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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
Form 10-Q
(Mark One)
QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15 (d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended October 1, 2022
OR
TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the transition period from ______ to ______.
Commission File Number 1-5480
Textron Inc.
(Exact name of registrant as specified in its charter)
Delaware05-0315468
(State or other jurisdiction of incorporation or organization)(I.R.S. Employer Identification No.)
40 Westminster Street, Providence, RI
02903
(Address of principal executive offices)(Zip code)
(401) 421-2800
(Registrant’s telephone number, including area code)
Securities registered pursuant to Section 12(b) of the Act:
Title of each classTrading Symbol (s)Name of each exchange on which registered
Common stock, $0.125 par valueTXT
New York Stock Exchange (NYSE)
Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes þ No ¨
Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T during the preceding 12 months (or for such shorter period that the registrant was required to submit such files). Yes þ No ¨
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, smaller reporting company, or an emerging growth company. See definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company” and “emerging growth company” in Rule 12b-2 of the Exchange Act (Check one):
Large accelerated filerþAccelerated filerNon-accelerated filer
Smaller reporting companyEmerging growth company
If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act.¨
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes No þ
As of October 14, 2022, there were 208,771,472 shares of common stock outstanding.


TEXTRON INC.
Index to Form 10-Q
For the Quarterly Period Ended October 1, 2022

    
Page
2

PART I. FINANCIAL INFORMATION

Item 1. Financial Statements

TEXTRON INC.
Consolidated Statements of Operations (Unaudited)
Three Months EndedNine Months Ended
(In millions, except per share amounts)October 1,
2022
October 2,
2021
October 1,
2022
October 2,
2021
Revenues
Manufacturing product revenues$2,608 $2,551 $7,745 $7,620 
Manufacturing service revenues459 428 1,447 1,402 
Finance revenues11 11 41 38 
Total revenues3,078 2,990 9,233 9,060 
Costs, expenses and other
Cost of products sold2,243 2,173 6,616 6,505 
Cost of services sold341 313 1,101 1,041 
Selling and administrative expense258 283 841 895 
Interest expense31 33 96 109 
Non-service components of pension and postretirement income, net(59)(40)(180)(119)
Special charges 10  20 
Gain on business disposition   (17)
Total costs, expenses and other2,814 2,772 8,474 8,434 
Income from continuing operations before income taxes264 218 759 626 
Income tax expense39 33 123 86 
Income from continuing operations225 185 636 540 
Loss from discontinued operations  (1)(1)
Net income$225 $185 $635 $539 
Basic Earnings per share
Continuing operations$1.06 $0.83 $2.96 $2.39 
Diluted Earnings per share
Continuing operations$1.06 $0.82 $2.94 $2.37 
See Notes to the Consolidated Financial Statements.
3

TEXTRON INC.
Consolidated Statements of Comprehensive Income (Unaudited)

Three Months EndedNine Months Ended
(In millions)October 1,
2022
October 2,
2021
October 1,
2022
October 2,
2021
Net income$225 $185 $635 $539 
Other comprehensive income (loss), net of tax
Pension and postretirement benefits adjustments, net of reclassifications18 30 52 90 
Foreign currency translation adjustments, net of reclassifications(97)(19)(201)(22)
Deferred gains (losses) on hedge contracts, net of reclassifications(8)(5)(4)1 
Other comprehensive income (loss)(87)6 (153)69 
Comprehensive income$138 $191 $482 $608 
See Notes to the Consolidated Financial Statements.
4

