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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 2, 2021
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 15, 2021, there were 220,425,217 shares of common stock outstanding.


TEXTRON INC.
Index to Form 10-Q
For the Quarterly Period Ended October 2, 2021

    
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 2,
2021
October 3,
2020
October 2,
2021
October 3,
2020
Revenues
Manufacturing revenues$2,979 $2,722 $9,022 $7,942 
Finance revenues11 13 38 42 
Total revenues2,990 2,735 9,060 7,984 
Costs, expenses and other
Cost of sales2,486 2,332 7,546 6,970 
Selling and administrative expense283 258 895 760 
Interest expense33 43 109 125 
Special charges10 7 20 124 
Non-service components of pension and post-retirement income, net(40)(21)(119)(62)
Gain on business disposition  (17) 
Total costs, expenses and other2,772 2,619 8,434 7,917 
Income from continuing operations before income taxes218 116 626 67 
Income tax expense (benefit)33 1 86 (6)
Income from continuing operations$185 $115 $540 $73 
Loss from discontinued operations  (1) 
Net income$185 $115 $539 $73 
Basic Earnings per share
Continuing operations$0.83 $0.50 $2.39 $0.32 
Diluted Earnings per share
Continuing operations$0.82 $0.50 $2.37 $0.32 
See Notes to the Consolidated Financial Statements.
3

TEXTRON INC.
Consolidated Statements of Comprehensive Income (Unaudited)

Three Months EndedNine Months Ended
(In millions)October 2,
2021
October 3,
2020
October 2,
2021
October 3,
2020
Net income$185 $115 $539 $73 
Other comprehensive income, net of tax
Pension and postretirement benefits adjustments, net of reclassifications30 37 90 110 
Foreign currency translation adjustments, net of reclassifications(19)35 (22)25 
Deferred gains (losses) on hedge contracts, net of reclassifications(5)2 1 (5)
Other comprehensive income6 74 69 130 
Comprehensive income$191 $189 $608 $203 
See Notes to the Consolidated Financial Statements.
4

TEXTRON INC.
Consolidated Balance Sheets (Unaudited)
(Dollars in millions)October 2,
2021
January 2,
2021
Assets
Manufacturing group
Cash and equivalents$1,969 $2,146 
Accounts receivable, net773 787 
Inventories3,670 3,513 
Other current assets890 950 
Total current assets7,302 7,396 
Property, plant and equipment, less accumulated depreciation
   and amortization of $4,855 and $4,696, respectively
2,469 2,516 
Goodwill2,152 2,157 
Other assets2,468 2,436 
Total Manufacturing group assets14,391 14,505 
Finance group
Cash and equivalents213 108 
Finance receivables, net596 744 
Other assets69 86 
Total Finance group assets878 938 
Total assets$15,269 $15,443 
Liabilities and shareholders’ equity
Liabilities
Manufacturing group
Current portion of long-term debt$7 $509 
Accounts payable775 776 
Other current liabilities2,270 1,985 
Total current liabilities3,052 3,270 
Other liabilities2,292 2,357 
Long-term debt3,180 3,198 
Total Manufacturing group liabilities8,524 8,825 
Finance group
Other liabilities123 111 
Debt585 662 
Total Finance group liabilities708 773 
Total liabilities9,232 9,598 
Shareholders’ equity
Common stock29 29 
Capital surplus1,969 1,785 
Treasury stock(789)(203)
Retained earnings6,498 5,973 
Accumulated other comprehensive loss(1,670)(1,739)
Total shareholders’ equity6,037 5,845 
Total liabilities and shareholders’ equity$15,269 $15,443 
Common shares outstanding (in thousands)221,031 226,444 
See Notes to the Consolidated Financial Statements.
5

