FORM 10-K

25 Textron Systems % Change (Dollars in millions) 2017 2016 2015 2017 2016 Revenues $ 1,840 $ 1,756 $ 1,520 5% 16% Operating expenses 1,701 1,570 1,391 8% 13% Segment profit 139 186 129 (25)% 44% Profit margin 7.6% 10.6% 8.5% Backlog $ 1,406 $ 1,841 $ 2,328 (24)% (21)% Textron Systems Revenues and Operating Expenses Factors contributing to the 2017 year-over-year revenue change are provided below: (In millions) 2017 versus 2016 Volume $ 67 Acquisitions 10 Other 7 Total change $ 84 Revenues at Textron Systems increased $84 million, 5%, in 2017, compared with 2016, primarily due to higher volume of $176 million in the Marine and Land Systems product line, partially offset by lower volume in the other product lines, largely due to the final deliveries of our discontinued sensor-fuzed weapon product in the first half of 2017. Textron Systems’ operating expenses increased $131 million, 8%, in 2017, compared with 2016, primarily due to higher volume as described above and the unfavorable impact from net program adjustments described below. Factors contributing to the 2016 year-over-year revenue change are provided below: (In millions) 2016 versus 2015 Volume $ 200 Acquisitions 32 Other 4 Total change $ 236 Revenues at Textron Systems increased $236 million, 16%, in 2016, compared with 2015, primarily due to higher volume of $106 million in the Marine and Land Systems product line and $77 million in the Unmanned Systems product line, and the impact from an acquisition of $32 million. Textron Systems’ operating expenses increased $179 million, 13%, in 2016, compared with 2015, primarily due to higher volume as described above. Textron Systems Segment Profit Factors contributing to 2017 year-over-year segment profit change are provided below: (In millions) 2017 versus 2016 Performance $ (28) Volume and mix (13) Other (6) Total change $ (47) Textron Systems’ segment profit decreased $47 million, 25%, in 2017, compared with 2016, primarily due to unfavorable performance. Performance reflects an unfavorable impact from net program adjustments compared with 2016, largely due to $44 million of adjustments recorded in 2017 related to the Tactical Armoured Patrol Vehicle program (TAPV). In 2017, this program experienced inefficiencies resulting from various production issues during the ramp up and subsequent production.