TEXTRON INC.
Consolidated Balance Sheets (Unaudited)
(Dollars in millions)October 1,
2022
January 1,
2022
Assets
Manufacturing group
Cash and equivalents$1,817 $1,922 
Accounts receivable, net836 838 
Inventories3,817 3,468 
Other current assets943 1,018 
Total current assets7,413 7,246 
Property, plant and equipment, less accumulated depreciation
   and amortization of $4,972 and $4,888, respectively
2,443 2,538 
Goodwill2,262 2,149 
Other assets3,173 3,027 
Total Manufacturing group assets15,291 14,960 
Finance group
Cash and equivalents67 195 
Finance receivables, net566 605 
Other assets32 67 
Total Finance group assets665 867 
Total assets$15,956 $15,827 
Liabilities and shareholders’ equity
Liabilities
Manufacturing group
Current portion of long-term debt$7 $6 
Accounts payable887 786 
Other current liabilities2,733 2,344 
Total current liabilities3,627 3,136 
Other liabilities1,930 2,005 
Long-term debt3,176 3,179 
Total Manufacturing group liabilities8,733 8,320 
Finance group
Other liabilities81 110 
Debt380 582 
Total Finance group liabilities461 692 
Total liabilities9,194 9,012 
Shareholders’ equity
Common stock28 28 
Capital surplus1,980 1,863 
Treasury stock(796)(157)
Retained earnings6,492 5,870 
Accumulated other comprehensive loss(942)(789)
Total shareholders’ equity6,762 6,815 
Total liabilities and shareholders’ equity$15,956 $15,827 
Common shares outstanding (in thousands)209,067 216,935 
See Notes to the Consolidated Financial Statements.
5

TEXTRON INC.
Consolidated Statements of Cash Flows (Unaudited)
For the Nine Months Ended October 1, 2022 and October 2, 2021, respectively
Consolidated
(In millions)20222021
Cash flows from operating activities
Income from continuing operations$636 $540 
Adjustments to reconcile income from continuing operations to
   net cash provided by operating activities:
Non-cash items:
Depreciation and amortization288 285 
Deferred income taxes(183)7 
Gain on business disposition (17)
Other, net77 85 
Changes in assets and liabilities:
Accounts receivable, net(23)8 
Inventories(353)(164)
Other assets105 (11)
Accounts payable116 1 
Other liabilities344 323 
Income taxes, net44 26 
Pension, net(123)(62)
Captive finance receivables, net29 152 
Other operating activities, net6 1 
Net cash provided by operating activities of continuing operations963 1,174 
Net cash used in operating activities of discontinued operations(2)(1)
Net cash provided by operating activities961 1,173 
Cash flows from investing activities
Capital expenditures(192)(204)
Net cash used in business acquisitions(201) 
Net proceeds from corporate-owned life insurance policies23  
Proceeds from sale of property, plant and equipment21 3 
Net proceeds from business disposition 38 
Finance receivables repaid21 19 
Other investing activities, net44 17 
Net cash used in investing activities(284)(127)
Cash flows from financing activities
Decrease in short-term debt(15) 
Principal payments on long-term debt and nonrecourse debt(227)(615)
Purchases of Textron common stock(639)(586)
Dividends paid(13)(14)
Proceeds from options exercised36 105 
Other financing activities, net(3)(2)
Net cash used in financing activities(861)(1,112)
Effect of exchange rate changes on cash and equivalents(49)(6)
Net decrease in cash and equivalents(233)(72)
Cash and equivalents at beginning of period2,117 2,254 
Cash and equivalents at end of period$1,884 $2,182 
See Notes to the Consolidated Financial Statements.
6


TEXTRON INC.
Consolidated Statements of Cash Flows (Unaudited) (Continued)
For the Nine Months Ended October 1, 2022 and October 2, 2021, respectively

