<HTML> <HEAD> <TITLE>SECURITIES AND EXCHANGE COMMISSION</TITLE> </HEAD> <BODY LINK="#0000ff" VLINK="#800080"> <B><P ALIGN="CENTER">SECURITIES AND EXCHANGE COMMISSION</P> </B><P ALIGN="CENTER">Washington, DC 20549</P> <P ALIGN="CENTER">_______________</P> <B><FONT SIZE=5><P ALIGN="CENTER">FORM 10-Q</P></B></FONT> <P ALIGN="CENTER"><CENTER><TABLE CELLSPACING=0 BORDER=0 WIDTH=660> <TR><TD WIDTH="6%" VALIGN="TOP"> <P>[X]</TD> <TD WIDTH="94%" VALIGN="TOP"> <P>QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15 (d) OF THE SECURITIES <BR> EXCHANGE ACT OF 1934</P> <P>For the fiscal quarter ended July 3, 1999</TD> </TR> <TR><TD WIDTH="6%" VALIGN="TOP"> <P> </TD> <TD WIDTH="94%" VALIGN="TOP"> <P>OR </TD> </TR> <TR><TD WIDTH="6%" VALIGN="TOP"> <P>[ ]</TD> <TD WIDTH="94%" VALIGN="TOP"> <P>TRANSITION REPORT PURSUANT TO SECTION 13 OR 15 (d) OF THE SECURITIES <BR> EXCHANGE ACT OF 1934 </TD> </TR> </TABLE> </CENTER></P> <P ALIGN="CENTER">Commission file number 1-5480</P> <P ALIGN="CENTER">_______________</P> <B><FONT SIZE=5><P ALIGN="CENTER">TEXTRON INC.</P> </B></FONT><I><P ALIGN="CENTER">(Exact name of registrant as specified in its charter)</P> </I><P ALIGN="CENTER">_______________</P> <P ALIGN="CENTER"><CENTER><TABLE CELLSPACING=0 BORDER=0 WIDTH=683> <TR><TD WIDTH="46%" VALIGN="TOP" ROWSPAN=2> <P ALIGN="CENTER">Delaware<BR> (State or other jurisdiction of<BR> incorporation or organization) </TD> <TD WIDTH="18%" VALIGN="TOP"> <P> </TD> <TD WIDTH="36%" VALIGN="TOP" ROWSPAN=2> <P>05-0315468<BR> (I.R.S. Employer Identification No.) </TD> </TR> <TR><TD WIDTH="18%" VALIGN="TOP"> <P> </TD> </TR> </TABLE> </CENTER></P> <P ALIGN="CENTER">40 Westminster Street, Providence, RI 02903<BR> 401-421-2800<BR> <I>(Address and telephone number of principal executive offices)</P> </I><P ALIGN="CENTER">_______________</P> <P ALIGN="JUSTIFY">Indicate by check mark whether the registrant (1) has filed all reports required to be filed by <BR> Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or <BR> for such shorter period that the registrant was required to file such reports) and (2) has been <BR> subject to such filing requirements for the past 90 days.</P> <P ALIGN="JUSTIFY"> </P> <P ALIGN="RIGHT"><TABLE CELLSPACING=0 BORDER=0 CELLPADDING=7 WIDTH=643> <TR><TD VALIGN="TOP"> <P ALIGN="RIGHT">Yes <U> X </U> No<U> </U></TD> </TR> </TABLE> </P> <P ALIGN="JUSTIFY"> </P> <P ALIGN="JUSTIFY"> </P> <P ALIGN="CENTER">Common stock outstanding at July 31, 1998 - 150,180,000 shares</P> <B><FONT SIZE=2><P ALIGN="CENTER">PART I. FINANCIAL INFORMATION</P> </B><P>Item 1. <U>FINANCIAL STATEMENTS</P> </U><B><P ALIGN="CENTER">TEXTRON INC.</P> <P ALIGN="CENTER">Condensed Consolidated Statement of Income (unaudited)</P> </B><P ALIGN="CENTER">(Dollars in millions except per share amounts)</P></FONT> <TABLE BORDER CELLSPACING=1 CELLPADDING=2 WIDTH=728> <TR><TD WIDTH="47%" VALIGN="TOP"> <P> </TD> <TD WIDTH="26%" VALIGN="TOP" COLSPAN=2> <FONT SIZE=2><P ALIGN="CENTER">Three months ended</FONT></TD> <TD WIDTH="27%" VALIGN="TOP" COLSPAN=2> <FONT SIZE=2><P ALIGN="CENTER">Six months ended</FONT></TD> </TR> <TR><TD WIDTH="47%" VALIGN="TOP"> <P> </TD> <TD WIDTH="13%" VALIGN="TOP"> <FONT SIZE=2><P ALIGN="CENTER">July 3,<BR> 1999</FONT></TD> <TD WIDTH="13%" VALIGN="TOP"> <FONT SIZE=2><P ALIGN="CENTER">July 4,<BR> 1998</FONT></TD> <TD WIDTH="14%" VALIGN="TOP"> <FONT SIZE=2><P ALIGN="CENTER">July 3,<BR> 1999</FONT></TD> <TD WIDTH="13%" VALIGN="TOP"> <FONT SIZE=2><P ALIGN="CENTER">July 4,<BR> 1998</FONT></TD> </TR> <TR><TD WIDTH="47%" VALIGN="TOP"> <B><FONT SIZE=2><P>Textron Manufacturing</B></FONT></TD> <TD WIDTH="13%" VALIGN="TOP"> <P> </TD> <TD WIDTH="13%" VALIGN="TOP"> <P> </TD> <TD WIDTH="14%" VALIGN="TOP"> <P> </TD> <TD WIDTH="13%" VALIGN="TOP"> <P> </TD> </TR> <TR><TD WIDTH="47%" VALIGN="TOP"> <FONT SIZE=2><P>Revenues</FONT></TD> <TD WIDTH="13%" VALIGN="TOP"> <FONT SIZE=2><P ALIGN="RIGHT">$2,783</FONT></TD> <TD WIDTH="13%" VALIGN="TOP"> <FONT SIZE=2><P ALIGN="RIGHT">$2,393</FONT></TD> <TD WIDTH="14%" VALIGN="TOP"> <FONT SIZE=2><P ALIGN="RIGHT">$5,436</FONT></TD> <TD WIDTH="13%" VALIGN="TOP"> <FONT SIZE=2><P ALIGN="RIGHT">$4,560</FONT></TD> </TR> <TR><TD WIDTH="47%" VALIGN="TOP"> <B><FONT SIZE=2><P>Cost and Expenses</B></FONT></TD> <TD WIDTH="13%" VALIGN="TOP"> <P> </TD> <TD WIDTH="13%" VALIGN="TOP"> <P> </TD> <TD WIDTH="14%" VALIGN="TOP"> <P> </TD> <TD WIDTH="13%" VALIGN="TOP"> <P> </TD> </TR> <TR><TD WIDTH="47%" VALIGN="TOP"> <FONT SIZE=2><P>Cost of sales</FONT></TD> <TD WIDTH="13%" VALIGN="TOP"> <FONT SIZE=2><P ALIGN="RIGHT">2,221</FONT></TD> <TD WIDTH="13%" VALIGN="TOP"> <FONT SIZE=2><P ALIGN="RIGHT">1,948</FONT></TD> <TD WIDTH="14%" VALIGN="TOP"> <FONT SIZE=2><P ALIGN="RIGHT">4,457</FONT></TD> <TD WIDTH="13%" VALIGN="TOP"> <FONT SIZE=2><P ALIGN="RIGHT">3,713</FONT></TD> </TR> <TR><TD WIDTH="47%" VALIGN="TOP"> <FONT SIZE=2><P>Selling and administrative</FONT></TD> <TD WIDTH="13%" VALIGN="TOP"> <FONT SIZE=2><P ALIGN="RIGHT">327</FONT></TD> <TD WIDTH="13%" VALIGN="TOP"> <FONT SIZE=2><P ALIGN="RIGHT">237</FONT></TD> <TD WIDTH="14%" VALIGN="TOP"> <FONT SIZE=2><P ALIGN="RIGHT">531</FONT></TD> <TD WIDTH="13%" VALIGN="TOP"> <FONT SIZE=2><P ALIGN="RIGHT">461</FONT></TD> </TR> <TR><TD WIDTH="47%" VALIGN="TOP"> <FONT SIZE=2><P>Gain on sale of division</FONT></TD> <TD WIDTH="13%" VALIGN="TOP"> <FONT SIZE=2><P ALIGN="RIGHT">-</FONT></TD> <TD WIDTH="13%" VALIGN="TOP"> <FONT SIZE=2><P ALIGN="RIGHT">(97)</FONT></TD> <TD WIDTH="14%" VALIGN="TOP"> <FONT SIZE=2><P ALIGN="RIGHT">-</FONT></TD> <TD WIDTH="13%" VALIGN="TOP"> <FONT SIZE=2><P ALIGN="RIGHT">(97)</FONT></TD> </TR> <TR><TD WIDTH="47%" VALIGN="TOP"> <FONT SIZE=2><P>Special charges</FONT></TD> <TD WIDTH="13%" VALIGN="TOP"> <FONT SIZE=2><P ALIGN="RIGHT">2</FONT></TD> <TD WIDTH="13%" VALIGN="TOP"> <FONT SIZE=2><P ALIGN="RIGHT">87</FONT></TD> <TD WIDTH="14%" VALIGN="TOP"> <FONT SIZE=2><P ALIGN="RIGHT">2</FONT></TD> <TD WIDTH="13%" VALIGN="TOP"> <FONT SIZE=2><P ALIGN="RIGHT">87</FONT></TD> </TR> <TR><TD WIDTH="47%" VALIGN="TOP"> <FONT SIZE=2><P>Interest expense</FONT></TD> <TD WIDTH="13%" VALIGN="TOP"> <FONT SIZE=2><P ALIGN="RIGHT">3</FONT></TD> <TD WIDTH="13%" VALIGN="TOP"> <FONT SIZE=2><P ALIGN="RIGHT">36</FONT></TD> <TD WIDTH="14%" VALIGN="TOP"> <FONT SIZE=2><P ALIGN="RIGHT">16</FONT></TD> <TD WIDTH="13%" VALIGN="TOP"> <FONT SIZE=2><P ALIGN="RIGHT">69</FONT></TD> </TR> <TR><TD WIDTH="47%" VALIGN="TOP"> <FONT SIZE=2><P>Interest income</FONT></TD> <TD WIDTH="13%" VALIGN="TOP"> <FONT SIZE=2><P ALIGN="RIGHT">(6)</FONT></TD> <TD WIDTH="13%" VALIGN="TOP"> <FONT SIZE=2><P ALIGN="RIGHT">-</FONT></TD> <TD WIDTH="14%" VALIGN="TOP"> <FONT SIZE=2><P ALIGN="RIGHT">(22)</FONT></TD> <TD WIDTH="13%" VALIGN="TOP"> <FONT SIZE=2><P ALIGN="RIGHT">-</FONT></TD> </TR> <TR><TD WIDTH="47%" VALIGN="TOP"> <FONT SIZE=2><P>	Total costs and expenses</FONT></TD> <TD WIDTH="13%" VALIGN="TOP"> <FONT SIZE=2><P ALIGN="RIGHT">2,547</FONT></TD> <TD WIDTH="13%" VALIGN="TOP"> <FONT SIZE=2><P ALIGN="RIGHT">2,211</FONT></TD> <TD WIDTH="14%" VALIGN="TOP"> <FONT SIZE=2><P ALIGN="RIGHT">4,984</FONT></TD> <TD WIDTH="13%" VALIGN="TOP"> <FONT SIZE=2><P ALIGN="RIGHT">4,233</FONT></TD> </TR> <TR><TD WIDTH="47%" VALIGN="TOP"> <FONT SIZE=2><P>Manufacturing income</FONT></TD> <TD WIDTH="13%" VALIGN="TOP"> <FONT SIZE=2><P ALIGN="RIGHT">236</FONT></TD> <TD WIDTH="13%" VALIGN="TOP"> <FONT SIZE=2><P ALIGN="RIGHT">182</FONT></TD> <TD WIDTH="14%" VALIGN="TOP"> <FONT SIZE=2><P ALIGN="RIGHT">452</FONT></TD> <TD WIDTH="13%" VALIGN="TOP"> <FONT SIZE=2><P ALIGN="RIGHT">327</FONT></TD> </TR> <TR><TD WIDTH="47%" VALIGN="TOP"> <B><FONT SIZE=2><P>Textron Finance</B></FONT></TD> <TD WIDTH="13%" VALIGN="TOP"> <P> </TD> <TD WIDTH="13%" VALIGN="TOP"> <P> </TD> <TD WIDTH="14%" VALIGN="TOP"> <P> </TD> <TD WIDTH="13%" VALIGN="TOP"> <P> </TD> </TR> <TR><TD WIDTH="47%" VALIGN="TOP"> <FONT SIZE=2><P>Revenues</FONT></TD> <TD WIDTH="13%" VALIGN="TOP"> <FONT SIZE=2><P ALIGN="RIGHT">104</FONT></TD> <TD WIDTH="13%" VALIGN="TOP"> <FONT SIZE=2><P ALIGN="RIGHT">91</FONT></TD> <TD WIDTH="14%" VALIGN="TOP"> <FONT SIZE=2><P ALIGN="RIGHT">200</FONT></TD> <TD WIDTH="13%" VALIGN="TOP"> <FONT SIZE=2><P ALIGN="RIGHT">176</FONT></TD> </TR> <TR><TD WIDTH="47%" VALIGN="TOP"> <B><FONT SIZE=2><P>Costs and Expenses</B></FONT></TD> <TD WIDTH="13%" VALIGN="TOP"> <P> </TD> <TD WIDTH="13%" VALIGN="TOP"> <P> </TD> <TD WIDTH="14%" VALIGN="TOP"> <P> </TD> <TD WIDTH="13%" VALIGN="TOP"> <P> </TD> </TR> <TR><TD WIDTH="47%" VALIGN="TOP"> <FONT SIZE=2><P>Interest</FONT></TD> <TD WIDTH="13%" VALIGN="TOP"> <FONT SIZE=2><P ALIGN="RIGHT">49</FONT></TD> <TD WIDTH="13%" VALIGN="TOP"> <FONT SIZE=2><P ALIGN="RIGHT">39</FONT></TD> <TD WIDTH="14%" VALIGN="TOP"> <FONT SIZE=2><P ALIGN="RIGHT">90</FONT></TD> <TD WIDTH="13%" VALIGN="TOP"> <FONT SIZE=2><P ALIGN="RIGHT">76</FONT></TD> </TR> <TR><TD WIDTH="47%" VALIGN="TOP"> <FONT SIZE=2><P>Selling and administrative</FONT></TD> <TD WIDTH="13%" VALIGN="TOP"> <FONT SIZE=2><P ALIGN="RIGHT">19</FONT></TD> <TD WIDTH="13%" VALIGN="TOP"> <FONT SIZE=2><P ALIGN="RIGHT">20</FONT></TD> <TD WIDTH="14%" VALIGN="TOP"> <FONT SIZE=2><P ALIGN="RIGHT">42</FONT></TD> <TD WIDTH="13%" VALIGN="TOP"> <FONT SIZE=2><P ALIGN="RIGHT">38</FONT></TD> </TR> <TR><TD WIDTH="47%" VALIGN="TOP"> <FONT SIZE=2><P>Provision for losses on collection of finance receivables</FONT></TD> <TD WIDTH="13%" VALIGN="TOP"> <FONT SIZE=2><P ALIGN="RIGHT">6</FONT></TD> <TD WIDTH="13%" VALIGN="TOP"> <FONT SIZE=2><P ALIGN="RIGHT">5</FONT></TD> <TD WIDTH="14%" VALIGN="TOP"> <FONT SIZE=2><P ALIGN="RIGHT">12</FONT></TD> <TD WIDTH="13%" VALIGN="TOP"> <FONT SIZE=2><P ALIGN="RIGHT">10</FONT></TD> </TR> <TR><TD WIDTH="47%" VALIGN="TOP"> <FONT SIZE=2><P>	Total costs and expenses</FONT></TD> <TD WIDTH="13%" VALIGN="TOP"> <FONT SIZE=2><P ALIGN="RIGHT">74</FONT></TD> <TD WIDTH="13%" VALIGN="TOP"> <FONT SIZE=2><P ALIGN="RIGHT">64</FONT></TD> <TD WIDTH="14%" VALIGN="TOP"> <FONT SIZE=2><P ALIGN="RIGHT">144</FONT></TD> <TD WIDTH="13%" VALIGN="TOP"> <FONT SIZE=2><P ALIGN="RIGHT">124</FONT></TD> </TR> <TR><TD WIDTH="47%" VALIGN="TOP"> <FONT SIZE=2><P>Finance income</FONT></TD> <TD WIDTH="13%" VALIGN="TOP"> <FONT SIZE=2><P ALIGN="RIGHT">30</FONT></TD> <TD WIDTH="13%" VALIGN="TOP"> <FONT SIZE=2><P ALIGN="RIGHT">27</FONT></TD> <TD WIDTH="14%" VALIGN="TOP"> <FONT SIZE=2><P ALIGN="RIGHT">56</FONT></TD> <TD WIDTH="13%" VALIGN="TOP"> <FONT SIZE=2><P ALIGN="RIGHT">52</FONT></TD> </TR> <TR><TD WIDTH="47%" VALIGN="TOP"> <B><FONT SIZE=2><P>Total Company</B></FONT></TD> <TD WIDTH="13%" VALIGN="TOP"> <P> </TD> <TD WIDTH="13%" VALIGN="TOP"> <P> </TD> <TD WIDTH="14%" VALIGN="TOP"> <P> </TD> <TD WIDTH="13%" VALIGN="TOP"> <P> </TD> </TR> <TR><TD WIDTH="47%" VALIGN="TOP"> <FONT SIZE=2><P>Income from continuing operations before income taxes and<BR> 	distributions on preferred securities of subsidiary trust</FONT></TD> <TD WIDTH="13%" VALIGN="TOP"> <FONT SIZE=2><P ALIGN="RIGHT"><BR> 266</FONT></TD> <TD WIDTH="13%" VALIGN="TOP"> <FONT SIZE=2><P ALIGN="RIGHT"><BR> 209</FONT></TD> <TD WIDTH="14%" VALIGN="TOP"> <FONT SIZE=2><P ALIGN="RIGHT"><BR> 508</FONT></TD> <TD WIDTH="13%" VALIGN="TOP"> <FONT SIZE=2><P ALIGN="RIGHT"><BR> 379</FONT></TD> </TR> <TR><TD WIDTH="47%" VALIGN="TOP"> <FONT SIZE=2><P>Income taxes</FONT></TD> <TD WIDTH="13%" VALIGN="TOP"> <FONT SIZE=2><P ALIGN="RIGHT">(97)</FONT></TD> <TD WIDTH="13%" VALIGN="TOP"> <FONT SIZE=2><P ALIGN="RIGHT">(86)</FONT></TD> <TD WIDTH="14%" VALIGN="TOP"> <FONT SIZE=2><P ALIGN="RIGHT">(188)</FONT></TD> <TD WIDTH="13%" VALIGN="TOP"> <FONT SIZE=2><P ALIGN="RIGHT">(151)</FONT></TD> </TR> <TR><TD WIDTH="47%" VALIGN="TOP"> <FONT SIZE=2><P>Distributions on preferred securities of subsidiary trust,<BR> 	net of income taxes</FONT></TD> <TD WIDTH="13%" VALIGN="TOP"> <FONT SIZE=2><P ALIGN="RIGHT"><BR> (7)</FONT></TD> <TD WIDTH="13%" VALIGN="TOP"> <FONT SIZE=2><P ALIGN="RIGHT"><BR> (7)</FONT></TD> <TD WIDTH="14%" VALIGN="TOP"> <FONT SIZE=2><P ALIGN="RIGHT"><BR> (13)</FONT></TD> <TD WIDTH="13%" VALIGN="TOP"> <FONT SIZE=2><P ALIGN="RIGHT"><BR> (13)</FONT></TD> </TR> <TR><TD WIDTH="47%" VALIGN="TOP"> <FONT SIZE=2><P>Income from continuing operations</FONT></TD> <TD WIDTH="13%" VALIGN="TOP"> <FONT SIZE=2><P ALIGN="RIGHT">162</FONT></TD> <TD WIDTH="13%" VALIGN="TOP"> <FONT SIZE=2><P ALIGN="RIGHT">116</FONT></TD> <TD WIDTH="14%" VALIGN="TOP"> <FONT SIZE=2><P ALIGN="RIGHT">307</FONT></TD> <TD WIDTH="13%" VALIGN="TOP"> <FONT SIZE=2><P ALIGN="RIGHT">215</FONT></TD> </TR> <TR><TD WIDTH="47%" VALIGN="TOP"> <FONT SIZE=2><P>Discontinued operations, net of income taxes:</FONT></TD> <TD WIDTH="13%" VALIGN="TOP"> <P> </TD> <TD WIDTH="13%" VALIGN="TOP"> <P> </TD> <TD WIDTH="14%" VALIGN="TOP"> <P> </TD> <TD WIDTH="13%" VALIGN="TOP"> <P> </TD> </TR> <TR><TD WIDTH="47%" VALIGN="TOP"> <FONT SIZE=2><P>	Income from operations</FONT></TD> <TD WIDTH="13%" VALIGN="TOP"> <FONT SIZE=2><P ALIGN="RIGHT">-</FONT></TD> <TD WIDTH="13%" VALIGN="TOP"> <FONT SIZE=2><P ALIGN="RIGHT">48</FONT></TD> <TD WIDTH="14%" VALIGN="TOP"> <FONT SIZE=2><P ALIGN="RIGHT">-</FONT></TD> <TD WIDTH="13%" VALIGN="TOP"> <FONT SIZE=2><P ALIGN="RIGHT">91</FONT></TD> </TR> <TR><TD WIDTH="47%" VALIGN="TOP"> <FONT SIZE=2><P>	Gain on disposal</FONT></TD> <TD WIDTH="13%" VALIGN="TOP"> <FONT SIZE=2><P ALIGN="RIGHT">-</FONT></TD> <TD WIDTH="13%" VALIGN="TOP"> <FONT SIZE=2><P ALIGN="RIGHT">-</FONT></TD> <TD WIDTH="14%" VALIGN="TOP"> <FONT SIZE=2><P ALIGN="RIGHT">1,615</FONT></TD> <TD WIDTH="13%" VALIGN="TOP"> <FONT SIZE=2><P ALIGN="RIGHT">-</FONT></TD> </TR> <TR><TD WIDTH="47%" VALIGN="TOP"> <P> </TD> <TD WIDTH="13%" VALIGN="TOP"> <FONT SIZE=2><P ALIGN="RIGHT">-</FONT></TD> <TD WIDTH="13%" VALIGN="TOP"> <FONT SIZE=2><P ALIGN="RIGHT">48</FONT></TD> <TD WIDTH="14%" VALIGN="TOP"> <FONT SIZE=2><P ALIGN="RIGHT">1,615</FONT></TD> <TD WIDTH="13%" VALIGN="TOP"> <FONT SIZE=2><P ALIGN="RIGHT">91</FONT></TD> </TR> <TR><TD WIDTH="47%" VALIGN="TOP"> <FONT SIZE=2><P>Income before extraordinary loss</FONT></TD> <TD WIDTH="13%" VALIGN="TOP"> <FONT SIZE=2><P ALIGN="RIGHT">162</FONT></TD> <TD WIDTH="13%" VALIGN="TOP"> <FONT SIZE=2><P ALIGN="RIGHT">164</FONT></TD> <TD WIDTH="14%" VALIGN="TOP"> <FONT SIZE=2><P ALIGN="RIGHT">1,922</FONT></TD> <TD WIDTH="13%" VALIGN="TOP"> <FONT SIZE=2><P ALIGN="RIGHT">306</FONT></TD> </TR> <TR><TD WIDTH="47%" VALIGN="TOP"> <FONT SIZE=2><P>Extraordinary loss from debt retirement, net of income taxes</FONT></TD> <TD WIDTH="13%" VALIGN="TOP"> <FONT SIZE=2><P ALIGN="RIGHT">-</FONT></TD> <TD WIDTH="13%" VALIGN="TOP"> <FONT SIZE=2><P ALIGN="RIGHT">-</FONT></TD> <TD WIDTH="14%" VALIGN="TOP"> <FONT SIZE=2><P ALIGN="RIGHT">(43)</FONT></TD> <TD WIDTH="13%" VALIGN="TOP"> <FONT SIZE=2><P ALIGN="RIGHT">-</FONT></TD> </TR> <TR><TD WIDTH="47%" VALIGN="TOP"> <B><FONT SIZE=2><P>Net income</B></FONT></TD> <TD WIDTH="13%" VALIGN="TOP"> <FONT SIZE=2><P ALIGN="RIGHT">$162</FONT></TD> <TD WIDTH="13%" VALIGN="TOP"> <FONT SIZE=2><P ALIGN="RIGHT">$164</FONT></TD> <TD WIDTH="14%" VALIGN="TOP"> <FONT SIZE=2><P ALIGN="RIGHT">$1,879</FONT></TD> <TD WIDTH="13%" VALIGN="TOP"> <FONT SIZE=2><P ALIGN="RIGHT">$306</FONT></TD> </TR> <TR><TD WIDTH="47%" VALIGN="TOP"> <FONT SIZE=2><P>Per common share:</FONT></TD> <TD WIDTH="13%" VALIGN="TOP"> <P> </TD> <TD WIDTH="13%" VALIGN="TOP"> <P> </TD> <TD WIDTH="14%" VALIGN="TOP"> <P> </TD> <TD WIDTH="13%" VALIGN="TOP"> <P> </TD> </TR> <TR><TD WIDTH="47%" VALIGN="TOP"> <FONT SIZE=2><P>Basic:</FONT></TD> <TD WIDTH="13%" VALIGN="TOP"> <P> </TD> <TD WIDTH="13%" VALIGN="TOP"> <P> </TD> <TD WIDTH="14%" VALIGN="TOP"> <P> </TD> <TD WIDTH="13%" VALIGN="TOP"> <P> </TD> </TR> <TR><TD WIDTH="47%" VALIGN="TOP"> <FONT SIZE=2><P>	Income from continuing operations</FONT></TD> <TD WIDTH="13%" VALIGN="TOP"> <FONT SIZE=2><P ALIGN="RIGHT">$1.08</FONT></TD> <TD WIDTH="13%" VALIGN="TOP"> <FONT SIZE=2><P ALIGN="RIGHT">$.71</FONT></TD> <TD WIDTH="14%" VALIGN="TOP"> <FONT SIZE=2><P ALIGN="RIGHT">$2.03</FONT></TD> <TD WIDTH="13%" VALIGN="TOP"> <FONT SIZE=2><P ALIGN="RIGHT">$1.32</FONT></TD> </TR> <TR><TD