows:</p>
</font>
<p ALIGN="RIGHT">&nbsp;
<div align="center">
  <center>
<table CELLSPACING="1" CELLPADDING="1" WIDTH="578">
  <tr>
    <td WIDTH="84" VALIGN="BOTTOM" HEIGHT="47" style="border-style: solid; border-width: 1"><u><font FACE="Garamond" SIZE="1">
      <p>Vest Date</font></u></td>
    <td WIDTH="84" VALIGN="BOTTOM" HEIGHT="47" style="border-style: solid; border-width: 1"><b><u><font FACE="Garamond-Bold" SIZE="1">
      <p>Shares Granted</font></u></b></td>
    <td WIDTH="26" VALIGN="BOTTOM" HEIGHT="47" style="border-style: solid; border-width: 1">
      <p></p>
    </td>
    <td WIDTH="101" VALIGN="BOTTOM" HEIGHT="47" style="border-style: solid; border-width: 1"><b><font FACE="Arial" SIZE="1">
      <p>Number of<br>
      Complete or<br>
      Partial Months<br>
      Employed by<br>
      Textron<br>
      <u>During the<br>
      Vesting<br>
      Period </u>(1)</font></b></td>
    <td WIDTH="31" VALIGN="BOTTOM" HEIGHT="47" style="border-style: solid; border-width: 1">
      <p></p>
    </td>
    <td WIDTH="94" VALIGN="BOTTOM" HEIGHT="47" style="border-style: solid; border-width: 1"><b><font FACE="Arial" SIZE="1">
      <p>Number of<br>
      Months in <u>the<br>
      Vesting<br>
      Period</u></font></b></td>
    <td WIDTH="28" VALIGN="BOTTOM" HEIGHT="47" style="border-style: solid; border-width: 1"><b><font FACE="Arial" SIZE="1">
      <p>=</font></b></td>
    <td WIDTH="80" VALIGN="BOTTOM" HEIGHT="47" style="border-style: solid; border-width: 1"><b><font FACE="Arial" SIZE="1">
      <p>Pro&#45;Rata<br>
      <u>Shares</u></font></b></td>
  </tr>
  <tr>
    <td WIDTH="84" VALIGN="TOP" HEIGHT="15" style="border-style: solid; border-width: 1"><font FACE="Garamond" SIZE="1">
      <p>7/16/06</font></td>
    <td WIDTH="84" VALIGN="TOP" HEIGHT="15" style="border-style: solid; border-width: 1"><font FACE="Garamond" SIZE="1">
      <p>800</font></td>
    <td WIDTH="26" VALIGN="TOP" HEIGHT="15" style="border-style: solid; border-width: 1"><font FACE="Garamond" SIZE="1">
      <p>X</font></td>
    <td WIDTH="101" VALIGN="TOP" HEIGHT="15" style="border-style: solid; border-width: 1"><font FACE="Garamond" SIZE="1">
      <p>26</font></td>
    <td WIDTH="31" VALIGN="TOP" HEIGHT="15" style="border-style: solid; border-width: 1"><font FACE="SymbolMT" SIZE="1">
      <p>&#247;</font></td>
    <td WIDTH="94" VALIGN="TOP" HEIGHT="15" style="border-style: solid; border-width: 1"><font FACE="Garamond" SIZE="1">
      <p>36 <sup> (2)</sup></font></td>
    <td WIDTH="28" VALIGN="TOP" HEIGHT="15" style="border-style: solid; border-width: 1">
      <p></p>
    </td>
    <td WIDTH="80" VALIGN="TOP" HEIGHT="15" style="border-style: solid; border-width: 1"><font FACE="Garamond" SIZE="1">
      <p>577.778</font></td>
  </tr>
  <tr>
    <td WIDTH="84" VALIGN="TOP" HEIGHT="15" style="border-style: solid; border-width: 1"><font FACE="Garamond" SIZE="1">
      <p>7/16/07</font></td>
    <td WIDTH="84" VALIGN="TOP" HEIGHT="15" style="border-style: solid; border-width: 1"><font FACE="Garamond" SIZE="1">
      <p>800</font></td>
    <td WIDTH="26" VALIGN="TOP" HEIGHT="15" style="border-style: solid; border-width: 1"><font FACE="Garamond" SIZE="1">
      <p>X</font></td>
    <td WIDTH="101" VALIGN="TOP" HEIGHT="15" style="border-style: solid; border-width: 1"><font FACE="Garamond" SIZE="1">
      <p>26</font></td>
    <td WIDTH="31" VALIGN="TOP" HEIGHT="15" style="border-style: solid; border-width: 1"><font FACE="SymbolMT" SIZE="1">
      <p>&#247;</font></td>
    <td WIDTH="94" VALIGN="TOP" HEIGHT="15" style="border-style: solid; border-width: 1"><font FACE="Garamond" SIZE="1">
      <p>48 <sup> (3)</sup></font></td>
    <td WIDTH="28" VALIGN="TOP" HEIGHT="15" style="border-style: solid; border-width: 1">
      <p></p>
    </td>
    <td WIDTH="80" VALIGN="TOP" HEIGHT="15" style="border-style: solid; border-width: 1"><font FACE="Garamond" SIZE="1">
      <p>433.333</font></td>
  </tr>
  <tr>
    <td WIDTH="84" VALIGN="TOP" HEIGHT="15" style="border-style: solid; border-width: 1"><font FACE="Garamond" SIZE="1">
      <p>7/16/08</font></td>
    <td WIDTH="84" VALIGN="TOP" HEIGHT="15" style="border-style: solid; border-width: 1"><font FACE="Garamond" SIZE="1">
      <p>800</font></td>
    <td WIDTH="26" VALIGN="TOP" HEIGHT="15" style="border-style: solid; border-width: 1"><font FACE="Garamond" SIZE="1">
      <p>X</font></td>
    <td WIDTH="101" VALIGN="TOP" HEIGHT="15" style="border-style: solid; border-width: 1"><font FACE="Garamond" SIZE="1">
      <p>26</font></td>
    <td WIDTH="31" VALIGN="TOP" HEIGHT="15" style="border-style: solid; border-width: 1"><font FACE="SymbolMT" SIZE="1">
      <p>&#247;</font></td>
    <td WIDTH="94" VALIGN="TOP" HEIGHT="15" style="border-style: solid; border-width: 1"><font FACE="Garamond" SIZE="1">
