Textron Inc 10-K for FY2024
Textron Inc (TXT)
10-K
2025-02-06
For: 2024-12-28
View Original
Added on
April 08, 2026
About this 10-K
Textron Inc filed this 10-K on February 6, 2025, covering the fiscal year ended December 28, 2024 (FY2024).
Headline figures
Fiscal year ended December 28, 2024, as reported in this filing, compared with the same period a year earlier where the filing states it.
- Revenue
- $13.7B
- up 0.1% from $13.68B a year earlier
- Net income
- $824M
- down 10.5% from net income of $921M a year earlier
- Diluted EPS
- $4.33
- down 5.0% from $4.56 a year earlier
UNITED STATES SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
Form 10-K
| ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 | |||||
For the fiscal year ended December 28 , 2024
or
| TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 | |||||
For the transition period from to .
Commission File Number 1-5480
(Exact name of registrant as specified in its charter)
| (State or other jurisdiction of incorporation or organization) | (I.R.S. Employer Identification No.) | |||||||
| (Address of principal executive offices) | (Zip code) | |||||||
Registrant’s Telephone Number, Including Area Code: (401 ) 421-2800
Securities registered pursuant to Section 12(b) of the Act:
| Title of Each Class | Trading Symbol(s) | Name of Each Exchange on Which Registered | ||||||
Securities registered pursuant to Section 12(g) of the Act: None
______________________________________________
Indicate by check mark if the registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities Act. xYes ¨ No
Indicate by check mark if the registrant is not required to file reports pursuant to Section 13 or Section 15(d) of the Act . ¨ Yes x No
Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. x Yes ¨ No
Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T during the preceding 12 months (or for such shorter period that the registrant was required to submit such files). x Yes ¨No
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, smaller reporting company, or an emerging growth company. See definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company” and “emerging growth company” in Rule 12b-2 of the Exchange Act (Check one):
x | Accelerated filer | ☐ | |||||||||||||||
Non-accelerated filer | ☐ | Smaller reporting company | Emerging growth company | ||||||||||||||
If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ◻
Indicate by check mark whether the registrant has filed a report on and attestation to its management’s assessment of the effectiveness of its internal control over financial reporting under Section 404(b) of the Sarbanes-Oxley Act (15 U.S.C. 7262(b)) by the registered public accounting firm that prepared or issued its audit report. ☒ Yes ¨ No
If securities are registered pursuant to Section 12(b) of the Act, indicate by check mark whether the financial statements of the registrant included in the filing reflect the correction of an error to previously issued financial statements. ☐
Indicate by check mark whether any of those error corrections are restatements that required a recovery analysis of incentive-based compensation received by any of the registrant's executive officers during the relevant recovery period pursuant to §240.10D-1(b) ☐
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Act). ☐ Yes ☒ No
The aggregate market value of the registrant’s Common Stock held by non-affiliates at June 29, 2024 was approximately $16.0 billion based on the New York Stock Exchange closing price for such shares on that date. The registrant has no non-voting common equity.
At February 1, 2025, 182,572,762 shares of Common Stock were outstanding.
| Documents Incorporated by Reference | ||
Part III of this Report incorporates information from certain portions of the registrant’s Definitive Proxy Statement for its Annual Meeting of Shareholders to be held on April 23, 2025.
Textron Inc.
Index to Annual Report on Form 10-K
For the Fiscal Year Ended December 28, 2024
| Page | ||||||||
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PART I
Item 1. Business
Textron Inc. is a multi-industry company that leverages its global network of aircraft, defense, industrial and finance businesses to provide customers with innovative products and services around the world. References to “Textron Inc.,” the “Company,” “we,” “our” and “us” in this Annual Report on Form 10-K, unless otherwise indicated, refer to Textron Inc. and its consolidated subsidiaries.
We conduct our business through six operating segments: Textron Aviation, Bell, Textron Systems, Industrial and Textron eAviation, which represent our manufacturing businesses, and Finance, which represents our captive finance business. Our segments include numerous separately incorporated subsidiaries. Total revenues for 2024 were $13.7 billion and are presented below by segment and customer type.
The following description of our business and operating segments should be read in conjunction with Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations.
Textron Aviation Segment
Textron Aviation is a leader in general aviation. Textron Aviation manufactures, sells and services Cessna and Beechcraft aircraft, and services the Hawker brand of business jets. The segment has two principal product lines: aircraft and aftermarket parts and services. Aircraft includes sales of business jets, turboprop aircraft, military trainer and defense aircraft and piston engine aircraft. Aftermarket parts and services includes commercial parts sales and maintenance, inspection and repair services, and advanced flight training devices.
Textron Aviation's business jets include the Cessna Citation M2 Gen2, Citation CJ3+, Citation CJ4 Gen2, Citation XLS Gen2, Citation Latitude and the Citation Longitude. In October 2024, Textron Aviation introduced its next generation of light jets, the Citation M2 Gen3, CJ3 Gen3 and CJ4 Gen3, which will include the revolutionary Garmin Emergency Autoland technology. Currently under development, the CJ3 Gen2 is expected to enter into service in 2025, the CJ4 Gen3 is expected to enter into service in 2026, and the M2 Gen3 and CJ3 Gen3 are expected to enter into service in 2027. In addition, Textron Aviation is developing the Citation Ascend, a high-performance midsize business jet, which is continuing to progress through the Federal Aviation Administration's (FAA) certification process and is expected to enter into service in 2025.
Textron Aviation’s turboprop aircraft include the Beechcraft King Air 260, King Air 360ER and King Air 360, and the Cessna Caravan, Grand Caravan EX and SkyCourier. The Beechcraft Denali, a high-performance single engine turboprop aircraft under development, continues toward FAA certification. The Denali will be powered by an engine expected to be up to 20% more efficient than similarly sized engines.
Textron Aviation’s military trainer and defense aircraft include the Beechcraft T-6 trainer, which has been used to train pilots from more than 40 countries, and the AT-6 light attack military aircraft. Textron Aviation’s piston engine aircraft include the Cessna Skyhawk, Skylane, Turbo Skylane, Turbo Stationair HD and the Beechcraft Baron G58 and Bonanza G36.
Textron Aviation markets its products worldwide through its own sales force, as well as through a network of authorized independent sales representatives. With a product lineup ranging from introductory training aircraft through super mid-size business jets, Textron Aviation’s diverse customer base includes fractional aircraft businesses, charter and fleet operators, corporate aviation, individual buyers, training schools, airlines, and special mission, military and government operators.
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In support of its family of aircraft, Textron Aviation operates a global network of more than 20 service centers. In addition, more than 300 authorized independent service centers are located throughout the world. Textron Aviation-owned service centers provide customers with 24-hour service and maintenance. Textron Aviation also provides its customers with around-the-clock parts support and offers a mobile support program with over 80 mobile service units.
Bell Segment
Bell is a leading supplier of military and commercial helicopters, tiltrotor aircraft, and related spare parts and services in the world. Tiltrotor aircraft are designed to provide the benefits of both helicopters and fixed-wing aircraft.
Bell supplies advanced military helicopters and provides parts and support services to the U.S. Government and to military customers outside the United States. Bell’s primary U.S. Government programs are for the development of a next generation tiltrotor aircraft for the U.S. Army’s Future Long Range Assault Aircraft (FLRAA) program and the production and support of the V-22 tiltrotor aircraft and H-1 helicopters. Under the U.S. Government-sponsored foreign military sales program, Bell offers the V-22 tiltrotor aircraft and H-1 helicopter products for sale to other countries.
The FLRAA development contract was awarded to Bell in December 2022. In 2024, the U.S. Army announced approval of Milestone B for the FLRAA program, establishing FLRAA as a program of record and transitioning the program to the Engineering and Manufacturing Development phase. This phase includes continued digital modeling, detailed hardware and software design, and fabrication of hardware, as Bell proceeds to critical design review and the first prototype flight planned for 2026.
Through its commercial business, Bell is a leading supplier of commercially certified helicopters and support to corporate, private, law enforcement, utility, public safety and emergency medical helicopter operators, and U.S. and foreign governments. Bell produces a variety of commercial aircraft types, including light single- and twin-engine helicopters and medium twin-engine helicopters, along with other related products. The commercial helicopters currently offered by Bell include the 429, 407GXi, 412EPX and 505 Jet Ranger X. Bell’s super medium commercial helicopter, the 525 Relentless, continues toward FAA certification.
For both its military programs and its commercial products, Bell provides post-sale support and service for an installed base of approximately 13,000 helicopters. Bell operates a global network of eight Company-operated service centers and four global parts distribution centers. In addition, approximately 85 independent service centers are located in about 35 countries. Collectively, these service sites offer a complete range of logistics support, including parts, support equipment, technical data, training devices, pilot and maintenance training, component repair and overhaul, engine repair and overhaul, aircraft modifications, aircraft customizing, accessory manufacturing, contractor maintenance, field service and product support engineering.
Textron Systems Segment
The businesses in our Textron Systems segment develop, manufacture and integrate a variety of products and services for U.S. and international military, government and commercial customers to support defense, homeland security, aerospace, infrastructure protection and other customer missions. Product and service offerings of this segment include electronic systems and solutions, advanced marine craft, piston aircraft engines, live military air-to-air and air-to-ship training, weapons and related components, unmanned aircraft systems and both manned and unmanned armored and specialty vehicles.
Notable products currently developed and produced by the Textron Systems segment include the Ship-to-Shore Connector, the U.S. Navy's next generation of Landing Craft Air Cushion vehicles; a family of test and simulation products; the Aerosonde Small Unmanned Aircraft System, a multi-mission capable unmanned aircraft system for commercial and military operations; and piston aircraft engines under the Lycoming brand. Notable service offerings of the segment include fee-for-service programs, using unmanned aircraft systems, and live military air-to-air and air-to-ship training and support services for U.S. Navy, Marine and Air Force personnel provided by Airborne Tactical Advantage Company.
Industrial Segment
Our Industrial segment designs and manufactures a variety of products within the Kautex and Textron Specialized Vehicles businesses.
Kautex is a leader in designing and manufacturing plastic fuel systems for automobiles and light trucks, including blow-molded solutions for conventional plastic fuel tanks and pressurized plastic fuel tanks for hybrid vehicle applications. Kautex also develops and manufactures clear-vision systems for automotive safety and advanced driver assistance systems (ADAS). Our cleaning systems are comprised of nozzles, reservoirs, inlets and pumps to support onboard cleaning for windscreens, headlamps and ADAS cameras and sensors. In addition, Kautex produces plastic tanks for selective catalytic reduction systems used to reduce emissions from diesel engines, and other fuel system components. Kautex also offers lightweight, composite Pentatonic battery systems, which include enclosures, underbody protection and thermal management systems, for use in electric vehicles, from hybrid to full battery-powered.
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Kautex’s business model is focused on developing and maintaining long-term customer relationships with leading global original equipment manufacturers (OEMs). Kautex, which is headquartered in Bonn, Germany, operates over 30 plants in 13 countries in close proximity to its customers, along with 9 engineering/research and development locations around the world.
Our Textron Specialized Vehicles businesses manufacture and sell products under our E-Z-GO, Arctic Cat, TUG Technologies, Douglas Equipment, Premier, Safeaero, Ransomes, Jacobsen and Cushman brands. These businesses design, manufacture and sell golf cars; off-road utility vehicles; powersports products; light transportation vehicles; aviation ground support equipment; professional turf-maintenance equipment; and specialized turf-care vehicles. A significant portion of the products sold by these businesses are powered with lithium batteries, greatly reducing the products’ impact on the environment.
The diversified customer base for Textron Specialized Vehicles includes golf courses and resorts, government agencies and municipalities, consumers, outdoor enthusiasts, and commercial and industrial users such as factories, warehouses, airlines, planned communities, hunting preserves, educational and corporate campuses, sporting venues and landscaping professionals. Sales are made through a network of independent distributors and dealers worldwide and the Bass Pro Shops and Cabela's retail outlets, which sell our powersports products under the Tracker Off Road brand, as well as factory direct resources. In addition, we also manufacture powersports products for OEMs for resale to customers under the OEM’s branding.
Textron eAviation Segment
Our Textron eAviation segment is focused on research and development initiatives related to sustainable aviation solutions and includes Pipistrel, a manufacturer of light aircraft. Pipistrel offers a family of light aircraft and gliders with both electric and combustion engines, including the Velis Electro, which is the world’s first, and currently only, electric aircraft to receive full type certification from the European Union Aviation Safety Agency and from the UK Civil Aviation Authority. In 2024, the FAA granted a light-sport aircraft airworthiness exemption for the Pipistrel Velis Electro, allowing flight training in an electric aircraft within the United States.
The Textron eAviation segment is also developing both hybrid and electric propulsion aircraft, including Pipistrel's Nuuva V300, a long-range, large-capacity hybrid-electric vertical takeoff and landing aircraft, and an electric vertical takeoff and landing (eVTOL) aircraft. The Nuuva V300's first hover flight is expected in 2025 and initial testing on the Nexus, a full-scale technology demonstrator eVTOL, is expected to begin in 2025.
Finance Segment
Our Finance segment, or the Finance group, is a commercial finance business that consists of Textron Financial Corporation (TFC) and its consolidated subsidiaries. The Finance segment provides financing primarily to purchasers of new and pre-owned Textron Aviation aircraft and Bell helicopters. A substantial number of the originations in our finance receivable portfolio are cross-border transactions for aircraft sold outside of the U.S. In 2024 and 2023, our Finance group made payments of $109 million and $160 million, respectively, to finance the Manufacturing group's sale of Textron-manufactured products to third parties.
Backlog
Backlog represents amounts allocated to contracts that we expect to recognize as revenue in future periods when we perform under the contracts. Backlog excludes unexercised contract options and potential orders under ordering-type contracts, such as Indefinite Delivery, Indefinite Quantity contracts.
Our backlog at the end of 2024 and 2023 is summarized below:
| (In millions) | December 28, 2024 | December 30, 2023 | ||||||
| Textron Aviation | $ | 7,845 | $ | 7,169 | ||||
| Bell | 7,469 | 4,780 | ||||||
| Textron Systems | 2,594 | 1,950 | ||||||
| Total backlog | $ | 17,908 | $ | 13,899 | ||||
U.S. Government Contracts and Other Governmental Regulation
Our operations, products and services are subject to various government regulations, including regulations related to U.S. government business, international regulation of aviation products and services, and environmental regulations.
Contracts with the U.S. Government, including contracts under the U.S. Government-sponsored foreign military sales program, generated approximately 25% of our consolidated revenues in 2024, primarily in our Bell and Textron Systems segments. We must comply with and are affected by laws and regulations relating to the formation, administration and performance of U.S. Government contracts. These laws and regulations, among other things, require certification and disclosure of all cost and pricing
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data in connection with contract negotiation; define allowable and unallowable costs and otherwise govern our right to reimbursement under certain cost-based U.S. Government contracts; and safeguard and restrict the use and dissemination of classified and covered defense information and the export of certain products and technical data. New laws, regulations or procurement requirements, or changes to current ones, can significantly increase our costs, reducing our profitability.
Our contracts with the U.S. Government generally may be terminated by the U.S. Government for convenience or if we default in whole or in part by failing to perform under the terms of the applicable contract. If the U.S. Government terminates a contract for convenience, we normally will be entitled to payment for the cost of contract work performed before the effective date of termination, including, if applicable, reasonable profit on such work, as well as reasonable termination costs. If, however, the U.S. Government terminates a contract for default, generally: (a) we will be paid the contract price for completed supplies delivered and accepted and services rendered, an agreed-upon amount for manufacturing materials delivered and accepted and for the protection and preservation of property, and an amount for partially completed products accepted by the U.S. Government; (b) the U.S. Government may not be liable for our costs with respect to unaccepted items and may be entitled to repayment of advance payments and progress payments related to the terminated portions of the contract; (c) the U.S. Government may not be liable for assets we own and utilize to provide services under the “fee-for-service” contracts; and (d) we may be liable for excess costs incurred by the U.S. Government in procuring undelivered items from another source. See the Aerospace and Defense Industry section in Item 1A. Risk Factors for additional information related to regulation of U.S. Government business.
Our commercial aircraft manufacturing businesses are regulated by the FAA in the U.S. and by similar aviation regulatory governing authorities internationally, including, the European Aviation Safety Agency. Maintenance facilities and aftermarket services must also comply with FAA and international regulations. These regulations address production and quality systems, airworthiness and installation approvals, repair procedures and continuing operational safety. For an aircraft to be manufactured and sold, the model must receive a type certificate from the appropriate aviation authority, and each aircraft must receive a certificate of airworthiness. Aircraft outfitting and completions also require approval by the appropriate aviation authority. See the Strategic Risks section in Item 1A. Risk Factors for additional information with respect to risks related to obtaining certification of new aircraft products.
Our operations are subject to numerous laws and regulations designed to protect the environment. For additional information regarding environmental matters, see Note 17 to the Consolidated Financial Statements in Item 8. Financial Statements and Supplementary Data, and the Business and Operational Risks and Risks Related to Regulatory, Legal and Other Matters sections in Item 1A. Risk Factors.
Based on current information and the applicable laws and regulations currently in effect, compliance with government regulations, including environmental regulations, has not had, and we do not expect it to have, a material effect on our capital expenditures, earnings or competitive position. However, laws and regulations may be changed or adopted that impose additional compliance requirements which could necessitate capital expenditures or otherwise increase our costs of doing business, reducing our profitability and negatively impacting our operating results.
Human Capital Resources
At December 28, 2024, we employed approximately 34,000 employees worldwide, with approximately 80% located in the U.S. and the remainder located outside of the U.S. Approximately 7,400, or 28%, of our U.S. employees, most of whom work for our Bell and Textron Aviation segments, are represented by unions under collective bargaining agreements, and certain of our non-U.S. employees are represented by organized works councils. From time to time, our collective bargaining agreements expire. Historically, we have been successful in negotiating renewals to expiring agreements without any material disruption of operating activities; however, on September 21, 2024, Textron Aviation’s largest union rejected a proposed new contract and initiated a strike. The strike impacted approximately 5,000 of Textron Aviation’s employees at its manufacturing, parts and distribution and service center facilities in Wichita, Kansas. On October 20, 2024, Textron Aviation and the union reached an agreement and a new five-year labor contract was ratified.
Our success is highly dependent upon our ability to hire, train and retain a workforce with the skills necessary for our businesses to develop and manufacture the products desired by our customers. We need highly skilled personnel in multiple areas including, among others, engineering, manufacturing, information technology, cybersecurity, flight operations, business development and strategy and management. In order to attract and retain highly skilled employees, we offer comprehensive compensation and benefit programs, career opportunities and an engaging, inclusive environment where employees are treated with dignity and respect.
Health and Safety
The health and safety of our employees, contractors and communities is a priority, and we strive to provide our employees with healthy working conditions and safe facilities. To maintain and enhance the safety of our employees, we promote a workplace safety culture of continuous improvement, shared responsibility, and individual accountability. We use an annual goal setting
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process to drive injury rate improvements, and the injury rate reduction goal is a performance metric that is tracked and reported to senior leadership and the Audit Committee of the Board of Directors.
Talent and Career Development
Our talent development programs are designed to prepare our employees at all levels to take on new career and growth opportunities at Textron. Leadership, professional and functional training courses are tailored for employees at each stage of their careers and include a mix of enterprise-wide and business unit-specific programs. Textron University, an internal corporate function, provides (i) facilitated face-to-face professional and leadership development programs, (ii) web-based general and specialized functional and technical courses and (iii) an online portal to access advanced skills technical training, manage recertification of existing qualifications and other career planning tools and resources.
The current and future talent needs of each of our businesses are assessed annually through a formal talent review process which enables us to develop leadership succession plans and provide our employees with potential new career opportunities. In addition, leaders from functional areas within each business belong to enterprise-wide councils that conduct annual talent reviews. These processes enable us to fill talent needs by matching employees who are ready to assume significant leadership roles with opportunities that best fit their career path, which may be in other businesses within the enterprise.
We believe by employing highly talented employees who feel valued, respected and are able to contribute fully, we will improve performance, innovation, collaboration and talent retention, all of which contributes to stronger business results and reinforces our reputation as leaders in our industries and communities.
For discussion of certain risks relating to human capital management, see the Risks Related to Human Capital section in Item 1A. Risk Factors.
Patents and Trademarks
We own, or are licensed under, numerous patents throughout the world relating to products, services and methods of manufacturing. Patents developed while under contract with the U.S. Government may be subject to use by the U.S. Government. We also own or license active trademark registrations and pending trademark applications in the U.S. and in various foreign countries or regions, as well as trade names and service marks. While our intellectual property rights in the aggregate are important to the operation of our business, we do not believe that any existing patent, license, trademark or other intellectual property right is of such importance that its loss or termination would have a material adverse effect on our business taken as a whole.
Information about our Executive Officers
The following table sets forth certain information concerning our executive officers as of February 6, 2025.
| Name | Age | Current Position with Textron Inc. | ||||||
| Scott C. Donnelly | 63 | Chairman, President and Chief Executive Officer | ||||||
| Frank T. Connor | 65 | Executive Vice President and Chief Financial Officer | ||||||
| Julie G. Duffy | 59 | Executive Vice President and Chief Human Resources Officer | ||||||
| E. Robert Lupone | 65 | Executive Vice President, General Counsel, Secretary and Chief Compliance Officer | ||||||
Mr. Donnelly joined Textron in June 2008 as Executive Vice President and Chief Operating Officer and was promoted to President and Chief Operating Officer in January 2009. He was appointed to the Board of Directors in October 2009 and became Chief Executive Officer of Textron in December 2009. In July 2010, Mr. Donnelly was appointed Chairman of the Board of Directors effective September 1, 2010. Previously, Mr. Donnelly was the President and CEO of General Electric Company’s Aviation business unit, a position he had held since July 2005. GE’s Aviation business unit is a leading maker of commercial and military jet engines and components, as well as integrated digital, electric power and mechanical systems for aircraft. Prior to July 2005, Mr. Donnelly served as Senior Vice President of GE Global Research, one of the world’s largest and most diversified industrial research organizations with facilities in the U.S., India, China and Germany and held various other management positions since joining General Electric in 1989.
Mr. Connor joined Textron in August 2009 as Executive Vice President and Chief Financial Officer. Previously, Mr. Connor was head of Telecom Investment Banking at Goldman, Sachs & Co. from 2003 to 2008. Prior to that position, he served as Chief Operating Officer of Telecom, Technology and Media Investment Banking at Goldman, Sachs & Co. from 1998 to 2003. Mr. Connor joined the Corporate Finance Department of Goldman, Sachs & Co. in 1986 and became a Vice President in 1990 and a Managing Director in 1996.
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On October 23, 2024, we announced that Mr. Connor will be retiring effective February 28, 2025. David Rosenberg, currently our Vice President – Investor Relations, has been appointed Executive Vice President and Chief Financial Officer to succeed Mr. Connor, effective March 1, 2025. Mr. Rosenberg, 48, has more than 24 years of experience in the aviation industry. Prior to his role as Vice President – Investor Relations, he served as Senior Vice President & Chief Financial Officer of Textron Aviation from 2018 through 2023, having previously held leadership positions in finance at Textron Aviation. Following Textron’s acquisition of Beechcraft in 2014, as Textron Aviation’s Vice President, Integration & Strategy, Mr. Rosenberg led the successful merger and integration of Beechcraft and Textron’s Cessna Aircraft business, which created today’s Textron Aviation segment. Prior to Textron’s acquisition of Beechcraft, Mr. Rosenberg held a series of leadership positions in financial planning, business management, strategic planning and operations with Beechcraft and its predecessor companies.
Ms. Duffy was named Executive Vice President, Human Resources in July 2017 and Executive Vice President and Chief Human Resources Officer in April 2022. Ms. Duffy joined Textron in 1997 as a member of the corporate legal team and has since held positions of increasing responsibility within the Company’s legal function, previously serving as Vice President and Deputy General Counsel – Litigation, a position she had held since 2011. In that role she was responsible for managing the corporate litigation staff with primary oversight of litigation throughout Textron. She has also played an active role in developing, implementing and standardizing human resources policies across the Company and served as the senior legal advisor on employment and benefits issues.
Mr. Lupone joined Textron in February 2012 as Executive Vice President, General Counsel, Secretary and Chief Compliance Officer. Previously, he was Senior Vice President and General Counsel of Siemens Corporation (U.S.) since 1999 and General Counsel of Siemens AG for the Americas since 2008. Prior to joining Siemens in 1992, Mr. Lupone was Vice President and General Counsel of Price Communications Corporation.
Available Information
We make available free of charge on our Internet Web site (www.textron.com) our Annual Report on Form 10-K, Quarterly Reports on Form 10-Q, Current Reports on Form 8-K and amendments to those reports filed or furnished pursuant to Section 13(a) or 15(d) of the Securities Exchange Act of 1934 as soon as reasonably practicable after we electronically file such material with, or furnish it to, the Securities and Exchange Commission.
Forward-Looking Information
Certain statements in this Annual Report on Form 10-K and other oral and written statements made by us from time to time are “forward-looking statements” within the meaning of the Private Securities Litigation Reform Act of 1995. These forward-looking statements, which may describe strategies, goals, outlook or other non-historical matters, or project revenues, income, returns or other financial measures, often include words such as “believe,” “expect,” “anticipate,” “intend,” “plan,” “estimate,” “guidance,” “project,” “target,” “potential,” “will,” “should,” “could,” “likely” or “may” and similar expressions intended to identify forward-looking statements. These statements are only predictions and involve known and unknown risks, uncertainties, and other factors that may cause our actual results to differ materially from those expressed or implied by such forward-looking statements. Given these uncertainties, you should not place undue reliance on these forward-looking statements. Forward-looking statements speak only as of the date on which they are made, and we undertake no obligation to update or revise any forward-looking statements. In addition to those factors described herein under “Risk Factors,” among the factors that could cause actual results to differ materially from past and projected future results are the following:
•Interruptions in the U.S. Government’s ability to fund its activities and/or pay its obligations;
•Changing priorities or reductions in the U.S. Government defense budget, including those related to military operations in foreign countries;
•Our ability to perform as anticipated and to control costs under contracts with the U.S. Government;
•The U.S. Government’s ability to unilaterally modify or terminate its contracts with us for the U.S. Government’s convenience or for our failure to perform, to change applicable procurement and accounting policies, or, under certain circumstances, to withhold payment or suspend or debar us as a contractor eligible to receive future contract awards;
•Changes in foreign military funding priorities or budget constraints and determinations, or changes in government regulations or policies on the export and import of military and commercial products;
•Volatility in the global economy or changes in worldwide political conditions that adversely impact demand for our products;
•Volatility in interest rates or foreign exchange rates and inflationary pressures;
•Risks related to our international business, including establishing and maintaining facilities in locations around the world and relying on joint venture partners, subcontractors, suppliers, representatives, consultants and other business partners in connection with international business, including in emerging market countries;
•Our Finance segment’s ability to maintain portfolio credit quality or to realize full value of receivables;
•Performance issues with key suppliers or subcontractors;
•Legislative or regulatory actions, both domestic and foreign, impacting our operations or demand for our products;
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•Our ability to control costs and successfully implement various cost-reduction activities;
•The efficacy of research and development investments to develop new products or unanticipated expenses in connection with the launching of significant new products or programs;
•The timing of our new product launches or certifications of our new aircraft products;
•Our ability to keep pace with our competitors in the introduction of new products and upgrades with features and technologies desired by our customers;
•Pension plan assumptions and future contributions;
•Demand softness or volatility in the markets in which we do business;
•Cybersecurity threats, including the potential misappropriation of assets or sensitive information, corruption of data or operational disruption;
•Difficulty or unanticipated expenses in connection with integrating acquired businesses;
•The risk that acquisitions do not perform as planned, including, for example, the risk that acquired businesses will not achieve revenue and profit projections;
•The impact of changes in tax legislation;
•The risk of disruptions to our business and the business of our suppliers, customers and other business partners due to unexpected events, such as pandemics, natural disasters, acts of war, strikes, terrorism, social unrest or other societal, geopolitical or macroeconomic conditions;
•Risks related to changing U.S. and foreign trade policies, including increased trade restrictions or tariffs; and
•The ability of our businesses to hire, train and retain the highly skilled personnel necessary for our businesses to succeed.
Item 1A. Risk Factors
Our business, financial condition and results of operations are subject to various risks, including those discussed below, which may affect the value of our securities. The risks discussed below are those that we believe currently are the most significant to our business.
Aerospace and Defense Industry Risks
Demand for our aircraft products is cyclical and lower demand adversely affects our financial results.
Demand for business jets, turbo props and commercial helicopters has been cyclical and difficult to forecast. From time to time, the demand for our aircraft products has been adversely impacted by unexpected events and may be impacted by such events in the future. Therefore, future demand for these products could be significantly and unexpectedly less than anticipated and/or less than previous period deliveries. Similarly, there is uncertainty as to when or whether our existing commercial backlog for aircraft products will convert to revenues as the conversion depends on production capacity, customer needs and credit availability, among other factors. Changes in economic conditions have in the past caused, and in the future may cause, customers to request that firm orders be rescheduled, deferred or cancelled. Reduced demand for our aircraft products or delays or cancellations of orders previously has had and, in the future, could have a material adverse effect on our cash flows, results of operations and financial condition.
We have customer concentration with the U.S. Government; reduction in U.S. Government defense spending can adversely affect our results of operations and financial condition.
During 2024, we derived approximately 25% of our revenues from sales to a variety of U.S. Government entities. Our revenues from the U.S. Government largely result from contracts awarded to us under various U.S. Government defense-related programs. Considerable uncertainty exists regarding how future budget and program decisions will develop. We cannot predict the impact on existing, follow-on or future programs from changes in the threat environment, defense spending levels, government priorities, political leadership, procurement practices, inflation and other macroeconomic trends, military strategy, or broader societal changes. Significant changes in national and international priorities for defense spending could affect the funding, or the timing of funding, of our programs, which could negatively impact our results of operations and financial condition.
The funding of U.S. Government defense programs is subject to congressional appropriation decisions and the U.S. Government budget process which includes enacting relevant legislation, such as appropriations bills and accords on the debt ceiling. Although multiple-year contracts may be planned in connection with major procurements, Congress generally appropriates funds on a fiscal year basis even though a program may continue for several years. Consequently, programs often are only partially funded initially, and additional funds are committed only as Congress makes further appropriations. Further uncertainty with respect to ongoing programs could also result in the event that the U.S. Government finances its operations through temporary funding measures such as “continuing resolutions” rather than full-year appropriations or if a government shutdown were to occur and were to continue for an extended period of time. If we incur costs in advance or in excess of funds committed on a contract, we are at risk for non-reimbursement of those costs until additional funds are appropriated. The reduction, termination or delay in the timing of funding for U.S. Government programs for which we currently provide or propose to provide products or services from time to time has resulted and, in the future, may result in a loss of anticipated revenues. A loss of such revenues could materially
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and adversely impact our results of operations and financial condition. In addition, because our U.S. Government contracts generally require us to continue to perform even if the U.S. Government is unable to make timely payments, we may need to finance our continued performance for the impacted contracts from our other resources on an interim basis. An extended delay in the timely payment by the U.S. Government could have a material adverse effect on our liquidity.
U.S. Government contracts can be terminated at any time and may contain other unfavorable provisions.
The U.S. Government typically can terminate or modify any of its contracts with us either for its convenience or if we default by failing to perform under the terms of the applicable contract. In the event of termination for the U.S. Government’s convenience, contractors are generally protected by provisions covering reimbursement for costs incurred on the contracts and profit on those costs but not the anticipated profit that would have been earned had the contract been completed. A termination arising out of our default for failure to perform could expose us to liability, including but not limited to, all costs incurred under the contract plus potential liability for re-procurement costs in excess of the total original contract amount, less the value of work performed and accepted by the customer under the contract. Such an event could also have an adverse effect on our ability to compete for future contracts and orders. If any of our contracts are terminated by the U.S. Government whether for convenience or default, our backlog would be reduced by the expected value of the remaining work under such contracts. We also enter into “fee for service” contracts with the U.S. Government where we retain ownership of, and consequently the risk of loss on, aircraft and equipment supplied to perform under these contracts. Termination of these contracts could materially and adversely impact our results of operations. On contracts for which we are teamed with others and are not the prime contractor, the U.S. Government could terminate a prime contract under which we are a subcontractor, irrespective of the quality of our products and services as a subcontractor. In addition, in the event that the U.S. Government is unable to make timely payments, failure to continue contract performance places the contractor at risk of termination for default. Any such event could have a material adverse effect on our cash flows, results of operations and financial condition.
As a U.S. Government contractor, we are subject to procurement rules and regulations; our failure to comply with these rules and regulations could adversely affect our business.
We must comply with and are affected by laws and regulations relating to the formation, administration and performance of U.S. Government contracts. These laws and regulations, among other things, require certification and disclosure of all cost and pricing data in connection with contract negotiation, define allowable and unallowable costs and otherwise govern our right to reimbursement under certain cost-based U.S. Government contracts, and safeguard and restrict the use and dissemination of classified information, covered defense information, and the exportation of certain products and technical data. New laws, regulations or procurement requirements or changes to current ones (including, for example, regulations related to cybersecurity) can significantly increase our costs, reducing our profitability. Our failure to comply with procurement regulations and requirements could allow the U.S. Government to suspend or debar us from receiving new contracts for a period of time, reduce the value of existing contracts, issue modifications to a contract, withhold cash on contract payments, and control and potentially prohibit the export of our products, services and associated materials, any of which could negatively impact our results of operations, financial condition or liquidity. A number of our U.S. Government contracts contain provisions that require us to make disclosure to the Inspector General of the agency that is our customer if we have credible evidence that we have violated U.S. criminal laws involving fraud, conflict of interest, or bribery; the U.S. civil False Claims Act; or received a significant overpayment under a U.S. Government contract. Failure to properly and timely make disclosures under these provisions may result in a termination for default or cause, suspension and/or debarment, and potential fines.
As a U.S. Government contractor, our businesses and systems are subject to audit and review by the Defense Contract Audit Agency (DCAA) and the Defense Contract Management Agency (DCMA).
We operate in a highly regulated environment and are routinely audited and reviewed by the U.S. Government and its agencies such as the DCAA and DCMA. These agencies review our performance under contracts, our cost structure and our compliance with laws and regulations applicable to U.S. Government contractors. The systems that are subject to review include, but are not limited to, our accounting, estimating, material management and accounting, earned value management, purchasing and government property systems. If an audit uncovers improper or illegal activities, we may be subject to civil and criminal penalties and administrative sanctions that may include the termination of our contracts, forfeiture or reduction of profits, suspension or reduction of payments, fines, and, under certain circumstances, suspension or debarment from future contracts for a period of time. Whether or not illegal activities are alleged, the U.S. Government also has the ability to decrease or withhold certain payments when it deems systems subject to its review to be inadequate. These laws and regulations affect how we conduct business with our government customers and, in some instances, impose added costs on our business.
Our profitability and cash flow varies depending on the mix of our government contracts and our ability to control costs.
Under fixed-price contracts, generally we receive a fixed price irrespective of the actual costs we incur, and, consequently, we absorb any costs in excess of the fixed price. Changes in underlying assumptions, circumstances or estimates used in developing the pricing for such contracts can adversely affect our results of operations. Additionally, fixed-price contracts generally require progress payments rather than performance-based payments which can delay our ability to recover a significant amount of costs
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incurred on a contract and thus affect the timing of our cash flows. Under fixed-price incentive contracts, we share with the U.S. Government cost underrun savings, which are derived from total cost being less than target costs; we also share in cost overruns, which occur when total costs exceed target costs up to a negotiated cost ceiling; however, we are solely responsible for costs above the ceiling. Under time and materials contracts, we are paid for labor at negotiated hourly billing rates and for certain expenses. Under cost-reimbursement contracts that are subject to a contract-ceiling amount, we are reimbursed for allowable costs and paid a fee, which may be fixed or performance-based; however, if our costs exceed the contract ceiling or are not allowable under the provisions of the contract or applicable regulations, we may not be able to obtain reimbursement for all such costs. Due to the nature of our work under government contracts, we sometimes experience unforeseen technological or schedule difficulties and cost overruns due to inflation, labor shortages, supply chain challenges, bid protests, and/or other factors. Under each type of contract, if we are unable to control costs or if our initial cost estimates are incorrect, our cash flows, results of operations and financial condition could be adversely affected. Cost overruns also may adversely affect our ability to sustain existing programs and obtain future contract awards.
The market for U.S. Government defense business is highly competitive, and the competitive bidding process increases pricing pressure and cost which may affect our ability to win new contracts for major government programs.
Our defense businesses operate in highly competitive markets in which they participate in rigorous, increasingly competitive bidding processes against other defense companies for U.S. government business. The U.S. Government relies upon competitive contract award types, including indefinite-delivery, indefinite-quantity, other transaction agreements and multi-award contracts, which often create increased pricing pressure and increase our cost by requiring that we submit multiple bids or share in costs. In addition, multi-award contracts increase our cost as they require that we make sustained efforts to compete for task orders and delivery orders under the contract. Further, the competitive bidding process is costly, in some instances requires significant research and development and/or engineering efforts to participate and demands employee and managerial time to prepare bids and proposals for contracts that may not be awarded to us or may be split among competitors.
Despite our best efforts, the U.S. Government customer sometimes chooses competitor's offerings over our offerings and there can be no assurance that our businesses will be selected for government programs with significant long-term revenues. Even if we are successful in obtaining an award, we have in the past and may in the future encounter bid protests from unsuccessful bidders on new program awards. Bid protests could result in significant expenses associated with justifying the selection or due to potential program delays and could result in contract modifications that alter schedule or scope or even cause the loss of the contract award. Even when a bid protest does not result in the loss of a contract award, the resolution could postpone commencement of contract activity, resulting in additional cost and delay in the recognition of revenue and profit. If we are unable to continue to compete successfully against our current or future competitors, do not win government programs with significant long-term revenues or do not prevail in bid protests, we may experience declines in future revenues and profitability, which could have a material adverse effect on our financial position, results of operations or cash flows.
Strategic Risks
Developing new products and technologies entails significant risks and uncertainties.
To continue to grow our revenues and segment profit, we must successfully develop new products and technologies or modify our existing products and technologies for our current and future markets. Our future performance depends, in part, on our ability to identify emerging technological trends and customer requirements and to develop and maintain competitive products and services. Delays or cost overruns in the development and acceptance of new products or certification of new aircraft and other products occur from time to time and could adversely affect our results of operations. These delays or cost overruns could be caused by unanticipated technological hurdles, production changes to meet customer demands, unanticipated difficulties in obtaining required regulatory certifications of new aircraft or other products, or failure on the part of our suppliers to deliver components as agreed. We also could be adversely affected if our research and development efforts are less successful than expected or if these efforts require significantly more funding to achieve our goals than anticipated. In particular, the success of Textron eAviation depends in large part, on our ability to develop and certify new electric and hybrid electric aircraft products in order to achieve our long-term strategy of offering a family of sustainable aircraft for urban air mobility, general aviation, cargo and special mission roles. In addition, new products and technologies could generate unanticipated safety or other concerns resulting in expanded product liability risks, potential product recalls and other regulatory issues that could have an adverse impact on us. Furthermore, because of the lengthy research and development cycle involved in bringing certain of our products to market, we cannot predict the economic conditions that will exist when any new product is complete, and the market for our product offerings does not always develop or continue to expand as we anticipate.