TEXTRON INC.
Consolidated Statements of Cash Flows (Unaudited)
For the Nine Months Ended October 2, 2021 and October 3, 2020, respectively
Consolidated
(In millions)20212020
Cash flows from operating activities
Income from continuing operations$540 $73 
Adjustments to reconcile income from continuing operations to
   net cash provided by operating activities:
Non-cash items:
Depreciation and amortization285 283 
Gain on business disposition(17) 
Deferred income taxes7 (31)
Asset impairments and TRU inventory charge11 111 
Other, net74 81 
Changes in assets and liabilities:
Accounts receivable, net8 59 
Inventories(164)(258)
Other assets(11)114 
Accounts payable1 (267)
Other liabilities323 60 
Income taxes, net26 (4)
Pension, net(62)(11)
Captive finance receivables, net152 (25)
Other operating activities, net1 15 
Net cash provided by operating activities of continuing operations1,174 200 
Net cash used in operating activities of discontinued operations(1)(1)
Net cash provided by operating activities1,173 199 
Cash flows from investing activities
Capital expenditures(204)(151)
Net proceeds from business disposition38  
Proceeds from an insurance recovery and sale of property, plant and equipment3 25 
Net proceeds from corporate-owned life insurance policies 21 
Net cash used in acquisitions (11)
Finance receivables repaid19 21 
Other investing activities, net17 3 
Net cash used in investing activities(127)(92)
Cash flows from financing activities
Decrease in short-term debt (2)
Net proceeds from long-term debt 1,137 
Proceeds from borrowings against corporate-owned life insurance policies 377 
Payment on borrowings against corporate-owned life insurance policies (15)
Principal payments on long-term debt and nonrecourse debt(615)(235)
Purchases of Textron common stock(586)(54)
Dividends paid(14)(14)
Proceeds from options exercised105 16 
Other financing activities, net(2)(2)
Net cash provided by (used in) financing activities(1,112)1,208 
Effect of exchange rate changes on cash and equivalents(6)(2)
Net increase (decrease) in cash and equivalents(72)1,313 
Cash and equivalents at beginning of period2,254 1,357 
Cash and equivalents at end of period$2,182 $2,670 
See Notes to the Consolidated Financial Statements.
6

TEXTRON INC.
Consolidated Statements of Cash Flows (Unaudited) (Continued)
For the Nine Months Ended October 2, 2021 and October 3, 2020, respectively