      <p>60 <sup> (4)</sup></font></td>
    <td WIDTH="28" VALIGN="TOP" HEIGHT="15" style="border-style: solid; border-width: 1">
      <p></p>
    </td>
    <td WIDTH="80" VALIGN="TOP" HEIGHT="15" style="border-style: solid; border-width: 1"><u><font FACE="Garamond" SIZE="1">
      <p>346.667</font></u></td>
  </tr>
  <tr>
    <td WIDTH="84" VALIGN="TOP" HEIGHT="13" style="border-style: solid; border-width: 1">
      <p></p>
    </td>
    <td WIDTH="84" VALIGN="TOP" HEIGHT="13" style="border-style: solid; border-width: 1">
      <p></p>
    </td>
    <td WIDTH="26" VALIGN="TOP" HEIGHT="13" style="border-style: solid; border-width: 1">
      <p></p>
    </td>
    <td WIDTH="101" VALIGN="TOP" HEIGHT="13" style="border-style: solid; border-width: 1">
      <p></p>
    </td>
    <td WIDTH="31" VALIGN="TOP" HEIGHT="13" style="border-style: solid; border-width: 1">
      <p></p>
    </td>
    <td WIDTH="94" VALIGN="TOP" HEIGHT="13" style="border-style: solid; border-width: 1"><font FACE="Garamond" SIZE="1">
      <p>Pro&#45;Rata Shares<br>
      Earned:</font></td>
    <td WIDTH="28" VALIGN="TOP" HEIGHT="13" style="border-style: solid; border-width: 1">
      <p></p>
    </td>
    <td WIDTH="80" VALIGN="TOP" HEIGHT="13" style="border-style: solid; border-width: 1"><font FACE="Garamond" SIZE="1">
      <p>1,357.778*</font></td>
  </tr>
</table>
  </center>
</div>
<font FACE="Garamond" SIZE="1">
<p style="margin-left: 20; margin-top: 0; margin-bottom: 0"><sup>(1) J</sup>uly 16, 2003 &#45; August 30, 2005 (25 completed plus 1 partial
month)</p>
<p style="margin-left: 20; margin-top: 0; margin-bottom: 0"><sup>(2) </sup> July 16, 2003 &#45; July 16, 2006</p>
<p style="margin-left: 20; margin-top: 0; margin-bottom: 0"><sup>(3)</sup> July 16, 2003 &#45; July 16, 2007</p>
<p style="margin-left: 20; margin-top: 0; margin-bottom: 0"><sup>(4) </sup> July 16, 2003 &#45; July 16, 2008</p>
</font><font FACE="Garamond" SIZE="3">
<p style="margin-left: 20; margin-top: 0; margin-bottom: 0">*Fractional shares will be paid in cash. For instance, if the share price is
$43 on the date that the shares vest, then Textron would pay the executive
$33.45 (.778 x $43 = $33.45).</p>
</font><font FACE="Arial" SIZE="3">
<p></p>
</font><b><font SIZE="2">
<p ALIGN="CENTER">TEXTRON INC.</p>
<p ALIGN="CENTER">RESTRICTED STOCK NON&#45;COMPETITION AGREEMENT</p>
<p ALIGN="CENTER">(7/2003)</p>
</font></b><font SIZE="2">
<p ALIGN="JUSTIFY">&nbsp;</p>
<p ALIGN="JUSTIFY">The purpose of Textron&#39;s grant of Restricted Stock
(the &quot;Shares&quot;) under the Textron 1999 Long&#45;Term Incentive Plan
(&quot;the Plan&quot;) is to attract, retain and reward employees, to increase
stock ownership and identification with Textron&#39;s interests, and to
provide incentive for remaining with and enhancing the value of Textron over the
long&#45;term. In return for granting these Shares to you, please
acknowledge by signing the attached Notice of Grant of Restricted Stock and
Agreement that you have read and agree to the following:</p>
    <b>
    <p ALIGN="JUSTIFY" style="margin-top: 0; margin-bottom: 0">1.
    &#160;&#160;&#160;&#160;<u>&#160;Forfeiture of unvested
    Shares if you engage in certain competitive activities</u></p>
  </b>
  <p ALIGN="JUSTIFY" style="margin-left: 30; margin-top: 0; margin-bottom: 0">If at any time during the Period of Restriction (as defined
  in the Notice of Grant of Restricted Stock and Agreement) while you are a
  Company employee, or within two years after the termination of your
  employment, you do any of the following activities:</p>
<blockquote>
    <p>(a)&#160;&#160;&#160;&#160;&#160;engage in any
    business which competes with the Company&#39;s business (as defined in
    Paragraph 2) within the Restricted Territory (as defined in Paragraph 3); or</p>
    <p ALIGN="JUSTIFY">(b)&#160;&#160;&#160;&#160;&#160;solicit
    customers, business or orders for or sell any products and services (i)&#160;in
    competition with the Company&#39;s business within the Restricted
    Territory or (ii) for any business, wherever located, that competes with the
    Company&#39;s business within the Restricted Territory; or</p>
    <p>(c)&#160;&#160;&#160;&#160;&#160;divert, entice or
    otherwise take away customers, business or orders of the Company within the
    Restricted Territory, or attempt to do so; or</p>
    <p>(d)&#160;&#160;&#160;&#160;&#160;promote or assist,
    financially or otherwise, any firm, corporation or other entity engaged in
    any business which competes with the Company&#39;s business within the
    Restricted Territory;</p>
</blockquote>
<p ALIGN="JUSTIFY">then all unvested Shares shall be forfeited effective the
date you enter into such activity. You will be in violation of Paragraph 1 if
you engage in any or all of the activities discussed in this Paragraph directly