A reduction in capital spending in the aerospace or defense industries could have a significant effect on the demand for new products and technologies under development, which could have an adverse effect on our financial condition and results of operations. In addition, our investments in equipment or technology that we believe will enable us to obtain future contracts for our U.S. Government or other customers may not result in contracts or revenues sufficient to offset such investment. We cannot be sure that our competitors will not develop competing technologies which gain superior market acceptance compared to our
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products. A significant failure in our new product development efforts, a substantial change to schedule, a material change in an anticipated market or the failure of our products or services to achieve customer acceptance relative to our competitors’ products or services, could have an adverse effect on our financial condition and results of operations.
We have made and may continue to make acquisitions that increase the risks of our business.
We enter into acquisitions with the intention of expanding our business and enhancing shareholder value. Acquisitions involve risks and uncertainties that, in some cases, have resulted, and, in the future, could result in our not achieving expected benefits. Such risks include difficulties in integrating newly acquired businesses and operations in an efficient and cost-effective manner; challenges in achieving expected strategic objectives, cost savings and other benefits; the risk that the acquired businesses’ markets do not evolve as anticipated and that the acquired businesses’ products and technologies do not prove to be those needed to be successful in those markets; the risk that our due diligence reviews of the acquired business do not identify or adequately assess all of the material issues which impact valuation of the business or result in costs or liabilities in excess of what we anticipated; the risk that we pay a purchase price that exceeds what the future results of operations would have merited; the risk that the acquired business may have significant internal control deficiencies or exposure to regulatory sanctions; and the potential loss of key customers, suppliers and employees of the acquired businesses.
Business and Operational Risks
Risks arising from uncertainty in global macroeconomic conditions may harm our business.
We are sensitive to global macroeconomic conditions. Negative macroeconomic factors may have an adverse effect on our business, results of operations and financial condition, as well as on our distributors, customers, subcontractors and suppliers, and on activity in many of the industries and markets we serve. We cannot predict changes in worldwide or regional economic or political conditions and government policies as such factors are highly volatile and beyond our control. If current macroeconomic pressures, including from inflation and labor and supply chain challenges, continue or if global macroeconomic conditions deteriorate and remain at depressed levels for extended periods, our business, results of operations and financial condition could be materially adversely affected. In addition, changes in laws or policies governing the terms of foreign trade, and in particular increased trade restrictions, tariffs or taxes on imports from countries where we manufacture or sell our products or from where we import products or raw materials (either directly or through our suppliers) could adversely impact our competitive position, business operations and financial results.
Our business could be negatively impacted by cybersecurity threats and other disruptions.
Our information technology (IT) and related systems are critical to the efficient operation of our business and essential to our ability to perform day to day processes. We routinely face persistent security threats, including threats to our IT infrastructure and unlawful attempts to gain access to our confidential, classified or otherwise proprietary information via phishing/malware campaigns and other cyberattack methods, as well as threats to the physical security of our facilities and employees. The threats we face vary from those common to most industries, to attacks by more advanced and persistent, highly organized adversaries, including nation state actors, which target us for the national security information in our possession, for our role in developing advanced technology systems or with the goal of committing fraudulent activity. Our customers, suppliers and subcontractors are likewise targeted, and attack methods continue to evolve. Some cyberattacks depend on human error or manipulation, including phishing attacks or schemes that use social engineering or artificial intelligence to gain access to systems or carry out disbursement of funds or other frauds. Developments in artificial intelligence and machine learning provide threat actors with the capability to use more sophisticated means to attack our systems and may exacerbate cybersecurity risk.
While we have experienced cybersecurity attacks, such attacks have not resulted in a material information security breach and we have not suffered any material losses relating to such attacks. Due to the evolving nature of security threats, the possibility of future material incidents cannot be completely mitigated, and we may not always be successful in timely detecting, reporting or responding to cyber incidents. Future attacks or breaches of data security, whether of our systems, the systems of our customers, suppliers, subcontractors or other business partners, or the systems of our service providers or other third parties who may have access to our data for business purposes, could disrupt our operations, cause the loss of business information or compromise confidential information, exposing us to liability or regulatory action. Such an incident also could require significant management attention and resources, increase costs that may not be covered by insurance, and result in reputational damage, potentially adversely affecting our competitiveness and our results of operations. Products and services that we provide to our customers may themselves be subject to cyberthreats which may not be detected or effectively mitigated, resulting in potential losses that could adversely affect us and our customers. In addition, our customers, including the U.S. Government, are increasingly requiring cybersecurity protections and mandating cybersecurity standards in our products, and we may incur additional costs to comply with such demands. For information on our cybersecurity governance, risk management and strategy, see Item 1C. Cybersecurity.
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Challenges faced by our subcontractors or suppliers could materially and adversely affect our performance.
We rely on other companies to provide raw materials, major components and subsystems for our products. Subcontractors also perform services that we provide to our customers in certain circumstances. We depend on these suppliers and subcontractors to meet our contractual obligations to our customers and conduct our operations. Our ability to meet our obligations to our customers could be adversely affected if suppliers or subcontractors do not provide the agreed-upon supplies or perform the agreed-upon services in compliance with customer requirements and in a timely and cost-effective manner. Likewise, the quality of our products could be adversely impacted if companies to whom we delegate manufacture of major components or subsystems for our products, or from whom we acquire such items, do not provide components or subsystems which meet required specifications and perform to our and our customers’ expectations. Our businesses are experiencing and may continue to experience manufacturing inefficiencies and production delays as a result of shortages and delays of critical components for our products and other issues related to our direct or indirect suppliers. Suppliers may be unable to quickly recover from natural disasters, acts of war, and other events beyond their control and may be subject to additional risks such as material or labor shortages, inflationary conditions or other financial problems that limit their ability to conduct their operations, resulting in their inability to perform as anticipated. As a result, we have experienced, and may continue to experience, cost increases for certain materials and components which, along with increased energy and shipping costs and other inflationary pressures, have negatively impacted, and may continue to negatively impact, our profitability. The risk of these adverse effects would likely be greater in circumstances where we rely on only one or two subcontractors or suppliers for a particular raw material, product or service. In particular, in the aircraft industry, most vendor parts are certified by the regulatory agencies as part of the overall Type Certificate for the aircraft being produced by the manufacturer. If a vendor does not or cannot supply its parts, then the manufacturer’s production line may be stopped until the manufacturer can design, manufacture and certify a similar part itself or identify and certify another similar vendor’s part, resulting in significant delays in the completion of aircraft. Such events may adversely affect our financial results, damage our reputation and relationships with our customers, and result in regulatory actions and/or litigation.
We are subject to risks of doing business globally that could adversely impact our business.
During 2024, we derived approximately 29% of our revenues from international business, including U.S. exports. Conducting business internationally exposes us to additional risks than if we conducted our business solely within the U.S. We maintain manufacturing facilities, service centers, supply centers and other facilities worldwide, including in various emerging market countries. Risks related to international operations include import, export, economic sanctions and other trade restrictions; changing U.S. and foreign procurement policies and practices; changes in international trade policies, including higher tariffs on imported goods and materials and renegotiation of free trade agreements; potential retaliatory tariffs imposed by foreign countries against U.S. goods; impacts on our non-U.S. suppliers and customers due to acts of war or terrorism occurring internationally; restrictions on technology transfer; difficulties in protecting intellectual property; increasing complexity of employment and environmental, health and safety regulations; foreign investment laws; exchange controls; repatriation of earnings or cash settlement challenges; compliance with increasingly rigorous data privacy and protection laws; competition from foreign and multinational firms with home country advantages; economic and government instability; acts of industrial espionage, acts of war and terrorism and related safety concerns. The impact of any one or more of these or other factors could adversely affect our business, financial condition or operating results.
Additionally, some international government customers require contractors to agree to specific in-country purchases, technology transfers, manufacturing agreements or financial support arrangements, known as offsets, as a condition for a contract award. These contracts generally extend over several years and may include penalties if we fail to perform in accordance with the offset requirements which are often subjective. We also are exposed to risks associated with using foreign representatives and consultants for international sales and operations and teaming with international subcontractors and suppliers in connection with international programs. In many foreign countries, particularly in those with developing economies, it is common to engage in business practices that are prohibited by laws and regulations applicable to us, such as the Foreign Corrupt Practices Act. Although we maintain policies and procedures designed to facilitate compliance with these laws, a violation of such laws by any of our international representatives, consultants, joint ventures, business partners, subcontractors or suppliers, even if prohibited by our policies, could have an adverse effect on our business and reputation.
Natural disasters or other events outside of our control have disrupted and may in the future disrupt our operations, adversely affect our results of operations and financial condition, and may not be fully covered by insurance.
Natural disasters, including hurricanes, fires, tornados, floods and other forms of severe weather, the intensity and frequency of which are being exacerbated by climate change, along with other impacts of climate change, such as rising sea waters, as well as other events outside of our control including public health crises, pandemics, power outages and industrial accidents, have in the past and could in the future disrupt our operations and adversely affect our business. Any of these events could result in physical damage to and/or complete or partial closure of one or more of our facilities and temporary or long-term disruption of our operations or the operations of our suppliers by causing business interruptions or by impacting the availability and cost of materials needed for manufacturing or otherwise impacting our ability to deliver products and services to our customers. Existing insurance arrangements may not provide full protection for the costs that may arise from such events. The occurrence of any of
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these events could materially increase our costs and expenses and have a material adverse effect on our business, financial condition and results of operations.
Financial Risks
If our Finance segment has difficulty collecting on its finance receivables, our financial performance could be adversely affected.
The financial performance of our Finance segment depends on the quality of loans, leases and other assets in its portfolio. Portfolio quality can be adversely affected by several factors, including finance receivable underwriting procedures, collateral value, geographic or industry concentrations, and the effect of general economic conditions. In addition, a substantial number of the originations in our finance receivable portfolio are cross-border transactions for aircraft sold outside of the U.S. Cross-border transactions present additional challenges and risks in the event of borrower default, which can result in difficulty or delay in collecting on the related finance receivables. If our Finance segment has difficulty successfully collecting on its finance receivable portfolio, our cash flow, results of operations and financial condition could be adversely affected.
We periodically need to obtain financing and such financing may not be available to us on satisfactory terms, if at all.
We periodically need to obtain financing in order to meet our debt obligations as they come due, to support our operations and/or to make acquisitions. Our access to the debt capital markets and the cost of borrowings are affected by a number of factors including market conditions and the strength of our credit ratings. If we cannot obtain adequate sources of credit on favorable terms, or at all, our business, operating results, and financial condition could be adversely affected.
Unanticipated changes in our tax rates or exposure to additional income tax liabilities could affect our profitability.
We are subject to income taxes in the U.S. and various non-U.S. jurisdictions, and our domestic and international tax liabilities are subject to the location of income among these different jurisdictions. Our effective tax rate could be adversely affected by changes in the mix of earnings in countries with differing statutory tax rates, changes in the valuation of deferred tax assets and liabilities, changes in the amount of earnings indefinitely reinvested offshore, changes to unrecognized tax benefits or changes in tax laws, which could affect our profitability. In particular, the carrying value of deferred tax assets is dependent on our ability to generate future taxable income, as well as changes to applicable statutory tax rates. In addition, the amount of income taxes we pay is subject to audits in various jurisdictions, and a material assessment by a tax authority could affect our profitability.
Risks Related to Regulatory, Legal and Other Matters
We are subject to increasing compliance risks that could adversely affect our operating results.
As a global business, we are subject to laws and regulations in the U.S. and other countries in which we operate. International sales and global operations require importing and exporting goods, software and technology, some of which have military applications subjecting them to more stringent import-export controls across international borders on a regular basis. For example, we sometimes initially must obtain licenses and authorizations from various U.S. Government agencies before we are permitted to sell certain of our aerospace and defense products outside the U.S., and we are not always successful in obtaining these licenses or authorizations in a timely manner. Both U.S. and foreign laws and regulations applicable to us have been increasing in scope and complexity. For example, both U.S. and foreign governments and government agencies regulate the aviation industry, and they have previously and may in the future impose new regulations for additional aircraft security or other requirements or restrictions. New or changing laws and regulations or related interpretation and policies could increase our costs of doing business, affect how we conduct our operations, adversely impact demand for our products, and/or limit our ability to sell our products and services. Compliance with laws and regulations of increasing scope and complexity is even more challenging in our business environment in which reducing our operating costs is often necessary to remain competitive. In addition, a violation of U.S. and/or foreign laws by one of our employees or business partners could subject us or our employees to civil or criminal penalties, including material monetary fines, or other adverse actions, such as denial of import or export privileges and/or debarment as a government contractor which could damage our reputation and have an adverse effect on our business.
Certain of our products are subject to laws regulating consumer products and could be subject to repurchase or recall as a result of safety issues.
As a distributor of consumer products in the U.S., certain of our products are subject to the Consumer Product Safety Act, which empowers the U.S. Consumer Product Safety Commission (CPSC) to exclude from the market products that are found to be unsafe or hazardous. Under certain circumstances, the CPSC has in the past and could require in the future us to repair, replace or refund the purchase price of one or more of our products, or potentially even discontinue entire product lines. We also may voluntarily take such action and, from time to time, have done so, but within strictures recommended by the CPSC. The CPSC also can impose fines or penalties on a manufacturer for non-compliance with its requirements. Furthermore, failure to timely notify the CPSC of a potential safety hazard can result in significant fines being assessed against us. Any repurchases or recalls of our products or an imposition of fines or penalties could be costly to us and could damage the reputation or the value of our brands. Additionally, laws regulating certain consumer products exist in some states, as well as in other countries in which we sell our products, and more restrictive laws and regulations could be adopted in the future.
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Increased regulation and stakeholder expectations related to global climate change could negatively affect our operating results.
Increased worldwide public awareness and concern regarding global climate change has resulted and is likely to continue to result in more legislative and regulatory efforts, in the U.S., the European Union and in other jurisdictions in which we operate, in an effort to address the negative impacts of climate change. Recently enacted laws and regulations include, and future such laws and regulations may include, more prescriptive required reporting on environmental metrics, climate change related risks and associated financial and other impacts, as well as increased oversight of and reporting on our supply chain and other compliance requirements. We expect that compliance with such laws and regulations will require additional internal and external resources. Stricter limits on greenhouse gas emissions generated by our facilities or by our products that produce carbon emissions, carbon pricing mechanisms and/or energy taxes could also be imposed. Compliance with stricter limits may necessitate larger investment in product development and manufacturing equipment and/or facilities, as well as sourcing from new suppliers and/or higher costs from existing suppliers. These increased regulatory requirements are expected to increase our direct and indirect costs and could negatively impact our business, results of operations, financial condition and competitive position. Our failure to adequately comply with such laws and regulations could jeopardize our ability to receive contract awards from the U.S. government and other customers.
Moreover, our investors, customers, employees and other stakeholders increasingly expect us to reduce greenhouse gas emissions generated by our operations by implementing more efficient manufacturing technologies and increasing the amount of renewable energy used within our facilities. While we are engaged in efforts to transition to a lower carbon economy by reducing the emissions generated by our operations and increasing our use of renewable energy, these efforts take time and resources and may increase our energy acquisition and other costs and require capital investment. In addition, our stakeholders expect us to reduce greenhouse gas emissions from the use of our products, including by developing and incorporating sustainable technologies into our products. We expect that most of our businesses will require significant research and development investment to succeed in developing the new technologies and products that will enable us to significantly reduce such emissions from the use of our products and successfully compete in a lower carbon economy. We may not realize the anticipated benefits of our investments and actions for a variety of reasons, including technological challenges, evolving government and customer requirements and our ability to anticipate them and develop the desired technologies and products on a timely basis. Our competitors may develop these technologies and products before we do and they may be deemed by our customers to be superior to technologies and products we may develop, and they may otherwise gain industry acceptance in advance of, or instead of, our products. In addition, as we and our competitors develop increasingly sustainable technologies, demand for our existing offerings may decrease or become nonexistent.
We are subject to legal proceedings and other claims.
We are subject to legal proceedings and other claims arising out of the conduct of our business, including proceedings and claims relating to commercial and financial transactions; government contracts; alleged lack of compliance with applicable laws and regulations; disputes with suppliers, production partners or other third parties; product liability; patent and trademark infringement; employment disputes; and environmental, safety and health matters. Due to the nature of our manufacturing business, we are regularly subject to liability claims arising from accidents involving our products, including claims for serious personal injuries or death caused by weather or by pilot, driver or user error. In the case of litigation matters for which reserves have not been established because the loss is not deemed probable, it is reasonably possible that such claims could be decided against us and could require us to pay damages or make other expenditures in amounts that are not presently estimable. In addition, we cannot be certain that our reserves are adequate and that our insurance coverage will be sufficient to cover one or more substantial claims. Furthermore, we may not be able to obtain insurance coverage at acceptable levels and costs in the future. Litigation is inherently unpredictable, and we could incur judgments, receive adverse arbitration awards or enter into settlements for current or future claims that could adversely affect our results of operations in any particular period.
Intellectual property infringement claims of others and the inability to protect our intellectual property rights could harm our business and our customers.
Intellectual property infringement claims are, from time to time, asserted by third parties against us or our customers. Any related indemnification payments or legal costs we are obliged to pay on behalf of our businesses, our customers or other third parties can be costly. Infringement claims also have resulted in legal restrictions on our businesses engaging in sales of allegedly infringing products. If such a restriction were imposed upon a material product line, our business and results of operations could be adversely impacted. In addition, we own the rights to many patents, trademarks, brand names, trade names and trade secrets that are important to our business. Our inability to enforce these intellectual property rights could have an adverse effect on our results of operations. Additionally, our intellectual property could be at risk due to cybersecurity threats.
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Risks Related to Human Capital
Our success is highly dependent on our ability to hire, train and retain a qualified workforce.
Our success is highly dependent upon our ability to hire, train and retain a workforce with the skills necessary for our businesses to develop and manufacture the products desired by our customers. We need highly skilled personnel in multiple areas including, among others, engineering, manufacturing, information technology, cybersecurity, flight operations, business development and strategy and management. Because many of our businesses experience cyclical market demand, they face challenges in maintaining their workforce at levels aligned with market demand which in the past has necessitated workforce reductions at some of our businesses as demand decreased. Conversely, our businesses sometimes need to increase the size of their workforce in order to keep pace with production needs due to increased customer demand. Furthermore, for our defense businesses the uncertainty of being awarded follow-on contracts and the related timing can also present difficulties in matching workforce size with contract needs. Such challenges in aligning the size of our businesses’ workforces with current or future business needs have resulted and may, in the future result in increased costs, production delays or other adverse impacts on our business and results of operations.
In addition, from time to time we face challenges that may impact employee retention, such as workforce reductions and facility consolidations and closures, and some of our most experienced employees are retirement-eligible which may adversely impact retention. To the extent that we lose experienced personnel through retirement or otherwise, it is critical for us to develop other employees, hire new qualified employees and successfully manage the transfer of critical knowledge. Competition for skilled employees is intense, and we may incur higher labor, recruiting and/or training costs in order to attract and retain employees with the requisite skills. We may not be successful in hiring or retaining such employees which could adversely impact our business and results of operations.
The increasing costs of certain employee and retiree benefits could adversely affect our results.
Our results of operations and cash flows may be adversely impacted by increasing costs and funding requirements related to our employee benefit plans. The obligation for our defined benefit pension plans is driven by, among other things, our assumptions of the expected long-term rate of return on plan assets and the discount rate used for future payment obligations. Additionally, as part of our annual evaluation of these plans, significant changes in our assumptions, due to changes in economic, legislative and/or demographic experience or circumstances, or changes in our actual investment returns could negatively impact the funded status of our plans requiring us to substantially increase our pension liability with a resulting decrease in shareholders’ equity. Also, changes in pension legislation and regulations could increase the cost associated with our defined benefit pension plans.
Our business could be adversely affected by strikes or work stoppages and other labor issues.
Approximately 7,400, or 28%, of our U.S. employees are represented by labor unions under various collective bargaining agreements with varying durations and expiration dates, and many of our non-U.S. employees are represented by organized councils. From time to time, our collective bargaining agreements expire and are subject to renegotiation at that time. We may not be able to negotiate successor collective bargaining agreements upon expiration without experiencing labor disputes, including strikes or work stoppages, or we may be unable to renegotiate such contracts on favorable terms. For example, on September 21, 2024, Textron Aviation’s largest union rejected a proposed new contract and engaged in a strike that had an adverse effect on Textron Aviation's ability to meet its production and delivery schedules, and negatively impacted revenues and segment profit in 2024. If we experience any extended interruption of operations at any of our facilities as a result of labor disputes, strikes or other work stoppages, our business, financial condition or results of operations could be adversely affected. In addition, the workforces of many of our suppliers and customers are represented by labor unions. Work stoppages or strikes at the plants of our key suppliers could disrupt our manufacturing processes; similar actions at the plants of our customers could result in delayed or canceled orders for our products. Any of these events could adversely affect our results of operations.
Item 1B. Unresolved Staff Comments
None.
Item 1C. Cybersecurity
Overview
Our centrally defined cybersecurity policies and processes are based on industry best practices and are revisited regularly to ensure their appropriateness based on risk, threats and current technological capabilities. We use a multi-layered approach to security with processes and tools aligned with the National Institute of Standards and Technology Cybersecurity Framework. We monitor compliance with these policies and processes through frequent internal audits and a set of robust metrics that assist in protection of our environment. As a U.S. defense contractor, we are required to comply with extensive regulations, including requirements imposed by the Defense Federal Acquisition Regulation Supplement related to adequately safeguarding controlled unclassified information (CUI) and reporting cybersecurity incidents to the U.S. Department of Defense (DoD). We will also be
16
required to achieve Cybersecurity Maturity Model Certification which will certify our compliance with the federally mandated CUI program.
We maintain Information Systems Incident Management Standards applicable to all our businesses that are intended to ensure information security events and weaknesses associated with information systems are communicated and acted on in a timely manner. Our disclosure controls and procedures address cybersecurity and include processes intended to ensure that security breaches are reported to appropriate personnel and, if warranted, analyzed for potential disclosure. While we have experienced cybersecurity attacks, such attacks to date have not materially affected the Company or our business strategy, results of operations, or financial condition. For more information regarding the risks we face from cybersecurity threats, see Item 1A. Risk Factors.
Governance
Board Oversight of Cybersecurity Matters
Management of Cybersecurity Risks
Textron Information Services is led by our CIO who has held positions of increasing responsibility within our corporate, Bell and Textron Systems IT organizations since 2008, including leading the IT organizations at both segments in maintaining compliance with the DoD information security requirements, as well as with our enterprise information security policies and standards. He previously led strategic IT projects and teams responsible for delivering global IT solutions for several large U.S. based companies.
Risk Management
Strategy
Our Security Culture
We protect our information assets and manage risk by promoting a culture that communicates security risks, designs secure IT systems and operates according to approved processes to reduce the likelihood and impact of security incidents. We achieve this objective by:
•Designing, implementing and maintaining solutions with appropriate security controls.
•Sustaining solutions with required patching and vulnerability remediation.
•Creating and executing controls in support of policy as well as regulatory compliance.
•Ensuring that our policies, processes, practices and technologies proactively protect, shield, defend and remediate cyber threats.
•Delivering quality communications and annual training to stakeholders on cyber awareness and computing hygiene.
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We believe that the conduct of our employees is critical to the success of our information security. Through our security awareness program, we keep our employees apprised of threats, risks and the part that they play in protecting both themselves and the company. We conduct periodic compliance training for our employees regarding the protection of sensitive information, which includes mandatory annual cyber safety training for all users with access to our computer network intended to reduce the likelihood of success of cyberattacks which target our employees. We also conduct regular phishing simulations to increase employee awareness on how to spot phishing attempts, and what to do if they suspect an email to be a phishing attack.
We execute penetration testing against our technical environment and processes, and continuously monitor our network and systems for signs of intrusion. We also retain consultants to enhance our penetration testing program with current trends and methodologies utilized against other companies, ensuring we are proactively reducing risk from emerging threats. In addition, we conduct tabletop exercises to prepare for responding to potential cybersecurity events.
We have a rigorous process, including a formal IT risk assessment, to assess our service providers prior to allowing our information to be processed, stored or transmitted by third parties, and we include standardized contractual requirements in each contract where appropriate. We validate our service providers’ security via questionnaires, open-source intelligence and, where appropriate, SOC1 reports on financially significant third-party service providers . Our process also includes regular monitoring of risk related to third parties on a periodic basis or when services or product purchases expand beyond their original scope or intended use.
Protections against insider threat is a critical component of our security strategy, particularly within our defense business units. Our insider threat detection processes are designed to identify and evaluate potential insider threats so that appropriate mitigation can be implemented.
Item 2. Properties
On December 28, 2024, we operated a total of 56 plants located throughout the U.S. and 44 plants outside the U.S. We own 60 plants and lease the remainder for a total manufacturing space of approximately 23.6 million square feet. We consider the productive capacity of the plants operated by each of our business segments to be adequate. We also own or lease offices, warehouses, training and service centers and other space at various locations. In general, our facilities are in good condition, are considered to be adequate for the uses to which they are being put and are substantially in regular use.
Item 3. Legal Proceedings
We are subject to actual and threatened legal proceedings and other claims arising out of the conduct of our business, including proceedings and claims relating to commercial and financial transactions; government contracts; alleged lack of compliance with applicable laws and regulations; disputes with suppliers, production partners or other third parties; product liability; patent and trademark infringement; employment disputes; and environmental, health and safety matters. Some of these legal proceedings and claims seek damages, fines or penalties in substantial amounts or remediation of environmental contamination. As a government contractor, we are subject to audits, reviews and investigations to determine whether our operations are being conducted in accordance with applicable regulatory requirements. Under federal government procurement regulations, certain claims brought by the U.S. Government could result in our suspension or debarment from U.S. Government contracting for a period of time. On the basis of information presently available, we do not believe that existing proceedings and claims will have a material effect on our financial position or results of operations.
Item 4. Mine Safety Disclosures
Not applicable.
18
PART II
Item 5. Market for Registrant’s Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities
The principal market on which our common stock is traded is the New York Stock Exchange under the symbol "TXT." At December 28, 2024, there were approximately 4,800 record holders of Textron common stock.
Issuer Repurchases of Equity Securities
The following provides information about our fourth quarter 2024 repurchases of equity securities that are registered pursuant to Section 12 of the Securities Exchange Act of 1934, as amended:
Period (shares in thousands) | Total Number of Shares Purchased * | Average Price Paid per Share (excluding commissions) | Total Number of Shares Purchased as part of Publicly Announced Plan * | Maximum Number of Shares that may yet be Purchased under the Plan | ||||||||||
| September 29, 2024 – November 2, 2024 | 500 | $ | 82.32 | 500 | 17,881 | |||||||||
| November 3, 2024 – November 30, 2024 | 1,475 | 84.88 | 1,475 | 16,406 | ||||||||||
| December 1, 2024 – December 28, 2024 | 820 | 80.60 | 820 | 15,586 | ||||||||||
| Total | 2,795 | $ | 83.17 | 2,795 | ||||||||||
* These shares were purchased pursuant to a plan authorizing the repurchases of up to 35 million shares of Textron common stock that was approved on July 24, 2023 by our Board of Directors. This share repurchase program has no expiration date.
Stock Performance Graph
The following graph compares the total return on a cumulative basis at the end of each year of $100 invested in our common stock on December 31, 2019 with the Standard & Poor’s (S&P) 500 Stock Index, the S&P 500 Aerospace & Defense (A&D) Index and the S&P 500 Industrials Index, all of which include Textron. The values calculated assume dividend reinvestment.
| 2019 | 2020 | 2021 | 2022 | 2023 | 2024 | |||||||||||||||
| Textron Inc. | $ | 100.00 | $ | 108.62 | $ | 173.72 | $ | 159.50 | $ | 181.37 | $ | 174.29 | ||||||||
| S&P 500 | 100.00 | 118.40 | 152.39 | 124.79 | 157.59 | 199.99 | ||||||||||||||
| S&P 500 A&D | 100.00 | 83.94 | 95.03 | 111.54 | 119.09 | 138.18 | ||||||||||||||
| S&P 500 Industrials | 100.00 | 111.06 | 134.52 | 127.15 | 150.20 | 178.38 | ||||||||||||||
Item 6. [Reserved]
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Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations
Overview
In 2024, our operating results were adversely impacted by a strike at the Textron Aviation segment. On September 21, 2024, the International Association of Machinists and Aerospace Workers (IAM) District 70, Local Lodge 774 called a strike against Textron Aviation. On October 20, 2024, an agreement was reached on a new five-year labor contract. As a result, our revenues and profit were unfavorably impacted in the second half of 2024 due to delayed aircraft deliveries and manufacturing inefficiencies associated with the labor disruption and the recovery of operating activities. At the Industrial segment, we experienced lower revenues and profit in 2024, largely resulting from a decline in demand in our end markets for Textron Specialized Vehicles products. We are in the process of conducting a strategic review of our powersports product line, as discussed in Note 15 to the Consolidated Financial Statements on page 62.
At our Bell segment, the ramp up of the FLRAA program contributed to a 14% growth in its revenues for the year. In August, the U.S. Army announced approval of Milestone B for the FLRAA program, establishing it as a program of record and transitioning it to the Engineering and Manufacturing Development phase. In the second half of the year, Bell was awarded contracts totaling approximately $3.0 billion for this phase of the program that contributed to a total company backlog increase of $4.0 billion, 29%, to $17.9 billion at the end of 2024. This backlog increase included growth of $676 million at the Textron Aviation segment, reflecting steady customer demand supported by new products, and $644 million at the Textron Systems segment, which included new contract awards for the Ship-to-Shore Connector program.
Financial highlights for 2024 also include:
•Generated $1.0 billion of net cash from operating activities from our manufacturing businesses.
•Invested $491 million in research and development projects and $364 million in capital expenditures.
•Returned $1.1 billion to our shareholders through the repurchase of 12.9 million shares of our common stock.
For an overview of our business segments, including a discussion of our major products and services, refer to Item 1. Business. A discussion of our financial condition and operating results for 2024 compared with 2023 is provided below, while a discussion of 2023 compared with 2022 can be found in Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations of our Annual Report on Form 10-K for the year ended December 30, 2023.
In November 2023, the Financial Accounting Standards Board issued Accounting Standard Update (ASU) No. 2023-07, Segment Reporting (Topic 280): Improvements to Reportable Segment Disclosures, which requires a public entity to disclose, on an annual and interim basis, significant segment expenses and other segment items that are regularly provided to the Chief Operating Decision Maker. The new standard is effective for fiscal years beginning after December 15, 2023. We adopted ASU 2023-07 in the fourth quarter of 2024 and have recast management’s discussion and analysis of the results of operations of our company to include a discussion of the additional expense categories. In connection with the adoption of this standard, research and development costs previously included within Cost of products sold are now reported on a separate line in our Consolidated Statements of Operations. Prior period amounts have been recast to conform to the new presentation.
The following discussion should be read in conjunction with our Consolidated Financial Statements and related Notes included in Item 8. Financial Statements and Supplementary Data.
Consolidated Results of Operations
| % Change | |||||||||||||||||
| (Dollars in millions) | 2024 | 2023 | 2022 | 2024 | 2023 | ||||||||||||
| Revenues | $ | 13,702 | $ | 13,683 | $ | 12,869 | —% | 6% | |||||||||
| Cost of sales | 11,200 | 10,835 | 10,199 | 3% | 6% | ||||||||||||
| Gross margin as a percentage of Manufacturing revenues | 18.0% | 20.5% | 20.4% | ||||||||||||||
| Research and development costs | 491 | 570 | 601 | (14)% | (5)% | ||||||||||||
| Selling and administrative expense | 1,156 | 1,225 | 1,186 | (6)% | 3% | ||||||||||||
| Interest expense, net | 97 | 77 | 107 | 26% | (28)% | ||||||||||||
| Special charges | 78 | 126 | — | (38)% | 100% | ||||||||||||
| Non-service components of pension and postretirement income, net | 263 | 237 | 240 | 11% | (1)% | ||||||||||||
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Revenues
Revenues increased $19 million in 2024, compared with 2023, largely due to the following factors:
•Higher Bell revenues of $432 million, largely reflecting higher military aircraft and support revenues of $347 million, primarily due to higher volume on the FLRAA program, partially offset by lower volume on the V-22 program.
•Lower Industrial revenues of $326 million, due to lower revenues of $263 million at Textron Specialized Vehicles, principally in the powersports and personal transportation vehicles product lines due to reduced demand in their end markets, and lower revenues of $63 million at Kautex.
•Lower Textron Aviation revenues of $89 million, reflecting lower volume and mix of $270 million, principally a result of the strike discussed in the Segment Analysis section below, partially offset by higher pricing of $181 million in both the aircraft and aftermarket parts and services product lines.
Cost of Sales
Cost of sales includes cost of products and services sold for the Manufacturing group. In 2024, cost of sales increased $365 million, 3%, compared with 2023. The increase in cost was largely due to a $299 million impact from inflation and higher LIFO inventory provision and a $38 million inventory valuation charge to write down inventory to its net realizable value at Textron Specialized Vehicles as discussed in Note 15 to the Consolidated Financial Statements on page 62.
Consolidated gross margin as a percentage of Manufacturing revenues decreased 250 basis points in 2024, compared with 2023, primarily due to lower gross margin at the Bell segment, largely due to the mix of contracts discussed above, and at the Textron Aviation segment, reflecting the mix of aircraft sold and manufacturing inefficiencies, largely due to the strike. In addition, higher LIFO inventory provision and the inventory valuation charge noted above accounted for 80 basis points of the decrease.
Research and Development Costs
Research and development costs decreased $79 million, 14%, in 2024, compared with 2023, largely reflecting the winddown of the Future Attack Reconnaissance Aircraft Program at the Bell segment, partially offset by a $17 million increase at the Textron eAviation segment, largely due to development efforts on hybrid and electric propulsion aircraft.
Selling and Administrative Expense
Selling and administrative expense decreased $69 million, 6%, in 2024, compared with 2023, primarily reflecting lower compensation expense, which included lower shared-based and incentive compensation and savings from restructuring activities.
Interest Expense, Net
Interest expense, net includes interest expense for both the Finance and Manufacturing borrowing groups, with interest on intercompany borrowings eliminated, and interest income earned on cash and equivalents for the Manufacturing borrowing group. In 2024, interest expense, net increased $20 million, 26%, compared with 2023, primarily due to an increase in the weighted-average interest rate of our debt and $7 million in lower interest income. For 2024, 2023 and 2022, gross interest expense totaled $146 million, $133 million and $129 million, respectively.
Special Charges
Special charges of $78 million and $126 million in 2024 and 2023, respectively, include restructuring activities and asset impairment charges as described in Note 15 to the Consolidated Financial Statements on page 62.
Non-service Components of Pension and Postretirement Income, Net
Non-service components of pension and postretirement income, net increased by $26 million, 11%, in 2024, compared with 2023. The increase is based on our annual valuation at the end of 2023 and is primarily driven by the impact of actual pension asset returns that exceeded our expected return on plan assets.
Income Taxes
| 2024 | 2023 | 2022 | |||||||||
| Effective tax rate | 12.5% | 15.2% | 15.2% | ||||||||
In 2024, the effective tax rate of 12.5% was lower than the U.S. federal statutory tax rate of 21%, largely due to the favorable impact of research and development credits and the effective settlement of certain tax positions in the fourth quarter of 2024, which is discussed in Note 16 to the Consolidated Financial Statements on page 63. In 2023, the effective tax rate of 15.2% was lower than the U.S. federal statutory tax rate of 21%, largely due to the favorable impact of research and development credits and tax deductions for foreign-derived intangible income.
For a full reconciliation of our effective tax rate to the U.S. federal statutory tax rate, see Note 16 to the Consolidated Financial Statements on page 63.
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Segment Analysis
We operate in, and report financial information for, the following six operating segments: Textron Aviation, Bell, Textron Systems, Industrial, Textron eAviation and Finance. Segment profit is an important measure used for evaluating performance and for decision-making purposes. Segment profit for the manufacturing segments excludes the non-service components of pension and postretirement income, net; LIFO inventory provision; intangible asset amortization; interest expense, net for Manufacturing group; certain corporate expenses; gains/losses on major business dispositions; special charges and the inventory valuation charge to write down production-related powersports inventory. The operating costs used to derive segment profit for our manufacturing segments includes cost of sales, research and development costs and selling and administrative expense. The cost of sales discussed in this Segment Analysis section excludes the LIFO inventory provision, intangible asset amortization and the inventory valuation charge discussed above that are reported within Cost of products sold or Cost of services sold on the Consolidated Statement of Operations. The measurement for the Finance segment includes interest income and expense along with intercompany interest income and expense.
In our discussion of comparative results for the Manufacturing group, material changes in revenues and segment profit for our commercial businesses typically are expressed in terms of product line revenues, including volume and mix and pricing; foreign exchange; acquisitions and dispositions; inflation; manufacturing efficiency; and changes in research and development costs and selling and administrative expense. For revenues, volume and mix represents changes in revenues from increases or decreases in the number of units delivered or services provided and the composition of products and/or services sold. For segment profit, volume and mix represents a change due to the number of units delivered or services provided and the composition of products and/or services sold at different profit margins. Pricing represents changes in unit pricing. Foreign exchange is the change resulting from translating foreign-denominated amounts into U.S. dollars at exchange rates that are different from the prior period. Revenues generated by acquired businesses are reflected in Acquisitions for a twelve-month period, while reductions in revenues and segment profit from the sale of businesses are reflected as Dispositions. Inflation represents higher material, wages, benefits, pension service cost or other costs. Manufacturing efficiency includes changes in material, labor and overhead variances to standards, typically due to scrap rates, labor efficiency or inefficiencies, facility usage and other manufacturing productivity inputs.
Approximately 25% of our 2024 revenues were derived from contracts with the U.S. Government, including those under the U.S. Government-sponsored foreign military sales program. For our segments that contract with the U.S. Government, material changes in revenues related to these contracts are expressed in terms of volume. Changes in segment profit for these contracts are typically expressed in terms of volume and mix and contract performance, which includes cumulative catch-up adjustments associated with a) revisions to the transaction price that may reflect contract modifications or changes in assumptions related to award fees and other variable consideration or b) changes in the total estimated costs at completion due to improved or deteriorated operating performance.