Manufacturing GroupFinance Group
(In millions)2022202120222021
Cash flows from operating activities
Income from continuing operations$615 $537 $21 $3 
Adjustments to reconcile income from continuing operations to
   net cash provided by (used in) operating activities:
Non-cash items:
Depreciation and amortization287 277 1 8 
Deferred income taxes(168)9 (15)(2)
Gain on business disposition (17)  
Other, net85 93 (8)(8)
Changes in assets and liabilities:
Accounts receivable, net(23)8   
Inventories(353)(164)  
Other assets105 (10) (1)
Accounts payable116 1   
Other liabilities356 323 (12) 
Income taxes, net42 16 2 10 
Pension, net(123)(62)  
Other operating activities, net6 1   
Net cash provided by (used in) operating activities of continuing operations945 1,012 (11)10 
Net cash used in operating activities of discontinued operations(2)(1)  
Net cash provided by (used in) operating activities943 1,011 (11)10 
Cash flows from investing activities
Capital expenditures(192)(204)  
Net cash used in business acquisitions(201)   
Net proceeds from corporate-owned life insurance policies23    
Proceeds from sale of property, plant and equipment21 3   
Net proceeds from business disposition 38   
Finance receivables repaid  108 205 
Finance receivables originated  (58)(34)
Other investing activities, net  44 17 
Net cash provided by (used in) investing activities(349)(163)94 188 
Cash flows from financing activities
Decrease in short-term debt(15)   
Principal payments on long-term debt and nonrecourse debt(16)(522)(211)(93)
Purchases of Textron common stock(639)(586)  
Dividends paid(13)(14)  
Proceeds from options exercised36 105   
Other financing activities, net(3)(2)  
Net cash used in financing activities(650)(1,019)(211)(93)
Effect of exchange rate changes on cash and equivalents(49)(6)  
Net increase (decrease) in cash and equivalents(105)(177)(128)105 
Cash and equivalents at beginning of period1,922 2,146 195 108 
Cash and equivalents at end of period$1,817 $1,969 $67 $213 
See Notes to the Consolidated Financial Statements.
7

TEXTRON INC.
Notes to the Consolidated Financial Statements (Unaudited)

Note 1. Basis of Presentation
Our Consolidated Financial Statements include the accounts of Textron Inc. (Textron) and its majority-owned subsidiaries.  We have prepared these unaudited consolidated financial statements in accordance with accounting principles generally accepted in the U.S. for interim financial information.  Accordingly, these interim financial statements do not include all of the information and footnotes required by accounting principles generally accepted in the U.S. for complete financial statements.  The consolidated interim financial statements included in this quarterly report should be read in conjunction with the consolidated financial statements included in our Annual Report on Form 10-K for the year ended January 1, 2022.  In the opinion of management, the interim financial statements reflect all adjustments (consisting only of normal recurring adjustments) that are necessary for the fair presentation of our consolidated financial position, results of operations and cash flows for the interim periods presented. The results of operations for the interim periods are not necessarily indicative of the results to be expected for the full year.
Our financings are conducted through two separate borrowing groups.  The Manufacturing group consists of Textron consolidated with its majority-owned subsidiaries that operate in the Textron Aviation, Bell, Textron Systems and Industrial segments, and our new reporting segment, Textron eAviation, formed in the second quarter of 2022. Textron eAviation includes the operating results of Pipistrel, a manufacturer of electrically powered aircraft acquired on April 15, 2022, as discussed in Note 2, along with other research and development initiatives related to sustainable aviation solutions. The Finance group, which also is the Finance segment, consists of Textron Financial Corporation and its consolidated subsidiaries. We designed this framework to enhance our borrowing power by separating the Finance group. Our Manufacturing group operations include the development, production and delivery of tangible goods and services, while our Finance group provides financial services. Due to the fundamental differences between each borrowing group’s activities, investors, rating agencies and analysts use different measures to evaluate each group’s performance.  To support those evaluations, we present balance sheet and cash flow information for each borrowing group within the Consolidated Financial Statements.  All significant intercompany transactions are eliminated from the Consolidated Financial Statements, including retail financing activities for inventory sold by our Manufacturing group and financed by our Finance group.
Use of Estimates
We prepare our financial statements in conformity with generally accepted accounting principles, which require us to make estimates and assumptions that affect the amounts reported in the financial statements.  Actual results could differ from those estimates. Our estimates and assumptions are reviewed periodically, and the effects of changes, if any, are reflected in the Consolidated Statements of Operations in the period that they are determined.
Contract Estimates
For contracts where revenue is recognized over time, we recognize changes in estimated contract revenues, costs and profits using the cumulative catch-up method of accounting. This method recognizes the cumulative effect of changes on current and prior periods with the impact of the change from inception-to-date recorded in the current period.  Anticipated losses on contracts are recognized in full in the period in which the losses become probable and estimable.  
In the third quarter of 2022, our cumulative catch-up adjustments decreased segment profit by $3 million and net income by $2 million, $0.01 per diluted share. In the third quarter of 2021, our cumulative catch-up adjustments increased segment profit by $25 million and net income by $19 million, $0.08 per diluted share. Gross favorable profit adjustments totaled $25 million and $43 million in the third quarter of 2022 and 2021, respectively, and gross unfavorable profit adjustments totaled $28 million and $18 million, respectively. We reduced revenues by $2 million and recognized revenues of $27 million in the third quarter of 2022 and 2021, respectively, from performance obligations satisfied in prior periods that related to changes in profit booking rates.
In the first nine months of 2022, our cumulative catch-up adjustments decreased segment profit by $24 million and net income by $18 million, $0.08 per diluted share. In the first nine months of 2021, our cumulative catch-up adjustments increased segment profit by $54 million and net income by $41 million, $0.18 per diluted share. Gross favorable profit adjustments totaled $66 million and $119 million in the first nine months of 2022 and 2021, respectively, and gross unfavorable profit adjustments totaled $90 million and $65 million, respectively. We reduced revenues by $35 million and recognized revenues of $65 million in the first nine months of 2022 and 2021, respectively, from performance obligations satisfied in prior periods that related to changes in profit booking rates.