as an individual or indirectly as an employee, representative, consultant or in
any other capacity on behalf of any firm, corporation or other entity.</p>
<p ALIGN="JUSTIFY" style="margin-top: 0; margin-bottom: 0">&nbsp;<b>2. &#160;&#160;&#160;&#160;&#160;<u>Company&#39;s
business &#45; defined</p>
  </u></b>
<p ALIGN="JUSTIFY" style="margin-left: 30; margin-top: 0; margin-bottom: 0">For the purpose of this Agreement:</p>
<blockquote>
<p ALIGN="JUSTIFY">(a)&#160;&#160;&#160;&#160;&#160;the
Company shall include Textron and all subsidiary, affiliated or related
companies or operations of Textron, and</p>
<p ALIGN="JUSTIFY">(b)&#160;&#160;&#160;&#160;&#160;the
Company&#39;s business shall include the products manufactured, marketed and
sold and/or the services provided by any operation of the Company for which you
have worked or to which you were assigned or had responsibility (either direct
or supervisory), at the time of the termination of your employment and any time
during the two&#45;year period prior to such termination.</p>
</blockquote>
<b>
<p ALIGN="JUSTIFY" style="margin-top: 0; margin-bottom: 0">3. &#160;&#160;&#160;&#160;&#160;<u>Restricted
Territory &#45;&#45; defined</p>
</u></b>
<p ALIGN="JUSTIFY" style="margin-left: 30; margin-top: 0; margin-bottom: 0">For the purpose of Paragraph 1, the Restricted Territory
shall be defined as and limited to:</p>
<blockquote>
  <p ALIGN="JUSTIFY">(a)&#160;&#160;&#160;&#160;&#160;the
  geographic area(s) within a one hundred (100) mile radius of any and all
  Company location(s) in or for which you have worked or to which you were
  assigned or had responsibility (either direct or supervisory), at the time of
  the termination of your employment and at any time during the two&#45;year
  period prior to such termination; and</p>
  <p ALIGN="JUSTIFY">(b)&#160;&#160;&#160;&#160;&#160;all of
  the specific customer accounts, whether within or outside of the geographic
  area described in (a) above, with which you have had any contact or for which
  you have had any responsibility (either direct or supervisory), at the time of
  termination of your employment and at any time during the two&#45;year
  period prior to such termination.</p>
  <b>
</blockquote>
  <p ALIGN="JUSTIFY">Page 2</p>
</b>
  <b>
  <p ALIGN="JUSTIFY" style="margin-top: 0; margin-bottom: 0">4.&#160;&#160;&#160;&#160;&#160;<u>Forfeiture
  of unvested Shares if you engage in certain solicitation activities</p>
  </u></b>
  <p ALIGN="JUSTIFY" style="margin-left: 30; margin-top: 0; margin-bottom: 0">If at any time while you have any unvested Shares you
  directly or indirectly solicit or induce or attempt to solicit or induce any
  employee(s), sales representative(s), agent(s) or consultant(s) of the Company
  to terminate their employment, representation or other association with the
  Company, then such unvested Shares shall be forfeited</p>
<b>
<p ALIGN="JUSTIFY" style="margin-bottom: 0">5. &#160;&#160;&#160;&#160;&#160;<u>Forfeiture
of unvested Shares if you disclose confidential information</p>
  </u></b>
<p ALIGN="JUSTIFY" style="margin-left: 30; margin-top: 0; margin-bottom: 0">You specifically acknowledge that any trade secrets or
confidential business and technical information of the Company or its suppliers
or customers, whether reduced to writing, maintained on any form of electronic
media, or maintained in your mind or memory and whether compiled by you or the
Company, derives independent economic value from not being readily known to or
ascertainable by proper means by others who can obtain economic value from its
disclosure or use; that reasonable efforts have been made by the Company to
maintain the secrecy of such information; that such information is the sole
property of the Company or its suppliers or customers and that any retention,
use or disclosure of such information by you during your employment (except in
the course of performing your duties and obligations of employment with the
Company) or after termination thereof, shall constitute a misappropriation of
the trade secrets of the Company or its suppliers or customers. If at any time
while you have any unvested Shares you directly or indirectly misappropriate any
such trade secrets, then such unvested Shares shall be forfeited</p>
<b>
<p ALIGN="JUSTIFY" style="margin-bottom: 0">6. &#160;&#160;&#160;&#160;&#160;<u>Organization
and Compensation Committee Discretion</p>
  </u></b>
<p ALIGN="JUSTIFY" style="margin-left: 30; margin-top: 0; margin-bottom: 0">You may be released from your obligations under Paragraph 1,
4 and 5 above only if the Organization and Compensation Committee of the Board
of Directors (or its duly appointed agent) determines in its sole discretion
that such action is in the best interests of Textron.</p>
</font>