Textron Aviation
| % Change | |||||||||||||||||
| (Dollars in millions) | 2024 | 2023 | 2022 | 2024 | 2023 | ||||||||||||
| Revenues: | |||||||||||||||||
| Aircraft | $ | 3,374 | $ | 3,577 | $ | 3,387 | (6)% | 6% | |||||||||
| Aftermarket parts and services | 1,910 | 1,796 | 1,686 | 6% | 7% | ||||||||||||
| Total revenues | 5,284 | 5,373 | 5,073 | (2)% | 6% | ||||||||||||
| Cost of sales | 4,102 | 4,116 | 3,905 | —% | 5% | ||||||||||||
| Research and development costs | 208 | 199 | 191 | 5% | 4% | ||||||||||||
| Selling and administrative expense | 408 | 409 | 417 | —% | (2)% | ||||||||||||
| Segment profit | $ | 566 | $ | 649 | $ | 560 | (13)% | 16% | |||||||||
| Profit margin | 10.7% | 12.1% | 11.0% | ||||||||||||||
| Backlog | $ | 7,845 | $ | 7,169 | $ | 6,387 | 9% | 12% | |||||||||
Textron Aviation’s revenues decreased $89 million, 2%, in 2024, compared with 2023, reflecting lower volume and mix of $270 million, which was principally a result of the strike discussed below, partially offset by higher pricing of $181 million. Aircraft revenues decreased $203 million, 6%, due to lower volume and mix, largely from Citation jet and commercial turboprop deliveries, partially offset by higher pricing. We delivered 151 Citation jets and 127 commercial turboprops in 2024, compared with 168 Citation jets and 153 commercial turboprops in 2023. Aftermarket parts and services revenues increased $114 million, 6%, due to higher pricing and volume.
22
On September 21, 2024, the IAM District 70, Local Lodge 774 called a strike against Textron Aviation. The strike impacted approximately 5,000 of Textron Aviation’s employees at the manufacturing, parts and distribution and service center facilities in Wichita. On October 20, 2024, Textron Aviation and the IAM reached an agreement on a new five-year labor contract. The strike had a significant adverse impact on Textron Aviation’s ability to meet its production and delivery schedules in the third quarter and continuing into the fourth quarter of 2024. As a result, our revenues and profit were unfavorably impacted in the second half of 2024 by delayed aircraft deliveries and manufacturing inefficiencies associated with the labor disruption and the recovery of operating activities.
Textron Aviation’s cost of sales decreased $14 million in 2024, compared with 2023. The impact of lower volume and mix on our cost of sales was offset by $127 million of inflation and $43 million in manufacturing inefficiencies, largely reflecting idle facilities costs resulting from the strike discussed above.
Textron Aviation’s segment profit decreased $83 million, 13%, in 2024, compared with 2023, primarily due to lower volume and mix and the manufacturing inefficiencies discussed above, partially offset by higher pricing, net of inflation.
Textron Aviation’s backlog increased $676 million, 9%, in 2024, reflecting orders in excess of deliveries.
Bell
| % Change | |||||||||||||||||
| (Dollars in millions) | 2024 | 2023 | 2022 | 2024 | 2023 | ||||||||||||
| Revenues: | |||||||||||||||||
| Military aircraft and support programs | $ | 2,048 | $ | 1,701 | $ | 1,740 | 20% | (2)% | |||||||||
| Commercial helicopters, parts and services | 1,531 | 1,446 | 1,351 | 6% | 7% | ||||||||||||
| Total revenues | 3,579 | 3,147 | 3,091 | 14% | 2% | ||||||||||||
| Cost of sales | 2,899 | 2,392 | 2,316 | 21% | 3% | ||||||||||||
| Research and development costs | 97 | 192 | 266 | (49)% | (28)% | ||||||||||||
| Selling and administrative expense | 213 | 243 | 227 | (12)% | 7% | ||||||||||||
| Segment profit | $ | 370 | $ | 320 | $ | 282 | 16% | 13% | |||||||||
| Profit margin | 10.3% | 10.2% | 9.1% | ||||||||||||||
| Backlog | $ | 7,469 | $ | 4,780 | $ | 4,781 | 56% | —% | |||||||||
Bell’s military aircraft and support programs include a development contract for the U.S. Army's FLRAA program, as well as production, upgrade, and support contracts for the V-22 tiltrotor aircraft and H-1 helicopters. The FLRAA program represents an increasing portion of Bell’s revenues as development activities have ramped. In August 2024, the U.S. Army announced approval of Milestone B for the FLRAA program, establishing it as a program of record and transitioning it to the Engineering and Manufacturing Development phase. In the second half of 2024, Bell was awarded contracts totaling approximately $3.0 billion for this phase of the program.
Bell’s military and support programs revenues increased $347 million, 20%, in 2024, compared with 2023, primarily due to higher volume on the FLRAA program, partially offset by lower volume on the V-22 program. Commercial helicopters, parts and services increased $85 million, 6%. We delivered 172 commercial helicopters in 2024, compared with 171 commercial helicopters in 2023.
Bell's cost of sales increased $507 million, 21%, in 2024, compared with 2023, primarily due to the higher volume and mix discussed above.
Bell's research and development costs decreased $95 million, 49%, in 2024, compared with 2023, largely due to the winddown of the Future Attack Reconnaissance Aircraft Program.
Selling and administrative expense decreased at Bell by $30 million, 12%, in 2024, compared with 2023, primarily due to a gain on a legal settlement recorded in the first quarter of 2024 and lower bid and proposal costs.
Bell’s segment profit increased $50 million, 16%, in 2024, compared with 2023, primarily due to lower research and development costs, as described above, partially offset by an unfavorable impact from mix as volume increased on lower margin FLRAA development activities while volume decreased on higher margin V-22 program revenues.
Backlog increased $2.7 billion, 56%, at Bell due to orders in excess of revenues recognized and deliveries, largely related to the FLRAA program discussed above.
23
Textron Systems
| % Change | |||||||||||||||||
| (Dollars in millions) | 2024 | 2023 | 2022 | 2024 | 2023 | ||||||||||||
| Revenues | $ | 1,241 | $ | 1,235 | $ | 1,172 | —% | 5% | |||||||||
| Cost of sales | 929 | 925 | 878 | —% | 5% | ||||||||||||
| Research and development costs | 51 | 53 | 53 | (4)% | —% | ||||||||||||
| Selling and administrative expense | 107 | 110 | 109 | (3)% | 1% | ||||||||||||
| Segment profit | $ | 154 | $ | 147 | $ | 132 | 5% | 11% | |||||||||
| Profit margin | 12.4% | 11.9% | 11.3% | ||||||||||||||
| Backlog | $ | 2,594 | $ | 1,950 | $ | 2,098 | 33% | (7)% | |||||||||
Textron Systems revenues and segment profit increased $6 million and $7 million, respectively, in 2024, compared with 2023. The impact on volume related to the cancellation of the Shadow program in the first quarter of 2024 was largely offset by higher volume on the Ship-to-Shore Connector program.
Textron Systems’ backlog increased $644 million, 33%, in 2024, compared with 2023, reflecting orders in excess of revenues recognized and deliveries, which included new contract awards for the Ship-to-Shore Connector program.
Industrial
| % Change | |||||||||||||||||
| (Dollars in millions) | 2024 | 2023 | 2022 | 2024 | 2023 | ||||||||||||
| Revenues: | |||||||||||||||||
| Kautex | $ | 1,891 | $ | 1,954 | $ | 1,771 | (3)% | 10% | |||||||||
| Textron Specialized Vehicles | 1,624 | 1,887 | 1,694 | (14)% | 11% | ||||||||||||
| Total revenues | 3,515 | 3,841 | 3,465 | (8)% | 11% | ||||||||||||
| Cost of sales | 2,993 | 3,221 | 2,959 | (7)% | 9% | ||||||||||||
| Research and development costs | 72 | 80 | 71 | (10)% | 13% | ||||||||||||
| Selling and administrative expense | 299 | 312 | 280 | (4)% | 11% | ||||||||||||
| Segment profit | $ | 151 | $ | 228 | $ | 155 | (34)% | 47% | |||||||||
| Profit margin | 4.3% | 5.9% | 4.5% | ||||||||||||||
Industrial segment revenues decreased $326 million, 8%, in 2024, compared with 2023, largely due to lower volume and mix. Textron Specialized Vehicles' revenues decreased $263 million, 14%, reflecting lower volume, principally in the powersports and personal transportation vehicles products due to reduced demand in their end markets. Kautex revenues decreased $63 million, 3%, largely due to lower volume.
Industrial's cost of sales decreased $228 million, 7%, in 2024 compared with 2023, primarily reflecting the impact of lower volume and mix.
Segment profit for the Industrial segment decreased $77 million, 34%, in 2024, compared with 2023, largely due to a $105 million impact from lower volume and mix, partially offset by $22 million in manufacturing efficiencies and $21 million in lower selling and administrative expense and research and development costs, largely due to cost reduction activities.
Textron eAviation
| % Change | |||||||||||||||||
| (Dollars in millions) | 2024 | 2023 | 2022 | 2024 | 2023 | ||||||||||||
| Revenues | $ | 33 | $ | 32 | $ | 16 | 3% | 100% | |||||||||
| Cost of sales | 29 | 35 | 18 | (17)% | 94% | ||||||||||||
| Research and development costs | 63 | 46 | 20 | 37% | 130% | ||||||||||||
| Selling and administrative expense | 17 | 14 | 2 | 21% | 600% | ||||||||||||
| Segment loss | $ | (76) | $ | (63) | $ | (24) | 21% | 163% | |||||||||
Textron eAviation segment revenues increased $1 million, 3%, in 2024, compared with 2023. Research and development costs increased $17 million, 37%, largely due to the ramp up of development efforts on hybrid and electric propulsion aircraft. Segment loss increased $13 million in 2024, compared with 2023, primarily reflecting the higher research and development costs.
24
Finance
| (In millions) | 2024 | 2023 | 2022 | ||||||||
| Revenues | $ | 50 | $ | 55 | $ | 52 | |||||
| Selling and administrative expense | (4) | (6) | 8 | ||||||||
| Interest expense, net | 19 | 15 | 13 | ||||||||
| Segment profit | $ | 35 | $ | 46 | $ | 31 | |||||
Finance segment revenues decreased $5 million and segment profit decreased $11 million in 2024, compared with 2023. Selling and administrative expense included recoveries of $10 million and $18 million in 2024 and 2023, respectively. The decrease in segment profit was primarily due to $8 million in lower recoveries of credit losses.
Liquidity and Capital Resources
Our financings are conducted through two separate borrowing groups. The Manufacturing group consists of Textron consolidated with its majority-owned subsidiaries that operate in the Textron Aviation, Bell, Textron Systems, Industrial and Textron eAviation segments. The Finance group, which also is the Finance segment, consists of Textron Financial Corporation and its consolidated subsidiaries. We designed this framework to enhance our borrowing power by separating the Finance group. Our Manufacturing group operations include the development, production and delivery of tangible products and services, while our Finance group provides financial services. Due to the fundamental differences between each borrowing group’s activities, investors, rating agencies and analysts use different measures to evaluate each group’s performance. To support those evaluations, we present balance sheet and cash flow information for each borrowing group within the Consolidated Financial Statements.
Assessment of Liquidity and Significant Future Cash Requirements
Key information that is utilized in assessing our liquidity is summarized below:
| (Dollars in millions) | December 28, 2024 | December 30, 2023 | ||||||
| Manufacturing group | ||||||||
| Cash and equivalents | $ | 1,386 | $ | 2,121 | ||||
| Debt | 3,247 | 3,526 | ||||||
| Shareholders’ equity | 7,204 | 6,987 | ||||||
| Capital (debt plus shareholders’ equity) | 10,451 | 10,513 | ||||||
| Net debt (net of cash and equivalents) to capital | 21% | 17% | ||||||
| Debt to capital | 31% | 34% | ||||||
| Finance group | ||||||||
| Cash and equivalents | $ | 55 | $ | 60 | ||||
| Debt | 341 | 348 | ||||||
We believe that our calculations of debt to capital and net debt to capital are useful measures as they provide a summary indication of the level of debt financing (i.e., leverage) that is in place to support our capital structure, as well as to provide an indication of our capacity to add further leverage.
We expect to have sufficient cash to meet our needs based on our existing cash balances, the cash we expect to generate from our manufacturing operations and the availability of our existing credit facility. In addition to our manufacturing operating cash requirements, future material cash outlays include our contractual combined debt and interest payments for the Manufacturing group of $473 million in 2025, $457 million in 2026, $444 million in 2027 and $2.5 billion thereafter, and for the Finance group of $46 million in 2025, $20 million in 2026, $69 million in 2027 and $507 million thereafter.
For the Manufacturing group, we also have purchase obligations that require material future cash outlays totaling $2.7 billion in 2025, $501 million in 2026 and $355 million thereafter. Purchase obligations include undiscounted amounts committed under contracts or purchase orders for goods and services with defined terms as to price, quantity and delivery dates, as well as property, plant and equipment. Approximately 28% of our purchase obligations represent purchase orders issued for goods and services to be delivered under firm contracts with the U.S. Government for which we have full recourse under customary contract termination clauses.
25
Credit Facilities and Other Sources of Capital
Textron has a senior unsecured revolving credit facility for an aggregate principal amount of $1.0 billion, of which $100 million is available for the issuance of letters of credit. We may elect to increase the aggregate amount of commitments under the facility to up to $1.3 billion by designating an additional lender or by an existing lender agreeing to increase its commitment. The facility expires in October 2027 and provides for two one-year extensions at our option with the consent of lenders representing a majority of the commitments under the facility. At December 28, 2024 and December 30, 2023, there were no amounts borrowed against the facility and there were $9 million of outstanding letters of credit issued under the facility.
We also maintain an effective shelf registration statement filed with the Securities and Exchange Commission that allows us to issue an unlimited amount of public debt and other securities. On March 1, 2024, we repaid our $350 million 4.30% Notes due March 2024.
Manufacturing Group Cash Flows
Cash flows from continuing operations for the Manufacturing group as presented in our Consolidated Statements of Cash Flows are summarized below:
| (In millions) | 2024 | 2023 | 2022 | ||||||||
| Operating activities | $ | 1,008 | $ | 1,270 | $ | 1,461 | |||||
| Investing activities | (288) | (345) | (511) | ||||||||
| Financing activities | (1,438) | (776) | (875) | ||||||||
Cash flows from operating activities were $1.0 billion in 2024, compared with $1.3 billion in 2023. The $262 million decrease in cash flows was largely due to changes in working capital and lower earnings, partially offset by $157 million in lower net tax payments. Net income tax payments were $181 million and $338 million in 2024 and 2023, respectively. Pension contributions were $44 million and $45 million in 2024 and 2023, respectively.
In 2024 and 2023, investing cash flows included capital expenditures of $364 million and $402 million, respectively, partially offset by net proceeds from corporate-owned life insurance policies of $85 million and $40 million, respectively.
Cash flows used by financing activities in 2024 included $1.1 billion of cash paid to repurchase an aggregate of 12.9 million shares of our common stock under the 2023 share repurchase plan described below and payments on long-term debt of $361 million. In 2023, cash flows used by financing activities included $1.2 billion of cash paid to repurchase an aggregate of 16.2 million shares of our common stock, partially offset by $348 million of net proceeds from the issuance of long-term debt.
In July 2023, Textron's Board of Directors approved a program for the repurchase of up to 35 million shares of our common stock. This share repurchase program allows us to continue our practice of repurchasing shares to offset the impact of dilution from stock-based compensation and benefit plans and for opportunistic capital management purposes. The repurchase program has no expiration date and there were 15.6 million shares remaining under the program at December 28, 2024.
Dividend payments to shareholders totaled $12 million and $16 million in 2024 and 2023, respectively. Due to the timing of our fiscal year-end, we made three dividend payments in 2024, compared with four dividend payments in 2023.
Finance Group Cash Flows
The cash flows from continuing operations for the Finance group as presented in our Consolidated Statements of Cash Flows are summarized below:
| (In millions) | 2024 | 2023 | 2022 | ||||||||
| Operating activities | $ | 8 | $ | 14 | $ | (7) | |||||
| Investing activities | 3 | 11 | 100 | ||||||||
| Financing activities | (16) | (37) | (216) | ||||||||
The Finance group’s cash flows from investing activities primarily included collections on finance receivables totaling $133 million and $169 million in 2024 and 2023, respectively, partially offset by finance receivable originations of $130 million and $160 million, respectively. Cash flows used in financing activities included payments on long-term and nonrecourse debt of $16 million and $37 million in 2024 and 2023, respectively.
26
Consolidated Cash Flows
The consolidated cash flows from continuing operations, after elimination of activity between the borrowing groups, are summarized below:
| (In millions) | 2024 | 2023 | 2022 | ||||||||
| Operating activities | $ | 1,015 | $ | 1,267 | $ | 1,490 | |||||
| Investing activities | (284) | (317) | (447) | ||||||||
| Financing activities | (1,454) | (813) | (1,091) | ||||||||
Consolidated cash flows from operating activities were $1.0 billion in 2024, compared with $1.3 billion in 2023. The decrease of $252 million in cash flows was largely due to changes in working capital and lower earnings, partially offset by $161 million in lower net tax payments. Net income tax payments were $191 million and $352 million in 2024 and 2023, respectively. Pension contributions were $44 million and $45 million in 2024 and 2023, respectively.
In 2024 and 2023, investing cash flows included capital expenditures of $364 million and $402 million, respectively, partially offset by net proceeds from corporate-owned life insurance policies of $85 million and $40 million, respectively.
Cash flows used by financing activities in 2024 included $1.1 billion of share repurchases and payments on long-term debt of $377 million. In 2023, cash flows used by financing activities included $1.2 billion of share repurchases, partially offset by $348 million of net proceeds from the issuance of long-term debt.
Captive Financing and Other Intercompany Transactions
The Finance group provides financing primarily to purchasers of new and pre-owned Textron Aviation aircraft and Bell helicopters manufactured by our Manufacturing group, otherwise known as captive financing. In the Consolidated Statements of Cash Flows, cash received from customers is reflected as operating activities when received from third parties. However, in the cash flow information provided for the separate borrowing groups, cash flows related to captive financing activities are reflected based on the operations of each group. For example, when product is sold by our Manufacturing group to a customer and is financed by the Finance group, the origination of the finance receivable is recorded within investing activities as a cash outflow in the Finance group’s statement of cash flows. Meanwhile, in the Manufacturing group’s statement of cash flows, the cash received from the Finance group on the customer’s behalf is recorded within operating cash flows as a cash inflow. Although cash is transferred between the two borrowing groups, there is no cash transaction reported in the consolidated cash flows at the time of the original financing. These captive financing activities, along with all significant intercompany transactions, are reclassified or eliminated from the Consolidated Statements of Cash Flows.
Reclassification adjustments included in the Consolidated Statements of Cash Flows on page 36 are summarized below:
| (In millions) | 2024 | 2023 | 2022 | ||||||||
| Reclassification adjustments from investing activities to operating activities: | |||||||||||
| Finance receivable originations for Manufacturing group inventory sales | $ | (109) | $ | (160) | $ | (92) | |||||
| Cash received from customers | 108 | 143 | 127 | ||||||||
| Other | — | — | 1 | ||||||||
| Total reclassification adjustments from investing activities to operating activities | $ | (1) | $ | (17) | $ | 36 | |||||
Under a Support Agreement between Textron and TFC, Textron is required to maintain a controlling interest in TFC. The agreement, as amended in December 2015, also requires Textron to ensure that TFC maintains fixed charge coverage of no less than 125% and consolidated shareholders' equity of no less than $125 million. There were no cash contributions required to be paid to TFC in 2024 and 2023 to maintain compliance with the support agreement.
Critical Accounting Estimates
To prepare our Consolidated Financial Statements to be in conformity with generally accepted accounting principles, we must make complex and subjective judgments in the selection and application of accounting policies. The accounting policies that we believe are most critical to the portrayal of our financial condition and results of operations are listed below. We believe these policies require our most difficult, subjective and complex judgments in estimating the effect of inherent uncertainties. This section should be read in conjunction with Note 1 to the Consolidated Financial Statements on page 38, which includes other significant accounting policies.
27
Revenue Recognition
A substantial portion of our revenues is related to long-term contracts with the U.S. Government, including those under the U.S. Government-sponsored foreign military sales program, for the design, development, manufacture or modification of aerospace and defense products as well as related services. We generally use the cost-to-cost method to measure progress for these contracts because it best depicts the transfer of control to the customer that occurs as we incur costs on our contracts. Under this measure, the extent of progress towards completion is measured based on the ratio of costs incurred to date to the estimated costs at completion of the performance obligation, and revenue is recorded proportionally as costs are incurred.
Due to the number of years it may take to complete these contracts and the scope and nature of the work required to be performed on the contracts, the estimation of total transaction price and costs at completion is complicated and subject to many variables and, accordingly, is subject to change. In estimating total costs at completion, we are required to make numerous assumptions related to the complexity of design and related development work to be performed; engineering requirements; product performance; subcontractor performance; availability and cost of materials; labor productivity, availability and cost; overhead and capital costs; manufacturing efficiencies; the length of time to complete the contract (to estimate increases in wages and prices for materials); and costs of satisfying offset obligations, among other variables. Our cost estimation process is based on the professional knowledge and experience of engineers and program managers along with finance professionals. We review and update our cost projections quarterly or more frequently when circumstances significantly change. When our estimate of the total costs to be incurred on a contract exceeds the estimated total transaction price, a provision for the entire loss is recorded in the period in which the loss is determined.
At the outset of each contract, we estimate an initial profit booking rate considering the risks surrounding our ability to achieve the technical requirements (e.g., a newly developed product versus a mature product), schedule (e.g., the number and type of milestone events), and costs by contract requirements in the initial estimated costs at completion. Profit booking rates may increase during the performance of the contract if we successfully retire risks surrounding the technical, schedule and cost aspects of the contract. Conversely, the profit booking rate may decrease if we are not successful in retiring the risks; and, as a result, our estimated costs at completion increase. All estimates are subject to change during the performance of the contract and, therefore, may affect the profit booking rate.
Changes in our estimate of the total expected cost or in the transaction price for a contract typically impact our profit booking rate. We utilize the cumulative catch-up method of accounting to recognize the impact of these changes on our profit booking rate for a contract. Under this method, the inception-to-date impact of a profit adjustment on a contract is recognized in the period the adjustment is identified. The impact of our cumulative catch-up adjustments on segment profit recognized in prior periods is presented below:
| (In millions) | 2024 | 2023 | 2022 | ||||||||
| Gross favorable | $ | 122 | $ | 106 | $ | 101 | |||||
| Gross unfavorable | (91) | (62) | (117) | ||||||||
| Net adjustments | $ | 31 | $ | 44 | $ | (16) | |||||
Due to the significance of judgment in the estimation process described above, it is likely that materially different revenues and/or cost of sales amounts could be recorded if we used different assumptions or if the underlying circumstances were to change. Our earnings could be reduced by a material amount resulting in a charge to earnings if (a) total estimated contract costs are significantly higher than expected due to changes in customer specifications prior to contract amendment, (b) total estimated contract costs are significantly higher than previously estimated due to cost overruns or inflation, (c) there is a change in engineering efforts required during the development stage of the contract or (d) we are unable to meet contract milestones.
Goodwill
We evaluate the recoverability of goodwill annually in the fourth quarter or more frequently if events or changes in circumstances indicate a potential impairment of a reporting unit. We calculate the fair value of each reporting unit using discounted cash flows. These cash flows incorporate assumptions for revenue growth rates and operating margins that are based on our strategic plans and long-range planning forecasts, which include our best estimates of current and forecasted market conditions, cost structure and anticipated net cost reductions. The long-term revenue growth rate we use to determine the terminal value of the business is based on our assessment of its minimum expected terminal growth rate, as well as its past historical growth and broader economic considerations such as gross domestic product, inflation and the maturity of the markets we serve. The discount rates utilized in this analysis are based on each reporting unit’s weighted average cost of capital, which takes into account the relative weights of each component of capital structure (equity and debt) and represents the expected cost of new capital, adjusted as appropriate to consider the risk inherent in future cash flows of the respective reporting unit. We believe this approach yields a discount rate that is consistent with an implied rate of return that an independent investor or market participant would require for an investment in a company having similar risks and business characteristics to the reporting unit being assessed.
28
Based on our annual impairment review, the fair value calculated using the estimates discussed above exceeded the carrying value by an adequate amount for each reporting group. Accordingly, we do not believe that there is a reasonable possibility that any units might fail the impairment test in the foreseeable future.
Retirement Benefits
We sponsor funded and unfunded domestic and international pension plans for certain of our employees. Beginning on January 1, 2010, we initiated actions to commence the closure of the pension plans to new entrants. We provide employees hired subsequent to these closures with defined contribution benefits. Our pension benefit obligations are calculated based on actuarial valuations. Key assumptions used in determining these obligations and related expenses or benefits include the expected long-term rates of return on plan assets and discount rates. We also make assumptions regarding employee demographic factors such as retirement patterns, mortality, turnover and rate of compensation increases. We evaluate and update these assumptions annually.
To determine the weighted-average expected long-term rate of return on plan assets, we consider the current and expected asset allocation, as well as historical and expected returns on each plan asset class. A lower expected rate of return on plan assets will decrease pension income. For 2024 and 2023, the assumed expected long-term rate of return on plan assets used in calculating pension income was 7.16% and 7.14%, respectively. For 2024, the assumed rate of return for our domestic plans, which represent approximately 90% of our total pension assets, was 7.25%. Net periodic benefit income is sensitive to changes in the expected long-term rate of return on plan assets.
The discount rate enables us to state expected future benefit payments as a present value on the measurement date, reflecting the current rate at which the pension liabilities could be effectively settled. This rate should be in line with rates for high-quality fixed income investments available for the period to maturity of the pension benefits, which fluctuate as long-term interest rates change. A lower discount rate increases the present value of the benefit obligations and generally decreases pension income. In 2024, the weighted-average discount rate used in calculating pension income was 5.19%, compared with 5.51% in 2023. For our domestic plans, the assumed discount rate was 5.25% in 2024, compared with 5.55% in 2023. A change of 50 basis-points higher or lower, with all other assumptions held constant, in this weighted-average discount rate in 2024 would have changed our pension income for our domestic plans by approximately $10 million.
29
Item 7A. Quantitative and Qualitative Disclosures About Market Risk
Foreign Currency Exchange Risk
Our financial results are affected by changes in foreign currency exchange rates in the various countries in which our products are manufactured and/or sold. For our manufacturing operations, we manage our foreign currency transaction exposures by entering into foreign currency exchange contracts. These contracts generally are used to fix the local currency cost of purchased goods or services or selling prices denominated in currencies other than the functional currency. The notional amount of outstanding foreign currency exchange contracts was $464 million and $478 million at December 28, 2024 and December 30, 2023, respectively. We also may hedge exposures to certain of our foreign currency assets and earnings by funding those asset positions with debt in the same foreign currency so the exposures are naturally offset.
Interest Rate Risk
Our financial results are affected by changes in interest rates. As part of managing this risk, we seek to achieve a prudent balance between floating- and fixed-rate exposures. We continually monitor our mix of these exposures and adjust the mix, as necessary. For our Finance group, we generally limit our risk to changes in interest rates with a strategy of matching floating-rate assets with floating-rate liabilities. This strategy includes the use of interest rate swap agreements. We had interest rate swap agreements with a total notional amount of $289 million at December 28, 2024 and $210 million at December 30, 2023, which effectively converted certain floating-rate debt to a fixed-rate equivalent.
Quantitative Risk Measures
In the normal course of business, we enter into financial instruments for purposes other than trading. The financial instruments that are subject to market risk include finance receivables (excluding leases), debt (excluding finance lease obligations) and foreign currency exchange contracts. To quantify the market risk inherent in these financial instruments, we utilize a sensitivity analysis that includes a hypothetical change in fair value assuming a 10% decrease in interest rates and a 10% strengthening in foreign exchange rates against the U.S. dollar. The fair value of these financial instruments is estimated using discounted cash flow analysis and indicative market pricing as reported by leading financial news and data providers.
At the end of each year, the table below provides the carrying and fair values of these financial instruments along with the sensitivity of fair value to the hypothetical changes discussed above. This sensitivity analysis is most likely not indicative of actual results in the future.
| December 28, 2024 | December 30, 2023 | |||||||||||||||||||
(In millions) | Carrying Value* | Fair Value* | Sensitivity of Fair Value to a 10% Change | Carrying Value* | Fair Value* | Sensitivity of Fair Value to a 10% Change | ||||||||||||||
| Manufacturing group | ||||||||||||||||||||
| Foreign currency exchange risk | ||||||||||||||||||||
| Foreign currency exchange contracts | $ | (14) | $ | (14) | $ | 31 | $ | 1 | $ | 1 | $ | 30 | ||||||||
| Interest rate risk | ||||||||||||||||||||
| Debt | (3,164) | (2,989) | (49) | (3,520) | (3,342) | (54) | ||||||||||||||
| Finance group | ||||||||||||||||||||
| Interest rate risk | ||||||||||||||||||||
| Finance receivables | 439 | 454 | 9 | 417 | 423 | 9 | ||||||||||||||
| Debt | (341) | (311) | — | (348) | (293) | (1) | ||||||||||||||
* The value represents an asset or (liability).
30
Item 8. Financial Statements and Supplementary Data
Our Consolidated Financial Statements and the related report of our independent registered public accounting firm thereon are included in this Annual Report on Form 10-K on the pages indicated below:
| Page | |||||||||||
Consolidated Balance Sheets as of December 28, 2024 and December 30, 2023 | |||||||||||
Supplementary Information: | |||||||||||
All other schedules are omitted either because they are not applicable or not required or because the required information is included in the financial statements or notes thereto.
31
Consolidated Statements of Operations
For each of the years in the three-year period ended December 28, 2024
| (In millions, except per share data) | 2024 | 2023 | 2022 | ||||||||
| Revenues | |||||||||||
| Manufacturing product revenues | $ | $ | $ | ||||||||
| Manufacturing service revenues | |||||||||||
| Finance revenues | |||||||||||
| Total revenues | |||||||||||
| Costs, expenses and other | |||||||||||
| Cost of products sold | |||||||||||
| Cost of services sold | |||||||||||
| Research and development costs | |||||||||||
| Selling and administrative expense | |||||||||||
| Interest expense, net | |||||||||||
| Special charges | |||||||||||
| Non-service components of pension and postretirement income, net | ( | ( | ( | ||||||||
| Total costs, expenses and other | |||||||||||
| Income from continuing operations before income taxes | |||||||||||
| Income tax expense | |||||||||||
| Income from continuing operations | |||||||||||
| Loss from discontinued operations | ( | ( | ( | ||||||||
| Net income | $ | $ | $ | ||||||||
| Basic Earnings per share | |||||||||||
| Continuing operations | $ | $ | $ | ||||||||
| Discontinued operations | ( | ||||||||||
| Basic Earnings per share | $ | $ | $ | ||||||||
| Diluted Earnings per share | |||||||||||
| Continuing operations | $ | $ | $ | ||||||||
| Discontinued operations | ( | ( | |||||||||
| Diluted Earnings per share | $ | $ | $ | ||||||||
See Notes to the Consolidated Financial Statements.
32
Consolidated Statements of Comprehensive Income
For each of the years in the three-year period ended December 28, 2024
| (In millions) | 2024 | 2023 | 2022 | ||||||||
| Net income | $ | $ | $ | ||||||||
| Other comprehensive income (loss), net of tax | |||||||||||
| Pension and postretirement benefits adjustments, net of reclassifications | ( | ||||||||||
| Foreign currency translation adjustments, net of reclassifications | ( | ( | |||||||||
| Deferred gains (losses) on hedge contracts, net of reclassifications | ( | ( | |||||||||
| Total other comprehensive income (loss), net of tax | ( | ||||||||||
| Comprehensive income | $ | $ | $ | ||||||||
See Notes to the Consolidated Financial Statements.
33
Consolidated Balance Sheets
| (In millions, except share data) | December 28, 2024 | December 30, 2023 | ||||||
| Assets | ||||||||
| Manufacturing group | ||||||||
| Cash and equivalents | $ | $ | ||||||
| Accounts receivable, net | ||||||||
| Inventories | ||||||||
| Other current assets | ||||||||
| Total current assets | ||||||||
| Property, plant and equipment, net | ||||||||
| Goodwill | ||||||||
| Other assets | ||||||||
| Total Manufacturing group assets | ||||||||
| Finance group | ||||||||
| Cash and equivalents | ||||||||
| Finance receivables, net | ||||||||
| Other assets | ||||||||
| Total Finance group assets | ||||||||
| Total assets | $ | $ | ||||||
| Liabilities and shareholders’ equity | ||||||||
| Liabilities | ||||||||
| Manufacturing group | ||||||||
| Current portion of long-term debt | $ | $ | ||||||
| Accounts payable | ||||||||
| Other current liabilities | ||||||||
| Total current liabilities | ||||||||
| Other liabilities | ||||||||
| Long-term debt | ||||||||
| Total Manufacturing group liabilities | ||||||||
| Finance group | ||||||||
| Other liabilities | ||||||||
| Debt | ||||||||
| Total Finance group liabilities | ||||||||
| Total liabilities | ||||||||
| Shareholders’ equity | ||||||||
Common stock ( and | ||||||||
| Capital surplus | ||||||||
| Treasury stock | ( | ( | ||||||
| Retained earnings | ||||||||
| Accumulated other comprehensive loss | ( | ( | ||||||
| Total shareholders’ equity | ||||||||
| Total liabilities and shareholders’ equity | $ | $ | ||||||
See Notes to the Consolidated Financial Statements.
34
Consolidated Statements of Shareholders’ Equity
| (In millions, except per share data) | Common Stock | Capital Surplus | Treasury Stock | Retained Earnings | Accumulated Other Comprehensive Loss | Total Shareholders’ Equity | ||||||||||||||
| Balance at January 1, 2022 | $ | $ | $ | ( | $ | $ | ( | $ | ||||||||||||
| Net income | — | — | — | — | ||||||||||||||||
| Other comprehensive income | — | — | — | — | ||||||||||||||||
Dividends declared ($ | — | — | — | ( | — | ( | ||||||||||||||
| Share-based compensation activity | — | — | — | — | ||||||||||||||||
| Purchases of common stock | — | — | ( | — | — | ( | ||||||||||||||
| Retirement of treasury stock | ( | ( | ( | — | ||||||||||||||||
| Balance at December 31, 2022 | ( | ( | ||||||||||||||||||
| Net income | — | — | — | — | ||||||||||||||||
| Other comprehensive loss | — | — | — | — | ( | ( | ||||||||||||||
Dividends declared ($ | — | — | — | ( | — | ( | ||||||||||||||
| Share-based compensation activity | — | — | — | — | ||||||||||||||||
| Purchases of common stock, including excise tax* | — | — | ( | — | — | ( | ||||||||||||||
| Retirement of treasury stock | ( | ( | ( | — | ||||||||||||||||
| Balance at December 30, 2023 | ( | ( | ||||||||||||||||||
| Net income | — | — | — | — | ||||||||||||||||
| Other comprehensive income | — | — | — | — | ||||||||||||||||
Dividends declared ($ | — | — | — | ( | — | ( | ||||||||||||||
| Share-based compensation activity | — | — | — | |||||||||||||||||
| Purchases of common stock, including excise tax* | — | — | ( | — | — | ( | ||||||||||||||
| Retirement of treasury stock | ( | ( | ( | — | ||||||||||||||||
| Balance at December 28, 2024 | $ | $ | $ | ( | $ | $ | ( | $ | ||||||||||||
*Includes amounts accrued for excise tax imposed on common share repurchases that totaled $9 million in 2024 and $10 million in 2023.
See Notes to the Consolidated Financial Statements.
35
Consolidated Statements of Cash Flows
For each of the years in the three-year period ended December 28, 2024
| Consolidated | |||||||||||
| (In millions) | 2024 | 2023 | 2022 | ||||||||
| Cash flows from operating activities | |||||||||||
| Income from continuing operations | $ | $ | $ | ||||||||
Adjustments to reconcile income from continuing operations to net cash provided by operating activities of continuing operations: | |||||||||||
| Non-cash items: | |||||||||||
| Depreciation and amortization | |||||||||||
| Deferred income taxes | ( | ( | ( | ||||||||
| Asset impairments and powersports inventory charge | |||||||||||
| Other, net | |||||||||||
| Changes in assets and liabilities: | |||||||||||
| Accounts receivable, net | ( | ( | ( | ||||||||
| Inventories | ( | ( | ( | ||||||||
| Other assets | |||||||||||
| Accounts payable | ( | ||||||||||
| Other liabilities | |||||||||||
| Income taxes, net | ( | ||||||||||
| Pension, net | ( | ( | ( | ||||||||
| Captive finance receivables, net | ( | ( | |||||||||
| Other operating activities, net | |||||||||||
| Net cash provided by operating activities of continuing operations | |||||||||||
| Net cash used in operating activities of discontinued operations | ( | ( | ( | ||||||||
| Net cash provided by operating activities | |||||||||||
| Cash flows from investing activities | |||||||||||
| Capital expenditures | ( | ( | ( | ||||||||
| Net cash used in business acquisitions | ( | ( | ( | ||||||||
| Net proceeds from corporate-owned life insurance policies | |||||||||||
| Proceeds from sale of property, plant and equipment | |||||||||||
| Finance receivables repaid | |||||||||||
| Finance receivables originated | ( | ||||||||||
| Other investing activities, net | |||||||||||
| Net cash used in investing activities | ( | ( | ( | ||||||||
| Cash flows from financing activities | |||||||||||
| Decrease in short-term debt | ( | ( | |||||||||
| Net proceeds from long-term debt | |||||||||||
| Principal payments on long-term debt and nonrecourse debt | ( | ( | ( | ||||||||
| Purchases of Textron common stock | ( | ( | ( | ||||||||
| Proceeds from exercise of stock options | |||||||||||
| Dividends paid | ( | ( | ( | ||||||||
| Other financing activities, net | ( | ( | ( | ||||||||
| Net cash used in financing activities | ( | ( | ( | ||||||||
| Effect of exchange rate changes on cash and equivalents | ( | ( | |||||||||
| Net increase (decrease) in cash and equivalents | ( | ( | |||||||||
| Cash and equivalents at beginning of year | |||||||||||
| Cash and equivalents at end of year | $ | $ | $ | ||||||||
See Notes to the Consolidated Financial Statements.