WIDTH="47%" VALIGN="TOP"> <FONT SIZE=2><P>	Discontinued operations, net of income taxes</FONT></TD> <TD WIDTH="13%" VALIGN="TOP"> <FONT SIZE=2><P ALIGN="RIGHT">-</FONT></TD> <TD WIDTH="13%" VALIGN="TOP"> <FONT SIZE=2><P ALIGN="RIGHT">.29</FONT></TD> <TD WIDTH="14%" VALIGN="TOP"> <FONT SIZE=2><P ALIGN="RIGHT">10.64</FONT></TD> <TD WIDTH="13%" VALIGN="TOP"> <FONT SIZE=2><P ALIGN="RIGHT">.55</FONT></TD> </TR> <TR><TD WIDTH="47%" VALIGN="TOP"> <FONT SIZE=2><P>	Extraordinary loss from debt retirement, net of<BR> 		income taxes</FONT></TD> <TD WIDTH="13%" VALIGN="TOP"> <FONT SIZE=2><P ALIGN="RIGHT"><BR> - -</FONT></TD> <TD WIDTH="13%" VALIGN="TOP"> <FONT SIZE=2><P ALIGN="RIGHT"><BR> - -</FONT></TD> <TD WIDTH="14%" VALIGN="TOP"> <FONT SIZE=2><P ALIGN="RIGHT"><BR> (.28)</FONT></TD> <TD WIDTH="13%" VALIGN="TOP"> <FONT SIZE=2><P ALIGN="RIGHT"><BR> - -</FONT></TD> </TR> <TR><TD WIDTH="47%" VALIGN="TOP"> <FONT SIZE=2><P>Net income</FONT></TD> <TD WIDTH="13%" VALIGN="TOP"> <FONT SIZE=2><P ALIGN="RIGHT">$1.08</FONT></TD> <TD WIDTH="13%" VALIGN="TOP"> <FONT SIZE=2><P ALIGN="RIGHT">$1.00</FONT></TD> <TD WIDTH="14%" VALIGN="TOP"> <FONT SIZE=2><P ALIGN="RIGHT">$12.39</FONT></TD> <TD WIDTH="13%" VALIGN="TOP"> <FONT SIZE=2><P ALIGN="RIGHT">$1.87</FONT></TD> </TR> <TR><TD WIDTH="47%" VALIGN="TOP"> <FONT SIZE=2><P>Diluted:</FONT></TD> <TD WIDTH="13%" VALIGN="TOP"> <P> </TD> <TD WIDTH="13%" VALIGN="TOP"> <P> </TD> <TD WIDTH="14%" VALIGN="TOP"> <P> </TD> <TD WIDTH="13%" VALIGN="TOP"> <P> </TD> </TR> <TR><TD WIDTH="47%" VALIGN="TOP"> <FONT SIZE=2><P>	Income from continuing operations</FONT></TD> <TD WIDTH="13%" VALIGN="TOP"> <FONT SIZE=2><P ALIGN="RIGHT">$1.05</FONT></TD> <TD WIDTH="13%" VALIGN="TOP"> <FONT SIZE=2><P ALIGN="RIGHT">$.70</FONT></TD> <TD WIDTH="14%" VALIGN="TOP"> <FONT SIZE=2><P ALIGN="RIGHT">$1.98</FONT></TD> <TD WIDTH="13%" VALIGN="TOP"> <FONT SIZE=2><P ALIGN="RIGHT">$1.29</FONT></TD> </TR> <TR><TD WIDTH="47%" VALIGN="TOP"> <FONT SIZE=2><P>	Discontinued operations, net of income taxes</FONT></TD> <TD WIDTH="13%" VALIGN="TOP"> <FONT SIZE=2><P ALIGN="RIGHT">-</FONT></TD> <TD WIDTH="13%" VALIGN="TOP"> <FONT SIZE=2><P ALIGN="RIGHT">.28</FONT></TD> <TD WIDTH="14%" VALIGN="TOP"> <FONT SIZE=2><P ALIGN="RIGHT">10.40</FONT></TD> <TD WIDTH="13%" VALIGN="TOP"> <FONT SIZE=2><P ALIGN="RIGHT">.54</FONT></TD> </TR> <TR><TD WIDTH="47%" VALIGN="TOP"> <FONT SIZE=2><P>	Extraordinary loss from debt retirement, net of<BR> 		income taxes</FONT></TD> <TD WIDTH="13%" VALIGN="TOP"> <FONT SIZE=2><P ALIGN="RIGHT"><BR> - -</FONT></TD> <TD WIDTH="13%" VALIGN="TOP"> <FONT SIZE=2><P ALIGN="RIGHT"><BR> - -</FONT></TD> <TD WIDTH="14%" VALIGN="TOP"> <FONT SIZE=2><P ALIGN="RIGHT"><BR> (.27)</FONT></TD> <TD WIDTH="13%" VALIGN="TOP"> <FONT SIZE=2><P ALIGN="RIGHT"><BR> - -</FONT></TD> </TR> <TR><TD WIDTH="47%" VALIGN="TOP"> <FONT SIZE=2><P>Net income</FONT></TD> <TD WIDTH="13%" VALIGN="TOP"> <FONT SIZE=2><P ALIGN="RIGHT">$1.05</FONT></TD> <TD WIDTH="13%" VALIGN="TOP"> <FONT SIZE=2><P ALIGN="RIGHT">$.98</FONT></TD> <TD WIDTH="14%" VALIGN="TOP"> <FONT SIZE=2><P ALIGN="RIGHT">$12.11</FONT></TD> <TD WIDTH="13%" VALIGN="TOP"> <FONT SIZE=2><P ALIGN="RIGHT">$1.83</FONT></TD> </TR> <TR><TD WIDTH="47%" VALIGN="TOP"> <FONT SIZE=2><P>Average shares outstanding:</FONT></TD> <TD WIDTH="13%" VALIGN="TOP"> <P> </TD> <TD WIDTH="13%" VALIGN="TOP"> <P> </TD> <TD WIDTH="14%" VALIGN="TOP"> <P> </TD> <TD WIDTH="13%" VALIGN="TOP"> <P> </TD> </TR> <TR><TD WIDTH="47%" VALIGN="TOP"> <FONT SIZE=2><P>	Basic</FONT></TD> <TD WIDTH="13%" VALIGN="TOP"> <FONT SIZE=2><P ALIGN="RIGHT">150,512,000</FONT></TD> <TD WIDTH="13%" VALIGN="TOP"> <FONT SIZE=2><P ALIGN="RIGHT">163,613,000</FONT></TD> <TD WIDTH="14%" VALIGN="TOP"> <FONT SIZE=2><P ALIGN="RIGHT">151,623,000</FONT></TD> <TD WIDTH="13%" VALIGN="TOP"> <FONT SIZE=2><P ALIGN="RIGHT">163,189,000</FONT></TD> </TR> <TR><TD WIDTH="47%" VALIGN="TOP"> <FONT SIZE=2><P>	Diluted</FONT></TD> <TD WIDTH="13%" VALIGN="TOP"> <FONT SIZE=2><P ALIGN="RIGHT">154,096,000</FONT></TD> <TD WIDTH="13%" VALIGN="TOP"> <FONT SIZE=2><P ALIGN="RIGHT">168,027,000</FONT></TD> <TD WIDTH="14%" VALIGN="TOP"> <FONT SIZE=2><P ALIGN="RIGHT">155,230,000</FONT></TD> <TD WIDTH="13%" VALIGN="TOP"> <FONT SIZE=2><P ALIGN="RIGHT">167,541,000</FONT></TD> </TR> <TR><TD WIDTH="47%" VALIGN="TOP"> <FONT SIZE=2><P>Dividends per share:</FONT></TD> <TD WIDTH="13%" VALIGN="TOP"> <P> </TD> <TD WIDTH="13%" VALIGN="TOP"> <P> </TD> <TD WIDTH="14%" VALIGN="TOP"> <P> </TD> <TD WIDTH="13%" VALIGN="TOP"> <P> </TD> </TR> <TR><TD WIDTH="47%" VALIGN="TOP"> <FONT SIZE=2><P>	$2.08 Preferred stock, Series A</FONT></TD> <TD WIDTH="13%" VALIGN="TOP"> <FONT SIZE=2><P ALIGN="RIGHT">$.52</FONT></TD> <TD WIDTH="13%" VALIGN="TOP"> <FONT SIZE=2><P ALIGN="RIGHT">$.52</FONT></TD> <TD WIDTH="14%" VALIGN="TOP"> <FONT SIZE=2><P ALIGN="RIGHT">$1.04</FONT></TD> <TD WIDTH="13%" VALIGN="TOP"> <FONT SIZE=2><P ALIGN="RIGHT">$1.04</FONT></TD> </TR> <TR><TD WIDTH="47%" VALIGN="TOP"> <FONT SIZE=2><P>	$1.40 Preferred stock, Series B</FONT></TD> <TD WIDTH="13%" VALIGN="TOP"> <FONT SIZE=2><P ALIGN="RIGHT">$.35</FONT></TD> <TD WIDTH="13%" VALIGN="TOP"> <FONT SIZE=2><P ALIGN="RIGHT">$.35</FONT></TD> <TD WIDTH="14%" VALIGN="TOP"> <FONT SIZE=2><P ALIGN="RIGHT">$.70</FONT></TD> <TD WIDTH="13%" VALIGN="TOP"> <FONT SIZE=2><P ALIGN="RIGHT">$.70</FONT></TD> </TR> <TR><TD WIDTH="47%" VALIGN="TOP"> <FONT SIZE=2><P>	Common stock</FONT></TD> <TD WIDTH="13%" VALIGN="TOP"> <FONT SIZE=2><P ALIGN="RIGHT">$.325</FONT></TD> <TD WIDTH="13%" VALIGN="TOP"> <FONT SIZE=2><P ALIGN="RIGHT">$.285</FONT></TD> <TD WIDTH="14%" VALIGN="TOP"> <FONT SIZE=2><P ALIGN="RIGHT">$.65</FONT></TD> <TD WIDTH="13%" VALIGN="TOP"> <FONT SIZE=2><P ALIGN="RIGHT">$.57</FONT></TD> </TR> </TABLE> <I><FONT SIZE=2><P>See notes to the condensed consolidated financial statements.</P> </I></FONT><P>Item 1.	<U>FINANCIAL STATEMENTS</U> (Continued)</P> <B><P ALIGN="CENTER">TEXTRON INC.<BR> Condensed Consolidated Balance Sheet (unaudited)</B><BR> (Dollars in millions)</P> <TABLE BORDER CELLSPACING=1 CELLPADDING=7 WIDTH=655> <TR><TD WIDTH="58%" VALIGN="TOP"> <P> </TD> <TD WIDTH="17%" VALIGN="TOP"> <P ALIGN="CENTER">July 3,<BR> 1999</TD> <TD WIDTH="6%" VALIGN="TOP"> <P> </TD> <TD WIDTH="18%" VALIGN="TOP"> <P ALIGN="CENTER">January 2,<BR> 1999</TD> </TR> <TR><TD WIDTH="58%" VALIGN="TOP"><DIR> <B><P>Assets</DIR> </B></TD> <TD WIDTH="17%" VALIGN="TOP"> <P> </TD> <TD WIDTH="6%" VALIGN="TOP"> <P> </TD> <TD WIDTH="18%" VALIGN="TOP"> <P> </TD> </TR> <TR><TD WIDTH="58%" VALIGN="TOP"> <B><P>Textron Manufacturing</B></TD> <TD WIDTH="17%" VALIGN="TOP"> <P> </TD> <TD WIDTH="6%" VALIGN="TOP"> <P> </TD> <TD WIDTH="18%" VALIGN="TOP"> <P> </TD> </TR> <TR><TD WIDTH="58%" VALIGN="TOP"> <P>Cash and cash equivalents</TD> <TD WIDTH="17%" VALIGN="TOP"> <P ALIGN="RIGHT">$246</TD> <TD WIDTH="6%" VALIGN="TOP"> <P> </TD> <TD WIDTH="18%" VALIGN="TOP"> <P ALIGN="RIGHT">$31</TD> </TR> <TR><TD WIDTH="58%" VALIGN="TOP"> <P>Commercial and U.S. government receivables - net</TD> <TD WIDTH="17%" VALIGN="TOP"> <P ALIGN="RIGHT">1,372</TD> <TD WIDTH="6%" VALIGN="TOP"> <P> </TD> <TD WIDTH="18%" VALIGN="TOP"> <P ALIGN="RIGHT">1,160</TD> </TR> <TR><TD WIDTH="58%" VALIGN="TOP"> <P>Inventories</TD> <TD WIDTH="17%" VALIGN="TOP"> <P ALIGN="RIGHT">1,828</TD> <TD WIDTH="6%" VALIGN="TOP"> <P> </TD> <TD WIDTH="18%" VALIGN="TOP"> <P ALIGN="RIGHT">1,640</TD> </TR> <TR><TD WIDTH="58%" VALIGN="TOP"> <P>Investment in discontinued operations</TD> <TD WIDTH="17%" VALIGN="TOP"> <P ALIGN="RIGHT">-</TD> <TD WIDTH="6%" VALIGN="TOP"> <P> </TD> <TD WIDTH="18%" VALIGN="TOP"> <P ALIGN="RIGHT">1,176</TD> </TR> <TR><TD WIDTH="58%" VALIGN="TOP"> <P>Other current assets</TD> <TD WIDTH="17%" VALIGN="TOP"> <P ALIGN="RIGHT">319</TD> <TD WIDTH="6%" VALIGN="TOP"> <P> </TD> <TD WIDTH="18%" VALIGN="TOP"> <P ALIGN="RIGHT">348</TD> </TR> <TR><TD WIDTH="58%" VALIGN="TOP"> <P>	Total current assets</TD> <TD WIDTH="17%" VALIGN="TOP"> <P ALIGN="RIGHT">3,765</TD> <TD WIDTH="6%" VALIGN="TOP"> <P> </TD> <TD WIDTH="18%" VALIGN="TOP"> <P ALIGN="RIGHT">4,355</TD> </TR> <TR><TD WIDTH="58%" VALIGN="TOP"> <P>Property, plant, and equipment, less accumulated<BR> 	depreciation of $2,009 and $1,874</TD> <TD WIDTH="17%" VALIGN="TOP"> <P ALIGN="RIGHT"><BR> 2,294</TD> <TD WIDTH="6%" VALIGN="TOP"> <P> </TD> <TD WIDTH="18%" VALIGN="TOP"> <P ALIGN="RIGHT"><BR> 2,185</TD> </TR> <TR><TD WIDTH="58%" VALIGN="TOP"> <P>Goodwill, less accumulated amortization of $422 and<BR> 	$388</TD> <TD WIDTH="17%" VALIGN="TOP"> <P ALIGN="RIGHT"><BR> 2,205</TD> <TD WIDTH="6%" VALIGN="TOP"> <P> </TD> <TD WIDTH="18%" VALIGN="TOP"> <P ALIGN="RIGHT"><BR> 2,119</TD> </TR> <TR><TD WIDTH="58%" VALIGN="TOP"> <P>Other (including net deferred income taxes)</TD> <TD WIDTH="17%" VALIGN="TOP"> <P ALIGN="RIGHT">1,391</TD> <TD WIDTH="6%" VALIGN="TOP"> <P> </TD> <TD WIDTH="18%" VALIGN="TOP"> <P ALIGN="RIGHT">1,277</TD> </TR> <TR><TD WIDTH="58%" VALIGN="TOP"> <P>	Total Textron Manufacturing assets</TD> <TD WIDTH="17%" VALIGN="TOP"> <P ALIGN="RIGHT">9,655</TD> <TD WIDTH="6%" VALIGN="TOP"> <P> </TD> <TD WIDTH="18%" VALIGN="TOP"> <P ALIGN="RIGHT">9,936</TD> </TR> <TR><TD WIDTH="58%" VALIGN="TOP"> <B><P>Textron Finance</B></TD> <TD WIDTH="17%" VALIGN="TOP"> <P> </TD> <TD WIDTH="6%" VALIGN="TOP"> <P> </TD> <TD WIDTH="18%" VALIGN="TOP"> <P> </TD> </TR> <TR><TD WIDTH="58%" VALIGN="TOP"> <P>Cash</TD> <TD WIDTH="17%" VALIGN="TOP"> <P ALIGN="RIGHT">12</TD> <TD WIDTH="6%" VALIGN="TOP"> <P> </TD> <TD WIDTH="18%" VALIGN="TOP"> <P ALIGN="RIGHT">22</TD> </TR> <TR><TD WIDTH="58%" VALIGN="TOP"> <P>Finance receivables - net</TD> <TD WIDTH="17%" VALIGN="TOP"> <P ALIGN="RIGHT">3,900</TD> <TD WIDTH="6%" VALIGN="TOP"> <P> </TD> <TD WIDTH="18%" VALIGN="TOP"> <P ALIGN="RIGHT">3,528</TD> </TR> <TR><TD WIDTH="58%" VALIGN="TOP"> <P>Other assets</TD> <TD WIDTH="17%" VALIGN="TOP"> <P ALIGN="RIGHT">251</TD> <TD WIDTH="6%" VALIGN="TOP"> <P> </TD> <TD WIDTH="18%" VALIGN="TOP"> <P ALIGN="RIGHT">235</TD> </TR> <TR><TD WIDTH="58%" VALIGN="TOP"> <P>	Total Textron Finance assets</TD> <TD WIDTH="17%" VALIGN="TOP"> <P ALIGN="RIGHT">4,163</TD> <TD WIDTH="6%" VALIGN="TOP"> <P> </TD> <TD WIDTH="18%" VALIGN="TOP"> <P ALIGN="RIGHT">3,785</TD> </TR> <TR><TD WIDTH="58%" VALIGN="TOP"> <P>	Total assets</TD> <TD WIDTH="17%" VALIGN="TOP"> <P ALIGN="RIGHT">$13,818</TD> <TD WIDTH="6%" VALIGN="TOP"> <P> </TD> <TD WIDTH="18%" VALIGN="TOP"> <P ALIGN="RIGHT">$13,721</TD> </TR> <TR><TD WIDTH="58%" VALIGN="TOP"> <B><P>Liabilities and shareholders' equity</B></TD> <TD WIDTH="17%" VALIGN="TOP"> <P> </TD> <TD WIDTH="6%" VALIGN="TOP"> <P> </TD> <TD WIDTH="18%" VALIGN="TOP"> <P> </TD> </TR> <TR><TD WIDTH="58%" VALIGN="TOP"> <B><P>Liabilities</B></TD> <TD WIDTH="17%" VALIGN="TOP"> <P> </TD> <TD WIDTH="6%" VALIGN="TOP"> <P> </TD> <TD WIDTH="18%" VALIGN="TOP"> <P> </TD> </TR> <TR><TD WIDTH="58%" VALIGN="TOP"> <B><P>Textron Manufacturing</B></TD> <TD WIDTH="17%" VALIGN="TOP"> <P> </TD> <TD WIDTH="6%" VALIGN="TOP"> <P> </TD> <TD WIDTH="18%" VALIGN="TOP"> <P> </TD> </TR> <TR><TD WIDTH="58%" VALIGN="TOP"> <P>Current portion of long-term debt and short-term debt</TD> <TD WIDTH="17%" VALIGN="TOP"> <P ALIGN="RIGHT">$218</TD> <TD WIDTH="6%" VALIGN="TOP"> <P> </TD> <TD WIDTH="18%" VALIGN="TOP"> <P ALIGN="RIGHT">$1,735</TD> </TR> <TR><TD WIDTH="58%" VALIGN="TOP"> <P>Accounts payable</TD> <TD WIDTH="17%" VALIGN="TOP"> <P ALIGN="RIGHT">1,069</TD> <TD WIDTH="6%" VALIGN="TOP"> <P> </TD> <TD WIDTH="18%" VALIGN="TOP"> <P ALIGN="RIGHT">1,010</TD> </TR> <TR><TD WIDTH="58%" VALIGN="TOP"> <P>Income taxes payable</TD> <TD WIDTH="17%" VALIGN="TOP"> <P ALIGN="RIGHT">529</TD> <TD WIDTH="6%" VALIGN="TOP"> <P> </TD> <TD WIDTH="18%" VALIGN="TOP"> <P ALIGN="RIGHT">76</TD> </TR> <TR><TD WIDTH="58%" VALIGN="TOP"> <P>Other accrued liabilities</TD> <TD WIDTH="17%" VALIGN="TOP"> <P ALIGN="RIGHT">1,089</TD> <TD WIDTH="6%" VALIGN="TOP"> <P> </TD> <TD WIDTH="18%" VALIGN="TOP"> <P ALIGN="RIGHT">1,098</TD> </TR> <TR><TD WIDTH="58%" VALIGN="TOP"> <P>	Total current liabilities</TD> <TD WIDTH="17%" VALIGN="TOP"> <P ALIGN="RIGHT">2,905</TD> <TD WIDTH="6%" VALIGN="TOP"> <P> </TD> <TD WIDTH="18%" VALIGN="TOP"> <P ALIGN="RIGHT">3,919</TD> </TR> <TR><TD WIDTH="58%" VALIGN="TOP"> <P>Accrued postretirement benefits other than pensions</TD> <TD WIDTH="17%" VALIGN="TOP"> <P ALIGN="RIGHT">755</TD> <TD WIDTH="6%" VALIGN="TOP"> <P> </TD> <TD WIDTH="18%" VALIGN="TOP"> <P ALIGN="RIGHT">762</TD> </TR> <TR><TD WIDTH="58%" VALIGN="TOP"> <P>Other liabilities</TD> <TD WIDTH="17%" VALIGN="TOP"> <P ALIGN="RIGHT">1,339</TD> <TD WIDTH="6%" VALIGN="TOP"> <P> </TD> <TD WIDTH="18%" VALIGN="TOP"> <P ALIGN="RIGHT">1,367</TD> </TR> <TR><TD WIDTH="58%" VALIGN="TOP"> <P>Long-term debt</TD> <TD WIDTH="17%" VALIGN="TOP"> <P ALIGN="RIGHT">292</TD> <TD WIDTH="6%" VALIGN="TOP"> <P> </TD> <TD WIDTH="18%" VALIGN="TOP"> <P ALIGN="RIGHT">880</TD> </TR> <TR><TD WIDTH="58%" VALIGN="TOP"> <P>	Total Textron Manufacturing liabilities</TD> <TD WIDTH="17%" VALIGN="TOP"> <P ALIGN="RIGHT">5,291</TD> <TD WIDTH="6%" VALIGN="TOP"> <P> </TD> <TD WIDTH="18%" VALIGN="TOP"> <P ALIGN="RIGHT">6,928</TD> </TR> <TR><TD WIDTH="58%" VALIGN="TOP"> <B><P>Textron Finance</B></TD> <TD WIDTH="17%" VALIGN="TOP"> <P> </TD> <TD WIDTH="6%" VALIGN="TOP"> <P> </TD> <TD WIDTH="18%" VALIGN="TOP"> <P> </TD> </TR> <TR><TD WIDTH="58%" VALIGN="TOP"> <P>Other liabilities</TD> <TD WIDTH="17%" VALIGN="TOP"> <P ALIGN="RIGHT">186</TD> <TD WIDTH="6%" VALIGN="TOP"> <P> </TD> <TD WIDTH="18%" VALIGN="TOP"> <P ALIGN="RIGHT">162</TD> </TR> <TR><TD WIDTH="58%" VALIGN="TOP"> <P>Deferred income taxes</TD> <TD WIDTH="17%" VALIGN="TOP"> <P ALIGN="RIGHT">330</TD> <TD WIDTH="6%" VALIGN="TOP"> <P> </TD> <TD WIDTH="18%" VALIGN="TOP"> <P ALIGN="RIGHT">322</TD> </TR> <TR><TD WIDTH="58%" VALIGN="TOP"> <P>Debt</TD> <TD WIDTH="17%" VALIGN="TOP"> <P ALIGN="RIGHT">3,151</TD> <TD WIDTH="6%" VALIGN="TOP"> <P> </TD> <TD WIDTH="18%" VALIGN="TOP"> <P ALIGN="RIGHT">2,829</TD> </TR> <TR><TD WIDTH="58%" VALIGN="TOP"> <P>	Total Textron Finance liabilities</TD> <TD WIDTH="17%" VALIGN="TOP"> <P ALIGN="RIGHT">3,667</TD> <TD WIDTH="6%" VALIGN="TOP"> <P> </TD> <TD WIDTH="18%" VALIGN="TOP"> <P ALIGN="RIGHT">3,313</TD> </TR> <TR><TD WIDTH="58%" VALIGN="TOP"> <P>	Total liabilities</TD> <TD WIDTH="17%" VALIGN="TOP"> <P ALIGN="RIGHT">8,958</TD> <TD WIDTH="6%" VALIGN="TOP"> <P> </TD> <TD WIDTH="18%" VALIGN="TOP"> <P ALIGN="RIGHT">10,241</TD> </TR> <TR><TD WIDTH="58%" VALIGN="TOP"> <B><P>Textron - obligated mandatorily redeemable<BR> 	preferred securities of subsidiary trust holding<BR> 	solely Textron junior subordinated debt securities</B></TD> <TD WIDTH="17%" VALIGN="TOP"> <P ALIGN="RIGHT"><BR> <BR> 483</TD> <TD WIDTH="6%" VALIGN="TOP"> <P> </TD> <TD WIDTH="18%" VALIGN="TOP"> <P ALIGN="RIGHT"><BR> <BR> 483</TD> </TR> <TR><TD WIDTH="58%" VALIGN="TOP"> <B><P>Shareholders' equity</B></TD> <TD WIDTH="17%" VALIGN="TOP"> <P> </TD> <TD WIDTH="6%" VALIGN="TOP"> <P> </TD> <TD WIDTH="18%" VALIGN="TOP"> <P> </TD> </TR> <TR><TD WIDTH="58%" VALIGN="TOP"> <P>Capital stock:</TD> <TD WIDTH="17%" VALIGN="TOP"> <P> </TD> <TD WIDTH="6%" VALIGN="TOP"> <P> </TD> <TD WIDTH="18%" VALIGN="TOP"> <P> </TD> </TR> <TR><TD WIDTH="58%" VALIGN="TOP"> <P>	Preferred stock</TD> <TD WIDTH="17%" VALIGN="TOP"> <P ALIGN="RIGHT">12</TD> <TD WIDTH="6%" VALIGN="TOP"> <P> </TD> <TD WIDTH="18%" VALIGN="TOP"> <P ALIGN="RIGHT">13</TD> </TR> <TR><TD WIDTH="58%" VALIGN="TOP"> <P>	Common stock</TD> <TD WIDTH="17%" VALIGN="TOP"> <P ALIGN="RIGHT">24</TD> <TD WIDTH="6%" VALIGN="TOP"> <P> </TD> <TD WIDTH="18%" VALIGN="TOP"> <P ALIGN="RIGHT">24</TD> </TR> <TR><TD WIDTH="58%" VALIGN="TOP"> <P>Capital surplus</TD> <TD WIDTH="17%" VALIGN="TOP"> <P ALIGN="RIGHT">982</TD> <TD WIDTH="6%" VALIGN="TOP"> <P> </TD> <TD WIDTH="18%" VALIGN="TOP"> <P ALIGN="RIGHT">931</TD> </TR> <TR><TD WIDTH="58%" VALIGN="TOP"> <P>Retained earnings</TD> <TD WIDTH="17%" VALIGN="TOP"> <P ALIGN="RIGHT">5,567</TD> <TD WIDTH="6%" VALIGN="TOP"> <P> </TD> <TD WIDTH="18%" VALIGN="TOP"> <P ALIGN="RIGHT">3,786</TD> </TR> <TR><TD WIDTH="58%" VALIGN="TOP"> <P>Accumulated other comprehensive income (loss)</TD> <TD WIDTH="17%" VALIGN="TOP"> <P ALIGN="RIGHT">(86)</TD> <TD WIDTH="6%" VALIGN="TOP"> <P> </TD> <TD WIDTH="18%" VALIGN="TOP"> <P ALIGN="RIGHT">(96)</TD> </TR> <TR><TD WIDTH="58%" VALIGN="TOP"> <P> </TD> <TD WIDTH="17%" VALIGN="TOP"> <P ALIGN="RIGHT">6,499</TD> <TD WIDTH="6%" VALIGN="TOP"> <P> </TD> <TD WIDTH="18%" VALIGN="TOP"> <P ALIGN="RIGHT">4,658</TD> </TR> <TR><TD WIDTH="58%" VALIGN="TOP"> <P>	Less cost of treasury shares</TD> <TD WIDTH="17%" VALIGN="TOP"> <P ALIGN="RIGHT">2,122</TD> <TD WIDTH="6%" VALIGN="TOP"> <P> </TD> <TD WIDTH="18%" VALIGN="TOP"> <P ALIGN="RIGHT">1,661</TD> </TR> <TR><TD WIDTH="58%" VALIGN="TOP"> <P>	Total shareholders' equity</TD> <TD WIDTH="17%" VALIGN="TOP"> <P ALIGN="RIGHT">4,377</TD> <TD WIDTH="6%" VALIGN="TOP"> <P> </TD> <TD WIDTH="18%" VALIGN="TOP"> <P ALIGN="RIGHT">2,997</TD> </TR> <TR><TD WIDTH="58%" VALIGN="TOP"> <P>	Total liabilities and shareholders' equity</TD> <TD WIDTH="17%" VALIGN="TOP"> <P ALIGN="RIGHT">$13,818</TD> <TD WIDTH="6%" VALIGN="TOP"> <P> </TD> <TD WIDTH="18%" VALIGN="TOP"> <P ALIGN="RIGHT">$13,721</TD> </TR> <TR><TD WIDTH="58%" VALIGN="TOP"> <P>Common shares outstanding</TD> <TD WIDTH="17%" VALIGN="TOP"> <P ALIGN="RIGHT">150,109,000</TD> <TD WIDTH="6%" VALIGN="TOP"> <P> </TD> <TD WIDTH="18%" VALIGN="TOP"> <P ALIGN="RIGHT">154,742,000</TD> </TR> </TABLE> <DIR> <I><P>See notes to condensed consolidated financial statements</P></DIR> </I><P ALIGN="JUSTIFY">Item 1.	