8

Note 2. Business Acquisition
On April 15, 2022, we acquired Pipistrel, a manufacturer of electrically powered aircraft, for a cash purchase price of $239 million, which included the assumption of $35 million of debt and other contractual obligations under the agreement and a final fixed payment of $21 million due in 2024. Beginning in the second quarter of 2022, this business is included in a new reporting segment, Textron eAviation, which combines the operating results of Pipistrel along with other research and development initiatives related to sustainable aviation solutions.
We allocated the purchase price for this business to the assets acquired and liabilities assumed based on their estimated fair values at the acquisition date and recorded $141 million in goodwill, related to expected synergies and the value of the assembled workforce, and $76 million in intangible assets, primarily developed technologies. The intangible assets were primarily valued using the relief-from-royalty method. This method utilizes significant unobservable inputs, or Level 3 inputs, as defined by the fair value hierarchy and requires us to make estimates and assumptions about sales, growth rates, royalty rates and discount rates based on marketplace data.
Note 3. Accounts Receivable and Finance Receivables
Accounts Receivable
Accounts receivable is composed of the following:
(In millions)October 1,
2022
January 1,
2022
Commercial$778 $704 
U.S. Government contracts82 158 
860 862 
Allowance for credit losses(24)(24)
Total accounts receivable, net$836 $838 
Finance Receivables
Finance receivables are presented in the following table:
(In millions)October 1,
2022
January 1,
2022
Finance receivables$590 $630 
Allowance for credit losses(24)(25)
Total finance receivables, net$566 $605 
Finance Receivable Portfolio Quality
We internally assess the quality of our finance receivables based on a number of key credit quality indicators and statistics such as delinquency, loan balance to estimated collateral value and the financial strength of individual borrowers and guarantors.  Because many of these indicators are difficult to apply across an entire class of receivables, we evaluate individual loans on a quarterly basis and classify these loans into three categories based on the key credit quality indicators for the individual loan. These three categories are performing, watchlist and nonaccrual.
We classify finance receivables as nonaccrual if credit quality indicators suggest full collection of principal and interest is doubtful. In addition, we automatically classify accounts as nonaccrual once they are contractually delinquent by more than three months unless collection of principal and interest is not doubtful. Accounts are classified as watchlist when credit quality indicators have deteriorated as compared with typical underwriting criteria, and we believe collection of full principal and interest is probable but not certain. All other finance receivables that do not meet the watchlist or nonaccrual categories are classified as performing.
We measure delinquency based on the contractual payment terms of our finance receivables.  In determining the delinquency aging category of an account, any/all principal and interest received is applied to the most past-due principal and/or interest amounts due. If a significant portion of the contractually due payment is delinquent, the entire finance receivable balance is reported in accordance with the most past-due delinquency aging category.
9