</body>

</html>

</TEXT>
</DOCUMENT>
<DOCUMENT>
<TYPE>EX-12.1
<SEQUENCE>5
<FILENAME>tweone.htm
<TEXT>
<html>

<head>
<title>EXHIBIT 12</title>
</head>

<body>

<u>
<p ALIGN="RIGHT">EXHIBIT 12.1</p>
</u><b>
<p ALIGN="CENTER">TEXTRON MANUFACTURING<br>
</p>
<p ALIGN="CENTER">COMPUTATION OF RATIO OF INCOME TO FIXED CHARGES<br>
<br>
(unaudited)<br>
</b><br>
(In millions except ratio)<br>
</p>
<div align="center">
  <center>
<table CELLSPACING="1" WIDTH="696">
  <tr>
    <td WIDTH="78%" VALIGN="TOP" style="border-bottom-style: solid; border-bottom-width: 1">&nbsp;</td>
    <td WIDTH="19%" VALIGN="TOP" COLSPAN="2" style="border-bottom-style: solid; border-bottom-width: 1">
      <p ALIGN="CENTER">Six Months<br>
      Ended<br>
      July 3, 2004</td>
    <td WIDTH="3%" VALIGN="TOP">&nbsp;</td>
  </tr>
  <tr>
    <td WIDTH="78%" VALIGN="TOP">
      <p>Fixed charges:</td>
    <td WIDTH="3%" VALIGN="TOP">&nbsp;</td>
    <td WIDTH="16%" VALIGN="TOP">&nbsp;</td>
    <td WIDTH="3%" VALIGN="TOP">&nbsp;</td>
  </tr>
  <tr>
    <td WIDTH="78%" VALIGN="TOP">
      <p>&#160;&#160;&#160;&#160;&#160;Interest expense</td>
    <td WIDTH="3%" VALIGN="TOP">
      <p>$</td>
    <td WIDTH="16%" VALIGN="TOP">
      <p style="margin-right: 40" align="right">54</td>
    <td WIDTH="3%" VALIGN="TOP">&nbsp;</td>
  </tr>
  <tr>
    <td WIDTH="78%" VALIGN="TOP" style="border-bottom-style: solid; border-bottom-width: 1">
      <p>&#160;&#160;&#160;&#160;&#160;Estimated interest
      portion of rents</td>
    <td WIDTH="3%" VALIGN="TOP" style="border-bottom-style: solid; border-bottom-width: 1">&nbsp;</td>
    <td WIDTH="16%" VALIGN="TOP" style="border-bottom-style: solid; border-bottom-width: 1">
      <p style="margin-right: 40" align="right">17</td>
    <td WIDTH="3%" VALIGN="TOP">&nbsp;</td>
  </tr>
  <tr>
    <td WIDTH="78%" VALIGN="TOP" style="border-bottom-style: solid">
      <p><br>
      &#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;Total
      fixed charges</td>
    <td WIDTH="3%" VALIGN="TOP" style="border-bottom-style: solid">
      <p><br>
      $</td>
    <td WIDTH="16%" VALIGN="TOP" style="border-bottom-style: solid">
      <p style="margin-right: 40" align="right"><br>
      71</td>
    <td WIDTH="3%" VALIGN="TOP">&nbsp;</td>
  </tr>
  <tr>
    <td WIDTH="78%" VALIGN="TOP">&nbsp;</td>
    <td WIDTH="3%" VALIGN="TOP">&nbsp;</td>
    <td WIDTH="16%" VALIGN="TOP">
      <p style="margin-right: 40" align="right">&nbsp;</p>
    </td>
    <td WIDTH="3%" VALIGN="TOP">&nbsp;</td>
  </tr>
  <tr>
    <td WIDTH="78%" VALIGN="TOP">&nbsp;</td>
    <td WIDTH="3%" VALIGN="TOP">&nbsp;</td>
    <td WIDTH="16%" VALIGN="TOP">
      <p style="margin-right: 40" align="right">&nbsp;</p>
    </td>
    <td WIDTH="3%" VALIGN="TOP">&nbsp;</td>
  </tr>
  <tr>
    <td WIDTH="78%" VALIGN="TOP">
      <p>Income:</td>
    <td WIDTH="3%" VALIGN="TOP">&nbsp;</td>
    <td WIDTH="16%" VALIGN="TOP">
      <p style="margin-right: 40" align="right">&nbsp;</p>
    </td>
    <td WIDTH="3%" VALIGN="TOP">&nbsp;</td>
  </tr>
  <tr>
    <td WIDTH="78%" VALIGN="TOP">
      <p>&#160;&#160;&#160;&#160;&#160;Income from
      operations before income taxes</td>
    <td WIDTH="3%" VALIGN="TOP">
      <p>$</td>
    <td WIDTH="16%" VALIGN="TOP">
      <p style="margin-right: 40" align="right">209</td>
    <td WIDTH="3%" VALIGN="TOP">&nbsp;</td>
  </tr>
  <tr>
    <td WIDTH="78%" VALIGN="TOP" style="border-bottom-style: solid; border-bottom-width: 1">
      <p>&#160;&#160;&#160;&#160;&#160;Fixed charges</td>
    <td WIDTH="3%" VALIGN="TOP" style="border-bottom-style: solid; border-bottom-width: 1">&nbsp;</td>
    <td WIDTH="16%" VALIGN="TOP" style="border-bottom-style: solid; border-bottom-width: 1">
      <p style="margin-right: 40" align="right">71</td>
    <td WIDTH="3%" VALIGN="TOP">&nbsp;</td>
  </tr>
  <tr>
    <td WIDTH="78%" VALIGN="TOP" style="border-bottom-style: solid">
      <p><br>
      &#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;Adjusted
      income</td>
    <td WIDTH="3%" VALIGN="TOP" style="border-bottom-style: solid">
      <p><br>
      $</td>
    <td WIDTH="16%" VALIGN="TOP" style="border-bottom-style: solid">
      <p style="margin-right: 40" align="right"><br>
      280</td>
    <td WIDTH="3%" VALIGN="TOP">&nbsp;</td>
  </tr>
  <tr>
    <td WIDTH="78%" VALIGN="TOP">&nbsp;</td>
    <td WIDTH="3%" VALIGN="TOP">&nbsp;</td>
    <td WIDTH="16%" VALIGN="TOP">
      <p style="margin-right: 40" align="right">&nbsp;</p>
    </td>
    <td WIDTH="3%" VALIGN="TOP">&nbsp;</td>
  </tr>
  <tr>
    <td WIDTH="78%" VALIGN="TOP">
      <p><br>
    </td>
    <td WIDTH="3%" VALIGN="TOP">&nbsp;</td>
    <td WIDTH="16%" VALIGN="TOP">
      <p style="margin-right: 40" align="right">&nbsp;</p>
    </td>
    <td WIDTH="3%" VALIGN="TOP">&nbsp;</td>
  </tr>
  <tr>
    <td WIDTH="78%" VALIGN="TOP" style="border-bottom-style: solid">
      <p>Ratio of income to fixed charges</td>
    <td WIDTH="3%" VALIGN="TOP" style="border-bottom-style: solid">&nbsp;</td>
    <td WIDTH="16%" VALIGN="TOP" style="border-bottom-style: solid">
      <p style="margin-right: 40" align="right">3.94</td>
    <td WIDTH="3%" VALIGN="TOP">&nbsp;</td>
  </tr>
  <tr>
    <td WIDTH="78%" VALIGN="TOP">&nbsp;</td>
    <td WIDTH="3%" VALIGN="TOP">&nbsp;</td>
    <td WIDTH="16%" VALIGN="TOP">
      <p style="margin-right: 40" align="right">&nbsp;</p>
    </td>
    <td WIDTH="3%" VALIGN="TOP">&nbsp;</td>
  </tr>
</table>

  </center>
</div>

</body>

</html>

</TEXT>
</DOCUMENT>
<DOCUMENT>
<TYPE>EX-12.2
<SEQUENCE>6
<FILENAME>twetwo.htm
<TEXT>
<html>