<U>FINANCIAL STATEMENTS</U> (Continued)</P> <B><P ALIGN="CENTER">TEXTRON INC.<BR> Condensed Consolidated Statement of Cash Flows (Unaudited)<BR> </B>(In millions)</P> <TABLE BORDER CELLSPACING=1 CELLPADDING=7 WIDTH=757> <TR><TD WIDTH="67%" VALIGN="TOP"> <P> </TD> <TD WIDTH="33%" VALIGN="TOP" COLSPAN=3> <P ALIGN="CENTER">Six Months Ended</TD> </TR> <TR><TD WIDTH="67%" VALIGN="TOP"> <P> </TD> <TD WIDTH="15%" VALIGN="TOP"> <P ALIGN="CENTER">July 3,<BR> 1999</TD> <TD WIDTH="3%" VALIGN="TOP"> <P> </TD> <TD WIDTH="15%" VALIGN="TOP"> <P ALIGN="CENTER">July 4,<BR> 1998</TD> </TR> <TR><TD WIDTH="67%" VALIGN="TOP"> <B><P>Cash flows from operating activities:</B></TD> <TD WIDTH="15%" VALIGN="TOP"> <P> </TD> <TD WIDTH="3%" VALIGN="TOP"> <P> </TD> <TD WIDTH="15%" VALIGN="TOP"> <P> </TD> </TR> <TR><TD WIDTH="67%" VALIGN="TOP"> <P>Income from continuing operations</TD> <TD WIDTH="15%" VALIGN="TOP"> <P ALIGN="RIGHT">$307</TD> <TD WIDTH="3%" VALIGN="TOP"> <P> </TD> <TD WIDTH="15%" VALIGN="TOP"> <P ALIGN="RIGHT">$215</TD> </TR> <TR><TD WIDTH="67%" VALIGN="TOP"> <P>Adjustments to reconcile income from continuing operations to<BR> 	net cash provided by operating activities:</TD> <TD WIDTH="15%" VALIGN="TOP"> <P> </TD> <TD WIDTH="3%" VALIGN="TOP"> <P> </TD> <TD WIDTH="15%" VALIGN="TOP"> <P> </TD> </TR> <TR><TD WIDTH="67%" VALIGN="TOP"> <P>		Depreciation</TD> <TD WIDTH="15%" VALIGN="TOP"> <P ALIGN="RIGHT">167</TD> <TD WIDTH="3%" VALIGN="TOP"> <P> </TD> <TD WIDTH="15%" VALIGN="TOP"> <P ALIGN="RIGHT">137</TD> </TR> <TR><TD WIDTH="67%" VALIGN="TOP"> <P>		Amortization</TD> <TD WIDTH="15%" VALIGN="TOP"> <P ALIGN="RIGHT">40</TD> <TD WIDTH="3%" VALIGN="TOP"> <P> </TD> <TD WIDTH="15%" VALIGN="TOP"> <P ALIGN="RIGHT">31</TD> </TR> <TR><TD WIDTH="67%" VALIGN="TOP"> <P>		Gain on sale of division</TD> <TD WIDTH="15%" VALIGN="TOP"> <P ALIGN="RIGHT">-</TD> <TD WIDTH="3%" VALIGN="TOP"> <P> </TD> <TD WIDTH="15%" VALIGN="TOP"> <P ALIGN="RIGHT">(97)</TD> </TR> <TR><TD WIDTH="67%" VALIGN="TOP"> <P>		Special charges</TD> <TD WIDTH="15%" VALIGN="TOP"> <P ALIGN="RIGHT">2</TD> <TD WIDTH="3%" VALIGN="TOP"> <P> </TD> <TD WIDTH="15%" VALIGN="TOP"> <P ALIGN="RIGHT">87</TD> </TR> <TR><TD WIDTH="67%" VALIGN="TOP"> <P>		Provision for losses on receivables</TD> <TD WIDTH="15%" VALIGN="TOP"> <P ALIGN="RIGHT">12</TD> <TD WIDTH="3%" VALIGN="TOP"> <P> </TD> <TD WIDTH="15%" VALIGN="TOP"> <P ALIGN="RIGHT">12</TD> </TR> <TR><TD WIDTH="67%" VALIGN="TOP"> <P>		Dividends from discontinued operations</TD> <TD WIDTH="15%" VALIGN="TOP"> <P ALIGN="RIGHT">-</TD> <TD WIDTH="3%" VALIGN="TOP"> <P> </TD> <TD WIDTH="15%" VALIGN="TOP"> <P ALIGN="RIGHT">115</TD> </TR> <TR><TD WIDTH="67%" VALIGN="TOP"> <P>		Deferred income taxes</TD> <TD WIDTH="15%" VALIGN="TOP"> <P ALIGN="RIGHT">35</TD> <TD WIDTH="3%" VALIGN="TOP"> <P> </TD> <TD WIDTH="15%" VALIGN="TOP"> <P ALIGN="RIGHT">11</TD> </TR> <TR><TD WIDTH="67%" VALIGN="TOP"> <P>		Changes in assets and liabilities excluding those related to acquisitions<BR> 			and divestitures:</TD> <TD WIDTH="15%" VALIGN="TOP"> <P> </TD> <TD WIDTH="3%" VALIGN="TOP"> <P> </TD> <TD WIDTH="15%" VALIGN="TOP"> <P> </TD> </TR> <TR><TD WIDTH="67%" VALIGN="TOP"> <P>				(Increase) in commercial and U.S. government receivables</TD> <TD WIDTH="15%" VALIGN="TOP"> <P ALIGN="RIGHT">(84)</TD> <TD WIDTH="3%" VALIGN="TOP"> <P> </TD> <TD WIDTH="15%" VALIGN="TOP"> <P ALIGN="RIGHT">(113)</TD> </TR> <TR><TD WIDTH="67%" VALIGN="TOP"> <P>				(Increase) in inventories</TD> <TD WIDTH="15%" VALIGN="TOP"> <P ALIGN="RIGHT">(103)</TD> <TD WIDTH="3%" VALIGN="TOP"> <P> </TD> <TD WIDTH="15%" VALIGN="TOP"> <P ALIGN="RIGHT">(198)</TD> </TR> <TR><TD WIDTH="67%" VALIGN="TOP"> <P>				(Increase) in other assets</TD> <TD WIDTH="15%" VALIGN="TOP"> <P ALIGN="RIGHT">(151)</TD> <TD WIDTH="3%" VALIGN="TOP"> <P> </TD> <TD WIDTH="15%" VALIGN="TOP"> <P ALIGN="RIGHT">(126)</TD> </TR> <TR><TD WIDTH="67%" VALIGN="TOP"> <P>				Increase (decrease) in accounts payable</TD> <TD WIDTH="15%" VALIGN="TOP"> <P ALIGN="RIGHT">12</TD> <TD WIDTH="3%" VALIGN="TOP"> <P> </TD> <TD WIDTH="15%" VALIGN="TOP"> <P ALIGN="RIGHT">(53)</TD> </TR> <TR><TD WIDTH="67%" VALIGN="TOP"> <P>				(Decrease) increase in accrued liabilities</TD> <TD WIDTH="15%" VALIGN="TOP"> <P ALIGN="RIGHT">(114)</TD> <TD WIDTH="3%" VALIGN="TOP"> <P> </TD> <TD WIDTH="15%" VALIGN="TOP"> <P ALIGN="RIGHT">189</TD> </TR> <TR><TD WIDTH="67%" VALIGN="TOP"> <P>	Other - net</TD> <TD WIDTH="15%" VALIGN="TOP"> <P ALIGN="RIGHT">5</TD> <TD WIDTH="3%" VALIGN="TOP"> <P> </TD> <TD WIDTH="15%" VALIGN="TOP"> <P ALIGN="RIGHT">(27)</TD> </TR> <TR><TD WIDTH="67%" VALIGN="TOP"> <P>	Net cash provided by operating activities</TD> <TD WIDTH="15%" VALIGN="TOP"> <P ALIGN="RIGHT">128</TD> <TD WIDTH="3%" VALIGN="TOP"> <P> </TD> <TD WIDTH="15%" VALIGN="TOP"> <P ALIGN="RIGHT">183</TD> </TR> <TR><TD WIDTH="67%" VALIGN="TOP"> <B><P>Cash flows from investing activities:</B></TD> <TD WIDTH="15%" VALIGN="TOP"> <P> </TD> <TD WIDTH="3%" VALIGN="TOP"> <P> </TD> <TD WIDTH="15%" VALIGN="TOP"> <P> </TD> </TR> <TR><TD WIDTH="67%" VALIGN="TOP"> <P>Finance receivables:</TD> <TD WIDTH="15%" VALIGN="TOP"> <P> </TD> <TD WIDTH="3%" VALIGN="TOP"> <P> </TD> <TD WIDTH="15%" VALIGN="TOP"> <P> </TD> </TR> <TR><TD WIDTH="67%" VALIGN="TOP"> <P>	Originated or purchased</TD> <TD WIDTH="15%" VALIGN="TOP"> <P ALIGN="RIGHT">(2,130)</TD> <TD WIDTH="3%" VALIGN="TOP"> <P> </TD> <TD WIDTH="15%" VALIGN="TOP"> <P ALIGN="RIGHT">(1,857)</TD> </TR> <TR><TD WIDTH="67%" VALIGN="TOP"> <P>	Repaid or sold</TD> <TD WIDTH="15%" VALIGN="TOP"> <P ALIGN="RIGHT">1,838</TD> <TD WIDTH="3%" VALIGN="TOP"> <P> </TD> <TD WIDTH="15%" VALIGN="TOP"> <P ALIGN="RIGHT">1,741</TD> </TR> <TR><TD WIDTH="67%" VALIGN="TOP"> <P>Cash used in acquisitions</TD> <TD WIDTH="15%" VALIGN="TOP"> <P ALIGN="RIGHT">(295)</TD> <TD WIDTH="3%" VALIGN="TOP"> <P> </TD> <TD WIDTH="15%" VALIGN="TOP"> <P ALIGN="RIGHT">(441)</TD> </TR> <TR><TD WIDTH="67%" VALIGN="TOP"> <P>Investments in joint ventures</TD> <TD WIDTH="15%" VALIGN="TOP"> <P ALIGN="RIGHT">(41)</TD> <TD WIDTH="3%" VALIGN="TOP"> <P> </TD> <TD WIDTH="15%" VALIGN="TOP"> <P ALIGN="RIGHT">-</TD> </TR> <TR><TD WIDTH="67%" VALIGN="TOP"> <P>Net proceeds from dispositions</TD> <TD WIDTH="15%" VALIGN="TOP"> <P ALIGN="RIGHT">3,376</TD> <TD WIDTH="3%" VALIGN="TOP"> <P> </TD> <TD WIDTH="15%" VALIGN="TOP"> <P ALIGN="RIGHT">160</TD> </TR> <TR><TD WIDTH="67%" VALIGN="TOP"> <P>Capital expenditures</TD> <TD WIDTH="15%" VALIGN="TOP"> <P ALIGN="RIGHT">(222)</TD> <TD WIDTH="3%" VALIGN="TOP"> <P> </TD> <TD WIDTH="15%" VALIGN="TOP"> <P ALIGN="RIGHT">(196)</TD> </TR> <TR><TD WIDTH="67%" VALIGN="TOP"> <P>Other investing activities - net</TD> <TD WIDTH="15%" VALIGN="TOP"> <P ALIGN="RIGHT">17</TD> <TD WIDTH="3%" VALIGN="TOP"> <P> </TD> <TD WIDTH="15%" VALIGN="TOP"> <P ALIGN="RIGHT">11</TD> </TR> <TR><TD WIDTH="67%" VALIGN="TOP"> <P>	Net cash provided (used) by investing activities</TD> <TD WIDTH="15%" VALIGN="TOP"> <P ALIGN="RIGHT">2,543</TD> <TD WIDTH="3%" VALIGN="TOP"> <P> </TD> <TD WIDTH="15%" VALIGN="TOP"> <P ALIGN="RIGHT">(582)</TD> </TR> <TR><TD WIDTH="67%" VALIGN="TOP"> <B><P>Cash flows from financing activities:</B></TD> <TD WIDTH="15%" VALIGN="TOP"> <P> </TD> <TD WIDTH="3%" VALIGN="TOP"> <P> </TD> <TD WIDTH="15%" VALIGN="TOP"> <P> </TD> </TR> <TR><TD WIDTH="67%" VALIGN="TOP"> <P>(Decrease) increase in short-term debt</TD> <TD WIDTH="15%" VALIGN="TOP"> <P ALIGN="RIGHT">(1,717)</TD> <TD WIDTH="3%" VALIGN="TOP"> <P> </TD> <TD WIDTH="15%" VALIGN="TOP"> <P ALIGN="RIGHT">561</TD> </TR> <TR><TD WIDTH="67%" VALIGN="TOP"> <P>Proceeds from issuance of long-term debt</TD> <TD WIDTH="15%" VALIGN="TOP"> <P ALIGN="RIGHT">660</TD> <TD WIDTH="3%" VALIGN="TOP"> <P> </TD> <TD WIDTH="15%" VALIGN="TOP"> <P ALIGN="RIGHT">310</TD> </TR> <TR><TD WIDTH="67%" VALIGN="TOP"> <P>Principal payments and retirements on long-term debt</TD> <TD WIDTH="15%" VALIGN="TOP"> <P ALIGN="RIGHT">(834)</TD> <TD WIDTH="3%" VALIGN="TOP"> <P> </TD> <TD WIDTH="15%" VALIGN="TOP"> <P ALIGN="RIGHT">(361)</TD> </TR> <TR><TD WIDTH="67%" VALIGN="TOP"> <P>Proceeds from exercise of stock options</TD> <TD WIDTH="15%" VALIGN="TOP"> <P ALIGN="RIGHT">43</TD> <TD WIDTH="3%" VALIGN="TOP"> <P> </TD> <TD WIDTH="15%" VALIGN="TOP"> <P ALIGN="RIGHT">39</TD> </TR> <TR><TD WIDTH="67%" VALIGN="TOP"> <P>Purchases of Textron common stock</TD> <TD WIDTH="15%" VALIGN="TOP"> <P ALIGN="RIGHT">(478)</TD> <TD WIDTH="3%" VALIGN="TOP"> <P> </TD> <TD WIDTH="15%" VALIGN="TOP"> <P ALIGN="RIGHT">-</TD> </TR> <TR><TD WIDTH="67%" VALIGN="TOP"> <P>Dividends paid</TD> <TD WIDTH="15%" VALIGN="TOP"> <P ALIGN="RIGHT">(140)</TD> <TD WIDTH="3%" VALIGN="TOP"> <P> </TD> <TD WIDTH="15%" VALIGN="TOP"> <P ALIGN="RIGHT">(93)</TD> </TR> <TR><TD WIDTH="67%" VALIGN="TOP"> <P>	Net cash (used) provided by financing activities</TD> <TD WIDTH="15%" VALIGN="TOP"> <P ALIGN="RIGHT">(2,466)</TD> <TD WIDTH="3%" VALIGN="TOP"> <P> </TD> <TD WIDTH="15%" VALIGN="TOP"> <P ALIGN="RIGHT">456</TD> </TR> <TR><TD WIDTH="67%" VALIGN="TOP"> <B><P>Net increase in cash and cash equivalents</B></TD> <TD WIDTH="15%" VALIGN="TOP"> <P ALIGN="RIGHT">205</TD> <TD WIDTH="3%" VALIGN="TOP"> <P> </TD> <TD WIDTH="15%" VALIGN="TOP"> <P ALIGN="RIGHT">57</TD> </TR> <TR><TD WIDTH="67%" VALIGN="TOP"> <P>Cash and cash equivalents at beginning of period</TD> <TD WIDTH="15%" VALIGN="TOP"> <P ALIGN="RIGHT">53</TD> <TD WIDTH="3%" VALIGN="TOP"> <P> </TD> <TD WIDTH="15%" VALIGN="TOP"> <P ALIGN="RIGHT">43</TD> </TR> <TR><TD WIDTH="67%" VALIGN="TOP"> <P>Cash and cash equivalents at end of period</TD> <TD WIDTH="15%" VALIGN="TOP"> <P ALIGN="RIGHT">$258</TD> <TD WIDTH="3%" VALIGN="TOP"> <P> </TD> <TD WIDTH="15%" VALIGN="TOP"> <P ALIGN="RIGHT">$100</TD> </TR> </TABLE> <I><P ALIGN="JUSTIFY">See notes to condensed consolidated financial statements.</P> </I><B><P ALIGN="CENTER">TEXTRON INC.</P> </B><P ALIGN="CENTER">Notes to Condensed Consolidated Financial Statements (unaudited)</P> <P ALIGN="CENTER"> </P> <B><P>Note 1:	Basis of presentation</P><DIR> <DIR> <DIR> </B><P ALIGN="JUSTIFY">The financial statements should be read in conjunction with the financial statements <BR> included in Textron's Annual Report on Form 10-K for the year ended January 2, <BR> 1999. The financial statements reflect all adjustments (consisting only of normal <BR> recurring adjustments) which are, in the opinion of management, necessary for a fair <BR> presentation of Textron's consolidated financial position at July 3, 1999, and its <BR> consolidated results of operations and cash flows for each of the respective three and <BR> six month periods ended July 3, 1999 and July 4, 1998. Certain prior year balances <BR> have been reclassified to conform to the current year presentation. Consistent with <BR> prior periods, Textron Finance's second quarter ended on June 30, 1999.</P></DIR> </DIR> </DIR> <B><P ALIGN="JUSTIFY">Note 2:	Disposition</P><DIR> <DIR> <DIR> </B><P ALIGN="JUSTIFY">On August 11, 1998, Textron announced that it had reached an agreement to sell <BR> Avco Financial Services (AFS) to Associates First Capital Corporation for $3.9 <BR> billion in cash. The sale was completed on January 6, 1999. Net after-tax proceeds <BR> are expected to approximate $2.9 billion, resulting in an after-tax gain of $1.6 <BR> billion. Textron has presented AFS as a discontinued operation in these financial <BR> statements.</P></DIR> </DIR> </DIR> <B><P ALIGN="JUSTIFY">Note 3:	Extraordinary Loss from Debt Retirement</P><DIR> <DIR> <DIR> </B><P ALIGN="JUSTIFY">During the first quarter of 1999, Textron retired $168 million of 6.625% debentures <BR> originally due 2007, $165 million of 8.75% debentures originally due 2022, $146 <BR> million of medium term notes with interest rates ranging from 9.375% to 10.01% <BR> and other debt totaling $74 million with interest rates ranging from 3.5% to 10.04%. <BR> As a result of these transactions, Textron recorded an after-tax loss of $43 million, <BR> which has been reflected in the condensed consolidated statement of income as an <BR> extraordinary item.</P></DIR> </DIR> </DIR> <B><P ALIGN="JUSTIFY">Note 4:	Earnings per Share</P><DIR> <DIR> <DIR> </B><P ALIGN="JUSTIFY">FAS 128 requires companies to present basic and diluted earnings per share <BR> amounts. The dilutive effect of stock options was 3,607,000 and 4,352,000 shares <BR> for the six month periods ending July 3, 1999 and July 4, 1998, respectively. <BR> Income available to common shareholders used to calculate both basic and diluted <BR> earnings per share approximated net income for both periods.</P></DIR> </DIR> </DIR> <B><P ALIGN="JUSTIFY">Note 5:	Cash and Cash Equivalents</P><DIR> <DIR> <DIR> </B><P ALIGN="JUSTIFY">Cash and cash equivalents consist of cash and short-term, highly liquid securities <BR> with original maturities of ninety days or less.