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2016 ANNUAL REPORT
Textron’s Diverse Product Portfolio
Textron is known around the world for its powerful brands of aircraft, defense and industrial products that provide
customers with groundbreaking technologies, innovative solutions and first-class service.
TEXTRON AVIATION
BELL HELICOPTER
INDUSTRIAL
TEXTRON SYSTEMS
Citation Longitude®
Bell Boeing V-22 Osprey
Jacobsen LF577 Fairway Mower
Ship to Shore Connector (SSC)
Citation Latitude®
Bell AH-1Z
Greenlee® GorillaTM Press
TRU Level D Full Flight Simulator
Textron AirLand ScorpionTM
Bell 525 Relentless
Sherman + Reilly Bullwheel Tensioner
Lycoming Race Engines
Beechcraft® King Air® 350i
Bell 505 Jet Ranger X
E-Z-GO Freedom® TXT®
Shadow® M2
Beechcraft T-6 Military Trainer
Bell 429WLG
Textron Off Road StampedeTM
Fury® Precision Guided Munition
Cessna® Grand Caravan® EX
Bell 407GXP
Premier Deicer
COMMANDOTM Elite
Textron’s Global Network of Businesses
TEXTRON AVIATION
BELL HELICOPTER
INDUSTRIAL
TEXTRON SYSTEMS
FINANCE
Textron Aviation is home
to the Beechcraft®,
Cessna® and Hawker®
aircraft brands and
continues to be a leader
in general aviation
through two principal
lines of business: aircraft
sales and aftermarket.
Aircraft sales include
business jet, turboprop
and piston aircraft, as
well as special mission
and military aircraft.
Aftermarket includes
commercial parts sales,
maintenance, inspection
and repair services.
Bell Helicopter is one
of the leading suppliers
of helicopters and
related spare parts and
services in the world.
Bell is the pioneer
of the revolutionary
tiltrotor aircraft and
has delivered more
than 35,000 aircraft to
customers around the
world. Greater than
29% of all helicopters
in operation today carry
the Bell brand, including
both military and
commercial applications.
Our Industrial segment
offers three main
product lines: fuel
systems and functional
components produced
by Kautex; specialized
vehicles and equipment,
such as golf cars,
utility vehicles and
professional mowers,
manufactured by
Textron Specialized
Vehicles businesses;
and tools and test
equipment made by the
Textron Tools & Test
companies.
Textron Systems’
businesses provide
innovative solutions to
the defense, aerospace
and general aviation
markets. Product lines
include unmanned
systems, armored
vehicles, advanced
marine craft and
surveillance systems,
intelligence software
solutions, piston
engines, simulation,
training and other
defense and aviation
mission support
products and services.
Our Finance segment,
operated by Textron
Financial Corporation
(TFC), is a commercial
finance business that
provides financing
solutions for purchasers
of Textron products,
primarily Textron
Aviation aircraft and Bell
helicopters. For more
than five decades, TFC
has played a key role
for Textron customers
around the globe.
Selected Year-Over-Year Financial Data
(Dollars in Millions, Except Per Share Amounts)
Total Revenues
Total Segment Profit
Income from Continuing Operations1
PER SHARE OF COMMON STOCK
Common Stock Price:
High
Low
Year-End
Diluted Earnings from Continuing Operations1
COMMON SHARES OUTSTANDING (In Thousands)
Diluted Average
Year-End
FINANCIAL POSITION
Total Assets
Manufacturing Group Debt
Finance Group Debt
Shareholders’ Equity
Manufacturing Group Debt-to-Capital (Net of Cash)
Manufacturing Group Debt-to-Capital
KEY PERFORMANCE METRICS
Net Cash Provided by Operating Activities of Continuing Operations for Manufacturing Group—GAAP
Manufacturing Cash Flow Before Pension Contributions—Non-GAAP2
2016
$13,788
1,309
843
$ 49.82
30.69
48.56
3.09
272,365
270,287
$15,358
2,777
903
5,574
2015
$13,423
1,255
698
$ 46.93
32.20
42.01
2.50
278,727
274,228
$14,708
2,697
913
4,964
23%
33%
26%
35%
$ 988
573
$ 1,038
631
1. For 2016, Income from continuing operations and Diluted earnings from continuing operations include special charges, net of income taxes, and a significant
multi-year income tax settlement. See page immediately preceding Form 10-K for additional information.
2. Manufacturing Cash Flow Before Pension Contributions is a Non-GAAP Measure. See page immediately preceding Form 10-K for Reconciliation to GAAP.
Textron 2016 Annual Report 1
Fellow Shareholders,
When the Citation Longitude
EXECUTING ON OUR STRATEGY FOR GROWTH
lifted off from a Wichita
airfield for its first test flight
on October 8, it marked
more than the first flight of
a new aircraft. It was one
of the many milestones
representative of our
strategy for growth and
Scott C. Donnelly
Chairman and
Chief Executive Officer
emblematic of our progress as a company.
From the development and launch of
exciting new products to the enhancement
of customer support programs and the
strategic acquisition of new businesses,
we attained a number of significant goals
in 2016. This resulted in 2016 revenues of
$13.8 billion, up 3% from the previous year,
and a segment profit of $1.3 billion with a
profit margin of 9.5%.
In 2016, our businesses kept their focus on our key
drivers for growth and execution. Demonstrating its robust
product pipeline, Textron Aviation made progress with its
new Citation family of business jets: the Citation Latitude
had its first full year of sales, receiving a strong customer
response; the Citation Longitude, in addition to making its
first flight, had a second aircraft enter into the test program
less than a month later; and the Citation Hemisphere
continued making progress in its development phase.
At Bell Helicopter, the challenging commercial helicopter
market resulted in fewer helicopter deliveries than the
previous year, but the business remained focused on the
long term with new product development. The Bell 505
Jet Ranger X received type certification in December
from Transport Canada Civil Aviation, a critical step for
deliveries of this highly anticipated short, light, single-
engine helicopter set to begin in early 2017. On the
military side, the Bell V-280 Valor tiltrotor progressed
toward its scheduled first flight in 2017, and there were
new orders for Bell UH-1Y Venom utility and AH-1Z Viper
attack helicopters.
Even as our U.S. military customers faced budgetary
constraints, Textron Systems realized successes on
both the domestic and international fronts. Our Marine &
Land Systems business received a foreign military sales
contract from Iraq and Colombia for 60 COMMANDO
Select vehicles and an order for five additional Ship to
Shore Connectors; our Unmanned Systems business
received a contract for an additional 24 Shadow V2 Tactical
Unmanned Aircraft Systems (TUAS) upgrades; our Support
Solutions business won a $206 million contract from the
U.S. Army to sustain the Shadow TUAS; and our Electronic
Systems business won several contracts for testing
equipment and testing stations. Marine & Land Systems
also began deliveries of the Tactical Armoured Patrol
Vehicle to the Canadian Army.
A YEAR OF EXPANSION AND INNOVATION
JANUARY
FEBRUARY
MARCH
APRIL
MAY
JUNE
JULY
AUGUST
SEPTEMBER
OCTOBER
NOVEMBER
DECEMBER
Able Engineering & Component
Services acquired
Textron Off Road StampedeTM
introduced
Bell V-280 Valor wing and
fuselage mated
TRU awarded Boeing 777X
flight simulator contract
Airborne Tactical Advantage
Company acquired
Premier Engineering &
Manufacturing acquired
2 Textron 2016 Annual Report
Our Industrial segment launched new products and won
business both in the U.S. and abroad. Textron Specialized
Vehicles expanded its ground support equipment business
with two acquisitions and added several new off-road
powersports vehicles to its product lineup. Kautex secured
new automotive fuel systems business with Ford, Toyota
and BMW.
WINNING NEW BUSINESS AND DELIVERING FOR CUSTOMERS
With its entry into service in September 2015 and a full year
of deliveries in 2016, the Citation Latitude demonstrated the
importance of new products to our company. Customers
around the world embraced the reliability, efficiency and
total ownership value of this mid-size business jet. NetJets,
a longtime Textron Aviation customer, announced in June
that it was adding up to 50 units to its initial Latitude order,
bringing its total order and options to up to 200 aircraft
based on customer reception to this exciting new aircraft.
TRU Simulation + Training demonstrated its global reach,
securing contracts with Air Arabia, Avianca, China Express,
Qingdao Airlines, Finnair Flight Academy, and the Flight
Simulation Technique Centre in India. Working with Bell
Helicopter, TRU developed and installed its first Bell 429
full flight simulator at the Bell Helicopter Training Academy
in Valencia, Spain. TRU continued to grow its relationship
with Boeing, winning the contract to develop the full flight
simulator for the Boeing 777X, its newest twin-aisle airplane.
TRU also delivered the first of its Boeing 737 MAX full flight
training suites to Boeing’s flight training operations.
Demonstrating its confidence in deploying our aircraft
to hotspots around the world, the U.S. Marine Corps
entered into a $461 million contract to purchase 12 UH-
1Y Venom utility helicopters and 16 AH-1Z Viper attack
helicopters from Bell Helicopter. On the commercial side,
Bell Helicopter continued to make progress in China with
the first Bell 407GXP sold to an aviation firm for use as
corporate transport and for helicopter tours. Meanwhile,
customer interest in the Bell 525 Relentless, which is under
development, is continuing to grow with one customer
announcing at Heli-Expo its intent to purchase 10 aircraft.
TOTAL REVENUE BY SEGMENT
TEXTRON AVIATION 36%
INDUSTRIAL 27%
BELL 23%
TEXTRON SYSTEMS 13%
FINANCE 1%
With 34 facilities in 16 countries and innovative automotive
products like its Selective Catalytic Reduction (SCR)
system, Kautex continued to win new business around the
world. Ford selected Kautex’s SCR system for its Mondeo,
Kuga and Focus models in Europe, while BMW announced
it will use Kautex fuel tanks for its 1 Series vehicles globally
U.S. 62%
beginning in 2019. With these contracts, Kautex is now
EUROPE 14%
the supplier for all of Ford’s Gen 3 SCR tank and filler
ASIA PACIFIC 7%
business in Europe and, from 2019 onward, for all vehicles
LATIN AND SOUTH AMERICA 7%
on BMW’s UKL platform, which encompasses its 1 and 2
CANADA 5%
Series as well as its X1, X2 and Mini series of vehicles.
MIDDLE EAST 4%
AFRICA 1%
MILESTONES FOR NEW PRODUCTS AND CUSTOMER SERVICE
Knowing that new products drive customer interest
and sales, we made progress on several new product
development programs in 2016. In addition to flying two
Citation Longitudes in the flight test program, we announced
at the 2016 National Business Aviation Association (NBAA)
show an improved range of 3,500 nautical miles and an
improved fuel payload of 1,600 pounds.
Also at the NBAA show, a cabin mockup of the Citation
Hemisphere, our large-cabin jet targeted for first flight in
2019, was on display, representing our ongoing commitment
to a continuous pipeline of new products. Textron Aviation
also unveiled the Cessna Denali as the name of its new,
clean sheet, single-engine turboprop aircraft, targeted for
first flight in 2018, which will have the widest and most
comfortable cabin in its class and offer best-in-class
operating costs.
Textron AirLand achieved two significant milestones
with the Scorpion jet, a tactical aircraft designed to excel
JANUARY
FEBRUARY
MARCH
APRIL
MAY
JUNE
JULY
AUGUST
SEPTEMBER
OCTOBER
NOVEMBER
DECEMBER
Cessna® Denali unveiled
Safeaero acquired
First flight of ScorpionTM
production jet
Bell V-247 Vigilant unmanned
tiltrotor announced
Citation Longitude® achieves
first flight
Canadian type certification of
Bell 505 Jet Ranger X
Textron 2016 Annual Report 3
TEXTRON AVIATION 36%
INDUSTRIAL 27%
BELL 23%
TEXTRON SYSTEMS 13%
FINANCE 1%
U.S. 62%
EUROPE 14%
ASIA PACIFIC 7%
LATIN AND SOUTH AMERICA 7%
CANADA 5%
MIDDLE EAST 4%
AFRICA 1%
TOTAL REVENUE BY REGION
STRATEGIC ACQUISITIONS COMPLEMENT OUR PRODUCT
AND SERVICE OFFERINGS
Our acquisitions during the year complemented our
businesses, enabling us to reach new customers and
expand our portfolio of products to serve adjacent markets.
Acquiring Able Engineering & Component Services Inc. and
Able Aerospace Inc. in January aligned with our strategy
to enhance maintenance and repair capabilities for both
commercial rotorcraft and fixed-wing customers around the
world so they can quickly get their aircraft back in service.
In April, we acquired Airborne Tactical Advantage Company
(ATAC), a Newport News, Virginia-based company that
provides tactical training and adversary aggressor services
for U.S. Navy, Marine and Air Force pilots in the U.S. and
Japan. With the goal of providing a full spectrum of military
pilot training support solutions in the U.S. and internationally,
we formed Textron Airborne Solutions, a new business unit
that includes ATAC.
TSV acquired two highly-regarded deicing businesses —
Premier Engineering & Manufacturing in Wisconsin and
Safeaero in Sweden —strengthening our ground support
equipment business and expanding our product offerings
for our aviation industry customers.
PUTTING THE PIECES IN PLACE FOR GROWTH
We can take pride in what we accomplished in 2016.
Not only did we mark the year with product and service
milestones, we improved our manufacturing processes
and realized productivity gains across our operations.
These achievements, along with our investments in new
product development and strategic acquisitions, are what
drives profitable growth and creates long-term value for
our shareholders. With the support of our employees,
customers and investors, we look forward to achieving
major milestones in 2017, poised for growth and more
competitive than ever.
Scott C. Donnelly
Chairman and Chief Executive Officer
in multi-mission roles from intelligence, surveillance
and reconnaissance to close air support and armed
reconnaissance. In October, the Scorpion completed a
successful test deploying three widely-used weapons
systems and, in December, the first production conforming
Scorpion jet successfully completed its maiden flight. This
latest version of the Scorpion incorporates a number of
improvements based on customer feedback and an extensive
flight test program. The business has also entered into a
Cooperative Research and Development Agreement with
the U.S. Air Force to conduct the airworthiness assessment
of this novel new aircraft.
We are also addressing the evolving needs of the military
for next-generation and unmanned aircraft. Bell made
progress on the V-280 Valor tiltrotor program, mating the
wing and fuselage of this aircraft in support of first flight
scheduled in 2017. In October, Bell Helicopter announced
the V-247 Vigilant, an unmanned tiltrotor, further displaying
our leadership in tiltrotor technology and our commitment
to meeting the needs of our military customers.
Textron Systems continued to invest in the research and
development of exciting next-generation products to meet
our customers’ needs. In 2016, Textron Systems Unmanned
Systems introduced a line of command and control products
that can be integrated with a range of platforms, including
its unmanned aircraft systems, to gather and disseminate
information that can provide operators with greater situational
awareness on missions.
Textron Specialized Vehicles (TSV) unveiled its highly-
anticipated Textron Off Road Stampede, a 4x4 off-road
vehicle with a high-performance motor and suspension
developed specifically for the side-by-side off-road
powersports segment of the market. The Stampede is part of
a family of vehicles designed to expand TSV’s reach into this
segment. Jacobsen released its new HR series of wide-area
rotary mowers that deliver exceptional efficiency, productivity
and comfort to operators.
Enhancing our service and support network for customers
represents a competitive advantage for our businesses.
In 2016, Bell introduced its Customer Advantage Plans to
provide customers with comprehensive coverage solutions
for their daily operations. For the 22nd consecutive year, Bell
Helicopter’s customer service was ranked first by readers of
Professional Pilot and first in Vertical’s Original Equipment
Manufacturing survey in several leading industry sectors. To
expand its coverage through its authorized service centers
and mobile service units, Textron Aviation launched 1Call, a
single point of contact for Beechcraft, Cessna and Hawker
customers when there are unscheduled maintenance events.
4 Textron 2016 Annual Report
Leadership
Board of Directors
Scott C. Donnelly (1)
Chairman, President and CEO
Textron Inc.
Lawrence K. Fish (3) (4)
Chairman and CEO (Retired)
Citizens Financial Group, Inc.
Kathleen M. Bader (1) (3)
President and CEO (Retired)
NatureWorks LLC
Paul E. Gagné (2) (4)
Chairman
Wajax Corporation
R. Kerry Clark (1) (2)
Chairman and CEO (Retired)
Cardinal Health, Inc.
James T. Conway (2) (3)
General (Retired)
U.S. Marine Corps
Ivor J. Evans (2) (3)
Operating Partner (Retired)
HCI Equity Partners
Dain M. Hancock (2) (4)
Executive Vice President
(Retired)
Lockheed Martin Corporation
Ralph D. Heath (2) (4)
Executive Vice President —
Aeronautics (Retired)
Lockheed Martin Corporation
Executive
Officers
Segment and
Business Unit
Presidents
Scott C. Donnelly
Chairman, President and CEO
Textron Inc.
Russ Bartlett
President and CEO
Textron Airborne Solutions
Frank T. Connor
Executive Vice President and
Chief Financial Officer
Textron Inc.
Cheryl H. Johnson
Executive Vice President,
Human Resources
Textron Inc.
Jason Butchko
President and CEO
Greenlee Textron Inc.,
Sherman + Reilly Inc., and
HD Electric Company
Scott A. Ernest
President and CEO
Textron Aviation
Lord Powell of Bayswater
KCMG (3) (4)
Former Private Secretary and
Advisor on Foreign Affairs and
Defense to Prime Ministers
Margaret Thatcher and
John Major
Lloyd G. Trotter (1) (4) (5)
Managing Partner
GenNx 360 Capital Partners
James L. Ziemer (2) (4)
President and CEO (Retired)
Harley-Davidson, Inc.
Maria T. Zuber (3) (4)
Vice President, Research
Massachusetts Institute of
Technology
Corporate
Officers
Mark S. Bamford
Vice President and
Corporate Controller
Textron Inc.
Julie G. Duffy
Vice President and Deputy
General Counsel – Litigation
Textron Inc.
Dana L. Goldberg
Vice President – Tax
Textron Inc.
E. Robert Lupone
Executive Vice President,
General Counsel and Secretary
Textron Inc.
Kevin P. Holleran
President and CEO
Industrial Segment and Textron
Specialized Vehicles
Scott P. Hegstrom
Vice President – Mergers &
Acquisitions
Textron Inc.
Mary F. Lovejoy
Vice President and Treasurer
Textron Inc.
Paul Mc Gartoll
Vice President – Strategy and
Business Development
Textron Inc.
Ellen M. Lord
President and CEO
Textron Systems Segment
R. Danny Maldonado
President and CEO
Textron Financial Corporation
Jörg Rautenstrauch
President and CEO
Kautex
Mitch Snyder
President and CEO
Bell Helicopter
Ian K. Walsh
President and CEO
TRU Simulation + Training Inc.
Numbers Indicate Committee
Memberships:
(1) Executive Committee:
Chair, Scott C. Donnelly
(2) Audit Committee:
Chair, R. Kerry Clark
(3) Nominating and Corporate
Governance Committee:
Chair, Kathleen M. Bader
(4) Organization and
Compensation Committee:
Chair, Lloyd G. Trotter
(5) Lead Director:
Lloyd G. Trotter
Thomas N. Nichipor
Vice President – Textron
Audit Services
Textron Inc.
Elizabeth C. Perkins
Vice President and
Deputy General Counsel
Textron Inc.
Robert O. Rowland
Senior Vice President –
Washington Operations
Textron Inc.
Eric Salander
Vice President –
Investor Relations
Textron Inc.
Diane K. Schwarz
Vice President and
Chief Information Officer
Textron Inc.
Cathy A. Streker
Vice President –
Human Resources and Benefits
Textron Inc.
4 Textron 2016 Annual Report
Textron 2016 Annual Report 5
Footnote To Selected Year-Over-Year Financial Data
1 For 2016, Income from continuing operations and Diluted earnings from continuing operations include special charges, net
of income taxes, of $78 million or $0.29 per diluted share, related to a plan initiated in 2016 to restructure and realign our
businesses by implementing headcount reductions, facility consolidations and other actions in order to improve the overall
operating efficiency across Textron. Special charges for this plan primarily include severance costs and asset impairments.
In 2016, we also recognized an income tax benefit of $319 million, inclusive of interest, of which $206 million or $0.76
per diluted share is included in Income from continuing operations and $113 million is included in discontinued operations.
This benefit was the result of the final settlement with the Internal Revenue Service Office of Appeals for our 1998 to 2008
tax years.
2 We use Manufacturing Cash Flow Before Pension Contributions as our measure of free cash flow. This measure is not a
financial measure under generally accepted accounting principles (GAAP) and should be used in conjunction with GAAP
cash measures provided in our Consolidated Statements of Cash Flows.
Our definition of manufacturing cash flow before pension contributions adjusts net cash from operating activities of
continuing operations (GAAP) for the following:
• Excludes dividends received from Textron Financial Corporation (TFC) and capital contributions to TFC provided under
the Support Agreement and debt agreements as these cash flows are not representative of manufacturing operations;
• Deducts capital expenditures and includes proceeds from the sale of property, plant and equipment to arrive at the net
capital investment required to support ongoing manufacturing operations;
• Adds back pension contributions as we consider our pension obligations to be debt-like liabilities. Additionally, these
contributions can fluctuate significantly from period to period and we believe that they are not representative of cash
used by our manufacturing operations during the period.
While we believe this measure provides a focus on cash generated from manufacturing operations, before pension
contributions, and may be used as an additional relevant measure of liquidity, it does not necessarily provide the amount
available for discretionary expenditures since we have certain non-discretionary obligations that are not deducted from
the measure.
A reconciliation of Net cash provided by operating activities of continuing operations for the Manufacturing group (GAAP) to
Manufacturing cash flow before pension contributions (Non-GAAP) is provided below:
(In Millions)
Net cash provided by operating activities of continuing operations for the Manufacturing group—GAAP
Less: Capital expenditures
Dividends received from TFC
Plus: Total pension contributions
Proceeds from the sale of property, plant and equipment
Manufacturing Cash Flow Before Pension Contributions—Non-GAAP
2016
2015
$ 988
(446)
(29)
50
10
$1,038
(420)
(63)
68
8
$ 573
$ 631
6 Textron 2016 Annual Report
UNITED STATES SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
Form 10-K
[ x ] ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT
For the fiscal year ended December 31, 2016
or
OF 1934
For the transition period from
to
.
Commission File Number 1-5480
Textron Inc.
(Exact name of registrant as specified in its charter)
Delaware
(State or other jurisdiction of incorporation or organization)
05-0315468
(I.R.S. Employer Identification No.)
40 Westminster Street, Providence, RI
(Address of principal executive offices)
02903
(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
Common Stock — par value $0.125
Name of Each Exchange on Which Registered
New York Stock Exchange
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. Yes (cid:57) 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
No (cid:57)
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. Yes (cid:57) No
Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File
required to be submitted and posted 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 and post such files). Yes (cid:57) No____
Indicate by check mark if disclosure of delinquent filers pursuant to Item 405 of Regulation S-K is not contained herein, and will not be contained, to
the best of registrant’s knowledge, in definitive proxy or information statements incorporated by reference in Part III of this Form 10-K or any
amendment to this Form 10-K. [ (cid:57) ]
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer or a smaller reporting company.
See definitions of “large accelerated filer,” “accelerated filer” and “smaller reporting company” in Rule 12b-2 of the Exchange Act. (Check one):
Large accelerated filer [ (cid:57) ]
Accelerated filer [ ]
Non-accelerated filer [ ]
(Do not check if a smaller reporting company)
Smaller reporting company [ ]
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Act). Yes
No (cid:57)
The aggregate market value of the registrant’s Common Stock held by non-affiliates at July 2, 2016 was approximately $9.8 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 4, 2017, 270,086,401 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 26, 2017.
(cid:55)(cid:72)(cid:91)(cid:87)(cid:85)(cid:82)(cid:81)(cid:3)(cid:21)(cid:19)(cid:20)(cid:25)(cid:3)(cid:36)(cid:81)(cid:81)(cid:88)(cid:68)(cid:79)(cid:3)(cid:53)(cid:72)(cid:83)(cid:82)(cid:85)(cid:87)(cid:3)(cid:3)(cid:3)(cid:3)(cid:3)(cid:3)(cid:3)(cid:20)
Textron Inc.