Finance receivables categorized based on the credit quality indicators and by the delinquency aging category are summarized as follows:
(Dollars in millions)October 1,
2022
January 1,
2022
Performing$540$536
Nonaccrual5094
Nonaccrual as a percentage of finance receivables8.47%14.92%
Current and less than 31 days past due$580$624
31-60 days past due55
61-90 days past due4
Over 90 days past due11
60+ days contractual delinquency as a percentage of finance receivables0.85%0.16%
At October 1, 2022, 43% of our performing finance receivables were originated since the beginning of 2020 and 25% were originated from 2017 to 2019. For finance receivables categorized as nonaccrual, 80% were originated from 2017 to 2019.
On a quarterly basis, we evaluate individual larger balance accounts for impairment. A finance receivable is considered impaired when it is probable that we will be unable to collect all amounts due according to the contractual terms of the loan agreement based on our review of the credit quality indicators described above. Impaired finance receivables include both nonaccrual accounts and accounts for which full collection of principal and interest remains probable, but the account’s original terms have been, or are expected to be, significantly modified. If the modification specifies an interest rate equal to or greater than a market rate for a finance receivable with comparable risk, the account is not considered impaired in years subsequent to the modification.
A summary of finance receivables and the allowance for credit losses, based on the results of our impairment evaluation, is provided below. The finance receivables included in this table specifically exclude leveraged leases in accordance with U.S. generally accepted accounting principles.
(In millions)October 1,
2022
January 1,
2022
Finance receivables evaluated collectively$454 $441 
Finance receivables evaluated individually50 94 
Allowance for credit losses based on collective evaluation21 21 
Allowance for credit losses based on individual evaluation3 4 
Impaired finance receivables with specific allowance for credit losses$17 $33 
Impaired finance receivables with no specific allowance for credit losses33 61 
Unpaid principal balance of impaired finance receivables64 109 
Allowance for credit losses on impaired finance receivables3 4 
Average recorded investment of impaired finance receivables72 117 
Note 4. Inventories
Inventories are composed of the following:
(In millions)October 1,
2022
January 1,
2022
Finished goods$1,084 $1,071 
Work in process1,754 1,548 
Raw materials and components979 849 
Total inventories$3,817 $3,468 
10

Note 5. Warranty Liability
Changes in our warranty liability are as follows:
Nine Months Ended
(In millions)October 1,
2022
October 2,
2021
Beginning of period$127 $119 
Provision51 49 
Settlements(46)(52)
Adjustments*11 5 
End of period$143 $121 
* Adjustments include changes to prior year estimates, new issues on prior year sales, acquisitions and currency translation adjustments.