36
Consolidated Statements of Cash Flows continued
For each of the years in the three-year period ended December 28, 2024
| Manufacturing Group | Finance Group | |||||||||||||||||||
| (In millions) | 2024 | 2023 | 2022 | 2024 | 2023 | 2022 | ||||||||||||||
| Cash flows from operating activities | ||||||||||||||||||||
| Income from continuing operations | $ | $ | $ | $ | $ | $ | ||||||||||||||
| Adjustments to reconcile income from continuing operations to net cash provided by (used in) operating activities of continuing operations: | ||||||||||||||||||||
| Non-cash items: | ||||||||||||||||||||
| Depreciation and amortization | ||||||||||||||||||||
| Deferred income taxes | ( | ( | ( | ( | ( | ( | ||||||||||||||
| Asset impairments and powersports inventory charge | ||||||||||||||||||||
| Other, net | ( | ( | ( | |||||||||||||||||
| Changes in assets and liabilities: | ||||||||||||||||||||
| Accounts receivable, net | ( | ( | ( | |||||||||||||||||
| Inventories | ( | ( | ( | |||||||||||||||||
| Other assets | ||||||||||||||||||||
| Accounts payable | ( | |||||||||||||||||||
| Other liabilities | ( | ( | ( | |||||||||||||||||
| Income taxes, net | ( | ( | ( | |||||||||||||||||
| Pension, net | ( | ( | ( | |||||||||||||||||
| Other operating activities, net | ||||||||||||||||||||
| Net cash provided by (used in) operating activities of continuing operations | ( | |||||||||||||||||||
| Net cash used in operating activities of discontinued operations | ( | ( | ( | |||||||||||||||||
| Net cash provided by (used in) operating activities | ( | |||||||||||||||||||
| Cash flows from investing activities | ||||||||||||||||||||
| Capital expenditures | ( | ( | ( | |||||||||||||||||
| Net cash used in business acquisitions | ( | ( | ( | |||||||||||||||||
| Net proceeds from corporate-owned life insurance policies | ||||||||||||||||||||
| Proceeds from sale of property, plant and equipment | ||||||||||||||||||||
| Finance receivables repaid | ||||||||||||||||||||
| Finance receivables originated | ( | ( | ( | |||||||||||||||||
| Other investing activities, net | ||||||||||||||||||||
| Net cash provided by (used in) investing activities | ( | ( | ( | |||||||||||||||||
| Cash flows from financing activities | ||||||||||||||||||||
| Decrease in short-term debt | ( | ( | ||||||||||||||||||
| Net proceeds from long-term debt | ||||||||||||||||||||
| Principal payments on long-term debt and nonrecourse debt | ( | ( | ( | ( | ( | ( | ||||||||||||||
| Purchases of Textron common stock | ( | ( | ( | |||||||||||||||||
| Proceeds from exercise of stock options | ||||||||||||||||||||
| Dividends paid | ( | ( | ( | |||||||||||||||||
| Other financing activities, net | ( | ( | ( | |||||||||||||||||
| Net cash used in financing activities | ( | ( | ( | ( | ( | ( | ||||||||||||||
| Effect of exchange rate changes on cash and equivalents | ( | ( | ||||||||||||||||||
| Net increase (decrease) in cash and equivalents | ( | ( | ( | ( | ||||||||||||||||
| Cash and equivalents at beginning of year | ||||||||||||||||||||
| Cash and equivalents at end of year | $ | $ | $ | $ | $ | $ | ||||||||||||||
See Notes to the Consolidated Financial Statements.
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Notes to the Consolidated Financial Statements
Note 1. Summary of Significant Accounting Policies
Principles of Consolidation and Financial Statement Presentation
Our Consolidated Financial Statements include the accounts of Textron Inc. and its majority-owned subsidiaries. Our financings are conducted through two separate borrowing groups. The Manufacturing group consists of Textron Inc. consolidated with its majority-owned subsidiaries that operate in the Textron Aviation, Bell, Textron Systems, Industrial and Textron eAviation segments. The Finance group, which also is the Finance segment, consists of Textron Financial Corporation (TFC) and its consolidated subsidiaries. We designed this framework to enhance our borrowing power by separating the Finance group. Our Manufacturing group operations include the development, production and delivery of tangible goods and services, while our Finance group provides financial services. Due to the fundamental differences between each borrowing group’s activities, investors, rating agencies and analysts use different measures to evaluate each group’s performance. To support those evaluations, we present balance sheet and cash flow information for each borrowing group within the Consolidated Financial Statements.
Our Finance group provides financing primarily to purchasers of new and pre-owned Textron Aviation aircraft and Bell helicopters manufactured by our Manufacturing group, otherwise known as captive financing. In the Consolidated Statements of Cash Flows, cash received from customers is reflected as operating activities when received from third parties. However, in the cash flow information provided for the separate borrowing groups, cash flows related to captive financing activities are reflected based on the operations of each group. For example, when product is sold by our Manufacturing group to a customer and is financed by the Finance group, the origination of the finance receivable is recorded within investing activities as a cash outflow in the Finance group’s statement of cash flows. Meanwhile, in the Manufacturing group’s statement of cash flows, the cash received from the Finance group on the customer’s behalf is recorded within operating cash flows as a cash inflow. Although cash is transferred between the two borrowing groups, there is no cash transaction reported in the consolidated cash flows at the time of the original financing. These captive financing activities, along with all significant intercompany transactions, are reclassified or eliminated in consolidation.
Collaborative Arrangements
Our Bell segment has a strategic alliance agreement with a third-party company to provide engineering, development and test services related to the V-22 aircraft, as well as to produce the V-22 aircraft, under a number of separate contracts with the U.S. Government (V-22 Contracts). The alliance created by this agreement is not a legal entity and has no employees, no assets and no true operations. This agreement creates contractual rights and does not represent an entity in which we have an equity interest. We account for this alliance as a collaborative arrangement with Bell and the third-party company reporting costs incurred and revenues generated from transactions with the U.S. Government in each company’s respective income statement. Neither Bell nor the third-party company is considered to be the principal participant for the transactions recorded under this agreement. Profits on cost-plus contracts are allocated between Bell and the third-party company on a 50 %-50% basis. Negotiated profits on fixed-price contracts are also allocated 50 %-50%; however, Bell and the third-party company are each responsible for their own cost overruns and are entitled to retain any cost underruns. Based on the contractual arrangement established under the alliance, Bell accounts for its rights and obligations under the specific requirements of the V-22 Contracts allocated to Bell under the work breakdown structure. We account for all of our rights and obligations, including warranty, product and any contingent liabilities, under the specific requirements of the V-22 Contracts allocated to us under the agreement. Revenues and cost of sales reflect our performance under the V-22 Contracts with revenues recognized using the cost-to-cost method. We include all assets used in performance of the V-22 Contracts that we own and all liabilities arising from our obligations under the V-22 Contracts in our Consolidated Balance Sheets.
Use of Estimates
We prepare our financial statements in conformity with generally accepted accounting principles, which require us to make estimates and assumptions that affect the amounts reported in the financial statements. Actual results could differ from those estimates. Our estimates and assumptions are reviewed periodically, and the effects of changes, if any, are reflected in the Consolidated Statements of Operations in the period that they are determined.
Revenue Recognition
Revenue is recognized when control of the product or service promised under the contract is transferred to the customer either at a point in time (e.g., upon delivery) or over time (e.g., as we perform under the contract). We account for a contract when it has approval and commitment from both parties, the rights and payment terms of the parties are identified, the contract has commercial substance and collectability of consideration is probable. Contracts are reviewed to determine whether there is one or multiple performance obligations. A performance obligation is a promise to transfer a distinct product or service to a customer and represents the unit of accounting for revenue recognition. For contracts with multiple performance obligations, the expected consideration, or the transaction price, is allocated to each performance obligation identified in the contract based on the relative standalone selling price of each performance obligation. Revenue is then recognized for the transaction price allocated to the
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performance obligation when control of the promised product or service underlying the performance obligation is transferred. Contract consideration is not adjusted for the effects of a significant financing component when, at contract inception, the period between when control transfers and when the customer will pay for that good or service is one year or less.
Revenue is classified as product or service revenue based on the predominant attributes of each performance obligation.
Commercial Contracts
The majority of our contracts with commercial customers have a single performance obligation as there is only one product or service promised or the promise to transfer the product or service is not distinct or separately identifiable from other promises in the contract. Revenue is primarily recognized at a point in time, which is generally when the customer obtains control of the asset upon delivery and customer acceptance. Contract modifications that provide for additional distinct products or services at the standalone selling price are treated as separate contracts.
For commercial fixed-wing aircraft, we contract with our customers to sell fully outfitted aircraft, which may include configuration options. The aircraft typically represents a single performance obligation and revenue is recognized upon customer acceptance and delivery. For commercial helicopters, our customers generally contract with us for fully functional basic configuration aircraft and control is transferred upon customer acceptance and delivery. At times, customers may separately contract with us for the installation of accessories and customization to the basic aircraft. If these contracts are entered into at or near the same time of the basic aircraft contract, we assess whether the contracts meet the criteria to be combined. For contracts that are combined, the basic aircraft and the accessories and customization are typically considered to be distinct, and therefore, are separate performance obligations. For these contracts, revenue is recognized on the basic aircraft upon customer acceptance and transfer of title and risk of loss, and on the accessories and customization, upon delivery and customer acceptance. We utilize observable prices to determine the standalone selling prices when allocating the transaction price to these performance obligations.
The transaction price for our commercial contracts reflects our estimate of returns, rebates and discounts, which are based on historical, current and forecasted information. Amounts billed to customers for shipping and handling are included in the transaction price and generally are not treated as separate performance obligations as these costs fulfill a promise to transfer the product to the customer. Taxes collected from customers and remitted to government authorities are recorded on a net basis.
We primarily provide standard warranty programs for products in our commercial businesses for periods that typically range from one year to five years . These assurance-type programs typically cannot be purchased separately and do not meet the criteria to be considered a performance obligation.
U.S. Government Contracts
Our contracts with the U.S. Government generally include the design, development, manufacture or modification of aerospace and defense products and related support services. These contracts, which also include those under the U.S. Government-sponsored foreign military sales program, accounted for approximately 25 % of total revenues in 2024. The customer typically contracts with us to provide a significant service of integrating a complex set of tasks and components into a single project or capability, which often results in the delivery of multiple units. Accordingly, the entire contract is accounted for as one performance obligation. In certain circumstances, a contract may include both production and support services, such as logistics and parts plans, which are considered to be distinct in the context of the contract and represent separate performance obligations. When a contract is separated into more than one performance obligation, we generally utilize the expected cost plus a margin approach to determine the standalone selling prices when allocating the transaction price.
Our contracts are frequently modified for changes in contract specifications and requirements. Most of our contract modifications with the U.S. Government are for products and services that are not distinct from the existing contract due to the significant integration service provided in the context of the contract and are accounted for as part of that existing contract. The effect of these contract modifications on our estimates is recognized using the cumulative catch-up method of accounting.
Contracts with the U.S. Government generally contain clauses that provide lien rights to work-in-process along with clauses that allow the customer to unilaterally terminate the contract for convenience, pay us for costs incurred plus a reasonable profit and take control of any work-in-process. Due to the continuous transfer of control to the U.S. Government, we recognize revenue over the time that we perform under the contract. Selecting the method to measure progress towards completion requires judgment and is based on the nature of the products or service to be provided. We generally use the cost-to-cost method to measure progress for our contracts because it best depicts the transfer of control to the customer that occurs as we incur costs on our contracts. Under this measure, the extent of progress towards completion is measured based on the ratio of costs incurred to date to the estimated costs at completion of the performance obligation, and revenue is recorded proportionally as costs are incurred.
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The transaction price for our contracts represents our best estimate of the consideration we will receive and includes assumptions regarding variable consideration as applicable. Certain of our long-term contracts contain incentive fees or other provisions that can either increase or decrease the transaction price. These variable amounts generally are awarded upon achievement of certain performance metrics, program milestones or cost targets and can be based upon customer discretion. We include estimated amounts in the transaction price to the extent it is probable that a significant reversal of cumulative revenue recognized will not occur when the uncertainty associated with the variable consideration is resolved. Our estimates of variable consideration and determination of whether to include estimated amounts in the transaction price are based largely on an assessment of our anticipated performance, historical performance, and all other information that is reasonably available to us.
Total contract cost is estimated utilizing current contract specifications and expected engineering requirements. Contract costs typically are incurred over a period of several years, and the estimation of these costs requires substantial judgment. Our cost estimation process is based on the professional knowledge and experience of engineers and program managers along with finance professionals. We review and update our projections of costs quarterly or more frequently when circumstances significantly change.
Approximately 58 % of our 2024 revenues with the U.S. Government were under fixed-price and fixed-price incentive contracts. Under the typical payment terms of these contracts, the customer pays us either performance-based or progress payments. Performance-based payments represent interim payments of up to 90 % of the contract price based on quantifiable measures of performance or on the achievement of specified events or milestones. Progress payments are interim payments of up to 80 % of costs incurred as the work progresses. Because the customer retains a small portion of the contract price until completion of the contract, these contracts generally result in revenue recognized in excess of billings. Amounts billed and due from our customers are classified in Accounts receivable, net. The portion of the payments retained by the customer until final contract settlement is not considered a significant financing component because the intent is to protect the customer. For cost-type contracts, we are generally paid for our actual costs incurred within a short period of time.
Finance Revenues
Finance revenues primarily include interest on finance receivables, finance lease earnings and portfolio gains/losses. We recognize interest using the interest method, which provides a constant rate of return over the terms of the receivables. Accrual of interest income is suspended if credit quality indicators suggest full collection of principal and interest is doubtful. In addition, we automatically suspend the accrual of interest income for accounts that are contractually delinquent by more than three months unless collection is not doubtful. Cash payments on nonaccrual accounts, including finance charges, generally are applied to reduce the net investment balance. Once we conclude that the collection of all principal and interest is no longer doubtful, we resume the accrual of interest and recognize previously suspended interest income at the time either a) the loan becomes contractually current through payment according to the original terms of the loan, or b) if the loan has been modified, following a period of performance under the terms of the modification.
Contract Estimates
In 2024 and 2023, our cumulative catch-up adjustments increased segment profit by $31 million and $44 million, respectively, and net income by $24 million and $34 million, respectively ($0.12 and $0.17 per diluted share, respectively). In 2022, our cumulative catch-up adjustments decreased segment profit by $16 million and net income by $12 million ($0.06 per diluted share). Revenue was increased by $32 million and $42 million in 2024 and 2023, respectively, and reduced by $25 million in 2022, related to changes in profit booking rates for performance obligations satisfied in prior periods.
Contract Assets and Liabilities
Contract assets arise from contracts when revenue is recognized over time and the amount of revenue recognized exceeds the amount billed to the customer. These amounts are included in contract assets until the right to payment is no longer conditional on events other than the passage of time and are included in Other current assets in the Consolidated Balance Sheets. Contract liabilities, which are primarily included in Other current liabilities, include deposits, largely from our commercial aviation customers, and billings in excess of revenue recognized.
The incremental costs of obtaining a contract with a customer that is expected to be recovered is expensed as incurred when the period to be benefitted is one year or less.
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Accounts Receivable, Net
Accounts receivable, net includes amounts billed to customers where the right to payment is unconditional. We maintain an allowance for credit losses for our commercial accounts receivable to provide for the estimated amount that will not be collected, even when the risk of loss is remote. The allowance is measured on a collective pool basis when similar risk characteristics exist and is established as a percentage of accounts receivable. We have identified pools with similar risk characteristics, based on customer and industry type and geographic location. The percentage is based on all available and relevant information including age of outstanding receivables and collateral value, if any, historical payment experience and loss history, current economic conditions, and, when reasonable and supportable factors exist, management’s expectation of future economic conditions. For amounts due from the U.S. Government, we have not established an allowance for credit losses as we have zero loss expectation based on a long history of no credit losses and the explicit guarantee of a sovereign entity.
Cash and Equivalents
Cash and equivalents consist of cash and short-term, highly liquid investments with original maturities of three months or less.
Inventories
Inventories are stated at the lower of cost or estimated realizable value. The majority of our inventories are valued using the last-in, first-out (LIFO) method, while the remaining inventories are generally valued using the first-in, first-out (FIFO) method.
Property, Plant and Equipment
Goodwill and Intangible Assets
Goodwill represents the excess of the consideration paid for the acquisition of a business over the fair values assigned to intangible and other net assets of the acquired business. Goodwill and intangible assets deemed to have indefinite lives are not amortized but are subject to an annual impairment test. We evaluate the recoverability of these assets in the fourth quarter of each year or more frequently if events or changes in circumstances, such as declines in sales, earnings or cash flows, or material adverse changes in the business climate, indicate a potential impairment.
For our goodwill impairment test, we calculate the fair value of each reporting unit using discounted cash flows. A reporting unit represents the operating segment unless discrete financial information is prepared and reviewed by segment management for businesses one level below that operating segment, in which case such component is the reporting unit. In certain instances, we have aggregated components of an operating segment into a single reporting unit based on similar economic characteristics. The discounted cash flows incorporate assumptions for revenue growth rates, operating margins and discount rates that represent our best estimates of current and forecasted market conditions, cost structure, anticipated net cost reductions, and the implied rate of return that we believe a market participant would require for an investment in a business having similar risks and characteristics to the reporting unit being assessed. The fair value of our indefinite-lived intangible assets is primarily determined using the relief of royalty method based on forecasted revenues and royalty rates. If the estimated fair value of the reporting unit or indefinite-lived intangible asset exceeds the carrying value, there is no impairment. Otherwise, an impairment loss is recognized for the amount by which the carrying value exceeds the estimated fair value.
Acquired intangible assets with finite lives are subject to amortization. These assets are reviewed for impairment whenever events or changes in circumstances indicate that the carrying amount of the asset may not be recoverable. Amortization of these intangible assets is recognized over their estimated useful lives using a method that reflects the pattern in which the economic benefits of the intangible assets are consumed or otherwise realized. The majority of our intangible assets are amortized based on the cash flow streams used to value the assets, with the remaining assets amortized using the straight-line method.
Finance Receivables
Finance receivables primarily include loans provided to purchasers of new and pre-owned Textron Aviation aircraft and Bell helicopters. Finance receivables are generally recorded at the amount of outstanding principal less allowance for credit losses.
We establish an allowance for credit losses to cover probable but specifically unknown losses existing in the portfolio. This allowance is established as a percentage of finance receivables categorized by pools with similar risk characteristics, such as collateral or customer type and geographic location. The percentage is based on a combination of factors, including historical loss experience, current delinquency and default trends, collateral values, current economic conditions, and, when reasonable and supportable factors exist, management’s expectation of future economic conditions.
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For those finance receivables that do not have similar risk characteristics, including larger balance accounts specifically identified as impaired, a reserve is established against the carrying amount either based on comparing the expected future cash flows that are discounted at the finance receivable's effective interest rate, or based on the fair value of the underlying collateral if the finance receivable is collateral dependent. The expected future cash flows consider collateral value; financial performance and liquidity of our borrower; existence and financial strength of guarantors; estimated recovery costs, including legal expenses; and costs associated with the repossession and eventual disposal of collateral. When there is a range of potential outcomes, we perform multiple discounted cash flow analyses and weight the potential outcomes based on their relative likelihood of occurrence. The evaluation of our portfolio is inherently subjective, as it requires estimates, including the amount and timing of future cash flows expected to be received on impaired finance receivables and the estimated fair value of the underlying collateral, which may differ from actual results. While our analysis is specific to each individual account, critical factors included in this analysis include industry valuation guides, age and physical condition of the collateral, payment history, and existence and financial strength of guarantors.
Finance receivables are charged off at the earlier of the date the collateral is repossessed or when management no longer deems the receivable collectible. Repossessed assets are recorded at their fair value, less estimated cost to sell.
Pension and Postretirement Benefit Obligations
We maintain various pension and postretirement plans for our employees globally. Our pension plans include significant benefit obligations, which are calculated based on actuarial valuations. Key assumptions used in determining these obligations and related expenses include expected long-term rates of return on plan assets, discount rates and healthcare cost projections. We evaluate and update these assumptions annually in consultation with third-party actuaries and investment advisors. We also make assumptions regarding employee demographic factors such as retirement patterns, mortality, turnover and rate of compensation increases.
Derivatives and Hedging Activities
We are exposed to market risk primarily from changes in currency exchange rates and interest rates. We do not hold or issue derivative financial instruments for trading or speculative purposes. To manage the volatility relating to our exposures, we net these exposures on a consolidated basis to take advantage of natural offsets. For the residual portion, we enter into various derivative transactions pursuant to our policies in areas such as counterparty exposure and hedging practices. Credit risk related to derivative financial instruments is considered minimal and is managed by requiring high credit standards for counterparties and through periodic settlements of positions.
All derivative instruments are reported at fair value in the Consolidated Balance Sheets. Designation to support hedge accounting is performed on a specific exposure basis. For financial instruments qualifying as cash flow hedges, we record changes in the fair value of derivatives (to the extent they are effective as hedges) in other comprehensive income (loss), net of deferred taxes. Changes in fair value of derivatives not qualifying as hedges are recorded in earnings.
Leases
We identify leases by evaluating our contracts to determine if the contract conveys the right to use an identified asset for a stated period of time in exchange for consideration. Specifically, we consider whether we can control the underlying asset and have the right to obtain substantially all of the economic benefits or outputs from the asset. For our contracts that contain both lease components (e.g., fixed payments including rent, real estate taxes and insurance costs) and non-lease components (e.g., common-area maintenance costs or other goods/services), we allocate the consideration in the contract to each component based on its standalone price. Leases with terms greater than 12 months are classified as either operating or finance leases at the commencement date. For these leases, we capitalize the lesser of a) the present value of the minimum lease payments over the lease term, or b) the fair value of the asset, as a right-of-use asset with an offsetting lease liability. The discount rate used to calculate the present value of the minimum lease payments is typically our incremental borrowing rate, as the rate implicit in the lease is generally not known or determinable. The lease term includes any noncancelable period for which we have the right to use the asset and may include options to extend or terminate the lease when it is reasonably certain that we will exercise the
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Product Liabilities
We accrue for product liability claims and related defense costs when a loss is probable and reasonably estimable. Our estimates are generally based on the specifics of each claim or incident and our best estimate of the probable loss using historical experience.
Environmental Liabilities and Asset Retirement Obligations
Liabilities for environmental matters are recorded on a site-by-site basis when it is probable that an obligation has been incurred and the cost can be reasonably estimated. We estimate our accrued environmental liabilities using currently available facts, existing technology, and presently enacted laws and regulations, all of which are subject to a number of factors and uncertainties. Our environmental liabilities are not discounted and do not take into consideration possible future insurance proceeds or significant amounts from claims against other third parties.
We have incurred asset retirement obligations primarily related to costs to remove and dispose of underground storage tanks and asbestos materials used in insulation, adhesive fillers and floor tiles. Currently, there is no legal requirement to remove these items and there is no plan to remodel the related facilities or otherwise cause the impacted items to require disposal. Since these asset retirement obligations are not probable, there is no related liability recorded in the Consolidated Balance Sheets.
Warranty Liabilities
For our assurance-type warranty programs, we estimate the costs that may be incurred and record a liability in the amount of such costs at the time product revenues are recognized. Factors that affect this liability include the number of products sold, historical costs per claim, length of warranty period, contractual recoveries from vendors and historical and anticipated rates of warranty claims, including production and warranty patterns for new models. We assess the adequacy of our recorded warranty liability periodically and adjust the amounts as necessary. Additionally, we may establish a warranty liability related to the issuance of aircraft service bulletins for aircraft no longer covered under the limited warranty programs.
Research and Development Costs
Our customer-funded research and development costs are charged directly to the related contracts, which primarily consist of U.S. Government contracts. In accordance with government regulations, we recover a portion of company-funded research and development costs through overhead rate charges on our U.S. Government contracts. Research and development costs that are not reimbursable under a contract with the U.S. Government or another customer are charged to expense as incurred.
Income Taxes
The provision for income tax expense is calculated on reported income before income taxes based on current tax law and includes, in the current period, the cumulative effect of any changes in tax rates from those used previously in determining deferred tax assets and liabilities. Tax laws may require items to be included in the determination of taxable income at different times from when the items are reflected in the financial statements. Deferred tax balances reflect the effects of temporary differences between the financial reporting carrying amounts of assets and liabilities and their tax bases, as well as from net operating losses and tax credit carryforwards, and are stated at enacted tax rates in effect for the year taxes are expected to be paid or recovered.
Deferred tax assets represent tax benefits for tax deductions or credits available in future years and require certain estimates and assumptions to determine whether it is more likely than not that all or a portion of the benefit will not be realized. The recoverability of these future tax deductions and credits is determined by assessing the adequacy of future expected taxable income from all sources, including the future reversal of existing taxable temporary differences, taxable income in carryback years, estimated future taxable income and available tax planning strategies. Should a change in facts or circumstances lead to a change in judgment about the ultimate recoverability of a deferred tax asset, we record or adjust the related valuation allowance in the period that the change in facts and circumstances occurs, along with a corresponding increase or decrease in income tax expense.
We record tax benefits for uncertain tax positions based upon management’s evaluation of the information available at the reporting date. To be recognized in the financial statements, the tax position must meet the more-likely-than-not threshold that the position will be sustained upon examination by the tax authority based on technical merits assuming the tax authority has full knowledge of all relevant information. For positions meeting this recognition threshold, the benefit is measured as the largest amount of benefit that meets the more-likely-than-not threshold to be sustained. We periodically evaluate these tax positions based on the latest available information. For tax positions that do not meet the threshold requirement, we recognize net tax-related interest and penalties for continuing operations in income tax expense.
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Note 2. Goodwill and Intangible Assets
Goodwill
The changes in the carrying amount of goodwill by segment are as follows:
| (In millions) | Textron Aviation | Bell | Textron Systems | Industrial | Textron eAviation | Total | ||||||||||||||
| Balance at December 31, 2022 | $ | $ | $ | $ | $ | $ | ||||||||||||||
| Foreign currency translation | ||||||||||||||||||||
| Balance at December 30, 2023 | ||||||||||||||||||||
| Acquisitions | ||||||||||||||||||||
| Foreign currency translation | ( | ( | ( | ( | ||||||||||||||||
| Balance at December 28, 2024 | $ | $ | $ | $ | $ | $ | ||||||||||||||
Intangible Assets
Our intangible assets are summarized below:
| December 28, 2024 | December 30, 2023 | ||||||||||||||||||||||
| (Dollars in millions) | Weighted-Average Amortization Period (in years) | Gross Carrying Amount | Accumulated Amortization | Net | Gross Carrying Amount | Accumulated Amortization | Net | ||||||||||||||||
| Trade names and trademarks | $ | $ | ( | $ | $ | $ | ( | $ | |||||||||||||||
| Patents and technology | ( | ( | |||||||||||||||||||||
| Customer relationships and contractual agreements | ( | ( | |||||||||||||||||||||
| Total | $ | $ | ( | $ | $ | $ | ( | $ | |||||||||||||||
Trade names and trademarks in the table above include $169 34 million, $39 million and $52 million, in 2024, 2023 and 2022, respectively. Amortization expense is estimated to be approximately $32 million, $29 million, $27 million, $26 million and $25 million in 2025, 2026, 2027, 2028 and 2029, respectively.
Note 3. Accounts Receivable and Finance Receivables
Accounts Receivable
Accounts receivable is composed of the following:
| (In millions) | December 28, 2024 | December 30, 2023 | ||||||
| Commercial | $ | $ | ||||||
| U.S. Government contracts | ||||||||
| Allowance for credit losses | ( | ( | ||||||
| Total | $ | $ | ||||||
Finance Receivables
Finance receivables are presented in the following table:
| (In millions) | December 28, 2024 | December 30, 2023 | ||||||
| Finance receivables | $ | $ | ||||||
| Allowance for credit losses | ( | ( | ||||||
| Total finance receivables, net | $ | $ | ||||||
Finance receivables primarily includes loans provided to purchasers of new and pre-owned Textron Aviation aircraft and Bell helicopters. These loans generally have initial terms ranging from five years to twelve years and amortization terms ranging from five years to fifteen years ; the average loan balance was $2.0 million at December 28, 2024. Loans generally require the customer to pay a significant down payment, along with periodic scheduled principal payments that reduce the outstanding balance through the term of the loan. Our finance receivables are diversified across geographic region and borrower industry. At December 28,
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2024, 58 % of our finance receivables were distributed internationally and 42 % throughout the U.S., compared with 57 % and 43 %, respectively, at December 30, 2023.
Finance Receivable Portfolio Quality
We internally assess the quality of our finance receivables based on a number of key credit quality indicators and statistics such as delinquency, loan balance to estimated collateral value and the financial strength of individual borrowers and guarantors. Because many of these indicators are difficult to apply across an entire class of receivables, we evaluate individual loans on a quarterly basis and classify these loans into three categories based on the key credit quality indicators for the individual loan. These three categories are performing, watchlist and nonaccrual.
We classify finance receivables as nonaccrual if credit quality indicators suggest full collection of principal and interest is doubtful. In addition, we automatically classify accounts as nonaccrual once they are contractually delinquent by more than three months unless collection of principal and interest is not doubtful. Accounts are classified as watchlist when credit quality indicators have deteriorated as compared with typical underwriting criteria, and we believe collection of full principal and interest is probable but not certain. All other finance receivables that do not meet the watchlist or nonaccrual categories are classified as performing.
We measure delinquency based on the contractual payment terms of our finance receivables. In determining the delinquency aging category of an account, any/all principal and interest received is applied to the most past-due principal and/or interest amounts due. If a significant portion of the contractually due payment is delinquent, the entire finance receivable balance is reported in accordance with the most past-due delinquency aging category.
Finance receivables categorized based on the credit quality indicators and by delinquency aging category are summarized as follows:
| (Dollars in millions) | December 28, 2024 | December 30, 2023 | ||||||
| Performing | $ | $ | ||||||
| Watchlist | ||||||||
| Nonaccrual | ||||||||
| Nonaccrual as a percentage of finance receivables | ||||||||
| Current and less than 31 days past due | $ | $ | ||||||
| 31-60 days past due | ||||||||
| 61-90 days past due | ||||||||
| Over 90 days past due | ||||||||
| 60+ days contractual delinquency as a percentage of finance receivables | ||||||||
At December 28, 2024, 44 % of our performing finance receivables were originated since the beginning of 2022 and 26 % were originated from 2019 to 2021 with the remainder prior to 2019. For finance receivables categorized as nonaccrual, 100 % were originated prior to 2021.
On a quarterly basis, we evaluate individual larger balance accounts for impairment. A finance receivable is considered impaired when it is probable that we will be unable to collect all amounts due according to the contractual terms of the loan agreement based on our review of the credit quality indicators described above. Impaired finance receivables include both nonaccrual accounts and accounts for which full collection of principal and interest remains probable, but the account’s original terms have been, or are expected to be, significantly modified. If the modification specifies an interest rate equal to or greater than a market rate for a finance receivable with comparable risk, the account is not considered impaired in years subsequent to the modification. Our impaired finance receivables were insignificant at December 28, 2024 and December 30, 2023.
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Note 4. Inventories
Inventories are composed of the following:
| (In millions) | December 28, 2024 | December 30, 2023 | ||||||
| Finished goods | $ | $ | ||||||
| Work in process | ||||||||
| Raw materials and components | ||||||||
| Total | $ | $ | ||||||
Note 5. Property, Plant and Equipment, Net
Our Manufacturing group’s property, plant and equipment, net is composed of the following:
| (Dollars in millions) | Useful Lives (in years) | December 28, 2024 | December 30, 2023 | ||||||||||||||
| Land, buildings and improvements | - | $ | $ | ||||||||||||||
| Machinery and equipment | - | ||||||||||||||||
| Accumulated depreciation and amortization | ( | ( | |||||||||||||||
| Total | $ | $ | |||||||||||||||
The Manufacturing group's depreciation expense totaled $344 million, $353 million and $340 million in 2024, 2023 and 2022, respectively.
Note 6. Accounts Payable and Liabilities
Supplier Financing Arrangement
We have a financing arrangement with one of our suppliers that extends payment terms for up to 190 days from the receipt of goods and provides for the supplier to be paid by a financial institution earlier than maturity. In June 2024, the maximum amount available under the financing arrangement was increased by $25 million to $200 million. This financing arrangement expires in April 2027. At December 28, 2024 and December 30, 2023, the amount due under the supplier financing arrangement was $50 million and $125 million, respectively. During 2024, the amounts added under this arrangement totaled $247 million and the amounts settled totaled $322 million.
Other Current Liabilities
The other current liabilities of our Manufacturing group are summarized below:
| (In millions) | December 28, 2024 | December 30, 2023 | ||||||
| Contract liabilities | $ | $ | ||||||
| Salaries, wages and employer taxes | ||||||||
| Current portion of warranty and product repair and maintenance program liabilities | ||||||||
| Other | ||||||||
| Total | $ | $ | ||||||
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Warranty Liability
Changes in our current and non-current warranty liability are as follows:
| (In millions) | 2024 | 2023 | 2022 | ||||||||
| Balance at beginning of year | $ | $ | $ | ||||||||
| Provision | |||||||||||
| Settlements | ( | ( | ( | ||||||||
| Adjustments* | ( | ||||||||||
| Balance at end of year | $ | $ | $ | ||||||||
* Adjustments include changes to prior year estimates, new issues on prior year sales, currency translation adjustments and acquisitions.
Note 7. Leases
We primarily lease certain manufacturing plants, offices, warehouses, training and service centers at various locations worldwide that are classified as either operating or finance leases. Our leases have remaining lease terms up to 24 years, which include options to extend the lease term for periods up to 20 years when it is reasonably certain the option will be exercised.
Operating lease cost totaled $74 million, $69 million and $69 million in 2024, 2023 and 2022, respectively. Cash paid for operating lease liabilities approximated the lease expense and is classified in cash flows from operating activities. Noncash transactions related to operating leases totaled $49 million, $54 million and $58 million in 2024, 2023 and 2022, respectively, reflecting the recognition of operating lease assets and liabilities for new or extended leases. In 2024, non-cash transactions included the recognition of a $72 million asset and liability related to a new finance lease that matures in 2028. Finance lease, variable and short-term lease costs were not significant.
Balance sheet and other information related to our leases is as follows:
| (Dollars in millions) | December 28, 2024 | December 30, 2023 | ||||||
| Operating leases: | ||||||||
| $ | $ | |||||||
| Weighted-average remaining lease term (in years) | ||||||||
| Weighted-average discount rate | ||||||||
| Finance leases: | ||||||||
of $ | $ | $ | ||||||
| Weighted-average remaining lease term (in years) | ||||||||
| Weighted-average discount rate | ||||||||
At December 28, 2024, maturities of our operating lease liabilities on an undiscounted basis totaled $69 million for 2025, $56 million for 2026, $47 million for 2027, $45 million for 2028, $40 million for 2029 and $220 million thereafter.
47
Note 8. Debt and Credit Facilities
Our debt is summarized in the table below:
| (In millions) | December 28, 2024 | December 30, 2023 | ||||||
| Manufacturing group | ||||||||
| $ | $ | |||||||
Other (weighted-average rate of | ||||||||
| Total Manufacturing group debt | $ | $ | ||||||
| Less: Current portion of long-term debt | ( | ( | ||||||
| Total Long-term debt | $ | $ | ||||||
| Finance group | ||||||||
Variable-rate note due 2025 (weighted-average rate of | $ | $ | ||||||
Fixed-rate note due 2027 ( | ||||||||
Floating Rate Junior Subordinated Notes due 2067 ( | ||||||||
| Other | ||||||||
| Total Finance group debt | $ | $ | ||||||
The following table shows required principal payments during the next five years on debt outstanding at December 28, 2024:
| (In millions) | 2025 | 2026 | 2027 | 2028 | 2029 | ||||||||||||
| Manufacturing group | $ | $ | $ | $ | $ | ||||||||||||
| Finance group | |||||||||||||||||
| Total | $ | $ | $ | $ | $ | ||||||||||||
Textron has a senior unsecured revolving credit facility for an aggregate principal amount of $1.0 billion, of which $100 million is available for the issuance of letters of credit. We may elect to increase the aggregate amount of commitments under the facility to up to $1.3 billion by designating an additional lender or by an existing lender agreeing to increase its commitment. The facility expires in October 2027 and provides for two one-year extensions at our option with the consent of lenders representing a majority of the commitments under the facility. At December 28, 2024 and December 30, 2023, there were no 9
Floating Rate Junior Subordinated Notes
The Finance group’s $264 million of Floating Rate Junior Subordinated Notes are unsecured and rank junior to all of its existing and future senior debt. The notes mature on February 15, 2067 ; however, we have the right to redeem the notes at par at any time and we are obligated to redeem the notes beginning on February 15, 2042 . In 2023, TFC repurchased $8 million of these notes. Interest is variable at the three-month CME Term Secured Overnight Financing Rate + 1.99661 %.
Support Agreement
Under a Support Agreement between Textron and TFC, Textron is required to maintain a controlling interest in TFC. The agreement, as amended in December 2015, also requires Textron to ensure that TFC maintains fixed charge coverage of no less than 125 % and consolidated shareholders' equity of no less than $125 million. There were no
48
Note 9. Derivative Instruments and Fair Value Measurements
We measure fair value at the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date. We prioritize the assumptions that market participants would use in pricing the asset or liability into a three-tier fair value hierarchy. This fair value hierarchy gives the highest priority (Level 1) to quoted prices in active markets for identical assets or liabilities and the lowest priority (Level 3) to unobservable inputs in which little or no market data exist, requiring companies to develop their own assumptions. Observable inputs that do not meet the criteria of Level 1, which include quoted prices for similar assets or liabilities in active markets or quoted prices for identical assets and liabilities in markets that are not active, are categorized as Level 2. Level 3 inputs are those that reflect our estimates about the assumptions market participants would use in pricing the asset or liability based on the best information available in the circumstances. Valuation techniques for assets and liabilities measured using Level 3 inputs may include methodologies such as the market approach, the income approach or the cost approach and may use unobservable inputs such as projections, estimates and management’s interpretation of current market data. These unobservable inputs are utilized only to the extent that observable inputs are not available or cost effective to obtain.
Assets and Liabilities Recorded at Fair Value on a Recurring Basis
We manufacture and sell our products in a number of countries throughout the world, and, therefore, we are exposed to movements in foreign currency exchange rates. We primarily utilize foreign currency exchange contracts with maturities of no more than three years to manage this volatility. These contracts qualify as cash flow hedges and are intended to offset the effect of exchange rate fluctuations on forecasted sales, inventory purchases and overhead expenses. Net gains and losses recognized in earnings and Accumulated other comprehensive loss on cash flow hedges, including gains and losses related to hedge ineffectiveness, were not significant in the periods presented.
Our foreign currency exchange contracts are measured at fair value using the market method valuation technique. The inputs to this technique utilize current foreign currency exchange forward market rates published by third-party leading financial news and data providers. These are observable data that represent the rates that the financial institution uses for contracts entered into at that date; however, they are not based on actual transactions, so they are classified as Level 2. At December 28, 2024 and December 30, 2023, we had foreign currency exchange contracts with notional amounts upon which the contracts were based of $464 million and $478 million, respectively. At December 28, 2024, the fair value amounts of our foreign currency exchange contracts were a $5 million asset and a $19 million liability. At December 30, 2023, the fair value amount of our foreign currency exchange contracts was a $4 million asset and a $3 million liability.
Our Finance group enters into interest rate swap agreements to mitigate certain exposures to fluctuations in interest rates. By using these contracts, we are able to convert floating-rate cash flows to fixed-rate cash flows. These agreements are designated as cash flow hedges. The fair value of these interest rate swap agreements is determined using values published by third-party leading financial news and data providers. These values are observable data that represent the value that financial institutions use for contracts entered into at that date, but are not based on actual transactions, so they are classified as Level 2. The fair value of our outstanding interest rate swap agreements was an $8 million and a $4 million asset at December 28, 2024 and December 30, 2023, respectively.