Index to Annual Report on Form 10-K
For the Fiscal Year Ended December 31, 2016
PART I
Item 1.
Business
Item 1A.
Risk Factors
Item 1B.
Unresolved Staff Comments
Item 2.
Item 3.
Item 4.
PART II
Item 5.
Item 6.
Item 7.
Properties
Legal Proceedings
Mine Safety Disclosures
Market for Registrant’s Common Equity, Related Stockholder Matters and Issuer
Purchases of Equity Securities
Selected Financial Data
Management’s Discussion and Analysis of Financial Condition and Results of Operations
Item 7A.
Quantitative and Qualitative Disclosures About Market Risk
Item 8.
Item 9.
Financial Statements and Supplementary Data
Changes In and Disagreements With Accountants on Accounting and Financial Disclosure
Item 9A.
Controls and Procedures
PART III
Item 10.
Directors, Executive Officers and Corporate Governance
Item 11.
Executive Compensation
Item 12.
Security Ownership of Certain Beneficial Owners and Management and Related
Stockholder Matters
Item 13.
Certain Relationships and Related Transactions and Director Independence
Item 14.
Principal Accountant Fees and Services
PART IV
Item 15.
Exhibits and Financial Statement Schedules
Signatures
Page
3
10
15
15
15
16
16
18
19
35
36
71
71
73
73
73
73
73
74
79
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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. We have approximately 36,000 employees worldwide.
Textron Inc. was founded in 1923 and reincorporated in Delaware on July 31, 1967. Unless otherwise indicated, references to
“Textron Inc.,” the “Company,” “we,” “our” and “us” in this Annual Report on Form 10-K refer to Textron Inc. and its consolidated
subsidiaries.
We conduct our business through five operating segments: Textron Aviation, Bell, Textron Systems and Industrial, which represent
our manufacturing businesses, and Finance, which represents our finance business. A description of the business of each of our
segments is set forth below. Our business segments include operations that are unincorporated divisions of Textron Inc. and others
that are separately incorporated subsidiaries. Financial information by business segment and geographic area appears in Note 16 to
the Consolidated Financial Statements on pages 66 through 68 of this Annual Report on Form 10-K. The following description of
our business should be read in conjunction with “Management’s Discussion and Analysis of Financial Condition and Results of
Operations” on pages 19 through 35 of this Annual Report on Form 10-K. Information included in this Annual Report on Form 10-
K refers to our continuing businesses unless otherwise indicated.
Textron Aviation Segment
Textron Aviation is a leader in general aviation. Textron Aviation manufactures, sells and services Beechcraft and Cessna aircraft,
and services the Hawker brand of business jets. The segment has two principal product lines: aircraft sales and aftermarket. Aircraft
sales include business jets, turboprop aircraft, piston engine aircraft, and military trainer and defense aircraft. Aftermarket includes
commercial parts sales, and maintenance, inspection and repair services. Revenues in the Textron Aviation segment accounted for
approximately 36%, 36% and 33% of our total revenues in 2016, 2015 and 2014, respectively. Revenues for Textron Aviation’s
principal lines of business were as follows:
(In millions)
Aircraft sales
Aftermarket
Total revenues
2016
$ 3,412
1,509
$ 4,921
2015
$ 3,404
1,418
$ 4,822
2014
$ 3,182
1,386
$ 4,568
The family of jets currently produced by Textron Aviation includes the Mustang, Citation M2, Citation CJ3+, Citation CJ4, Citation
XLS+, Citation Latitude, Citation Sovereign+, and the Citation X+, the fastest civilian jet in the world. In addition, Textron Aviation
is developing the Citation Longitude, a super-midsize jet which achieved first flight in October 2016 and is expected to enter into
service in 2017, and the Citation Hemisphere, a large-cabin jet for which first flight is targeted in 2019.
Textron Aviation’s turboprop aircraft include the Beechcraft King Air, which offers the King Air C90GTx, King Air 250, King Air
350ER and King Air 350i, and the Cessna Caravan, a utility turboprop. In addition, Textron Aviation recently announced the Cessna
Denali, a high-performance single engine turboprop aircraft, which is targeted to achieve its first flight in 2018. Textron Aviation
also offers the T-6 trainer, which is used to train pilots of more than 20 countries, and the AT-6 light attack military aircraft.
Textron Aviation’s piston engine aircraft include the Beechcraft Baron and Bonanza, and the Cessna Skyhawk, Skylane, Turbo
Stationair and the high performance TTx.
The Scorpion was added to the Textron Aviation product line and will be included in this segment’s results beginning January 1,
2017. The Scorpion represents a highly affordable, multi-mission aircraft offering diverse capabilities including intelligence,
surveillance and reconnaissance, humanitarian assistance, disaster relief, advanced training and precision strike, designed primarily
for the tactical military jet aviation market. The Scorpion has completed more than 800 flight hours, and the first flight of a
production conforming aircraft was achieved in December 2016. Also, in 2016, we entered into a cooperative research and
development agreement with the U.S. Air Force under which an airworthiness assessment of this aircraft will be performed.
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In support of its family of aircraft, Textron Aviation operates a global network of 19 service centers, two of which are co-located
with Bell Helicopter, along with more than 350 authorized independent service centers 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 60 mobile service units and several
dedicated support aircraft.
To further enhance its service capabilities, during 2016, Textron Aviation acquired Able Engineering and Component Services, Inc.
and Able Aerospace, Inc., an industry-leading repair and overhaul business that provides component repairs, component exchanges
and replacement parts, among other support and service offerings for commercial rotorcraft and fixed-wing aircraft customers around
the world.
Textron Aviation markets its products worldwide through its own sales force, as well as through a network of authorized independent
sales representatives. Textron Aviation has several competitors domestically and internationally in various market segments.
Textron Aviation’s aircraft compete with other aircraft that vary in size, speed, range, capacity and handling characteristics on the
basis of price, product quality and reliability, direct operating costs, product support and reputation.
Bell Segment
Bell Helicopter is one of the leading suppliers of military and commercial helicopters, tiltrotor aircraft, and related spare parts and
services in the world. Revenues for Bell accounted for approximately 23%, 26% and 31% of our total revenues in 2016, 2015 and
2014, respectively. Revenues by Bell’s principal lines of business were as follows:
(In millions)
Military:
V-22 Program
Other Military
Commercial
Total revenues
2016
2015
2014
$ 1,151
936
1,152
$ 3,239
$ 1,194
839
1,421
$ 3,454
$ 1,771
860
1,614
$ 4,245
Bell supplies advanced military helicopters and support to the U.S. Government and to military customers outside the United States.
Bell’s primary U.S. Government programs are the V-22 tiltrotor aircraft and the H-1 helicopters. Bell is one of the leading suppliers
of helicopters to the U.S. Government and, in association with The Boeing Company (Boeing), the only supplier of military tiltrotor
aircraft. Tiltrotor aircraft are designed to provide the benefits of both helicopters and fixed-wing aircraft. Through its strategic
alliance with Boeing, Bell produces and supports the V-22 tiltrotor aircraft for the U.S. Department of Defense (DoD), and also for
Japan under the U.S. Government-sponsored foreign military sales program. The H-1 helicopter program includes a utility model,
the UH-1Y, and an advanced attack model, the AH-1Z, which have 84% parts commonality between them. While the U.S. Marine
Corps is the primary customer for H-1 helicopters, we have received orders for Pakistan under the U.S. Government-sponsored
foreign military sales program.
Through its commercial business, Bell is a leading supplier of commercially certified helicopters and support to corporate, offshore
petroleum exploration and development, utility, charter, police, fire, rescue and emergency medical helicopter operators, 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 helicopters currently offered by Bell for commercial applications
include the 206L-4, 407, 407GT, 407GXP, 412EP, 412EPI, 429 and Huey II. The new 505 Jet Ranger X, a short-light single
helicopter, achieved certification in Canada at the end of 2016, with a follow-on Federal Aviation Administration (FAA) certification
expected in the first quarter of 2017. In addition, Bell achieved first flight in 2015 for the 525 Relentless, its first super medium
commercial helicopter. On July 6, 2016, one of the two test aircraft used in flight testing for the 525 Relentless helicopters crashed.
We are cooperating fully with the National Transportation Safety Board in its investigation of the accident and working closely with
the FAA on progressing toward certification of the 525. While we have temporarily suspended flight activity for the remaining test
aircraft, other certification activities and production work on the 525 program continue. The timing of the aircraft’s certification and
entry into service will be determined upon resumption of flight testing.
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 through a network of six Bell-operated service centers, four global parts distribution centers and
over 100 independent service centers located in 32 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.
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Bell competes against a number of competitors throughout the world for its helicopter business and its parts and support business.
Competition is based primarily on price, product quality and reliability, product support, performance and reputation.
Textron Systems Segment
Textron Systems’ product lines consist of unmanned aircraft systems, marine and land systems, weapons and sensors, simulation,
training and other defense and aviation mission support products and services.
Textron Systems is a supplier to the defense, aerospace and general aviation markets, and represents approximately 13%, 11% and
12% of our total revenues in 2016, 2015 and 2014, respectively. This segment sells its products to U.S. Government customers and
to customers outside the U.S. through foreign military sales sponsored by the U.S. Government and directly through commercial
sales channels. Textron Systems competes on the basis of technology, contract performance, price, product quality and reliability,
product support and reputation. Revenues by Textron Systems’ product lines were as follows:
(In millions)
Unmanned Systems
Marine and Land Systems
Weapons and Sensors
Simulation, Training and Other
Total revenues
$
2016
763
294
282
417
$ 1,756
$
2015
686
188
255
391
$ 1,520
$
2014
797
158
264
405
$ 1,624
Unmanned Systems
Unmanned Systems consists of the Unmanned Systems and Support Solutions businesses. The Unmanned Systems business has
designed, manufactured and fielded combat-proven unmanned aircraft systems for more than 25 years. This business’s products
include the U.S. Army’s premier tactical unmanned aircraft system, the Shadow, which surpassed one million flight hours during
2016, and the Aerosonde Small Unmanned Aircraft System, a multi-mission capable unmanned aircraft system that has amassed
more than 150,000 flight hours in commercial and military operations around the world. In addition, its unmanned aircraft and
interoperable command and control technologies provide critical situational awareness and actionable intelligence for users
worldwide. Our Support Solutions business provides logistical support for various unmanned systems as well as training and supply
chain services to government and commercial customers worldwide.
Marine and Land Systems
The Marine and Land Systems business is a world leader in the design, production and support of armored vehicles, turrets and
related subsystems as well as advanced marine craft. It produces a family of extremely mobile, highly protective vehicles for the
U.S. Army and international allies, and is developing the U.S. Navy’s next generation Landing Craft Air Cushion as part of the Ship-
to-Shore Connector program.
Weapons and Sensors
The Weapons and Sensors business consists of state-of-the-art smart weapons, airborne and ground-based sensors and surveillance
systems, and protection systems for the defense and aerospace industries. During the third quarter of 2016, as discussed in Note 12
to the consolidated financial statements, we announced a plan to discontinue production of our sensor-fuzed weapon product by the
end of the first quarter of 2017, with final deliveries to be completed by the end of 2017.
Simulation, Training and Other
Simulation, Training and Other includes six businesses: TRU Simulation + Training, Lycoming, Electronic Systems, Advanced
Information Solutions, Geospatial Solutions and Textron Airborne Solutions. TRU Simulation + Training designs, develops,
manufactures, installs, and provides maintenance of advanced flight training courseware and devices, including full flight simulators,
for both rotary- and fixed-wing aircraft for commercial airlines, aircraft original equipment manufacturers (OEMs), flight training
centers and training organizations worldwide. Through its training centers, TRU Simulation + Training provides initial type-rating
and recurrency training for pilots, as well as maintenance training in its Aviation Maintenance Training Academy. Lycoming
specializes in the engineering, manufacture, service and support of piston aircraft engines for the general aviation and remotely
piloted aircraft markets. Electronic Systems provides high technology test equipment and electronic warfare test and training
solutions. Advanced Information Solutions and Geospatial Solutions provide intelligence software solutions for U.S. and
international defense, intelligence and law enforcement communities. Textron Airborne Solutions focuses on live military air-to-air
and air-to-ship training and support services for U.S. Navy, Marine and Air Force pilots, and includes the recently acquired Airborne
Tactical Advantage Company.
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Industrial Segment
Our Industrial segment designs and manufactures a variety of products within three principal product lines. Industrial segment
revenues were as follows:
(In millions)
Fuel Systems and Functional Components
Specialized Vehicles and Equipment
Tools and Test Equipment
Total revenues
2016
$ 2,273
1,080
441
$ 3,794
2015
$ 2,078
1,021
445
$ 3,544
2014
$ 1,975
868
495
$ 3,338
Fuel Systems and Functional Components
Our Fuel Systems and Functional Components product line is operated by our Kautex business unit, which is headquartered in Bonn,
Germany. Kautex is a leading developer and manufacturer of blow-molded plastic fuel systems for cars, light trucks, all-terrain
vehicles, windshield and headlamp washer systems for automobiles and selective catalytic reduction systems used to reduce
emissions from diesel engines. Kautex serves the global automobile market, with operating facilities near its major customers around
the world. Kautex also produces cast iron engine camshafts and develops and produces plastic bottles and containers for food,
household, laboratory and industrial uses. Revenues of Kautex accounted for approximately 16%, 15% and 14% of our total revenues
in 2016, 2015 and 2014, respectively.
Our automotive products have several major competitors worldwide, some of which are affiliated with the OEMs that comprise our
targeted customer base. Competition typically is based on a number of factors including price, technology, environmental
performance, product quality and reliability, prior experience and available manufacturing capacity.
Specialized Vehicles and Equipment
Our Specialized Vehicles and Equipment product line includes the products designed, manufactured and sold by our Textron
Specialized Vehicles and Jacobsen businesses. As discussed in Note 12 to the consolidated financial statements, the Jacobsen
business is being combined into the Textron Specialized Vehicles business in order to optimize efficiencies and better serve their
shared customers and distributors. The Specialized Vehicles and Equipment product line includes the E-Z-GO, Textron Off Road,
TUG Technologies, Douglas Equipment, Ransomes, Jacobsen, Cushman, Dixie Chopper, and the recently acquired Premier and
Safeaero, businesses and brands. The businesses in this product line design, manufacture and sell golf cars, off-road utility vehicles,
light transportation vehicles, aviation ground support equipment and professional turf-maintenance equipment, as well as specialized
turf-care vehicles.
These businesses have a diversified customer base that includes golf courses and resorts, government agencies and municipalities,
consumers, and commercial and industrial users such as factories, warehouses, airports, planned communities, hunting preserves,
educational and corporate campuses, sporting venues, municipalities and landscaping professionals. Sales are made through a
combination of factory direct resources and a network of independent distributors and dealers worldwide. We have two major
competitors for both golf cars and professional turf-maintenance equipment, and several competitors for off-road and light
transportation vehicles, aviation ground support equipment, and specialized turf-care products. Competition is based primarily on
price, product quality and reliability, product features, product support and reputation.
We recently entered into an agreement to acquire Arctic Cat Inc., a leader in the recreational vehicle industry. The company
manufactures and markets all-terrain vehicles, side-by-sides and snowmobiles, in addition to related parts, garments and
accessories under the Arctic Cat® and Motorfist® brand names. Subject to customary closing conditions, we expect the
transaction to close in March 2017.
Tools and Test Equipment
The Tools and Test Equipment product line includes products sold by businesses that design and manufacture powered equipment,
electrical test and measurement instruments, mechanical and hydraulic tools, cable connectors, fiber optic assemblies, underground
and aerial transmission and distribution products and power utility products. These businesses also encompass the Greenlee, Greenlee
Communications, Greenlee Utility, HD Electric, Klauke, Sherman+Reilly and Endura brand names, and their products are used
principally in the construction, maintenance, telecommunications, data communications, electrical, utility and plumbing
industries. Their products are distributed through a global network of sales representatives and distributors and are also sold directly
to home improvement retailers and OEMs. The businesses have plant operations in five countries with almost half of their combined
revenues coming from outside the United States. These businesses face competition from numerous manufacturers based primarily
on price, delivery lead time, product quality and reliability.
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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. The majority of our finance receivables are cross-border transactions for aircraft sold outside
of the U.S. Finance receivables originated in the U.S. are primarily for purchasers who had difficulty in accessing other sources of
financing for the purchase of Textron-manufactured products. In 2016, 2015 and 2014, our Finance group paid our Manufacturing
group $173 million, $194 million and $215 million, respectively, related to the sale of Textron-manufactured products to third parties
that were financed by the Finance group.
The commercial finance business traditionally is extremely competitive. Our Finance segment is subject to competition from various
types of financing institutions, including banks, leasing companies, commercial finance companies and finance operations of
equipment vendors. Competition within the commercial finance industry primarily is focused on price, term, structure and service.
Our Finance segment’s largest business risk is the collectability of its finance receivable portfolio. See “Finance Portfolio Quality”
in “Management’s Discussion and Analysis of Financial Condition and Results of Operations” on page 28 for information about the
Finance segment’s credit performance.
Backlog
Our backlog at the end of 2016 and 2015 is summarized below:
(In millions)
Bell
Textron Systems
Textron Aviation
Total backlog
December 31,
2016
$ 5,360
1,841
1,041
$ 8,242
January 2,
2016
$ 5,224
2,328
1,074
$ 8,626
Approximately 41% of our total backlog at December 31, 2016 represents orders that are not expected to be filled in 2017.
At the end of 2016, approximately 61% of our total backlog was with the U.S. Government, which included only funded amounts
as the U.S. Government is obligated only up to the amount of funding formally appropriated for a contract. Bell’s 2016 backlog
included $1.7 billion related to a multi-year procurement contract with the U.S. Government for the purchase of V-22 tiltrotor
aircraft.
U.S. Government Contracts
In 2016, approximately 25% of our consolidated revenues were generated by or resulted from contracts with the U.S. Government,
excluding those contracts under the U.S. Government-sponsored foreign military sales program. This business is subject to
competition, changes in procurement policies and regulations, the continuing availability of funding, which is dependent upon
congressional appropriations, national and international priorities for defense spending, world events, and the size and timing of
programs in which we may participate.
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.
Research and Development
Information regarding our research and development expenditures is contained in Note 1 to the Consolidated Financial Statements
on page 47 of this Annual Report on Form 10-K.
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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. Some of these trademarks, trade names
and service marks are used in this Annual Report on Form 10-K and other reports, including: A-2PATS; Able Aerospace Services;
Able Preferred; Aeronautical Accessories; AAI; acAlert; AirScout; Ascent; Aerosonde; AH-1Z; Ambush; AVCOAT; Baron;
BattleHawk; Beechcraft; Beechcraft T-6; Bell; Bell CAP; Bell Customer Advantage Plan; Bell Helicopter; BENDWORKS;
Bonanza; Bravo; Cadillac Gage; Caravan; Caravan Amphibian; Caravan 675; Cessna; Cessna 350; Cessna 400; Cessna Turbo
Skylane JT-A; Cessna Turbo Skyhawk JT-A; Citation; CITATION ALPINE EDITION; Citation Encore+; Citation Latitude;
Citation Longitude; Citation M2; Citation Sovereign; Citation X; Citation X+; Citation XLS+; CJ1+; CJ2+; CJ3; CJ3+; CJ4; Clairity;
CLAW; CLEARTEST; Commando; Cushman; CUSV; DataScout; Denali; Dixie Chopper; Dixie Chopper Stryker; DoubleVision;
Duct Dawg X; Eclipse; ENFORCER; Excel; E-Z-GO; E-Z-GO EXPRESS; FAST-N-LATCH; FASTRAP; Firefly; Fury; G3 Tugger;
GatorEye; Gator Grips; GLOBAL MISSION SUPPORT; Gorilla; Grand Caravan; Greenlee; H-1; HAULER; HDE; Hawker;
Hemisphere; Huey; Huey II; iCommand; iPress; IE2; Instinct; Integrated Command Suite; INTELLIBRAKE; INTELLI-CRIMP;
Jacobsen; Jacobsen HoverKing; Jet Ranger X; Kautex; King Air; King Air C90GTx; King Air 250; King Air 350; Kiowa Warrior;
Klauke; LF; Lycoming; M1117 ASV; MADE FOR THE TRADE; McCauley; Mechtronix; MicroObserver; Millenworks; Mission
Critical Support (MCS); MissionLink (IVHM); Mustang; Next Generation Carbon Canister; Next Generation Fuel System; NGCC;
NGFS; Odyssey; ONSLAUGHT; Overwatch; PDCue; Power Advantage; Premier; Pro-Fit; ProFlight; ProParts; ProPropeller;
Ransomes; REALCue; REALFeel; Recoil; Relentless; ROCONNECT; RT2; RXV; SABER; Safeaero; Safe-Zone; Scorpion;
Shadow; Shadow Knight; Shadow Master; Sherman+Reilly; Skyhawk; Skyhawk SP; Skylane; SkyPLUS; Sovereign; Speed Punch;
Spider; Stampede; Stationair; ST 4X4; Super Cargomaster; Super Medium; SuperCobra; SYMTX; Synturian; TDCue; Textron;
Textron Airborne Solutions; Textron Aviation; Textron Defense Systems; Textron Financial Corporation; Textron GSE; Textron
Marine & Land Systems; Textron Off Road; Textron Systems; TI-Metal; TRUESET; TRU Simulation + Training; TRUCKSTER;
TTx; TUG; Turbo Skylane; Turbo Stationair; UH-1Y; Under Dawg; V-Watch Connect; VALOR; Value-Driven MRO Solutions; V-
22 Osprey; V-247; V-280; Watchman; Wolverine; 2FIVE; 206; 407; 407GT; 407GX; 412; 429; 505; 525 and 525 Relentless. These
marks and their related trademark designs and logotypes (and variations of the foregoing) are trademarks, trade names or service
marks of Textron Inc., its subsidiaries, affiliates or joint ventures.
Environmental Considerations
Our operations are subject to numerous laws and regulations designed to protect the environment. Compliance with these laws and
expenditures for environmental control facilities has not had a material effect on our capital expenditures, earnings or competitive
position. Additional information regarding environmental matters is contained in Note 14 to the Consolidated Financial Statements
on page 65 of this Annual Report on Form 10-K.
We do not believe that existing or pending climate change legislation, regulation, or international treaties or accords are reasonably
likely to have a material effect in the foreseeable future on our business or markets nor on our results of operations, capital
expenditures or financial position. We will continue to monitor emerging developments in this area.
Employees
At December 31, 2016, we had approximately 36,000 employees.
Executive Officers of the Registrant
The following table sets forth certain information concerning our executive officers as of February 22, 2017.
Name
Scott C. Donnelly
Frank T. Connor
Cheryl H. Johnson
E. Robert Lupone
Age
55
57
56
57
Current Position with Textron Inc.
Chairman, President and Chief Executive Officer
Executive Vice President and Chief Financial Officer
Executive Vice President, Human Resources
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, at which time the Chief Operating Officer position was eliminated. 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
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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.
Ms. Johnson was named Executive Vice President, Human Resources in July 2012. Ms. Johnson joined Textron in 1996 and has
held various human resources leadership positions across Textron's businesses, including Senior Human Resources Business Partner
for Greenlee and Vice President of Human Resources for E-Z-GO, a position she held from 2006 until joining Bell in 2009. At Bell,
she most recently served as Director of Talent and Organizational Development. Prior to Textron, Ms. Johnson held roles in human
resources, marketing and sales, and finance disciplines at several organizations, including IBM and Hamilton Sundstrand, a United
Technologies Company.
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:
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(cid:120)
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;
(cid:120) Our ability to perform as anticipated and to control costs under contracts with the U.S. Government;
(cid:120)
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;
(cid:120)
(cid:120) Volatility in the global economy or changes in worldwide political conditions that adversely impact demand for our
products;
(cid:120) Volatility in interest rates or foreign exchange rates;
(cid:120)
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;
(cid:120) Our Finance segment’s ability to maintain portfolio credit quality or to realize full value of receivables;
(cid:120)
Performance issues with key suppliers or subcontractors;
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Legislative or regulatory actions, both domestic and foreign, impacting our operations or demand for our products;
(cid:120)
(cid:120) Our ability to control costs and successfully implement various cost-reduction activities;
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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;
(cid:120)
(cid:120) 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;
(cid:120)
(cid:120) Demand softness or volatility in the markets in which we do business;
(cid:120)
Cybersecurity threats, including the potential misappropriation of assets or sensitive information, corruption of data or
operational disruption;
(cid:120) Difficulty or unanticipated expenses in connection with integrating acquired businesses; and
(cid:120)
The risk that acquisitions do not perform as planned, including, for example, the risk that acquired businesses will not
achieve revenues and profit projections.