Note 6. Leases
We primarily lease certain manufacturing plants, offices, warehouses, training and service centers at various locations worldwide through operating leases. Our operating leases have remaining lease terms up to 26 years, which include options to extend the lease term for periods up to 25 years when it is reasonably certain the option will be exercised. Operating lease cost totaled $17 million and $17 million in the third quarter of 2022 and 2021, respectively, and $51 million and $49 million in the first nine months of 2022 and 2021, respectively. Variable and short-term lease costs were not significant. Cash paid for operating leases totaled $51 million and $49 million in the first nine months of 2022 and 2021, respectively, and is classified in cash flows from operating activities. Noncash transactions totaled $34 million and $81 million in the first nine months of 2022 and 2021, respectively, reflecting the recognition of operating lease assets and liabilities for new or extended leases.
Balance sheet and other information related to our operating leases is as follows:
(Dollars in millions)October 1,
2022
January 1,
2022
Other assets$360$374
Other current liabilities5656
Other liabilities311325
Weighted-average remaining lease term (in years)10.110.5
Weighted-average discount rate3.64%3.19%
At October 1, 2022, maturities of our operating lease liabilities on an undiscounted basis totaled $18 million for the remainder of 2022, $67 million for 2023, $57 million for 2024, $49 million for 2025, $37 million for 2026 and $228 million thereafter.
Note 7. Derivative Instruments and Fair Value Measurements
We measure fair value at the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date.  We prioritize the assumptions that market participants would use in pricing the asset or liability into a three-tier fair value hierarchy. This fair value hierarchy gives the highest priority (Level 1) to quoted prices in active markets for identical assets or liabilities and the lowest priority (Level 3) to unobservable inputs in which little or no market data exist, requiring companies to develop their own assumptions. Observable inputs that do not meet the criteria of Level 1, which include quoted prices for similar assets or liabilities in active markets or quoted prices for identical assets and liabilities in markets that are not active, are categorized as Level 2. Level 3 inputs are those that reflect our estimates about the assumptions market participants would use in pricing the asset or liability based on the best information available in the circumstances. Valuation techniques for assets and liabilities measured using Level 3 inputs may include methodologies such as the market approach, the income approach or the cost approach and may use unobservable inputs such as projections, estimates and management’s interpretation of current market data. These unobservable inputs are utilized only to the extent that observable inputs are not available or cost effective to obtain.
Assets and Liabilities Recorded at Fair Value on a Recurring Basis
We manufacture and sell our products in a number of countries throughout the world, and, therefore, we are exposed to movements in foreign currency exchange rates. We primarily utilize foreign currency exchange contracts with maturities of no more than three years to manage this volatility. These contracts qualify as cash flow hedges and are intended to offset the effect of exchange rate fluctuations on forecasted sales, inventory purchases and overhead expenses. Net gains and losses recognized in earnings and Accumulated other comprehensive loss on cash flow hedges, including gains and losses related to hedge ineffectiveness, were not significant in the periods presented.
11

Our foreign currency exchange contracts are measured at fair value using the market method valuation technique. The inputs to this technique utilize current foreign currency exchange forward market rates published by third-party leading financial news and data providers. These are observable data that represent the rates that the financial institution uses for contracts entered into at that date; however, they are not based on actual transactions, so they are classified as Level 2.  At October 1, 2022 and January 1, 2022, we had foreign currency exchange contracts with notional amounts upon which the contracts were based of $327 million and $272 million, respectively. At October 1, 2022, the fair value amounts of our foreign currency exchange contracts were a $2 million asset and a $15 million liability. At January 1, 2022, the fair value amounts of our foreign currency exchange contracts were a $4 million asset and a $3 million liability.
Our Finance group enters into interest rate swap agreements to mitigate certain exposures to fluctuations in interest rates. By using these contracts, we are able to convert floating-rate cash flows to fixed-rate cash flows. These agreements are designated as cash flow hedges. At October 1, 2022, we had a swap agreement for a notional amount of $272 million with a maturity of August 2023, and a swap agreement for a notional amount of $25 million, maturing in June 2025, with a combined fair value of a $9 million asset. At January 1, 2022, we had a swap agreement for a notional amount of $289 million with a maturity of August 2023 and an insignificant fair value. The fair value of these swap agreements is determined using values published by third-party leading financial news and data providers. These values are observable data that represent the value that financial institutions use for contracts entered into at that date, but are not based on actual transactions, so they are classified as Level 2.
Assets and Liabilities Not Recorded at Fair Value
The carrying value and estimated fair value of our financial instruments that are not reflected in the financial statements at fair value are as follows:
October 1, 2022January 1, 2022
CarryingEstimatedCarryingEstimated
(In millions)ValueFair ValueValueFair Value
Manufacturing group
Debt, excluding leases$(3,177)$(2,826)$(3,181)$(3,346)
Finance group
Finance receivables, excluding leases391 363 413 444 
Debt(380)(294)(582)(546)
Fair value for the Manufacturing group debt is determined using market observable data for similar transactions (Level 2).  The fair value for the Finance group debt was determined primarily based on discounted cash flow analyses using observable market inputs from debt with similar duration, subordination and credit default expectations (Level 2). Fair value estimates for finance receivables were determined based on internally developed discounted cash flow models primarily utilizing significant unobservable inputs (Level 3), which include estimates of the rate of return, financing cost, capital structure and/or discount rate expectations of current market participants combined with estimated loan cash flows based on credit losses, payment rates and expectations of borrowers’ ability to make payments on a timely basis.
12