</P> <P ALIGN="JUSTIFY"> </P></DIR> </DIR> </DIR> <B><P>Note 6:	Inventories</P></B> <TABLE BORDER CELLSPACING=1 WIDTH=665> <TR><TD WIDTH="12%" VALIGN="TOP"> <P> </TD> <TD WIDTH="51%" VALIGN="TOP"> <P> </TD> <TD WIDTH="17%" VALIGN="TOP"> <P ALIGN="CENTER">July 3,<BR> 1999</TD> <TD WIDTH="4%" VALIGN="TOP"> <P> </TD> <TD WIDTH="16%" VALIGN="TOP"> <P ALIGN="CENTER">January 2,<BR> 1999</TD> </TR> <TR><TD WIDTH="12%" VALIGN="TOP"> <P> </TD> <TD WIDTH="51%" VALIGN="TOP"> <P> </TD> <TD WIDTH="37%" VALIGN="TOP" COLSPAN=3> <P ALIGN="CENTER">(In millions)</TD> </TR> <TR><TD WIDTH="12%" VALIGN="TOP"> <P> </TD> <TD WIDTH="51%" VALIGN="TOP"> <P>Finished goods </TD> <TD WIDTH="17%" VALIGN="TOP"> <P ALIGN="RIGHT">$608</TD> <TD WIDTH="4%" VALIGN="TOP"> <P> </TD> <TD WIDTH="16%" VALIGN="TOP"> <P ALIGN="RIGHT">$483</TD> </TR> <TR><TD WIDTH="12%" VALIGN="TOP"> <P> </TD> <TD WIDTH="51%" VALIGN="TOP"> <P>Work in process </TD> <TD WIDTH="17%" VALIGN="TOP"> <P ALIGN="RIGHT">994</TD> <TD WIDTH="4%" VALIGN="TOP"> <P> </TD> <TD WIDTH="16%" VALIGN="TOP"> <P ALIGN="RIGHT">878</TD> </TR> <TR><TD WIDTH="12%" VALIGN="TOP"> <P> </TD> <TD WIDTH="51%" VALIGN="TOP"> <P>Raw materials </TD> <TD WIDTH="17%" VALIGN="TOP"> <P ALIGN="RIGHT">450</TD> <TD WIDTH="4%" VALIGN="TOP"> <P> </TD> <TD WIDTH="16%" VALIGN="TOP"> <P ALIGN="RIGHT">454</TD> </TR> <TR><TD WIDTH="12%" VALIGN="TOP"> <P> </TD> <TD WIDTH="51%" VALIGN="TOP"> <P> </TD> <TD WIDTH="17%" VALIGN="TOP"> <P ALIGN="RIGHT">2,052</TD> <TD WIDTH="4%" VALIGN="TOP"> <P> </TD> <TD WIDTH="16%" VALIGN="TOP"> <P ALIGN="RIGHT">1,815</TD> </TR> <TR><TD WIDTH="12%" VALIGN="TOP"> <P> </TD> <TD WIDTH="51%" VALIGN="TOP"> <P>Less progress payments and customer deposits </TD> <TD WIDTH="17%" VALIGN="TOP"> <P ALIGN="RIGHT">224</TD> <TD WIDTH="4%" VALIGN="TOP"> <P> </TD> <TD WIDTH="16%" VALIGN="TOP"> <P ALIGN="RIGHT">175</TD> </TR> <TR><TD WIDTH="12%" VALIGN="TOP"> <P> </TD> <TD WIDTH="51%" VALIGN="TOP"> <P> </TD> <TD WIDTH="17%" VALIGN="TOP"> <P ALIGN="RIGHT">$1,828</TD> <TD WIDTH="4%" VALIGN="TOP"> <P> </TD> <TD WIDTH="16%" VALIGN="TOP"> <P ALIGN="RIGHT">$1,640</TD> </TR> </TABLE> <B><P>Note 7:	Textron-obligated mandatorily redeemable preferred securities of subsidiary<BR> 	trust holding solely Textron junior subordinated debt securities</P><DIR> <DIR> <DIR> </B><P ALIGN="JUSTIFY">In 1996, a trust sponsored and wholly-owned by Textron issued preferred securities <BR> to the public (for $500 million) and shares of its common securities to Textron (for <BR> $15.5 million), the proceeds of which were invested by the trust in $515.5 million <BR> aggregate principal amount of Textron's newly issued 7.92% Junior Subordinated <BR> Deferrable Interest Debentures, due 2045. The debentures are the sole asset of the <BR> trust. The amounts due to the trust under the debentures and the related income <BR> statement amounts have been eliminated in Textron's consolidated financial <BR> statements. The preferred securities accrue and pay cash distributions quarterly at a <BR> rate of 7.92% per annum. Textron has guaranteed, on a subordinated basis, <BR> distributions and other payments due on the preferred securities. The guarantee, <BR> when taken together with Textron's obligations under the debentures and in the <BR> indenture pursuant to which the debentures were issued and Textron's obligations <BR> under the Amended and Restated Declaration of Trust governing the trust, provides a <BR> full and unconditional guarantee of amounts due on the preferred securities.</P> <P ALIGN="JUSTIFY">The preferred securities are mandatorily redeemable upon the maturity of the <BR> debentures on March 31, 2045, or earlier to the extent of any redemption by Textron <BR> of any debentures. The redemption price in either such case will be $25 per share <BR> plus accrued and unpaid distributions to the date fixed for redemption.</P></DIR> </DIR> </DIR> <B><P>Note 8:	Contingencies</P><DIR> <DIR> <DIR> </B><P ALIGN="JUSTIFY">Textron is subject to a number of lawsuits, investigations and claims arising out of <BR> the conduct of its business, including those relating to commercial transactions, <BR> government contracts, product liability, and environmental, safety and health <BR> matters. Some seek compensatory, treble or punitive damages in substantial <BR> amounts; fines, penalties or restitution; or remediation of contamination. Some are or <BR> purport to be class actions. Under federal government procurement regulations, some <BR> could result in suspension or debarment of Textron or its subsidiaries from U.S. <BR> government contracting for a period of time. On the basis of information presently <BR> available, Textron believes that any liability for these suits and proceedings would <BR> not have a material effect on Textron's net income or financial condition.</P></DIR> </DIR> </DIR> <B><P>Note 9:	Comprehensive Income</P><DIR> <DIR> <DIR> </B><P ALIGN="JUSTIFY">During the first six months of 1999 and 1998, total comprehensive income amounted <BR> to $1,889 million and $276 million, respectively. For the three month period ended <BR> July 3, 1999 and July 4, 1998, total comprehensive income amounted to $155 <BR> million and $130 million, respectively.</P></DIR> </DIR> </DIR> <B><P>Note 10:	Intercompany Financing</P><DIR> <DIR> <DIR> </B><P ALIGN="JUSTIFY">In the first quarter of 1999, Textron Manufacturing entered into a promissory note <BR> agreement with Textron Finance, whereby Textron Finance could borrow up to <BR> $1.25 billion from Textron Manufacturing. The maximum amount outstanding <BR> under this agreement during the first six months of 1999 was $1.0 billion. The <BR> amount of interest expense/income incurred/earned by Textron Finance and Textron <BR> Manufacturing, respectively, was approximately $6 million and $15 million for the <BR> three and six month periods ending July 3, 1999. Textron Finance's operating <BR> income includes interest expense incurred under this agreement. As of July 3, 1999, <BR> there were no amounts outstanding under this agreement and the agreement was <BR> cancelled.</P></DIR> </DIR> </DIR> <B><P>Note 11:	Special Charges</P><DIR> <DIR> <DIR> </B><P ALIGN="JUSTIFY">In the second quarter of 1999, the Company reassessed the remaining actions <BR> anticipated in the 1998 program and determined that certain projects should be <BR> delayed or cancelled while other provisions were no longer necessary. Specifically, <BR> provisions for severance and exit costs associated with the decision to exit certain <BR> automotive product lines were no longer required due to a decision to build different <BR> products in a plant originally anticipated to be closed. In the Industrial Segment, <BR> certain cost reduction programs in the Fluid and Power Group have been suspended <BR> as a result of management's evaluation of the opportunities presented by the David <BR> Brown acquisition. Some smaller programs have been delayed as the Company re-<BR> examines strategic alternatives. Others were completed at costs less than originally <BR> anticipated.</P> <P ALIGN="JUSTIFY">Concurrently, the Company initiated a series of new cost reduction efforts in the <BR> Industrial Segment designed to significantly reduce headcount from levels at the <BR> beginning of the year. Significant actions include the downsizing of an <BR> underperforming plant in Europe and targeted headcount reductions across most <BR> Industrial divisions. Headcount reductions were also effected at Bell Helicopter.</P> <P ALIGN="JUSTIFY">As a result of the above, in the second quarter the Company reversed approximately <BR> $24 million of reserves no longer deemed necessary for the 1998 programs and <BR> recorded severance accruals of approximately $21 million and recorded a charge <BR> related to asset impairment of $5 million. As of July 3, 1999, approximately 1,400 <BR> people had been terminated under these severance programs. The Company <BR> continues to evaluate additional programs and expects cost reduction efforts to <BR> continue over the next year. Additional charges may be required in the future when <BR> such programs become finalized.</P></DIR> </DIR> </DIR> <DIR> <DIR> </B><P ALIGN="JUSTIFY">The following table summarizes the spending associated with 1998 and 1999 <BR> programs:</P></DIR> </DIR> </DIR> <P ALIGN="RIGHT"><TABLE BORDER CELLSPACING=1 CELLPADDING=2 WIDTH=667> <TR><TD WIDTH="11%" VALIGN="TOP"> <P> </TD> <TD WIDTH="40%" VALIGN="TOP"> <P> </TD> <TD WIDTH="16%" VALIGN="TOP"> <P> </TD> <TD WIDTH="1%" VALIGN="TOP"> <P> </TD> <TD WIDTH="19%" VALIGN="TOP"> <P> </TD> <TD WIDTH="1%" VALIGN="TOP"> <P> </TD> <TD WIDTH="12%" VALIGN="TOP"> <P> </TD> </TR> <TR><TD WIDTH="11%" VALIGN="TOP"> <P> </TD> <TD WIDTH="40%" VALIGN="TOP"> <P ALIGN="JUSTIFY"><BR> (In millions)</TD> <TD WIDTH="16%" VALIGN="TOP"> <P ALIGN="CENTER">Asset<BR> impairments</TD> <TD WIDTH="1%" VALIGN="TOP"> <P> </TD> <TD WIDTH="19%" VALIGN="TOP"> <P ALIGN="CENTER">Severance &<BR> other</TD> <TD WIDTH="1%" VALIGN="TOP"> <P> </TD> <TD WIDTH="12%" VALIGN="TOP"> <P ALIGN="CENTER"><BR> Total</TD> </TR> <TR><TD WIDTH="11%" VALIGN="TOP"> <P> </TD> <TD WIDTH="40%" VALIGN="TOP"> <P>Balance January 1, 1999</TD> <TD WIDTH="16%" VALIGN="TOP"> <P ALIGN="RIGHT">$-</TD> <TD WIDTH="1%" VALIGN="TOP"> <P> </TD> <TD WIDTH="19%" VALIGN="TOP"> <P ALIGN="RIGHT">$40</TD> <TD WIDTH="1%" VALIGN="TOP"> <P> </TD> <TD WIDTH="12%" VALIGN="TOP"> <P ALIGN="RIGHT">$40</TD> </TR> <TR><TD WIDTH="11%" VALIGN="TOP"> <P> </TD> <TD WIDTH="40%" VALIGN="TOP"> <P>	Utilized first quarter of 1999</TD> <TD WIDTH="16%" VALIGN="TOP"> <P ALIGN="RIGHT">-</TD> <TD WIDTH="1%" VALIGN="TOP"> <P> </TD> <TD WIDTH="19%" VALIGN="TOP"> <P ALIGN="RIGHT">(3)</TD> <TD WIDTH="1%" VALIGN="TOP"> <P> </TD> <TD WIDTH="12%" VALIGN="TOP"> <P ALIGN="RIGHT">(3)</TD> </TR> <TR><TD WIDTH="11%" VALIGN="TOP"> <P> </TD> <TD WIDTH="40%" VALIGN="TOP"> <P>	No longer required</TD> <TD WIDTH="16%" VALIGN="TOP"> <P ALIGN="RIGHT">-</TD> <TD WIDTH="1%" VALIGN="TOP"> <P> </TD> <TD WIDTH="19%" VALIGN="TOP"> <P ALIGN="RIGHT">(24)</TD> <TD WIDTH="1%" VALIGN="TOP"> <P> </TD> <TD WIDTH="12%" VALIGN="TOP"> <P ALIGN="RIGHT">(24)</TD> </TR> <TR><TD WIDTH="11%" VALIGN="TOP"> <P> </TD> <TD WIDTH="40%" VALIGN="TOP"> <P>	1999 Programs</TD> <TD WIDTH="16%" VALIGN="TOP"> <P ALIGN="RIGHT">5</TD> <TD WIDTH="1%" VALIGN="TOP"> <P> </TD> <TD WIDTH="19%" VALIGN="TOP"> <P ALIGN="RIGHT">21</TD> <TD WIDTH="1%" VALIGN="TOP"> <P> </TD> <TD WIDTH="12%" VALIGN="TOP"> <P ALIGN="RIGHT">26</TD> </TR> <TR><TD WIDTH="11%" VALIGN="TOP"> <P> </TD> <TD WIDTH="40%" VALIGN="TOP"> <P>	Utilized second quarter of 1999</TD> <TD WIDTH="16%" VALIGN="TOP"> <P ALIGN="RIGHT">(5)</TD> <TD WIDTH="1%" VALIGN="TOP"> <P> </TD> <TD WIDTH="19%" VALIGN="TOP"> <P ALIGN="RIGHT">(6)</TD> <TD WIDTH="1%" VALIGN="TOP"> <P> </TD> <TD WIDTH="12%" VALIGN="TOP"> <P ALIGN="RIGHT">(11)</TD> </TR> <TR><TD WIDTH="11%" VALIGN="TOP"> <P> </TD> <TD WIDTH="40%" VALIGN="TOP"> <P>Balance July 3, 1999</TD> <TD WIDTH="16%" VALIGN="TOP"> <P ALIGN="RIGHT">$-</TD> <TD WIDTH="1%" VALIGN="TOP"> <P> </TD> <TD WIDTH="19%" VALIGN="TOP"> <P ALIGN="RIGHT">$28</TD> <TD WIDTH="1%" VALIGN="TOP"> <P> </TD> <TD WIDTH="12%" VALIGN="TOP"> <P ALIGN="RIGHT">$28</TD> </TR> </TABLE> </P> <B><P ALIGN="JUSTIFY">Note 12:	New Accounting Pronouncements</P><DIR> <DIR> <DIR> </B><P ALIGN="JUSTIFY">In June 1998, the Financial Accounting Standards Board (FASB) issued FAS 133 <BR> "Accounting for Derivative Instruments and Hedging Activities." FAS 133 requires <BR> an entity to recognize all derivatives as either assets or liabilities and measure those <BR> instruments at fair value. In June 1999, the FASB issued FAS 137 which deferred <BR> the effective date of FAS 133 to all fiscal quarters of all fiscal years beginning after <BR> June 15, 2000. Textron is evaluating the potential impact of this pronouncement on <BR> future reporting.</P> <P ALIGN="JUSTIFY">At its March 24, 1999 meeting, the Emerging Issues Task Force (EITF) added to its <BR> agenda an issue addressing whether pre-production engineering costs are <BR> capitalizable fixed asset costs, start-up costs within the scope of SOP 98-5, or <BR> research and development costs within the scope of FASB Statement No. 2. At its <BR> July 22, 1999 meeting, the EITF did not reach a consensus.</P> <P ALIGN="JUSTIFY">At July 3, 1999, other assets includes approximately $83 million of customer <BR> engineering costs for which customer reimbursement is anticipated.</P></DIR> </DIR> </DIR> <B><P>Note 13:	Financial information by borrowing group</P><DIR> <DIR> <DIR> </B><P ALIGN="JUSTIFY">Textron's financings are conducted through two borrowing groups, Textron Finance <BR> and Textron Manufacturing. This framework is designed to enhance the Company's <BR> borrowing power by separating the Finance segment, which is a borrowing unit of a <BR> specialized business nature. Textron Finance consists of Textron Financial <BR> Corporation consolidated with its subsidiaries, which are the entities through which <BR> Textron operates its Finance segment. Textron Finance finances its operations by <BR> borrowing from its own group of external creditors. Textron Manufacturing is <BR> Textron Inc., the parent company, consolidated with the entities which operate in the <BR> Aircraft, Automotive and Industrial business segments.</P> <B><P ALIGN="JUSTIFY"> </P></DIR> </DIR> </DIR> </B><P>Item 1. <U>FINANCIAL STATEMENTS</U> (Continued)</P> <B><P>Note 13: Financial information by borrowing group (continued)</P> <P>Textron Manufacturing<BR> </B>(unaudited) (In millions)</P> <TABLE BORDER CELLSPACING=1 CELLPADDING=2 WIDTH=704> <TR><TD WIDTH="63%" VALIGN="TOP" HEIGHT=18> <P></TD> <TD WIDTH="37%" VALIGN="TOP" COLSPAN=3 HEIGHT=18> <P ALIGN="CENTER">Six Months Ended</TD> </TR> <TR><TD WIDTH="63%" VALIGN="TOP"> <B><P>Condensed Statement of Cash Flows </B></TD> <TD WIDTH="16%" VALIGN="TOP"> <P ALIGN="CENTER">July 3,<BR> 1999</TD> <TD WIDTH="7%" VALIGN="TOP"> <P> </TD> <TD WIDTH="14%" VALIGN="TOP"> <P ALIGN="CENTER">July 4,<BR> 1998</TD> </TR> <TR><TD WIDTH="63%" VALIGN="TOP"> <B><P>Cash flows from operating activities:</B></TD> <TD WIDTH="16%" VALIGN="TOP"> <P> </TD> <TD WIDTH="7%" VALIGN="TOP"> <P> </TD> <TD WIDTH="14%" VALIGN="TOP"> <P> </TD> </TR> <TR><TD WIDTH="63%" VALIGN="TOP" HEIGHT=18> <P>Income from continuing operations</TD> <TD WIDTH="16%" VALIGN="TOP" HEIGHT=18> <P ALIGN="RIGHT">$307</TD> <TD WIDTH="7%" VALIGN="TOP" HEIGHT=18><P></P></TD> <TD WIDTH="14%" VALIGN="TOP" HEIGHT=18> <P ALIGN="RIGHT">$215</TD> </TR> <TR><TD WIDTH="63%" VALIGN="TOP" HEIGHT=18> <P>Adjustments to reconcile income from continuing<BR> 	operations to net cash provided by operating activities:</TD> <TD WIDTH="16%" VALIGN="TOP" HEIGHT=18><P></P></TD> <TD WIDTH="7%" VALIGN="TOP" HEIGHT=18><P></P></TD> <TD WIDTH="14%" VALIGN="TOP" HEIGHT=18><P></P></TD> </TR> <TR><TD WIDTH="63%" VALIGN="TOP" HEIGHT=18> <P>	Earnings of Finance Group greater than<BR> 		distributions to Parent Group</TD> <TD WIDTH="16%" VALIGN="TOP" HEIGHT=18> <P ALIGN="RIGHT"><BR> (16)</TD> <TD WIDTH="7%" VALIGN="TOP" HEIGHT=18><P></P></TD> <TD WIDTH="14%" VALIGN="TOP" HEIGHT=18> <P ALIGN="RIGHT"><BR> (11)</TD> </TR> <TR><TD WIDTH="63%" VALIGN="TOP" HEIGHT=18> <P>	Depreciation</TD> <TD WIDTH="16%" VALIGN="TOP" HEIGHT=18> <P ALIGN="RIGHT">161</TD> <TD WIDTH="7%" VALIGN="TOP" HEIGHT=18><P></P></TD> <TD WIDTH="14%" VALIGN="TOP" HEIGHT=18> <P ALIGN="RIGHT">132</TD> </TR> <TR><TD WIDTH="63%" VALIGN="TOP" HEIGHT=18> <P>	Amortization</TD> <TD WIDTH="16%" VALIGN="TOP" HEIGHT=18> <P ALIGN="RIGHT">38</TD> <TD WIDTH="7%" VALIGN="TOP" HEIGHT=18><P></P></TD> <TD WIDTH="14%" VALIGN="TOP" HEIGHT=18> <P ALIGN="RIGHT">30</TD> </TR> <TR><TD WIDTH="63%" VALIGN="TOP" HEIGHT=18> <P>	Gain on sale of division</TD> <TD WIDTH="16%" VALIGN="TOP" HEIGHT=18> <P ALIGN="RIGHT">-</TD> <TD WIDTH="7%" VALIGN="TOP" HEIGHT=18><P></P></TD> <TD WIDTH="14%" VALIGN="TOP" HEIGHT=18> <P ALIGN="RIGHT">(97)</TD> </TR> <TR><TD WIDTH="63%" VALIGN="TOP" HEIGHT=18> <P>	Special charges</TD> <TD WIDTH="16%" VALIGN="TOP" HEIGHT=18> <P ALIGN="RIGHT">2</TD> <TD WIDTH="7%" VALIGN="TOP" HEIGHT=18><P></P></TD> <TD WIDTH="14%" VALIGN="TOP" HEIGHT=18> <P ALIGN="RIGHT">87</TD> </TR> <TR><TD WIDTH="63%" VALIGN="TOP" HEIGHT=18> <P>	Dividends received from discontinued operation</TD> <TD WIDTH="16%" VALIGN="TOP" HEIGHT=18> <P ALIGN="RIGHT">-</TD> <TD WIDTH="7%" VALIGN="TOP" HEIGHT=18><P></P></TD> <TD WIDTH="14%" VALIGN="TOP" HEIGHT=18> <P ALIGN="RIGHT">115</TD> </TR> <TR><TD WIDTH="63%" VALIGN="TOP" HEIGHT=18> <P>	Deferred taxes</TD> <TD WIDTH="16%" VALIGN="TOP" HEIGHT=18> <P ALIGN="RIGHT">27</TD> <TD WIDTH="7%" VALIGN="TOP" HEIGHT=18><P></P></TD> <TD WIDTH="14%" VALIGN="TOP" HEIGHT=18> <P ALIGN="RIGHT">12</TD> </TR> <TR><TD WIDTH="63%" VALIGN="TOP" HEIGHT=18> <P>	Changes in assets and liabilities excluding those<BR> 		related to acquisitions and divestitures:</TD> <TD WIDTH="16%" VALIGN="TOP" HEIGHT=18><P></P></TD> <TD WIDTH="7%" VALIGN="TOP" HEIGHT=18><P></P></TD> <TD WIDTH="14%" VALIGN="TOP" HEIGHT=18><P></P></TD> </TR> <TR><TD WIDTH="63%" VALIGN="TOP" HEIGHT=18> <P>			(Increase) in receivables</TD> <TD WIDTH="16%" VALIGN="TOP" HEIGHT=18> <P ALIGN="RIGHT">(84)</TD> <TD WIDTH="7%" VALIGN="TOP" HEIGHT=18><P></P></TD> <TD WIDTH="14%" VALIGN="TOP" HEIGHT=18> <P ALIGN="RIGHT">(113)</TD> </TR> <TR><TD WIDTH="63%" VALIGN="TOP" HEIGHT=18> <P>			(Increase) in inventories</TD> <TD WIDTH="16%" VALIGN="TOP" HEIGHT=18> <P ALIGN="RIGHT">(103)</TD> <TD WIDTH="7%" VALIGN="TOP" HEIGHT=18><P></P></TD> <TD WIDTH="14%" VALIGN="TOP" HEIGHT=18> <P ALIGN="RIGHT">(198)</TD> </TR> <TR><TD