FORM 10-K

26 Factors contributing to 2016 year-over-year segment profit change are provided below: (In millions) 2016 versus 2015 Performance $ 43 Volume and mix 13 Other 1 Total change $ 57 Textron Systems’ segment profit increased $57 million, 44%, in 2016, compared with 2015, primarily due to improved cost performance and higher volume as described above. Textron Systems Backlog Backlog at Textron Systems decreased $435 million, 24%, in 2017, primarily due to deliveries in excess of orders in the Marine and Land Systems product line as TAPV deliveries near completion, and final deliveries of our discontinued sensor-fuzed weapon product in 2017. In 2016, backlog decreased by $487 million, 21%, primarily due to deliveries in excess of orders in the Weapons and Sensors business and Unmanned Systems product line. Industrial % Change (Dollars in millions) 2017 2016 2015 2017 2016 Revenues: Fuel Systems and Functional Components $ 2,330 $ 2,273 $ 2,078 3% 9% Other Industrial 1,956 1,521 1,466 29% 4% Total revenues 4,286 3,794 3,544 13% 7% Operating expenses 3,996 3,465 3,242 15% 7% Segment profit 290 329 302 (12)% 9% Profit margin 6.8% 8.7% 8.5% Industrial Revenues and Operating Expenses Factors contributing to the 2017 year-over-year revenue change are provided below: (In millions) 2017 versus 2016 Acquisitions $ 393 Volume 77 Foreign exchange 27 Other (5) Total change $ 492 Industrial segment revenues increased $492 million, 13%, in 2017, compared with 2016, primarily due to the impact from acquired businesses of $393 million, largely related to the acquisition of Arctic Cat as described below. Revenues were also impacted by higher volume of $77 million, primarily related to the Fuel Systems and Functional Components product line and a favorable impact of $27 million from foreign exchange, primarily related to the Euro. On March 6, 2017, we acquired Arctic Cat, a manufacturer of all-terrain vehicles, side-by-sides and snowmobiles, in addition to related parts, garments and accessories. Arctic Cat provides a platform to expand our product portfolio and increase our distribution channel to support growth within our Textron Specialized Vehicles business. The operating results of Arctic Cat have been included in our financial results only for the period subsequent to the completion of the acquisition. See Note 2 to the Consolidated Financial Statements for additional information regarding this acquisition. Operating expenses for the Industrial segment increased $531 million, 15%, in 2017, compared with 2016, primarily due to additional operating expenses from acquired businesses. The increase in operating expenses was also due to higher volume as described above.