Note 8. Shareholders’ Equity
A reconciliation of Shareholders’ equity is presented below:
(In millions)Common
Stock
Capital
Surplus
Treasury
Stock
Retained
Earnings
Accumulated
Other
Comprehensive
Loss
Total
Shareholders'
Equity
Three months ended October 1, 2022
Beginning of period$28 $1,953 $(596)$6,271 $(855)$6,801 
Net income— — — 225 — 225 
Other comprehensive loss— — — — (87)(87)
Share-based compensation activity— 27 — — — 27 
Dividends declared— — — (4)— (4)
Purchases of common stock— — (200)— — (200)
End of period$28 $1,980 $(796)$6,492 $(942)$6,762 
Three months ended October 2, 2021
Beginning of period$29 $1,920 $(490)$6,318 $(1,676)$6,101 
Net income— — — 185 — 185 
Other comprehensive income— — — — 6 6 
Share-based compensation activity— 49 — — — 49 
Dividends declared— — — (5)— (5)
Purchases of common stock— — (299)— — (299)
End of period$29 $1,969 $(789)$6,498 $(1,670)$6,037 
Nine months ended October 1, 2022
Beginning of period$28 $1,863 $(157)$5,870 $(789)$6,815 
Net income— — — 635 — 635 
Other comprehensive loss— — — — (153)(153)
Share-based compensation activity— 117 — — — 117 
Dividends declared— — — (13)— (13)
Purchases of common stock— — (639)— — (639)
End of period$28 $1,980 $(796)$6,492 $(942)$6,762 
Nine months ended October 2, 2021
Beginning of period$29 $1,785 $(203)$5,973 $(1,739)$5,845 
Net income— — — 539 — 539 
Other comprehensive income— — — — 69 69 
Share-based compensation activity— 184 — — — 184 
Dividends declared— — — (14)— (14)
Purchases of common stock— — (586)— — (586)
End of period$29 $1,969 $(789)$6,498 $(1,670)$6,037 
Dividends per share of common stock were $0.02 for both the third quarter of 2022 and 2021 and $0.06 for both the first nine months of 2022 and 2021.
Earnings Per Share
We calculate basic and diluted earnings per share (EPS) based on net income, which approximates income available to common shareholders for each period.  Basic EPS is calculated using the two-class method, which includes the weighted-average number of common shares outstanding during the period and restricted stock units to be paid in stock that are deemed participating securities as they provide nonforfeitable rights to dividends. Diluted EPS considers the dilutive effect of all potential future common stock, including stock options.  
The weighted-average shares outstanding for basic and diluted EPS are as follows:
Three Months EndedNine Months Ended
(In thousands)October 1,
2022
October 2,
2021
October 1,
2022
October 2,
2021
Basic weighted-average shares outstanding211,307 223,663 214,301 225,545 
Dilutive effect of stock options1,833 2,827 2,167 2,250 
Diluted weighted-average shares outstanding213,140 226,490 216,468