<head>
<title>EXHIBIT 12</title>
</head>

<body>

<u>
<p ALIGN="RIGHT">EXHIBIT 12.2</p>
</u>
<p>&nbsp;</p>
<b>
<p ALIGN="CENTER">TEXTRON INC.<br>
INCLUDING ALL MAJORITY&#45;OWNED SUBSIDIARIES<br>
<br>
COMPUTATION OF RATIO OF INCOME TO FIXED CHARGES<br>
<br>
(unaudited)<br>
<br>
</b>(In millions except ratio)<br>
</p>
<div align="center">
  <center>
<table CELLSPACING="1" WIDTH="696">
  <tr>
    <td WIDTH="78%" VALIGN="TOP" style="border-bottom-style: solid; border-bottom-width: 1">&nbsp;</td>
    <td WIDTH="18%" VALIGN="TOP" COLSPAN="2" style="border-bottom-style: solid; border-bottom-width: 1">
      <p ALIGN="CENTER">Six Months<br>
      Ended<br>
      July 3, 2004</td>
    <td WIDTH="3%" VALIGN="TOP">&nbsp;</td>
  </tr>
  <tr>
    <td WIDTH="78%" VALIGN="TOP">
      <p>Fixed charges:</td>
    <td WIDTH="3%" VALIGN="TOP">&nbsp;</td>
    <td WIDTH="16%" VALIGN="TOP">&nbsp;</td>
    <td WIDTH="3%" VALIGN="TOP">&nbsp;</td>
  </tr>
  <tr>
    <td WIDTH="78%" VALIGN="TOP">
      <p>&#160;&#160;&#160;&#160;&#160;Interest expense</td>
    <td WIDTH="3%" VALIGN="TOP">
      <p ALIGN="RIGHT">$</td>
    <td WIDTH="16%" VALIGN="TOP">
      <p style="margin-right: 40" align="right">127</td>
    <td WIDTH="3%" VALIGN="TOP">&nbsp;</td>
  </tr>
  <tr>
    <td WIDTH="78%" VALIGN="TOP" style="border-bottom-style: solid; border-bottom-width: 1">
      <p>&#160;&#160;&#160;&#160;&#160;Estimated interest
      portion of rents</td>
    <td WIDTH="3%" VALIGN="TOP" style="border-bottom-style: solid; border-bottom-width: 1">&nbsp;</td>
    <td WIDTH="16%" VALIGN="TOP" style="border-bottom-style: solid; border-bottom-width: 1">
      <p style="margin-right: 40" align="right">18</td>
    <td WIDTH="3%" VALIGN="TOP">&nbsp;</td>
  </tr>
  <tr>
    <td WIDTH="78%" VALIGN="TOP" style="border-bottom-style: solid">
      <p><br>
      &#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;Total
      fixed charges</td>
    <td WIDTH="3%" VALIGN="TOP" style="border-bottom-style: solid">
      <p ALIGN="RIGHT"><br>
      $</td>
    <td WIDTH="16%" VALIGN="TOP" style="border-bottom-style: solid">
      <p style="margin-right: 40" align="right"><br>
      145</td>
    <td WIDTH="3%" VALIGN="TOP">&nbsp;</td>
  </tr>
  <tr>
    <td WIDTH="78%" VALIGN="TOP">&nbsp;</td>
    <td WIDTH="3%" VALIGN="TOP">&nbsp;</td>
    <td WIDTH="16%" VALIGN="TOP">
      <p style="margin-right: 40" align="right">&nbsp;</p>
    </td>
    <td WIDTH="3%" VALIGN="TOP">&nbsp;</td>
  </tr>
  <tr>
    <td WIDTH="78%" VALIGN="TOP">&nbsp;</td>
    <td WIDTH="3%" VALIGN="TOP">&nbsp;</td>
    <td WIDTH="16%" VALIGN="TOP">
      <p style="margin-right: 40" align="right">&nbsp;</p>
    </td>
    <td WIDTH="3%" VALIGN="TOP">&nbsp;</td>
  </tr>
  <tr>
    <td WIDTH="78%" VALIGN="TOP">
      <p>Income:</td>
    <td WIDTH="3%" VALIGN="TOP">&nbsp;</td>
    <td WIDTH="16%" VALIGN="TOP">
      <p style="margin-right: 40" align="right">&nbsp;</p>
    </td>
    <td WIDTH="3%" VALIGN="TOP">&nbsp;</td>
  </tr>
  <tr>
    <td WIDTH="78%" VALIGN="TOP">
      <p>&#160;&#160;&#160;&#160;&#160;Income from
      operations before income taxes</td>
    <td WIDTH="3%" VALIGN="TOP">
      <p ALIGN="RIGHT">$</td>
    <td WIDTH="16%" VALIGN="TOP">
      <p style="margin-right: 40" align="right">209</td>
    <td WIDTH="3%" VALIGN="TOP">&nbsp;</td>
  </tr>
  <tr>
    <td WIDTH="78%" VALIGN="TOP" style="border-bottom-style: solid; border-bottom-width: 1">
      <p>&#160;&#160;&#160;&#160;&#160;Fixed charges</td>
    <td WIDTH="3%" VALIGN="TOP" style="border-bottom-style: solid; border-bottom-width: 1">&nbsp;</td>
    <td WIDTH="16%" VALIGN="TOP" style="border-bottom-style: solid; border-bottom-width: 1">
      <p style="margin-right: 40" align="right">145</td>
    <td WIDTH="3%" VALIGN="TOP">&nbsp;</td>
  </tr>
  <tr>
    <td WIDTH="78%" VALIGN="TOP" style="border-bottom-style: solid">
      <p><br>
      &#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;Adjusted
      income</td>
    <td WIDTH="3%" VALIGN="TOP" style="border-bottom-style: solid">
      <p ALIGN="RIGHT"><br>
      $</td>
    <td WIDTH="16%" VALIGN="TOP" style="border-bottom-style: solid">
      <p style="margin-right: 40" align="right"><br>
      354</td>
    <td WIDTH="3%" VALIGN="TOP">&nbsp;</td>
  </tr>
  <tr>
    <td WIDTH="78%" VALIGN="TOP">&nbsp;</td>
    <td WIDTH="3%" VALIGN="TOP">&nbsp;</td>
    <td WIDTH="16%" VALIGN="TOP">
      <p style="margin-right: 40" align="right">&nbsp;</p>
    </td>
    <td WIDTH="3%" VALIGN="TOP">&nbsp;</td>
  </tr>
  <tr>
    <td WIDTH="78%" VALIGN="TOP">
      <p><br>
    </td>
    <td WIDTH="3%" VALIGN="TOP">&nbsp;</td>
    <td WIDTH="16%" VALIGN="TOP">
      <p style="margin-right: 40" align="right"><br>
    </td>
    <td WIDTH="3%" VALIGN="TOP">&nbsp;</td>
  </tr>
  <tr>
    <td WIDTH="78%" VALIGN="TOP" style="border-bottom-style: solid">
      <p>Ratio of income to fixed charges</td>
    <td WIDTH="3%" VALIGN="TOP" style="border-bottom-style: solid">&nbsp;</td>
    <td WIDTH="16%" VALIGN="TOP" style="border-bottom-style: solid">
      <p style="margin-right: 40" align="right">2.44</td>
    <td WIDTH="3%" VALIGN="TOP">&nbsp;</td>
  </tr>
  <tr>
    <td WIDTH="78%" VALIGN="TOP">&nbsp;</td>
    <td WIDTH="3%" VALIGN="TOP">&nbsp;</td>
    <td WIDTH="16%" VALIGN="TOP">
      <p style="margin-right: 40" align="right">&nbsp;</p>
    </td>
    <td WIDTH="3%" VALIGN="TOP">&nbsp;</td>
  </tr>
</table>
  </center>
</div>
<p ALIGN="JUSTIFY">&nbsp;</p>