At December 28, 2024, our Finance group had interest rate swap agreements related to its Floating Rate Junior Subordinated Notes for an aggregate notional amount of $264 million that effectively converts the variable-rate interest for these Notes to a weighted-average fixed rate of 5.20 %. These agreements have maturities ranging from August 2025 to August 2029. In 2024, we also entered into a new swap agreement related to these Notes with a notional amount of $30 million and a weighted-average fixed rate of 5.10 %; this agreement has a forward start date of August 15, 2025 and matures on August 15, 2030. At December 30, 2023, interest rate swap agreements related to these Notes had an aggregate notional amount of $185 million with a weighted-average fixed rate of 5.17 %. At December 28, 2024 and December 30, 2023, we had an interest rate swap agreement with a notional amount of $25 4.13
49
Assets and Liabilities Not Recorded at Fair Value
The carrying value and estimated fair value of our financial instruments that are not reflected in the financial statements at fair value are as follows:
| December 28, 2024 | December 30, 2023 | |||||||||||||
| (In millions) | Carrying Value | Estimated Fair Value | Carrying Value | Estimated Fair Value | ||||||||||
| Manufacturing group | ||||||||||||||
| Debt, excluding leases | $ | ( | $ | ( | $ | ( | $ | ( | ||||||
| Finance group | ||||||||||||||
| Finance receivables, excluding leases | ||||||||||||||
| Debt | ( | ( | ( | ( | ||||||||||
Fair value for the Manufacturing group debt is determined using market observable data for similar transactions (Level 2). The fair value for the Finance group debt was determined primarily based on discounted cash flow analyses using observable market inputs from debt with similar duration, subordination and credit default expectations (Level 2). Fair value estimates for finance receivables were determined based on internally developed discounted cash flow models primarily utilizing significant unobservable inputs (Level 3), which include estimates of the rate of return, financing cost, capital structure and/or discount rate expectations of current market participants combined with estimated loan cash flows based on credit losses, payment rates and expectations of borrowers’ ability to make payments on a timely basis.
Note 10. Shareholders’ Equity
Capital Stock
We have authorization for 15 million shares of preferred stock with a par value of $0.01 and 500 million shares of common stock with a par value of $0.125 . Outstanding common stock activity is presented below:
| (In thousands) | 2024 | 2023 | 2022 | ||||||||
| Balance at beginning of year | |||||||||||
| Share repurchases | ( | ( | ( | ||||||||
| Share-based compensation activity | |||||||||||
| Balance at end of year | |||||||||||
Earnings Per Share
We calculate basic and diluted earnings per share (EPS) based on net income, which approximates income available to common shareholders for each period. Basic EPS is calculated using the two-class method, which includes the weighted-average number of common shares outstanding during the period and restricted stock units to be paid in stock that are deemed participating securities as they provide nonforfeitable rights to dividends. Diluted EPS considers the dilutive effect of all potential future common stock, including stock options.
The weighted-average shares outstanding for basic and diluted EPS are as follows:
| (In thousands) | 2024 | 2023 | 2022 | ||||||||
| Basic weighted-average shares outstanding | |||||||||||
| Dilutive effect of stock options | |||||||||||
| Diluted weighted-average shares outstanding | |||||||||||
In 2024, 2023 and 2022, stock options to purchase 0.9 million, 1.5 million and 1.0 million shares, respectively, of common stock were excluded from the calculation of diluted weighted-average shares outstanding as their effect would have been anti-dilutive.
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Accumulated Other Comprehensive Loss
The components of Accumulated other comprehensive loss are presented below:
| (In millions) | Pension and Postretirement Benefits Adjustments | Foreign Currency Translation Adjustments | Deferred Gains (Losses) on Hedge Contracts | Accumulated Other Comprehensive Loss | ||||||||||
| Balance at December 31, 2022 | $ | ( | $ | ( | $ | ( | $ | ( | ||||||
| Other comprehensive loss before reclassifications | ( | ( | ( | |||||||||||
| Reclassified from Accumulated other comprehensive loss | ||||||||||||||
| Balance at December 30, 2023 | $ | ( | $ | ( | $ | $ | ( | |||||||
| Other comprehensive income before reclassifications | ( | ( | ||||||||||||
| Reclassified from Accumulated other comprehensive loss | ||||||||||||||
| Balance at December 28, 2024 | $ | ( | $ | ( | $ | ( | $ | ( | ||||||
Other Comprehensive Income (Loss)
The before and after-tax components of other comprehensive income (loss) are presented below:
| 2024 | 2023 | 2022 | |||||||||||||||||||||||||||
| (In millions) | Pre-Tax Amount | Tax (Expense) Benefit | After- Tax Amount | Pre-Tax Amount | Tax (Expense) Benefit | After- Tax Amount | Pre-Tax Amount | Tax (Expense) Benefit | After- Tax Amount | ||||||||||||||||||||
| Pension and postretirement benefits adjustments: | |||||||||||||||||||||||||||||
| Unrealized gains (losses) | $ | $ | ( | $ | $ | ( | $ | $ | ( | $ | $ | ( | $ | ||||||||||||||||
| Amortization of net actuarial (gain) loss* | ( | ( | ( | ( | ( | ||||||||||||||||||||||||
| Amortization of prior service cost* | ( | ( | ( | ||||||||||||||||||||||||||
| Recognition of prior service cost | ( | ( | ( | ( | ( | ( | |||||||||||||||||||||||
| Pension and postretirement benefits adjustments, net | ( | ( | ( | ( | |||||||||||||||||||||||||
| Foreign currency translation adjustments: | |||||||||||||||||||||||||||||
| Foreign currency translation adjustments | ( | ( | ( | ( | |||||||||||||||||||||||||
| Other | |||||||||||||||||||||||||||||
| Foreign currency translation adjustments, net | ( | ( | ( | ( | |||||||||||||||||||||||||
| Deferred gains (losses) on hedge contracts: | |||||||||||||||||||||||||||||
| Current deferrals | ( | ( | ( | ( | ( | ( | |||||||||||||||||||||||
| Reclassification adjustments | ( | ( | |||||||||||||||||||||||||||
| Deferred gains (losses) on hedge contracts, net | ( | ( | ( | ( | ( | ||||||||||||||||||||||||
| Total | $ | $ | ( | $ | $ | ( | $ | $ | ( | $ | $ | ( | $ | ||||||||||||||||
* These components of other comprehensive income (loss) are included in the computation of net periodic pension cost. See Note 14 for additional information.
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Note 11. Segment Financial Information
We operate in, and report financial information for, the following six
Textron Aviation products and services include Cessna Citation jets, Beechcraft and Cessna turboprop aircraft, military trainer and defense aircraft, piston engine aircraft, advanced flight training devices, aftermarket parts and maintenance, inspection and repair services. Textron Aviation has a diverse customer base including fractional aircraft businesses, charter and fleet operators, corporate aviation, individual buyers, training schools, airlines, and special mission, military and government operators.
Bell products and services include development of a next generation tiltrotor aircraft, the V-22 tiltrotor aircraft, advanced military helicopters, and aftermarket parts and support services to the U.S. and non-U.S. governments. Bell also supplies commercial helicopters and aftermarket parts and services to corporate, private, law enforcement, utility, public safety and emergency medical helicopter operators, and U.S. and foreign governments.
Textron Systems products and services include electronic systems and solutions, advanced marine craft, piston aircraft engines, live military air-to-air and air-to-ship training, weapons and related components, unmanned aircraft systems, and both manned and unmanned armored and specialty vehicles for U.S. and international military, government and commercial customers.
Industrial products and markets include the following:
•Kautex products include blow-molded plastic fuel systems, including conventional plastic fuel tanks and pressurized fuel tanks for hybrid vehicle applications, clear-vision systems, plastic tanks for selective catalytic reduction systems and battery systems for use in electric vehicles, from hybrid to full battery-powered, that are sold to automobile OEMs; and
•Textron Specialized Vehicles products include golf cars, off-road utility vehicles, powersports products, light transportation vehicles, aviation ground support equipment, professional turf-maintenance equipment and specialized turf-care vehicles that are marketed primarily to golf courses and resorts, government agencies and municipalities, consumers, outdoor enthusiasts, and commercial and industrial users.
The Textron eAviation segment is focused on research and development initiatives related to sustainable aviation solutions and also manufactures a family of light aircraft and gliders with both electric and combustion engines.
The Finance segment provides financing primarily to purchasers of new and pre-owned Textron Aviation aircraft and Bell helicopters.
In November 2023, the Financial Accounting Standards Board issued Accounting Standard Update (ASU) No. 2023-07, Segment Reporting (Topic 280): Improvements to Reportable Segment Disclosures, which requires a public entity to disclose, on an annual and interim basis, significant segment expenses and other segment items that are regularly provided to the Chief Operating Decision Maker (CODM). The new standard is effective for fiscal years beginning after December 15, 2023. We adopted ASU 2023-07 in the fourth quarter of 2024. In connection with the adoption of this standard, research and development costs previously included within Cost of products sold are now reported on a separate line in our Consolidated Statements of Operations. Prior period amounts have been recast to conform to the new presentation.
Textron’s CODM is its Chairman and Chief Executive Officer, Scott Donnelly. Mr. Donnelly utilizes segment profit to evaluate the performance of the segments to establish management's compensation and for decision-making purposes, including the allocation of capital resources between segments. Segment profit for the manufacturing segments excludes the non-service components of pension and postretirement income, net; LIFO inventory provision; intangible asset amortization; interest expense, net for Manufacturing group; certain corporate expenses; gains/losses on major business dispositions; special charges; and the inventory valuation charge to write down production-related powersports inventory discussed in Note 15. The measurement for the Finance segment includes interest income and expense along with intercompany interest income and expense.
52
Our revenues and expenses by segment are provided below:
| (in millions) | Textron Aviation | Bell | Textron Systems | Industrial | Textron eAviation | Finance | Total | ||||||||||||||||
| 2024 | |||||||||||||||||||||||
| Revenues | $ | $ | $ | $ | $ | $ | $ | ||||||||||||||||
| Costs and expenses: | |||||||||||||||||||||||
| Cost of sales | |||||||||||||||||||||||
| Research and development costs | |||||||||||||||||||||||
| Selling and administrative expense | ( | ||||||||||||||||||||||
| Interest expense, net | |||||||||||||||||||||||
| Segment profit (loss) | $ | $ | $ | $ | $ | ( | $ | $ | |||||||||||||||
| 2023 | |||||||||||||||||||||||
| Revenues | $ | $ | $ | $ | $ | $ | $ | ||||||||||||||||
| Costs and expenses: | |||||||||||||||||||||||
| Cost of sales | |||||||||||||||||||||||
| Research and development costs | |||||||||||||||||||||||
| Selling and administrative expense | ( | ||||||||||||||||||||||
| Interest expense, net | |||||||||||||||||||||||
| Segment profit (loss) | $ | $ | $ | $ | $ | ( | $ | $ | |||||||||||||||
| 2022 | |||||||||||||||||||||||
| Revenues | $ | $ | $ | $ | $ | $ | $ | ||||||||||||||||
| Costs and expenses: | |||||||||||||||||||||||
| Cost of sales | |||||||||||||||||||||||
| Research and development costs | |||||||||||||||||||||||
| Selling and administrative expense | |||||||||||||||||||||||
| Interest expense, net | |||||||||||||||||||||||
| Segment profit (loss) | $ | $ | $ | $ | $ | ( | $ | $ | |||||||||||||||
A reconciliation of segment profit to income from continuing operations before income taxes is presented below:
| (in millions) | 2024 | 2023 | 2022 | ||||||||
| Segment profit | $ | $ | $ | ||||||||
| Unallocated amounts: | |||||||||||
| Corporate expenses and other, net | ( | ( | ( | ||||||||
| Interest expense, net for Manufacturing group | ( | ( | ( | ||||||||
| LIFO inventory provision | ( | ( | ( | ||||||||
| Intangible asset amortization | ( | ( | ( | ||||||||
| Special charges* | ( | ( | |||||||||
| Inventory charge* | ( | ||||||||||
| Non-service components of pension and postretirement income, net | |||||||||||
| Income from continuing operations before income taxes | $ | $ | $ | ||||||||
* See Note 15 for additional information.
53
Other information by segment is provided below:
| Assets | Capital Expenditures | Depreciation and Amortization | ||||||||||||||||||||||||
| (In millions) | December 28, 2024 | December 30, 2023 | 2024 | 2023 | 2022 | 2024 | 2023 | 2022 | ||||||||||||||||||
| Textron Aviation | $ | $ | $ | $ | $ | $ | $ | $ | ||||||||||||||||||
| Bell | ||||||||||||||||||||||||||
| Textron Systems | ||||||||||||||||||||||||||
| Industrial | ||||||||||||||||||||||||||
| Textron eAviation | ||||||||||||||||||||||||||
| Finance | ||||||||||||||||||||||||||
| Corporate | ||||||||||||||||||||||||||
| Total | $ | $ | $ | $ | $ | $ | $ | $ | ||||||||||||||||||
Note 12. Revenues
Disaggregation of Revenues
Our revenues disaggregated by major product type are presented below:
| (In millions) | 2024 | 2023 | 2022 | ||||||||
| Aircraft | $ | $ | $ | ||||||||
| Aftermarket parts and services | |||||||||||
| Textron Aviation | $ | $ | $ | ||||||||
| Military aircraft and support programs | |||||||||||
| Commercial helicopters, parts and services | |||||||||||
| Bell | $ | $ | $ | ||||||||
| Textron Systems | $ | $ | $ | ||||||||
| Fuel systems and functional components | |||||||||||
| Specialized vehicles | |||||||||||
| Industrial | $ | $ | $ | ||||||||
| Textron eAviation | $ | $ | $ | ||||||||
| Finance | $ | $ | $ | ||||||||
| Total revenues | $ | $ | $ | ||||||||
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Our revenues for our segments by customer type and geographic location are presented below:
| (In millions) | Textron Aviation | Bell | Textron Systems | Industrial | Textron eAviation | Finance | Total | ||||||||||||||||
| 2024 | |||||||||||||||||||||||
| Customer type: | |||||||||||||||||||||||
| Commercial | $ | $ | $ | $ | $ | $ | $ | ||||||||||||||||
| U.S. Government | |||||||||||||||||||||||
| Total revenues | $ | $ | $ | $ | $ | $ | $ | ||||||||||||||||
| Geographic location: | |||||||||||||||||||||||
| United States | $ | $ | $ | $ | $ | $ | $ | ||||||||||||||||
| Europe | |||||||||||||||||||||||
| Other international | |||||||||||||||||||||||
| Total revenues | $ | $ | $ | $ | $ | $ | $ | ||||||||||||||||
| 2023 | |||||||||||||||||||||||
| Customer type: | |||||||||||||||||||||||
| Commercial | $ | $ | $ | $ | $ | $ | $ | ||||||||||||||||
| U.S. Government | |||||||||||||||||||||||
| Total revenues | $ | $ | $ | $ | $ | $ | $ | ||||||||||||||||
| Geographic location: | |||||||||||||||||||||||
| United States | $ | $ | $ | $ | $ | $ | $ | ||||||||||||||||
| Europe | |||||||||||||||||||||||
| Other international | |||||||||||||||||||||||
| Total revenues | $ | $ | $ | $ | $ | $ | $ | ||||||||||||||||
| 2022 | |||||||||||||||||||||||
| Customer type: | |||||||||||||||||||||||
| Commercial | $ | $ | $ | $ | $ | $ | $ | ||||||||||||||||
| U.S. Government | |||||||||||||||||||||||
| Total revenues | $ | $ | $ | $ | $ | $ | $ | ||||||||||||||||
| Geographic location: | |||||||||||||||||||||||
| United States | $ | $ | $ | $ | $ | $ | $ | ||||||||||||||||
| Europe | |||||||||||||||||||||||
| Other international | |||||||||||||||||||||||
| Total revenues | $ | $ | $ | $ | $ | $ | $ | ||||||||||||||||
Remaining Performance Obligations
Our remaining performance obligations, which is the equivalent of our backlog, represent the expected transaction price allocated to our contracts that we expect to recognize as revenue in future periods when we perform under the contracts. These remaining obligations exclude unexercised contract options and potential orders under ordering-type contracts such as Indefinite Delivery, Indefinite Quantity contracts. At December 28, 2024, we had $17.9 billion in remaining performance obligations of which we expect to recognize revenues of approximately 76 % through 2026, an additional 19 % through 2028, and the balance thereafter.
Contract Assets and Liabilities
55
Note 13. Share-Based Compensation
In April 2024, our shareholders approved our 2024 Long-Term Incentive Plan (the 2024 Plan), which replaced our 2015 Long-Term Incentive Plan (the 2015 Plan). Under the 2024 Plan, consistent with the 2015 Plan, we have authorization to provide awards to selected employees and non-employee directors in the form of stock options, restricted stock, restricted stock units, stock appreciation rights, performance stock, performance share units and other awards. A maximum of 10 million shares is authorized for issuance for all purposes under the 2024 Plan plus any shares that become available upon cancellation, forfeiture or expiration of awards granted under the 2015 Plan. Under the 2024 Plan, the maximum number of shares that may be issued pursuant to awards payable in shares, such as restricted stock, restricted stock units, performance stock, performance share units, or other awards is 3.127 million, plus any shares that become available upon cancellation, forfeiture or expiration of such awards which were granted under the 2015 Plan. For 2024, 2023 and 2022, the awards granted under these plans primarily included stock options, restricted stock units and performance share units.
Share-based compensation costs are reflected primarily in selling and administrative expense. Compensation expense included in net income for our share-based compensation plans is as follows:
| (In millions) | 2024 | 2023 | 2022 | ||||||||
| Compensation expense | $ | $ | $ | ||||||||
| Income tax benefit | ( | ( | ( | ||||||||
| Total compensation expense included in net income | $ | $ | $ | ||||||||
Compensation cost for awards subject only to service conditions that vest ratably is recognized on a straight-line basis over the requisite service period for each separately vesting portion of the award utilizing an estimated forfeiture rate. Our awards include continued vesting provisions for retirement eligible employees. Upon reaching retirement eligibility, the service requirement for these individuals is considered to have been satisfied and compensation expense for future awards is recognized on the date of the grant.
As of December 28, 2024, we had not recognized $27 million of total compensation costs associated with unvested awards subject only to service conditions. We expect to recognize compensation expense for these awards over a weighted-average period of approximately two years . We typically grant stock appreciation rights to selected non-U.S. employees. At December 28, 2024, outstanding stock appreciation rights totaled 391,414 with a weighted-average exercise price of $64.09 and a weighted-average remaining contractual life of 6.1 years; these units had an intrinsic value of $6 million, compared to $12 million at December 30, 2023.
Stock Options
Stock option compensation expense was $25 million, $23 million and $22 million in 2024, 2023 and 2022, respectively. Options to purchase our shares have a maximum term of ten years and generally vest ratably over a three-year period. Stock option compensation cost is calculated under the fair value approach using the Black-Scholes option-pricing model to determine the fair value of options granted on the date of grant. The expected volatility used in this model is based on historical volatilities and implied volatilities from traded options on our common stock. The expected term is based on historical option exercise data, which is adjusted to reflect any anticipated changes in expected behavior.
We grant options annually on the first day of March. The assumptions used in our option-pricing model for these grants and the weighted-average fair value for these options are as follows:
| 2024 | 2023 | 2022 | |||||||||
| Fair value of options at grant date | $ | $ | $ | ||||||||
| Dividend yield | |||||||||||
| Expected volatility | |||||||||||
| Risk-free interest rate | |||||||||||
| Expected term (in years) | |||||||||||
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The stock option activity during 2024 is provided below:
| (Options in thousands) | Number of Options | Weighted- Average Exercise Price | ||||||
| Outstanding at beginning of year | $ | |||||||
| Granted | ||||||||
| Exercised | ( | ( | ||||||
| Forfeited or expired | ( | ( | ||||||
| Outstanding at end of year | $ | |||||||
| Exercisable at end of year | $ | |||||||
At December 28, 2024, our outstanding options had an aggregate intrinsic value of $115 million and a weighted-average remaining contractual life of 5.7 years. Our exercisable options had an aggregate intrinsic value of $109 million and a weighted-average remaining contractual life of 4.5 years at December 28, 2024. The total intrinsic value of options exercised during 2024, 2023 and 2022 was $78 million, $50 million and $32 million, respectively.
Restricted Stock Units
We issue restricted stock units that include the right to receive dividend equivalents and are settled in either cash or stock. Beginning in 2020, new grants of restricted stock units vest in full on the third anniversary of the grant date. Restricted stock units granted prior to 2020 vest one-third each in the third, fourth and fifth year following the year of the grant. Compensation cost is determined using the fair value of these units based on the trading price of our common stock. For units payable in stock, we use the trading price on the grant date, while units payable in cash are remeasured using the price at each reporting period date.
The 2024 activity for restricted stock units is provided below:
| Units Payable in Stock | Units Payable in Cash | ||||||||||||||||
| (Shares/Units in thousands) | Number of Shares | Weighted- Average Grant Date Fair Value | Number of Units | Weighted- Average Grant Date Fair Value | |||||||||||||
| Outstanding at beginning of year, nonvested | $ | $ | |||||||||||||||
| Granted | |||||||||||||||||
| Vested | ( | ( | ( | ( | |||||||||||||
| Forfeited | ( | ( | |||||||||||||||
| Outstanding at end of year, nonvested | $ | $ | |||||||||||||||
The fair value of the restricted stock unit awards that vested and/or amounts paid under these awards is as follows:
| (In millions) | 2024 | 2023 | 2022 | ||||||||
| Fair value of awards vested | $ | $ | $ | ||||||||
| Cash paid | |||||||||||
Performance Share Units
The fair value of share-based compensation awards accounted for as liabilities includes performance share units, which are generally paid in cash in the first quarter of the year following vesting. Performance share units are subject to performance goals set at the beginning of the three-year performance period and vest at the end of the performance period. These units are remeasured to fair value at the end of each reporting period based on the trading price of our common stock and the number of units, as adjusted based on assumptions with respect to performance on the relevant metrics.
The 2024 activity for our performance share units is as follows:
| (Units in thousands) | Number of Units | Weighted- Average Grant Date Fair Value | ||||||
| Outstanding at beginning of year, nonvested | $ | |||||||
| Granted | ||||||||
| Vested | ( | ( | ||||||
| Outstanding at end of year, nonvested | $ | |||||||
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The fair value of the performance share units that vested and/or amounts paid under these awards is as follows:
| (In millions) | 2024 | 2023 | 2022 | ||||||||
| Fair value of awards vested | $ | $ | $ | ||||||||
| Cash paid | |||||||||||
Note 14. Retirement Plans
We provide defined-contribution benefits to eligible employees, as well as some remaining defined-benefit pension and other post-retirement benefits covering certain of our U.S. and Non-U.S. employees. Substantially all of our employees are covered by defined contribution plans. The largest of these plans, the Textron Savings Plan, is a qualified 401(k) plan subject to the Employee Retirement Income Security Act of 1974 (ERISA). Our defined contribution plans cost $164 million, $154 million and $140 million in 2024, 2023 and 2022, respectively. We also provide postretirement benefits other than pensions for certain retired employees in the U.S. that include healthcare, dental care, Medicare Part B reimbursement and life insurance.
A portion of our U.S. employees participate in the legacy defined benefit pension plans which were closed to new participants beginning on January 1, 2010. These legacy plans include the Textron Master Retirement Plan (TMRP), the Bell Helicopter Textron Master Retirement Plan, and the CWC Castings Division of Textron Inc. Hourly-Rated Employees' Pension Plan, which are each subject to the provisions of ERISA and provide a minimum guaranteed benefit to participants. The primary factors affecting the benefits earned by participants in our pension plans are employees’ years of service and compensation levels. Employees hired subsequent to the closure of these plans receive an additional annual cash contribution to their Textron Savings Plan account based on their eligible compensation of up to 4 %.
Periodic Benefit Cost (Income)
The components of net periodic benefit cost (income) and other amounts recognized in other comprehensive income (loss) (OCI) are as follows:
| Pension Benefits | Postretirement Benefits Other than Pensions | |||||||||||||||||||
| (In millions) | 2024 | 2023 | 2022 | 2024 | 2023 | 2022 | ||||||||||||||
| Net periodic benefit cost (income) | ||||||||||||||||||||
| Service cost | $ | $ | $ | $ | $ | $ | ||||||||||||||
| Interest cost | ||||||||||||||||||||
| Expected return on plan assets | ( | ( | ( | |||||||||||||||||
| Amortization of prior service cost (credit) | ( | ( | ( | |||||||||||||||||
| Amortization of net actuarial loss (gain) | ( | ( | ( | |||||||||||||||||
| Net periodic benefit cost (income)* | $ | ( | $ | ( | $ | ( | $ | ( | $ | ( | $ | ( | ||||||||
| Other changes in plan assets and benefit obligations recognized in OCI | ||||||||||||||||||||
| Current year actuarial loss (gain) | $ | ( | $ | $ | ( | $ | ( | $ | ( | $ | ( | |||||||||
| Current year prior service cost | ||||||||||||||||||||
| Amortization of net actuarial gain (loss) | ( | ( | ( | |||||||||||||||||
| Amortization of prior service credit (cost) | ( | ( | ( | |||||||||||||||||
| Total recognized in OCI, before taxes | $ | ( | $ | $ | ( | $ | $ | $ | ( | |||||||||||
| Total recognized in net periodic benefit cost (income) and OCI | $ | ( | $ | ( | $ | ( | $ | $ | $ | ( | ||||||||||
* Excludes the cost associated with the defined contribution component that is included in certain of our U.S.-based defined benefit pension plans, of $10 million in 2024, and $11
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Obligations and Funded Status
All of our plans are measured as of our fiscal year-end. The changes in the projected benefit obligation and in the fair value of plan assets, along with our funded status, are as follows:
| Pension Benefits | Postretirement Benefits Other than Pensions | |||||||||||||
| (In millions) | December 28, 2024 | December 30, 2023 | December 28, 2024 | December 30, 2023 | ||||||||||
| Change in projected benefit obligation | ||||||||||||||
| Projected benefit obligation at beginning of year | $ | $ | $ | $ | ||||||||||
| Service cost | ||||||||||||||
| Interest cost | ||||||||||||||
| Plan participants’ contributions | ||||||||||||||
| Actuarial losses (gains) | ( | ( | ( | |||||||||||
| Benefits paid | ( | ( | ( | ( | ||||||||||
| Plan amendment | ||||||||||||||
| Foreign exchange rate changes and other | ( | |||||||||||||
| Projected benefit obligation at end of year | $ | $ | $ | $ | ||||||||||
| Change in fair value of plan assets | ||||||||||||||
| Fair value of plan assets at beginning of year | $ | $ | ||||||||||||
| Actual return on plan assets | ||||||||||||||
| Employer contributions | ||||||||||||||
| Benefits paid | ( | ( | ||||||||||||
| Foreign exchange rate changes and other | ( | |||||||||||||
| Fair value of plan assets at end of year | $ | $ | ||||||||||||
| Funded status at end of year | $ | $ | $ | ( | $ | ( | ||||||||
Actuarial losses (gains) for 2024 and 2023 were largely the result of changes in the discount rate utilized.
Amounts recognized in our balance sheets are as follows:
| Pension Benefits | Postretirement Benefits Other than Pensions | |||||||||||||
| (In millions) | December 28, 2024 | December 30, 2023 | December 28, 2024 | December 30, 2023 | ||||||||||
| Non-current assets | $ | $ | $ | $ | ||||||||||
| Current liabilities | ( | ( | ( | ( | ||||||||||
| Non-current liabilities | ( | ( | ( | ( | ||||||||||
| Recognized in Accumulated other comprehensive loss, pre-tax: | ||||||||||||||
| Net loss (gain) | ( | ( | ||||||||||||
| Prior service cost (credit) | ( | ( | ||||||||||||
The accumulated benefit obligation for all defined benefit pension plans was $6.5 billion and $6.9 billion at December 28, 2024 and December 30, 2023, respectively, which included $316 million and $336 million, respectively, in accumulated benefit obligations for unfunded plans where funding is not permitted or in foreign environments where funding is not feasible.
Pension plans with accumulated benefit obligation exceeding the fair value of plan assets are as follows:
| (In millions) | December 28, 2024 | December 30, 2023 | ||||||
| Accumulated benefit obligation | $ | $ | ||||||
| Fair value of plan assets | ||||||||
Pension plans with projected benefit obligation exceeding the fair value of plan assets are as follows:
| (In millions) | December 28, 2024 | December 30, 2023 | ||||||
| Projected benefit obligation | $ | $ | ||||||
| Fair value of plan assets | ||||||||
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Assumptions
The weighted-average assumptions we use for our pension and postretirement plans are as follows:
| Pension Benefits | Postretirement Benefits Other than Pensions | |||||||||||||||||||
| 2024 | 2023 | 2022 | 2024 | 2023 | 2022 | |||||||||||||||
| Net periodic benefit cost | ||||||||||||||||||||
| Discount rate | ||||||||||||||||||||
| Expected long-term rate of return on assets | ||||||||||||||||||||
| Rate of compensation increase | ||||||||||||||||||||
| Benefit obligations at year-end | ||||||||||||||||||||
| Discount rate | ||||||||||||||||||||
| Rate of compensation increase | ||||||||||||||||||||
| Interest crediting rate for cash balance plans | ||||||||||||||||||||
Our assumed healthcare cost trend rate for both the medical and prescription drug cost was 6.50 % in 2024 and 6.50 % in 2023. We expect this rate to gradually decline to 4.75 % by 2031 where we assume it will remain.
Pension Assets
The expected long-term rate of return on plan assets is determined based on a variety of considerations, including the established asset allocation targets and expectations for those asset classes, historical returns of the plans’ assets and other market considerations. We invest our pension assets with the objective of achieving a total rate of return over the long term that will be sufficient to fund future pension obligations and to minimize future pension contributions. We are willing to tolerate a commensurate level of risk to achieve this objective based on the funded status of the plans and the long-term nature of our pension liability. Risk is controlled by maintaining a portfolio of assets that is diversified across a variety of asset classes, investment styles and investment managers. Where possible, investment managers are prohibited from owning our securities in the portfolios that they manage on our behalf.
For U.S. plan assets, which represent the majority of our plan assets, asset allocation target ranges are established consistent with our investment objectives, and the assets are rebalanced periodically. For Non-U.S. plan assets, allocations are based on expected cash flow needs and assessments of the local practices and markets. Our target allocation ranges are as follows:
| U.S. Plan Assets | |||||||||||
| Domestic equity securities | % | to | |||||||||
| International equity securities | % | to | |||||||||
| Global equities | % | to | |||||||||
| Debt securities | % | to | |||||||||
| Real estate | % | to | |||||||||
| Private investment partnerships | % | to | |||||||||
| Non-U.S. Plan Assets | |||||||||||
| Equity securities | % | to | |||||||||
| Debt securities | % | to | |||||||||
| Real estate | % | to | |||||||||
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The fair value of our pension plan assets by major category and valuation method is as follows:
| December 28, 2024 | December 30, 2023 | |||||||||||||||||||||||||
| (In millions) | Level 1 | Level 2 | Level 3 | Not Subject to Leveling | Level 1 | Level 2 | Level 3 | Not Subject to Leveling | ||||||||||||||||||
| Cash and equivalents | $ | $ | $ | $ | $ | $ | $ | $ | ||||||||||||||||||
| Equity securities: | ||||||||||||||||||||||||||
| Domestic | ||||||||||||||||||||||||||
| International | ||||||||||||||||||||||||||
| Mutual funds | — | — | ||||||||||||||||||||||||
| Debt securities: | ||||||||||||||||||||||||||
| National, state and local governments | ||||||||||||||||||||||||||
| Corporate debt | ||||||||||||||||||||||||||
| Private investment partnerships | ||||||||||||||||||||||||||
| Real estate | ||||||||||||||||||||||||||
| Total | $ | $ | $ | $ | $ | $ | $ | $ | ||||||||||||||||||
Cash and equivalents, equity securities and debt securities include commingled funds, which represent investments in funds offered to institutional investors that are similar to mutual funds in that they provide diversification by holding various equity and debt securities. Generally, the fair value of the majority of the commingled funds is determined and published by the fund's investment managers and is the basis for current transactions, therefore, they are categorized as Level 1 in the table above. Certain commingled funds, consisting of underlying equity and fixed income securities, are stated at their Net Asset Value (NAV) per share because such investments do not have readily determinable fair values and, therefore, are not subject to leveling within the fair value hierarchy. The NAV is the total value of the fund divided by the number of the fund’s shares outstanding. Debt securities are valued based on same day actual trading prices, if available. If such prices are not available, we use a matrix pricing model with historical prices, trends and other factors.
Private investment partnerships represents interests in funds which invest in equity, debt and other financial assets. These funds are generally not publicly traded so the interests therein are valued using income and market methods that include cash flow projections and market multiples for various comparable investments. Real estate includes owned properties and limited partnership interests in real estate partnerships. Owned properties are valued using certified appraisals at least every three years that are updated at least annually by the real estate investment manager based on current market trends and other available information. These appraisals generally use the standard methods for valuing real estate, including forecasting income and identifying current transactions for comparable real estate to arrive at a fair value. Limited partnership interests in real estate partnerships are valued similarly to private investment partnerships, with the general partner using standard real estate valuation methods to value the real estate properties and securities held within their portfolios. Neither private investment nor real estate partnerships are subject to leveling within the fair value hierarchy.
The table below presents a reconciliation of the fair value measurements for owned real estate properties, which use significant unobservable inputs (Level 3):
| (In millions) | 2024 | 2023 | ||||||
| Balance at beginning of year | $ | $ | ||||||
| Unrealized losses, net | ( | ( | ||||||
| Realized gains, net | ||||||||
| Purchases, sales and settlements, net | ( | ( | ||||||
| Balance at end of year | $ | $ | ||||||
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Estimated Future Cash Flow Impact
Defined benefits under salaried plans are based on salary and years of service. Hourly plans generally provide benefits based on stated amounts for each year of service. Our funding policy is consistent with applicable laws and regulations. In 2025, we expect to contribute approximately $50 million to our pension plans. Benefit payments provided below reflect expected future employee service, as appropriate, and are expected to be paid, net of estimated participant contributions. These payments are based on the same assumptions used to measure our benefit obligation at the end of 2024. While pension benefit payments primarily will be paid out of qualified pension trusts, we will pay postretirement benefits other than pensions out of our general corporate assets. Benefit payments that we expect to pay on an undiscounted basis are as follows:
| (In millions) | 2025 | 2026 | 2027 | 2028 | 2029 | 2030-2034 | ||||||||||||||
| Pension benefits | $ | $ | $ | $ | $ | $ | ||||||||||||||
| Postretirement benefits other than pensions | ||||||||||||||||||||
Note 15. Special Charges
Special charges recorded in 2024 and 2023 by segment and type of cost are as follows:
| (In millions) | Severance Costs | Contract Terminations and Other | Asset Impairments | Total | |||||||||||||||||||
| 2024 | |||||||||||||||||||||||
| Industrial | $ | $ | $ | $ | |||||||||||||||||||
| Bell | |||||||||||||||||||||||
| Textron Systems | |||||||||||||||||||||||
| Total special charges | $ | $ | $ | $ | |||||||||||||||||||
| 2023 | |||||||||||||||||||||||
| Industrial | $ | $ | $ | $ | |||||||||||||||||||
| Bell | |||||||||||||||||||||||
| Textron Systems | |||||||||||||||||||||||
| Total special charges | $ | $ | $ | $ | |||||||||||||||||||
In the fourth quarter of 2023, we initiated a restructuring plan to reduce operating expenses through headcount reductions at the Industrial, Bell and Textron Systems segments. In the Industrial segment, the plan included headcount reductions at Textron Specialized Vehicles, resulting from lower demand for certain of our powersports products, and at Kautex, due to reduced demand for fuel systems from European automotive manufacturers. In the Bell and Textron Systems segments, the plan included targeted headcount reductions to improve the segments’ cost structures and realign their workforces as these segments transition from legacy production contracts to more development, engineering focused contracts. In April 2024, the plan was expanded for the Bell and Textron Systems segments to include headcount reductions resulting from the cancellations of the Future Attack Reconnaissance Aircraft and Shadow programs in 2024.
In December 2024, we approved additional actions under the 2023 plan at Textron Specialized Vehicles related to an indefinite pause in production of its powersports products. During 2024, the consumer end market demand for powersports products continued to remain soft. As a result, and in conjunction with its annual operating plan process, Textron Specialized Vehicles began to pause production of powersports products as Textron's management reviews strategic alternatives for the business. Upon completion of limited production runs to satisfy customer commitments, production of powersports products will be paused indefinitely in the first half of 2025.
In 2024, we recorded special charges totaling $78 million as a result of the above restructuring actions. Since inception of the 2023 plan, we have incurred $204 million in including severance costs of $82 million, which included $58 million at the Industrial segment, $14 million at the Bell segment and $10 million at the Textron Systems segment; and contract termination and other costs of $32 million and asset impairment charges of $90 million at the Industrial segment. Headcount reductions since inception of the plan are expected to total approximately 1,800 positions, representing 5 % of our global workforce. We expect the plan to be substantially completed and the majority of the $71 million restructuring reserve to be paid in the first half of 2025.
In the fourth quarter of 2024 and in connection with the actions taken under the restructuring plan at Textron Specialized Vehicles, we recorded an inventory valuation charge of $38 million, which is recorded in Cost of products sold, to write down production-related powersports inventory to its net realizable value.
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In 2023, as a result of the lower demand described above, we recognized asset impairment charges of $75 million at Textron Specialized Vehicles related to both fixed and intangible assets and $12 million of fixed asset impairment charges at Kautex. The fair value of these assets was determined utilizing a discounted cash flow methodology that reflected the impact of lower anticipated demand for the powersports and fuel systems products on future revenues and profit.