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.
We have customer concentration with the U.S. Government; reduction in U.S. Government defense spending may adversely affect
our results of operations and financial condition.
During 2016, 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.
The funding of these 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. 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 may
result in a loss of anticipated future revenues that could materially and adversely impact our results of operations and financial
condition. Significant changes in national and international policies or priorities for defense spending could impact the funding, or
the timing of funding, of our programs, which could negatively impact our results of operations and financial condition.
Under the Budget Control Act of 2011, the U.S. Government committed to significantly reduce the federal deficit over ten years. As
a result, long-term funding for various programs in which we participate, as well as future purchasing decisions by our U.S.
Government customers, could be reduced, delayed or cancelled. In addition, these cuts could adversely affect the viability of the
suppliers and subcontractors under our programs. There are many variables in how these budget cuts could be implemented that
make it difficult to determine specific impacts; however, we expect that sequestration, as currently provided for under the Budget
Control Act, would result in lower revenues, profits and cash flows for our company. Such circumstances may also result in an
impairment of our goodwill and intangible assets. 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; if, for example, the debt ceiling is not raised, and, as a
result, our customer does not pay us on a timely basis, we may need to finance our continued performance of the impacted contracts
from our other resources on an interim basis. An extended delay in the timely payment by the U.S. Government could result in a
material adverse effect on our cash flows, results of operations and financial condition.
U.S. Government contracts may 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
and anticipated revenues would be reduced by the expected value of the remaining work under such contracts. We also enter into
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“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 result in 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.
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. Our U.S. Government
contracts contain provisions that allow the U.S. Government to unilaterally suspend or debar us from receiving new contracts for a
period of time, reduce the value of existing contracts, issue modifications to a contract, and control and potentially prohibit the export
of our products, services and associated materials. 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 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 of profits, suspension 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.
Cost overruns on U.S. Government contracts could subject us to losses or adversely affect our future business.
Under fixed-price contracts, as a general rule, we receive a fixed price irrespective of the actual costs we incur, and, consequently,
any costs in excess of the fixed price are absorbed by us. Changes in underlying assumptions, circumstances or estimates used in
developing the pricing for such contracts may adversely affect our results of operations. Additionally, U.S. Government procurement
policies increasingly favor fixed-price incentive-based fee arrangements rather than traditional fixed-price contracts; these fee
arrangements could negatively impact our profitability. Other current U.S. Government policies could negatively impact our working
capital and cash flow. For example, the government has expressed a preference for requiring progress payments rather than
performance based payments on new fixed-price contracts, which if implemented, delays our ability to recover a significant amount
of costs incurred on a contract and thus affects the timing of our cash flows. 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. Under each type of contract, if we are unable to control costs incurred in performing
under the contract, 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.
Demand for our aircraft products is cyclical and could adversely affect our financial results.
Demand for business jets, turbo props and commercial helicopters has been cyclical and difficult to forecast. 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. Changes in economic conditions may
cause customers to request that firm orders be rescheduled or cancelled. Reduced demand for our aircraft products or delays or
cancellations of orders could result in a material adverse effect on our cash flows, results of operations and financial condition.
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We may make acquisitions that increase the risks of our business.
We may enter into acquisitions in an effort to expand our business and enhance shareholder value. Acquisitions involve risks and
uncertainties that 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 that may 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. In addition, unanticipated delays or difficulties in effecting acquisitions may prevent the consummation of the
acquisition or divert the attention of our management and resources from our existing operations.
If our Finance segment is unable to maintain portfolio credit quality, our financial performance could be adversely affected.
A key determinant of the financial performance of our Finance segment is the quality of loans, leases and other assets in its portfolio.
Portfolio quality may 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 majority of the new 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 realizing upon collateral in the event of borrower default, which may result in difficulty or delay
in collecting on the related finance receivables. If our Finance segment has difficulty successfully collecting its finance receivable
portfolio, our cash flow, results of operations and financial condition could be adversely affected.
We may need to obtain financing in the future; such financing may not be available to us on satisfactory terms, if at all.
We may 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.
Failure to perform by our subcontractors or suppliers could 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
may 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 may 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 suppliers may be less likely than us to be able to quickly recover from natural disasters and other
events beyond their control and may be subject to additional risks such as financial problems that limit their ability to conduct their
operations. The risk of these adverse effects may 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.
Our business could be negatively impacted by information technology disruptions and security threats.
Our information technology (IT) and related systems are critical to the smooth operation of our business and essential to our ability
to perform day to day operations. From time to time, we update and/or replace IT systems used by our businesses. The
implementation of new systems can present temporary disruptions of business activities as existing processes are transitioned to the
new systems, resulting in productivity issues, including delays in production, shipments or other business operations. In addition,
we outsource certain support functions, including certain global IT infrastructure services, to third-party service providers. Any
disruption of such outsourced processes or functions also could have a material adverse impact on our operations. In addition, as a
U.S. defense contractor, we face certain security threats, including threats to our IT infrastructure, unlawful attempts to gain access
to our proprietary or classified information and threats to the physical security of our facilities and employees, as do our customers,
suppliers, subcontractors and joint venture partners. Cybersecurity threats, such as malicious software, attempts to gain unauthorized
access to our confidential, classified or otherwise proprietary information or that of our employees or customers, as well as other
security breaches, are persistent, continue to evolve and require highly skilled IT resources. While we have experienced
cybersecurity attacks, we have not suffered any material losses relating to such attacks, and we believe our threat detection and
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mitigation processes and procedures are robust. Due to the evolving nature of these security threats, the possibility of future material
incidents cannot be completely mitigated. An IT system failure, issues related to implementation of new IT systems or breach of
data security, whether of our systems 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.
Such an incident also could require significant management attention and resources and increased costs, and could adversely affect
our competitiveness and our results of operations.
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, could
affect our results of operations. These delays 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,
coordination with joint venture partners or failure on the part of our suppliers to deliver components as agreed. We also could be
adversely affected if our research and development investments are less successful than expected or if we do not adequately protect
the intellectual property developed through these efforts. Likewise, 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. 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,
the market for our product offerings may not develop or continue to expand as we currently anticipate. Furthermore, we cannot be
sure that our competitors will not develop competing technologies which gain superior market acceptance compared to our
products. A significant failure in our new product development efforts or the failure of our products or services to achieve market
acceptance relative to our competitors’ products or services could have an adverse effect on our financial condition and results of
operations.
We are subject to the risks of doing business in foreign countries.
During 2016, we derived approximately 38% of our revenues from international business, including U.S. exports, and we expect
international revenues to continue to increase. 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. We also have entered into, and expect to continue to enter into, joint
venture arrangements in emerging market countries, some of which may require capital investment, guaranties or other
commitments. Risks related to international operations include import, export and other trade restrictions; changing U.S. and foreign
procurement policies and practices; 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, competition from foreign and multinational firms with home country
advantages; economic and government instability, acts of 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. The
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.
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. Our increased focus
on international sales and global operations requires importing and exporting goods 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. 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
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aviation industry, and they may impose new regulations with additional aircraft security or other requirements or restrictions,
including, for example, restrictions and/or fees related to carbon emissions levels. Changes in environmental laws and regulations,
including those enacted in response to climate change concerns and other actions known as “green initiatives,” could lead to the
necessity for new or additional investment in product designs or manufacturing processes and could increase environmental
compliance expenditures, including costs to defend regulatory reviews. 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 current 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.
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; production partners; product liability; patent and trademark infringement; employment disputes; and environmental,
safety and health matters. Due to the nature of our manufacturing business, we may be 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 financial position or 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 may be asserted by third parties against us or our customers. Any related indemnification
payments or legal costs we may be obliged to pay on behalf of our businesses, our customers or other third parties could be costly.
In addition, we own the rights to many patents, trademarks, brand names, trade names and trade secrets that are important to our
business. The inability to enforce these intellectual property rights may have an adverse effect on our results of operations.
Additionally, our intellectual property could be at risk due to various cybersecurity threats.
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 also 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 could require us to repair, replace or refund the purchase price of one or more
of our products, or potentially even discontinue entire product lines, or we may voluntarily do 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 may be adopted in the future.
The increasing costs of certain employee and retiree benefits could adversely affect our results.
Our earnings and cash flow may be adversely impacted by the amount of income or expense we expend or record for employee
benefit plans. This is particularly true for our defined benefit pension plans, where required contributions to those plans and related
expenses are driven by, among other things, our assumptions of the expected long-term rate of return on plan assets, the discount
rate used for future payment obligations and the rates of future cost growth. 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.
(cid:20)(cid:23)(cid:1)(cid:1)(cid:1)(cid:1)(cid:1)(cid:1) (cid:55)(cid:72)(cid:91)(cid:87)(cid:85)(cid:82)(cid:81)(cid:3)(cid:21)(cid:19)(cid:20)(cid:25)(cid:3)(cid:36)(cid:81)(cid:81)(cid:88)(cid:68)(cid:79)(cid:3)(cid:53)(cid:72)(cid:83)(cid:82)(cid:85)(cid:87)
Our business could be adversely affected by strikes or work stoppages and other labor issues.
Approximately 7,300, or 28%, of our U.S. employees are unionized, and many of our non-U.S. employees are represented by
organized councils. As a result, we may experience work stoppages, which could negatively impact our ability to manufacture our
products on a timely basis, resulting in strain on our relationships with our customers and a loss of revenues. The presence of unions
also may limit our flexibility in responding to competitive pressures in the marketplace. 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.
Currency, raw material price and interest rate fluctuations may adversely affect our results.
We are exposed to a variety of market risks, including the effects of changes in foreign currency exchange rates, raw material prices
and interest rates. Currency variations also contribute to variations in sales of products and services in impacted jurisdictions.
Accordingly, fluctuations in foreign currency rates could adversely affect our profitability in future periods. We monitor and manage
these exposures as an integral part of our overall risk management program. In some cases, we purchase derivatives or enter into
contracts to insulate our results of operations from these fluctuations. Nevertheless, changes in currency exchange rates, raw material
prices and interest rates can have substantial adverse effects on our results of operations.
We may be unable to effectively mitigate pricing pressures.
In some markets, particularly where we deliver component products and services to OEMs, we face ongoing customer demands for
price reductions, which sometimes are contractually obligated. However, if we are unable to effectively mitigate future pricing
pressures through technological advances or by lowering our cost base through improved operating and supply chain efficiencies,
our results of operations 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.
Item 1B. Unresolved Staff Comments
None.
Item 2. Properties
On December 31, 2016, we operated a total of 63 plants located throughout the U.S. and 53 plants outside the U.S. We own 58
plants and lease the remainder for a total manufacturing space of approximately 24.3 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
On February 7, 2012, a lawsuit was filed in the United States Bankruptcy Court, Northern District of Ohio, Eastern Division (Akron)
by Brian A. Bash, Chapter 7 Trustee for Fair Finance Company against TFC, Fortress Credit Corp. and Fair Facility I, LLC. TFC
provided a revolving line of credit of up to $17.5 million to Fair Finance Company from 2002 through 2007. The complaint alleges
numerous counts against TFC, as Fair Finance Company’s working capital lender, including receipt of fraudulent transfers and
assisting in fraud perpetrated on Fair Finance investors. The Trustee seeks avoidance and recovery of alleged fraudulent transfers in
the amount of $316 million as well as damages of $223 million on the other claims. The Trustee also seeks trebled damages on all
claims under Ohio law. On November 9, 2012, the Court dismissed all claims against TFC. The trustee appealed, and on August
23, 2016, the 6th Circuit Court of Appeals reversed the dismissal in part and remanded certain claims back to the trial court. We
intend to vigorously defend this lawsuit.
(cid:55)(cid:72)(cid:91)(cid:87)(cid:85)(cid:82)(cid:81)(cid:3)(cid:21)(cid:19)(cid:20)(cid:25)(cid:3)(cid:36)(cid:81)(cid:81)(cid:88)(cid:68)(cid:79)(cid:3)(cid:53)(cid:72)(cid:83)(cid:82)(cid:85)(cid:87)(cid:3)(cid:3)(cid:3)(cid:3)(cid:3)(cid:3)(cid:3)(cid:20)(cid:24)
We also 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; production partners; 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.
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
31, 2016, there were approximately 9,400 record holders of Textron common stock. The high and low sales prices per share of our
common stock as reported on the New York Stock Exchange and the dividends paid per share are provided in the following table:
First quarter
Second quarter
Third quarter
Fourth quarter
High
$ 41.74
40.61
41.33
49.82
2016
Low
$ 30.69
34.00
35.06
37.19
Dividends
per Share
0.02
$
0.02
0.02
0.02
High
$ 45.61
46.93
44.98
43.93
2015
Low
$ 40.95
42.97
32.20
38.18
Dividends
per Share
0.02
$
0.02
0.02
0.02
Issuer Repurchases of Equity Securities
The following provides information about our fourth quarter 2016 repurchases of equity securities that are registered pursuant to
Section 12 of the Securities Exchange Act of 1934, as amended:
Period (shares in thousands)
October 2, 2016 – November 5, 2016
November 6, 2016 – December 3, 2016
December 4, 2016 – December 31, 2016
Total
* These shares were purchased pursuant to a plan authorizing the repurchase of up to 25 million shares of Textron common stock that had been
announced on January 23, 2013, which had no expiration date.
Total
Number of
Shares
Purchased *
200
450
—
650
Average Price
Paid per Share
(excluding
commissions)
39.92
$
39.87
—
39.88
$
Total Number of
Shares Purchased as
part of Publicly
Announced Plan *
200
450
—
650
Maximum
Number of Shares
that may yet be
Purchased under
the Plan
4,434
3,984
3,984
On January 25, 2017, we announced the adoption of a new plan authorizing the repurchase of up to 25 million shares of Textron
common stock. This new plan has no expiration date and replaced the existing plan adopted in 2013 that had 4.0 million remaining
shares available for repurchase.
(cid:20)(cid:25)(cid:1)(cid:1)(cid:1)(cid:1)(cid:1) (cid:1)(cid:55)(cid:72)(cid:91)(cid:87)(cid:85)(cid:82)(cid:81)(cid:3)(cid:21)(cid:19)(cid:20)(cid:25)(cid:3)(cid:36)(cid:81)(cid:81)(cid:88)(cid:68)(cid:79)(cid:3)(cid:53)(cid:72)(cid:83)(cid:82)(cid:85)(cid:87)
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, 2011 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.
Textron
S&P 500
S&P 500 A&D
S&P 500 Industrials
$300
$250
$200
$150
$100
Textron Inc.
S&P 500
S&P 500 A&D
S&P 500 Industrials
2011
$ 100.00
100.00
100.00
100.00
2012
$ 134.50
116.00
114.56
114.76
2013
$ 199.98
153.57
177.48
151.06
2014
$ 229.56
174.60
197.77
169.73
2015
$ 229.44
177.01
208.52
174.65
2016
$ 265.75
198.18
247.93
192.32
(cid:55)(cid:72)(cid:91)(cid:87)(cid:85)(cid:82)(cid:81)(cid:3)(cid:21)(cid:19)(cid:20)(cid:25)(cid:3)(cid:36)(cid:81)(cid:81)(cid:88)(cid:68)(cid:79)(cid:3)(cid:53)(cid:72)(cid:83)(cid:82)(cid:85)(cid:87)(cid:3)(cid:3)(cid:3)(cid:3)(cid:3)(cid:3)(cid:3)(cid:20)(cid:26)
Item 6. Selected Financial Data
(Dollars in millions, except per share amounts)
Revenues
Textron Aviation
Bell
Textron Systems
Industrial
Finance
Total revenues
Segment profit
Textron Aviation (a)
Bell
Textron Systems
Industrial
Finance
Total segment profit
Corporate expenses and other, net
Interest expense, net for Manufacturing group
Special charges (b)
Income tax expense (c)
Income from continuing operations
Earnings per share
Basic earnings per share — continuing operations
Diluted earnings per share — continuing operations
Basic average shares outstanding (in thousands)
Diluted average shares outstanding (in thousands)
Common stock information
Dividends declared per share
Book value at year-end
Price at year-end
Financial position
Total assets
Manufacturing group debt
Finance group debt
Shareholders’ equity
Manufacturing group debt-to-capital (net of cash)
Manufacturing group debt-to-capital
Investment data
Capital expenditures
Manufacturing group depreciation
(a)
2016
2015
2014
2013
2012
$ 4,921
3,239
1,756
3,794
78
$ 13,788
$ 4,822
3,454
1,520
3,544
83
$ 13,423
$ 4,568
4,245
1,624
3,338
103
$ 13,878
$ 2,784
4,511
1,665
3,012
132
$ 12,104
$ 3,111
4,274
1,737
2,900
215
$ 12,237
$
$
389
386
186
329
19
1,309
(172)
(138)
(123)
(33)
843
$
$
400
400
129
302
24
1,255
(154)
(130)
—
(273)
698
$
$
234
529
150
280
21
1,214
(161)
(148)
(52)
(248)
605
$
$
(48)
573
147
242
49
963
(166)
(123)
—
(176)
498
$
$
82
639
132
215
64
1,132
(148)
(143)
—
(260)
581
$
$
3.11
3.09
270,774
272,365
$
$
2.52
2.50
276,682
278,727
$
$
2.17
2.15
279,409
281,790
$
$
1.78
1.75
279,299
284,428
$
$
2.07
1.97
280,182
294,663
0.08
$
$ 20.62
$ 48.56
0.08
$
$ 18.10
$ 42.01
0.08
$
$ 15.45
$ 42.17
0.08
$
$ 15.54
$ 36.61
0.08
$
$ 11.03
$ 24.12
$ 15,358
$ 2,777
$
903
$ 5,574
23%
33%
$ 14,708
$ 2,697
$
913
$ 4,964
26%
35%
$ 14,605
$ 2,811
$ 1,063
$ 4,272
33%
40%
$ 12,944
$ 1,931
$ 1,256
$ 4,384
15%
31%
$ 13,033
$ 2,301
$ 1,686
$ 2,991
24%
44%
$
$
Segment profit includes amortization of $12 million and $63 million in 2015 and 2014, respectively, related to fair value step-up adjustments of Beechcraft
acquired inventories sold during the period.
446
368
444
335
480
315
420
383
429
379
$
$
$
$
$
$
$
$
(b)
(c)
In 2016, we initiated a plan to restructure and realign our businesses by implementing headcount reductions, facility consolidations and other actions in order
to improve overall operating efficiency across Textron. Special charges for 2016 include restructuring charges for this plan, which primarily consists of
severance costs of $70 million and asset impairments of $38 million. For 2014, special charges include acquisition and restructuring costs related to the
acquisition of Beechcraft.
In 2016, we recognized an income tax benefit of $319 million, inclusive of interest, of which $206 million is attributable to continuing operations and $113
million is attributable to discontinued operations. This benefit was a result of the final settlement with the Internal Revenue Service Office of Appeals for our
1998 to 2008 tax years.
(cid:20)(cid:27)(cid:1)(cid:1)(cid:1)(cid:1)(cid:1)(cid:1) (cid:55)(cid:72)(cid:91)(cid:87)(cid:85)(cid:82)(cid:81)(cid:3)(cid:21)(cid:19)(cid:20)(cid:25)(cid:3)(cid:36)(cid:81)(cid:81)(cid:88)(cid:68)(cid:79)(cid:3)(cid:53)(cid:72)(cid:83)(cid:82)(cid:85)(cid:87)
Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations
Overview and Consolidated Results of Operations
In 2016, revenues and segment profit grew by 3% and 4%, respectively, despite challenging and weaker than expected end markets,
most notably the business jet and commercial helicopter markets. We continued to invest in our businesses through the ongoing
development of new products and services, and the completion of several strategic business acquisitions to support growth and create
long-term shareholder value. Financial highlights of 2016 include the following:
(cid:120) Generated $988 million in cash from operating activities of our manufacturing businesses.
(cid:120)
Invested $677 million in research and development activities, $446 million in capital expenditures and $186 million in
business acquisitions.
Returned $263 million to our shareholders through share repurchases and dividend payments.
Initiated a plan to restructure and realign our businesses to improve overall operating efficiency and to better position our
businesses for the future, which resulted in special charges of $123 million.
(cid:120)
(cid:120)
An analysis of our consolidated operating results is set forth below. A more detailed analysis of our segments’ operating results is
provided in the Segment Analysis section on pages 21 to 28.
Revenues
(Dollars in millions)
Revenues
2016
$ 13,788
2015
$ 13,423
2014
$ 13,878
% Change
2016
3%
2015
(3)%
Revenues increased $365 million, 3%, in 2016, compared with 2015, largely driven by increases in the Industrial, Textron Systems
and Textron Aviation segments, partially offset by lower revenues at the Bell segment. The net revenue increase included the
following factors:
(cid:120) Higher Industrial revenues of $250 million, primarily due to higher volume of $168 million, largely in the Fuel Systems
and Functional Components product line, and the impact from acquired businesses of $121 million.
(cid:120) Higher Textron Systems revenues of $236 million, primarily due to higher volume of $106 million in the Marine and Land
Systems product line and $77 million in the Unmanned Systems product line.
(cid:120) Higher Textron Aviation revenues of $99 million, primarily due to the impact from an acquired business of $66 million and
higher volume and mix of $42 million, largely the result of higher Citation jet volume of $165 million, partially offset by
lower turboprop volume.
Lower Bell revenues of $215 million, primarily due to a decrease in commercial revenues of $269 million, largely reflecting
lower aircraft deliveries.
(cid:120)
Revenues decreased $455 million, 3%, in 2015, compared with 2014, as decreases in the Bell and Textron Systems segments were
partially offset by higher revenues in the Textron Aviation and Industrial segments. The net revenue decrease included the following
factors:
(cid:120)
(cid:120)
Lower Bell revenues of $791 million, largely due to a decrease of $577 million in V-22 program revenues, primarily
reflecting lower aircraft deliveries, a decrease of $193 million in commercial revenues, largely related to a change in mix
of commercial aircraft sold during the period, and lower commercial aftermarket volume of $92 million.
Lower Textron Systems revenues of $104 million, primarily due to lower volume in the Unmanned Systems product line,
largely reflecting lower deliveries in the fourth quarter.
(cid:120) Higher Textron Aviation revenues of $254 million, primarily due to the first quarter impact of the Beechcraft acquisition
of $219 million and higher volume and mix of $35 million. We completed the acquisition of Beechcraft on March 14, 2014,
and as a result, 2014 does not reflect a full twelve months of its revenues.
(cid:120) Higher Industrial segment revenues of $206 million, primarily due to higher volume of $357 million, largely in the Fuel
Systems and Functional Components product line, and the impact from acquisitions of $103 million, partially offset by an
unfavorable foreign exchange impact of $240 million.
(cid:55)(cid:72)(cid:91)(cid:87)(cid:85)(cid:82)(cid:81)(cid:3)(cid:21)(cid:19)(cid:20)(cid:25)(cid:3)(cid:36)(cid:81)(cid:81)(cid:88)(cid:68)(cid:79)(cid:3)(cid:53)(cid:72)(cid:83)(cid:82)(cid:85)(cid:87)(cid:3)(cid:3)(cid:3)(cid:3)(cid:3)(cid:3)(cid:3)(cid:20)(cid:28)
Cost of Sales and Selling and Administrative Expense
(Dollars in millions)
Cost of sales
Gross margin as a percentage of Manufacturing revenues
Selling and administrative expense
2016
$ 11,311
17.5%
1,304
$
2015
$ 10,979
17.7%
1,304
$
2014
$ 11,421
17.1%
1,361
$
% Change
2016
3%
2015
(4)%
—
(4)%
In 2016, cost of sales increased $332 million, 3%, compared with 2015, largely due to higher volume at the Textron Systems,
Industrial and Textron Aviation segments, and an increase from acquired businesses. These increases were partially offset by lower
volume at the Bell segment and favorable cost performance across all of our manufacturing segments. Selling and administrative
expense was unchanged in 2016, compared with 2015.