</body>

</html>

</TEXT>
</DOCUMENT>
<DOCUMENT>
<TYPE>EX-31.1
<SEQUENCE>7
<FILENAME>thoneone.htm
<TEXT>
<html>

<head>
<title>EXHIBIT 31</title>
</head>

<body>

<p ALIGN="RIGHT">EXHIBIT 31.1</p>
<b>
<p ALIGN="CENTER">Certification of Chief Executive Officer Pursuant to Rule
13a&#45;14(a)</p>
</b>
<p ALIGN="JUSTIFY">I, Lewis B. Campbell, Chairman, President and Chief Executive
Officer of Textron Inc. (the &quot;Company&quot;) certify that:</p>
<ol>
  <li>
    <p ALIGN="JUSTIFY">I have
  reviewed this quarterly report on Form 10&#45;Q of Textron Inc.;</li>
  <li>
    <p ALIGN="justify" style="margin-top: 12">Based
  on my knowledge, this report does not contain any untrue statement of a
  material fact or omit to state a material fact necessary to make the
  statements made, in light of the circumstances under which such statements
  were made, not misleading with respect to the period covered by this report;</li>
  <li>
    <p ALIGN="justify" style="margin-top: 12">Based
  on my knowledge, the financial statements, and other financial information
  included in this report, fairly present in all material respects the financial
  condition, results of operations and cash flows of the registrant as of, and
  for, the periods presented in this report;</li>
  <li>
    <p ALIGN="justify" style="margin-top: 12">The
  registrant&#39;s other certifying officer(s) and I are responsible for
  establishing and maintaining disclosure controls and procedures (as defined in
  Exchange Act Rules 13a&#45;15(e) and 15d&#45;15(e)) for the registrant
  and have:</li>
</ol>
  <blockquote>
    <ol type="a">
      <li>
        <p ALIGN="JUSTIFY">designed
    such disclosure controls and procedures, or caused such disclosure controls
    and procedures to be designed under our supervision, to ensure that material
    information relating to the registrant, including its consolidated
    subsidiaries, is made known to us by others within those entities,
    particularly during the period in which this report is being prepared;</li>
      <li>
        <p ALIGN="justify" style="margin-top: 12">evaluated
    the effectiveness of the registrant&#39;s disclosure controls and
    procedures and presented in this report our conclusions about the
    effectiveness of the disclosure controls and procedures, as of the end of
    the period covered by this report based on such evaluation;</li>
      <li>
        <p ALIGN="justify" style="margin-top: 12">disclosed
    in this report any change in the registrant&#39;s internal control over
    financial reporting that occurred during the registrant&#39;s most
    recent fiscal quarter that has materially affected, or is reasonably likely
    to materially affect, the registrant&#39;s internal control over
    financial reporting; and</li>
    </ol>
  </blockquote>
<ol start="5">
  <li>
    <p ALIGN="JUSTIFY">The
  registrant&#39;s other certifying officer(s) and I have disclosed, based
  on our most recent evaluation of internal control over financial reporting, to
  the registrant&#39;s auditors and the audit committee of the
  registrant&#39;s board of directors (or persons performing the equivalent
  functions):</li>
</ol>
  <blockquote>
    <ol type="a">
      <li>
        <p ALIGN="JUSTIFY">all
    significant deficiencies and material weaknesses in the design or operation
    of internal control over financial reporting which are reasonably likely to
    adversely affect the registrant&#39;s ability to record, process,
    summarize and report financial information; and</li>
      <li>
        <p ALIGN="justify" style="margin-top: 12">any
    fraud, whether or not material, that involves management or other employees
    who have a significant role in the registrant&#39;s internal control
    over financial reporting.</li>
    </ol>
    <p ALIGN="JUSTIFY">&nbsp;</p>
  </blockquote>
<div align="center">
  <center>
<table CELLSPACING="1" CELLPADDING="1" WIDTH="640">
  <tr>
    <td WIDTH="56%" VALIGN="TOP">
      <p>Date: August 10, 2004</td>
    <td WIDTH="44%" VALIGN="TOP">
      <p style="border-bottom-style: solid; border-bottom-width: 1">/s/Lewis B. Campbell</td>
  </tr>
  <tr>
    <td WIDTH="56%" VALIGN="TOP">&nbsp;</td>
    <td WIDTH="44%" VALIGN="TOP">
      <p>Lewis B. Campbell</td>
  </tr>
  <tr>
    <td WIDTH="56%" VALIGN="TOP">&nbsp;</td>
    <td WIDTH="44%" VALIGN="TOP">
      <p>Chairman, President and Chief Executive<br>
      &#160;&#160;&#160;&#160;&#160;Officer</td>
  </tr>
</table>

  </center>
</div>

</body>

</html>

</TEXT>
</DOCUMENT>
<DOCUMENT>
<TYPE>EX-31.2
<SEQUENCE>8
<FILENAME>thonetwo.htm
<TEXT>
<html>