Restructuring Reserve
Our restructuring reserve activity is summarized below:
| (In millions) | Severance Costs | Contract Terminations and Other | Total | ||||||||
| Balance at December 31, 2022 | $ | $ | $ | ||||||||
| Provision for 2023 restructuring plan | |||||||||||
| Cash paid | ( | ( | ( | ||||||||
| Foreign currency translation | |||||||||||
| Balance at December 30, 2023 | $ | $ | $ | ||||||||
| Provision for 2023 restructuring plan | |||||||||||
| Cash paid | ( | ( | ( | ||||||||
| Reversals | ( | ( | |||||||||
| Foreign currency translation | ( | ( | |||||||||
| Balance at December 28, 2024 | $ | $ | $ | ||||||||
Note 16. Income Taxes
We conduct business globally and, as a result, file numerous consolidated and separate income tax returns within and outside the U.S. For all of our U.S. subsidiaries, we file a consolidated federal income tax return. Income from continuing operations before income taxes is as follows:
| (In millions) | 2024 | 2023 | 2022 | ||||||||
| U.S. | $ | $ | $ | ||||||||
| Non-U.S. | |||||||||||
| Income from continuing operations before income taxes | $ | $ | $ | ||||||||
Income tax expense is summarized as follows:
| (In millions) | 2024 | 2023 | 2022 | ||||||||
| Current expense: | |||||||||||
| Federal | $ | $ | $ | ||||||||
| State | |||||||||||
| Non-U.S. | |||||||||||
| Deferred expense (benefit): | |||||||||||
| Federal | ( | ( | ( | ||||||||
| State | ( | ( | |||||||||
| Non-U.S. | ( | ( | |||||||||
| ( | ( | ( | |||||||||
| Income tax expense | $ | $ | $ | ||||||||
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The following table reconciles the U.S. Federal statutory income tax rate to our effective income tax rate:
| 2024 | 2023 | 2022 | |||||||||
| U.S. Federal statutory income tax rate | |||||||||||
| Increase (decrease) resulting from: | |||||||||||
| State income taxes, net of federal tax benefit | ( | ||||||||||
| Non-U.S. tax rate differential and foreign tax credits | |||||||||||
| Research and development tax credits | ( | ( | ( | ||||||||
| Uncertain tax positions release for 2012 to 2017 IRS audit | ( | ||||||||||
| Foreign-derived intangible income deduction | ( | ( | ( | ||||||||
| Other, net | ( | ( | ( | ||||||||
| Effective income tax rate | |||||||||||
Unrecognized Tax Benefits
Our unrecognized tax benefits represent tax positions for which reserves have been established, with unrecognized state tax benefits reflected net of applicable federal tax benefits. If our unrecognized tax benefits were recognized in future periods, they would favorably impact our effective tax rate. A reconciliation of these unrecognized tax benefits is as follows:
| (In millions) | 2024 | 2023 | 2022 | ||||||||
| Balance at beginning of year | $ | $ | $ | ||||||||
| Additions for tax positions related to current year | |||||||||||
| Additions for tax positions of prior years | |||||||||||
| Reductions for tax positions of prior years | ( | ||||||||||
| Reductions for settlements | ( | ||||||||||
| Balance at end of year | $ | $ | $ | ||||||||
In November 2024, we received a Revenue Agent Report (RAR) from the Internal Revenue Service (IRS) for the tax years 2012 to 2017 that proposed adjustments related to research and development tax credits generated on amended returns filed in 2019 and 2021. We disagree with the proposed adjustments and are vigorously contesting them through the IRS’s Office of Appeals and, if necessary, will continue with legal proceedings. We believe it is more likely than not that we will prevail on our refund claim for these credits. As of December 28, 2024, we believe our allowance for uncertain tax positions related to this matter is adequate. We do not expect a final resolution to this matter in the next twelve months. In connection with the RAR for these years, other tax positions were effectively settled, resulting in a benefit upon the reversal of $27 million of uncertain tax positions in the fourth quarter of 2024.
We are currently under examination by the IRS for the tax years 2018 to 2021. In the normal course of business, we are subject to examination by tax authorities throughout the world. We are generally no longer subject to state and local income tax examinations for years before 2019 and non-U.S. income tax examinations for years before 2012.
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Deferred Taxes
The significant components of our net deferred tax assets/(liabilities) are provided below:
| (In millions) | December 28, 2024 | December 30, 2023 | ||||||
| Capitalized research and development expenditures | $ | $ | ||||||
| Accrued liabilities (a) | ||||||||
| U.S. operating loss and tax credit carryforwards (b) | ||||||||
| Obligation for pension and postretirement benefits | ||||||||
| Deferred compensation | ||||||||
| Operating lease liabilities | ||||||||
| Non-U.S. operating loss and tax credit carryforwards (c) | ||||||||
| Prepaid pension benefits | ( | ( | ||||||
| Property, plant and equipment, principally depreciation | ( | ( | ||||||
| Amortization of goodwill and other intangibles | ( | ( | ||||||
| Operating lease right-of-use assets | ( | ( | ||||||
| Valuation allowance on deferred tax assets | ( | ( | ||||||
| Other leasing transactions, principally leveraged leases | ( | ( | ||||||
| Other, net | ( | ( | ||||||
| Deferred taxes, net | $ | $ | ||||||
(a)Accrued liabilities include warranty reserves, self-insured liabilities and interest.
(b)At December 28, 2024, U.S. operating loss and tax credit carryforward benefits of $166 million expire through 2044 if not utilized and $46 million may be carried forward indefinitely.
(c)At December 28, 2024, non-U.S. operating loss and tax credit carryforward benefits of $80 million may be carried forward indefinitely.
We believe earnings during the period when the temporary differences become deductible will be sufficient to realize the related future income tax benefits. For those jurisdictions where the expiration date of tax carryforwards or the projected operating results indicate that realization is not more than likely, a valuation allowance is provided.
The following table presents the breakdown of our deferred taxes:
| (In millions) | December 28, 2024 | December 30, 2023 | ||||||
| Manufacturing group: | ||||||||
| Deferred tax assets, net of valuation allowance | $ | $ | ||||||
| Deferred tax liabilities | ( | ( | ||||||
| Finance group – Deferred tax liabilities | ( | ( | ||||||
| Net deferred tax asset | $ | $ | ||||||
Non-U.S. and U.S. state income taxes have not been provided for on basis differences in certain investments, primarily as a result of unremitted earnings in foreign subsidiaries that are indefinitely reinvested, totaling $1.8 billion at December 28, 2024 and $1.6 billion at December 30, 2023. Should these earnings be distributed in the future in the form of dividends or otherwise, we would be subject to withholding and local taxes to various non-U.S. jurisdictions and U.S. states. Determination of the deferred tax liability associated with indefinitely reinvested earnings is not practicable due to multiple factors, including the complexity of non-U.S. tax laws and tax treaty interpretations, exchange rate fluctuations, and the uncertainty of available credits or exemptions.
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Note 17. Commitments and Contingencies
We are subject to actual and threatened legal proceedings and other claims arising out of the conduct of our business, including proceedings and claims relating to commercial and financial transactions; government contracts; alleged lack of compliance with applicable laws and regulations; disputes with suppliers, production partners or other third parties; product liability; patent and trademark infringement; employment disputes; and environmental, health and safety matters. Some of these legal proceedings and claims seek damages, fines or penalties in substantial amounts or remediation of environmental contamination. As a government contractor, we are subject to audits, reviews and investigations to determine whether our operations are being conducted in accordance with applicable regulatory requirements. Under federal government procurement regulations, certain claims brought by the U.S. Government could result in our suspension or debarment from U.S. Government contracting for a period of time. On the basis of information presently available, we do not believe that existing proceedings and claims will have a material effect on our financial position or results of operations.
In the ordinary course of business, we enter into standby letter of credit agreements and surety bonds with financial institutions to meet various performance and other obligations. These outstanding letter of credit arrangements and surety bonds aggregated to approximately $336 million and $338 million at December 28, 2024 and December 30, 2023, respectively.
Environmental Remediation
As with other industrial enterprises engaged in similar businesses, we are involved in a number of remedial actions under various federal and state laws and regulations relating to the environment that impose liability on companies to clean up, or contribute to the cost of cleaning up, sites on which hazardous wastes or materials were disposed or released. Our accrued environmental liabilities relate to installation of remediation systems, disposal costs, U.S. Environmental Protection Agency oversight costs, legal fees, and operating and maintenance costs for both currently and formerly owned or operated facilities. Circumstances that can affect the reliability and precision of the accruals include the identification of additional sites, environmental regulations, level of cleanup required, technologies available, number and financial condition of other contributors to remediation and the time period over which remediation may occur. We believe that any changes to the accruals that may result from these factors and uncertainties will not have a material effect on our financial position or results of operations.
Based upon information currently available, we estimate that our potential environmental liabilities are within the range of $40 million to $145 million. At December 28, 2024, environmental reserves of $72 million have been established to address these specific estimated liabilities. We estimate that we will likely pay our accrued environmental remediation liabilities over the next ten years and have classified $16 million as current liabilities. In 2024, 2023 and 2022, to evaluate and remediate contaminated sites, we incurred expense, net of recoveries received, of $9 million, $8 million and $9 million, respectively.
Note 18. Supplemental Cash Flow Information
Our cash payments and receipts are as follows:
| (In millions) | 2024 | 2023 | 2022 | ||||||||
| Interest paid: | |||||||||||
| Manufacturing group | $ | $ | $ | ||||||||
| Finance group | |||||||||||
| Net income taxes paid: | |||||||||||
| Manufacturing group | |||||||||||
| Finance group | |||||||||||
66
Report of Independent Registered Public Accounting Firm
To the Shareholders and the Board of Directors of Textron Inc.
Opinion on the Financial Statements
We have audited the accompanying Consolidated Balance Sheets of Textron Inc. (the Company) as of December 28, 2024 and December 30, 2023, the related Consolidated Statements of Operations, Comprehensive Income, Shareholders’ Equity and Cash Flows for each of the three years in the period ended December 28, 2024, and the related notes and the financial statement schedule listed in the Index at Item 8 (collectively referred to as the “consolidated financial statements”). In our opinion, the consolidated financial statements present fairly, in all material respects, the financial position of the Company at December 28, 2024 and December 30, 2023 and the results of its operations and its cash flows for each of the three years in the period ended December 28, 2024, in conformity with U.S. generally accepted accounting principles.
We also have audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States) (PCAOB), the Company’s internal control over financial reporting as of December 28, 2024, based on criteria established in Internal Control – Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission (2013 Framework) and our report dated February 6, 2025 expressed an unqualified opinion thereon.
Basis for Opinion
These financial statements are the responsibility of the Company’s management. Our responsibility is to express an opinion on the Company’s financial statements based on our audits. We are a public accounting firm registered with the PCAOB and are required to be independent with respect to the Company in accordance with the U.S. federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB.
We conducted our audits in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement, whether due to error or fraud. Our audits included performing procedures to assess the risks of material misstatement of the financial statements, whether due to error or fraud, and performing procedures that respond to those risks. Such procedures included examining, on a test basis, evidence regarding the amounts and disclosures in the financial statements. Our audits also included evaluating the accounting principles used and significant estimates made by management, as well as evaluating the overall presentation of the financial statements. We believe that our audits provide a reasonable basis for our opinion.
Critical Audit Matters
The critical audit matters communicated below are matters arising from the current period audit of the financial statements that were communicated or required to be communicated to the audit committee and that: (1) relate to accounts or disclosures that are material to the financial statements and (2) involved our especially challenging, subjective or complex judgments. The communication of critical audit matters does not alter in any way our opinion on the consolidated financial statements, taken as a whole, and we are not, by communicating the critical audit matters below, providing separate opinions on the critical audit matters or on the accounts or disclosures to which they relate.
| Revenue Recognition - Estimates at Completion for Select Long Term Contracts | ||||||||
| Description of the Matter | As described in Note 1 to the consolidated financial statements, revenues under long-term contracts with the U.S. Government are generally recognized over time using the cost-to-cost method of accounting. Under this method, the extent of progress towards completion is measured based on the ratio of costs incurred to date to the estimated costs at completion, and revenue is recorded proportionally as costs are incurred. Contract costs, which are estimated utilizing current contract specifications and expected engineering requirements, typically are incurred over a period of several years, and the estimation of these costs at completion requires substantial judgment. The Company’s cost estimation process is based on professional knowledge and experience of engineers and program managers along with finance professionals. The Company updates its projections of costs quarterly or more frequently when circumstances significantly change. When adjustments are required, any changes from prior estimates are recognized using the cumulative catch-up method with the impact of the change from inception-to-date of the contract recorded in the current period and required disclosure is provided in the consolidated financial statements. Anticipated losses on contracts are recognized in full in the period in which losses become probable and estimable. | |||||||
67
| Auditing the Company’s estimated costs at completion for select long-term contracts was complex due to the judgment involved in evaluating management’s assumptions and key estimates over the duration of these long-term contracts. The estimated costs at completion for the select long-term contracts consider risks surrounding the Company’s ability to achieve the technical requirements and specifications of the contract, schedule, and other cost elements of the contract, and depend on whether the Company is able to successfully retire risks surrounding such aspects of the contract. | ||||||||
| How We Addressed the Matter in Our Audit | We obtained an understanding, evaluated the design and tested the operating effectiveness of the controls related to the Company’s revenue recognition process, including controls over management’s review of the estimated costs at completion for the select long-term contracts and related key assumptions and management’s review that the data underlying the estimated costs at completion was complete and accurate. | |||||||
| To test the accuracy of the Company’s estimated costs at completion for the select long-term contracts, our audit procedures included, among others, evaluating the key assumptions used by management to determine such estimate. This included evaluating the historical accuracy of management’s estimates by comparing planned costs to actual costs incurred to date. We also tested the completeness and accuracy of the underlying data back to source documents and contracts. | ||||||||
| Defined Benefit Pension Obligations | ||||||||
| Description of the Matter | As described in Note 14 to the consolidated financial statements, at December 28, 2024, the aggregate qualified defined benefit pension obligation was $6.8 billion and the fair value of pension plan assets was $8.8 billion, resulting in a net pension asset of $2.0 billion. As explained in Note 1 to the consolidated financial statements, the Company updates the estimates used to measure the defined benefit pension assets and obligations annually in the fourth quarter or more frequently upon the occurrence of certain events. | |||||||
| Auditing the defined benefit pension obligations was complex and required the involvement of specialists as a result of the judgmental nature of certain actuarial assumptions including the discount rate and expected return on plan assets used in the measurement process. These assumptions have a significant effect on the projected benefit obligation. | ||||||||
| How We Addressed the Matter in Our Audit | We obtained an understanding, evaluated the design and tested the operating effectiveness of the controls that address the risks of material misstatement relating to the measurement and valuation of the defined benefit pension obligation. For example, we tested controls over management’s review of the defined benefit pension obligation actuarial calculations, the significant actuarial assumptions, and the data inputs provided to the actuaries. | |||||||
| To test the defined benefit pension obligation, our audit procedures included, among others, evaluating the methodology used, the significant actuarial assumptions discussed above, and the underlying data used by management and its actuaries. We compared the actuarial assumptions used by management to historical trends and evaluated the change in the defined benefit pension obligation from the prior year due to the change in service cost, interest cost, benefit payments, actuarial gains and losses, contributions, and plan amendments, as applicable. In addition, we involved an actuarial specialist to assist in evaluating management’s methodology for determining the discount rate that reflects the maturity and duration of the benefit payments and is used to measure the defined benefit pension obligation. As part of this assessment, we compared the projected cash flows to prior year and compared the current year benefits paid to the prior year projected cash flows. We also tested the completeness and accuracy of the underlying data, including the participant data provided to the Company’s actuaries. Lastly, to evaluate the expected return on plan assets, we assessed whether management’s assumption is consistent with a range of returns for a portfolio of comparative investments. | ||||||||
/s/ Ernst & Young LLP
We have served as the Company’s auditor since 1957.
February 6, 2025
68
Schedule II — Valuation and Qualifying Accounts
| (In millions) | 2024 | 2023 | 2022 | ||||||||
| Allowance for credit losses on accounts receivable | |||||||||||
| Balance at beginning of year | $ | $ | $ | ||||||||
| Provision (reversal) for credit losses | ( | ||||||||||
| Deductions from reserves* | ( | ( | ( | ||||||||
| Balance at end of year | $ | $ | $ | ||||||||
| Allowance for credit losses on finance receivables | |||||||||||
| Balance at beginning of year | $ | $ | $ | ||||||||
| Reversal for credit losses | ( | ( | ( | ||||||||
| Charge-offs | ( | ||||||||||
| Recoveries | |||||||||||
| Balance at end of year | $ | $ | $ | ||||||||
| Inventory FIFO reserves | |||||||||||
| Balance at beginning of year | $ | $ | $ | ||||||||
| Charged to costs and expenses | |||||||||||
| Deductions from reserves* | ( | ( | ( | ||||||||
| Balance at end of year | $ | $ | $ | ||||||||
* Deductions primarily include amounts written off on uncollectible accounts (less recoveries), inventory disposals, changes to prior year estimates and currency translation adjustments.
Item 9. Changes In and Disagreements With Accountants on Accounting and Financial Disclosure
None.
Item 9A. Controls and Procedures
Disclosure Controls and Procedures
We performed an evaluation of the effectiveness of our disclosure controls and procedures as of December 28, 2024. The evaluation was performed with the participation of senior management of each business segment and key Corporate functions, under the supervision of our Chairman, President and Chief Executive Officer (CEO) and our Executive Vice President and Chief Financial Officer (CFO). Based on this evaluation, the CEO and CFO concluded that our disclosure controls and procedures were operating and effective as of December 28, 2024.
Changes in Internal Controls Over Financial Reporting
There were no changes in our internal control over financial reporting during the fourth quarter of the fiscal year covered by this report that materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.
Management’s Report on Internal Control Over Financial Reporting
Management is responsible for establishing and maintaining adequate internal control over financial reporting for Textron Inc. as such term is defined in Exchange Act Rules 13a-15(f). Our internal control structure is designed to provide reasonable assurance, at appropriate cost, that assets are safeguarded and that transactions are properly executed and recorded. The internal control structure includes, among other things, established policies and procedures, an internal audit function, the selection and training of qualified personnel as well as management oversight.
With the participation of our management, we performed an evaluation of the effectiveness of our internal control over financial reporting based on criteria established in Internal Control – Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission (2013 Framework). Based on our evaluation under the 2013 Framework, we have concluded that Textron Inc. maintained, in all material respects, effective internal control over financial reporting as of December 28, 2024.
The independent registered public accounting firm, Ernst & Young LLP (PCAOB ID: 42 ), has audited the Consolidated Financial Statements of Textron Inc. and has issued an attestation report on Textron’s internal controls over financial reporting as of December 28, 2024, as stated in its report, which is included herein.
69
Report of Independent Registered Public Accounting Firm
To the Shareholders and the Board of Directors of Textron Inc.
Opinion on Internal Control over Financial Reporting
We have audited Textron Inc.’s internal control over financial reporting as of December 28, 2024, based on criteria established in Internal Control— Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission (2013 Framework), (the COSO criteria). In our opinion, Textron, Inc. (the Company) maintained, in all material respects, effective internal control over financial reporting as of December 28, 2024, based on the COSO criteria.
We also have audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States) (PCAOB), the Consolidated Balance Sheets of the Company as of December 28, 2024 and December 30, 2023, and the related Consolidated Statements of Operations, Comprehensive Income, Shareholders' Equity and Cash Flows for each of the three years in the period ended December 28, 2024, and the related notes and the financial statement schedule listed in the Index at Item 8 of the Company and our report dated February 6, 2025 expressed an unqualified opinion thereon.
Basis for Opinion
The Company’s management is responsible for maintaining effective internal control over financial reporting and for its assessment of the effectiveness of internal control over financial reporting included in the accompanying Management’s Report on Internal Control Over Financial Reporting. Our responsibility is to express an opinion on the Company’s internal control over financial reporting based on our audit. We are a public accounting firm registered with the PCAOB and are required to be independent with respect to the Company in accordance with the U.S. federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB.
We conducted our audit in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether effective internal control over financial reporting was maintained in all material respects.
Our audit included obtaining an understanding of internal control over financial reporting, assessing the risk that a material weakness exists, testing and evaluating the design and operating effectiveness of internal control based on the assessed risk, and performing such other procedures as we considered necessary in the circumstances. We believe that our audit provides a reasonable basis for our opinion.
Definition and Limitations of Internal Control Over Financial Reporting
A company’s internal control over financial reporting is a process designed to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles. A company’s internal control over financial reporting includes those policies and procedures that (1) pertain to the maintenance of records that, in reasonable detail, accurately and fairly reflect the transactions and dispositions of the assets of the company; (2) provide reasonable assurance that transactions are recorded as necessary to permit preparation of financial statements in accordance with generally accepted accounting principles, and that receipts and expenditures of the company are being made only in accordance with authorizations of management and directors of the company; and (3) provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use, or disposition of the company’s assets that could have a material effect on the financial statements.
Because of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements. Also, projections of any evaluation of effectiveness to future periods are subject to the risk that controls may become inadequate because of changes in conditions, or that the degree of compliance with the policies or procedures may deteriorate.
/s/ Ernst & Young LLP
Boston, Massachusetts
February 6, 2025
70
Item 9B. Other Information
(a)As previously announced, Mr. Frank Connor will retire effective February 28, 2025 after having served as our CFO for fifteen years. During his tenure Mr. Connor has made significant contributions across Textron to drive financial and operational excellence. As part of his 2025 duties, Mr. Connor will oversee the completion of the Company’s post year-end financial reporting and related activities and will effect an orderly transition of the CFO role to Mr. Rosenberg and other succession planning within the finance organization. On February 5, 2025, the Organization and Compensation Committee approved Mr. Connor’s 2025 compensation to be set at $1,000,000, taking into account Mr. Connor’s expected duties through his retirement. Mr. Connor’s 2024 total target compensation was $6,300,000.”
(b)None of our directors or executive officers adopted or terminated a “Rule 10b5-1 trading arrangement” or adopted or terminated a “non-Rule 10b5-1 trading arrangement” (as such terms are defined in Item 408 of Regulation S-K) during the quarter ended December 28, 2024.
Item 9C. Disclosure Regarding Foreign Jurisdictions that Prevent Inspections
Not applicable.
PART III
Item 10. Directors, Executive Officers and Corporate Governance
The information appearing under “ELECTION OF DIRECTORS – Nominees for Director,” "SECURITY OWNERSHIP – Delinquent Section 16(a) Reports,” “CORPORATE GOVERNANCE – Board Committees – Audit Committee,” “– Corporate Governance Guidelines and Policies,” “– Code of Ethics,” and “– Insider Trading Policies and Procedures,” in the Proxy Statement for our 2025 Annual Meeting of Shareholders is incorporated by reference into this Annual Report on Form 10-K.
Information regarding our executive officers is contained in Part I of this Annual Report on Form 10-K.
Item 11. Executive Compensation
The information appearing under “CORPORATE GOVERNANCE – Compensation of Directors,” “COMPENSATION COMMITTEE REPORT,” “COMPENSATION DISCUSSION AND ANALYSIS” and “EXECUTIVE COMPENSATION” in the Proxy Statement for our 2025 Annual Meeting of Shareholders is incorporated by reference into this Annual Report on Form 10-K.
Item 12. Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters
The information appearing under “SECURITY OWNERSHIP” and “EXECUTIVE COMPENSATION – Equity Compensation Plan Information” in the Proxy Statement for our 2025 Annual Meeting of Shareholders is incorporated by reference into this Annual Report on Form 10-K.
Item 13. Certain Relationships and Related Transactions and Director Independence
The information appearing under “CORPORATE GOVERNANCE – Director Independence” and “EXECUTIVE COMPENSATION – Transactions with Related Persons” in the Proxy Statement for our 2025 Annual Meeting of Shareholders is incorporated by reference into this Annual Report on Form 10-K.
Item 14. Principal Accountant Fees and Services
The information appearing under “RATIFICATION OF APPOINTMENT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM – Fees to Independent Auditors” in the Proxy Statement for our 2025 Annual Meeting of Shareholders is incorporated by reference into this Annual Report on Form 10-K.
71
PART IV
Item 15. Exhibits and Financial Statement Schedules
| Exhibits | ||||||||
| 3.1A | ||||||||
| 3.1B | ||||||||
| 3.2 | ||||||||
| 4.1A | ||||||||
| 4.1B | ||||||||
| 4.2 | ||||||||
| NOTE: | Instruments defining the rights of holders of certain issues of long-term debt of Textron have not been filed as exhibits because the authorized principal amount of any one of such issues does not exceed 10% of the total assets of Textron and its subsidiaries on a consolidated basis. Textron agrees to furnish a copy of each such instrument to the Commission upon request. | |||||||
| NOTE: | Exhibits 10.1 through 10.16 below are management contracts or compensatory plans, contracts or agreements. | |||||||
| 10.1A | ||||||||
| 10.1B | ||||||||
| 10.2A | ||||||||
| 10.2B | ||||||||
| 10.3A | ||||||||
| 10.3B | ||||||||
| 10.3C | ||||||||
| 10.3D | ||||||||
72
| 10.3E | ||||||||
| 10.3F | ||||||||
| 10.4 | ||||||||
| 10.5A | ||||||||
| 10.5B | ||||||||
| 10.5C | ||||||||
| 10.6 | ||||||||
| 10.7A | ||||||||
| 10.7B | ||||||||
| 10.7C | ||||||||
| 10.7D | ||||||||
| 10.7E | ||||||||
| 10.8A | ||||||||
| 10.8B | ||||||||
73
| 10.8C | ||||||||
| 10.9 | ||||||||
| 10.10 | ||||||||
| 10.11A | ||||||||
| 10.11B | ||||||||
| 10.11C | ||||||||
| 10.11D | ||||||||
| 10.12A | ||||||||
| 10.12B | ||||||||
| 10.13 | ||||||||
| 10.14A | ||||||||
| 10.14B | ||||||||
| 10.15 | ||||||||
| 10.16 | ||||||||
74
| 10.17 | ||||||||
| 19 | ||||||||
| 21 | ||||||||
| 23 | ||||||||
| 24 | ||||||||
| 31.1 | ||||||||
| 31.2 | ||||||||
| 32.1 | ||||||||
| 32.2 | ||||||||
| 97 | ||||||||
| 101 | The following materials from Textron Inc.’s Annual Report on Form 10-K for the year ended December 28, 2024, formatted in Inline XBRL (eXtensible Business Reporting Language): (i) the Consolidated Statements of Operations, (ii) the Consolidated Statements of Comprehensive Income (iii) the Consolidated Balance Sheets, (iv) the Consolidated Statements of Shareholders’ Equity, (v) the Consolidated Statements of Cash Flows, (vi) the Notes to the Consolidated Financial Statements, and (vii) Schedule II – Valuation and Qualifying Accounts. | |||||||
| 104 | Cover Page Interactive Data File (formatted as Inline XBRL and contained in Exhibit 101). | |||||||
Item 16. Form 10-K Summary
Not applicable.
75
Signatures
Pursuant to the requirement of Section 13 or 15(d) of the Securities Exchange Act of 1934, the registrant has duly caused this Annual Report on Form 10-K to be signed on its behalf by the undersigned, thereunto duly authorized on this 6th day of February 2025.
| TEXTRON INC. | ||||||||
| Registrant | ||||||||
| By: | /s/ Frank T. Connor | |||||||
| Frank T. Connor Executive Vice President and Chief Financial Officer | ||||||||
76
Pursuant to the requirements of the Securities Exchange Act of 1934, this Annual Report on Form 10-K has been signed below on this 6th day of February 2025 by the following persons on behalf of the registrant and in the capacities indicated:
| Name | Title | ||||||||||
| /s/ Scott C. Donnelly | |||||||||||
| Scott C. Donnelly | Chairman, President and Chief Executive Officer (principal executive officer) | ||||||||||
| * | |||||||||||
| Richard F. Ambrose | Director | ||||||||||
| * | |||||||||||
| Kathleen M. Bader | Director | ||||||||||
| * | |||||||||||
| R. Kerry Clark | Director | ||||||||||
| * | |||||||||||
| Michael X. Garrett | Director | ||||||||||
| * | |||||||||||
| Deborah Lee James | Director | ||||||||||
| * | |||||||||||
| Thomas A. Kennedy | Director | ||||||||||
| * | |||||||||||
| Lionel L. Nowell III | Director | ||||||||||
| * | |||||||||||
| James L. Ziemer | Director | ||||||||||
| * | |||||||||||
| Maria T. Zuber | Director | ||||||||||
| /s/ Frank T. Connor | |||||||||||
| Frank T. Connor | Executive Vice President and Chief Financial Officer (principal financial officer) | ||||||||||
| /s/ Mark S. Bamford | |||||||||||
| Mark S. Bamford | Vice President and Corporate Controller (principal accounting officer) | ||||||||||
| *By: | /s/ Jayne M. Donegan | ||||||||||
| Jayne M. Donegan, Attorney-in-fact | |||||||||||
77
EXHIBIT 4.2
DESCRIPTION OF COMMON STOCK
The following description of our common stock summarizes material terms and provisions that apply to our common stock. It is subject to and qualified in its entirety by reference to our Restated Certificate of Incorporation , as amended (our “certificate of incorporation”), and our Amended and Restated By-Laws (our “by-laws”), as currently in effect under Delaware law, which are filed as exhibits to this Annual Report on Form 10-K. Throughout this exhibit, references to “Textron”, the “company”, “we,” “our” and “us” mean Textron Inc.
General
Textron has authority to issue up to 500,000,000 shares of common stock, $.125 par value.
Common Stock
Voting rights. Each holder of our common stock is entitled to one vote for each share held on all matters to be voted upon by stockholders.
Dividends. The holders of our common stock, after any preferences of holders of our preferred stock, if any is outstanding, are entitled to receive dividends as determined by our board of directors.
Liquidation and dissolution. If we are liquidated or dissolved, the holders of our common stock will be entitled to share in our assets available for distribution to stockholders in proportion to the amount of our common stock they own. The amount available for distribution to common stockholders is calculated after payment of all liabilities and after holders of our preferred stock, if any is outstanding, receive their preferential share of our assets.
Other terms. Holders of our common stock have no right to:
convert the stock into any other security;
have the stock redeemed; or
purchase additional stock or to maintain their proportionate ownership interest.
Our common stock does not have cumulative voting rights.
Directors’ liability. Our certificate of incorporation provides that no member of our board of directors will be personally liable to Textron or its stockholders for monetary damages for breaches of their fiduciary duties as a director, except for liability:
for any breach of the director’s duty of loyalty to Textron or its stockholders;
for acts or omissions by the director not in good faith or that involve intentional misconduct or a knowing violation of the law;
for declaring dividends or authorizing the purchase or redemption of shares in violation of Delaware law; or
for transactions where the director derived an improper personal benefit.
Our by-laws also require us to indemnify directors and officers to the fullest extent permitted by Delaware law.
1
EXHIBIT 4.2
Transfer agent and registrar. Equiniti Trust Company (successor to American Stock Transfer & Trust Company) is transfer agent and registrar for our common stock.
Listing. Our common stock is listed on the New York Stock Exchange under the symbol “TXT”.
Exclusive Forum. Our by-laws provide that, unless we consent in writing to the selection of an alternative forum, the Delaware Court of Chancery will be the sole and exclusive forum for (i) any derivative action or proceeding brought on behalf of the company, (ii) any action asserting a claim of breach of a fiduciary duty owed by any director or officer or other employee of the company to the company or its stockholders, (iii) any action asserting a claim against the company or any director or officer or other employee of the company arising pursuant to any provision of the Delaware General Corporation Law or our certificate of incorporation or by-laws, (iv) any action asserting a claim governed by the internal affairs doctrine, or (v) any other action asserting an internal corporate claim, and the federal district courts of the United States of America will be the sole and exclusive forum for any complaint asserting a cause of action arising under the Securities Act of 1933, as amended, to the fullest extent permitted by law.
The following provisions in our certificate of incorporation, by-laws and Delaware law may have anti-takeover effects:
Advance notice requirements of stockholder nomination of directors and proposals of other business. Our by-laws provide that a stockholder must notify us in writing of any stockholder nomination of a director or proposal of other business at an annual meeting of our stockholders at least 90 but not more than 150 days prior to the anniversary date of the immediately preceding annual meeting. However, if the annual meeting is called for a date that is more than 30 days before or more than 60 days after the anniversary date, then the notice must be received no later than the close of business on the 90th day before the date of the annual meeting or 10 days after public disclosure of the meeting is first made, whichever occurs later, or if a stockholder wishes to make a nomination or proposal of other business at a special meeting held instead of an annual meeting, the notice must be received by us not later than the close of business on the 90th day before the date of the special meeting or the 10th day following the day on which public disclosure of the date of the special meeting was first made, whichever occurs later. The notice must include the information required by our by-laws and any such nomination or item of business must in addition be made or proposed in accordance with the procedures set forth in the by-laws.
Proxy access for director nominations. Our by-laws allow a stockholder or group of up to 20 stockholders owning in the aggregate 3% or more of our outstanding common stock continuously for at least three years to nominate and include in our proxy materials director nominees constituting up to 20% of the number of directors in office or two nominees, whichever is greater, provided the stockholder and nominees satisfy the requirements in our by-laws. If a stockholder or group of stockholders wishes to nominate one or more director candidates to be included in our proxy statement, we must receive proper written notice of the nomination not less than 120 or more than 150 days before the anniversary date that the definitive proxy statement was first released to stockholders in connection with the immediately preceding annual meeting, and the nomination must otherwise comply with our by-laws.
No action by written consent. Our certificate of incorporation provides that our stockholders may act only at duly called meetings of stockholders and by unanimous written consent.
Special meetings of stockholders. Pursuant to our by-laws, a special meeting of stockholders may be called by our chief executive officer or board of directors. In addition, our by-laws provide that a special meeting of stockholders, subject to certain limitations, will be called by our board of directors upon the receipt by the secretary of the company of a written request for the board of directors to call a special meeting by one or more stockholders of record that have owned continuously for a period of at least one year shares representing in the aggregate at least 25% of the outstanding shares of common stock of the company, provided that such request complies with the requirements and includes the information described in our by-laws.
10% stockholder provision. Under our certificate of incorporation, the holders of at least two-thirds of the outstanding shares of our voting stock must approve any transaction involving a merger or combination, a
2
EXHIBIT 4.2
disposition of assets or any other specified “business combination” with a 10% stockholder and Textron or any of our subsidiaries. The vote of two-thirds of the outstanding shares of our voting stock is required unless:
a majority of disinterested directors who were directors before the 10% stockholder became a 10% stockholder approve the transaction; or
the form and value of the consideration to be received by our stockholders is fair in relation to the price paid by the 10% stockholder in connection with his or her prior acquisition of our stock.
Under Delaware law, a vote of the holders of at least two-thirds of the outstanding shares of our voting stock is required to amend or repeal this provision of our certificate of incorporation.
Delaware business combination statute. We are subject to Section 203 of the Delaware General Corporation Law. Section 203 restricts some types of transactions and business combinations between a corporation and a 15% stockholder. A 15% stockholder is generally considered by Section 203 to be a person owning 15% or more of the corporation’s outstanding voting stock. A 15% stockholder is referred to as an “interested stockholder.” Section 203 restricts these transactions for a period of three years from the date the stockholder acquired 15% or more of our outstanding voting stock. With some exceptions, unless the transaction is approved by our board of directors and the holders of at least two-thirds of our outstanding voting stock, Section 203 prohibits significant business transactions such as:
a merger with, disposition of significant assets to or receipt of disproportionate financial benefits by the 15% stockholder; or
any other transaction that would increase the 15% stockholder’s proportionate ownership of any class or series of our capital stock.
The shares held by the 15% stockholder are not counted as outstanding when calculating the two-thirds of the outstanding voting stock needed for approval.
The prohibition against these transactions does not apply if:
prior to the time that any stockholder became a 15% stockholder, our board of directors approved either the business combination or the transaction in which such stockholder acquired 15% or more of our outstanding voting stock; or
the 15% stockholder owns at least 85% of the outstanding voting stock of the corporation as a result of the transaction in which such stockholder acquired 15% or more of our outstanding voting stock.
Shares held by persons who are both directors and officers or by some types of employee stock plans are not counted as outstanding when making this calculation.
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EXHIBIT 10.1A
TEXTRON INC.
2024 LONG-TERM INCENTIVE PLAN
2024 LONG-TERM INCENTIVE PLAN
1. Purposes of the Plan
The purposes of the Plan are to (a) promote the long-term success of the Company and its Subsidiaries and to increase shareholder value by providing Eligible Individuals with incentives to contribute to the long-term growth and profitability of the Company and (b) assist the Company in attracting, retaining and motivating highly qualified individuals who are in a position to make significant contributions to the Company and its Subsidiaries.
After the Effective Date, no further Awards will be granted under the Prior Plan.
2. Definitions and Rules of Construction
(a) Definitions. For purposes of the Plan, the following capitalized words shall have the meanings set forth below:
“Affiliate” means any Parent or Subsidiary and any person that directly or indirectly through one or more intermediaries, controls, is controlled by, or is under common control with, the Company.
“Annual Meeting” means the Company’s Annual Meeting of Shareholders.
“Award” means an Option, Restricted Stock, Restricted Stock Unit, Stock Appreciation Right, Performance Stock, Performance Share Unit or Other Award granted by the Committee pursuant to the terms of the Plan.
“Award Document” means an agreement, certificate or other type or form of document or documentation approved by the Committee that sets forth the terms and conditions of an Award. An Award Document may be in paper, electronic or other media, may be limited to a notation on the books and records of the Company and, unless the Committee requires otherwise, need not be signed by a representative of the Company or a Participant.
“Beneficial Owner” and “Beneficially Owned” have the meaning set forth in Rule 13d-3 under the Exchange Act.
“Board” means the Board of Directors of the Company, as constituted from time to time.
“Cause” shall have the meaning set forth in the applicable Award Document.
“Change of Control” means:
(i) Any “person” or “group” (within the meaning of Sections 13(d) and 14(d)(2) of the Exchange Act other than the Company, any “person” who on the Effective Date was a director or officer of the Company, any trustee or other fiduciary holding Common Stock under an employee benefit plan of the Company or a Subsidiary, or any corporation which is owned, directly or indirectly, by the shareholders of the Company in substantially the same proportions as their ownership of Common Stock, is or becomes the “beneficial owner” (as defined in Rule 13d-3 under the Act) of more than thirty percent (30%) of the then outstanding voting stock of the Company, or
(ii) during any period of two consecutive years, individuals who at the beginning of such period constitute the Board and any new director whose election by the Board or nomination
for election by the Company’s shareholders was approved by a vote of at least two-thirds of the directors then still in office who either were directors at the beginning of the two-year period (or whose election or nomination was previously so approved) cease for any reason to constitute a majority of the Board, or
(iii) the consummation of a merger or consolidation of the Company with any other corporation, other than a merger or consolidation which results in the voting securities of the Company outstanding immediately prior thereto continuing to represent (either by remaining outstanding or by being converted into voting securities of the surviving entity) more than fifty percent (50%) of the combined voting power of the voting securities of the Company or such surviving entity outstanding immediately after such merger or consolidation, or
(iv) the consummation of the complete liquidation of the Company or the sale or disposition by the Company of all or substantially all of the Company’s assets.
For the avoidance of doubt, no change in ownership or control of a Subsidiary or business, whether through a sale of stock or assets or merger, consolidation, spin-off or otherwise, shall be a Change of Control hereunder unless the transaction triggers any of (i) through (iv) above with respect to the Company.
If an Award is subject to Section 409A of the Code, the payment or settlement of the Award shall accelerate upon a Change of Control only if the event also constitutes a “change in ownership,” “change in effective control,” or “change in the ownership of a substantial portion of the Company’s assets” as defined under Section 409A of the Code. Any adjustment to the Award that does not affect the time or form of payment of an Award that is subject to Section 409A or an Award’s exemption from the requirements of Section 409A (including accelerated vesting or adjustment of the amount of the Award) may occur upon a Change of Control as defined in the Plan, regardless of whether the event also constitutes a change in control under Section 409A.
“Code” means the Internal Revenue Code of 1986, as amended.
“Committee” means the Organization and Compensation Committee of the Board, except that, with respect to grants to Non-Employee Directors, “Committee” means the Nominating and Corporate Governance Committee of the Board, and, in each case, any successor committee thereto or any other committee appointed from time to time by the Board to administer the Plan, which committee shall meet the requirements of Section 16(b) of the Exchange Act and the applicable rules of the NYSE; provided, however, that, if any Committee member is found not to have met the qualification requirements of Section 16(b) of the Exchange Act, any actions taken or Awards granted by the Committee shall not be invalidated by such failure to so qualify.