Cost of sales decreased $442 million, 4%, in 2015, compared with 2014, largely due to lower volume at the Bell segment and a $217
million favorable foreign exchange impact mostly from the strengthening of the U.S. dollar against the Euro, partially offset by
higher volume at the Industrial segment, and an increase from acquired businesses, primarily Beechcraft. The 60 basis-point
improvement in gross margin was largely driven by the Textron Aviation segment, primarily reflecting the net impact of the
Beechcraft acquisition, which includes the benefit of the integrated cost structure of Beechcraft and Cessna, and lower amortization
of fair value step-up adjustments related to acquired Beechcraft inventories.
Selling and administrative expense decreased $57 million, 4%, in 2015, compared with 2014. Significant factors contributing to the
decrease in expense include a favorable impact from ongoing cost reduction activities at the Bell segment and lower share-based
compensation expense of $22 million, which were partially offset by an increase from acquired businesses, primarily Beechcraft.
Interest Expense
(Dollars in millions)
Interest expense
2016
174
$
2015
169
$
2014
191
$
% Change
2016
3%
2015
(12)%
Interest expense on the Consolidated Statements of Operations includes interest for both the Finance and Manufacturing borrowing
groups with interest related to intercompany borrowings eliminated. Interest expense for the Finance segment is included within
segment profit and includes intercompany interest. Consolidated interest expense increased $5 million, 3%, in 2016, compared with
2015, primarily due to higher average debt outstanding. In 2015, consolidated interest expense decreased $22 million, 12%,
compared with 2014, primarily due to favorable borrowing costs and lower average debt outstanding.
Special Charges
Special charges recorded in 2016 by segment are as follows:
(In millions)
Textron Systems
Textron Aviation
Industrial
Bell
Corporate
Severance
Costs
Asset
Impairments
Contract
Terminations
and Other
$
$
15 $
33
17
4
1
70 $
34 $
1
2
1
—
38 $
13 $
1
1
—
—
15 $
Total
Special
Charges
62
35
20
5
1
123
In 2016, we initiated a plan to restructure and realign our businesses by implementing headcount reductions, facility consolidations
and other actions in order to improve overall operating efficiency across Textron. As part of this plan, Textron Systems will
discontinue production of its sensor-fuzed weapon product by the end of the first quarter of 2017, resulting in headcount reductions,
facility consolidations and asset impairments within its Weapons and Sensors operating unit. Historically, sensor-fuzed weapon sales
have relied on foreign military and direct commercial international customers for which both executive branch and congressional
approval is required. The political environment has made it difficult to obtain these approvals. Within our Industrial segment, the
plan provides for the combination of our Jacobsen business with the Textron Specialized Vehicles businesses, resulting in the
consolidation of certain facilities and general and administrative functions and related headcount reductions. In addition, we initiated
restructuring actions, principally headcount reductions, in our Textron Aviation segment, as well as other businesses and corporate
(cid:21)(cid:19)(cid:1)(cid:1)(cid:1)(cid:1)(cid:1)(cid:1) (cid:55)(cid:72)(cid:91)(cid:87)(cid:85)(cid:82)(cid:81)(cid:3)(cid:21)(cid:19)(cid:20)(cid:25)(cid:3)(cid:36)(cid:81)(cid:81)(cid:88)(cid:68)(cid:79)(cid:3)(cid:53)(cid:72)(cid:83)(cid:82)(cid:85)(cid:87)
functions. The total headcount reduction related to restructuring activities is expected to be approximately 1,700 positions,
representing approximately 5% of our workforce.
We expect to incur additional pre-tax charges under this plan in the range of $17 million to $47 million, primarily related to contract
termination, severance, facility consolidation and relocation costs. The remaining charges are expected to primarily be in the
Industrial, Textron Systems and Textron Aviation segments. We anticipate the plan to be substantially completed by the end of the
first half of 2017. Total expected cash outlays for restructuring activities are estimated to be approximately $100 million to $120
million, of which $22 million was paid in 2016 and the remainder will be paid in 2017.
In 2014, we executed a restructuring program in our Textron Aviation segment to align the Cessna and acquired Beechcraft business,
reduce operating redundancies and maximize operating efficiencies. We recorded special charges of $41 million related to these
restructuring activities in 2014, along with $11 million of transaction costs from the acquisition of Beechcraft.
Income Taxes
Effective tax rate
2016
3.8%
2015
28.1%
2014
29.1%
In 2016, our effective tax rate was significantly lower than the U.S. federal statutory tax rate of 35%, largely due to a settlement with
the U.S. Internal Revenue Service Office of Appeals for our 1998 to 2008 tax years. This settlement resulted in a $206 million
benefit recognized in continuing operations and a $113 million benefit in discontinued operations. For a full reconciliation of our
effective tax rate to the U.S. federal statutory tax rate of 35% see Note 13 to the Consolidated Financial Statements.
Segment Analysis
We operate in, and report financial information for, the following five business segments: Textron Aviation, Bell, Textron Systems,
Industrial and Finance. Segment profit is an important measure used for evaluating performance and for decision-making purposes.
Segment profit for the manufacturing segments excludes interest expense, certain corporate expenses and special charges. 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, changes in revenues and segment profit typically are expressed
for our commercial business in terms of volume, pricing, foreign exchange and acquisitions. Additionally, changes in segment profit
may be expressed in terms of mix, inflation and cost performance. Volume changes in revenues represent increases/decreases in the
number of units delivered or services provided. 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. For segment profit, mix represents a
change due to the composition of products and/or services sold at different profit margins. Inflation represents higher material,
wages, benefits, pension or other costs. Performance reflects an increase or decrease in research and development, depreciation,
selling and administrative costs, warranty, product liability, quality/scrap, labor efficiency, overhead, product line profitability, start-
up, ramp up and cost-reduction initiatives or other manufacturing inputs.
Approximately 25% of our 2016 revenues were derived from contracts with the U.S. Government. For our segments that have
significant contracts with the U.S. Government, we typically express changes in segment profit related to the government business
in terms of volume, changes in program performance or changes in contract mix. Changes in volume that are described in net sales
typically drive corresponding changes in our segment profit based on the profit rate for a particular contract. Changes in program
performance typically relate to profit recognition associated with revisions to total estimated costs at completion that reflect improved
or deteriorated operating performance or award fee rates. Changes in contract mix refers to changes in operating margin due to a
change in the relative volume of contracts with higher or lower fee rates such that the overall average margin rate for the segment
changes.
(cid:55)(cid:72)(cid:91)(cid:87)(cid:85)(cid:82)(cid:81)(cid:3)(cid:21)(cid:19)(cid:20)(cid:25)(cid:3)(cid:36)(cid:81)(cid:81)(cid:88)(cid:68)(cid:79)(cid:3)(cid:53)(cid:72)(cid:83)(cid:82)(cid:85)(cid:87)(cid:3)(cid:3)(cid:3)(cid:3)(cid:3)(cid:3)(cid:3)(cid:21)(cid:20)
Textron Aviation
(Dollars in millions)
Revenues
Operating expenses
Segment profit
Profit margin
Backlog
2016
4,921
4,532
389
7.9%
1,041
$
$
2015
4,822
4,422
400
8.3%
1,074
$
$
2014
4,568
4,334
234
5.1%
1,365
$
$
% Change
2016
2%
2%
(3)%
2015
6%
2%
71%
(3)%
(21)%
Textron Aviation Revenues and Operating Expenses
Factors contributing to the 2016 year-over-year revenue change are provided below:
(In millions)
Acquisitions
Volume and mix
Other
Total change
$
2016 versus
2015
66
42
(9)
99
$
Textron Aviation’s revenues increased $99 million, 2%, in 2016, compared with 2015, primarily due to the impact from an
acquisition of a repair and overhaul business in the first quarter of 2016, and higher volume and mix of $42 million. The increase
in volume and mix was largely due to higher Citation jet volume of $165 million, partially offset by lower turboprop volume. We
delivered 178 Citation jets and 106 King Air turboprops in 2016, compared with 166 Citation jets and 117 King Air turboprops in
2015. The portion of the segment’s revenues derived from aftermarket sales and services represented 31% of its total revenues in
2016, compared with 29% in 2015, largely resulting from the acquisition.
Textron Aviation’s operating expenses increased $110 million, 2%, in 2016, compared with 2015, largely due to higher net volume
as described above and additional operating expenses resulting from the acquisition. These increases were partially offset by
improved cost performance of $64 million, largely attributable to lower research and development costs and lower compensation
expense.
Factors contributing to the 2015 year-over-year revenue change are provided below:
(In millions)
Acquisitions
Volume and mix
Total change
$
2015 versus
2014
219
35
254
$
Textron Aviation’s revenues increased $254 million, 6%, in 2015, compared with 2014, primarily due to the first quarter impact of
the Beechcraft acquisition of $219 million and higher volume and mix of $35 million. We delivered 166 Citation jets and 117 King
Air turboprops in 2015, compared with 159 Citation jets and 113 King Air turboprops in 2014. The portion of the segment’s revenues
derived from aftermarket sales and services represented 29% of its total revenues in 2015, compared with 30% in 2014.
Textron Aviation’s operating expenses increased $88 million in 2015, compared with 2014, primarily due to the incremental
operating costs related to the Beechcraft acquisition and higher volume, partially offset by lower amortization of $51 million related
to fair value step-up adjustments of acquired Beechcraft inventories sold during the period.
(cid:21)(cid:21)(cid:1)(cid:1)(cid:1)(cid:1)(cid:1)(cid:1) (cid:55)(cid:72)(cid:91)(cid:87)(cid:85)(cid:82)(cid:81)(cid:3)(cid:21)(cid:19)(cid:20)(cid:25)(cid:3)(cid:36)(cid:81)(cid:81)(cid:88)(cid:68)(cid:79)(cid:3)(cid:53)(cid:72)(cid:83)(cid:82)(cid:85)(cid:87)
Textron Aviation Segment Profit
Factors contributing to 2016 year-over-year segment profit change are provided below:
(In millions)
Performance and other
Volume and mix
Inflation and pricing
Total change
$
2016 versus
2015
65
(49)
(27)
(11)
$
Segment profit at Textron Aviation decreased $11 million, 3%, in 2016, compared with 2015, primarily as a result of the mix of
products sold and the unfavorable impact from inflation and pricing of $27 million. These decreases were partially offset by
favorable performance and other of $65 million, largely attributable to lower research and development costs and lower
compensation expense.
Factors contributing to 2015 year-over-year segment profit change are provided below:
(In millions)
Performance and other
Volume and mix
Total change
$
2015 versus
2014
119
47
166
$
Segment profit at Textron Aviation increased $166 million, 71%, in 2015, compared with 2014, primarily due to an increase in
performance and other, reflecting the net profit impact from the Beechcraft acquisition, which includes the benefit of the integrated
cost structure of Beechcraft and Cessna, and lower amortization of $51 million related to fair value step-up adjustments as described
above. Segment profit was also favorably impacted by higher volume as well as the mix of products sold.
Textron Aviation Backlog
Textron Aviation’s backlog decreased $33 million, 3%, in 2016 and $291 million, 21%, in 2015. The decrease in 2015 was primarily
due to deliveries on military contracts.
Bell
(Dollars in millions)
Revenues:
V-22 program
Other military
Commercial
Total revenues
Operating expenses
Segment profit
Profit margin
Backlog
2016
2015
2014
2016
2015
% Change
$ 1,151
936
1,152
3,239
2,853
386
11.9%
$ 5,360
$ 1,194
839
1,421
3,454
3,054
400
11.6%
$ 5,224
$ 1,771
860
1,614
4,245
3,716
529
12.5%
$ 5,524
(4)%
12%
(19)%
(6)%
(7)%
(4)%
(33)%
(2)%
(12)%
(19)%
(18)%
(24)%
3%
(5)%
Bell’s major U.S. Government programs at this time are the V-22 tiltrotor aircraft and the H-1 helicopter platforms, which are both
in the production stage and represent a significant portion of Bell’s revenues from the U.S. Government.
(cid:55)(cid:72)(cid:91)(cid:87)(cid:85)(cid:82)(cid:81)(cid:3)(cid:21)(cid:19)(cid:20)(cid:25)(cid:3)(cid:36)(cid:81)(cid:81)(cid:88)(cid:68)(cid:79)(cid:3)(cid:53)(cid:72)(cid:83)(cid:82)(cid:85)(cid:87)(cid:3)(cid:3)(cid:3)(cid:3)(cid:3)(cid:3)(cid:3)(cid:21)(cid:22)
Bell Revenues and Operating Expenses
Factors contributing to the 2016 year-over-year revenue change are provided below:
(In millions)
Volume and mix
Other
Total change
$
2016 versus
2015
(225)
10
(215)
$
Bell’s revenues decreased $215 million, 6%, in 2016, compared with 2015, primarily due to the following factors:
(cid:120)
(cid:120)
(cid:120)
$269 million decrease in commercial revenues, primarily due to lower aircraft deliveries, as we delivered 114 commercial
aircraft in 2016, compared with 175 aircraft in 2015.
$43 million decrease in V-22 program revenues, primarily due to lower aircraft deliveries, as we delivered 22 V-22 aircraft
in 2016, compared with 24 V-22 aircraft in 2015.
$97 million increase in other military revenues, primarily reflecting higher H-1 program revenues, as we delivered 35 H-1
aircraft in 2016, compared with 24 H-1 aircraft in 2015.
Bell’s operating expenses decreased $201 million, 7%, in 2016, compared with 2015, primarily due to lower net sales volume as
described above.
Factors contributing to the 2015 year-over-year revenue change are provided below:
(In millions)
Volume and mix
Other
Total change
$
2015 versus
2014
(807)
16
(791)
$
Bell’s revenues decreased $791 million, 19%, in 2015, compared with 2014, primarily due to the following factors:
(cid:120)
(cid:120)
(cid:120)
$577 million decrease in V-22 program revenues, primarily reflecting lower aircraft deliveries, as we delivered 24 V-22
aircraft in 2015, compared with 37 V-22 aircraft in 2014.
$193 million decrease in commercial revenues, largely related to a change in mix of commercial aircraft sold during the
period, reflecting lower sales activity across the commercial helicopter market, and $92 million of lower aftermarket
volume. Bell delivered 175 commercial aircraft in 2015, compared with 178 aircraft in 2014.
$21 million decrease in other military, which included $41 million recorded in the second quarter of 2014 related to the
settlement of the SDD phase of the ARH program. Bell delivered 24 H-1 aircraft in both periods.
Bell’s operating expenses decreased $662 million, 18%, in 2015, compared with 2014, primarily due to lower net sales volume as
described above and the favorable impact of ongoing cost reduction activities.
As a result of cost reduction actions announced in April 2015, Bell incurred approximately $40 million in severance and benefit
costs during the second quarter of 2015. The initial impact of the restructuring on Bell’s segment profit in the second quarter of
2015 was not significant due to cost savings from headcount reductions and the impact of including a portion of these costs in our
indirect cost rates. These actions reduced Bell’s headcount by approximately 1,100 employees representing approximately 12% of
the Bell workforce at that time.
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Bell Segment Profit
Factors contributing to 2016 year-over-year segment profit change are provided below:
(In millions)
Volume and mix
Performance and other
Total change
$
2016 versus
2015
(46)
32
(14)
$
Bell’s segment profit decreased $14 million, 4%, in 2016, compared with 2015. The unfavorable impact from volume and mix was
primarily due to lower commercial aircraft deliveries, while the favorable performance and other was largely the result of lower
research and development costs.
Factors contributing to 2015 year-over-year segment profit change are provided below:
(In millions)
Volume and mix
Performance and other
Total change
$
2015 versus
2014
(223)
94
(129)
$
Bell’s segment profit decreased $129 million, 24%, in 2015, compared with 2014, primarily due to a $223 million unfavorable
impact from lower volume and mix and a $16 million favorable program profit adjustment in 2014 related to the ARH program, as
described above. Volume and mix was partially offset by favorable performance and other of $94 million, largely related to ongoing
cost reduction activities.
Bell Backlog
Bell’s backlog increased $136 million, 3%, in 2016, while it decreased $300 million, 5%, in 2015. The decrease in 2015 was
primarily related to the commercial business.
Textron Systems
(Dollars in millions)
Revenues
Operating expenses
Segment profit
Profit margin
Backlog
2016
$ 1,756
1,570
186
10.6%
$ 1,841
2015
$ 1,520
1,391
129
8.5%
$ 2,328
2014
$ 1,624
1,474
150
9.2%
$ 2,790
% Change
2016
16%
13%
44%
2015
(6)%
(6)%
(14)%
(21)%
(17)%
Textron Systems Revenues and Operating Expenses
Factors contributing to the 2016 year-over-year revenue change are provided below:
(In millions)
Volume
Acquisitions
Other
Total change
$
2016 versus
2015
200
32
4
236
$
Revenues at Textron Systems increased $236 million, 16%, in 2016, compared with 2015, primarily due to higher volume of $106
million in the Marine and Land Systems product line and $77 million in the Unmanned Systems product line, and the impact from
an acquisition of $32 million.
Textron Systems’ operating expenses increased $179 million, 13%, in 2016, compared with 2015, primarily due to higher volume
as described above.
(cid:55)(cid:72)(cid:91)(cid:87)(cid:85)(cid:82)(cid:81)(cid:3)(cid:21)(cid:19)(cid:20)(cid:25)(cid:3)(cid:36)(cid:81)(cid:81)(cid:88)(cid:68)(cid:79)(cid:3)(cid:53)(cid:72)(cid:83)(cid:82)(cid:85)(cid:87)(cid:3)(cid:3)(cid:3)(cid:3)(cid:3)(cid:3)(cid:3)(cid:21)(cid:24)
Factors contributing to the 2015 year-over-year revenue change are provided below:
(In millions)
Volume
Other
Total change
$
2015 versus
2014
(105)
1
(104)
$
Revenues at Textron Systems decreased $104 million, 6%, in 2015, compared with 2014, primarily due to lower volume in the
Unmanned Systems product line.
Textron Systems’ operating expenses decreased $83 million, 6%, in 2015, compared with 2014, primarily due to lower volume as
described above, partially offset by an unfavorable mix of products delivered in 2015.
Textron Systems Segment Profit
Factors contributing to 2016 year-over-year segment profit change are provided below:
(In millions)
Performance
Volume and mix
Other
Total change
$
2016 versus
2015
43
13
1
57
$
Textron Systems’ segment profit increased $57 million, 44%, in 2016, compared with 2015, primarily due to improved cost
performance and higher volume as described above.
Factors contributing to 2015 year-over-year segment profit change are provided below:
(In millions)
Volume and mix
Performance
Other
Total change
$
2015 versus
2014
(24)
8
(5)
(21)
$
Textron Systems’ segment profit decreased $21 million, 14%, in 2015, compared with 2014, primarily resulting from lower volume
and unfavorable product mix in 2015.
Textron Systems Backlog
Backlog at Textron Systems decreased $487 million, 21%, in 2016, and $462 million, 17%, in 2015, primarily due to deliveries in
excess of orders in the Weapons and Sensors and Unmanned Systems product lines.
(cid:21)(cid:25)(cid:1)(cid:1)(cid:1)(cid:1)(cid:1)(cid:1) (cid:55)(cid:72)(cid:91)(cid:87)(cid:85)(cid:82)(cid:81)(cid:3)(cid:21)(cid:19)(cid:20)(cid:25)(cid:3)(cid:36)(cid:81)(cid:81)(cid:88)(cid:68)(cid:79)(cid:3)(cid:53)(cid:72)(cid:83)(cid:82)(cid:85)(cid:87)
Industrial
(Dollars in millions)
Revenues:
Fuel Systems and Functional Components
Other Industrial
Total revenues
Operating expenses
Segment profit
Profit margin
2016
2015
2014
2016
2015
% Change
$ 2,273
1,521
3,794
3,465
329
8.7%
$ 2,078
1,466
3,544
3,242
302
8.5%
$ 1,975
1,363
3,338
3,058
280
8.4%
9%
4%
7%
7%
9%
5%
8%
6%
6%
8%
Industrial Revenues and Operating Expenses
Factors contributing to the 2016 year-over-year revenue change are provided below:
(In millions)
Volume
Acquisitions
Foreign exchange
Other
Total change
$
2016 versus
2015
168
121
(35)
(4)
250
$
Industrial segment revenues increased $250 million, 7%, in 2016, compared with 2015, primarily due to higher volume of $168
million and the impact from acquired businesses of $121 million. The increase in volume was primarily related to the Fuel Systems
and Functional Components product line, largely reflecting automotive industry demand in Europe.
Operating expenses for the Industrial segment increased $223 million, 7%, in 2016, compared with 2015, primarily due to the impact
from higher volume as described above and additional operating expenses from acquired businesses.
Factors contributing to the 2015 year-over-year revenue change are provided below:
(In millions)
Volume
Foreign exchange
Acquisitions
Other
Total change
$
2015 versus
2014
357
(240)
103
(14)
206
$
Industrial segment revenues increased $206 million, 6%, in 2015, compared with 2014, primarily due to higher volume of $357
million and the impact from acquisitions of $103 million, partially offset by an unfavorable foreign exchange impact of $240 million
mostly related to the strengthening of the U.S. dollar primarily against the Euro. Higher volume reflected a $283 million increase
in the Fuel Systems and Functional Components product line, primarily due to automotive industry demand in Europe and North
America, and a $74 million increase in the Other Industrial product lines.
Operating expenses for the Industrial segment increased $184 million, 6%, in 2015, compared with 2014, largely due to the impact
from higher volume as described above and additional operating expenses from acquisitions of $105 million, partially offset by a
favorable impact of $225 million from changes in foreign currency exchange rates.
(cid:55)(cid:72)(cid:91)(cid:87)(cid:85)(cid:82)(cid:81)(cid:3)(cid:21)(cid:19)(cid:20)(cid:25)(cid:3)(cid:36)(cid:81)(cid:81)(cid:88)(cid:68)(cid:79)(cid:3)(cid:53)(cid:72)(cid:83)(cid:82)(cid:85)(cid:87)(cid:3)(cid:3)(cid:3)(cid:3)(cid:3)(cid:3)(cid:3)(cid:21)(cid:26)
Industrial Segment Profit
Factors contributing to 2016 year-over-year segment profit change are provided below:
(In millions)
Inflation, net of pricing
Foreign exchange
Volume
Performance and other
Total change
$
2016 versus
2015
19
(12)
11
9
27
$
Segment profit for the Industrial segment increased $27 million, 9%, in 2016, compared with 2015, largely due to a $19 million
favorable impact from inflation, net of pricing, primarily in our Specialized Vehicles and Equipment product line, and higher volume
as described above, partially offset by an unfavorable impact of $12 million from changes in foreign currency exchange rates.
Factors contributing to 2015 year-over-year segment profit change are provided below:
(In millions)
Volume
Performance
Foreign exchange
Other
Total change
$
2015 versus
2014
42
(15)
(15)
10
22
$
Segment profit for the Industrial segment increased $22 million, 8%, in 2015, compared with 2014, largely due to the impact from
higher volume as described above, partially offset by unfavorable performance of $15 million and an unfavorable impact of $15
million from changes in foreign currency exchange rates.
Finance
(In millions)
Revenues
Segment profit
$
2016
78
19
$
2015
83
24
$
2014
103
21
Finance segment revenues decreased $5 million in 2016, compared with 2015, and $20 million in 2015, compared with 2014,
primarily attributable to lower average finance receivables. Finance segment profit decreased $5 million in 2016, compared with
2015, primarily due to lower average finance receivables. In 2015, Finance segment profit increased $3 million, compared with
2014, primarily due to lower provision for loan losses.
Finance Portfolio Quality
The following table reflects information about the Finance segment’s credit performance related to finance receivables.
$
December 31,
2016
946
87
9.20%
40
4.23%
$
January 2,
2016
$ 1,105
84
7.60%
69
6.24%
$
(Dollars in millions)
Finance receivables*
Nonaccrual finance receivables
Ratio of nonaccrual finance receivables to finance receivables
60+ days contractual delinquency
60+ days contractual delinquency as a percentage of finance receivables
* Excludes finance receivables held for sale.