WIDTH="63%" VALIGN="TOP" HEIGHT=18> <P>			(Increase) in other assets</TD> <TD WIDTH="16%" VALIGN="TOP" HEIGHT=18> <P ALIGN="RIGHT">(144)</TD> <TD WIDTH="7%" VALIGN="TOP" HEIGHT=18><P></P></TD> <TD WIDTH="14%" VALIGN="TOP" HEIGHT=18> <P ALIGN="RIGHT">(188)</TD> </TR> <TR><TD WIDTH="63%" VALIGN="TOP" HEIGHT=18> <P>			(Increase) decrease in accounts payable and accrued<BR> 				liabilities</TD> <TD WIDTH="16%" VALIGN="TOP" HEIGHT=18> <P ALIGN="RIGHT"><BR> (127)</TD> <TD WIDTH="7%" VALIGN="TOP" HEIGHT=18><P></P></TD> <TD WIDTH="14%" VALIGN="TOP" HEIGHT=18> <P ALIGN="RIGHT"><BR> 109</TD> </TR> <TR><TD WIDTH="63%" VALIGN="TOP" HEIGHT=18> <P>	Other - net</TD> <TD WIDTH="16%" VALIGN="TOP" HEIGHT=18> <P ALIGN="RIGHT">5</TD> <TD WIDTH="7%" VALIGN="TOP" HEIGHT=18><P></P></TD> <TD WIDTH="14%" VALIGN="TOP" HEIGHT=18> <P ALIGN="RIGHT">(11)</TD> </TR> <TR><TD WIDTH="63%" VALIGN="TOP" HEIGHT=18> <P>		Net cash provided by operating activities</TD> <TD WIDTH="16%" VALIGN="TOP" HEIGHT=18> <P ALIGN="RIGHT">66</TD> <TD WIDTH="7%" VALIGN="TOP" HEIGHT=18><P></P></TD> <TD WIDTH="14%" VALIGN="TOP" HEIGHT=18> <P ALIGN="RIGHT">82</TD> </TR> <TR><TD WIDTH="63%" VALIGN="TOP" HEIGHT=18> <B><P>Cash flows from investing activities:</B></TD> <TD WIDTH="16%" VALIGN="TOP" HEIGHT=18><P></P></TD> <TD WIDTH="7%" VALIGN="TOP" HEIGHT=18><P></P></TD> <TD WIDTH="14%" VALIGN="TOP" HEIGHT=18><P></P></TD> </TR> <TR><TD WIDTH="63%" VALIGN="TOP" HEIGHT=18> <P>Capital expenditures</TD> <TD WIDTH="16%" VALIGN="TOP" HEIGHT=18> <P ALIGN="RIGHT">(217)</TD> <TD WIDTH="7%" VALIGN="TOP" HEIGHT=18><P></P></TD> <TD WIDTH="14%" VALIGN="TOP" HEIGHT=18> <P ALIGN="RIGHT">(191)</TD> </TR> <TR><TD WIDTH="63%" VALIGN="TOP" HEIGHT=18> <P>Cash used in acquisitions</TD> <TD WIDTH="16%" VALIGN="TOP" HEIGHT=18> <P ALIGN="RIGHT">(242)</TD> <TD WIDTH="7%" VALIGN="TOP" HEIGHT=18><P></P></TD> <TD WIDTH="14%" VALIGN="TOP" HEIGHT=18> <P ALIGN="RIGHT">(424)</TD> </TR> <TR><TD WIDTH="63%" VALIGN="TOP" HEIGHT=18> <P>Investments in joint ventures</TD> <TD WIDTH="16%" VALIGN="TOP" HEIGHT=18> <P ALIGN="RIGHT">(41)</TD> <TD WIDTH="7%" VALIGN="TOP" HEIGHT=18><P></P></TD> <TD WIDTH="14%" VALIGN="TOP" HEIGHT=18> <P ALIGN="RIGHT">-</TD> </TR> <TR><TD WIDTH="63%" VALIGN="TOP" HEIGHT=18> <P>Net proceeds from dispositions</TD> <TD WIDTH="16%" VALIGN="TOP" HEIGHT=18> <P ALIGN="RIGHT">3,376</TD> <TD WIDTH="7%" VALIGN="TOP" HEIGHT=18><P></P></TD> <TD WIDTH="14%" VALIGN="TOP" HEIGHT=18> <P ALIGN="RIGHT">160</TD> </TR> <TR><TD WIDTH="63%" VALIGN="TOP" HEIGHT=18> <P>Other investing activities - net</TD> <TD WIDTH="16%" VALIGN="TOP" HEIGHT=18> <P ALIGN="RIGHT">21</TD> <TD WIDTH="7%" VALIGN="TOP" HEIGHT=18><P></P></TD> <TD WIDTH="14%" VALIGN="TOP" HEIGHT=18> <P ALIGN="RIGHT">22</TD> </TR> <TR><TD WIDTH="63%" VALIGN="TOP" HEIGHT=17> <P>		Net cash provided (used) by investing activities</TD> <TD WIDTH="16%" VALIGN="TOP" HEIGHT=17> <P ALIGN="RIGHT">2,897</TD> <TD WIDTH="7%" VALIGN="TOP" HEIGHT=17><P></P></TD> <TD WIDTH="14%" VALIGN="TOP" HEIGHT=17> <P ALIGN="RIGHT">(433)</TD> </TR> <TR><TD WIDTH="63%" VALIGN="TOP" HEIGHT=18> <B><P>Cash flows from financing activities:</B></TD> <TD WIDTH="16%" VALIGN="TOP" HEIGHT=18><P></P></TD> <TD WIDTH="7%" VALIGN="TOP" HEIGHT=18><P></P></TD> <TD WIDTH="14%" VALIGN="TOP" HEIGHT=18><P></P></TD> </TR> <TR><TD WIDTH="63%" VALIGN="TOP" HEIGHT=18> <P>(Decrease) increase in short-term debt</TD> <TD WIDTH="16%" VALIGN="TOP" HEIGHT=18> <P ALIGN="RIGHT">(1,526)</TD> <TD WIDTH="7%" VALIGN="TOP" HEIGHT=18><P></P></TD> <TD WIDTH="14%" VALIGN="TOP" HEIGHT=18> <P ALIGN="RIGHT">524</TD> </TR> <TR><TD WIDTH="63%" VALIGN="TOP" HEIGHT=18> <P>Proceeds from issuance of long-term debt</TD> <TD WIDTH="16%" VALIGN="TOP" HEIGHT=18> <P ALIGN="RIGHT">-</TD> <TD WIDTH="7%" VALIGN="TOP" HEIGHT=18><P></P></TD> <TD WIDTH="14%" VALIGN="TOP" HEIGHT=18> <P ALIGN="RIGHT">9</TD> </TR> <TR><TD WIDTH="63%" VALIGN="TOP" HEIGHT=18> <P>Principal payments and retirements on long-term debt</TD> <TD WIDTH="16%" VALIGN="TOP" HEIGHT=18> <P ALIGN="RIGHT">(639)</TD> <TD WIDTH="7%" VALIGN="TOP" HEIGHT=18><P></P></TD> <TD WIDTH="14%" VALIGN="TOP" HEIGHT=18> <P ALIGN="RIGHT">(58)</TD> </TR> <TR><TD WIDTH="63%" VALIGN="TOP" HEIGHT=18> <P>Proceeds from exercise of stock options</TD> <TD WIDTH="16%" VALIGN="TOP" HEIGHT=18> <P ALIGN="RIGHT">43</TD> <TD WIDTH="7%" VALIGN="TOP" HEIGHT=18><P></P></TD> <TD WIDTH="14%" VALIGN="TOP" HEIGHT=18> <P ALIGN="RIGHT">39</TD> </TR> <TR><TD WIDTH="63%" VALIGN="TOP" HEIGHT=18> <P>Purchases of Textron common stock</TD> <TD WIDTH="16%" VALIGN="TOP" HEIGHT=18> <P ALIGN="RIGHT">(478)</TD> <TD WIDTH="7%" VALIGN="TOP" HEIGHT=18><P></P></TD> <TD WIDTH="14%" VALIGN="TOP" HEIGHT=18> <P ALIGN="RIGHT">-</TD> </TR> <TR><TD WIDTH="63%" VALIGN="TOP" HEIGHT=18> <P>Dividends paid</TD> <TD WIDTH="16%" VALIGN="TOP" HEIGHT=18> <P ALIGN="RIGHT">(140)</TD> <TD WIDTH="7%" VALIGN="TOP" HEIGHT=18><P></P></TD> <TD WIDTH="14%" VALIGN="TOP" HEIGHT=18> <P ALIGN="RIGHT">(93)</TD> </TR> <TR><TD WIDTH="63%" VALIGN="TOP" HEIGHT=18> <P>Contributions paid to Finance Group</TD> <TD WIDTH="16%" VALIGN="TOP" HEIGHT=18> <P ALIGN="RIGHT">(8)</TD> <TD WIDTH="7%" VALIGN="TOP" HEIGHT=18><P></P></TD> <TD WIDTH="14%" VALIGN="TOP" HEIGHT=18> <P ALIGN="RIGHT">(23)</TD> </TR> <TR><TD WIDTH="63%" VALIGN="TOP" HEIGHT=18> <P>		Net cash (used) provided by financing activities</TD> <TD WIDTH="16%" VALIGN="TOP" HEIGHT=18> <P ALIGN="RIGHT">(2,748)</TD> <TD WIDTH="7%" VALIGN="TOP" HEIGHT=18><P></P></TD> <TD WIDTH="14%" VALIGN="TOP" HEIGHT=18> <P ALIGN="RIGHT">398</TD> </TR> <TR><TD WIDTH="63%" VALIGN="TOP" HEIGHT=18> <B><P>Net increase in cash and cash equivalents</B></TD> <TD WIDTH="16%" VALIGN="TOP" HEIGHT=18> <P ALIGN="RIGHT">215</TD> <TD WIDTH="7%" VALIGN="TOP" HEIGHT=18><P></P></TD> <TD WIDTH="14%" VALIGN="TOP" HEIGHT=18> <P ALIGN="RIGHT">47</TD> </TR> <TR><TD WIDTH="63%" VALIGN="TOP" HEIGHT=18> <P>Cash and cash equivalents at beginning of period</TD> <TD WIDTH="16%" VALIGN="TOP" HEIGHT=18> <P ALIGN="RIGHT">31</TD> <TD WIDTH="7%" VALIGN="TOP" HEIGHT=18><P></P></TD> <TD WIDTH="14%" VALIGN="TOP" HEIGHT=18> <P ALIGN="RIGHT">30</TD> </TR> <TR><TD WIDTH="63%" VALIGN="TOP" HEIGHT=19> <P>Cash and cash equivalents at end of period</TD> <TD WIDTH="16%" VALIGN="TOP" HEIGHT=19> <P ALIGN="RIGHT">$246</TD> <TD WIDTH="7%" VALIGN="TOP" HEIGHT=19><P></P></TD> <TD WIDTH="14%" VALIGN="TOP" HEIGHT=19> <P ALIGN="RIGHT">$77</TD> </TR> </TABLE> <DIR> <DIR> <DIR> <P>Item 2.	<U>MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS</P></DIR> </DIR> </DIR> </U><B><P ALIGN="CENTER">TEXTRON INC.<BR> Revenues and Income by Business Segment<BR> </B>(In millions)</P> <TABLE BORDER CELLSPACING=1 CELLPADDING=7 WIDTH=750> <TR><TD WIDTH="33%" VALIGN="TOP"> <P> </TD> <TD WIDTH="33%" VALIGN="TOP" COLSPAN=3> <P ALIGN="CENTER">Three Months Ended</TD> <TD WIDTH="3%" VALIGN="TOP"> <P> </TD> <TD WIDTH="33%" VALIGN="TOP" COLSPAN=3> <P ALIGN="CENTER">Six Months Ended</TD> </TR> <TR><TD WIDTH="33%" VALIGN="TOP"> <P> </TD> <TD WIDTH="15%" VALIGN="TOP"> <P ALIGN="CENTER">July 3,<BR> 1999</TD> <TD WIDTH="3%" VALIGN="TOP"> <P> </TD> <TD WIDTH="15%" VALIGN="TOP"> <P ALIGN="CENTER">July 4,<BR> 1998</TD> <TD WIDTH="3%" VALIGN="TOP"> <P> </TD> <TD WIDTH="15%" VALIGN="TOP"> <P ALIGN="CENTER">July 3,<BR> 1999</TD> <TD WIDTH="3%" VALIGN="TOP"> <P> </TD> <TD WIDTH="15%" VALIGN="TOP"> <P ALIGN="CENTER">July 4,<BR> 1998</TD> </TR> <TR><TD WIDTH="33%" VALIGN="TOP"> <B><P>REVENUES</B></TD> <TD WIDTH="15%" VALIGN="TOP"> <P> </TD> <TD WIDTH="3%" VALIGN="TOP"> <P> </TD> <TD WIDTH="15%" VALIGN="TOP"> <P> </TD> <TD WIDTH="3%" VALIGN="TOP"> <P> </TD> <TD WIDTH="15%" VALIGN="TOP"> <P> </TD> <TD WIDTH="3%" VALIGN="TOP"> <P> </TD> <TD WIDTH="15%" VALIGN="TOP"> <P> </TD> </TR> <TR><TD WIDTH="33%" VALIGN="TOP"> <P>MANUFACTURING:</TD> <TD WIDTH="15%" VALIGN="TOP"> <P> </TD> <TD WIDTH="3%" VALIGN="TOP"> <P> </TD> <TD WIDTH="15%" VALIGN="TOP"> <P> </TD> <TD WIDTH="3%" VALIGN="TOP"> <P> </TD> <TD WIDTH="15%" VALIGN="TOP"> <P> </TD> <TD WIDTH="3%" VALIGN="TOP"> <P> </TD> <TD WIDTH="15%" VALIGN="TOP"> <P> </TD> </TR> <TR><TD WIDTH="33%" VALIGN="TOP"> <P>	Aircraft</TD> <TD WIDTH="15%" VALIGN="TOP"> <P ALIGN="RIGHT">$885</TD> <TD WIDTH="3%" VALIGN="TOP"> <P> </TD> <TD WIDTH="15%" VALIGN="TOP"> <P ALIGN="RIGHT">$858</TD> <TD WIDTH="3%" VALIGN="TOP"> <P> </TD> <TD WIDTH="15%" VALIGN="TOP"> <P ALIGN="RIGHT">$1,712</TD> <TD WIDTH="3%" VALIGN="TOP"> <P> </TD> <TD WIDTH="15%" VALIGN="TOP"> <P ALIGN="RIGHT">$1,514</TD> </TR> <TR><TD WIDTH="33%" VALIGN="TOP"> <P>	Automotive</TD> <TD WIDTH="15%" VALIGN="TOP"> <P ALIGN="RIGHT">757</TD> <TD WIDTH="3%" VALIGN="TOP"> <P> </TD> <TD WIDTH="15%" VALIGN="TOP"> <P ALIGN="RIGHT">583</TD> <TD WIDTH="3%" VALIGN="TOP"> <P> </TD> <TD WIDTH="15%" VALIGN="TOP"> <P ALIGN="RIGHT">1,491</TD> <TD WIDTH="3%" VALIGN="TOP"> <P> </TD> <TD WIDTH="15%" VALIGN="TOP"> <P ALIGN="RIGHT">1,201</TD> </TR> <TR><TD WIDTH="33%" VALIGN="TOP"> <P>	Industrial</TD> <TD WIDTH="15%" VALIGN="TOP"> <P ALIGN="RIGHT">1,141</TD> <TD WIDTH="3%" VALIGN="TOP"> <P> </TD> <TD WIDTH="15%" VALIGN="TOP"> <P ALIGN="RIGHT">952</TD> <TD WIDTH="3%" VALIGN="TOP"> <P> </TD> <TD WIDTH="15%" VALIGN="TOP"> <P ALIGN="RIGHT">2,233</TD> <TD WIDTH="3%" VALIGN="TOP"> <P> </TD> <TD WIDTH="15%" VALIGN="TOP"> <P ALIGN="RIGHT">1,845</TD> </TR> <TR><TD WIDTH="33%" VALIGN="TOP"> <P> </TD> <TD WIDTH="15%" VALIGN="TOP"> <P ALIGN="RIGHT">2,783</TD> <TD WIDTH="3%" VALIGN="TOP"> <P> </TD> <TD WIDTH="15%" VALIGN="TOP"> <P ALIGN="RIGHT">2,393</TD> <TD WIDTH="3%" VALIGN="TOP"> <P> </TD> <TD WIDTH="15%" VALIGN="TOP"> <P ALIGN="RIGHT">5,436</TD> <TD WIDTH="3%" VALIGN="TOP"> <P> </TD> <TD WIDTH="15%" VALIGN="TOP"> <P ALIGN="RIGHT">4,560</TD> </TR> <TR><TD WIDTH="33%" VALIGN="TOP"> <P>FINANCE</TD> <TD WIDTH="15%" VALIGN="TOP"> <P ALIGN="RIGHT">104</TD> <TD WIDTH="3%" VALIGN="TOP"> <P> </TD> <TD WIDTH="15%" VALIGN="TOP"> <P ALIGN="RIGHT">91</TD> <TD WIDTH="3%" VALIGN="TOP"> <P> </TD> <TD WIDTH="15%" VALIGN="TOP"> <P ALIGN="RIGHT">200</TD> <TD WIDTH="3%" VALIGN="TOP"> <P> </TD> <TD WIDTH="15%" VALIGN="TOP"> <P ALIGN="RIGHT">176</TD> </TR> <TR><TD WIDTH="33%" VALIGN="TOP"> <P>Total revenues</TD> <TD WIDTH="15%" VALIGN="TOP"> <P ALIGN="RIGHT">$2,887</TD> <TD WIDTH="3%" VALIGN="TOP"> <P> </TD> <TD WIDTH="15%" VALIGN="TOP"> <P ALIGN="RIGHT">$2,484</TD> <TD WIDTH="3%" VALIGN="TOP"> <P> </TD> <TD WIDTH="15%" VALIGN="TOP"> <P ALIGN="RIGHT">$5,636</TD> <TD WIDTH="3%" VALIGN="TOP"> <P> </TD> <TD WIDTH="15%" VALIGN="TOP"> <P ALIGN="RIGHT">$4,736</TD> </TR> <TR><TD WIDTH="33%" VALIGN="TOP"> <B><P>INCOME</B></TD> <TD WIDTH="15%" VALIGN="TOP"> <P> </TD> <TD WIDTH="3%" VALIGN="TOP"> <P> </TD> <TD WIDTH="15%" VALIGN="TOP"> <P> </TD> <TD WIDTH="3%" VALIGN="TOP"> <P> </TD> <TD WIDTH="15%" VALIGN="TOP"> <P> </TD> <TD WIDTH="3%" VALIGN="TOP"> <P> </TD> <TD WIDTH="15%" VALIGN="TOP"> <P> </TD> </TR> <TR><TD WIDTH="33%" VALIGN="TOP"> <P>MANUFACTURING:</TD> <TD WIDTH="15%" VALIGN="TOP"> <P> </TD> <TD WIDTH="3%" VALIGN="TOP"> <P> </TD> <TD WIDTH="15%" VALIGN="TOP"> <P> </TD> <TD WIDTH="3%" VALIGN="TOP"> <P> </TD> <TD WIDTH="15%" VALIGN="TOP"> <P> </TD> <TD WIDTH="3%" VALIGN="TOP"> <P> </TD> <TD WIDTH="15%" VALIGN="TOP"> <P> </TD> </TR> <TR><TD WIDTH="33%" VALIGN="TOP"> <P>	Aircraft</TD> <TD WIDTH="15%" VALIGN="TOP"> <P ALIGN="RIGHT">$75</TD> <TD WIDTH="3%" VALIGN="TOP"> <P> </TD> <TD WIDTH="15%" VALIGN="TOP"> <P ALIGN="RIGHT">$91</TD> <TD WIDTH="3%" VALIGN="TOP"> <P> </TD> <TD WIDTH="15%" VALIGN="TOP"> <P ALIGN="RIGHT">$142</TD> <TD WIDTH="3%" VALIGN="TOP"> <P> </TD> <TD WIDTH="15%" VALIGN="TOP"> <P ALIGN="RIGHT">$152</TD> </TR> <TR><TD WIDTH="33%" VALIGN="TOP"> <P>	Automotive</TD> <TD WIDTH="15%" VALIGN="TOP"> <P ALIGN="RIGHT">62</TD> <TD WIDTH="3%" VALIGN="TOP"> <P> </TD> <TD WIDTH="15%" VALIGN="TOP"> <P ALIGN="RIGHT">43</TD> <TD WIDTH="3%" VALIGN="TOP"> <P> </TD> <TD WIDTH="15%" VALIGN="TOP"> <P ALIGN="RIGHT">124</TD> <TD WIDTH="3%" VALIGN="TOP"> <P> </TD> <TD WIDTH="15%" VALIGN="TOP"> <P ALIGN="RIGHT">99</TD> </TR> <TR><TD WIDTH="33%" VALIGN="TOP"> <P>	Industrial</TD> <TD WIDTH="15%" VALIGN="TOP"> <P ALIGN="RIGHT">133</TD> <TD WIDTH="3%" VALIGN="TOP"> <P> </TD> <TD WIDTH="15%" VALIGN="TOP"> <P ALIGN="RIGHT">108</TD> <TD WIDTH="3%" VALIGN="TOP"> <P> </TD> <TD WIDTH="15%" VALIGN="TOP"> <P ALIGN="RIGHT">255</TD> <TD WIDTH="3%" VALIGN="TOP"> <P> </TD> <TD WIDTH="15%" VALIGN="TOP"> <P ALIGN="RIGHT">203</TD> </TR> <TR><TD WIDTH="33%" VALIGN="TOP"> <P> </TD> <TD WIDTH="15%" VALIGN="TOP"> <P ALIGN="RIGHT">270</TD> <TD WIDTH="3%" VALIGN="TOP"> <P> </TD> <TD WIDTH="15%" VALIGN="TOP"> <P ALIGN="RIGHT">242</TD> <TD WIDTH="3%" VALIGN="TOP"> <P> </TD> <TD WIDTH="15%" VALIGN="TOP"> <P ALIGN="RIGHT">521</TD> <TD WIDTH="3%" VALIGN="TOP"> <P> </TD> <TD WIDTH="15%" VALIGN="TOP"> <P ALIGN="RIGHT">454</TD> </TR> <TR><TD WIDTH="33%" VALIGN="TOP"> <P>FINANCE</TD> <TD WIDTH="15%" VALIGN="TOP"> <P ALIGN="RIGHT">30</TD> <TD WIDTH="3%" VALIGN="TOP"> <P> </TD> <TD WIDTH="15%" VALIGN="TOP"> <P ALIGN="RIGHT">27</TD> <TD WIDTH="3%" VALIGN="TOP"> <P> </TD> <TD WIDTH="15%" VALIGN="TOP"> <P ALIGN="RIGHT">56</TD> <TD WIDTH="3%" VALIGN="TOP"> <P> </TD> <TD WIDTH="15%" VALIGN="TOP"> <P ALIGN="RIGHT">52</TD> </TR> <TR><TD WIDTH="33%" VALIGN="TOP"> <P> </TD> <TD WIDTH="15%" VALIGN="TOP"> <P ALIGN="RIGHT">300</TD> <TD WIDTH="3%" VALIGN="TOP"> <P> </TD> <TD WIDTH="15%" VALIGN="TOP"> <P ALIGN="RIGHT">269</TD> <TD WIDTH="3%" VALIGN="TOP"> <P> </TD> <TD WIDTH="15%" VALIGN="TOP"> <P ALIGN="RIGHT">577</TD> <TD WIDTH="3%" VALIGN="TOP"> <P> </TD> <TD WIDTH="15%" VALIGN="TOP"> <P ALIGN="RIGHT">506</TD> </TR> <TR><TD WIDTH="33%" VALIGN="TOP"> <P>Gain on sale of division</TD> <TD WIDTH="15%" VALIGN="TOP"> <P ALIGN="RIGHT">-</TD> <TD WIDTH="3%" VALIGN="TOP"> <P> </TD> <TD WIDTH="15%" VALIGN="TOP"> <P ALIGN="RIGHT">97</TD> <TD WIDTH="3%" VALIGN="TOP"> <P> </TD> <TD WIDTH="15%" VALIGN="TOP"> <P ALIGN="RIGHT">-</TD> <TD WIDTH="3%" VALIGN="TOP"> <P> </TD> <TD WIDTH="15%" VALIGN="TOP"> <P ALIGN="RIGHT">97</TD> </TR> <TR><TD WIDTH="33%" VALIGN="TOP"> <P>Special charges *</TD> <TD WIDTH="15%" VALIGN="TOP"> <P ALIGN="RIGHT">(2)</TD> <TD WIDTH="3%" VALIGN="TOP"> <P> </TD> <TD WIDTH="15%" VALIGN="TOP"> <P ALIGN="RIGHT">(87)</TD> <TD WIDTH="3%" VALIGN="TOP"> <P> </TD> <TD WIDTH="15%" VALIGN="TOP"> <P ALIGN="RIGHT">(2)</TD> <TD WIDTH="3%" VALIGN="TOP"> <P> </TD> <TD WIDTH="15%" VALIGN="TOP"> <P ALIGN="RIGHT">(87)</TD> </TR> <TR><TD WIDTH="33%" VALIGN="TOP"> <P>Segment income</TD> <TD WIDTH="15%" VALIGN="TOP"> <P ALIGN="RIGHT">298</TD> <TD WIDTH="3%" VALIGN="TOP"> <P> </TD> <TD WIDTH="15%" VALIGN="TOP"> <P ALIGN="RIGHT">279</TD> <TD WIDTH="3%" VALIGN="TOP"> <P> </TD> <TD WIDTH="15%" VALIGN="TOP"> <P ALIGN="RIGHT">575</TD> <TD WIDTH="3%" VALIGN="TOP"> <P> </TD> <TD WIDTH="15%" VALIGN="TOP"> <P ALIGN="RIGHT">516</TD> </TR> <TR><TD WIDTH="33%" VALIGN="TOP"> <P>Corporate expenses and other - net</TD> <TD WIDTH="15%" VALIGN="TOP"> <P ALIGN="RIGHT">(35)</TD> <TD WIDTH="3%" VALIGN="TOP"> <P> </TD> <TD WIDTH="15%" VALIGN="TOP"> <P ALIGN="RIGHT">(34)</TD> <TD WIDTH="3%" VALIGN="TOP"> <P> </TD> <TD WIDTH="15%" VALIGN="TOP"> <P ALIGN="RIGHT">(73)</TD> <TD WIDTH="3%" VALIGN="TOP"> <P> </TD> <TD WIDTH="15%" VALIGN="TOP"> <P ALIGN="RIGHT">(68)</TD> </TR> <TR><TD WIDTH="33%" VALIGN="TOP"> <P>Interest income (expense) - net</TD> <TD WIDTH="15%" VALIGN="TOP"> <P ALIGN="RIGHT">3</TD> <TD WIDTH="3%" VALIGN="TOP"> <P> </TD> <TD WIDTH="15%" VALIGN="TOP"> <P ALIGN="RIGHT">(36)</TD> <TD WIDTH="3%" VALIGN="TOP"> <P> </TD> <TD WIDTH="15%" VALIGN="TOP"> <P ALIGN="RIGHT">6</TD> <TD WIDTH="3%" VALIGN="TOP"> <P> </TD> <TD WIDTH="15%" VALIGN="TOP"> <P ALIGN="RIGHT">(69)</TD> </TR> <TR><TD WIDTH="33%" VALIGN="TOP"> <P>Income from continuing<BR> 	operations before income taxes<BR> 	and distributions on preferred<BR> 	securities of subsidiary trust</TD> <TD WIDTH="15%" VALIGN="TOP"> <P ALIGN="RIGHT"><BR> <BR> <BR> $266</TD> <TD WIDTH="3%" VALIGN="TOP"> <P ALIGN="RIGHT"><BR> <BR> <BR> </TD> <TD WIDTH="15%" VALIGN="TOP"> <P ALIGN="RIGHT"><BR> <BR> <BR> $209</TD> <TD WIDTH="3%" VALIGN="TOP"> <P ALIGN="RIGHT"><BR> <BR> <BR> </TD> <TD WIDTH="15%" VALIGN="TOP"> <P ALIGN="RIGHT"><BR> <BR> <BR> $508</TD> <TD WIDTH="3%" VALIGN="TOP"> <P ALIGN="RIGHT"><BR> <BR> <BR> </TD> <TD WIDTH="15%" VALIGN="TOP"> <P ALIGN="RIGHT"><BR> <BR> <BR> $379</TD> </TR> </TABLE> <UL> <P ALIGN="JUSTIFY"><LI>The July 3, 1999 special charges include special charges of $26 million primarily for the <BR> Industrial Segment and a reversal of $24 million of reserves no longer deemed necessary for <BR> the 1998 programs ($8 million Automotive segment, $16 million Industrial segment).