“Common Stock” means the common stock of the Company, par value $0.125 per share, or such other class of share or other securities as may be applicable under Section 14 of the Plan.
“Company” means Textron Inc., a Delaware corporation, or any successor to all or substantially all of the Company’s business that adopts the Plan.
“Effective Date” means the date on which the Plan is approved by the shareholders of the Company.
“Eligible Individuals” means the individuals described in Section 4(a) of the Plan who are eligible for Awards under the Plan.
“Exchange Act” means the Securities Exchange Act of 1934.
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“Fair Market Value” means, with respect to a share of Common Stock, the closing selling price of a share of Common Stock on the relevant date of determination as reported on the composite tape for securities listed on the NYSE, or such national securities exchange as may be designated by the Committee. If there were no sales on the relevant date, the fair market value shall equal the closing share price on the most recent day preceding the relevant date during which a sale occurred.
“Incentive Stock Option” means an Option that is intended to comply with the requirements of Section 422 of the Code.
“Non-Employee Director” means any member of the Board who is not an officer or employee of the Company or any Subsidiary.
“Nonqualified Stock Option” means an Option that is not an Incentive Stock Option.
“NYSE” means the New York Stock Exchange or any successor thereto.
“Option” means an Incentive Stock Option or Nonqualified Stock Option granted pursuant to Section 7 of the Plan.
“Other Award” means any form of Award other than an Option, Restricted Stock, Restricted Stock Unit, Performance Stock, Performance Share Unit, or Stock Appreciation Right, granted pursuant to Section 12 of the Plan.
“Parent” means a corporation which owns or beneficially owns a majority of the outstanding voting stock or voting power of the Company. Notwithstanding the above, with respect to an Incentive Stock Option, Parent shall have the same meaning as “parent corporation” set forth in Section 424(e) of the Code.
“Participant” means an Eligible Individual who has been granted an Award under the Plan.
“Performance Period” means the period established by the Committee and set forth in the applicable Award Document over which Performance Targets are measured.
“Performance Stock” means an Award of Shares, the grant, issuance, retention, vesting and/or settlement of which is based in whole or in part on achievement of Performance Targets, granted pursuant to Section 10(b) of the Plan.
“Performance Target” means the performance objectives (which may be objective or subjective) established by the Committee in its sole discretion for an Award with respect to a particular Performance Period. A Performance Target may be based on individual performance, performance of the Company (as a whole or with respect to one or more business segments, business units, divisions, departments, regions, functions or other organization units within the Company or its Subsidiaries), and/or other performance criteria established by the Committee. Performance Targets and underlying performance criteria may be stated in absolute or relative terms, and may be established or adjusted to include or exclude any components of any performance measure, including, but not limited to, special charges such as restructuring or impairment charges, debt refinancing costs, extraordinary or noncash items, unusual, nonrecurring, infrequently occurring or one-time events affecting the Company or its financial statements, the effects of acquisitions or divestitures or other items deemed not reflective of the Company’s core performance, or changes in law or accounting principles.
“Performance Share Unit” means an Award that grants a right to receive Shares or cash in the future based on achievement of Performance Targets, granted pursuant to Section 10(c) of the Plan.
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“Plan” means this Textron Inc. 2024 Long-Term Incentive Plan, as set forth herein and amended or restated from time to time.
“Plan Limit” means the maximum aggregate number of Shares that may be issued for all purposes under the Plan as set forth in Section 5(a) of the Plan.
“Prior Plan” means the Textron Inc. 2015 Long-Term Incentive Plan, as amended from time to time.
“Restricted Stock” means one or more Shares granted pursuant to Section 8(b) of the Plan.
“Restricted Stock Unit” means a right to receive one or more Shares (or cash, if applicable) in the future granted pursuant to Section 8(c) of the Plan.
“Shares” means shares of Common Stock, as may be adjusted pursuant to Section 14(b).
“Stock Appreciation Right” means a right to receive all or some portion of the appreciation on Shares granted pursuant to Section 9 of the Plan.
“Subsidiary” means (i) a corporation or other entity with respect to which the Company, directly or indirectly, has the power, whether through the ownership of voting securities, by contract or otherwise, to elect at least a majority of the members of such corporation’s board of directors or analogous governing body, or (ii) any other corporation or other entity in which the Company, directly or indirectly, has an equity or similar interest greater than 50% and which the Committee designates as a Subsidiary for purposes of the Plan. For purposes of determining eligibility for the grant of Incentive Stock Options under the Plan, the term “Subsidiary” shall be defined in the manner required by Section 424(f) of the Code.
“Substitute Award” means any Award granted upon assumption of, or in substitution or exchange for, outstanding employee equity awards previously granted by a company or other entity acquired by the Company or with which the Company combines pursuant to the terms of an equity compensation plan that was approved by the shareholders of such company or other entity.
“Target Number” means, if applicable, the target number of Shares or cash value established by the Committee and set forth in the applicable Award Document.
(b) Rules of Construction. Whenever used in the Plan, (i) the masculine pronoun shall be deemed to include the feminine pronoun; (ii) the singular form of a word shall be deemed to include the plural form, unless the context requires otherwise; (iii) the word “include” shall mean “including but not limited to”; (iv) references to a statute or regulation or statutory or regulatory provision shall include the provision (or a successor provision of similar import) as currently in effect, as amended, or as reenacted, and to any regulations and other formal guidance of general applicability issued thereunder; (v) references to a law shall include any statute, regulation, rule, court case, or other requirement established by an exchange or an agency or other governmental authority, and (vi) applicable law shall include any tax law that imposes requirements in order to avoid adverse tax consequences. Unless the text indicates otherwise, references to sections are to sections of the Plan.
3. Administration
(a) Committee. The Plan shall be administered by the Committee, which shall have full power and authority, subject to the express provisions hereof, to:
(i) select the Participants from the Eligible Individuals who are employees;
(ii) grant Awards in accordance with the Plan;
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(iii) determine the number of Shares subject to each Award or the cash amount payable in connection with an Award;
(iv) determine the terms and conditions of each Award, including those related to term, permissible methods of exercise, vesting, cancellation, payment, settlement, exercisability, Performance Periods, Performance Targets, and the effect, if any, of a Participant’s termination of employment with the Company or any of its Subsidiaries or, subject to Section 6(d), a Change of Control of the Company;
(v) subject to Sections 6 (Awards in General), 16 (restrictions on amendment and termination) and 17(e) (Section 409A of the Code), amend the terms and conditions of an Award after the granting thereof;
(vi) specify and approve the provisions of the Award Documents delivered to Participants in connection with their Awards;
(vii) construe and interpret any Award Document delivered under the Plan;
(viii) make factual determinations in connection with the administration or interpretation of the Plan;
(ix) adopt, prescribe, amend, waive and rescind administrative regulations, rules and procedures relating to the Plan;
(x) employ such legal counsel, independent auditors and consultants as it deems desirable for the administration of the Plan and to rely upon any advice, opinion or computation received therefrom;
(xi) vary the terms of Awards to Participants in non-US jurisdictions to take account of local tax and securities law and other regulatory requirements or to procure favorable tax treatment for Participants;
(xii) correct any defects, supply any omission or reconcile any ambiguity or inconsistency in any Award Document or the Plan; and
(xiii) make all other determinations and take any other action desirable or necessary to interpret, construe, administer or implement properly the provisions of the Plan or any Award Document. so as to avoid unanticipated consequences or address unanticipated events (including any temporary closure of the stock exchange, disruption of communications or natural catastrophe) deemed by the Committee to be inconsistent with the purposes of the Plan or any Award Document, provided that no such action shall be taken absent stockholder approval to the extent required under Section 17.
(b) Plan Construction and Interpretation. The Committee shall have full power and authority, subject to the express provisions hereof, to construe and interpret the Plan.
(c) Determinations of Committee Final and Binding. All determinations by the Committee in carrying out and administering the Plan and in construing and interpreting the Plan shall be made in the Committee’s sole discretion and shall be final, binding and conclusive for all purposes and upon all persons interested herein.
(d) Delegation of Authority. To the extent not prohibited by applicable laws, rules and regulations, the Committee may, from time to time, delegate some or all of its authority under the Plan to a subcommittee or subcommittees thereof, or to one or more officers or employees of the Company, as it deems necessary, appropriate or advisable under such conditions or limitations as it may set at the
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time of such delegation or thereafter; provided, however, that the Committee may not delegate its authority (i) with respect to Awards granted to or held by Non-Employee Directors or employees who (at the time of any action) are subject to the reporting rules under Section 16(a) of the Exchange Act or (ii) to a person or body to make Awards to themselves or (iii) pursuant to Section 17 of the Plan. For purposes of the Plan, reference to the Committee shall be deemed to refer to any subcommittee, subcommittees, officer, officers, or employee or employees to whom the Committee delegates authority as permitted by this Section 3(d).
(e) Liability of Committee. Subject to applicable laws, rules and regulations: (i) no member of the Board or Committee (or its delegates) shall be liable for any good faith action or determination made in connection with the operation, administration or interpretation of the Plan and (ii) the members of the Board or the Committee (and its delegates) shall be entitled to indemnification and reimbursement in the manner provided in the Company’s Restated Certificate of Incorporation as it may be amended from time to time. In the performance of its responsibilities with respect to the Plan, the Committee shall be entitled to rely upon information and/or advice furnished by the Company’s officers or employees, the Company’s accountants, the Company’s counsel and any other party the Committee deems necessary, and no member of the Committee shall be liable for any action taken or not taken in reliance upon any such information and/or advice.
(f) Action by the Board. Anything in the Plan to the contrary notwithstanding, subject to applicable laws, rules and regulations, any authority or responsibility that, under the terms of the Plan, may be exercised by the Committee may alternatively be exercised by the Board.
4. Eligibility
(a) Eligible Individuals. Awards may be granted to employees and Non-Employee Directors of the Company or any of its Subsidiaries; provided, however, that only employees of the Company or a Parent or Subsidiary may be granted Incentive Stock Options. The Committee shall have the authority to select the Eligible Individuals to whom Awards may be granted and to determine the type, number and terms of Awards to be granted to each such Participant. Under the Plan, references to “employment” or “employed” include service of Participants who are Non-Employee Directors, except for purposes of determining eligibility to be granted Incentive Stock Options.
(b) Grants to Participants. No obligation to grant any Eligible Individual an Award or to designate an Eligible Individual as a Participant shall arise solely by reason of such Eligible Individual having received a prior Award or having been previously designated as a Participant. A Participant may be granted more than one Award, and an Eligible Individual may be designated as a Participant for overlapping periods of time.
5. Shares Subject to the Plan
(a) Plan Limit. Subject to adjustment in accordance with Section 14 of the Plan, the maximum aggregate number of Shares that may be issued for all purposes under the Plan shall be 10,000,000, plus any Shares subject to awards granted under the Prior Plan that after the Effective Date cease to be subject to such awards due to cancellation, forfeiture, or expiration of such awards. Notwithstanding anything to the contrary herein, the maximum number of Shares that may be issued for all purposes under the Plan shall be reduced by one share for every share subject to an award granted under the Prior Plan after March 2, 2024 and prior to the Effective Date. Shares to be issued under the Plan may be authorized and unissued shares, issued shares that have been reacquired by the Company (in the open-market or in private transactions) and that are being held in treasury, or a combination thereof. No more than 10,000,000 Shares may be issued pursuant to Incentive Stock Options.
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(b) Rules Applicable to Determining Shares Available for Issuance. The number of Shares remaining available for issuance will be reduced by the number of Shares subject to outstanding Awards that are both denominated and intended to be settled in Shares and, for all other awards, by the number of Shares, if any, actually delivered upon settlement or payment of the Award. For purposes of determining the number of Shares that remain available for issuance under the Plan, the following Shares will not be added back to the Plan Limit: (i) the number of Shares that are tendered by a Participant or withheld by the Company to pay the exercise price of an Option or Stock Appreciation Right or to satisfy the Participant’s tax withholding obligations in connection with the exercise or settlement of an Award, (ii) Shares that are purchased on the open market using the proceeds from exercise of an Option, and (iii) all of the Shares covered by a stock-settled Stock Appreciation Right (to the extent exercised). For purposes of determining the number of Shares that remain available for issuance under the Plan, the number of Shares corresponding to Awards that are both denominated and intended to be settled in Shares under the Plan that are forfeited or canceled or otherwise expire for any reason without having been exercised or settled, or that are settled through issuance of consideration other than Shares (including cash), shall be added back to the Plan Limit and again be available for the grant of Awards; provided, however, that this provision shall not be applicable with respect to (i) the cancellation of a Stock Appreciation Right granted in tandem with an Option upon the exercise of the Option or (ii) the cancellation of an Option granted in tandem with a Stock Appreciation Right upon the exercise of the Stock Appreciation Right.
(c) Special Limits. Anything to the contrary in Section 5(a) above notwithstanding, but subject to adjustment under Sections 5(b) and 13 of the Plan, the following special limits shall apply to Shares available for Awards under the Plan:
(i) the maximum number of Shares that may be issued pursuant to awards of Restricted Stock, Restricted Stock Units, Performance Stock, Performance Share Units and Other Awards that are payable in Shares granted under the Plan shall equal 3,127,000 Shares in the aggregate, plus any Shares subject to awards of Restricted Stock, Restricted Stock Units, Performance Stock, Performance Share Units and Other Awards that are payable in Shares granted under the Prior Plan that after the Effective Date cease to be subject to such awards on account of cancellation, forfeiture, or expiration of such awards.
(ii) the value of Awards (measured as of the date of grant based on the grant date fair value for financial reporting purposes) granted to a Non-Employee Director in any one calendar year shall not exceed $500,000; and
(iii) Except with respect to a maximum of five percent (5%) of the aggregate number of Shares authorized for issuance under the Plan, Awards of Options, Restricted Stock, Restricted Stock Units, Stock Appreciation Rights, Performance Stock, Performance Share Units, and any other stock-based Awards shall provide for a minimum vesting period of at least one year from the grant date of the Award; provided that (i) the Committee may permit, or an Award Document may provide for, acceleration of vesting as described in Section 6 or in the event of a Participant’s termination of employment due to death or disability; and (ii) the foregoing limit shall not apply to substitute awards.
(d) Any Shares underlying Substitute Awards shall not be counted against the number of Shares remaining for issuance and shall not be subject to Section 5(c).
6. Awards in General
(a) Types of Awards. Awards under the Plan may consist of Options, Restricted Stock, Restricted Stock Units, Stock Appreciation Rights, Performance Stock, Performance Share Units and Other Awards.
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Any Award described in Sections 7 through 11 of the Plan may be granted singly or in combination or tandem with any other Award, as the Committee may determine. Awards under the Plan may be made in combination with, in replacement of, or as alternatives to awards or rights under any other compensation or benefit plan of the Company, including the plan of any acquired entity.
(b) Terms Set Forth in Award Document. The terms and conditions of each Award shall be set forth in an Award Document in a form approved by the Committee for such Award, which Award Document shall contain terms and conditions consistent with the Plan. The terms of Awards may vary among Participants, and the Plan does not impose upon the Committee any requirement to make Awards subject to uniform terms. Accordingly, the terms of individual Award Documents may vary.
(c) Termination of Employment. The Committee shall specify at or after the time of grant of an Award the provisions governing the disposition of an Award in the event of a Participant’s termination of employment with the Company or any of its Subsidiaries (including in connection with a divestiture of a Subsidiary). Subject to applicable laws, rules and regulations, in connection with a Participant’s termination of employment, the Committee shall have the discretion to accelerate the vesting, exercisability or settlement of, eliminate the restrictions and conditions applicable to, alter the form of payment, or extend the post-termination exercise period of an outstanding Award. Such provisions may be specified in the applicable Award Document or determined at a subsequent time.
(d) Change of Control. (i) The Committee shall have full authority to determine the effect, if any, of a Change of Control on the vesting, exercisability, settlement, payment or lapse of restrictions applicable to an Award, which effect may be specified in the applicable Award Document or determined at a subsequent time. Subject to applicable laws, rules and regulations, the Board or the Committee shall, at any time prior to, coincident with, or after the effective time of a Change of Control, take such actions as it may consider appropriate, including: (A) providing for the acceleration of any vesting conditions relating to the exercise or settlement of an Award or that an Award shall terminate or expire unless exercised or settled in full on or before a date fixed by the Committee; (B) making such adjustments to the Awards then outstanding as the Committee deems appropriate to reflect such Change of Control; (C) causing the Awards then outstanding to be assumed, or new rights substituted therefor, by the surviving corporation in such Change of Control; or (D) permitting or requiring Participants to surrender outstanding Options and Stock Appreciation Rights in exchange for a cash payment equal to the difference, if any, between the highest price paid for a Share in the Change of Control transaction and the exercise price of the Award. If an Award is subject to Section 409A of the Code, the Committee shall have discretion to alter the terms of the Award only to the extent that the alteration would not cause the Award to fail to satisfy the requirements of Section 409A. In addition, except as otherwise specified in an Award Document (or a Participant’s written employment agreement with the Company or any Subsidiary) if a Participant’s employment with the Company and Subsidiaries is terminated involuntarily without Cause, within two years after a Change of Control:
(1) any and all Options and Stock Appreciation Rights outstanding as of the effective date of the Participant’s termination shall become immediately exercisable;
(2) any restrictions imposed on Restricted Stock and Restricted Stock Units outstanding as of the effective date of the Participant’s termination shall lapse;
(3) the Performance Targets with respect to all Performance Share Units, Performance Stock and other performance-based Awards granted pursuant to Sections 6(g) or 10 outstanding as of the effective date of the Participant’s termination shall be deemed to have been attained at the specified target level of performance;
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(4) all Awards denominated in Shares outstanding as of the effective date of the Participant’s termination shall be immediately vested; and
(5) any Award that became earned or vested as a result of the Participant’s termination or the Change of Control shall be paid in full within 30 days after the vesting date (unless the payment would constitute an impermissible acceleration under Section 409A of the Code, in which case the payment shall be made on the original distribution date).
To the extent provided under the applicable Award Document, resignation by a Participant for “good reason” (as defined in the Award Document) shall be treated as an involuntary termination of the Participant’s employment without Cause.
(ii) Notwithstanding any other provision of the Plan or any Award Document, the provisions of this Section 6(d) may not be terminated, amended, or modified upon or after a Change of Control in a manner that would adversely affect a Participant’s rights with respect to an outstanding Award without the prior written consent of the Participant. Subject to Section 17 and the requirements of Section 409A of the Code, the Board, upon recommendation of the Committee, may terminate, amend or modify this Section 6(d) at any time and from time to time prior to the approval by the shareholders of the Company of a transaction which would result in a Change of Control (or, if earlier, the occurrence of a Change of Control).
(e) Dividends and Dividend Equivalents. Participants holding Awards may, if the Committee so determines, be credited with dividends or dividend equivalents in respect of the Shares underlying Awards, in a manner determined by the Committee in its sole discretion. Such dividends or dividend equivalents may be subject to such restrictions as the Committee deems appropriate and the Committee, in its sole discretion, may determine the form of payment of dividends or dividend equivalents, including by cash or issuance of Shares, Restricted Stock, Restricted Stock Units or other Awards. Notwithstanding the foregoing, (i) in no event will dividends or dividend equivalents be credited or paid in respect of Options or SARs, (ii) in no event will dividends or dividend equivalents be paid in respect of any Award that is not yet vested and (iii) dividends or dividend equivalents credited in respect of an Award that is not yet vested shall be subject to the same restrictions and risk of forfeiture as the underlying Award, and shall be paid or settled at the same time as Shares on which they were credited are paid or settled under the Award.
(f) Rights of a Shareholder. A Participant shall have no rights as a shareholder with respect to Shares covered by an Award (including voting rights) until the date the Participant or his or her nominee becomes the holder of record of such Shares. No adjustment shall be made for dividends or other rights for which the record date is prior to such date, except as provided in Section 14.
(g) Performance-Based Awards. The Committee may determine whether the grant, issuance, retention, vesting and/or settlement of any Award (or portion of an Award) under the Plan will be conditioned in whole or in part on the achievement of one or more Performance Targets. A Performance Target may include a threshold level of performance below which no payout or vesting will occur, target levels of performance at which a full payout or full vesting will occur, and/or a maximum payout amount for exemplary performance.
(h) Deferrals. No Option or Stock Appreciation Right shall include a right to defer gain upon exercise or any other deferral feature. Deferrals of other Awards shall be subject to provisions of the Award Document or another plan document that satisfies the requirements of Section 409A of the Code.
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(i) Repricing of Options and Stock Appreciation Rights. Notwithstanding any other provision of the Plan, except as may be specifically authorized by the Company’s shareholders, at any time when the exercise price of an Option or Stock Appreciation Right is above the Fair Market Value of a Share, the Company shall not reduce the exercise price of such Option or Stock Appreciation Right and shall not exchange such Option or Stock Appreciation Right for a new Award with a lower (or no) exercise price or for cash. The foregoing shall not (i) prevent adjustments pursuant to Section 14 or (ii) apply to grants of Substitute Awards.
(j) Clawback Provision. This Section 6(j) sets forth the Company’s recovery policy in respect of Erroneously Awarded Compensation (as defined below) and shall be interpreted consistently with the intent to comply with the requirements of Section 303A.14 of NYSE’s Listed Company Manual (the “Listed Company Manual”).
(i) Definitions. Unless the context otherwise requires, the following terms have the meanings set forth in the Listed Company Manual, which is as follows:
“Executive Officer” means the Company’s principal executive officer (referred to in the Listed Company Manual as “president”), principal financial officer, principal accounting officer (or if there is no such accounting officer, the controller), any vice-president of the Company in charge of a principal business unit, division, or function, any other officer who performs a policy-making function, or any other person who performs similar policy-making functions for the Company.
“Financial Reporting Measures” are measures that are determined and presented in accordance with the accounting principles used in preparing the Company’s financial statements, and any measures that are derived wholly or in part from such measures. Stock price and total shareholder return are also financial reporting measures.
“Incentive-Based Compensation” is any Award that is granted, earned, or vested based wholly or in part upon the attainment of a Financial Reporting Measure.
“Received” Incentive-Based Compensation is deemed Received in the Company’s fiscal period during which the Financial Reporting Measure specified in the Incentive-Based Compensation award is attained, even if the payment or grant of the Incentive-Based Compensation occurs after the end of that period.
(ii) Recovery Policy
It is the policy of the Company that, if the Company is required to prepare an accounting restatement due to the material noncompliance of the Company with any financial reporting requirement under the securities laws, including any required accounting restatement to correct an error in previously issued financial statements that is material to the previously issued financial statements, or that would result in a material misstatement if the error were corrected in the current period or left uncorrected in the current period, the Company shall recover reasonably promptly from each Executive Officer the amount, if any, of Incentive-Based Compensation Received by an Executive Officer that exceeds the amount of Incentive-Based Compensation that otherwise would have been Received had it been determined based on the restated amounts (“Erroneously Awarded Compensation”), computed without regard to any
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taxes paid. For Incentive-Based Compensation based on stock price or total shareholder return, where the amount of Erroneously Awarded Compensation is not subject to mathematical recalculation directly from the information in an accounting restatement, the amount of Erroneously Awarded Compensation shall be based on a reasonable estimate of the effect of the accounting restatement on the stock price or total shareholder return upon which the Incentive-Based Compensation was Received.
This Recovery Policy applies to all Incentive-Based Compensation Received by a person: (A) after beginning service as an Executive Officer; (B) who served as an Executive Officer at any time during the performance period for that Incentive-Based Compensation; (C) while the Company has a class of securities listed on a national securities exchange or a national securities association; (D) during the three completed fiscal years immediately preceding the date that the Company is required to prepare an accounting restatement as described in this Section 6.1(j) and, if applicable, to any transition period as set forth in Section 303A.14.
(iii) Additional Rules
(A) For purposes of this Section 6(j), the Company shall be deemed to be required to prepare an accounting restatement as of the earlier of (I) the date the Board or a committee thereof, or an officer of the Company authorized to take such action if board action is not required, concludes or reasonably should have concluded that a restatement is required or (II) the date a court, regulator, or other legally authorized body directs the Company to prepare a restatement.
(B) Notwithstanding any other provision of this Section 6(j), the Company shall not be required to recover Erroneously Awarded Compensation to the extent that an exception set forth in Section 303A.14 (c)(1)(iv) of the Listed Company Manual (relating to impracticability by reason of expense to recover, violations of certain laws, or anti-alienation rules for tax-qualified plans) applies.
(C) The Company shall not indemnify any Executive Officer or former Executive Officer against the loss of Erroneously Awarded Compensation.
(D) The Committee shall maintain documentation related to enforcement of this Recovery Policy in accordance with the requirements of the Listed Company Manual.
(E) The Company’s recovery obligation under this Section 6(j) shall not be affected by if or when restated financial statements are filed.
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(iv) Other Policies
In addition to the Recovery Policy set forth above, all Awards under the Plan are subject to all other recovery policies and clawback procedures of the Company, each as in effect and as amended from time to time.
7. Options
(a) General. The Committee, in its discretion, may grant Options to Eligible Individuals and, with respect to Option grants to employees, shall determine whether such Options shall be Incentive Stock Options or Nonqualified Stock Options. Each Option shall be evidenced by an Award Document that shall expressly identify the Option as an Incentive Stock Option or Nonqualified Stock Option and be in such form and contain such provisions as the Committee shall from time to time deem appropriate.
(b) Exercise Price. The exercise price per Share of an Option shall be fixed by the Committee at the time of grant or shall be determined by a method specified by the Committee at the time of grant. In no event shall the exercise price per Share of an Option be less than one hundred percent (100%) of the Fair Market Value of a Share on the date of grant; provided, however that the exercise price of a Substitute Award granted as an Option shall be determined in accordance with Section 409A of the Code and, with respect to Incentive Stock Options, Section 424 of the Code, and may be less than one hundred percent (100%) of the Fair Market Value.
(c) Term. An Option shall be effective for such term as shall be determined by the Committee and as set forth in the Award Document relating to such Option, and the Committee may extend the term of an Option after the time of grant; provided, however, that the term of an Option may in no event extend beyond the tenth (10th) anniversary of the date of grant of such Option.
(d) Exercise; Payment of Exercise Price. Options shall be exercised by delivery of a notice of exercise in a form approved by the Company. Subject to the provisions of the applicable Award Document, the exercise price of an Option may be paid (i) in cash or cash equivalents, (ii) by actual delivery or attestation to ownership of freely transferable Shares already owned by the person exercising the Option, (iii) by a combination of cash and Shares equal in value to the exercise price, (iv) through net share settlement or similar procedure involving the withholding of Shares subject to the Option with a value equal to the exercise price or (v) by such other means as the Committee may authorize. In accordance with the rules and procedures authorized by the Committee for this purpose, the Option may also be exercised through a “cashless exercise” procedure authorized by the Committee from time to time that permits Participants to exercise Options by delivering irrevocable instructions to a broker to deliver promptly to the Company the amount necessary to pay the exercise price and the amount of any required tax or other withholding obligations or such other procedures determined by the Company from time to time.
(e) Incentive Stock Options. The exercise price per Share of an Incentive Stock Option shall be fixed by the Committee at the time of grant or shall be determined by a method specified by the Committee at the time of grant, but in no event shall the exercise price per Share of an Incentive Stock Option be less than one hundred percent (100%) of the Fair Market Value of a Share on the date of grant. No Incentive Stock Option may be issued pursuant to the Plan to any individual who, at the time the Incentive Stock Option is granted, owns stock possessing more than ten percent (10%) of the total combined voting power of all classes of stock of the Company or any of its Subsidiaries, unless (i) the exercise price per Share determined as of the date of grant is at least one hundred ten percent (110%) of the Fair Market Value on the date of grant of a Share and (ii) the Incentive Stock Option is not exercisable more than five (5) years from the date of grant thereof. No Participant shall be granted any
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Incentive Stock Option which would result in such Participant receiving a grant of Incentive Stock Options that would have an aggregate Fair Market Value in excess of one hundred thousand dollars ($100,000), determined as of the time of grant, that would be exercisable for the first time by such Participant during any calendar year. The terms of any Incentive Stock Option granted under the Plan shall comply in all respects with the provisions of Section 422 of the Code.
8. Restricted Stock and Restricted Stock Units
(a) Restricted Stock. The Committee, in its discretion, may grant Restricted Stock to Eligible Individuals. An Award of Restricted Stock shall consist of one or more Shares granted to an Eligible Individual, and shall be subject to the terms, conditions and restrictions set forth in the Plan and established by the Committee in connection with the Award and specified in the applicable Award Document. Restricted Stock may, among other things, be subject to restrictions on transferability, vesting requirements or other specified circumstances under which it may be canceled.
(b) Restricted Stock Units. The Committee, in its discretion, may grant Restricted Stock Units to Eligible Individuals. A Restricted Stock Unit shall entitle a Participant to receive, subject to the terms, conditions and restrictions set forth in the Plan and the applicable Award Document, one or more Shares or cash in the amount of the Fair Market Value of the Shares. Restricted Stock Units may, among other things, be subject to restrictions on transferability, vesting requirements or other specified circumstances under which they may be canceled. If and when the cancellation provisions lapse, the Participant shall become entitled to receive at the time prescribed by the applicable Award Document (and subject to such additional conditions, if any, as prescribed herein) Shares or, if provided in the Award Document or at the sole discretion of the Committee, cash, or a combination of cash and Shares, with a value equal to the Fair Market Value of the Shares on the vesting date.
9. Stock Appreciation Rights
(a) General. The Committee, in its discretion, may grant Stock Appreciation Rights to Eligible Individuals. A Stock Appreciation Right shall entitle a Participant to receive, upon satisfaction of the conditions to payment specified in the applicable Award Document, an amount equal to the excess, if any, of the Fair Market Value on the exercise date of the number of Shares for which the Stock Appreciation Right is exercised over the grant price for such Stock Appreciation Right specified in the applicable Award Document. The grant price per share of Shares covered by a Stock Appreciation Right shall be fixed by the Committee at the time of grant or, alternatively, shall be determined by a method specified by the Committee at the time of grant, but in no event shall the grant price of a Stock Appreciation Right be less than one hundred percent (100%) of the Fair Market Value of a Share on the date of grant; provided, however, that the grant price of a Substitute Award granted as a Stock Appreciation Rights shall be in accordance with Section 409A of the Code and may be less than one hundred percent (100%) of the Fair Market Value. Payments to a Participant upon exercise of a Stock Appreciation Right may be made in cash or Shares, or a combination of cash and Shares having an aggregate Fair Market Value as of the date of exercise equal to the excess, if any, of the Fair Market Value on the exercise date of the number of Shares for which the Stock Appreciation Right is exercised over the grant price for such Stock Appreciation Right. The term of a Stock Appreciation Right settled in Shares shall not exceed ten (10) years.
(b) Stock Appreciation Rights in Tandem with Options. A Stock Appreciation Right granted in tandem with an Option may be granted either at the same time as such Option or subsequent thereto. If granted in tandem with an Option, a Stock Appreciation Right shall cover the same number of Shares as covered by the Option (or such lesser number of Shares as the Committee may determine) and shall be exercisable only at such time or times and to the extent the related Option shall be exercisable and shall
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have the same term as the related Option. The grant price of a Stock Appreciation Right granted in tandem with an Option shall equal the per-share exercise price of the Option to which it relates. Upon exercise of a Stock Appreciation Right granted in tandem with an Option, the related Option shall be canceled automatically to the extent of the number of Shares covered by such exercise; conversely, if the related Option is exercised as to some or all of the Shares covered by the tandem grant, the tandem Stock Appreciation Right shall be canceled automatically to the extent of the number of Shares covered by the Option exercise.
10. Performance Stock and Performance Share Units
(a) Performance Stock. The Committee may grant Performance Stock to Eligible Individuals. An Award of Performance Stock shall consist of a Target Number of Shares granted to an Eligible Individual based on the achievement of Performance Targets over the applicable Performance Period, and shall be subject to the terms, conditions and restrictions set forth in the Plan and established by the Committee in connection with the Award and specified in the applicable Award Document.
(b) Performance Share Units. The Committee, in its discretion, may grant Performance Share Units to Eligible Individuals. A Performance Share Unit shall entitle a Participant to receive, subject to the terms, conditions and restrictions set forth in the Plan and established by the Committee in connection with the Award and specified in the applicable Award Document, a Target Number of Shares or cash based upon the achievement of Performance Targets over the applicable Performance Period. At the sole discretion of the Committee, Performance Share Units shall be settled through the delivery of Shares or cash, or a combination of Shares and cash.
11. Non-Employee Director Awards
(a) Annual Grant of RSUs to Non-Employee Directors. On December 3, 2019, the Board approved a program (the “Program”) under the Prior Plan for annual grants of Restricted Stock Units to Non-Employee Directors which Program will continue in effect and be implemented under this Plan. Pursuant to the Program, as of the date of the Annual Meeting for each year beginning after the Effective Date, each Non-Employee Director (each an “Eligible Director”) shall be granted Restricted Stock Units (the “Program RSUs”). The number of Program RSUs to be granted shall be established by resolution of the full Board from time to time, subject to the Plan’s limits. The terms of each Eligible Director’s Program RSUs shall be set forth in an Award Document.
(b) Off-Cycle Appointment. If an individual become an Eligible Director on a date other than the date of an Annual Meeting, such Eligible Director shall be granted a pro rata number of Program RSUs for the Eligible Director’s service until the next Annual Meeting.
(c) Vesting and Forfeiture of Unvested Program RSUs. The vesting date for each Program RSU granted at an Annual Meeting shall be the first anniversary of the date of the grant, and the vesting date for each Program RSU granted in respect of an off-cycle appointment shall be the first anniversary of the Annual Meeting immediately preceding the grant date. If an Eligible Director ceases to serve as a director of the Company before the vesting date of his or her Program RSUs, such unvested Program RSUs shall be immediately forfeited, and all rights of the former director with respect to such Program RSUs shall immediately terminate without any payment of consideration therefor; provided that the Program RSUs shall be fully vested if the Eligible Director’s term ends due to death, disability or retirement as of the Annual Meeting next following the grant date.
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(d) Payment. Unless otherwise provided in an Award Document, Program RSUs shall be settled in Shares as soon as practicable after the applicable vesting date, unless deferred in accordance with subsection (e) below.
(e) Election to Defer Settlement of Program RSUs. Except as otherwise provided in an applicable Award Document, an Eligible Director may elect to defer settlement of his or her Program RSUs until a date determined by the Company that is within 60 days after the Eligible Director’s “separation from service”. Such deferral election shall be filed with the Company and irrevocable before the first day of the calendar year in which the affected RSUs are granted; provided that, for the year in which an individual first becomes eligible to defer compensation under a deferral arrangement involving the Company or any of its Affiliates, the election deadline shall be extended to the earlier of (i) the 30th day after the individual first becomes an Eligible Director or (ii) the day immediately preceding the grant date. For purposes of the Program, “separation from service” shall have the meaning prescribed by the Textron Inc. Deferred Income Plan for Non-Employee Directors, as amended.
12. Other Awards
The Committee shall have the authority to specify the terms and provisions of other forms of equity- or cash-based Awards not described above that the Committee determines to be consistent with the purpose of the Plan and the interests of the Company, which Awards may provide for cash payments or settlement in Shares.
13. Certain Restrictions
(a) Transfers. No Award shall be transferable other than pursuant to a beneficiary designation under Section 13(c), by last will and testament or by the laws of descent and distribution or, except in the case of an Incentive Stock Option, pursuant to a domestic relations order; provided, however, that the Committee may, subject to applicable laws, rules and regulations and such terms and conditions as it shall specify, permit the transfer of an Award, other than an Incentive Stock Option, for no consideration, to a member of the Participant’s family or household or to a trust, partnership, corporation, or similar vehicle the parties in interest in which are limited to the Participant and members of the Participant’s family or household, in each case, with respect to whom such Award or the exercise thereof (as applicable) is covered by an effective registration statement under the Securities Act of 1933 (collectively, the “Permitted Transferees”). Any Award transferred to a Permitted Transferee shall be further transferable only by last will and testament or the laws of descent and distribution or, for no consideration, to another Permitted Transferee of the Participant.
(b) Award Exercisable Only by Participant. During the lifetime of a Participant, an Award shall be exercisable only by the Participant or by a Permitted Transferee to whom such Award has been transferred in accordance with Section 13(a) above. The grant of an Award shall impose no obligation on a Participant to exercise or settle the Award.
(c) Beneficiary Designation. Subject to restrictions and procedures established by the Company, a Participant may, from time to time, name a beneficiary or beneficiaries to receive any benefit under the Plan in case of his or her death before he or she receives any or all of such benefit. Each such designation shall revoke all prior designations by the same Participant, including any default designation, and will be effective only when filed by the Participant (in such form or manner as may be prescribed by the Company) and received by the Company. No beneficiary designation shall be effective if received by the Company after the Participant’s death. In the absence of a valid designation by the Participant under the Plan, the Participant’s beneficiary shall be his beneficiary under the Company’s group life insurance plan or, if none, the Participant’s estate. If a beneficiary determined under this paragraph does not survive the Participant, or such designated beneficiary is legally impaired or
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prohibited from receiving the benefits under an Award, the Participant’s beneficiary shall be determined as if such deceased or disqualified beneficiary were never designated.
14. Recapitalization or Reorganization
(a) Authority of the Company and Shareholders. The existence of the Plan, the Award Documents and the Awards granted hereunder shall not affect or restrict in any way the right or power of the Company or the shareholders of the Company to make or authorize any adjustment, recapitalization, reorganization or other change in the Company’s capital structure or business, any merger or consolidation of the Company, any issue of stock or of options, warrants or rights to purchase stock or of bonds, debentures, preferred or prior preference stocks whose rights are superior to or affect the Shares or the rights thereof or which are convertible into or exchangeable for Shares, or the dissolution or liquidation of the Company, or any sale or transfer of all or any part of its assets or business, or any other corporate act or proceeding, whether of a similar character or otherwise.
(b) Change in Capitalization. Notwithstanding any provision of the Plan or any Award Document, the number and kind of Shares authorized for issuance under Section 5 of the Plan, including the maximum number of Shares available under the special limits provided for in Section 5(c), shall be equitably adjusted as determined by the Committee in the event of a stock split, reverse stock split, stock dividend, recapitalization, reorganization, partial or complete liquidation, reclassification, merger, consolidation, separation, extraordinary cash dividend, split-up, spin-off, combination, exchange of Shares, warrants or rights offering to purchase Shares at a price substantially below Fair Market Value, or any other corporate event or distribution of stock or property of the Company affecting the Shares in order to preserve, but not increase, the benefits or potential benefits intended to be made available under the Plan. In addition, upon the occurrence of any of the foregoing events, the number and kind of Shares subject to any outstanding Award and the exercise price per Share (or the grant price per Share, as the case may be), if any, under any outstanding Award shall be equitably adjusted as determined by the Committee in order to preserve the benefits or potential benefits intended to be made available to Participants. Unless otherwise determined by the Committee, such adjusted Awards shall be subject to the same restrictions and vesting or settlement schedule to which the underlying Award is subject.