(cid:21)(cid:27)(cid:1)(cid:1)(cid:1)(cid:1)(cid:1)(cid:1) (cid:55)(cid:72)(cid:91)(cid:87)(cid:85)(cid:82)(cid:81)(cid:3)(cid:21)(cid:19)(cid:20)(cid:25)(cid:3)(cid:36)(cid:81)(cid:81)(cid:88)(cid:68)(cid:79)(cid:3)(cid:53)(cid:72)(cid:83)(cid:82)(cid:85)(cid:87)
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 and Industrial 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 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.
Key information that is utilized in assessing our liquidity is summarized below:
(Dollars in millions)
Manufacturing group
Cash and equivalents
Debt
Shareholders’ equity
Capital (debt plus shareholders’ equity)
Net debt (net of cash and equivalents) to capital
Debt to capital
Finance group
Cash and equivalents
Debt
December 31,
2016
January 2,
2016
$ 1,137
2,777
5,574
8,351
23%
33%
$
946
2,697
4,964
7,661
26%
35%
$
161
903
$
59
913
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 the
capacity to add further leverage. We believe that we will have sufficient cash to meet our future needs, based on our existing cash
balances, the cash we expect to generate from our manufacturing operations and other available funding alternatives, as appropriate.
In 2016, Textron entered into a senior unsecured revolving credit facility that expires in September 2021 for an aggregate principal
amount of $1.0 billion, of which up to $100 million is available for the issuance of letters of credit. At December 31, 2016, there
were no amounts borrowed against the facility and there were $11 million of letters of credit issued against it. This facility replaced
the existing 5-year facility, which had no outstanding borrowings and was scheduled to expire in October 2018.
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. In March 2016, we issued $350 million in 4.0% Notes due March 2026
under this registration statement.
Manufacturing Group Cash Flows
Cash flows from continuing operations for the Manufacturing group as presented in our Consolidated Statement of Cash Flows are
summarized below:
(In millions)
Operating activities
Investing activities
Financing activities
$
2016
988
(621)
(146)
2015
$ 1,038
(496)
(308)
2014
$ 1,097
(2,065)
552
In 2016, cash flows provided by operating activities was $988 million, compared with $1,038 million in 2015, a 5% decrease. This
decrease was primarily the result of changes in working capital, which included lower customer deposits of $257 million largely
related to performance-based payments on certain military contracts in the Bell segment, along with a $34 million reduction in
dividends received from the Finance group. These decreases were partially offset by a $75 million increase in cash proceeds from
the settlements of corporate-owned life insurance policies and $42 million in lower payments for taxes and pension contributions as
disclosed below.
Cash flows provided by operating activities was $1,038 million in 2015, compared with $1,097 million in 2014, a 5% decrease. This
decrease was largely due to a change in working capital, partially offset by higher income from continuing operations of $94 million
(cid:55)(cid:72)(cid:91)(cid:87)(cid:85)(cid:82)(cid:81)(cid:3)(cid:21)(cid:19)(cid:20)(cid:25)(cid:3)(cid:36)(cid:81)(cid:81)(cid:88)(cid:68)(cid:79)(cid:3)(cid:53)(cid:72)(cid:83)(cid:82)(cid:85)(cid:87)(cid:3)(cid:3)(cid:3)(cid:3)(cid:3)(cid:3)(cid:3)(cid:21)(cid:28)
and dividends received from the Finance group of $63 million in 2015. A significant factor contributing to the decrease in cash
flows related to working capital was a reduction in customer deposits of $304 million at Textron Aviation, largely reflecting advance
deposits received on military contracts in 2014 for 2015 deliveries.
Net tax payments were $163 million, $187 million and $266 million in 2016, 2015 and 2014, respectively. Pension contributions
were $50 million, $68 million and $76 million in 2016, 2015 and 2014, respectively.
Investing cash flows included capital expenditures of $446 million, $420 million and $429 million in 2016, 2015 and 2014,
respectively. Investing cash flows also included cash used for acquisitions of $186 million and $81 million in 2016 and 2015,
respectively, as well as a $1.5 billion aggregate cash payment to acquire Beechcraft in 2014.
Total financing cash flows included proceeds from long-term debt of $345 million in 2016 and $1.4 billion in 2014, most of which
was used to finance a portion of the Beechcraft acquisition. In 2016, 2015 and 2014, financing activities also included the repayment
of outstanding debt of $254 million, $100 million and $559 million, respectively.
Share Repurchases
Under a 2013 share repurchase authorization, we repurchased an aggregate of 6.9 million, 5.2 million and 8.9 million shares of our
outstanding common stock in 2016, 2015 and 2014, respectively, for $241 million, $219 million and $340 million, respectively.
On January 25, 2017, we announced the adoption of a new plan authorizing the repurchase of up to 25 million shares under which
we intend to purchase shares of Textron common stock to offset the impact of dilution from share-based compensation and benefit
plans and for opportunistic capital management purposes. This new plan has no expiration date and replaced the existing plan
adopted in 2013 that had 4.0 million remaining shares available for repurchase.
Dividends
Dividend payments to shareholders totaled $22 million, $22 million and $28 million in 2016, 2015 and 2014, respectively.
Dividends from the Finance group are included within cash flows from operating activities for the Manufacturing group as they
represent a return on investment. Dividends paid by the Finance group were $29 million and $63 million in 2016 and 2015,
respectively.
Finance Group Cash Flows
The cash flows from continuing operations for the Finance group are summarized below:
(In millions)
Operating activities
Investing activities
Financing activities
$
2016
11
142
(51)
$
2015
30
197
(259)
$
2014
5
255
(217)
The Finance group’s cash flows from operating activities included net tax payments of $11 million, $11 million and $23 million in
2016, 2015 and 2014, respectively.
Cash flows from investing activities primarily included collections on finance receivables totaling $292 million, $351 million and
$456 million in 2016, 2015 and 2014, respectively, partially offset by finance receivable originations of $173 million, $194 million
and $215 million, respectively.
Cash used in financing activities included payments on long-term and nonrecourse debt of $203 million, $256 million and $345
million in 2016, 2015 and 2014, respectively, which were partially offset by proceeds from long-term debt of $180 million, $61
million and $128 million, respectively. In 2016 and 2015, dividend payments to the Manufacturing group totaled $29 million and
$63 million, respectively.
(cid:22)(cid:19)(cid:1)(cid:1)(cid:1)(cid:1)(cid:1)(cid:1) (cid:55)(cid:72)(cid:91)(cid:87)(cid:85)(cid:82)(cid:81)(cid:3)(cid:21)(cid:19)(cid:20)(cid:25)(cid:3)(cid:36)(cid:81)(cid:81)(cid:88)(cid:68)(cid:79)(cid:3)(cid:53)(cid:72)(cid:83)(cid:82)(cid:85)(cid:87)
Consolidated Cash Flows
The consolidated cash flows from continuing operations, after elimination of activity between the borrowing groups, are summarized
below:
(In millions)
Operating activities
Investing activities
Financing activities
2016
$ 1,014
(523)
(168)
2015
$ 1,094
(388)
(504)
2014
$ 1,211
(1,919)
335
In 2016, cash flows provided by operating activities was $1,014 million, compared with $1,094 million in 2015, a 7% decrease.
This decrease was primarily the result of changes in working capital, which included lower customer deposits of $257 million largely
related to performance-based payments on certain military contracts in the Bell segment. These decreases were partially offset by a
$75 million increase in cash proceeds from the settlements of corporate-owned life insurance policies and $42 million in lower
payments for taxes and pension contributions as disclosed below.
Cash flows provided by operating activities was $1,094 million in 2015, compared with $1,211 million in 2014, a 10% decrease.
This decrease was largely due to a change in working capital, partially offset by higher income from continuing operations of $93
million. A significant factor contributing to the decrease in cash flows related to working capital was a reduction in customer deposits
of $304 million at Textron Aviation, largely reflecting advance deposits received on military contracts in 2014 for 2015 deliveries.
Net tax payments were $174 million, $198 million and $289 million in 2016, 2015 and 2014, respectively. Pension contributions
were $50 million, $68 million and $76 million in 2016, 2015 and 2014, respectively.
Investing cash flows included capital expenditures of $446 million, $420 million and $429 million in 2016, 2015 and 2014,
respectively. Investing cash flows also included cash used for acquisitions of $186 million and $81 million in 2016 and 2015,
respectively, as well as a $1.5 billion aggregate cash payment to acquire Beechcraft in 2014. Collections on finance receivables
totaled $44 million, $67 million and $91 million in 2016, 2015 and 2014, respectively.
In 2016, 2015 and 2014, cash used in financing activities included the repayment of outstanding long-term debt of $457 million,
$356 million and $904 million, respectively, and share repurchases of $241 million, $219 million and $340 million, respectively.
Total financing cash flows also included proceeds from long-term debt of $525 million and $61 million in 2016 and 2015,
respectively, and $1.6 billion in 2014, most of which was used to finance a portion of the Beechcraft acquisition.
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 Statement of Cash Flows are summarized below:
(In millions)
Reclassification adjustments from investing activities:
Cash received from customers
Finance receivable originations for Manufacturing group inventory sales
Other
Total reclassification adjustments from investing activities
Reclassification adjustments from financing activities:
Dividends received by Manufacturing group from Finance group
Total reclassification adjustments to cash flow from operating activities
2016
2015
2014
$
$
248
(173)
(31)
44
(29)
15
$
$
284
(194)
(1)
89
(63)
26
$
365
(215)
(41)
109
—
109
$
(cid:55)(cid:72)(cid:91)(cid:87)(cid:85)(cid:82)(cid:81)(cid:3)(cid:21)(cid:19)(cid:20)(cid:25)(cid:3)(cid:36)(cid:81)(cid:81)(cid:88)(cid:68)(cid:79)(cid:3)(cid:53)(cid:72)(cid:83)(cid:82)(cid:85)(cid:87)(cid:3)(cid:3)(cid:3)(cid:3)(cid:3)(cid:3)(cid:3)(cid:22)(cid:20)
Under a Support Agreement between Textron and TFC, Textron is required to maintain a controlling interest in TFC. The agreement,
which was amended in December 2015, also requires Textron to ensure that TFC maintains fixed charge coverage of no less than
125% and consolidated shareholder’s equity of no less than $125 million. There were no cash contributions required to be paid to
TFC in 2016, 2015 and 2014 to maintain compliance with the support agreement.
Contractual Obligations(cid:3)
Manufacturing Group
The following table summarizes the known contractual obligations, as defined by reporting regulations, of our Manufacturing group
as of December 31, 2016:
(In millions)
Liabilities reflected in balance sheet:
Debt
Interest on borrowings
Pension benefits for unfunded plans
Postretirement benefits other than pensions
Other long-term liabilities
Liabilities not reflected in balance sheet:
Purchase obligations
Operating leases
Total Manufacturing group
Payments Due by Period
Total
Year 1
Years 2-3
Years 4-5
$ 2,793
649
387
317
472
2,619
439
$ 7,676
$
363
130
27
35
96
$
614
212
49
61
122
$
702
146
46
52
97
2,019
79
$ 2,749
535
122
$ 1,715
58
83
$ 1,184
More Than 5
Years
$ 1,114
161
265
169
157
7
155
$ 2,028
Pension and Postretirement Benefits
We maintain defined benefit pension plans and postretirement benefit plans other than pensions as described in Note 11 to the
Consolidated Financial Statements. Included in the above table are discounted estimated benefit payments we expect to make related
to unfunded pension and other postretirement benefit plans. Actual benefit payments are dependent on a number of factors, including
mortality assumptions, expected retirement age, rate of compensation increases and medical trend rates, which are subject to change
in future years. Our policy for funding pension plans is to make contributions annually, consistent with applicable laws and
regulations; however, future contributions to our pension plans are not included in the above table. In 2017, we expect to make
approximately $28 million of contributions to our funded pension plans and the Retirement Account Plan. Based on our current
assumptions, which may change with changes in market conditions, our current contribution for each of the years from 2018 through
2021 are estimated to be in the range of approximately $75 million to $150 million under the plan provisions in place at this time.
Other Long-Term Liabilities
Other long-term liabilities consist of undiscounted amounts in the Consolidated Balance Sheets that primarily include obligations
under deferred compensation arrangements and estimated environmental remediation costs. Payments under deferred compensation
arrangements have been estimated based on management’s assumptions of expected retirement age, mortality, stock price and rates
of return on participant deferrals. The timing of cash flows associated with environmental remediation costs is largely based on
historical experience. Certain other long-term liabilities, such as deferred taxes, unrecognized tax benefits and product liability,
warranty and litigation reserves, have been excluded from the table due to the uncertainty of the timing of payments combined with
the absence of historical trends to be used as a predictor for such payments.
Purchase Obligations
Purchase obligations include undiscounted amounts committed under legally enforceable contracts or purchase orders for goods and
services with defined terms as to price, quantity and delivery dates. Approximately 38% of the purchase obligations we disclose
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.
(cid:22)(cid:21)(cid:1)(cid:1)(cid:1)(cid:1)(cid:1)(cid:1) (cid:55)(cid:72)(cid:91)(cid:87)(cid:85)(cid:82)(cid:81)(cid:3)(cid:21)(cid:19)(cid:20)(cid:25)(cid:3)(cid:36)(cid:81)(cid:81)(cid:88)(cid:68)(cid:79)(cid:3)(cid:53)(cid:72)(cid:83)(cid:82)(cid:85)(cid:87)
Finance Group
The following table summarizes the known contractual obligations, as defined by reporting regulations, of our Finance group as of
December 31, 2016:
(In millions)
Liabilities reflected in balance sheet:
Term debt
Subordinated debt
Interest on borrowings
Total Finance group
Total
Year 1
Years 2-3
Years 4-5
More Than 5
Years
Payments Due by Period
$
604
299
181
$ 1,084
$
$
64
—
22
86
$
$
427
—
31
458
$
$
59
—
17
76
$
$
54
299
111
464
At December 31, 2016, the Finance group also had $79 million in other liabilities that are payable within the next 12 months.
Critical Accounting Estimates(cid:3)
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, which includes other significant accounting policies.
Long-Term Contracts
We make a substantial portion of our sales to government customers pursuant to long-term contracts. These contracts require
development and delivery of products over multiple years and may contain fixed-price purchase options for additional products. We
account for these long-term contracts under the percentage-of-completion method of accounting. Under this method, we estimate
profit as the difference between total estimated revenues and cost of a contract. The percentage-of-completion method of accounting
involves the use of various estimating techniques to project costs at completion and, in some cases, includes estimates of recoveries
asserted against the customer for changes in specifications. Due to the size, length of time and nature of many of our contracts, the
estimation of total contract costs and revenues through completion is complicated and subject to many variables relative to the
outcome of future events over a period of several years. We are required to make numerous assumptions and estimates relating to
items such as expected engineering requirements, complexity of design and related development costs, product performance,
performance of subcontractors, availability and cost of materials, labor productivity and cost, overhead and capital costs,
manufacturing efficiencies and the achievement of contract milestones, including product deliveries, technical requirements, or
schedule.
Our cost estimation process is based on the professional knowledge and experience of engineers and program managers along with
finance professionals. We update our projections of costs at least semiannually or when circumstances significantly change.
Adjustments to projected costs are recognized in earnings when determinable. Anticipated losses on contracts are recognized in full
in the period in which the losses become probable and estimable. 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.
At the outset of each contract, we estimate the initial profit booking rate. The initial profit booking rate of each contract considers
risks surrounding the ability to achieve the technical requirements (for example, a newly-developed product versus a mature product),
schedule (for example, 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 costs aspects of the contract. Likewise, 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 of the estimates are subject to change during the
performance of the contract and, therefore, may affect the profit booking rate. 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 recorded
in the current period.
(cid:55)(cid:72)(cid:91)(cid:87)(cid:85)(cid:82)(cid:81)(cid:3)(cid:21)(cid:19)(cid:20)(cid:25)(cid:3)(cid:36)(cid:81)(cid:81)(cid:88)(cid:68)(cid:79)(cid:3)(cid:53)(cid:72)(cid:83)(cid:82)(cid:85)(cid:87)(cid:3)(cid:3)(cid:3)(cid:3)(cid:3)(cid:3)(cid:3)(cid:22)(cid:22)
The following table sets forth the aggregate gross amount of all program profit adjustments that are included within segment profit
for the three years ended December 31, 2016:
(In millions)
Gross favorable
Gross unfavorable
Net adjustments
2016
106
(23)
83
$
$
2015
111
(33)
78
$
$
2014
132
(37)
95
$
$
Goodwill
We evaluate the recoverability of goodwill annually in the fourth quarter 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 that the carrying value
of a reporting unit might be impaired. The 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.
We calculate the fair value of each reporting unit, primarily using discounted cash flows. These cash flows incorporate assumptions
for short- and long-term 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 business characteristics to the reporting unit being
assessed. The revenue growth rates and operating margins used in our discounted cash flow analysis are based on our strategic plans
and long-range planning forecasts. The long-term 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. We utilize a weighted-average
cost of capital in our impairment analysis that makes assumptions about the capital structure that we believe a market participant
would make and include a risk premium based on an assessment of risks related to the projected cash flows of each 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.
If the reporting unit’s estimated fair value exceeds its carrying value, there is no impairment, and no further analysis is performed.
Otherwise, the amount of the impairment is determined by comparing the carrying amount of the reporting unit’s goodwill to the
implied fair value of that goodwill. The implied fair value of goodwill is determined by assigning a fair value to all of the reporting
unit’s assets and liabilities, including any unrecognized intangible assets, as if the reporting unit had been acquired in a business
combination. If the carrying amount of the goodwill exceeds the implied fair value, an impairment loss is recognized in an amount
equal to that excess.
Based on our annual impairment review, the fair value of all of our reporting units exceeded their carrying values, and we do not
believe that there is a reasonable possibility that any units might fail the initial step of the impairment test in the foreseeable future.
Retirement Benefits
We maintain various pension and postretirement plans for our employees globally. These plans include significant pension and
postretirement 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 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
increase pension expense. For 2016, the assumed expected long-term rate of return on plan assets used in calculating pension
expense was 7.58%, compared with 7.57% in 2015. For the last five years, the assumed rate of return for our domestic plans, which
represent approximately 91% of our total pension assets, was 7.75%. A 50 basis-point decrease in this long-term rate of return in
2016 would have increased pension cost for our domestic plans by approximately $30 million.
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 increases pension expense. In 2016, the weighted-
average discount rate used in calculating pension expense was 4.66%, compared with 4.25% in 2015. For our domestic plans, the
(cid:22)(cid:23)(cid:1)(cid:1)(cid:1)(cid:1)(cid:1)(cid:1) (cid:55)(cid:72)(cid:91)(cid:87)(cid:85)(cid:82)(cid:81)(cid:3)(cid:21)(cid:19)(cid:20)(cid:25)(cid:3)(cid:36)(cid:81)(cid:81)(cid:88)(cid:68)(cid:79)(cid:3)(cid:53)(cid:72)(cid:83)(cid:82)(cid:85)(cid:87)
assumed discount rate was 4.75% in 2016, compared with 4.25% in 2015. A 50 basis-point decrease in the weighted-average
discount rate would have increased pension cost for our domestic plans by approximately $33 million in 2016.
The trend in healthcare costs is difficult to estimate, and it has an important effect on postretirement liabilities. The 2016 medical
and prescription drug healthcare cost trend rates represent the weighted-average annual projected rate of increase in the per capita
cost of covered benefits. In 2016, we assumed a trend rate of 7.25% for both medical and prescription drug healthcare rates and
assumed this rate would gradually decline to 5.0% by 2024 and then remain at that level. See Note 11 to the Consolidated Financial
Statements for the impact of a one-percentage-point change in the cost trend rate.
Item 7A. Quantitative and Qualitative Disclosures About Market Risk
Foreign Currency Exchange Risks
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 exposures to foreign currency assets and earnings primarily
by funding certain foreign currency-denominated assets with liabilities in the same currency so that certain exposures are naturally
offset. We primarily use borrowings denominated in British pound sterling for these purposes. In managing our foreign currency
transaction exposures, we also enter 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 approximately $665 million and $706 million at the end of
2016 and 2015, respectively. Foreign currency exchange rate changes decreased both revenues and segment profit in 2016 by $36
million and $12 million, respectively, and in 2015 by $244 million and $20 million, respectively. The impact of foreign currency
exchange rate changes on revenues and segment profit for 2014 was not significant.
Interest Rate Risks
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 limit our risk to changes in interest rates with a strategy of matching floating-rate assets with floating-
rate liabilities.
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 capital 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.
(In millions)
Manufacturing group
Foreign exchange rate risk
Debt
Foreign currency exchange contracts
Interest rate risk
Debt
Finance group
Interest rate risk
Finance receivables
Debt
* The value represents an asset or (liability).
2016
2015
Carrying
Value*
Fair
Value*
Sensitivity of
Fair Value
to a 10%
Change
Carrying
Value*
Fair
Value*
Sensitivity of
Fair Value
to a 10%
Change
$
$
(187)
(3)
(190)
$
$
(211)
(3)
(214)
$ (2,690)
$ (2,809)
$
759
(903)
$
788
(831)
$
$
$
$
(21)
29
8
$
$
(224)
(21)
(245)
$
$
(250)
(21)
(271)
$
$
(25)
31
6
(22)
$ (2,628)
$ (2,744)
$
(18)
15
20
$
894
(913)
$
850
(840)
$
21
19
(cid:55)(cid:72)(cid:91)(cid:87)(cid:85)(cid:82)(cid:81)(cid:3)(cid:21)(cid:19)(cid:20)(cid:25)(cid:3)(cid:36)(cid:81)(cid:81)(cid:88)(cid:68)(cid:79)(cid:3)(cid:53)(cid:72)(cid:83)(cid:82)(cid:85)(cid:87)(cid:3)(cid:3)(cid:3)(cid:3)(cid:3)(cid:3)(cid:3)(cid:22)(cid:24)
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:
Consolidated Statements of Operations for each of the years in the three-year period ended December 31, 2016
Consolidated Statements of Comprehensive Income for each of the years in the three-year period ended December 31, 2016
Consolidated Balance Sheets as of December 31, 2016 and January 2, 2016
Consolidated Statements of Shareholders’ Equity for each of the years in the three-year period ended December 31, 2016
Consolidated Statements of Cash Flows for each of the years in the three-year period ended December 31, 2016
Notes to the Consolidated Financial Statements
Summary of Significant Accounting Policies
Business Acquisitions, Goodwill and Intangible Assets
Accounts Receivable and Finance Receivables
Inventories
Property, Plant and Equipment, Net
Accrued Liabilities
Debt and Credit Facilities
Derivative Instruments and Fair Value Measurements
Shareholders’ Equity
Share-Based Compensation
Note 1.
Note 2.
Note 3.
Note 4.
Note 5.
Note 6.
Note 7.
Note 8.
Note 9.
Note 10.
Note 11. Retirement Plans
Note 12.
Special Charges
Note 13.
Income Taxes
Note 14. Commitments and Contingencies
Note 15.
Note 16.
Note 17.
Supplemental Cash Flow Information
Segment and Geographic Data
Subsequent Event
Report of Independent Registered Public Accounting Firm
Supplementary Information:
Quarterly Data for 2016 and 2015 (Unaudited)
Schedule II – Valuation and Qualifying Accounts
Page
37
38
39
40
41
43
48
49
51
51
52
52
53
54
56
58
62
63
65
66
66
68
69
70
71
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.
(cid:22)(cid:25)(cid:1)(cid:1)(cid:1)(cid:1)(cid:1)(cid:1) (cid:55)(cid:72)(cid:91)(cid:87)(cid:85)(cid:82)(cid:81)(cid:3)(cid:21)(cid:19)(cid:20)(cid:25)(cid:3)(cid:36)(cid:81)(cid:81)(cid:88)(cid:68)(cid:79)(cid:3)(cid:53)(cid:72)(cid:83)(cid:82)(cid:85)(cid:87)
Consolidated Statements of Operations
For each of the years in the three-year period ended December 31, 2016
(In millions, except per share data)
Revenues
Manufacturing revenues
Finance revenues
Total revenues
Costs, expenses and other
Cost of sales
Selling and administrative expense
Interest expense
Special charges
Total costs, expenses and other
Income from continuing operations before income taxes
Income tax expense
Income from continuing operations
Income (loss) from discontinued operations, net of income taxes*
Net income
Basic earnings per share
Continuing operations
Discontinued operations
2016
2015
2014
$ 13,710
78
13,788
$ 13,340
83
13,423
$ 13,775
103
13,878
11,311
1,304
174
123
12,912
876
33
843
119
962
3.11
0.44
3.55
$
$
$
10,979
1,304
169
—
12,452
971
273
698
(1)
697
2.52
—
2.52
$
$
$
11,421
1,361
191
52
13,025
853
248
605
(5)
600
2.17
(0.02)
2.15
$
$
$
Basic earnings per share
Diluted earnings per share
Continuing operations
Discontinued operations
2.15
(0.02)
2.13
*Income from discontinued operations, net of income taxes for the year ended December 31, 2016 primarily includes the settlement of a U.S. federal income tax
audit. See Note 13 to the Consolidated Financial Statements for additional information.