</LI></P></UL> <TABLE CELLSPACING=0 BORDER=0 CELLPADDING=7 WIDTH=686> <TR><TD WIDTH="5%" VALIGN="TOP"> <P> </TD> <TD WIDTH="95%" VALIGN="TOP"> <P>The July 4, 1998 special charges include special charges of $10 million for the Aircraft <BR> segment, $25 million for the Automotive segment and $52 million for the Industrial segment. <BR> The gain on sale of division relates to the Industrial segment.</TD> </TR> </TABLE> <P ALIGN="JUSTIFY"> </P> <B><P>Liquidity and Capital Resources</P> </B><P ALIGN="JUSTIFY">The Statements of Cash Flows for Textron Inc. and Textron Manufacturing detailing the changes <BR> in cash balances are on pages 4 and 9, respectively. Textron Manufacturing's operating cash <BR> flow includes dividends received from Textron Finance of $19 million and $21 million during <BR> the first six months of 1999 and 1998, respectively. Dividend payments to shareholders for the <BR> first six months of 1999 includes three payments as opposed to the first six months of 1998 when <BR> two payments were made. Dividend payments to shareholders for the first six months of 1999 <BR> amounted to $140 million, an increase of $47 million over the first six months of 1998.</P> <P ALIGN="JUSTIFY">On January 6, 1999 Textron completed its sale of Avco Financial Services to Associates First <BR> Capital Corporation for $3.9 billion in cash. Net after-tax proceeds will approximate $2.9 <BR> billion, resulting in an after-tax gain of $1.6 billion.</P> <P ALIGN="JUSTIFY">During the first quarter of 1999, Textron retired $553 million of long-term high coupon debt and <BR> terminated $479 million of interest rate exchange agreements designated as hedges of the retired <BR> borrowings. As a result, Textron recorded, as an extraordinary item, an after-tax loss of $43 <BR> million.</P> <P ALIGN="JUSTIFY">Textron typically finances foreign acquisitions with domestic borrowings. Such borrowings are <BR> typically converted synthetically into foreign currency borrowings by means of foreign currency <BR> exchange agreements. Under the terms of the agreements, Textron is obligated to make floating <BR> rate foreign currency interest payments to the counterparties, and the counterparties, in turn, are <BR> obligated to make floating rate US dollar interest payments to Textron. These payments are <BR> recorded as an adjustment to interest expense. In June 1999, Textron entered into fixed rate <BR> interest rate exchange agreements to fix the interest rate on the above-noted foreign currency <BR> exchange agreements and other floating rate debt. The purpose of the fixed rate interest rate <BR> exchange agreements, which all mature by March 21, 2000, is to insulate Textron against higher <BR> floating rate interest rates around year end 1999. The fixed rate interest rate exchange <BR> agreements have the following notional principal amounts: $323 million in euros; $352 million <BR> in British Pound sterling; and, $437 million in US dollars.</P> <P ALIGN="JUSTIFY">Textron Manufacturing's debt to total capital ratio was 9% at July 3, 1999, down from 43% at <BR> year end.</P> <P ALIGN="JUSTIFY">A summary of credit line facilities is as follows:</P> <TABLE BORDER CELLSPACING=1 CELLPADDING=2 WIDTH=662> <TR><TD WIDTH="33%" VALIGN="TOP"> <P><B>Credit Facilities</B></TD> <TD WIDTH="16%" VALIGN="TOP"> <P> </TD> <TD WIDTH="16%" VALIGN="TOP"> <P> </TD> <TD WIDTH="3%" VALIGN="TOP"> <P> </TD> <TD WIDTH="16%" VALIGN="TOP"> <P> </TD> <TD WIDTH="16%" VALIGN="TOP"> <P> </TD> </TR> <TR><TD WIDTH="33%" VALIGN="TOP"> <P> </TD> <TD WIDTH="32%" VALIGN="TOP" COLSPAN=2> <P ALIGN="CENTER">Textron Manufacturing</TD> <TD WIDTH="3%" VALIGN="TOP"> <P> </TD> <TD WIDTH="32%" VALIGN="TOP" COLSPAN=2> <P ALIGN="CENTER">Textron Finance</TD> </TR> <TR><TD WIDTH="33%" VALIGN="TOP"> <P><BR> (in millions)</TD> <TD WIDTH="16%" VALIGN="TOP"> <P ALIGN="CENTER">January 2,<BR> 1999</TD> <TD WIDTH="16%" VALIGN="TOP"> <P ALIGN="CENTER">July 3,<BR> 1999</TD> <TD WIDTH="3%" VALIGN="TOP"> <P> </TD> <TD WIDTH="16%" VALIGN="TOP"> <P ALIGN="CENTER">December 31,<BR> 1998</TD> <TD WIDTH="16%" VALIGN="TOP"> <P ALIGN="CENTER">June 30,<BR> 1999</TD> </TR> <TR><TD WIDTH="33%" VALIGN="TOP"> <P>Total lines</TD> <TD WIDTH="16%" VALIGN="TOP"> <P ALIGN="RIGHT">$2,755</TD> <TD WIDTH="16%" VALIGN="TOP"> <P ALIGN="RIGHT">$1,273</TD> <TD WIDTH="3%" VALIGN="TOP"> <P> </TD> <TD WIDTH="16%" VALIGN="TOP"> <P ALIGN="RIGHT">$1,200</TD> <TD WIDTH="16%" VALIGN="TOP"> <P ALIGN="RIGHT">$1,200</TD> </TR> <TR><TD WIDTH="33%" VALIGN="TOP"> <P>Amount available</TD> <TD WIDTH="16%" VALIGN="TOP"> <P ALIGN="RIGHT">1,084</TD> <TD WIDTH="16%" VALIGN="TOP"> <P ALIGN="RIGHT">1,129</TD> <TD WIDTH="3%" VALIGN="TOP"> <P> </TD> <TD WIDTH="16%" VALIGN="TOP"> <P ALIGN="RIGHT">114</TD> <TD WIDTH="16%" VALIGN="TOP"> <P ALIGN="RIGHT">16</TD> </TR> </TABLE> <P ALIGN="JUSTIFY">At July 3, 1999, Textron had $311 million available under its shelf registration statement with <BR> the Securities and Exchange Commission. Early in the third quarter Textron issued $300 <BR> million of 6-3/8% senior notes which mature in 2004. The proceeds from the sale of notes will <BR> be used for general corporate purposes. On August 5, Textron filed a shelf registration statement <BR> with the Securities and Exchange Commission registering up to $2 billion in common stock, <BR> preferred stock and debt securities of Textron and preferred securities of trusts sponsored by Textron.</P> <P ALIGN="JUSTIFY">During the first six months of 1999, Textron Finance increased its medium-term note facility by <BR> $250 million and issued $605 million under the facility. $25 million was available under the <BR> facility at June 30, 1999.</P> <P ALIGN="JUSTIFY">During the first six months of 1999, Textron repurchased 6.1 million shares of common <BR> stock under its Board authorized share repurchase program at an aggregate cost of $460 million.</P> <P ALIGN="JUSTIFY">During the first half of 1999, Textron acquired six companies and commenced two joint <BR> ventures. The total cost of the acquisitions and investment in joint ventures was approximately <BR> $335 million. The following is a brief description of these acquisitions and joint ventures:</P> <UL> <P ALIGN="JUSTIFY"><LI>Flexalloy, Inc., a provider of vendor managed inventory services for the North American <BR> fastener market;</LI></P> <P ALIGN="JUSTIFY"><LI>LCI Corporation International's Fluid Systems Division, a manufacturer and assembler of <BR> gear pumps, filtration systems and accessory equipment for the polymer, extrusion and <BR> industrial pump industry.</LI></P> <P ALIGN="JUSTIFY"><LI>Energy Manufacturing Inc. and Williams Machine & Tool Co., manufacturers of welded <BR> hydraulic cylinders, valves, pumps and reservoirs for the agriculture, construction, waste <BR> handling and truck equipment industries, and other industries utilizing hoist and material <BR> handling technology.</LI></P> <P ALIGN="JUSTIFY"><LI>Alstom Gears, a UK based leading supplier of components, systems and services to the <BR> energy and transport infrastructure markets.</LI></P> <P ALIGN="JUSTIFY"><LI>Textron Finance acquired an amusement park and carnival receivable portfolio from <BR> Southern Capital Corporation.</LI></P> <P ALIGN="JUSTIFY"><LI>A joint venture was entered with Breed Technologies, Inc. and Italy-based Magneti Marelli <BR> S.p.A. The joint venture was formed to design, develop and manufacture instrument panels, <BR> bumpers, and exterior and interior trim for Fiat.</LI></P> <P ALIGN="JUSTIFY"><LI>The Textron Fastening Systems/Tri-Star Corp. Limited., joint venture was formed in 1998 <BR> with Taiwan-based San Shing Hardware Works Company to manufacture internally threaded <BR> nuts. The joint venture commenced operations in 1999.</LI></P></UL> <P ALIGN="JUSTIFY">On July 9, 1999 Textron Finance purchased a specialty finance company, RFC Capital <BR> Corporation, that serves the commercial customers in the telecommunications industry.</P> <P ALIGN="JUSTIFY"> </P> <P ALIGN="JUSTIFY">Management believes that Textron will continue to have adequate access to credit markets and <BR> that its credit facilities, cash flows from operations and proceeds from the sale of AFS, will <BR> continue to be more than sufficient to meet its operating needs and to finance growth.</P> <B><P>Year 2000 Readiness Disclosure</P> <P>Introduction</P> </B><P ALIGN="JUSTIFY">Much of the world's computer hardware and software is not designed to process date information <BR> after 1999. This is largely because computer programs have historically used only two digits to <BR> identify the year in a date, but problems related to processing of date information also may arise <BR> because some software assigns special meaning to certain dates. This Year 2000 problem could, <BR> if uncorrected, cause computers and other equipment used and manufactured by Textron and <BR> Textron's suppliers and customers to fail to operate properly.</P> <B><P>Year 2000 Program</P> </B><P ALIGN="JUSTIFY">In early 1997, Textron began a company-wide program (the "Program") to assess the possible <BR> vulnerability of Textron to the Year 2000 problem and to minimize the effect of the problem on <BR> Textron's operations. The Program is centrally directed from the Year 2000 Program Office at <BR> Textron's corporate headquarters and is executed at each Textron business unit. The Program <BR> addresses five "Major Elements" at the corporate headquarters and each business unit:</P> <UL> <P ALIGN="JUSTIFY"><LI>Business Systems: management information systems and personal computer applications, <BR> including the computing environments that support them.</LI></P> <P ALIGN="JUSTIFY"><LI>Factory and Facilities Equipment: equipment that uses a computer to control its operation <BR> either for producing an end-product or providing services.</LI></P> <P ALIGN="JUSTIFY"><LI>End-Products: software products, delivered either alone or as a component of another <BR> product, that are supplied to Textron customers.</LI></P> <P ALIGN="JUSTIFY"><LI>Suppliers: assurance that those who sell goods and services to Textron will not interrupt <BR> Textron operations due to the Year 2000 problem.</LI></P> <P ALIGN="JUSTIFY"><LI>Customers: assurance that those who buy goods and services from Textron will not interrupt <BR> Textron operations due to the Year 2000 problem.</LI></P></UL> <P ALIGN="JUSTIFY">For each of the Major Elements, the Program measures five "Readiness Levels":</P> <TABLE CELLSPACING=0 BORDER=0 CELLPADDING=7 WIDTH=666> <TR><TD WIDTH="22%" VALIGN="TOP"> <P>Level I)</TD> <TD WIDTH="78%" VALIGN="TOP"> <P>Management has become aware of the issue. An inventory is being taken of <BR> the items that the Year 2000 problem may affect.</TD> </TR> <TR><TD WIDTH="22%" VALIGN="TOP"> <P>Level II)</TD> <TD WIDTH="78%" VALIGN="TOP"> <P>The inventory of Year 2000 items has been completed. The priority of each <BR> item is being assessed. Actions are being planned to assure that each item is <BR> ready for the Year 2000. Resources are being committed to do the work.</TD> </TR> <TR><TD WIDTH="22%" VALIGN="TOP"> <P>Level III)</TD> <TD WIDTH="78%" VALIGN="TOP"> <P>Planning has been completed. The prescribed actions are being performed, <BR> including testing to verify that the actions are effective. Suppliers and <BR> customers are being surveyed and their progress is being tracked.</TD> </TR> <TR><TD WIDTH="22%" VALIGN="TOP"> <P>Level IV)</TD> <TD WIDTH="78%" VALIGN="TOP"> <P>Items critical to operations have been remediated and have been put in normal <BR> operation. Surveys of critical suppliers and customers have been completed. <BR> Core business systems continue to be tested. Follow-up checking of suppliers <BR> and customers is in process. Contingency plans are being prepared. Audits to <BR> verify readiness are being performed. Remediation of items that are important <BR> to operations, but not critical, is being performed.</TD> </TR> <TR><TD WIDTH="22%" VALIGN="TOP"> <P>Level V)</TD> <TD WIDTH="78%" VALIGN="TOP"> <P>Systems critical to operations have been tested. Audits and associated <BR> corrective actions have been completed. Contingency plans have been <BR> completed. Follow-up checking of suppliers and customers is continuing. In <BR> all material respects, Textron is ready for Year 2000.</TD> </TR> </TABLE> <P ALIGN="JUSTIFY">Textron has substantially reached Readiness Level V. Based on information currently available, <BR> Textron estimates that it will achieve full Readiness Level V by September 30, 1999. In <BR> addition, Textron has reached full Readiness Level IV, except for fifteen projects that are <BR> expected to be complete by September 30, 1999. Textron has had a combination of independent <BR> parties and Textron personnel complete an assessment of the implementation of the Program at <BR> the corporate headquarters and each business unit. As of June 30, 1999, twenty-nine of thirty <BR> planned assessments are complete and the last one is expected to be complete in July.</P> <P ALIGN="JUSTIFY">The Readiness Level of the Major Elements items that have been inventoried as of June 30, 1999 <BR> is shown in the following table. Major Element inventories are under continuous review and <BR> additional items may be identified in the future. For the Major Elements of "Suppliers" and <BR> "Customers" the indicated Readiness Level refers to Textron's progress in reviewing the <BR> readiness of customers and suppliers, and not to Textron's assessment of their readiness.