FORM 10-K

22 Approximately 22% of our 2017 revenues were derived from contracts with the U.S. Government. For our segments that have significant contracts with the U.S. Government, we typically express changes in segment profit related to the government business in terms of volume, changes in program performance or changes in contract mix. Changes in volume that are described in net sales typically drive corresponding changes in our segment profit based on the profit rate for a particular contract. Changes in program performance typically relate to profit recognition associated with revisions to total estimated costs at completion that reflect improved or deteriorated operating performance or award fee rates. Changes in contract mix refers to changes in operating margin due to a change in the relative volume of contracts with higher or lower fee rates such that the overall average margin rate for the segment changes. Textron Aviation % Change (Dollars in millions) 2017 2016 2015 2017 2016 Revenues $ 4,686 $ 4,921 $ 4,822 (5)% 2% Operating expenses 4,383 4,532 4,422 (3)% 2% Segment profit 303 389 400 (22)% (3)% Profit margin 6.5% 7.9% 8.3% Backlog $ 1,180 $ 1,041 $ 1,074 13% (3)% Textron Aviation Revenues and Operating Expenses Factors contributing to the 2017 year-over-year revenue change are provided below: (In millions) 2017 versus 2016 Volume and mix $ (307) Other 72 Total change $ (235) Textron Aviation’s revenues decreased $235 million, 5%, in 2017, compared with 2016, primarily due to lower volume and mix of $307 million, largely the result of lower military and commercial turboprop volume. We delivered 180 Citation jets, 86 King Air turboprops and 13 Beechcraft T-6 trainers in 2017, compared with 178 Citation jets, 106 King Air turboprops and 38 Beechcraft T- 6 trainers in 2016. The portion of the segment’s revenues derived from aftermarket sales and services represented 34% of its total revenues in 2017, compared with 31% in 2016. Textron Aviation’s operating expenses decreased $149 million, 3%, in 2017, compared with 2016, largely due to lower net volume as described above. Factors contributing to the 2016 year-over-year revenue change are provided below: (In millions) 2016 versus 2015 Acquisitions $ 66 Volume and mix 42 Other (9) Total change $ 99 Textron Aviation’s revenues increased $99 million, 2%, in 2016, compared with 2015, primarily due to the impact from an acquisition of a repair and overhaul business in the first quarter of 2016, and higher volume and mix of $42 million. The increase in volume and mix was largely due to higher Citation jet volume of $165 million, partially offset by lower commercial turboprop volume. We delivered 178 Citation jets and 106 King Air turboprops in 2016, compared with 166 Citation jets and 117 King Air turboprops in 2015. The portion of the segment’s revenues derived from aftermarket sales and services represented 31% of its total revenues in 2016, compared with 29% in 2015, largely resulting from the acquisition. Textron Aviation’s operating expenses increased $110 million, 2%, in 2016, compared with 2015, largely due to higher net volume as described above and additional operating expenses resulting from the acquisition. These increases were partially offset by improved cost performance of $64 million, largely attributable to lower research and development costs and lower compensation expense.