Diluted earnings per share
2.50
—
2.50
3.09
0.44
3.53
$
$
$
$
$
$
See Notes to the Consolidated Financial Statements.
(cid:55)(cid:72)(cid:91)(cid:87)(cid:85)(cid:82)(cid:81)(cid:3)(cid:21)(cid:19)(cid:20)(cid:25)(cid:3)(cid:36)(cid:81)(cid:81)(cid:88)(cid:68)(cid:79)(cid:3)(cid:53)(cid:72)(cid:83)(cid:82)(cid:85)(cid:87)(cid:3)(cid:3)(cid:3)(cid:3)(cid:3)(cid:3)(cid:3)(cid:22)(cid:26)
Consolidated Statements of Comprehensive Income
For each of the years in the three-year period ended December 31, 2016
(In millions)
Net income
Other comprehensive income (loss), net of tax:
Pension and postretirement benefits adjustments, net of reclassifications
Foreign currency translation adjustments
Deferred gains (losses) on hedge contracts, net of reclassifications
Other comprehensive income (loss)
Comprehensive income
See Notes to the Consolidated Financial Statements.
2016
962
$
$
(178)
(49)
20
(207)
755
$
$
2015
697
184
(65)
(11)
108
805
2014
600
$
(401)
(75)
(3)
(479)
121
$
(cid:22)(cid:27)(cid:1)(cid:1)(cid:1)(cid:1)(cid:1)(cid:1) (cid:55)(cid:72)(cid:91)(cid:87)(cid:85)(cid:82)(cid:81)(cid:3)(cid:21)(cid:19)(cid:20)(cid:25)(cid:3)(cid:36)(cid:81)(cid:81)(cid:88)(cid:68)(cid:79)(cid:3)(cid:53)(cid:72)(cid:83)(cid:82)(cid:85)(cid:87)
Consolidated Balance Sheets
(In millions, except share data)
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
Short-term debt and current portion of long-term debt
Accounts payable
Accrued 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 (270.3 million and 288.3 million shares issued, respectively,
and 270.3 million and 274.2 million shares outstanding, respectively)
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.
December 31,
2016
January 2,
2016
$ 1,137
1,064
4,464
388
7,053
2,581
2,113
2,331
14,078
161
935
184
1,280
$ 15,358
$
363
1,273
2,257
3,893
2,354
2,414
8,661
220
903
1,123
9,784
$
946
1,047
4,144
341
6,478
2,492
2,023
2,399
13,392
59
1,087
170
1,316
$ 14,708
$
262
1,063
2,467
3,792
2,376
2,435
8,603
228
913
1,141
9,744
34
1,599
—
5,546
(1,605)
5,574
$ 15,358
36
1,587
(559)
5,298
(1,398)
4,964
$ 14,708
(cid:55)(cid:72)(cid:91)(cid:87)(cid:85)(cid:82)(cid:81)(cid:3)(cid:21)(cid:19)(cid:20)(cid:25)(cid:3)(cid:36)(cid:81)(cid:81)(cid:88)(cid:68)(cid:79)(cid:3)(cid:53)(cid:72)(cid:83)(cid:82)(cid:85)(cid:87)(cid:3)(cid:3)(cid:3)(cid:3)(cid:3)(cid:3)(cid:3)(cid:22)(cid:28)
Consolidated Statements of Shareholders’ Equity
(In millions, except per share data)
Balance at December 28, 2013
Net income
Other comprehensive loss
Dividends declared ($0.08 per share)
Share-based compensation activity
Purchases of common stock
Other
Balance at January 3, 2015
Net income
Other comprehensive income
Dividends declared ($0.08 per share)
Share-based compensation activity
Purchases of common stock
Other
Balance at January 2, 2016
Net income
Other comprehensive loss
Dividends declared ($0.08 per share)
Share-based compensation activity
Purchases of common stock
Retirement of treasury stock
Other
Balance at December 31, 2016
Common
Stock
35
$
Capital
Surplus
$ 1,331
Treasury
Stock
$ —
Accumulated
Other
Comprehensive
Loss(cid:3)
(1,027)
$
(479)
Retained
Earnings(cid:3)
$ 4,045
600
(22)
(1,506)
108
(1,398)
(207)
4,623
697
(22)
5,298
962
(22)
(692)
Total
Shareholders’
Equity
$ 4,384
600
(479)
(22)
135
(340)
(6)
4,272
697
108
(22)
126
(219)
2
4,964
962
(207)
(22)
120
(241)
—
(2)
$ 5,574
(340)
(340)
(219)
(559)
(241)
800
$ —
$ 5,546
$
(1,605)
1
36
36
1
(3)
$
34
134
(6)
1,459
126
2
1,587
119
(105)
(2)
$ 1,599
See Notes to the Consolidated Financial Statements.
(cid:23)(cid:19)(cid:1)(cid:1)(cid:1)(cid:1)(cid:1)(cid:1) (cid:55)(cid:72)(cid:91)(cid:87)(cid:85)(cid:82)(cid:81)(cid:3)(cid:21)(cid:19)(cid:20)(cid:25)(cid:3)(cid:36)(cid:81)(cid:81)(cid:88)(cid:68)(cid:79)(cid:3)(cid:53)(cid:72)(cid:83)(cid:82)(cid:85)(cid:87)
Consolidated Statements of Cash Flows
For each of the years in the three-year period ended December 31, 2016
(In millions)
Cash flows from operating activities
Net income
Less: Income (loss) from discontinued operations
Income from continuing operations
Adjustments to reconcile income from continuing operations to net cash
provided by operating activities:
Non-cash items:
Depreciation and amortization
Asset impairments
Deferred income taxes
Other, net
Changes in assets and liabilities:
Accounts receivable, net
Inventories
Other assets
Accounts payable
Accrued and 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 acquisitions
Finance receivables repaid
Other investing activities, net
Net cash used in investing activities
Cash flows from financing activities
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 provided by (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.
$
2016
962
119
843
449
40
48
92
(33)
(352)
72
215
(281)
(189)
25
75
10
1,014
(2)
1,012
(446)
(186)
44
65
(523)
525
(457)
(241)
36
(22)
(9)
(168)
(28)
293
1,005
1,298
$
Consolidated
2015
$
$
697
(1)
698
461
7
4
99
(14)
(239)
(36)
43
(155)
71
69
90
(4)
1,094
(4)
1,090
(420)
(81)
67
46
(388)
61
(356)
(219)
32
(22)
—
(504)
(15)
183
822
1,005
$
2014
600
(5)
605
459
—
(19)
100
56
(209)
(33)
(228)
311
(22)
46
150
(5)
1,211
(3)
1,208
(429)
(1,628)
91
47
(1,919)
1,567
(904)
(340)
50
(28)
(10)
335
(13)
(389)
1,211
822
$
(cid:55)(cid:72)(cid:91)(cid:87)(cid:85)(cid:82)(cid:81)(cid:3)(cid:21)(cid:19)(cid:20)(cid:25)(cid:3)(cid:36)(cid:81)(cid:81)(cid:88)(cid:68)(cid:79)(cid:3)(cid:53)(cid:72)(cid:83)(cid:82)(cid:85)(cid:87)(cid:3)(cid:3)(cid:3)(cid:3)(cid:3)(cid:3)(cid:3)(cid:23)(cid:20)
Consolidated Statements of Cash Flows continued
For each of the years in the three-year period ended December 31, 2016
(In millions)
Cash flows from operating activities
Net income
Less: Income (loss) from discontinued operations
Income from continuing operations
Adjustments to reconcile income from continuing operations to net cash
provided by operating activities:
Non-cash items:
Depreciation and amortization
Asset impairments
Deferred income taxes
Other, net
Changes in assets and liabilities:
Accounts receivable, net
Inventories
Other assets
Accounts payable
Accrued and other liabilities
Income taxes, net
Pension, net
Dividends received from Finance group
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 acquisitions
Finance receivables repaid
Finance receivables originated
Other investing activities, net
Net cash provided by (used in) investing activities
Cash flows from financing activities
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 provided by (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.
Manufacturing Group
2016
2015
Finance Group
2014
2016
2015
2014
$
951 $
119
832
683 $
(1)
684
585 $
(5)
590
11 $
—
11
14 $
—
14
15
—
15
437
40
36
90
(33)
(347)
104
215
(276)
(174)
25
29
10
988
(2)
986
(446)
(186)
—
—
11
(621)
449
7
14
90
(14)
(241)
(40)
43
(144)
62
69
63
(4)
1,038
(4)
1,034
(420)
(81)
—
—
5
(496)
446
—
(7)
86
56
(168)
(18)
(228)
316
(17)
46
—
(5)
1,097
(3)
1,094
(429)
(1,628)
—
—
(8)
(2,065)
12
—
12
2
—
—
(6)
—
(5)
(15)
—
—
—
11
—
11
—
—
292
(173)
23
142
12
—
(10)
9
—
—
4
—
(8)
9
—
—
—
30
—
30
—
—
351
(194)
40
197
345
(254)
(241)
36
(22)
(10)
(146)
(28)
191
946
$ 1,137 $
—
(100)
(219)
32
(22)
1
(308)
(15)
215
731
946 $
1,439
(559)
(340)
50
(28)
(10)
552
(13)
(432)
1,163
731 $
180
(203)
—
—
(29)
1
(51)
—
102
59
161 $
61
(256)
—
—
(63)
(1)
(259)
—
(32)
91
59 $
13
—
(12)
14
—
—
(15)
—
(5)
(5)
—
—
—
5
—
5
—
—
456
(215)
14
255
128
(345)
—
—
—
—
(217)
—
43
48
91
(cid:23)(cid:21)(cid:1)(cid:1)(cid:1)(cid:1)(cid:1)(cid:1) (cid:55)(cid:72)(cid:91)(cid:87)(cid:85)(cid:82)(cid:81)(cid:3)(cid:21)(cid:19)(cid:20)(cid:25)(cid:3)(cid:36)(cid:81)(cid:81)(cid:88)(cid:68)(cid:79)(cid:3)(cid:53)(cid:72)(cid:83)(cid:82)(cid:85)(cid:87)
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 and Industrial 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 The Boeing Company (Boeing) 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 Boeing reporting costs incurred and revenues generated from
transactions with the U.S. Government in each company’s respective income statement. Neither Bell nor Boeing is considered to be
the principal participant for the transactions recorded under this agreement. Profits on cost-plus contracts are allocated between Bell
and Boeing on a 50%-50% basis. Negotiated profits on fixed-price contracts are also allocated 50%-50%; however, Bell and Boeing
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 units-of-delivery method.
We include all assets used in performance of the V-22 Contracts that we own, including inventory and unpaid receivables 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.
We periodically change our estimates of revenues and costs on certain long-term contracts that are accounted for under the
percentage-of-completion method of accounting. These changes in estimates increased income from continuing operations before
income taxes by $83 million, $78 million and $95 million in 2016, 2015 and 2014, respectively, ($52 million, $49 million and $60
million after tax, respectively, or $0.19, $0.18 and $0.21 per diluted share, respectively). For 2016, 2015 and 2014, the gross
favorable program profit adjustments totaled $106 million, $111 million and $132 million, respectively, and the gross unfavorable
program profit adjustments totaled $23 million, $33 million and $37 million, respectively.
(cid:55)(cid:72)(cid:91)(cid:87)(cid:85)(cid:82)(cid:81)(cid:3)(cid:21)(cid:19)(cid:20)(cid:25)(cid:3)(cid:36)(cid:81)(cid:81)(cid:88)(cid:68)(cid:79)(cid:3)(cid:53)(cid:72)(cid:83)(cid:82)(cid:85)(cid:87)(cid:3)(cid:3)(cid:3)(cid:3)(cid:3)(cid:3)(cid:3)(cid:23)(cid:22)
Revenue Recognition
We generally recognize revenue for the sale of products, which are not under long-term contracts, upon delivery. For commercial
aircraft, delivery is upon completion of manufacturing, customer acceptance, and the transfer of the risk and rewards of ownership.
Taxes collected from customers and remitted to government authorities are recorded on a net basis.
When a sale arrangement involves multiple deliverables, such as sales of products that include customization and other services, we
evaluate the arrangement to determine whether there are separate items that are required to be delivered under the arrangement that
qualify as separate units of accounting. These arrangements typically involve the customization services we offer to customers who
purchase Bell helicopters, and the services generally are provided within the first six months after the customer accepts the aircraft
and assumes risk of loss. We consider the aircraft and the customization services to be separate units of accounting and allocate
contract price between the two on a relative selling price basis using the best evidence of selling price for each of the deliverables,
typically by reference to the price charged when the same or similar items are sold separately by us. We also consider any
performance, cancellation, termination or refund-type provisions. Revenue is recognized when the recognition criteria for each unit
of accounting are met.
Long-Term Contracts — Revenues under long-term contracts are accounted for under the percentage-of-completion method of
accounting. Under this method, we estimate profit as the difference between the total estimated revenues and cost of a contract. We
then recognize that estimated profit over the contract term based on either the units-of-delivery method or the cost-to-cost method
(which typically is used for development effort as costs are incurred), as appropriate under the circumstances. Revenues under fixed-
price contracts generally are recorded using the units-of-delivery method. Revenues under cost-reimbursement contracts are
recorded using the cost-to-cost method.
Long-term contract profits are based on estimates of total contract cost and revenues utilizing current contract specifications,
expected engineering requirements, the achievement of contract milestones and product deliveries. Certain contracts are awarded
with fixed-price incentive fees that also are considered when estimating revenues and profit rates. 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
update our projections of costs at least semiannually or 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 recorded in the current period. Anticipated losses on contracts are recognized in full in the period in which the losses become
probable and estimable.
Finance Revenues — Finance revenues primarily include interest on finance receivables, capital lease earnings and portfolio
gains/losses. Portfolio gains/losses include impairment charges related to repossessed assets and properties and gains/losses on the
sale or early termination of finance assets. 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.
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 net realizable value. We value our inventories generally using the first-in,
first-out (FIFO) method or the last-in, first-out (LIFO) method for certain qualifying inventories where LIFO provides a better
matching of costs and revenues. We determine costs for our commercial helicopters on an average cost basis by model considering
the expended and estimated costs for the current production release. Inventories include costs related to long-term contracts, which
are stated at actual production costs, including allocable operating overhead, advances to suppliers, and, in the case of contracts with
the U.S. Government, allocable research and development and general and administrative expenses. Since our inventoried costs
include amounts related to contracts with long production cycles, a portion of these costs is not expected to be realized within one
year. Pursuant to contract provisions, agencies of the U.S. Government have title to, or security interest in, inventories related to
such contracts as a result of advances, performance-based payments and progress payments. Accordingly, these advances and
payments are reflected as an offset against the related inventory balances with any remaining amounts recorded as a liability in
customer deposits. Customer deposits are recorded against inventory only when the right of offset exists, while all other customer
deposits are recorded in Accrued liabilities.
(cid:23)(cid:23)(cid:1)(cid:1)(cid:1)(cid:1)(cid:1)(cid:1) (cid:55)(cid:72)(cid:91)(cid:87)(cid:85)(cid:82)(cid:81)(cid:3)(cid:21)(cid:19)(cid:20)(cid:25)(cid:3)(cid:36)(cid:81)(cid:81)(cid:88)(cid:68)(cid:79)(cid:3)(cid:53)(cid:72)(cid:83)(cid:82)(cid:85)(cid:87)
Property, Plant and Equipment
Property, plant and equipment are recorded at cost and are depreciated primarily using the straight-line method. We capitalize
expenditures for improvements that increase asset values and extend useful lives. Property, plant and equipment are reviewed for
impairment whenever events or changes in circumstances indicate that the carrying amount of the asset may not be recoverable. If
the carrying value of the asset exceeds the sum of the undiscounted expected future cash flows, the asset is written down to fair
value.
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 impairment test, we calculate the fair value of each reporting unit and indefinite-lived intangible asset primarily 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. For the goodwill impairment test, the discounted cash flows incorporate assumptions for revenue
growth, 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. If the reporting unit’s estimated
fair value exceeds its carrying value, there is no impairment. Otherwise, the amount of the impairment is determined by comparing
the carrying amount of the reporting unit’s goodwill to the implied fair value of that goodwill. The implied fair value of goodwill is
determined by assigning a fair value to all of the reporting unit’s assets and liabilities as if the reporting unit had been acquired in a
business combination. If the carrying amount of the goodwill exceeds the implied fair value, an impairment loss is recognized in an
amount equal to that excess. For indefinite-lived intangible assets, if the carrying amount of an intangible asset exceeds its fair value,
an impairment loss is recognized in an amount equal to that excess.
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. Approximately 79% of our gross 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 losses.
We maintain an allowance for losses on finance receivables at a level considered adequate to cover inherent losses in the portfolio
based on management’s evaluation. For larger balance accounts specifically identified as impaired, a reserve is established based
on comparing the expected future cash flows, discounted at the finance receivable’s effective interest rate, or the fair value of the
underlying collateral if the finance receivable is collateral dependent, to its carrying amount. 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.
We also establish an allowance for losses to cover probable but specifically unknown losses existing in the portfolio. This allowance
is established as a percentage of non-recourse finance receivables, which have not been identified as requiring specific reserves. The
percentage is based on a combination of factors, including historical loss experience, current delinquency and default trends,
collateral values and both general economic and specific industry trends.
(cid:55)(cid:72)(cid:91)(cid:87)(cid:85)(cid:82)(cid:81)(cid:3)(cid:21)(cid:19)(cid:20)(cid:25)(cid:3)(cid:36)(cid:81)(cid:81)(cid:88)(cid:68)(cid:79)(cid:3)(cid:53)(cid:72)(cid:83)(cid:82)(cid:85)(cid:87)(cid:3)(cid:3)(cid:3)(cid:3)(cid:3)(cid:3)(cid:3)(cid:23)(cid:24)
Finance receivables are charged off at the earlier of the date the collateral is repossessed or when no payment has been received for
six months, unless management 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. These plans include significant pension and
postretirement 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.
For our year-end measurement, our defined benefit plan assets and obligations are measured as of the month-end date closest to our
fiscal year-end. We recognize the overfunded or underfunded status of our pension and postretirement plans in the Consolidated
Balance Sheets and recognize changes in the funded status of our defined benefit plans in comprehensive income in the year in which
they occur. Actuarial gains and losses that are not immediately recognized as net periodic pension cost are recognized as a component
of other comprehensive income (loss) (OCI) and are amortized into net periodic pension cost in future periods.
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 OCI, net of deferred taxes. Changes in fair value of derivatives
not qualifying as hedges are recorded in earnings.
Foreign currency denominated assets and liabilities are translated into U.S. dollars. Adjustments from currency rate changes are
recorded in the cumulative translation adjustment account in shareholders’ equity until the related foreign entity is sold or
substantially liquidated. We use foreign currency financing transactions to effectively hedge long-term investments in foreign
operations with the same corresponding currency. Foreign currency gains and losses on the hedge of the long-term investments are
recorded in the cumulative translation adjustment account.
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. There is no legal requirement to remove these items, and there
currently is no plan to remodel the related facilities or otherwise cause the impacted items to require disposal. Since these asset
retirement obligations are not estimable, there is no related liability recorded in the Consolidated Balance Sheets.
Warranty and Product Maintenance Liabilities
We provide limited warranty and product maintenance programs for certain products for periods ranging from one to five years. A
significant portion of these liabilities arises from our commercial aircraft businesses. For our product maintenance contracts, revenue
is recognized on a straight-line basis over the contract period, unless sufficient historical evidence indicates that the cost of providing
these services is incurred on a basis other than straight-line. In those circumstances, revenue is recognized over the contract period
in proportion to the costs expected to be incurred in performing the service.
(cid:23)(cid:25)(cid:1)(cid:1)(cid:1)(cid:1)(cid:1)(cid:1) (cid:55)(cid:72)(cid:91)(cid:87)(cid:85)(cid:82)(cid:81)(cid:3)(cid:21)(cid:19)(cid:20)(cid:25)(cid:3)(cid:36)(cid:81)(cid:81)(cid:88)(cid:68)(cid:79)(cid:3)(cid:53)(cid:72)(cid:83)(cid:82)(cid:85)(cid:87)
For our 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,
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. Company-funded
research and development costs were $677 million, $778 million and $694 million in 2016, 2015 and 2014, respectively, and are
included in cost of sales.
Income Taxes
The provision for income tax expense is calculated on reported Income from continuing operations 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.
New Accounting Pronouncements
In May 2014, the Financial Accounting Standards Board (FASB) issued Accounting Standards Update (ASU) No. 2014-09, Revenue
from Contracts with Customers, that outlines a five-step revenue recognition model based on the principle that an entity should
recognize revenue to depict the transfer of promised goods or services to customers in an amount that reflects the consideration to
which the entity expects to be entitled in exchange for those goods and services. In July 2015, the FASB approved a one-year deferral
of the effective date of the standard to the beginning of 2018 for public companies, with an option to adopt the standard as early as
the original effective date of 2017. The standard may be adopted either retrospectively or on a modified retrospective basis. We will
adopt the standard in 2018 and expect to apply it on a modified retrospective basis, with a cumulative catch-up adjustment recognized
at the beginning of 2018. The standard will primarily impact our businesses under long-term production contracts with the U.S.
Government as these contracts currently use the units-of-delivery accounting method; under the new standard, these contracts will
transition to a model that recognizes revenue over time, principally as costs are incurred, resulting in earlier revenue recognition. In
2016, approximately 25% of our revenues were from contracts with the U.S. Government. Given the complexity of our contracts,
we are continuing to assess the potential effect that the standard is expected to have on our consolidated financial statements.
(cid:55)(cid:72)(cid:91)(cid:87)(cid:85)(cid:82)(cid:81)(cid:3)(cid:21)(cid:19)(cid:20)(cid:25)(cid:3)(cid:36)(cid:81)(cid:81)(cid:88)(cid:68)(cid:79)(cid:3)(cid:53)(cid:72)(cid:83)(cid:82)(cid:85)(cid:87)(cid:3)(cid:3)(cid:3)(cid:3)(cid:3)(cid:3)(cid:3)(cid:23)(cid:26)
In February 2016, the FASB issued ASU No. 2016-02, Leases, that requires lessees to recognize all leases with a term greater than
12 months on the balance sheet as right-to-use assets and lease liabilities, while lease expenses would continue to be recognized in
the statement of operations in a manner similar to current accounting guidance. Under the current accounting guidance, we are not
required to recognize assets and liabilities arising from operating leases on the balance sheet. The new standard is effective for our
company at the beginning of 2019 and early adoption is permitted. Entities must adopt the standard on a modified retrospective
basis whereby it would be applied at the beginning of the earliest comparative year. While we continue to evaluate the impact of
the standard on our consolidated financial statements, we expect that it will materially increase our assets and liabilities on our
consolidated balance sheet as we recognize the rights and corresponding obligations related to our operating leases.
In June 2016, the FASB issued ASU No. 2016-13, Financial Instruments – Credit Losses. For most financial assets, such as trade
and other receivables, loans and other instruments, this standard changes the current incurred loss model to a forward-looking
expected credit loss model, which generally will result in the earlier recognition of allowances for losses. The new standard is
effective for our company at the beginning of 2020 with early adoption permitted beginning in 2019. Entities are required to apply
the provisions of the standard through a cumulative-effect adjustment to retained earnings as of the effective date. We are currently
evaluating the impact of the standard on our consolidated financial statements.