</P> <TABLE BORDER CELLSPACING=1 CELLPADDING=7 WIDTH=643> <TR><TD WIDTH="39%" VALIGN="TOP" HEIGHT=16> <P>Major Element</TD> <TD WIDTH="61%" VALIGN="TOP" COLSPAN=7 HEIGHT=16> <P ALIGN="CENTER">Percent of Identified Major Element Items<BR> at Readiness Level</TD> </TR> <TR><TD WIDTH="39%" VALIGN="TOP" HEIGHT=16><P></P></TD> <TD WIDTH="13%" VALIGN="TOP" HEIGHT=16> <P ALIGN="CENTER">II</TD> <TD WIDTH="6%" VALIGN="TOP" HEIGHT=16><P></P></TD> <TD WIDTH="11%" VALIGN="TOP" HEIGHT=16> <P ALIGN="CENTER">III</TD> <TD WIDTH="6%" VALIGN="TOP" HEIGHT=16><P></P></TD> <TD WIDTH="11%" VALIGN="TOP" HEIGHT=16> <P ALIGN="CENTER">IV</TD> <TD WIDTH="5%" VALIGN="TOP" HEIGHT=16><P></P></TD> <TD WIDTH="9%" VALIGN="TOP" HEIGHT=16> <P ALIGN="CENTER">V</TD> </TR> <TR><TD WIDTH="39%" VALIGN="TOP"> <P> </TD> <TD WIDTH="13%" VALIGN="TOP"> <P> </TD> <TD WIDTH="6%" VALIGN="TOP"> <P> </TD> <TD WIDTH="11%" VALIGN="TOP"> <P> </TD> <TD WIDTH="6%" VALIGN="TOP"> <P> </TD> <TD WIDTH="11%" VALIGN="TOP"> <P> </TD> <TD WIDTH="5%" VALIGN="TOP"> <P> </TD> <TD WIDTH="9%" VALIGN="TOP"> <P> </TD> </TR> <TR><TD WIDTH="39%" VALIGN="TOP"> <P>Business Systems</TD> <TD WIDTH="13%" VALIGN="TOP"> <P ALIGN="RIGHT">0%</TD> <TD WIDTH="6%" VALIGN="TOP"> <P> </TD> <TD WIDTH="11%" VALIGN="TOP"> <P ALIGN="RIGHT">1%</TD> <TD WIDTH="6%" VALIGN="TOP"> <P> </TD> <TD WIDTH="11%" VALIGN="TOP"> <P ALIGN="RIGHT">9%</TD> <TD WIDTH="5%" VALIGN="TOP"> <P> </TD> <TD WIDTH="9%" VALIGN="TOP"> <P ALIGN="RIGHT">90%</TD> </TR> <TR><TD WIDTH="39%" VALIGN="TOP"> <P>Factory and Facilities Equipment</TD> <TD WIDTH="13%" VALIGN="TOP"> <P ALIGN="RIGHT">0%</TD> <TD WIDTH="6%" VALIGN="TOP"> <P> </TD> <TD WIDTH="11%" VALIGN="TOP"> <P ALIGN="RIGHT">0%</TD> <TD WIDTH="6%" VALIGN="TOP"> <P> </TD> <TD WIDTH="11%" VALIGN="TOP"> <P ALIGN="RIGHT">5%</TD> <TD WIDTH="5%" VALIGN="TOP"> <P> </TD> <TD WIDTH="9%" VALIGN="TOP"> <P ALIGN="RIGHT">95%</TD> </TR> <TR><TD WIDTH="39%" VALIGN="TOP"> <P>End-Products</TD> <TD WIDTH="13%" VALIGN="TOP"> <P ALIGN="RIGHT">0%</TD> <TD WIDTH="6%" VALIGN="TOP"> <P> </TD> <TD WIDTH="11%" VALIGN="TOP"> <P ALIGN="RIGHT">0%</TD> <TD WIDTH="6%" VALIGN="TOP"> <P> </TD> <TD WIDTH="11%" VALIGN="TOP"> <P ALIGN="RIGHT">0%</TD> <TD WIDTH="5%" VALIGN="TOP"> <P> </TD> <TD WIDTH="9%" VALIGN="TOP"> <P ALIGN="RIGHT">100%</TD> </TR> <TR><TD WIDTH="39%" VALIGN="TOP"> <P>Suppliers</TD> <TD WIDTH="13%" VALIGN="TOP"> <P ALIGN="RIGHT">0%</TD> <TD WIDTH="6%" VALIGN="TOP"> <P> </TD> <TD WIDTH="11%" VALIGN="TOP"> <P ALIGN="RIGHT">2%</TD> <TD WIDTH="6%" VALIGN="TOP"> <P> </TD> <TD WIDTH="11%" VALIGN="TOP"> <P ALIGN="RIGHT">21%</TD> <TD WIDTH="5%" VALIGN="TOP"> <P> </TD> <TD WIDTH="9%" VALIGN="TOP"> <P ALIGN="RIGHT">77%</TD> </TR> <TR><TD WIDTH="39%" VALIGN="TOP"> <P>Customers</TD> <TD WIDTH="13%" VALIGN="TOP"> <P ALIGN="RIGHT">0%</TD> <TD WIDTH="6%" VALIGN="TOP"> <P> </TD> <TD WIDTH="11%" VALIGN="TOP"> <P ALIGN="RIGHT">11%</TD> <TD WIDTH="6%" VALIGN="TOP"> <P> </TD> <TD WIDTH="11%" VALIGN="TOP"> <P ALIGN="RIGHT">37%</TD> <TD WIDTH="5%" VALIGN="TOP"> <P> </TD> <TD WIDTH="9%" VALIGN="TOP"> <P ALIGN="RIGHT">52%</TD> </TR> </TABLE> <B><P>Year 2000 Costs</P> </B><P ALIGN="JUSTIFY">The total cost of the Year 2000 Program for continuing operations is estimated to be <BR> approximately $118 million. Approximately $62 million is for modifications to existing items <BR> and other program expenses and $56 million is for replacement systems which have been or are <BR> expected to be capitalized in accordance with Company policy. Through July 3, 1999, total <BR> expenditures were $95 million. The estimated future cost to complete the Program is expected to <BR> be approximately $23 million including approximately $9 million for replacement systems. <BR> Funds for the Program are provided from special project appropriations totaling approximately <BR> $24 million and from normal operating and capital budgets. The Year 2000 Program has delayed <BR> certain other Textron information management projects. Delay of these projects is not expected <BR> to have an adverse impact on Textron.</P> <B><P>Risks and Contingency Plans</P> </B><P ALIGN="JUSTIFY">Year 2000 issues have the potential, if not remediated, to severely disrupt Textron's business <BR> operations and to adversely affect Textron's financial condition. The Year 2000 Program is <BR> expected to significantly reduce Textron's exposure to these issues, particularly with respect to <BR> Textron's Business Systems, Factory & Facilities Equipment, and End-Products. However, it is <BR> possible that unanticipated problems may arise in the course of Textron's implementation of the <BR> Year 2000 Program. In addition, while monitoring of Year 2000 readiness by Textron's <BR> suppliers and customers is a major part of the Year 2000 Program, Textron has very limited <BR> ability to ensure Year 2000 readiness by such parties. Textron could also be affected by failure of <BR> government agencies, in the U.S. and elsewhere, to maintain governmental services that are <BR> essential to Textron's operations. Textron cannot identify all possible scenarios. However, the <BR> most reasonably likely worst case scenario would be the inability of third parties, including <BR> utilities, to deliver supplies and services that are critical to Textron's operations and that could <BR> not quickly be replaced by other suppliers or internally. In such situation, operations at the <BR> affected Textron facilities could be interrupted, with adverse effects on Textron's financial <BR> results.</P> <P ALIGN="JUSTIFY">Contingency plans to cover situations in which Year 2000 problems arise despite Textron's <BR> efforts are substantially ready. Textron is monitoring the Year 2000 readiness of critical <BR> suppliers and has identified qualified alternate suppliers that can be substituted if necessary. <BR> Also, Textron is prepared to increase certain inventories prior to the end of 1999 if necessary to <BR> assure timely deliveries to critical customers. Textron has established procedures to curtail and, <BR> if necessary, shut down production at operations affected by disruptions in services provided by <BR> utilities. Textron is preparing facilities, procedures and alternate utility sources to support critical <BR> communications if there are disruptions in normal communications services.</P> <P ALIGN="JUSTIFY">Forward-looking statements contained in this report relating to Year 2000 issues, including <BR> expectations of readiness, possible effects on Textron and similar matters, are subject to the risks <BR> described in this section.</P> <B><P ALIGN="JUSTIFY">Results of Operations - Three months ended July 3, 1999 vs Three months ended July 4, 1998</P> </B><P ALIGN="JUSTIFY">Diluted earnings per share from continuing operations in the second quarter of 1999 were $1.05 <BR> per share, up 50% from the 1998 amount of $0.70. Income from continuing operations in 1999 <BR> of $162 million was up 40% from $116 million in 1998. Revenues increased 16% to $2.9 billion <BR> in 1999 from $2.5 billion in 1998. Net income was $162 million vs $164 million in 1998, which <BR> included $48 million from a discontinued operation.</P> <P ALIGN="JUSTIFY">The <B>Aircraft segment's</B> revenues increased $27 million (3%), while income decreased $16 <BR> million (18%). Cessna Aircraft's revenues increased $76 million as a result of higher sales of <BR> business jets, primarily the Citation Excel, and higher single engine aircraft sales. Its income <BR> decreased slightly as the contribution from the higher sales was more than offset by lower <BR> margins on increased international sales, higher manufacturing costs associated with the ramp-up <BR> in production of new aircraft, and increased new product development expense related to the <BR> Citation CJ2. Bell Helicopter's revenues decreased $49 million due to lower commercial and U. <BR> S. Government helicopter sales, partially offset by higher U. S. Government revenues on the V-<BR> 22 production contract and the Huey and Cobra upgrade contracts. Bell's income decreased due <BR> to the lower revenues, a change in product mix reflecting lower margins on commercial and U. <BR> S. Government helicopter sales, and higher expenses related to new product development. This <BR> unfavorable impact was partially offset by the recognition into income ($9 million) of cash <BR> received in the fourth quarter of 1998 on the formation of a joint venture on the 609 program.</P> <P ALIGN="JUSTIFY">The <B>Automotive segment's</B> revenues increased $174 million (30%), while income increased $19 <BR> million (44%). The increase in revenues was due primarily to higher volume at Kautex <BR> associated with capacity expansion in North America and higher sales at Trim, reflecting <BR> increased DaimlerChrysler and General Motors production. The increase in revenues also <BR> reflected the benefit of acquisitions. Despite customer price reductions, income increased due to <BR> the contribution from higher organic sales and improved performance at Trim and Kautex.</P> <P ALIGN="JUSTIFY">The <B>Industrial segment's</B> revenues and income increased $189 million (20%) and $25 million <BR> (23%), respectively. These increases reflected the contribution from acquisitions, primarily <BR> David Brown, Ring Screw Works and Flexalloy, and higher organic sales in the Golf and Turf <BR> business, combined with ongoing margin improvement. In addition, second quarter 1998 results <BR> were depressed by a one-month strike at Textron's Jacobsen plant and a strike at General Motors. <BR> These benefits were partially offset by the divestiture of Fuel Systems in the second quarter 1998 <BR> and lower organic sales in the Fluid & Power Systems Group.</P> <P ALIGN="JUSTIFY">The <B>Finance segment's</B> revenues increased $13 million (14%), while income increased $3 <BR> million (11%). Revenues increased due to a higher level of average receivables and an increase <BR> in servicing fee income, partially offset by lower yields on receivables and a decrease in <BR> operating lease revenues. Income increased as the benefit of higher revenues more than offset <BR> higher expenses related to growth in the service and fee-related business and a higher provision <BR> for loan losses related to the equipment finance portfolio.</P> <B><P ALIGN="JUSTIFY">Special charges (credits) - </B>in the second quarter of 1999, Textron reassessed the remaining <BR> actions anticipated in the special charge recorded in the second quarter of 1998 and determined <BR> that certain projects should be delayed or canceled while other provisions were no longer <BR> necessary. Specifically, provisions for severance and exit costs associated with the decision to <BR> exit certain automotive product lines were no longer required due to a decision to build different <BR> products in a plant originally anticipated to be closed. In the Industrial Segment, certain cost <BR> reduction programs in the Fluid and Power Systems Group have been suspended as a result of <BR> management's evaluation of the opportunities presented by the David Brown acquisition. Some <BR> smaller programs have been delayed as Textron re-examines strategic alternatives. Others were <BR> completed at costs less than originally anticipated.</P> <P ALIGN="JUSTIFY">Concurrently, Textron initiated a series of new cost reduction efforts in the Industrial Segment <BR> designed to significantly reduce headcount from levels at the beginning of the year. Significant <BR> actions include the downsizing of an underperforming plant in Europe and targeted headcount <BR> reductions across all Industrial divisions. Headcount reductions were also effected at Bell <BR> Helicopter.</P> <P ALIGN="JUSTIFY">As a result of the above, in the second quarter Textron reversed approximately $24 million of <BR> reserves no longer deemed necessary for the 1998 programs and recorded a provision of <BR> approximately $21 million for severance and write downs of approximately $5 million for <BR> impaired assets. Textron continues to evaluate additional programs and expects cost reduction <BR> efforts to continue over the next year. Additional charges may be required in the future when <BR> such programs become finalized.</P> <B><P ALIGN="JUSTIFY">Interest income and expense - net</B> for Textron manufacturing decreased $39 million as a result <BR> of the proceeds received in January 1999 from the divestiture of Avco Financial Services. <BR> Interest income increased $6 million, as a result of Textron's net investment position, while <BR> interest expense decreased $33 million due to a lower level of average debt, resulting from the <BR> pay down of debt with the Avco Financial Services proceeds.</P> <B><P ALIGN="JUSTIFY">Income taxes -</B> the current quarter's effective income tax rate of 36.5% was lower than the <BR> corresponding prior year rate of 41.1%, due primarily to the nontax deductibility of goodwill <BR> related to the second quarter 1998 divestiture of Fuel Systems Textron and the benefit of tax <BR> planning initiatives that are being realized in 1999.</P> <B><P ALIGN="JUSTIFY">Results of Operations - Six months ended July 3, 1999 vs Six months ended July 4, 1998</P> </B><P ALIGN="JUSTIFY">Diluted earnings per share from continuing operations in the first half of 1999 were $1.98 per <BR> share, up 53% from the 1998 amount of $1.29. Income from continuing operations in 1999 of <BR> $307 million was up 43% from $215 million in 1998. Revenues increased 19% to $5.6 billion in <BR> 1999 from $4.7 billion in 1998.</P> <P ALIGN="JUSTIFY">In August, 1998, Textron announced that it had reached an agreement to sell Avco Financial <BR> Services (AFS) to Associates First Capital Corporation for $3.9 billion in cash. The sale of AFS <BR> was completed on January 6, 1999 and a gain of $1.62 billion on the sale of AFS was recorded in <BR> the first quarter 1999. Textron also recorded an extraordinary loss of $43 million on the early <BR> retirement of debt in the first quarter 1999. Net income, including the gain and extraordinary <BR> loss, was $1.88 billion vs $306 million in 1998, which included $91 million from a discontinued <BR> operation.</P> <P ALIGN="JUSTIFY">The <B>Aircraft segment's</B> revenues increased $198 million (13%) while income decreased $10 <BR> million (7%). Cessna's revenues increased $192 million as a result of higher sales of business <BR> jets, primarily the Citation Excel and the Citation X, and higher single engine aircraft sales. Its <BR> income increased as a result of the higher sales, partially offset by lower margins on increased <BR> fleet and international sales, higher manufacturing costs associated with the ramp-up in <BR> production of new aircraft and increased new product development expense related to the <BR> Citation CJ2. Bell Helicopter's revenues increased $6 million, due primarily to higher revenues <BR> on the V-22 production contract and the Huey and Cobra upgrade contracts, partially offset by <BR> lower commercial and U. S. Government helicopter sales. Bell's income decreased due <BR> primarily to a change in product mix reflecting lower margins on commercial and U. S. <BR> Government helicopter sales and higher expenses related to new product development. This <BR> unfavorable impact was partially offset by the recognition into income ($18 million) of cash <BR> received in the fourth quarter of 1998 on the formation of a joint venture on the 609 program.</P> <P ALIGN="JUSTIFY">The <B>Automotive segment's</B> revenues increased $290 million (24%), while income increased $25 <BR> million (25%). The increase in revenues was due primarily to higher volume at Kautex <BR> associated with capacity expansion in North America and higher sales at Trim, reflecting <BR> increased DaimlerChrysler and General Motors production. The increase in revenues also <BR> reflected the benefit of acquisitions. Despite customer price reductions, income increased due to <BR> the contribution from higher organic sales and improved performance at Trim and Kautex.</P> <P ALIGN="JUSTIFY">The <B>Industrial segment's</B> revenues and income increased $388 million (21%) and $52 million <BR> (26%), respectively. These increases reflected the contribution from acquisitions, primarily <BR> David Brown, Ring Screw Works, Ransomes, Sukosim and Flexalloy, and higher organic sales <BR> in the Golf and Turf and Fluid & Power Systems businesses, combined with ongoing margin <BR> improvement. In addition, 1998 results were depressed by a one-month strike at Textron's <BR> Jacobsen plant and a strike at General Motors. These benefits were partially offset by the <BR> divestiture of Fuel Systems in the second quarter 1998 and lower organic sales in Textron <BR> Fastening Systems and Industrial Components.</P> <P ALIGN="JUSTIFY">The <B>Finance segment's</B> revenues increased $24 million (14%), while income increased $4 <BR> million (8%). Revenues increased due to a higher level of average receivables and an increase in <BR> servicing fee and syndication income, partially offset by lower yields on receivables and a <BR> decrease in operating lease revenues. Income increased as the benefit of higher revenues more <BR> than offset higher expenses related to growth in the service and fee-related business and a higher <BR> provision for loan losses related to the equipment finance portfolio.</P> <B><P ALIGN="JUSTIFY">Interest income and expense - net</B> for Textron manufacturing decreased $75 million as a result <BR> of the proceeds received in January 1999 from the divestiture of Avco Financial Services. <BR> Interest income increased $22 million, as a result of Textron's net investment position, while <BR> interest expense decreased $53 million due to a lower level of average debt, resulting from the <BR> pay down of debt with the Avco Financial Services proceeds.