<head>
<title>EXHIBIT 31</title>
</head>

<body>

<p ALIGN="RIGHT">EXHIBIT 31.2</p>
<b>
<p ALIGN="CENTER">Certification of Chief Financial Officer Pursuant to Rule
13a&#45;14(a)</p>
</b>
<p ALIGN="JUSTIFY">I, Ted R. French, Executive Vice President and Chief
Financial Officer of Textron Inc. (the &quot;Company&quot;) certify that:</p>
<ol>
  <li>
    <p ALIGN="justify" style="margin-top: 12">&#160;I have
  reviewed this quarterly report on Form 10&#45;Q of Textron Inc.;</li>
  <li>
    <p ALIGN="justify" style="margin-top: 12">Based
  on my knowledge, this report does not contain any untrue statement of a
  material fact or omit to state a material fact necessary to make the
  statements made, in light of the circumstances under which such statements
  were made, not misleading with respect to the period covered by this report;</li>
  <li>
    <p ALIGN="justify" style="margin-top: 12">Based
  on my knowledge, the financial statements, and other financial information
  included in this report, fairly present in all material respects the financial
  condition, results of operations and cash flows of the registrant as of, and
  for, the periods presented in this report;</li>
  <li>
    <p ALIGN="justify" style="margin-top: 12">The
  registrant&#39;s other certifying officer(s) and I are responsible for
  establishing and maintaining disclosure controls and procedures (as defined in
  Exchange Act Rules 13a&#45;15(e) and 15d&#45;15(e)) for the registrant
  and have:</li>
</ol>
  <blockquote>
    <ol type="a">
      <li>
        <p ALIGN="JUSTIFY">designed
    such disclosure controls and procedures, or caused such disclosure controls
    and procedures to be designed under our supervision, to ensure that material
    information relating to the registrant, including its consolidated
    subsidiaries, is made known to us by others within those entities,
    particularly during the period in which this report is being prepared;</li>
      <li>
        <p ALIGN="justify" style="margin-top: 12">evaluated
    the effectiveness of the registrant&#39;s disclosure controls and
    procedures and presented in this report our conclusions about the
    effectiveness of the disclosure controls and procedures, as of the end of
    the period covered by this report based on such evaluation;</li>
      <li>
        <p ALIGN="justify" style="margin-top: 12">disclosed
    in this report any change in the registrant&#39;s internal control over
    financial reporting that occurred during the registrant&#39;s most
    recent fiscal quarter that has materially affected, or is reasonably likely
    to materially affect, the registrant&#39;s internal control over
    financial reporting; and</li>
    </ol>
  </blockquote>
<ol start="5">
  <li>
    <p ALIGN="JUSTIFY">The
  registrant&#39;s other certifying officer(s) and I have disclosed, based
  on our most recent evaluation of internal control over financial reporting, to
  the registrant&#39;s auditors and the audit committee of the
  registrant&#39;s board of directors (or persons performing the equivalent
  functions):</li>
</ol>
  <blockquote>
    <ol type="a">
      <li>
        <p ALIGN="JUSTIFY">all
    significant deficiencies and material weaknesses in the design or operation
    of internal control over financial reporting which are reasonably likely to
    adversely affect the registrant&#39;s ability to record, process,
    summarize and report financial information; and</li>
      <li>
        <p ALIGN="justify" style="margin-top: 12">any
    fraud, whether or not material, that involves management or other employees
    who have a significant role in the registrant&#39;s internal control
    over financial reporting.</li>
    </ol>
    <p ALIGN="JUSTIFY">&nbsp;</p>
  </blockquote>
<div align="center">
  <center>
<table CELLSPACING="1" CELLPADDING="1" WIDTH="642">
  <tr>
    <td WIDTH="55%" VALIGN="TOP">
      <p ALIGN="JUSTIFY">Date: August 10, 2004</td>
    <td WIDTH="45%" VALIGN="TOP">
      <p ALIGN="JUSTIFY" style="border-bottom-style: solid; border-bottom-width: 1">/s/Ted R. French</td>
  </tr>
  <tr>
    <td WIDTH="55%" VALIGN="TOP">&nbsp;</td>
    <td WIDTH="45%" VALIGN="TOP">
      <p ALIGN="JUSTIFY">Ted R. French</td>
  </tr>
  <tr>
    <td WIDTH="55%" VALIGN="TOP">&nbsp;</td>
    <td WIDTH="45%" VALIGN="TOP">
      <p>Executive Vice President and Chief<br>
      &#160;&#160;&#160;&#160;&#160;Financial Officer</td>
  </tr>
</table>

  </center>
</div>

</body>

</html>

</TEXT>
</DOCUMENT>
<DOCUMENT>
<TYPE>EX-32.1
<SEQUENCE>9
<FILENAME>thtwoone.htm
<TEXT>
<html>