Note 2. Business Acquisitions, Goodwill and Intangible Assets
2016 Acquisitions
In 2016, we paid $186 million in cash and assumed debt of $19 million to acquire six businesses, net of cash acquired and
holdbacks. Our acquisition of Able Engineering and Component Services, Inc. and Able Aerospace, Inc. (Able) in the first quarter
of 2016 represented the largest of these businesses and is included in the Textron Aviation segment. Able is an industry-leading
repair and overhaul business that provides component repairs, component exchanges and replacement parts, among other support
and service offerings for commercial rotorcraft and fixed-wing aircraft customers around the world. We are in the process of
allocating the purchase price and valuing the acquired assets and liabilities for certain of these acquisitions. Based on the allocation
of the aggregate purchase price for these acquisitions as of December 31, 2016, $101 million has been allocated to goodwill, related
to expected synergies and the value of the existing workforce, and $59 million to intangible assets. Of the recorded goodwill,
approximately $45 million is deductible for tax purposes. The intangible assets, which primarily include customer relationships and
technologies, are amortized over a weighted-average period of 15 years. The operating results of these acquisitions have been
included in the Consolidated Statements of Operations since their respective closing dates.
2015 Acquisitions
During 2015, we made aggregate cash payments for acquisitions of $81 million, which included three businesses within our Industrial
and Textron Aviation segments.
2014 Acquisitions
On March 14, 2014, we completed the acquisition of all of the outstanding equity interests in Beech Holdings, LLC, which included
Beechcraft Corporation and other subsidiaries, (collectively “Beechcraft”), for an aggregate cash payment of $1.5 billion. The
acquisition of Beechcraft and the formation of the Textron Aviation segment has provided increased scale and complementary
product offerings, allowing us to strengthen our position across the aviation industry and enhance our ability to support our
customers. We financed $1.1 billion of the purchase price with the issuance of long-term debt and the remaining balance was paid
from cash on hand. During 2014, we also made aggregate cash payments of $149 million for seven acquisitions within our Industrial
and Systems Segments, including Tug Technologies Corporation, a manufacturer of ground support equipment in the aviation
industry.
Goodwill
The changes in the carrying amount of goodwill by segment are as follows:
(In millions)
Balance at January 3, 2015
Acquisitions
Foreign currency translation
Balance at January 2, 2016
Acquisitions
Foreign currency translation
Balance at December 31, 2016
(cid:23)(cid:27)(cid:1)(cid:1)(cid:1)(cid:1)(cid:1)(cid:1) (cid:55)(cid:72)(cid:91)(cid:87)(cid:85)(cid:82)(cid:81)(cid:3)(cid:21)(cid:19)(cid:20)(cid:25)(cid:3)(cid:36)(cid:81)(cid:81)(cid:88)(cid:68)(cid:79)(cid:3)(cid:53)(cid:72)(cid:83)(cid:82)(cid:85)(cid:87)
Textron
Aviation
554
6
—
560
54
(1)
613
$
$
Bell
31
—
—
31
—
—
31
$
$
Textron
Systems
$ 1,057
—
(6)
1,051
36
—
$ 1,087
Industrial
385
$
10
(14)
381
7
(6)
382
$
Total
$ 2,027
16
(20)
2,023
97
(7)
$ 2,113
Intangible Assets
Our intangible assets are summarized below:
(Dollars in millions)
Patents and technology
Customer relationships and
contractual agreements
Trade names and trademarks
Other
Total
Weighted-Average
Amortization
Period (in years)
15
15
16
9
December 31, 2016
January 2, 2016
Gross
Carrying
Amount
537
$
384
264
18
$ 1,203
Accumulated
Amortization
(158)
$
(226)
(36)
(16)
(436)
$
Gross
Carrying
Amount
513
$
375
263
23
$ 1,174
Accumulated
Amortization
(120)
$
(220)
(32)
(19)
(391)
$
Net
$ 379
158
228
2
$ 767
Net
$ 393
155
231
4
$ 783
Trade names and trademarks in the table above include $204 million of indefinite-lived intangible assets at both December 31, 2016
and January 2, 2016. Amortization expense totaled $66 million, $61 million and $62 million in 2016, 2015 and 2014, respectively.
Amortization expense is estimated to be approximately $66 million, $63 million, $62 million, $58 million and $55 million in 2017,
2018, 2019, 2020 and 2021, respectively.
Note 3. Accounts Receivable and Finance Receivables
Accounts Receivable
Accounts receivable is composed of the following:
(In millions)
Commercial
U.S. Government contracts
Allowance for doubtful accounts
Total
$
December 31,
2016
797
294
1,091
(27)
$ 1,064
$
January 2,
2016
841
239
1,080
(33)
$ 1,047
We have unbillable receivables, primarily on U.S. Government contracts, that arise when the revenues we have appropriately
recognized based on performance cannot be billed yet under terms of the contract. Unbillable receivables within accounts receivable
totaled $178 million at December 31, 2016 and $135 million at January 2, 2016.
Finance Receivables
Finance receivables are presented in the following table:
(In millions)
Finance receivables*
Allowance for losses
Total finance receivables, net
* Includes finance receivables held for sale of $30 million at both December 31, 2016 and January 2, 2016.
$
December 31,
2016
976
(41)
935
$
January 2,
2016
$ 1,135
(48)
$ 1,087
Finance receivables primarily includes loans provided to purchasers of new and pre-owned Textron Aviation aircraft and Bell
helicopters. These loans typically have initial terms ranging from five to ten years, amortization terms ranging from eight to fifteen
years and an average balance of $1 million at December 31, 2016. 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 31, 2016, 61% of our finance
receivables were distributed internationally and 39% throughout the U.S., compared with 62% and 38%, respectively, at the end of
2015. At December 31, 2016 and January 2, 2016, finance receivables of $411 million and $493 million, respectively, have been
pledged as collateral for TFC’s debt of $244 million and $352 million, respectively.
(cid:55)(cid:72)(cid:91)(cid:87)(cid:85)(cid:82)(cid:81)(cid:3)(cid:21)(cid:19)(cid:20)(cid:25)(cid:3)(cid:36)(cid:81)(cid:81)(cid:88)(cid:68)(cid:79)(cid:3)(cid:53)(cid:72)(cid:83)(cid:82)(cid:85)(cid:87)(cid:3)(cid:3)(cid:3)(cid:3)(cid:3)(cid:3)(cid:3)(cid:23)(cid:28)
Finance Receivable Portfolio Quality
Credit Quality Indicators and Nonaccrual Finance Receivables
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.
Delinquency
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)
Performing
Watchlist
Nonaccrual
Nonaccrual as a percentage of finance receivables
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
$
December 31,
2016
758
101
87
9.20%
857
49
18
22
4.23%
$
$
January 2,
2016
891
130
84
7.60%
950
86
42
27
6.24%
$
Impaired Loans
On a quarterly basis, we evaluate individual finance receivables for impairment in non-homogeneous portfolios and larger balance
accounts in homogeneous loan portfolios. 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. Interest income recognized on impaired loans was not significant
in 2016 or 2015.
A summary of impaired finance receivables, excluding leveraged leases, and the average recorded investment is provided below:
(In millions)
Recorded investment:
Impaired loans with related allowance for losses
Impaired loans with no related allowance for losses
Total
Unpaid principal balance
Allowance for losses on impaired loans
Average recorded investment
(cid:24)(cid:19)(cid:1)(cid:1)(cid:1)(cid:1)(cid:1)(cid:1) (cid:55)(cid:72)(cid:91)(cid:87)(cid:85)(cid:82)(cid:81)(cid:3)(cid:21)(cid:19)(cid:20)(cid:25)(cid:3)(cid:36)(cid:81)(cid:81)(cid:88)(cid:68)(cid:79)(cid:3)(cid:53)(cid:72)(cid:83)(cid:82)(cid:85)(cid:87)
December 31,
2016
January 2,
2016
$
$
$
55
65
120
125
11
101
$
$
$
62
42
104
113
17
102
Allowance for Losses
A rollforward of the allowance for losses on finance receivables and a summary of its composition, based on how the underlying
finance receivables are evaluated for impairment, is provided below. The finance receivables reported in this table specifically
exclude $99 million and $118 million of leveraged leases at December 31, 2016 and January 2, 2016, respectively, in accordance
with U.S. generally accepted accounting principles.
(In millions)
Balance at beginning of year
Provision for losses
Charge-offs
Recoveries
Balance at end of year
Allowance based on collective evaluation
Allowance based on individual evaluation
Finance receivables evaluated collectively
Finance receivables evaluated individually
Note 4. Inventories
Inventories are composed of the following:
(In millions)
Finished goods
Work in process
Raw materials and components
Progress/milestone payments
Total
$
December 31,
2016
48
(1)
(16)
10
41
30
11
727
120
$
$
$
January 2,
2016
51
(2)
(14)
13
48
31
17
883
104
$
$
December 31,
January 2,
2016
$ 1,947
2,742
724
5,413
(949)
$ 4,464
2016
$ 1,735
2,921
605
5,261
(1,117)
$ 4,144
Inventories valued by the LIFO method totaled $1.9 billion and $1.6 billion at December 31, 2016 and January 2, 2016, respectively,
and the carrying values of these inventories would have been higher by approximately $457 million and $463 million, respectively,
had our LIFO inventories been valued at current costs. Inventories related to long-term contracts, net of progress/milestone payments,
were $557 million and $611 million at December 31, 2016 and January 2, 2016, respectively.
Note 5. Property, Plant and Equipment, Net
Our Manufacturing group’s property, plant and equipment, net is composed of the following:
(Dollars in millions)
Land and buildings
Machinery and equipment
Accumulated depreciation and amortization
Total
Useful Lives(cid:3)
(in years)(cid:3)
3 – 40
1 – 20
December 31,
2016
$ 1,884
4,820
6,704
(4,123)
$ 2,581
January 2,
2016
$ 1,859
4,548
6,407
(3,915)
$ 2,492
At December 31, 2016 and January 2, 2016, assets under capital leases totaled $284 million and $275 million, respectively, and had
accumulated amortization of $85 million and $87 million, respectively. The Manufacturing group’s depreciation expense, which
included amortization expense on capital leases, totaled $368 million, $383 million and $379 million in 2016, 2015 and 2014,
respectively.
(cid:55)(cid:72)(cid:91)(cid:87)(cid:85)(cid:82)(cid:81)(cid:3)(cid:21)(cid:19)(cid:20)(cid:25)(cid:3)(cid:36)(cid:81)(cid:81)(cid:88)(cid:68)(cid:79)(cid:3)(cid:53)(cid:72)(cid:83)(cid:82)(cid:85)(cid:87)(cid:3)(cid:3)(cid:3)(cid:3)(cid:3)(cid:3)(cid:3)(cid:24)(cid:20)
Note 6. Accrued Liabilities
The accrued liabilities of our Manufacturing group are summarized below:
(In millions)
Customer deposits
Salaries, wages and employer taxes
Current portion of warranty and product maintenance contracts
Other
Total
Changes in our warranty liability are as follows:
(In millions)
Balance at beginning of year
Provision
Settlements
Acquisitions
Adjustments*
Balance at end of year
* Adjustments include changes to prior year estimates, new issues on prior year sales and currency translation adjustments.
2016
143
79
(70)
2
(16)
138
$
$
$
December 31,
2016
991
301
151
814
$ 2,257
January 2,
2016
$ 1,323
315
137
692
$ 2,467
2015
148
78
(72)
3
(14)
143
$
$
2014
121
75
(71)
43
(20)
148
$
$
Note 7. Debt and Credit Facilities
Our debt is summarized in the table below:
(In millions)
Manufacturing group
4.625% due 2016
5.60% due 2017
Variable-rate note due 2018 (2.09% and 1.58%, respectively)
7.25% due 2019
Variable-rate note due 2019 (1.95% and 1.59%, respectively)
6.625% due 2020
3.65% due 2021
5.95% due 2021
4.30% due 2024
3.875% due 2025
4.00% due 2026
Other (weighted-average rate of 2.86% and 1.29%, respectively)
Total Manufacturing group debt
Less: Short-term debt and current portion of long-term debt
Total Long-term debt
Finance group
Fixed-rate notes due 2016-2017 (weighted-average rate of 4.59%) (a)
Variable-rate note due 2018 (weighted-average rate of 1.89% and 1.53%, respectively)
2.26% note due 2019
Fixed-rate notes due 2017-2025 (weighted-average rate of 2.87% and 2.79%, respectively) (a) (b)
Variable-rate notes due 2016-2025 (weighted-average rate of 1.97% and 1.54%, respectively) (a) (b)
Securitized debt (weighted-average rate of 1.71%)
6% Fixed-to-Floating Rate Junior Subordinated Notes
Total Finance group debt
(a) Notes amortize on a quarterly or semi-annual basis.
(b) Notes are secured by finance receivables as described in Note 3.
December 31,
2016
January 2,
2016
$
—
350
150
250
200
184
250
250
350
350
350
93
$ 2,777
(363)
$ 2,414
$
$
10
200
150
202
42
—
299
903
$
250
350
150
250
200
222
250
250
350
350
—
75
$ 2,697
(262)
$ 2,435
$
$
21
200
—
300
52
41
299
913
(cid:24)(cid:21)(cid:1)(cid:1)(cid:1)(cid:1)(cid:1)(cid:1) (cid:55)(cid:72)(cid:91)(cid:87)(cid:85)(cid:82)(cid:81)(cid:3)(cid:21)(cid:19)(cid:20)(cid:25)(cid:3)(cid:36)(cid:81)(cid:81)(cid:88)(cid:68)(cid:79)(cid:3)(cid:53)(cid:72)(cid:83)(cid:82)(cid:85)(cid:87)
The following table shows required payments during the next five years on debt outstanding at December 31, 2016:
(In millions)
Manufacturing group
Finance group
Total
2017
363
64
427
$
$
2018
157
239
396
$
$
2019
457
188
645
$
$
2020
195
36
231
$
$
2021
507
23
530
$
$
On September 30, 2016, Textron entered into a senior unsecured revolving credit facility that expires in September 2021 for an
aggregate principal amount of $1.0 billion, of which up to $100 million is available for the issuance of letters of credit. At December
31, 2016, there were no amounts borrowed against the facility and there were $11 million of letters of credit issued against it. This
facility replaced the existing 5-year facility, which had no outstanding borrowings and was scheduled to expire in October 2018.
6% Fixed-to-Floating Rate Junior Subordinated Notes
The Finance group’s $299 million of 6% Fixed-to-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
on or after February 15, 2017 and are obligated to redeem the notes beginning on February 15, 2042. Interest on the notes is fixed
at 6% until February 15, 2017 and is variable at the three-month London Interbank Offered Rate + 1.735% thereafter.
Support Agreement
Under a Support Agreement, as amended in December 2015, Textron Inc. is required to ensure that TFC maintains fixed charge
coverage of no less than 125% and consolidated shareholder’s equity of no less than $125 million. There were no cash contributions
required to be paid to TFC in 2016, 2015 and 2014 to maintain compliance with the support agreement.
Note 8. 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 31, 2016 and January 2, 2016, we
had foreign currency exchange contracts with notional amounts upon which the contracts were based of $665 million and $706
million, respectively. At December 31, 2016, the fair value amounts of our foreign currency exchange contracts were a $7 million
asset and a $17 million liability. At January 2, 2016, the fair value amounts of our foreign currency exchange contracts were a $7
million asset and a $28 million liability.
We hedge our net investment position in major currencies and generate foreign currency interest payments that offset other
transactional exposures in these currencies. To accomplish this, we borrow directly in foreign currency and designate a portion of
foreign currency debt as a hedge of a net investment. We record changes in the fair value of these contracts in other comprehensive
income to the extent they are effective as cash flow hedges. Currency effects on the effective portion of these hedges, which are
(cid:55)(cid:72)(cid:91)(cid:87)(cid:85)(cid:82)(cid:81)(cid:3)(cid:21)(cid:19)(cid:20)(cid:25)(cid:3)(cid:36)(cid:81)(cid:81)(cid:88)(cid:68)(cid:79)(cid:3)(cid:53)(cid:72)(cid:83)(cid:82)(cid:85)(cid:87)(cid:3)(cid:3)(cid:3)(cid:3)(cid:3)(cid:3)(cid:3)(cid:24)(cid:22)
reflected in the foreign currency translation adjustments within Accumulated other comprehensive loss, were not significant in the
periods presented.
Assets Recorded at Fair Value on a Nonrecurring Basis
During the years ended December 31, 2016 and January 2, 2016, the Finance group’s impaired nonaccrual finance receivables of
$44 million and $45 million, respectively, were measured at fair value on a nonrecurring basis using significant unobservable inputs
(Level 3). Impaired nonaccrual finance receivables represent assets recorded at fair value on a nonrecurring basis since the
measurement of required reserves on our impaired finance receivables is significantly dependent on the fair value of the underlying
collateral. For impaired nonaccrual finance receivables secured by aviation assets, the fair values of collateral are determined
primarily based on the use of industry pricing guides. Fair value measurements recorded on impaired finance receivables resulted in
charges to provision for loan losses totaling $10 million, $13 million and $18 million for 2016, 2015 and 2014, respectively.
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:
(In millions)
Manufacturing group
Debt, excluding leases
Finance group
Finance receivables, excluding leases
Debt
December 31, 2016
January 2, 2016
Carrying
Value
Estimated
Fair Value
Carrying
Value
Estimated
Fair Value
$ (2,690)
$ (2,809)
$ (2,628)
$ (2,744)
729
(903)
758
(831)
863
(913)
820
(840)
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 9. 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 for the three years ended December 31, 2016 is presented below:
(In thousands)
Balance at beginning of year
Stock repurchases
Share-based compensation activity
Balance at end of year
2016
274,228
(6,898)
2,957
270,287
2015
276,582
(5,197)
2,843
274,228
2014
282,059
(8,921)
3,444
276,582
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.
(cid:24)(cid:23)(cid:1)(cid:1)(cid:1)(cid:1)(cid:1) (cid:1)(cid:55)(cid:72)(cid:91)(cid:87)(cid:85)(cid:82)(cid:81)(cid:3)(cid:21)(cid:19)(cid:20)(cid:25)(cid:3)(cid:36)(cid:81)(cid:81)(cid:88)(cid:68)(cid:79)(cid:3)(cid:53)(cid:72)(cid:83)(cid:82)(cid:85)(cid:87)
The weighted-average shares outstanding for basic and diluted EPS are as follows:
(In thousands)
Basic weighted-average shares outstanding
Dilutive effect of:
Stock options
Accelerated Share Repurchase agreement
Diluted weighted-average shares outstanding
2016
270,774
2015
276,682
2014
279,409
1,591
—
272,365
2,045
—
278,727
2,049
332
281,790
Stock options to purchase 2 million shares of common stock are excluded from the calculation of diluted weighted-average shares
outstanding for each year presented as their effect would have been anti-dilutive.
Accumulated Other Comprehensive Loss
The components of Accumulated Other Comprehensive Loss are presented below:
(In millions)
Balance at January 3, 2015
Other comprehensive income (loss) before reclassifications
Reclassified from Accumulated other comprehensive loss
Other comprehensive income (loss)
Balance at January 2, 2016
Other comprehensive income (loss) before reclassifications
Reclassified from Accumulated other comprehensive loss
Other comprehensive income (loss)
Balance at December 31, 2016
Pension and
Postretirement
Benefits
Adjustments
(1,511)
$
92
92
184
(1,327)
(240)
62
(178)
(1,505)
$
$
Foreign
Currency
Translation
Adjustments
18
$
(65)
—
(65)
(47)
(49)
—
(49)
(96)
$
$
Other Comprehensive Income (Loss)
The before and after-tax components of other comprehensive income (loss) are presented below:
$
Deferred
Gains (Losses)
on Hedge
Contracts
(13)
(26)
15
(11)
(24)
7
13
20
(4)
$
$
$
Accumulated
Other
Comprehensive
Loss
(1,506)
1
107
108
(1,398)
(282)
75
(207)
(1,605)
$
$
(In millions)
Pension and postretirement
benefits adjustments:
Unrealized gains (losses)
Amortization of net actuarial loss*
Amortization of prior service credit*
Recognition of prior service credit
Pension and postretirement
benefits adjustments, net
Deferred gains (losses) on hedge
contracts:
Current deferrals
Reclassification adjustments
Deferred gains (losses) on hedge
contracts, net
Foreign currency translation
adjustments
2016
Tax
(Expense)
Benefit
Pre-Tax
Amount
After-Tax
Amount
Pre-Tax
Amount
2015
Tax
(Expense)
Benefit
After-Tax
Amount
Pre-Tax
Amount
2014
Tax
(Expense)
Benefit
After-Tax
Amount
$ (382) $ 135
(39)
4
(5)
104
(7)
12
$ (247) $ 136
150
(7)
—
65
(3)
7
$
(44) $
(53)
2
—
92
97
(5)
—
$ (734) $ 252
(40)
4
(7)
114
(8)
18
$ (482)
74
(4)
11
(273)
95
(178)
279
(95)
184
(610)
209
(401)
11
17
28
(4)
(4)
(8)
7
13
20
(33)
19
(14)
7
(4)
3
(26)
15
(11)
(16)
12
(4)
4
(3)
1
(12)
9
(3)
Total
*These components of other comprehensive income (loss) are included in the computation of net periodic pension cost. See Note 11 for additional information.
(36)
$ (281) $
(13)
74
(49)
(55)
$ (207) $ 210
(10)
(65)
$ (102) $ 108
(71)
(4)
$ (685) $ 206
(75)
$ (479)
(cid:55)(cid:72)(cid:91)(cid:87)(cid:85)(cid:82)(cid:81)(cid:3)(cid:21)(cid:19)(cid:20)(cid:25)(cid:3)(cid:36)(cid:81)(cid:81)(cid:88)(cid:68)(cid:79)(cid:3)(cid:53)(cid:72)(cid:83)(cid:82)(cid:85)(cid:87)(cid:3)(cid:3)(cid:3)(cid:3)(cid:3)(cid:3)(cid:3)(cid:24)(cid:24)
Note 10. Share-Based Compensation
Our 2015 Long-Term Incentive Plan (Plan), which replaced our 2007 Long-Term Incentive Plan in April 2015, authorizes awards
to selected employees 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 17 million shares is authorized for issuance for all purposes under
the Plan plus any shares that become available upon cancellation, forfeiture or expiration of awards granted under the 2007 Long-
Term Incentive Plan. No more than 17 million shares may be awarded pursuant to incentive stock options, and no more than 4.25
million shares may be issued pursuant to awards of restricted stock, restricted stock units, performance stock or other awards that
are payable in shares.
Through our Deferred Income Plan for Textron Executives, we provide certain executives the opportunity to voluntarily defer up to
80% of their base salary, along with incentive compensation. Elective deferrals may be put into either a stock unit account or an
interest-bearing account. Participants cannot move amounts between the two accounts while actively employed by us and cannot
receive distributions until termination of employment. The intrinsic value of amounts paid under this deferred income plan was not
significant in 2016, 2015 and 2014.
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)
Compensation expense
Income tax benefit
Total net compensation expense included in net income
2016
71
(26)
45
2015
63
(23)
40
2014
85
(32)
53
$
$
$
$
$
$
Compensation expense included approximately $20 million in 2016 and $21 million in both 2015 and 2014, respectively, for a
portion of the fair value of stock options issued and the portion of previously granted options for which the requisite service has been
rendered.
Compensation cost for awards subject only to service conditions that vest ratably are recognized on a straight-line basis over the
requisite service period for each separately vesting portion of the award. As of December 31, 2016, we had not recognized $43
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.
Stock Options
Options to purchase our shares have a maximum term of ten years and generally vest ratably over a three-year period. The stock
option compensation cost calculated under the fair value approach is recognized over the vesting period of the stock options. We
estimate the fair value of options granted on the date of grant using the Black-Scholes option-pricing model. Expected volatilities
are based on implied volatilities from traded options on our common stock, historical volatilities and other factors. The expected
term is based on historical option exercise data, which is adjusted to reflect any anticipated changes in expected behavior.