</P> <B><P ALIGN="JUSTIFY">Income taxes -</B> the effective income tax rate of 37.0% for the first half of 1999 was lower than <BR> the corresponding prior year rate of 39.8%, due primarily to the nontax deductibility of goodwill <BR> related to the second quarter 1998 divestiture of Fuel Systems Textron and the benefit of tax <BR> planning initiatives that are being realized in 1999.</P> <I><P ALIGN="JUSTIFY">Forward-looking Information: Certain statements in this Report, and other oral and written <BR> statements made by Textron from time to time, are forward-looking statements, including those <BR> that discuss strategies, goals, outlook or other non-historical matters; or project revenues, <BR> income, returns or other financial measures. These forward-looking statements are subject to <BR> risks and uncertainties that may cause actual results to differ materially from those contained in <BR> the statements, including the following: (a) the extent which Textron is able to successfully <BR> integrate acquisitions, (b) changes in worldwide economic and political conditions and <BR> associated impact on interest and foreign exchange rates, (c) the occurrence of work stoppages <BR> and strikes at key facilities of Textron or Textron's customers or suppliers, (d) the extent to which <BR> the Company is able to successfully develop, introduce, and launch new products and enter new <BR> markets, (e) the level of government funding for Textron products and (f) Textron's ability to <BR> complete Year 2000 conversion without unexpected complications and the ability of its suppliers <BR> and customers to successfully modify their own programs. For the Aircraft Segment: (a) the <BR> timing of certifications of new aircraft products and (b) the occurrence of a severe downturn in <BR> the U.S. economy that discourages businesses from purchasing business jets. For the Automotive <BR> Segment: (a) the level of consumer demand for the vehicle models for which Textron supplies <BR> parts to automotive original equipment manufacturers ("OEM's") and (b) the ability to offset, <BR> through cost reductions, pricing pressure brought by automotive OEM customers. For the <BR> Industrial Segment: the ability of Textron Fastening Systems to offset, through cost reductions, <BR> pricing pressure brought by automotive OEM customers. For the Finance Segment: (a) the level <BR> of sales of Textron products for which TFC offers financing and (b) the ability of TFC to <BR> maintain credit quality and control costs when entering new markets. </P> </I><B><P> </P><DIR> <DIR> <DIR> <P>Item 3.	<U>QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET </U>	<U>RISK</P></DIR> </DIR> </DIR> </B></U><P ALIGN="JUSTIFY">There has not been a material change in the Quantitative Risk Measure information disclosed in <BR> the April 3, 1999 Form 10-Q.</P> <I><P ALIGN="JUSTIFY"> </P> </I><B><P ALIGN="CENTER">PART II. OTHER INFORMATION</P></B> <TABLE CELLSPACING=0 BORDER=0 CELLPADDING=7 WIDTH=685> <TR><TD WIDTH="12%" VALIGN="TOP"> <P ALIGN="JUSTIFY">Item 1.</TD> <TD WIDTH="88%" VALIGN="TOP" COLSPAN=9> <U><P>LEGAL PROCEEDINGS</U></TD> </TR> <TR><TD WIDTH="12%" VALIGN="TOP"> <P> </TD> <TD WIDTH="88%" VALIGN="TOP" COLSPAN=9> <P>Textron Automotive's Rantoul, IL plant is the subject of an enforcement action before <BR> the U.S. Environmental Protection Agency, Region V (Chicago), in connection with <BR> the plant's air permits. The plant is alleged to have exceeded the allowable volatile <BR> organic compound content limit contained in its permits with respect to certain <BR> coatings used in its painting operations. The EPA has indicated that it may propose a <BR> civil penalty in the amount of $187,000.</TD> </TR> <TR><TD WIDTH="12%" VALIGN="TOP"> <P ALIGN="JUSTIFY">Item 4.</TD> <TD WIDTH="88%" VALIGN="TOP" COLSPAN=9> <U><P>SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS</U></TD> </TR> <TR><TD WIDTH="12%" VALIGN="TOP"> <P> </TD> <TD WIDTH="88%" VALIGN="TOP" COLSPAN=9> <P>At Textron's annual meeting of shareholders held on April 28, 1999, the following <BR> items were voted upon:</TD> </TR> <TR><TD WIDTH="12%" VALIGN="TOP"> <P> </TD> <TD WIDTH="9%" VALIGN="TOP"> <P>1.</TD> <TD WIDTH="79%" VALIGN="TOP" COLSPAN=8> <P>The following persons were elected to serve as directors in Class III for three year <BR> terms expiring in 2002 and received the votes listed.</TD> </TR> <TR><TD WIDTH="12%" VALIGN="TOP"> <P> </TD> <TD WIDTH="9%" VALIGN="TOP"> <P> </TD> <TD WIDTH="28%" VALIGN="TOP" COLSPAN=4> <U><P>Name</U></TD> <TD WIDTH="12%" VALIGN="TOP" COLSPAN=2> <U><P ALIGN="CENTER">For</U></TD> <TD WIDTH="39%" VALIGN="TOP" COLSPAN=2> <U><P ALIGN="CENTER">Withheld</U></TD> </TR> <TR><TD WIDTH="12%" VALIGN="TOP"> <P> </TD> <TD WIDTH="9%" VALIGN="TOP"> <P> </TD> <TD WIDTH="28%" VALIGN="TOP" COLSPAN=4> <P>H. Jesse Arnelle</TD> <TD WIDTH="12%" VALIGN="TOP" COLSPAN=2> <P ALIGN="CENTER">128,514,141</TD> <TD WIDTH="39%" VALIGN="TOP" COLSPAN=2> <P ALIGN="CENTER">2,505,428</TD> </TR> <TR><TD WIDTH="12%" VALIGN="TOP"> <P> </TD> <TD WIDTH="9%" VALIGN="TOP"> <P> </TD> <TD WIDTH="28%" VALIGN="TOP" COLSPAN=4> <P>John D. Macomber</TD> <TD WIDTH="12%" VALIGN="TOP" COLSPAN=2> <P ALIGN="CENTER">128,745,998</TD> <TD WIDTH="39%" VALIGN="TOP" COLSPAN=2> <P ALIGN="CENTER">2,273,571</TD> </TR> <TR><TD WIDTH="12%" VALIGN="TOP"> <P> </TD> <TD WIDTH="9%" VALIGN="TOP"> <P> </TD> <TD WIDTH="28%" VALIGN="TOP" COLSPAN=4> <P>Brian H. Rowe</TD> <TD WIDTH="12%" VALIGN="TOP" COLSPAN=2> <P ALIGN="CENTER">128,689,318</TD> <TD WIDTH="39%" VALIGN="TOP" COLSPAN=2> <P ALIGN="CENTER">2,330,251</TD> </TR> <TR><TD WIDTH="12%" VALIGN="TOP"> <P> </TD> <TD WIDTH="9%" VALIGN="TOP"> <P> </TD> <TD WIDTH="28%" VALIGN="TOP" COLSPAN=4> <P>Sam F. Segnar</TD> <TD WIDTH="12%" VALIGN="TOP" COLSPAN=2> <P ALIGN="CENTER">128,737,680</TD> <TD WIDTH="39%" VALIGN="TOP" COLSPAN=2> <P ALIGN="CENTER">2,281,889</TD> </TR> <TR><TD WIDTH="12%" VALIGN="TOP"> <P> </TD> <TD WIDTH="9%" VALIGN="TOP"> <P> </TD> <TD WIDTH="28%" VALIGN="TOP" COLSPAN=4> <P>Martin D. Walker</TD> <TD WIDTH="12%" VALIGN="TOP" COLSPAN=2> <P ALIGN="CENTER">128,712,437</TD> <TD WIDTH="39%" VALIGN="TOP" COLSPAN=2> <P ALIGN="CENTER">2,307,132</TD> </TR> <TR><TD WIDTH="12%" VALIGN="TOP"> <P> </TD> <TD WIDTH="9%" VALIGN="TOP"> <P> </TD> <TD WIDTH="79%" VALIGN="TOP" COLSPAN=8> <P>The following directors have terms of office which continued after the meeting: <BR> Teresa Beck, Lewis B. Campbell, R. Stuart Dickson, Lawrence K. Fish, Joe T. <BR> Ford, Paul E. Gagné, John A. Janitz, Dana G. Mead, Jean Head Sisco and <BR> Thomas B. Wheeler.</TD> </TR> <TR><TD WIDTH="12%" VALIGN="TOP"> <P> </TD> <TD WIDTH="9%" VALIGN="TOP"> <P>2.</TD> <TD WIDTH="79%" VALIGN="TOP" COLSPAN=8> <P>The adoption of the Textron 1999 Long-Term Incentive Plan was approved by <BR> the following vote:</TD> </TR> <TR><TD WIDTH="12%" VALIGN="TOP"> <P> </TD> <TD WIDTH="9%" VALIGN="TOP"> <P> </TD> <TD WIDTH="22%" VALIGN="TOP" COLSPAN=3> <U><P ALIGN="CENTER">For</U></TD> <TD WIDTH="12%" VALIGN="TOP" COLSPAN=2> <U><P ALIGN="CENTER">Against</U></TD> <TD WIDTH="17%" VALIGN="TOP" COLSPAN=2> <U><P ALIGN="CENTER">Abstain</U></TD> <TD WIDTH="28%" VALIGN="TOP"> <U><P ALIGN="CENTER">Broker Non-Votes</U></TD> </TR> <TR><TD WIDTH="12%" VALIGN="TOP"> <P> </TD> <TD WIDTH="9%" VALIGN="TOP"> <P> </TD> <TD WIDTH="22%" VALIGN="TOP" COLSPAN=3> <P ALIGN="CENTER">119,487,881</TD> <TD WIDTH="12%" VALIGN="TOP" COLSPAN=2> <P ALIGN="CENTER">8,278,978</TD> <TD WIDTH="17%" VALIGN="TOP" COLSPAN=2> <P ALIGN="CENTER">1,637,856</TD> <TD WIDTH="28%" VALIGN="TOP"> <P ALIGN="CENTER">1,614,854</TD> </TR> <TR><TD WIDTH="12%" VALIGN="TOP"> <P> </TD> <TD WIDTH="9%" VALIGN="TOP"> <P>3.</TD> <TD WIDTH="79%" VALIGN="TOP" COLSPAN=8> <P>The appointment of Ernst & Young LLP as Textron's independent auditors for <BR> 1999 was ratified by the following vote:</TD> </TR> <TR><TD WIDTH="12%" VALIGN="TOP"> <P> </TD> <TD WIDTH="9%" VALIGN="TOP"> <P> </TD> <TD WIDTH="22%" VALIGN="TOP" COLSPAN=3> <U><P ALIGN="CENTER">For</U></TD> <TD WIDTH="12%" VALIGN="TOP" COLSPAN=2> <U><P ALIGN="CENTER">Against</U></TD> <TD WIDTH="17%" VALIGN="TOP" COLSPAN=2> <U><P ALIGN="CENTER">Abstain</U></TD> <TD WIDTH="28%" VALIGN="TOP"> <U><P ALIGN="CENTER">Broker Non-Votes</U></TD> </TR> <TR><TD WIDTH="12%" VALIGN="TOP"> <P> </TD> <TD WIDTH="9%" VALIGN="TOP"> <P> </TD> <TD WIDTH="22%" VALIGN="TOP" COLSPAN=3> <P ALIGN="CENTER">128,480,078</TD> <TD WIDTH="12%" VALIGN="TOP" COLSPAN=2> <P ALIGN="CENTER">488,362</TD> <TD WIDTH="17%" VALIGN="TOP" COLSPAN=2> <P ALIGN="CENTER">2,051,129</TD> <TD WIDTH="28%" VALIGN="TOP"> <P ALIGN="CENTER">0</TD> </TR> <TR><TD WIDTH="12%" VALIGN="TOP"> <P> </TD> <TD WIDTH="9%" VALIGN="TOP"> <P>4.</TD> <TD WIDTH="79%" VALIGN="TOP" COLSPAN=8> <P>A shareholder proposal regarding Textron's foreign military sales was rejected by the <BR> following vote:</TD> </TR> <TR><TD WIDTH="12%" VALIGN="TOP"> <P> </TD> <TD WIDTH="9%" VALIGN="TOP"> <P> </TD> <TD WIDTH="22%" VALIGN="TOP" COLSPAN=3> <U><P ALIGN="CENTER">For</U></TD> <TD WIDTH="12%" VALIGN="TOP" COLSPAN=2> <U><P ALIGN="CENTER">Against</U></TD> <TD WIDTH="17%" VALIGN="TOP" COLSPAN=2> <U><P ALIGN="CENTER">Abstain</U></TD> <TD WIDTH="28%" VALIGN="TOP"> <U><P ALIGN="CENTER">Broker Non-Votes</U></TD> </TR> <TR><TD WIDTH="12%" VALIGN="TOP" HEIGHT=19><P></P></TD> <TD WIDTH="9%" VALIGN="TOP" HEIGHT=19><P></P></TD> <TD WIDTH="22%" VALIGN="TOP" COLSPAN=3 HEIGHT=19> <P ALIGN="CENTER">6,148,449</TD> <TD WIDTH="12%" VALIGN="TOP" COLSPAN=2 HEIGHT=19> <P ALIGN="CENTER">105,088,843</TD> <TD WIDTH="17%" VALIGN="TOP" COLSPAN=2 HEIGHT=19> <P ALIGN="CENTER">5,879,736</TD> <TD WIDTH="28%" VALIGN="TOP" HEIGHT=19> <P ALIGN="CENTER">13,902,541</TD> </TR> <TR><TD WIDTH="12%" VALIGN="TOP"> <P ALIGN="JUSTIFY">Item 6.</TD> <TD WIDTH="88%" VALIGN="TOP" COLSPAN=9> <U><P>EXHIBITS AND REPORTS ON FORM 8-K</U></TD> </TR> <TR><TD WIDTH="12%" VALIGN="TOP"> <P> </TD> <TD WIDTH="15%" VALIGN="TOP" COLSPAN=2> <P>(a)</TD> <TD WIDTH="73%" VALIGN="TOP" COLSPAN=7> <U><P>Exhibits</U></TD> </TR> <TR><TD WIDTH="12%" VALIGN="TOP"> <P> </TD> <TD WIDTH="15%" VALIGN="TOP" COLSPAN=2> <P> </TD> <TD WIDTH="10%" VALIGN="TOP"><DIR> <DIR> <P>10.1</DIR> </DIR> </TD> <TD WIDTH="63%" VALIGN="TOP" COLSPAN=6> <P>Amendment to Annual Incentive Compensation Plan for Textron Employees.</TD> </TR> <TR><TD WIDTH="12%" VALIGN="TOP"> <P> </TD> <TD WIDTH="15%" VALIGN="TOP" COLSPAN=2> <P> </TD> <TD WIDTH="10%" VALIGN="TOP"><DIR> <DIR> <P>10.2</DIR> </DIR> </TD> <TD WIDTH="63%" VALIGN="TOP" COLSPAN=6> <P>Amendment to Deferred Income Plan for Textron Key Executives.</TD> </TR> <TR><TD WIDTH="12%" VALIGN="TOP"> <P> </TD> <TD WIDTH="15%" VALIGN="TOP" COLSPAN=2> <P> </TD> <TD WIDTH="10%" VALIGN="TOP"><DIR> <DIR> <P>10.3</DIR> </DIR> </TD> <TD WIDTH="63%" VALIGN="TOP" COLSPAN=6> <P>Amendment to Supplemental Benefits Plan for Textron Key Executives.</TD> </TR> <TR><TD WIDTH="12%" VALIGN="TOP"> <P> </TD> <TD WIDTH="15%" VALIGN="TOP" COLSPAN=2> <P> </TD> <TD WIDTH="10%" VALIGN="TOP"><DIR> <DIR> <P>10.4</DIR> </DIR> </TD> <TD WIDTH="63%" VALIGN="TOP" COLSPAN=6> <P>Amendment to Supplemental Retirement Plan for Textron Key Executives.</TD> </TR> <TR><TD WIDTH="12%" VALIGN="TOP"> <P> </TD> <TD WIDTH="15%" VALIGN="TOP" COLSPAN=2> <P> </TD> <TD WIDTH="10%" VALIGN="TOP"><DIR> <DIR> <P>10.5</DIR> </DIR> </TD> <TD WIDTH="63%" VALIGN="TOP" COLSPAN=6> <P>Amendment to Survivor Benefit Plan for Textron Key Executives.</TD> </TR> <TR><TD WIDTH="12%" VALIGN="TOP"> <P> </TD> <TD WIDTH="15%" VALIGN="TOP" COLSPAN=2> <P> </TD> <TD WIDTH="10%" VALIGN="TOP"><DIR> <DIR> <P>10.6</DIR> </DIR> </TD> <TD WIDTH="63%" VALIGN="TOP" COLSPAN=6> <P>Amendment to 1994 Long Term Incentive Plan for Textron Employees.</TD> </TR> <TR><TD WIDTH="12%" VALIGN="TOP"> <P> </TD> <TD WIDTH="15%" VALIGN="TOP" COLSPAN=2> <P> </TD> <TD WIDTH="10%" VALIGN="TOP"><DIR> <DIR> <P>12.1</DIR> </DIR> </TD> <TD WIDTH="63%" VALIGN="TOP" COLSPAN=6> <P>Computation of ratio of income to combined fixed charges and preferred <BR> securities dividends of Textron Manufacturing.</TD> </TR> <TR><TD WIDTH="12%" VALIGN="TOP"> <P> </TD> <TD WIDTH="15%" VALIGN="TOP" COLSPAN=2> <P> </TD> <TD WIDTH="10%" VALIGN="TOP"><DIR> <DIR> <P>12.2</DIR> </DIR> </TD> <TD WIDTH="63%" VALIGN="TOP" COLSPAN=6> <P>Computation of ratio of income to combined fixed charges and preferred <BR> securities dividends of Textron Inc. including all majority-owned subsidiaries.</TD> </TR> <TR><TD WIDTH="12%" VALIGN="TOP"> <P> </TD> <TD WIDTH="15%" VALIGN="TOP" COLSPAN=2> <P> </TD> <TD WIDTH="10%" VALIGN="TOP"><DIR> <DIR> <P>27</DIR> </DIR> </TD> <TD WIDTH="63%" VALIGN="TOP" COLSPAN=6> <P>Financial Data Schedule (filed electronically only)</TD> </TR> <TR><TD WIDTH="12%" VALIGN="TOP"> <P> </TD> <TD WIDTH="15%" VALIGN="TOP" COLSPAN=2> <P>(b)</TD> <TD WIDTH="73%" VALIGN="TOP" COLSPAN=7> <P>Reports on Form 8-K</TD> </TR> <TR><TD WIDTH="12%" VALIGN="TOP"> <P> </TD> <TD WIDTH="15%" VALIGN="TOP" COLSPAN=2> <P> </TD> <TD WIDTH="73%" VALIGN="TOP" COLSPAN=7> <P>No reports on Form 8-K were filed during the second quarter ended July 3, 1999.</TD> </TR> </TABLE> <U><P ALIGN="CENTER"> </P> <P ALIGN="CENTER">SIGNATURES</P> </U><P ALIGN="JUSTIFY">	Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has <BR> duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.</P><DIR> <DIR> <DIR> <DIR> <DIR> <DIR> <DIR> <DIR> <DIR> <DIR> <DIR> <DIR> <DIR> <DIR> <P ALIGN="JUSTIFY">TEXTRON INC.</P></DIR> </DIR> </DIR> </DIR> </DIR> </DIR> </DIR> </DIR> </DIR> </DIR> </DIR> </DIR> </DIR> </DIR> <TABLE BORDER CELLSPACING=1 WIDTH=633> <TR><TD WIDTH="9%" VALIGN="TOP"> <P>Date: </TD> <TD WIDTH="30%" VALIGN="TOP"> <P> August 12, 1999</TD> <TD WIDTH="15%" VALIGN="TOP"> <P> </TD> <TD WIDTH="45%" VALIGN="TOP"> <P>s/R. L. Yates</TD> </TR> <TR><TD WIDTH="9%" VALIGN="TOP"> <P> </TD> <TD WIDTH="30%" VALIGN="TOP"> <P> </TD> <TD WIDTH="15%" VALIGN="TOP"> <P> </TD> <TD WIDTH="45%" VALIGN="TOP"> <P>R. L. Yates<BR> Vice President and Controller<BR> (principal accounting officer) </TD> </TR> </TABLE> <B><P ALIGN="CENTER">LIST OF EXHIBITS</P> </B><P ALIGN="JUSTIFY">The following exhibits are filed as part of this report on Form 10-Q:</P> <U><P ALIGN="CENTER">Name of Exhibit</P></U> <TABLE CELLSPACING=0 BORDER=0 CELLPADDING=7 WIDTH=666> <TR><TD WIDTH="11%" VALIGN="TOP"> <P>10.1</TD> <TD WIDTH="89%" VALIGN="TOP"> <P>Amendment to Annual Incentive Compensation Plan for Textron Employees.</TD> </TR> <TR><TD WIDTH="11%" VALIGN="TOP"> <P ALIGN="JUSTIFY">10.2</TD> <TD WIDTH="89%" VALIGN="TOP"> <P>Amendment to Deferred Income Plan for Textron Key Executives.</TD> </TR> <TR><TD WIDTH="11%" VALIGN="TOP"> <P>10.3</TD> <TD WIDTH="89%" VALIGN="TOP"> <P>Amendment to Supplemental Benefits Plan for Textron Key Executives.</TD> </TR> <TR><TD WIDTH="11%" VALIGN="TOP"> <P>10.4</TD> <TD WIDTH="89%" VALIGN="TOP"> <P>Amendment to Supplemental Retirement Plan for Textron Key Executives.</TD> </TR> <TR><TD WIDTH="11%" VALIGN="TOP"> <P>10.5</TD> <TD WIDTH="89%" VALIGN="TOP"> <P>Amendment to Survivor Benefit Plan for Textron Key Executives.</TD> </TR> <TR><TD WIDTH="11%" VALIGN="TOP"> <P>10.6</TD> <TD WIDTH="89%" VALIGN="TOP"> <P>Amendment to 1994 Long Term Incentive Plan for Textron Employees.</TD> </TR> <TR><TD WIDTH="11%" VALIGN="TOP"> <P>12.1</TD> <TD WIDTH="89%" VALIGN="TOP"> <P>Computation of ratio of income to combined fixed charges and preferred securities <BR> dividends of Textron Manufacturing </TD> </TR> <TR><TD WIDTH="11%" VALIGN="TOP"> <P>12.2</TD> <TD WIDTH="89%" VALIGN="TOP"> <P>Computation of ratio of income to combined fixed charges and preferred securities <BR> dividends of Textron Inc. including all majority-owned subsidiaries </TD> </TR> <TR><TD WIDTH="11%" VALIGN="TOP"> <P>27</TD> <TD WIDTH="89%" VALIGN="TOP"> <P>Financial Data Schedule (filed electronically only)</TD> </TR> </TABLE> <P> </P> <P> </P></BODY> </HTML>