<head>
<title>EXHIBIT 32</title>
</head>

<body>

<p ALIGN="RIGHT">EXHIBIT 32.1</p>
<b>
<p ALIGN="CENTER">&nbsp;</p>
<p ALIGN="CENTER">TEXTRON INC.</p>
<p ALIGN="CENTER">CERTIFICATION PURSUANT TO<br>
RULE 13a&#45;14(b) AND<br>
18 U.S.C. SECTION 1350,<br>
AS ADOPTED PURSUANT TO<br>
SECTION 906 OF THE SARBANES&#45;OXLEY ACT OF 2002</p>
</b>
<p>&nbsp;</p>
<p ALIGN="JUSTIFY">In connection with the quarterly report of Textron Inc. (the
&quot;Company&quot;) on Form 10&#45;Q for the period ended July 3, 2004 as
filed with the Securities and Exchange Commission on the Date hereof (the
&quot;Report&quot;), I, Lewis B. Campbell, Chairman, President and Chief
Executive Officer of the Company, certify, pursuant to Rule 13a&#45;14(b)
and 18 U.S.C. &#167; 1350, as adopted pursuant to &#167; 906 of the
Sarbanes&#45;Oxley Act of 2002, that:</p>
<blockquote>
  <ol>
    <li>
      <p ALIGN="JUSTIFY">The Report fully complies with the requirements of
    section 13(a) or 15(d) of the Securities Exchange Act of 1934; and</li>
    <li>
      <p ALIGN="justify" style="margin-top: 12">The information contained in the Report fairly
    presents, in all material respects, the financial condition and result of
    operations of the Company.</li>
  </ol>
</blockquote>
<div align="center">
  <center>
<table CELLSPACING="1" CELLPADDING="1" WIDTH="590">
  <tr>
    <td WIDTH="34%" VALIGN="TOP">&nbsp;</td>
    <td WIDTH="11%" VALIGN="TOP">&nbsp;</td>
    <td WIDTH="52%" VALIGN="TOP">
      <p>Textron Inc.</td>
    <td WIDTH="3%" VALIGN="TOP">&nbsp;</td>
  </tr>
  <tr>
    <td WIDTH="34%" VALIGN="TOP">&nbsp;</td>
    <td WIDTH="11%" VALIGN="TOP">&nbsp;</td>
    <td WIDTH="52%" VALIGN="TOP">&nbsp;</td>
    <td WIDTH="3%" VALIGN="TOP">&nbsp;</td>
  </tr>
  <tr>
    <td WIDTH="34%" VALIGN="TOP">
      <p>Date: August 10, 2004</td>
    <td WIDTH="11%" VALIGN="TOP">&nbsp;</td>
    <td WIDTH="52%" VALIGN="TOP">
      <p style="border-bottom-style: solid; border-bottom-width: 1">/s/ Lewis B. Campbell</td>
    <td WIDTH="3%" VALIGN="TOP">&nbsp;</td>
  </tr>
  <tr>
    <td WIDTH="34%" VALIGN="TOP">&nbsp;</td>
    <td WIDTH="11%" VALIGN="TOP">&nbsp;</td>
    <td WIDTH="52%" VALIGN="TOP">
      <p>Lewis B. Campbell</td>
    <td WIDTH="3%" VALIGN="TOP">&nbsp;</td>
  </tr>
  <tr>
    <td WIDTH="34%" VALIGN="TOP">&nbsp;</td>
    <td WIDTH="11%" VALIGN="TOP">&nbsp;</td>
    <td WIDTH="52%" VALIGN="TOP">
      <p>Chairman, President and Chief Executive<br>
      &#160;&#160;&#160;&#160;&#160;Officer</td>
    <td WIDTH="3%" VALIGN="TOP">&nbsp;</td>
  </tr>
</table>

  </center>
</div>

</body>

</html>

</TEXT>
</DOCUMENT>
<DOCUMENT>
<TYPE>EX-32.2
<SEQUENCE>10
<FILENAME>thtwotwo.htm
<TEXT>
<html>

<head>
<title>EXHIBIT 32</title>
</head>

<body>

<p ALIGN="RIGHT">EXHIBIT 32.2</p>
<b>
<p ALIGN="CENTER">&nbsp;</p>
<p ALIGN="CENTER">TEXTRON INC.</p>
</b>
<p ALIGN="CENTER">
<b>CERTIFICATION PURSUANT TO<br>
RULE 13a&#45;14(b) AND<br>
18 U.S.C. SECTION 1350,<br>
AS ADOPTED PURSUANT TO<br>
SECTION 906 OF THE SARBANES&#45;OXLEY ACT OF 2002</p>
</b>
<p>&nbsp;</p>
<p ALIGN="JUSTIFY">In connection with the quarterly report of Textron Inc. (the
&quot;Company&quot;) on Form 10&#45;Q for the period ended July 3, 2004 as
filed with the Securities and Exchange Commission on the Date hereof (the
&quot;Report&quot;), I, Ted R. French, Executive Vice President & Chief
Financial Officer of the Company, certify, pursuant to Rule 13a&#45;14(b)
and 18 U.S.C. &#167; 1350, as adopted pursuant to &#167; 906 of the
Sarbanes&#45;Oxley Act of 2002, that:</p>
<blockquote>
  <ol>
    <li>
      <p ALIGN="JUSTIFY">The Report fully complies with the requirements of
    section 13(a) or 15(d) of the Securities Exchange Act of 1934; and</li>
    <li>
      <p ALIGN="justify" style="margin-top: 12">The information contained in the Report fairly
    presents, in all material respects, the financial condition and result of
    operations of the Company.</li>
  </ol>
</blockquote>
<div align="center">
  <center>
<table CELLSPACING="1" CELLPADDING="1" WIDTH="590">
  <tr>
    <td WIDTH="32%" VALIGN="TOP">&nbsp;</td>
    <td WIDTH="11%" VALIGN="TOP">&nbsp;</td>
    <td WIDTH="54%" VALIGN="TOP">
      <p>Textron Inc.</td>
    <td WIDTH="3%" VALIGN="TOP">&nbsp;</td>
  </tr>
  <tr>
    <td WIDTH="32%" VALIGN="TOP">&nbsp;</td>
    <td WIDTH="11%" VALIGN="TOP">&nbsp;</td>
    <td WIDTH="54%" VALIGN="TOP">&nbsp;</td>
    <td WIDTH="3%" VALIGN="TOP">&nbsp;</td>
  </tr>
  <tr>
    <td WIDTH="32%" VALIGN="TOP">
      <p>Date: August 10, 2004</td>
    <td WIDTH="11%" VALIGN="TOP">&nbsp;</td>
    <td WIDTH="54%" VALIGN="TOP">
      <p style="border-bottom-style: solid; border-bottom-width: 1">/s/ Ted R. French</td>
    <td WIDTH="3%" VALIGN="TOP">&nbsp;</td>
  </tr>
  <tr>
    <td WIDTH="32%" VALIGN="TOP">&nbsp;</td>
    <td WIDTH="11%" VALIGN="TOP">&nbsp;</td>
    <td WIDTH="54%" VALIGN="TOP">
      <p>Ted R. French</td>
    <td WIDTH="3%" VALIGN="TOP">&nbsp;</td>
  </tr>
  <tr>
    <td WIDTH="32%" VALIGN="TOP">&nbsp;</td>
    <td WIDTH="11%" VALIGN="TOP">&nbsp;</td>
    <td WIDTH="54%" VALIGN="TOP">
      <p>Executive Vice President and Chief<br>
      &#160;&#160;&#160;&#160;&#160;Financial Officer</td>
    <td WIDTH="3%" VALIGN="TOP">&nbsp;</td>
  </tr>
</table>
  </center>
</div>
<p>&nbsp;</p>
<p>&nbsp;</p>

</body>

</html>

</TEXT>
</DOCUMENT>
</SEC-DOCUMENT>
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