Manufacturing GroupFinance Group
(In millions)2021202020212020
Cash flows from operating activities
Income from continuing operations$537 $67 $3 $6 
Adjustments to reconcile income from continuing operations to
   net cash provided by operating activities:
Non-cash items:
Depreciation and amortization277 279 8 4 
Gain on business disposition(17)   
Deferred income taxes9 (30)(2)(1)
Asset impairments and TRU inventory charge11 111   
Other, net82 74 (8)7 
Changes in assets and liabilities:
Accounts receivable, net8 59   
Inventories(164)(258)  
Other assets(10)114 (1) 
Accounts payable1 (267)  
Other liabilities323 66  (6)
Income taxes, net16 1 10 (5)
Pension, net(62)(11)  
Other operating activities, net1 15   
Net cash provided by operating activities of continuing operations1,012 220 10 5 
Net cash used in operating activities of discontinued operations(1)(1)  
Net cash provided by operating activities1,011 219 10 5 
Cash flows from investing activities
Capital expenditures(204)(151)  
Net proceeds from business disposition38    
Proceeds from an insurance recovery and sale of property, plant and equipment3 25   
Net proceeds from corporate-owned life insurance policies 21   
Net cash used in acquisitions (11)  
Finance receivables repaid  205 90 
Finance receivables originated  (34)(94)
Other investing activities, net  17 3 
Net cash provided by (used in) investing activities(163)(116)188 (1)
Cash flows from financing activities
Decrease in short-term debt (2)  
Net proceeds from long-term debt 1,137   
Proceeds from borrowings against corporate-owned life insurance policies 377   
Payment on borrowings against corporate-owned life insurance policies (15)  
Principal payments on long-term debt and nonrecourse debt(522)(195)(93)(40)
Purchases of Textron common stock(586)(54)  
Dividends paid(14)(14)  
Proceeds from options exercised105 16   
Other financing activities, net(2)(14) 12 
Net cash provided by (used in) financing activities(1,019)1,236 (93)(28)
Effect of exchange rate changes on cash and equivalents(6)(2)  
Net increase (decrease) in cash and equivalents(177)1,337 105 (24)
Cash and equivalents at beginning of period2,146 1,181 108 176 
Cash and equivalents at end of period$1,969 $2,518 $213 $152 
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 2, 2021.  In the opinion of management, the interim financial statements reflect all adjustments (consisting only of normal recurring adjustments) that are necessary for the fair presentation of our consolidated financial position, results of operations and cash flows for the interim periods presented. The results of operations for the interim periods are not necessarily indicative of the results to be expected for the full year.
Our financings are conducted through two separate borrowing groups.  The Manufacturing group consists of Textron consolidated with its majority-owned subsidiaries that operate in the Textron Aviation, Bell, Textron Systems and Industrial segments. The Finance group, which also is the Finance segment, consists of Textron Financial Corporation and its consolidated subsidiaries. We designed this framework to enhance our borrowing power by separating the Finance group. Our Manufacturing group operations include the development, production and delivery of tangible goods and services, while our Finance group provides financial services. Due to the fundamental differences between each borrowing group’s activities, investors, rating agencies and analysts use different measures to evaluate each group’s performance.  To support those evaluations, we present balance sheet and cash flow information for each borrowing group within the Consolidated Financial Statements.  All significant intercompany transactions are eliminated from the Consolidated Financial Statements, including retail financing activities for inventory sold by our Manufacturing group and financed by our Finance group.
Use of Estimates
We prepare our financial statements in conformity with generally accepted accounting principles, which require us to make estimates and assumptions that affect the amounts reported in the financial statements.  Actual results could differ from those estimates. Our estimates and assumptions are reviewed periodically, and the effects of changes, if any, are reflected in the Consolidated Statements of Operations in the period that they are determined.
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 2021 and 2020, our cumulative catch-up adjustments increased segment profit by $25 million and $22 million, respectively, and increased net income by $19 million and $17 million, respectively ($0.08 and $0.07 per diluted share, respectively). Gross favorable profit adjustments totaled $43 million and $31 million in the third quarter of 2021 and 2020, respectively, and the gross unfavorable profit adjustments totaled $18 million and $9 million, respectively. We recognized revenues of $27 million and $22 million in the third quarter of 2021 and 2020, respectively, from performance obligations satisfied in prior periods that related to changes in profit booking rates.
In the first nine months of 2021 and 2020, our cumulative catch-up adjustments increased segment profit by $54 million and $41 million, respectively, and increased net income by $41 million and $31 million, respectively ($0.18 and $0.14 per diluted share, respectively). Gross favorable profit adjustments totaled $119 million and $104 million in the first nine months of 2021 and 2020, respectively, and the gross unfavorable profit adjustments totaled $65 million and $63 million, respectively. We recognized revenues of $65 million and $48 million in the first nine months of 2021 and 2020, respectively, from performance obligations satisfied in prior periods that related to changes in profit booking rates.
Note 2. Business Disposition
On January 25, 2021, we completed the sale of TRU Simulation + Training Canada Inc. within our Textron Systems segment for net cash proceeds of $38 million and recorded an after-tax gain of $17 million.
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Note 3. Accounts Receivable and Finance Receivables
Accounts Receivable
Accounts receivable is composed of the following:
(In millions)October 2,
2021
January 2,
2021
Commercial$671 $668 
U.S. Government contracts131 155 
802 823 
Allowance for credit losses(29)(36)
Total accounts receivable, net$773 $787 
Finance Receivables
Finance receivables are presented in the following table:
(In millions)October 2,
2021
January 2,
2021
Finance receivables$621 $779 
Allowance for credit losses(25)(35)
Total finance receivables, net$596 $744 
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.
Since the first quarter of 2020, the Finance segment has worked with certain customers impacted by the pandemic to provide payment relief through loan modifications. The types of temporary payment relief we offered to these customers included delays in the timing of required principal payments, deferrals of interest payments and/or interest-only payments. The majority of these modified loans have returned to paying principal and interest. For loan modifications that cover payment-relief periods in excess of six months, even if the loan was previously current, the loan is deemed a troubled debt restructuring and considered impaired. These impaired loans are classified as either nonaccrual or watchlist based on a review of the credit quality indicators as discussed above.
During the first nine months of 2021, we modified finance receivable contracts for 21 customers with an outstanding balance at October 2, 2021 totaling $76 million, which were all categorized as troubled debt restructurings. Of these modifications, $71 million were previously modified in 2020. Due to the nature of these restructurings, the financial effects were not significant. We had no customer defaults during the last twelve months related to finance receivables previously modified as a troubled debt restructuring. We believe our allowance for credit losses adequately covers our exposure on these loans as our estimated collateral values largely exceed the outstanding loan amounts.