15. Term of the Plan
Unless earlier terminated pursuant to Section 17, the Plan shall terminate on the tenth (10th) anniversary of the Effective Date, except with respect to Awards then outstanding. No Awards may be granted under the Plan after the tenth (10th) anniversary of the Effective Date, and no Incentive Stock Option may be granted under the Plan after the tenth (10th) anniversary of the date on which the Plan was adopted by the Board.
16. Effective Date
The Plan shall become effective on the Effective Date.
17. Amendment and Termination
Subject to applicable laws, rules and regulations, the Board may at any time terminate or, from time to time, amend, modify or suspend the Plan; provided, however, that no termination, amendment, modification or suspension shall (a) be effective without the approval of the shareholders of the Company if such approval is required under applicable laws, rules and regulations, including the rules of NYSE, or (b) materially and adversely alter or impair the rights of a Participant in any Award previously made under the Plan without the consent of the holder thereof. Notwithstanding the foregoing, the Board shall have broad authority to amend the Plan or any Award under the Plan without the consent of a Participant to the extent it deems necessary or desirable (i) to comply with, take into account changes
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in, or interpretations of, applicable tax laws, securities laws, employment laws, accounting rules and other applicable laws, rules and regulations, (ii) to take into account unusual or nonrecurring events or market conditions (including the events described in Section 14(b)), or (iii) to take into account significant acquisitions or dispositions of assets or other property by the Company. To the extent permitted by applicable law, the Board may (I) make a non-exclusive written delegation of its authority to amend the Plan to the Committee or to one or more officers of the Company and (II) authorize the Committee or delegated officers to make a further delegation of their authority to amend the Plan.
18. Miscellaneous
(a) Tax Withholding. The Company or a Subsidiary, as appropriate, may require any individual entitled to receive a payment of an Award to remit to the Company, prior to payment, an amount sufficient to satisfy any applicable tax withholding requirements. In the case of an Award payable in Shares, the Company or a Subsidiary, as appropriate, may permit or require a Participant to satisfy, in whole or in part, such obligation to remit taxes by the Company withholding Shares that would otherwise be received by such individual or repurchasing Shares that were issued to the Participant to satisfy the (i) minimum statutory withholding rates within the United States, or (ii) in accordance with local tax jurisdictions outside the United States, as applicable, for any applicable tax withholding purposes, in accordance with all applicable laws and pursuant to such rules as the Committee may establish from time to time. The Company or a Subsidiary, as appropriate, shall also have the right to deduct from all cash payments made to a Participant (whether or not such payment is made in connection with an Award) any applicable taxes required to be withheld with respect to such payments. Regardless of the amount withheld or reported, the Participant or beneficiary shall be solely responsible for all taxes in respect of Awards (including taxes on imputed income), except the employer’s share of employment taxes.
(b) No Right to Awards or Employment. No person shall have any claim or right to receive Awards under the Plan. Neither the Plan, the grant of Awards under the Plan nor any action taken or omitted to be taken under the Plan shall be deemed to create or confer on any Eligible Individual any right to be retained in the employ or other service of the Company or any Subsidiary or other affiliate thereof, or to interfere with or to limit in any way the right of the Company or any Subsidiary or other affiliate thereof to terminate the employment or other service of such Eligible Individual at any time. No Award shall constitute salary or contractual compensation for the year of grant, any later year or any other period of time. Payments received by a Participant under any Award made pursuant to the Plan shall not be included in, nor have any effect on, the determination of employment-related rights or benefits under any other employee benefit plan or similar arrangement provided by the Company and the Subsidiaries, unless otherwise specifically provided for under the terms of such plan or arrangement or by the Committee.
(c) Securities Law Restrictions. An Award may not be exercised or settled, and no Shares may be issued in connection with an Award, unless the issuance of such Shares (i) has been registered under the Securities Act of 1933, (ii) has qualified under applicable state “blue sky” laws (or the Company has determined that an exemption from registration and from qualification under such state “blue sky” laws is available) and (iii) complies with all applicable foreign securities laws. All certificates for Shares delivered under the Plan shall be subject to such stock-transfer orders and other restrictions as the Committee may deem advisable under the rules, regulations, and other requirements of the Securities and Exchange Commission, any exchange upon which the Shares are then listed, and any applicable securities law, and the Committee may cause a legend or legends to be put on any such certificates to make appropriate reference to such restrictions.
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(d) Section 409A of the Code. The Plan is intended, and shall be interpreted, to provide compensation that is exempt from Section 409A, or that complies with the applicable requirements of Section 409A. If any provision of the Plan or an Award Document contravenes any regulations or guidance promulgated under Section 409A of the Code or would cause an Award to be subject to additional taxes, accelerated taxation, interest and/or penalties under Section 409A of the Code, such provision of the Plan or Award Document may be modified by the Committee without the consent of the Participant in any manner the Committee deems reasonable or necessary. In making such modifications the Committee shall attempt, but shall not be obligated, to maintain, to the maximum extent practicable, the original intent of the applicable provision without contravening the provisions of Section 409A of the Code. Moreover, any discretionary authority that the Committee may have pursuant to the Plan shall not be applicable to an Award that is subject to Section 409A of the Code to the extent such discretionary authority would contravene Section 409A of the Code or the guidance promulgated thereunder.
(e) Awards to Individuals Subject to Laws of a Jurisdiction Outside of the United States. To the extent that Awards under the Plan are awarded to Eligible Individuals who are domiciled or reside outside of the United States or to persons who are domiciled or reside in the United States but who are subject to the tax laws of a jurisdiction outside of the United States, the Committee may adjust the terms of the Awards granted hereunder to such person (i) to comply with the laws, rules and regulations of such jurisdiction and (ii) to permit the grant of the Award not to be a taxable event to the Participant. The authority granted under the previous sentence shall include the discretion for the Committee to adopt, on behalf of the Company, one or more sub-plans applicable to separate classes of Eligible Individuals who are subject to the laws of jurisdictions outside of the United States.
(f) Satisfaction of Obligations. Subject to applicable law, the Company may apply any cash, Shares, securities or other consideration received upon exercise or settlement of an Award to any obligations a Participant owes to the Company and the Subsidiaries in connection with the Plan or otherwise, including any tax obligations or obligations under a currency facility established in connection with the Plan.
(g) No Limitation on Corporate Actions. Nothing contained in the Plan shall be construed to prevent the Company or any Subsidiary from taking any corporate action, whether or not such action would have an adverse effect on any Awards made under the Plan. No Participant, beneficiary or other person shall have any claim against the Company or any Subsidiary as a result of any such action.
(h) Unfunded Plan. The Plan is intended to constitute an unfunded plan for incentive compensation. Prior to the issuance of Shares, cash or other form of payment in connection with an Award, nothing contained herein shall give any Participant any rights that are greater than those of a general unsecured creditor of the Company. The Committee may, but is not obligated to, authorize the creation of trusts or other arrangements to meet the obligations created under the Plan to deliver Shares with respect to awards hereunder.
(i) Successors. All obligations of the Company under the Plan with respect to Awards granted hereunder shall be binding on any successor to the Company, whether the existence of such successor is the result of a direct or indirect purchase, merger, consolidation, or otherwise, of all or substantially all of the business and/or assets of the Company.
(j) Application of Funds. The proceeds received by the Company from the sale of Shares pursuant to Awards will be used for general corporate purposes.
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(k) Award Document. In the event of any conflict or inconsistency between the Plan and any Award Document, the Plan shall govern and the Award Document shall be interpreted to minimize or eliminate any such conflict or inconsistency.
(l) Headings. The headings of Sections herein are included solely for convenience of reference and shall not affect the meaning of any of the provisions of the Plan.
(m) Severability. If any provision of this Plan is held unenforceable, the remainder of the Plan shall continue in full force and effect without regard to such unenforceable provision and shall be applied as though the unenforceable provision were not contained in the Plan.
(n) Expenses. The costs and expenses of administering the Plan shall be borne by the Company.
(o) Governing Law. Except as to matters of federal law, the Plan and all actions taken thereunder shall be governed by and construed in accordance with the laws of the State of Delaware, without regard to any conflict of law provisions that might otherwise point to a different jurisdiction.
(p) Compliance with Individual Tax Requirements. The Company does not warrant that the Plan will comply with Section 409A or any other provision of the Code with respect to any Participant or with respect to any payment. In no event shall the Company; any Subsidiary; any director, officer, or employee of the Company or a Subsidiary; or any member of the Committee be liable for any additional tax, interest, or penalty incurred by a Participant as a result of the Plan’s failure to satisfy the requirements of Section 409A of the Code or any other requirements of applicable tax laws.
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EXHIBIT 10.3C
AMENDMENT NO. 2 TO
TEXTRON INC.
2015 LONG-TERM INCENTIVE PLAN
Whereas Section 16 of the Textron Inc. 2015 Long-Term Incentive Plan (the "Plan") authorizes the Board of Directors (the “Board”) of Textron Inc. (the “Company”) to amend the Plan to take into account changes in, or interpretations of, applicable accounting rules; and
Whereas, the Board has delegated to its Organization and Compensation Committee (the “Committee”) the authority to amend the Plan; and
Whereas, the Committee has approved Amendment No. 2 to the Plan to update language in Section 13(b) of the Plan to conform to Section 13(b) of the newly adopted 2024 Long-Term Incentive Plan which take into account changes in accounting interpretations since the Plan’s adoption;
Now, therefore, the Company hereby amends the Plan, effective October 22, 2024, as follows:
1.Section 13(b) of the Plan is hereby amended to read in its entirety as follows:
(b) Change in Capitalization. Notwithstanding any provision of the Plan or any Award Document, the number and kind of Shares authorized for issuance under Section 5 of the Plan, including the maximum number of Shares available under the special limits provided for in Section 5(c), shall be equitably adjusted as determined by the Committee in the event of a stock split, reverse stock split, stock dividend, recapitalization, reorganization, partial or complete liquidation, reclassification, merger, consolidation, separation, extraordinary cash dividend, split-up, spin-off, combination, exchange of Shares, warrants or rights offering to purchase Shares at a price substantially below Fair Market Value, or any other corporate event or distribution of stock or property of the Company affecting the Shares in order to preserve, but not increase, the benefits or potential benefits intended to be made available under the Plan. In addition, upon the occurrence of any of the foregoing events, the number and kind of Shares subject to any outstanding Award and the exercise price per Share (or the grant price per Share, as the case may be), if any, under any outstanding Award shall be equitably adjusted as determined by the Committee in order to preserve the benefits or potential benefits intended to be made available to Participants. Unless otherwise determined by the Committee, such adjusted Awards shall be subject to the same restrictions and vesting or settlement schedule to which the underlying Award is subject.
2.Except as expressly amended hereby, all provisions of the Plan shall remain unamended and shall continue to be, and shall remain, in full force and effect in accordance with their respective terms.
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EXHIBIT 10.3C
IN WITNESS WHEREOF, Textron Inc. has caused this amendment to be executed by its duly authorized officer.
TEXTRON INC. | ||||||||
Dated: October 22, 2024 | By: | /s/ Julie G. Duffy | ||||||
Julie G. Duffy | ||||||||
Executive Vice President and Chief Human Resources Officer | ||||||||
[NOTE: Redline of Section 13(b) is attached as Exhibit A]
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EXHIBIT 10.3C
EXHIBIT A: Changes to Section 13(b) of 2015 LTIP
(b) Change in Capitalization. Notwithstanding any provision of the Plan or any Award Document, the number and kind of Shares authorized for issuance under Section 5 of the Plan, including the maximum number of Shares available under the special limits provided for in Section 5(c), shall be equitably adjusted in the sole discretion of as determined by the Committee in the event of a stock split, reverse stock split, stock dividend, recapitalization, reorganization, partial or complete liquidation, reclassification, merger, consolidation, separation, extraordinary cash dividend, split-up, spin-off, combination, exchange of Shares, warrants or rights offering to purchase Shares at a price substantially below Fair Market Value, or any other corporate event or distribution of stock or property of the Company affecting the Shares in order to preserve, but not increase, the benefits or potential benefits intended to be made available under the Plan. In addition, upon the occurrence of any of the foregoing events, the number and kind of Shares subject to any outstanding Award and the exercise price per Share (or the grant price per Share, as the case may be), if any, under any outstanding Award shall be equitably adjusted (including by payment of cash to a Participant) in the sole discretion of as determined by the Committee in order to preserve the benefits or potential benefits intended to be made available to Participants. Such adjustments shall be made by the Committee. Unless otherwise determined by the Committee, such adjusted Awards shall be subject to the same restrictions and vesting or settlement schedule to which the underlying Award is subject.
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Exhibit 10.16
TEXTRON INC.
COMPENSATION AND BENEFITS SUMMARY
FOR NON-EMPLOYEE DIRECTORS
(EFFECTIVE JANUARY 1, 2025)
COMPENSATION | |||||
| Cash Retainer | Non-employee directors receive an annual cash retainer of $130,000 which is paid in quarterly installments at the end of each full calendar quarter. Payments are prorated for partial calendar quarters served. Committee chairpersons are paid an additional annual retainer, as follows: Audit, $15,000; Nominating and Corporate Governance, $20,000; and Organization and Compensation, $25,000. The Lead Director is paid an additional $45,000 annual retainer. Audit Committee members (including the Audit Committee chairperson) are paid an additional $15,000 annual retainer. The additional retainers are paid in cash in quarterly installments at the end of each full quarter, and payments are prorated for partial calendar quarters served. | ||||
| Equity Program | Each year, each non-employee director elected at the Annual Meeting of Shareholders shall be granted Restricted Stock Units (“RSUs”) valued at $185,000 as of the date of the Annual Meeting. The RSUs will be issued under, and subject to the terms of, the Textron Inc. 2024 Long-Term Incentive Plan. RSUs granted at the Annual Meeting of Shareholders will vest one year from the date of grant. Pro rata grants of RSUs issued to non-employee directors for a partial year of service will vest as of the date of the next Annual Meeting of Shareholders. Upon vesting, the RSUs will be settled in shares of Common Stock, however directors may elect to defer settlement of the RSUs until his or her separation from Board service. | ||||
| Meeting Fees | There are no fees payable for attendance at any Board or committee meetings. | ||||
DEFERRED INCOME PLAN | |||||
| Any percentage of the cash portion of the annual Board retainer ($130,000) or any percentage of the additional retainers may be deferred into either the stock unit account or an interest-bearing account under the Deferred Income Plan for Non-Employee Directors. | |||||
| OTHER | |||||
| Expenses | Reasonable travel, lodging and incidental expenses in connection with meetings are reimbursed. | ||||
Matching Gift Program | The Textron Charitable Trust will match Director contributions to organizations located in the United States recognized by the Internal Revenue Service (IRS) as tax-exempt and designated as a public Charity under Section 501(c)3 of the IRS code, up to an aggregate maximum of $10,000 annually. | ||||
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EXHIBIT 19
POLICY ON TRADING IN TEXTRON SECURITIES (THE “POLICY”)
Memo To: | Members of Textron Board of Directors, Textron Executive and Corporate Officers, Segment and Business Unit Presidents and Chief Financial Officers; | ||||
From: | XXXXX, Executive Vice President, General Counsel and Secretary | ||||
Date: | January 22, 2025 | ||||
This Memorandum serves to update and reissue the above-referenced Policy which is applicable to all Textron Executive and Corporate Officers, Segment and Business Unit Presidents and Chief Financial Officers and members of our Board of Directors (the “Covered Individuals”). The Policy covers trading by immediate family or household members of a Covered Individual, or by a corporation, trust or other entity controlled by a Covered Individual. The Policy is designed to protect Textron and you from the serious liabilities and penalties that can result from violations of the securities laws.
Federal securities laws and Textron’s Business Conduct Guidelines (“BCGs”) prohibit (a) buying, selling or making other transfers of securities by persons who have material information that is not generally known or available to the public and (b) disclosing such information to others who may trade. Information is considered to be material if there is a substantial likelihood that a reasonable investor would consider it important in deciding whether to buy, hold or sell a security. Any information that could reasonably be expected to affect the price of a security is likely to be considered material. These prohibitions apply both to securities of Textron and of companies which do business with Textron.
You Must Pre-Clear Purchases or Sales in Textron Securities
Covered Individuals are required to pre-clear with XXXXX, our Senior Executive Counsel, or me any trading in Textron securities. For purposes of this Policy “securities” includes stocks, bonds, convertible notes or any other security and “trading” includes any purchase, sale, stock plan transaction, gift, loan or pledge, or any other transfer, including any exercise of a stock option where all or a portion of the acquired stock is immediately sold, i.e. a “cashless exercise”.1 To pre-clear a transaction, call or email XXXXX or me one day prior to your chosen trading date. When a request for pre-clearance is made, you should carefully consider whether you are aware of any material nonpublic information about Textron and describe fully to XXXXX or me any circumstances which you think should be considered.
If clearance for your trade is granted, XXXXX will send you a clearance email indicating when you are allowed to trade, and she will notify Fidelity of the clearance you have received. Cleared transactions are expected to be executed within approximately 48 hours of receiving clearance. If additional time elapses, another pre-clearance will be required since circumstances may have changed. If permission to engage in a transaction is denied, you should not inform anyone else of the restriction. Note that obtaining pre-clearance is not legal advice, and each individual remains responsible for his or her own decision to trade.
1 Note that if you exercise a stock option by paying the exercise price due under the option in cash and intend to indefinitely hold the shares, no transaction based upon the market price of Textron stock has taken place; this transaction (but not any subsequent sale of the stock) is, therefore, exempt from the application of the Policy.
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Participants in the Textron Savings Plan
Transactions in the Textron Savings Plan (“TSP”) also require receiving clearance to trade. Note that, if you receive clearance for a market trade, the flag on your TSP account will automatically be lifted for the time period for which you have been cleared. If you wish to transact only within the TSP, you should follow the pre-clearance procedure described above before giving instructions to (i) allocate your TSP contributions into the TSP's Textron Stock Fund, (ii) reallocate your existing funds into or out of the Textron Stock Fund, (iii) make withdrawals from the Textron Stock Fund, including borrowing money from your TSP account if the loan will result in a liquidation of some or all of your Textron Stock Fund balance or (iv) pre-pay a plan loan if the pre-payment will result in allocation of loan proceeds to the Textron stock fund. You need not pre-clear periodic payroll deductions that are allocated to the Textron Stock Fund as long as you did not have material nonpublic information at the time you provided the allocation instructions to the plan trustee.
Trades May Not Take Place During Blackout Periods
Trading requests by Covered Individuals will not be approved during the regular blackout period prior to each quarterly earnings release. The quarterly blackout period will commence on the first business day of the tenth week of each fiscal quarter (as set forth in the Controller’s Calendar) and will end one full day after earnings are announced, although the blackout period could begin earlier and end later if warranted by the circumstances of a particular quarter. In addition, from time to time, I may notify you that we have closed trading due to corporate developments giving rise to material nonpublic information.
Post-Termination Transactions
If an individual is in possession of material nonpublic information when his or her service for Textron terminates, that individual may not trade in Textron securities until that information has become public or is no longer material. The pre-clearance procedures described above, however, will cease to apply to individuals who have terminated service upon the expiration of any blackout period or other trading restriction in place at the time of the termination of service.
10b5-1 Trading Plans
Pursuant to SEC rules, it is possible for you to establish a plan for regular sales of Textron stock without regard to blackout periods or your possession of material inside information. Such a plan must be carefully crafted to comply with the requirements of SEC Rule 10b5-1, as amended effective February 27, 2023, and requires my approval. If you are thinking of establishing such a plan, you should contact XXXXX or me. For more information on 10b5-1 trading plans, please see the Policy on 10b5-1 Trading Plans.
Additional Provisions
Textron considers it improper for its Covered Individuals to engage in short-term or speculative transactions in Textron’s securities or in other transactions that may lead to inadvertent violations of securities laws. Accordingly:
Short Sales. You may not engage in short sales of Textron’s securities (sales of securities that are not then owned).
Publicly-Traded Options, Derivative Securities and Hedging Transactions. You may not engage in transactions in publicly-traded options (i.e. puts, calls) or derivative securities based on Textron’s securities, including any hedging, monetization or similar transaction designed to reduce the risks of holding Textron securities, such as zero-cost collars and forward sale contracts.
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Standing Orders. Standing orders (other than under an approved 10b5-1 plan) should be used only for a very brief period of time. A standing order placed with a broker to sell or purchase stock at a specified price leaves you with no control over the timing of the transaction and, if executed when you are aware of material nonpublic information, may be considered unlawful insider trading.
Margin Accounts and Pledges. Securities held in a margin account or pledged as collateral for a loan may be sold without your consent if you fail to meet your obligations. A margin or foreclosure sale that occurs when you are aware of material nonpublic information may be considered unlawful insider trading. Therefore, you should exercise caution in holding Textron securities in a margin account or pledging Textron securities as collateral for a loan. Moreover, due to this concern, named executive officers of Textron (our CEO, CFO, CHRO and GC) and our Directors are prohibited from holding Textron securities in a margin account or pledging Textron securities as collateral for a loan.
Section 16 and Form 144 Filers
Executive officers of Textron (our CEO, CFO, CHRO and GC), our Controller and our Directors are also subject to Section 16 of the Securities Exchange Act of 1934, which requires transactions in Textron securities, including bona fide gifts, to be reported on SEC Form 4 within two business days after the transaction date. Proposed sales of Textron stock by executive officers, including sales of stock in the Textron Stock Fund within the TSP, and by our Directors usually require the filing of a Form 144 in addition to a Form 4. Your prompt notification to us of any transaction will ensure that the Form 4 and, if applicable, Form 144, are filed on time. Please contact XXXXX if you need more information.
Special Information for Directors
In addition to pre-clearing any purchases or sales of Textron securities, you should notify us before engaging in any transaction in Textron stock (including any changes in beneficial ownership) on behalf of yourself, your immediate family, any trust with which you are associated or any other entity through which you have a direct or indirect pecuniary interest in Textron stock. You should also remind your broker to check with us before engaging in any such transaction, including during the six-month period following your departure from the Board as Section 16 reporting requirements may continue to apply. As stated above, proposed sales of Textron stock by directors usually require the filing of a Form 144 in addition to a Form 4; this requirement continues to apply for 90 days following a director’s departure from the Board. Your prompt notification to us of any transaction will ensure that the Form 4 and Form 144 are filed on time.
With Respect to Textron Employees Reporting to Covered Individuals
Advice for Your Employees. While Textron employees other than Covered Individuals are not required to pre-clear their trades, our Business Conduct Guidelines prohibit trading in Textron securities, or securities of another company, while in possession of material, non-public information about Textron or the other company. Sharing such information with unauthorized persons and/or providing recommendations to trade in Textron or the other company’s securities is also prohibited. You should advise members of your staff who have regular access to material nonpublic information of the blackout periods described above and these prohibitions from time to time. You also may want to suggest that staff members complete the Insider Trading module of Textron’s Compliance Resource Center; note that all participants in Textron’s long-term incentive plan are
required to complete the module every other year. Also, XXXXX is available to talk to your staff about insider trading.
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Extension of Blackout Period to Certain Employees. The regular quarterly blackout period (but not preclearance procedures) also applies to certain Textron corporate office employees who regularly have access to material inside information related to quarterly results and certain other matters. These employees will receive a separate communication from Fidelity notifying them of each blackout period, and their Fidelity accounts will be locked from online transactions during each blackout period.
Please call XXXXX or me at any time if you have any questions about insider trading or this Policy. (XXXXX may be reached at XXXXXXXXXXXX or XXXXX@textron.com.)
4
Exhibit 21
Certain Subsidiaries of Textron Inc.*
(Unless indicated otherwise, all entities listed are wholly owned.)
* Other subsidiaries, which considered in the aggregate do not constitute a significant subsidiary, are omitted from this list.
Name | Jurisdiction | ||||
TEXTRON INC. | Delaware | ||||
AAI Services Corporation | Maryland | ||||
Able Aerospace Services, Inc. | Arizona | ||||
Aeronautical Accessories LLC | Tennessee | ||||
Airborne Tactical Advantage Company, LLC | Colorado | ||||
Arctic Cat ACE Holding GmbH | Austria | ||||
Arctic Cat GmbH | Austria | ||||
Arctic Cat Inc. | Minnesota | ||||
Arctic Cat Sales Inc. | Minnesota | ||||
Arctic Cat UK Ltd. | England | ||||
Arkansas Aerospace, Inc. | Arkansas | ||||
Avco Corporation | Delaware | ||||
Aviation Service servis letal, doo, Ljubljana | Slovenia | ||||
B/K Navigational Equipment sro | Czech Republic | ||||
Beech Aircraft Corporation | Kansas | ||||
Beechcraft Defense Support Holding, LLC | Delaware | ||||
Beechcraft Domestic Service Company | Kansas | ||||
Beechcraft International Holding LLC | Delaware | ||||
Beechcraft International Service Company | Kansas | ||||
Beechcraft New Zealand | New Zealand | ||||
Bell Textron Asia (Pte.) Ltd. | Singapore | ||||
Bell Textron Australia Pty Ltd | Australia | ||||
Bell Textron Canada International Inc. | Canada | ||||
Bell Textron Canada Limited/Limitée | Canada | ||||
Bell Textron Co., Ltd | Japan | ||||
Bell Textron Inc. | Delaware | ||||
Bell Textron Korea Inc. | Delaware | ||||
Bell Textron LLC | Japan | ||||
Bell Textron Prague, a.s. | Czech Republic | ||||
Bell Textron Rhode Island Inc. | Delaware | ||||
Bell Textron Services Inc. | Delaware | ||||
Bell Textron Supply Center BV | Netherlands | ||||
Bell Textron Technical Services Inc. | Delaware | ||||
Bell Textron Valencia, S.L.U. | Spain | ||||
Cessna Citation European Service Center SAS | France | ||||
Cessna Düsseldorf Citation Service Center GmbH | Germany | ||||
Cessna Finance Corporation | Kansas | ||||
Cessna Finance Export Corporation | Delaware | ||||
Cessna Mexico, S de RL de CV | Mexico | ||||
Cessna Spanish Citation Service Center SLU | Spain | ||||
Cessna Zurich Citation Service Center GmbH | Switzerland | ||||
Citation Parts Distribution International, Inc. | Kansas | ||||
Cushman Inc. | Delaware | ||||
CWC Textron LLC | Delaware | ||||
Doncaster Citation Service Centre Limited | England | ||||
ElastomAero LLC | Delaware | ||||
E-Z-GO Canada Limited | Canada | ||||
Hawker Beech de Mexico, S de RL de CV | Mexico | ||||
Hawker Beechcraft Argentina SA | Argentina | ||||
HBC, LLC | Kansas | ||||
Page 1
Name | Jurisdiction | ||||
Howe & Howe Inc. | Delaware | ||||
Kautex (Changchun) Plastics Technology Co., Ltd. | PRC | ||||
Kautex (Chongqing) Plastic Technology Co., Ltd. | PRC | ||||
Kautex (Guangzhou) Plastic Technology Co., Ltd. | PRC | ||||
Kautex (Pinghu) Plastic Technology Co., Ltd. | PRC | ||||
Kautex (Shanghai) Plastic Technology Co., Ltd. | PRC | ||||
Kautex (Tianjin) Automotive Technology Co., Ltd. | PRC | ||||
Kautex (Wuhan) Plastic Technology Co., Ltd. | PRC | ||||
Kautex Corporation | Nova Scotia | ||||
Kautex Craiova srl | Romania | ||||
Kautex Germany Holding GmbH | Germany | ||||
Kautex Inc. | Delaware | ||||
Kautex Japan KK | Japan | ||||
Kautex of Georgia Inc. | Massachusetts | ||||
Kautex Shanghai GmbH | Germany | ||||
Kautex Textron Benelux BVBA | Belgium | ||||
Kautex Textron Bohemia spol sro | Czech Republic | ||||
Kautex Textron de Mexico, S de RL de CV | Mexico | ||||
Kautex Textron do Brasil Ltda. | Brazil | ||||
Kautex Textron GmbH & Co. KG | Germany | ||||
Kautex Textron Ibérica SL | Spain | ||||
Kautex Textron Management Services Company de Puebla, S. de RL de CV | Mexico | ||||
Kautex Textron Portugal – Produtos Plásticos, Sociedade Unipessoal, Lda. | Portugal | ||||
LLC Textron RUS | Russian Federation | ||||
McCord Corporation | Michigan | ||||
Medical Numerics, Inc. | Virginia | ||||
MillenWorks | California | ||||
MillenWorks Themed Technologies | California | ||||
MotorFist LLC | Minnesota | ||||
OPINICUS Simulation and Training Services, LLC | Delaware | ||||
Opto-Electronics Inc. | Ontario | ||||
Overwatch Systems, Ltd. | Delaware | ||||
PIPISTREL d.o.o. | Slovenia | ||||
PIPISTREL ITALIA S.R.L. | Italy | ||||
PIPISTREL VERTICAL SOLUTIONS d.o.o. | Slovenia | ||||
Ransomes Inc. | Wisconsin | ||||
Ransomes Investment LLC | Delaware | ||||
Ransomes Jacobsen France SAS | France | ||||
Ransomes Jacobsen Limited | England | ||||
Ransomes Limited | England | ||||
Ransomes Pensions Trustee Company Limited | England | ||||
Replacement Part Solutions, LLC | Illinois | ||||
Response Technologies, LLC | Rhode Island | ||||
Rotor Blades Limited | England | ||||
TekGPS Engineering Srl | Romania | ||||
Textron Airland, LLC | Delaware | ||||
Textron Atlantic LLC | Delaware | ||||
Textron Aviation Australia Pty Ltd | Australia | ||||
Textron Aviation Canada Ltd. | British Columbia | ||||
Textron Aviation Defense LLC | Delaware | ||||
Textron Aviation Finance Corporation | Delaware | ||||
Textron Aviation Inc. | Kansas | ||||
Textron Aviation Prague Service Center sro | Czech Republic | ||||
Textron Aviation Rhode Island Inc. | Delaware | ||||
Textron Aviation Services de Mexico S de RL de CV | Mexico | ||||
Textron Capital BV | Netherlands | ||||
Page 2
Name | Jurisdiction | ||||
Textron Communications Inc. | Delaware | ||||
Textron eAviation GmbH | Germany | ||||
Textron eAviation Inc. | Delaware | ||||
Textron E-Z-GO LLC | Delaware | ||||
Textron Far East Pte. Ltd. | Singapore | ||||
Textron Finance Holding Company | Delaware | ||||
Textron Financial Corporation | Delaware | ||||
Textron Financial Corporation Receivables Trust 2002-CP-2 | Delaware | ||||
Textron Fluid and Power Inc. | Delaware | ||||
Textron France Holding SAS | France | ||||
Textron Global Services Inc. | Delaware | ||||
Textron Ground Support Equipment Inc. | Delaware | ||||
Textron India Private Limited | India | ||||
Textron Innovations Inc. | Delaware | ||||
Textron International Mexico, S de RL de CV | Mexico | ||||
Textron IPMP Inc. | Delaware | ||||
Textron Limited | England | ||||
Textron Management Services Inc. | Delaware | ||||
Textron Motors GmbH | Germany | ||||
Textron Motors North America Inc. | Delaware | ||||
Textron Outdoor Power Equipment Inc. | Delaware | ||||
Textron Realty Corporation | Delaware | ||||
Textron Shared Service Centre (Canada) Inc. | Canada | ||||
Textron SI d.o.o. | Slovenia | ||||
Textron Specialized Vehicles Inc. | Delaware | ||||
Textron Sweden AB | Sweden | ||||
Textron Systems Australia Holding Pty Ltd | Australia | ||||
Textron Systems Australia Pty Ltd | Australia | ||||
Textron Systems Canada Inc. | Ontario | ||||
Textron Systems Corporation | Maryland | ||||
Textron Systems Electronic Systems UK (Holdings) Limited | England | ||||
Textron Systems Electronic Systems UK Limited | England | ||||
Textron Trading (Shanghai) Co., Ltd. | PRC | ||||
Textron UK Pension Trustee Limited | England | ||||
Textron Verwaltungs-GmbH | Germany | ||||
TRU Simulation + Training Inc. | Delaware | ||||
TRU Simulation + Training LLC | California | ||||
Turbine Engine Components Textron (Newington Operations) Inc. | Connecticut | ||||
United Industrial Corporation | Delaware | ||||
Westminster Insurance Company | Vermont | ||||
Zhenjiang Bell Textron Aviation Services Limited | PRC | ||||
Page 3
Exhibit 23
Consent of Independent Registered Public Accounting Firm
We consent to the incorporation by reference in the following Registration Statements: Form S-8 No. 333-281102 pertaining to the 2024 Long-Term Incentive Plan, Form S-8 No. 333-240117 pertaining to the Textron Savings Plan and the Textron Canada Savings Plan, Form S-8 No. 333-205932 pertaining to the 2015 Long-Term Incentive Plan, Form S-8 No. 333-144977 pertaining to the 2007 Long-Term Incentive Plan, and Form S-3 No. 333-269915 pertaining to the automatic shelf registration of common stock, preferred stock, senior debt securities and subordinated debt securities of Textron Inc. of our reports dated February 6, 2025, with respect to the consolidated financial statements and schedule of Textron Inc. and the effectiveness of internal control over financial reporting of Textron Inc. included in this Annual Report (Form 10-K) of Textron Inc. for the year ended December 28, 2024.
/s/ Ernst & Young LLP
Boston, Massachusetts
February 6, 2025
Exhibit 24
POWER OF ATTORNEY
The undersigned, Textron Inc. (“Textron”), a Delaware corporation, and the undersigned directors and officers of Textron, do hereby constitute and appoint E. Robert Lupone, Janet S. Fogarty, and Jayne M. Donegan, and each of them, with full powers of substitution, their true and lawful attorneys and agents to do or cause to be done any and all acts and things and to execute and deliver any and all instruments and documents which said attorneys and agents, or any of them, may deem necessary or advisable in order to enable Textron to comply with the Securities and Exchange Act of 1934, as amended, and any requirements of the Securities and Exchange Commission in respect thereof, in connection with the filing of Textron’s Annual Report on Form 10-K for the fiscal year ended December 28, 2024, which is hereby approved by the undersigned, including specifically, but without limitation, power and authority to sign the names of the undersigned directors and officers in the capacities indicated below and to sign the names of such officers on behalf of Textron to such Annual Report filed with the Securities and Exchange Commission, to any and all amendments to such Annual Report, to any instruments or documents or other writings in which the original or copies thereof are to be filed as a part of or in connection with such Annual Report or amendments thereto, and to file or cause to be filed the same with the Securities and Exchange Commission; and each of the undersigned hereby approves, ratifies and confirms all that such attorneys and agents, and each of them, shall do or cause to be done hereunder and such attorneys and agents, and each of them, shall have, and may exercise, all of the powers hereby conferred.
IN WITNESS WHEREOF, Textron has caused this Power of Attorney to be executed and delivered in its name and on its behalf by the undersigned duly authorized officer and its corporate seal affixed, and each of the undersigned has signed his or her name thereto, as of the 6th day of February 2025.
TEXTRON INC.
SEAL
By: /s/ Scott C. Donnelly
Scott C. Donnelly
Chairman,President and
Chief Executive Officer
ATTEST:
/s/ E. Robert Lupone
E. Robert Lupone
Executive Vice President, General Counsel,
Secretary and Chief Compliance Officer
/s/ Scott C. Donnelly Scott C. Donnelly Chairman, President, Chief Executive Officer and Director (principal executive officer) /s/ Richard F. Ambrose Richard F. Ambrose Director /s/ Kathleen M. Bader Kathleen M. Bader Director /s/ R. Kerry Clark R. Kerry Clark Director /s/ Michael X. Garrett Michael X. Garrett Director /s/ Deborah Lee James Deborah Lee James Director | /s/ Thomas A. Kennedy Thomas A. Kennedy Director /s/ Lionel L. Nowell III Lionel L. Nowell III Director /s/ James L. Ziemer James L. Ziemer Director /s/ Maria T. Zuber Maria T. Zuber Director /s/ Frank T. Connor Frank T. Connor Executive Vice President and Chief Financial Officer (principal financial officer) /s/ Mark S. Bamford Mark S. Bamford Vice President and Corporate Controller (principal accounting officer) | ||||
Exhibit 31.1
Certification of Chief Executive Officer Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002
I, Scott C. Donnelly, Chairman, President and Chief Executive Officer of Textron Inc. certify that:
1.I have reviewed this annual report on Form 10-K of Textron Inc.;
2.Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;
3.Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;
4.The registrant's other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:
a)designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;
b)designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;
c)evaluated the effectiveness of the registrant's disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and
d)disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and
5.The registrant's other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant's auditors and the audit committee of the registrant's board of directors (or persons performing the equivalent functions):
a)all significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant's ability to record, process, summarize and report financial information; and
b)any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant's internal control over financial reporting.
| Date: | February 6, 2025 | /s/ Scott C. Donnelly | |||||||||
| Scott C. Donnelly Chairman, President and Chief Executive Officer | |||||||||||
Exhibit 31.2
Certification of Chief Financial Officer Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002
I, Frank T. Connor, Executive Vice President and Chief Financial Officer of Textron Inc. certify that:
1.I have reviewed this annual report on Form 10-K of Textron Inc.;
2.Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;
3.Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;
4.The registrant's other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:
a)designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;
b)designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;
c)evaluated the effectiveness of the registrant's disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and
d)disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and
5.The registrant's other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant's auditors and the audit committee of the registrant's board of directors (or persons performing the equivalent functions):
a)all significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant's ability to record, process, summarize and report financial information; and
b)any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant's internal control over financial reporting.
| Date: | February 6, 2025 | /s/ Frank T. Connor | |||||||||
| Frank T. Connor Executive Vice President and Chief Financial Officer | |||||||||||
Exhibit 32.1
TEXTRON INC.
CERTIFICATION PURSUANT TO
18 U.S.C. SECTION 1350,
AS ADOPTED PURSUANT TO
SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002
In connection with the Annual Report of Textron Inc. (the "Company") on Form 10-K for the period ended December 28, 2024 as filed with the Securities and Exchange Commission on the date hereof (the "Report"), I, Scott C. Donnelly, Chairman, President and Chief Executive Officer of the Company, certify, pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, that to my knowledge:
(1)The Report fully complies with the requirements of section 13(a) or 15(d) of the Securities Exchange Act of 1934; and
(2)The information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company.
| Date: | February 6, 2025 | /s/ Scott C. Donnelly | |||||||||
| Scott C. Donnelly Chairman, President and Chief Executive Officer | |||||||||||
Exhibit 32.2
TEXTRON INC.
CERTIFICATION PURSUANT TO
18 U.S.C. SECTION 1350,
AS ADOPTED PURSUANT TO
SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002
In connection with the Annual Report of Textron Inc. (the "Company") on Form 10-K for the period ended December 28, 2024 as filed with the Securities and Exchange Commission on the date hereof (the "Report"), I, Frank T. Connor, Executive Vice President and Chief Financial Officer of the Company, certify, pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, that to my knowledge:
(1)The Report fully complies with the requirements of section 13(a) or 15(d) of the Securities Exchange Act of 1934; and
(2)The information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company.
| Date: | February 6, 2025 | /s/ Frank T. Connor | |||||||||
| Frank T. Connor Executive Vice President and Chief Financial Officer | |||||||||||