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Finance receivables categorized based on the credit quality indicators and by the delinquency aging category are summarized as follows:
(Dollars in millions)October 2,
2021
January 2,
2021
Performing$511$612
Watchlist74
Nonaccrual11093
Nonaccrual as a percentage of finance receivables17.71%11.94%
Current and less than 31 days past due$604$738
31-60 days past due512
61-90 days past due311
Over 90 days past due918
60+ days contractual delinquency as a percentage of finance receivables1.93%3.72%
At October 2, 2021, 30% of our performing finance receivables were originated since the beginning of 2020 and 32% were originated from 2017 to 2019. For finance receivables categorized as nonaccrual, 63% 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 2,
2021
January 2,
2021
Finance receivables evaluated collectively$416 $521 
Finance receivables evaluated individually110 163 
Allowance for credit losses based on collective evaluation21 28 
Allowance for credit losses based on individual evaluation4 7 
Impaired finance receivables with specific allowance for credit losses$34 $46 
Impaired finance receivables with no specific allowance for credit losses76 117 
Unpaid principal balance of impaired finance receivables124 175 
Allowance for credit losses on impaired finance receivables4 7 
Average recorded investment of impaired finance receivables123 126 
Note 4. Inventories
Inventories are composed of the following:
(In millions)October 2,
2021
January 2,
2021
Finished goods$1,085 $1,228 
Work in process1,741 1,455 
Raw materials and components844 830 
Total inventories$3,670 $3,513 
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Note 5. Warranty Liability
Changes in our warranty liability are as follows:
Nine Months Ended
(In millions)October 2,
2021
October 3,
2020
Beginning of period$119 $141 
Provision49 35 
Settlements(52)(46)
Adjustments*5 (13)
End of period$121 $117 
* Adjustments include changes to prior year estimates, new issues on prior year sales and currency translation adjustments.

Note 6. Leases
We primarily lease certain manufacturing plants, offices, warehouses, training and service centers at various locations worldwide. Our operating leases have remaining lease terms up to 28 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 $15 million in the third quarter of 2021 and 2020, respectively, and $49 million and $45 million in the first nine months of 2021 and 2020, respectively. Cash paid for operating leases totaled $49 million and $45 million in the first nine months of 2021 and 2020, respectively, and is classified in cash flows from operating activities. Noncash transactions totaled $81 million and $33 million in the first nine months of 2021 and 2020, respectively, reflecting the recognition of operating lease assets and liabilities for new or extended leases. Variable and short-term lease costs were not significant.
Balance sheet and other information related to our operating leases is as follows:
(Dollars in millions)October 2,
2021
January 2,
2021
Other assets$388$349
Other current liabilities5847
Other liabilities336306
Weighted-average remaining lease term (in years)10.511.6
Weighted-average discount rate3.34%4.17%
At October 2, 2021, maturities of our operating lease liabilities on an undiscounted basis totaled $20 million for the remainder of 2021, $69 million for 2022, $59 million for 2023, $51 million for 2024, $45 million for 2025 and $247 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.
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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 2, 2021 and January 2, 2021, we had foreign currency exchange contracts with notional amounts upon which the contracts were based of $341 million and $318 million, respectively. At October 2, 2021, the fair value amounts of our foreign currency exchange contracts were a $5 million asset and a $2 million liability. At January 2, 2021, the fair value amounts of our foreign currency exchange contracts were a $5 million asset and a $2 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 2, 2021, we had a swap agreement for a notional amount of $289 million with a maturity of August 2023 and a fair value of a $3 million liability. At January 2, 2021, we had a swap agreement for a notional amount of $294 million with a maturity of February 2022 and a fair value of a $4 million liability. The fair value of these swap agreements is determined using values published by third-party leading financial news and data providers. These values are observable data that represent the value that financial institutions use for contracts entered into at that date, but are not based on actual transactions, so they are classified as Level 2.
Assets and Liabilities Not Recorded at Fair Value
The carrying value and estimated fair value of our financial instruments that are not reflected in the financial statements at fair value are as follows:
October 2, 2021January 2, 2021
CarryingEstimatedCarryingEstimated
(In millions)ValueFair ValueValueFair Value
Manufacturing group
Debt, excluding leases$(3,183)$(3,413)$(3,690)$(3,986)
Finance group
Finance receivables, excluding leases404 438 549 599 
Debt(585)(552)(662)(587)
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.
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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 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 
Three months ended October 3, 2020
Beginning of period$29 $1,732 $(74)$5,631 $(1,791)$5,527 
Net income— — — 115 — 115 
Other comprehensive income— — — — 74 74 
Share-based compensation activity— 30 — — — 30 
Dividends declared— — — (5)— (5)
End of period$29 $1,762 $(74)$5,741 $(1,717)$5,741 
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 
Nine months ended October 3, 2020
Beginning of period$29 $