The weighted-average fair value of options granted during the past three years and the assumptions used in our option-pricing model
for such grants are as follows:
Fair value of options at grant date
Dividend yield
Expected volatility
Risk-free interest rate
Expected term (in years)
2016
$ 10.33
0.2%
33.6%
1.2%
4.8
2015
$ 14.03
0.2%
34.9%
1.5%
4.8
2014
$ 12.72
0.2%
34.5%
1.5%
5.0
(cid:24)(cid:25)(cid:1)(cid:1)(cid:1)(cid:1)(cid:1)(cid:1) (cid:55)(cid:72)(cid:91)(cid:87)(cid:85)(cid:82)(cid:81)(cid:3)(cid:21)(cid:19)(cid:20)(cid:25)(cid:3)(cid:36)(cid:81)(cid:81)(cid:88)(cid:68)(cid:79)(cid:3)(cid:53)(cid:72)(cid:83)(cid:82)(cid:85)(cid:87)
The stock option activity during 2016 is provided below:
(Options in thousands)
Outstanding at beginning of year
Granted
Exercised
Forfeited or expired
Outstanding at end of year
Exercisable at end of year
Number of
Options
8,808
1,795
(1,143)
(196)
9,264
5,849
Weighted-
Average
Exercise
Price
$ 32.91
34.51
(28.57)
(39.85)
$ 33.61
$ 30.71
At December 31, 2016, our outstanding options had an aggregate intrinsic value of $139 million and a weighted-average remaining
contractual life of six years. Our exercisable options had an aggregate intrinsic value of $104 million and a weighted-average
remaining contractual life of five years at December 31, 2016. The total intrinsic value of options exercised during 2016, 2015 and
2014 was $15 million, $23 million and $25 million, respectively.
Restricted Stock Units
We issue restricted stock units settled in both cash and stock (vesting one-third each in the third, fourth and fifth year following the
year of the grant), which include the right to receive dividend equivalents. The fair value of these units is based on the trading price
of our common stock and is recognized ratably over the vesting period. 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 2016 activity for restricted stock units is provided below:
Units Payable in Stock
Units Payable in Cash
(Shares/Units in thousands)
Outstanding at beginning of year, nonvested
Granted
Vested
Forfeited
Outstanding at end of year, nonvested
Number of
Shares
880
189
(272)
—
797
$
Weighted-
Average Grant
Date Fair Value
33.97
34.50
(28.57)
—
35.94
$
Number of
Units
1,492
403
(352)
(99)
1,444
$
Weighted-
Average Grant
Date Fair Value
34.84
34.59
(27.70)
(37.42)
36.33
$
The fair value of the restricted stock awards that vested and/or amounts paid under these awards is as follows:
(In millions)
Fair value of awards vested
Cash paid
$
2016
20
12
$
2015
25
20
$
2014
25
23
Performance Share Units
The fair value of share-based compensation awards accounted for as liabilities includes performance share units, which are paid in
cash in the first quarter of the year following vesting. Payouts under performance share units vary based on certain performance
criteria generally set for each year of a three-year performance period. The performance share units vest at the end of three years.
The fair value of these awards is based on the trading price of our common stock and is remeasured at each reporting period date.
The 2016 activity for our performance share units is as follows:
(Units in thousands)
Outstanding at beginning of year, nonvested
Granted
Vested
Forfeited
Outstanding at end of year, nonvested
Number of
Units
549
285
(290)
(9)
535
Weighted-
Average
Grant Date
Fair Value
$ 41.84
34.50
(39.70)
(39.56)
$ 39.13
(cid:55)(cid:72)(cid:91)(cid:87)(cid:85)(cid:82)(cid:81)(cid:3)(cid:21)(cid:19)(cid:20)(cid:25)(cid:3)(cid:36)(cid:81)(cid:81)(cid:88)(cid:68)(cid:79)(cid:3)(cid:53)(cid:72)(cid:83)(cid:82)(cid:85)(cid:87)(cid:3)(cid:3)(cid:3)(cid:3)(cid:3)(cid:3)(cid:3)(cid:24)(cid:26)
The fair value of the performance share units that vested and/or amounts paid under these awards is as follows:
(In millions)
Fair value of awards vested
Cash paid
Note 11. Retirement Plans
$
2016
14
13
$
2015
16
17
$
2014
20
12
Our defined benefit and defined contribution plans cover substantially all of our employees. A significant number of our U.S.-based
employees participate in the Textron Retirement Plan, which is designed to be a “floor-offset” arrangement with both a defined
benefit component and a defined contribution component. The defined benefit component of the arrangement includes the Textron
Master Retirement Plan (TMRP) and the Bell Helicopter Textron Master Retirement Plan (BHTMRP), and the defined contribution
component is the Retirement Account Plan (RAP). The defined benefit component provides a minimum guaranteed benefit (or
“floor” benefit). Under the RAP, participants are eligible to receive contributions from Textron of 2% of their eligible compensation
but may not make contributions to the plan. Upon retirement, participants receive the greater of the floor benefit or the value of the
RAP. Both the TMRP and the BHTMRP are subject to the provisions of the Employee Retirement Income Security Act of 1974
(ERISA). Effective on January 1, 2010, the Textron Retirement Plan was closed to new participants, and employees hired after that
date receive an additional 4% annual cash contribution to their Textron Savings Plan account based on their eligible compensation.
We also have other funded and unfunded defined benefit pension plans that cover certain of our U.S. and Non-U.S. employees. In
addition, several defined contribution plans are sponsored by our various businesses, of which the largest plan is the Textron Savings
Plan, which is a qualified 401(k) plan subject to ERISA. Our defined contribution plans cost approximately $110 million, $103
million and $99 million in 2016, 2015 and 2014, respectively; these amounts include $10 million, $12 million and $16 million,
respectively, in contributions to the RAP. We also provide postretirement benefits other than pensions for certain retired employees
in the U.S., which include healthcare, dental care, Medicare Part B reimbursement and life insurance benefits.
Periodic Benefit Cost
The components of net periodic benefit cost and other amounts recognized in OCI are as follows:
(In millions)
Net periodic benefit cost
Service cost
Interest cost
Expected return on plan assets
Amortization of prior service cost (credit)
Amortization of net actuarial loss
Curtailment and other charges
Net periodic benefit cost (credit)
Other changes in plan assets and benefit obligations
recognized in OCI
Current year actuarial loss (gain)
Current year prior service cost (credit)
Amortization of net actuarial loss
Amortization of prior service credit (cost)
Total recognized in OCI, before taxes
Total recognized in net periodic benefit cost and OCI
Pension Benefits
Postretirement Benefits
Other than Pensions
2016
2015
2014
2016
2015
2014
$
$
$
$
$
98
338
(490)
15
104
—
65
399
—
(104)
(15)
280
345
$
$
$
$
$
113
327
(483)
16
148
6
127
$
$
109
334
(462)
15
112
—
108
(107) $
—
(148)
(18)
(273) $
(146) $
729
12
(112)
(15)
614
722
$
$
$
$
$
$
3
16
—
(22)
—
—
(3) $
(17) $
(12)
—
22
(7) $
(10) $
$
4
15
—
(25)
2
—
(4) $
(29) $
—
(2)
25
(6) $
(10) $
4
19
—
(23)
2
—
2
5
(30)
(2)
23
(4)
(2)
The estimated amount that will be amortized from Accumulated other comprehensive loss into net periodic pension costs in 2017 is
as follows:
(In millions)
Net actuarial loss (gain)
Prior service cost (credit)
Total
(cid:24)(cid:27)(cid:1)(cid:1)(cid:1)(cid:1)(cid:1)(cid:1) (cid:55)(cid:72)(cid:91)(cid:87)(cid:85)(cid:82)(cid:81)(cid:3)(cid:21)(cid:19)(cid:20)(cid:25)(cid:3)(cid:36)(cid:81)(cid:81)(cid:88)(cid:68)(cid:79)(cid:3)(cid:53)(cid:72)(cid:83)(cid:82)(cid:85)(cid:87)
Pension
Benefits
137
15
152
$
$
Postretirement
Benefits
Other than
Pensions
(1)
(8)
(9)
$
$
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:
(In millions)
Change in benefit obligation
Benefit obligation at beginning of year
Service cost
Interest cost
Plan participants’ contributions
Actuarial losses (gains)
Benefits paid
Plan amendment
Curtailments and special termination benefits
Foreign exchange rate changes and other
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
Pension Benefits
Postretirement Benefits
Other than Pensions
2016
2015
2016
2015
$ 7,476
98
338
—
571
(410)
—
(7)
(75)
$ 7,991
$ 6,668
655
40
(410)
(79)
$ 6,874
$ (1,117)
$ 8,006
113
327
—
(470)
(423)
—
(4)
(73)
$ 7,476
$ 6,979
113
55
(423)
(56)
$ 6,668
(808)
$
$
$
364
3
16
5
(17)
(42)
(12)
—
—
317
$
$
413
4
15
5
(29)
(44)
—
—
—
364
$
(317)
$
(364)
Amounts recognized in our balance sheets are as follows:
(In millions)
Non-current assets
Current liabilities
Non-current liabilities
Recognized in Accumulated other comprehensive loss, pre-tax:
Net loss
Prior service cost (credit)
Pension Benefits
Postretirement Benefits
Other than Pensions
$
2016
63
(26)
(1,154)
$
2,187
78
2015
73
(26)
(855)
1,915
92
$
2016
—
(35)
(282)
(8)
(40)
$
2015
—
(40)
(324)
9
(50)
The accumulated benefit obligation for all defined benefit pension plans was $7.6 billion and $7.1 billion at December 31, 2016 and
January 2, 2016, respectively, which included $387 million and $371 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 obligations exceeding the fair value of plan assets are as follows:
(In millions)
Projected benefit obligation
Accumulated benefit obligation
Fair value of plan assets
2016
$ 7,799
7,422
6,627
2015
$ 2,881
2,708
2,091
(cid:55)(cid:72)(cid:91)(cid:87)(cid:85)(cid:82)(cid:81)(cid:3)(cid:21)(cid:19)(cid:20)(cid:25)(cid:3)(cid:36)(cid:81)(cid:81)(cid:88)(cid:68)(cid:79)(cid:3)(cid:53)(cid:72)(cid:83)(cid:82)(cid:85)(cid:87)(cid:3)(cid:3)(cid:3)(cid:3)(cid:3)(cid:3)(cid:3)(cid:24)(cid:28)
Assumptions
The weighted-average assumptions we use for our pension and postretirement plans are as follows:
Pension Benefits
Postretirement Benefits
Other than Pensions
2016
2015
2014
2016
2015
2014
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
4.66%
7.58%
3.49%
4.13%
3.50%
4.25%
7.57%
3.49%
4.66%
3.49%
4.92%
7.60%
3.50%
4.18%
3.49%
4.50%
4.00%
4.50%
4.00%
4.50%
4.00%
Our assumed healthcare cost trend rate for both the medical and prescription drug cost was 7.25% in 2016 and 7.50% in 2015. We
expect this rate to gradually decline to 5.0% by 2024 where we assume it will remain. These assumed healthcare cost trend rates
have a significant effect on the amounts reported for the postretirement benefits other than pensions. A one-percentage-point change
in these assumed healthcare cost trend rates would have the following effects:
(In millions)
Effect on total of service and interest cost components
Effect on postretirement benefit obligations other than pensions
One-
Percentage-
Point
Increase
1
14
$
One-
Percentage-
Point
Decrease
(1)
(12)
$
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, 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
International equity securities
Global equities
Debt securities
Real estate
Private investment partnerships
Hedge funds
Non-U.S. Plan Assets
Equity securities
Debt securities
Real estate
(cid:25)(cid:19)(cid:1)(cid:1)(cid:1)(cid:1)(cid:1)(cid:1) (cid:55)(cid:72)(cid:91)(cid:87)(cid:85)(cid:82)(cid:81)(cid:3)(cid:21)(cid:19)(cid:20)(cid:25)(cid:3)(cid:36)(cid:81)(cid:81)(cid:88)(cid:68)(cid:79)(cid:3)(cid:53)(cid:72)(cid:83)(cid:82)(cid:85)(cid:87)
20% to 35%
8% to 19%
0% to 12%
27% to 38%
7% to 13%
5% to 11%
0% to 5%
51% to 74%
26% to 46%
3% to 15%
The fair value of our pension plan assets by major category and valuation method is as follows:
December 31, 2016
January 2, 2016
(In millions)
Cash and equivalents
Equity securities:
Domestic
International
Mutual funds
Debt securities:
National, state and local governments
Corporate debt
Asset-backed securities
Real estate
Private investment partnerships
Hedge funds
Total
Level 1
Level 2
Level 3
Not
Subject to
Leveling
Level 1
$
26 $
8 $ — $ 156 $
27 $
Not
Subject to
Leveling
11 $ — $ 173
Level 3
Level 2
1,262
773
309
—
—
—
—
—
—
618
510
—
1,252
812
251
—
—
—
—
—
—
595
360
—
341
—
—
—
—
—
43
126
—
322
441
251
$ 2,711 $ 1,068 $ 494 $ 2,601 $ 2,752 $ 1,169 $ 436 $ 2,311
—
—
—
436
—
—
410
—
—
—
—
—
314
752
92
—
—
—
246
769
45
—
—
—
44
121
100
292
506
254
—
—
—
494
—
—
In 2016, we adopted ASU No. 2015-07, Disclosures for Investments in Certain Entities That Calculate Net Asset Value per Share
(or Its Equivalent), which removed the requirement to categorize within the fair value hierarchy, as defined in Note 8, investments
for which fair value is measured using the net asset value per share practical expedient. As a result, to conform with the current year
presentation, pension assets totaling $2.3 billion at January 2, 2016 have been reclassified from the Level 2 and 3 categories as they
are no longer subject to leveling within the fair value hierarchy.
Cash and equivalents, equity securities and debt securities include comingled 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. Since these comingled funds are not quoted on any active market, they are priced based on the relative value of the
underlying equity and debt investments and their individual prices at any given time; these funds are not subject to leveling within
the fair value hierarchy. 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 represent 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 real estate partnerships nor private investment partnerships are subject to leveling
within the fair value hierarchy.
Hedge funds represent an investment in a diversified fund of hedge funds of which we are the sole investor. The fund invests in
portfolio funds that are not publicly traded and are managed by various portfolio managers. Investments in portfolio funds are
typically valued on the basis of the most recent price or valuation provided by the fund’s administrator. The administrator for the
fund aggregates these valuations with the other assets and liabilities to calculate the value of the fund, which is not 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)
Balance at beginning of year
Unrealized gains, net
Realized gains (losses), net
Purchases, sales and settlements, net
Balance at end of year
2016
436
6
10
42
494
2015
436
46
(17)
(29)
436
$
$
$
$
(cid:55)(cid:72)(cid:91)(cid:87)(cid:85)(cid:82)(cid:81)(cid:3)(cid:21)(cid:19)(cid:20)(cid:25)(cid:3)(cid:36)(cid:81)(cid:81)(cid:88)(cid:68)(cid:79)(cid:3)(cid:53)(cid:72)(cid:83)(cid:82)(cid:85)(cid:87)(cid:3)(cid:3)(cid:3)(cid:3)(cid:3)(cid:3)(cid:3)(cid:25)(cid:20)
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 2017, we expect
to contribute approximately $55 million to fund our pension plans and the RAP. 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 2016. 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)
Pension benefits
Post-retirement benefits other than pensions
$
2017
407
36
$
2018
411
34
$
2019
417
32
$
2020
425
31
$
2021
434
29
2022-2026
$ 2,290
120
Note 12. Special Charges
2016 Special Charges
Special charges recorded in 2016 by segment are as follows:
(In millions)
Textron Systems
Textron Aviation
Industrial
Bell
Corporate
$
Severance
Costs
15
33
17
4
1
70
$
$
Asset
Impairments
34
1
2
1
—
38
$
Contract
Terminations
and Other
13
$
1
1
—
—
15
$
Total
Special
Charges
62
35
20
5
1
123
$
$
In 2016, we initiated a plan to restructure and realign our businesses by implementing headcount reductions, facility consolidations
and other actions in order to improve overall operating efficiency across Textron. As part of this plan, Textron Systems will
discontinue production of its sensor-fuzed weapon product by the end of the first quarter of 2017, resulting in headcount reductions,
facility consolidations and asset impairments within its Weapons and Sensors operating unit. Historically, sensor-fuzed weapon sales
have relied on foreign military and direct commercial international customers for which both executive branch and congressional
approval is required. The political environment has made it difficult to obtain these approvals. Within our Industrial segment, the
plan provides for the combination of our Jacobsen business with the Textron Specialized Vehicles businesses, resulting in the
consolidation of certain facilities and general and administrative functions and related headcount reductions. In addition, we initiated
restructuring actions, principally headcount reductions, in our Textron Aviation segment, as well as other businesses and corporate
functions. The total headcount reduction related to restructuring activities is expected to be approximately 1,700 positions,
representing approximately 5% of our workforce.
We expect to incur additional pre-tax charges under this plan in the range of $17 million to $47 million, primarily related to contract
termination, severance, facility consolidation and relocation costs. The remaining charges are expected to primarily be in the
Industrial, Textron Systems and Textron Aviation segments. We anticipate the plan to be substantially completed by the end of the
first half of 2017.
An analysis of our restructuring reserve activity under this plan is summarized below:
(In millions)
Provision
Reversals
Cash paid
End of year
$
Severance
Costs
75
(5)
(20)
50
$
Contract
Terminations
and Other
15
$
—
(2)
13
$
Total
90
(5)
(22)
63
$
$
Total expected cash outlays for restructuring activities are estimated to be approximately $100 million to $120 million, of which $22
million was paid in 2016 and the remainder will be paid in 2017. Severance costs generally are paid on a lump-sum basis and include
outplacement costs, which are paid in accordance with normal payment terms.
(cid:25)(cid:21)(cid:1)(cid:1)(cid:1)(cid:1)(cid:1)(cid:1) (cid:55)(cid:72)(cid:91)(cid:87)(cid:85)(cid:82)(cid:81)(cid:3)(cid:21)(cid:19)(cid:20)(cid:25)(cid:3)(cid:36)(cid:81)(cid:81)(cid:88)(cid:68)(cid:79)(cid:3)(cid:53)(cid:72)(cid:83)(cid:82)(cid:85)(cid:87)
2014 Special Charges
In 2014, we executed a restructuring program in our Textron Aviation segment to align the Cessna and acquired Beechcraft business,
reduce operating redundancies and maximize operating efficiencies. We recorded special charges of $41 million related to these
restructuring activities in 2014, along with $11 million of transaction costs from the acquisition of Beechcraft.
Note 13. 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)
U.S.
Non-U.S.
Income from continuing operations before income taxes
Income tax expense for continuing operations is summarized as follows:
(In millions)
Current:
Federal
State
Non-U.S.
Deferred:
Federal
State
Non-U.S.
Income tax expense
2016
652
224
876
2015
745
226
971
$
$
2016
2015
(74)
18
41
(15)
47
(7)
8
48
33
$
$
212
16
41
269
17
(14)
1
4
273
$
$
$
$
2014
553
300
853
2014
195
18
54
267
(12)
(4)
(3)
(19)
248
$
$
$
$
The following table reconciles the federal statutory income tax rate to our effective income tax rate for continuing operations:
U.S. Federal statutory income tax rate
Increase (decrease) resulting from:
Federal tax settlement
State income taxes (net of federal impact) (a)
Non-U.S. tax rate differential and foreign tax credits (b)
Domestic manufacturing deduction
Research credit
Other, net
2016
35.0%
(23.5)
0.8
(2.7)
(1.6)
(3.2)
(1.0)
3.8%
2015
35.0%
—
0.2
(3.6)
(2.7)
(1.5)
0.7
28.1%
2014
35.0%
—
1.0
(5.8)
(1.1)
(1.5)
1.5
29.1%
Effective income tax rate
(a)
(b)
Includes a favorable impact of (0.7)% in 2015 and (0.2)% in 2014 related to valuation allowance releases.
Includes a favorable impact of (1.4)% in 2015 and (0.6)% in 2014 related to a net change in valuation allowances.
The provision for income taxes for 2016 included a benefit of $319 million to reflect the settlement with the U.S. Internal Revenue
Service Office of Appeals for our 1998 to 2008 tax years, which resulted in a $206 million benefit attributable to continuing
operations and $113 million attributable to discontinued operations.
We have recorded income tax at U.S. tax rates on all earnings, except for undistributed earnings of non-U.S. subsidiaries of
approximately $1.4 billion, which are considered indefinitely reinvested. Should these earnings be distributed in the future in the
form of dividends or otherwise, we would be subject to both U.S. income taxes (less foreign tax credits) and, in some instances,
withholding taxes payable to various non-U.S. jurisdictions. Determination of the amount of unrecognized deferred tax liability
related to indefinitely reinvested earnings is not practicable due to the complexity of U.S. and local tax laws.
(cid:55)(cid:72)(cid:91)(cid:87)(cid:85)(cid:82)(cid:81)(cid:3)(cid:21)(cid:19)(cid:20)(cid:25)(cid:3)(cid:36)(cid:81)(cid:81)(cid:88)(cid:68)(cid:79)(cid:3)(cid:53)(cid:72)(cid:83)(cid:82)(cid:85)(cid:87)(cid:3)(cid:3)(cid:3)(cid:3)(cid:3)(cid:3)(cid:3)(cid:25)(cid:22)
Our unrecognized tax benefits represent tax positions for which reserves have been established. Unrecognized state tax benefits and
interest related to unrecognized tax benefits are reflected net of applicable tax benefits. A reconciliation of our unrecognized tax
benefits, excluding accrued interest, is as follows:
(In millions)
Balance at beginning of year
Additions for tax positions related to current year
Additions for tax positions of prior years
Additions for acquisitions
Reductions for settlements and expiration of statute of limitations
Reductions for tax positions of prior years
Balance at end of year
$
December 31,
2016
401
12
—
—
(219)
(8)
186
$
$
January 2,
2016
385
12
6
1
(2)
(1)
401
$
January 3,
2015
$ 284
10
—
100
(3)
(6)
$ 385
Unrecognized tax benefits decreased during 2016 primarily due to the federal tax settlement as discussed above. At December 31,
2016 and January 2, 2016, we had approximately $186 million and $321 million, respectively, of unrecognized tax benefits that, if
recognized, would favorably impact the effective tax rate in a future period. At January 2, 2016, the remaining $80 million in
unrecognized tax benefits were related to discontinued operations.
In the normal course of business, we are subject to examination by tax authorities throughout the world. We are no longer subject
to federal tax examinations for years before 2009, U.S. state and local income tax examinations for years before 1997, and non-U.S.
income tax examinations for years before 2011.
During 2016, 2015 and 2014, we recognized net tax-related interest expense totaling approximately $5 million, $7 million and $6
million, respectively, in income tax expense. Our net accrued interest liability decreased to $5 million at December 31, 2016, from
$139 million at January 2, 2016, primarily due to the federal tax settlement as discussed above.
The tax effects of temporary differences that give rise to significant portions of our net deferred tax assets and liabilities are as
follows:
(In millions)
Deferred tax assets
Obligation for pension and postretirement benefits
Accrued expenses*
Deferred compensation
Loss carryforwards
Inventory
Allowance for credit losses
Deferred income
Other, net
Total deferred tax assets
Valuation allowance for deferred tax assets
Deferred tax liabilities
Property, plant and equipment, principally depreciation
Amortization of goodwill and other intangibles
Leasing transactions
Prepaid pension and postretirement benefits
Total deferred tax liabilities
Net deferred tax asset
*Accrued expenses includes warranty reserves, self-insured liabilities and interest.
December 31,
2016
January 2,
2016
$ (cid:3)(cid:3)(cid:3) 529
282
175
158
49
23
11
56
1,283
(116)
$ 1,167
$
$
(168)
(164)
(147)
(19)
(498)
669
$
436
288
184
142
71
29
9
97
1,256
(115)
$ 1,141
$
$
(171)
(156)
(146)
(21)
(494)
647
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.
(cid:25)(cid:23)(cid:1)(cid:1)(cid:1)(cid:1)(cid:1)(cid:1) (cid:55)(cid:72)(cid:91)(cid:87)(cid:85)(cid:82)(cid:81)(cid:3)(cid:21)(cid:19)(cid:20)(cid:25)(cid:3)(cid:36)(cid:81)(cid:81)(cid:88)(cid:68)(cid:79)(cid:3)(cid:53)(cid:72)(cid:83)(cid:82)(cid:85)(cid:87)
The following table presents the breakdown of net deferred tax assets:
(In millions)
Manufacturing group:
Other assets
Other liabilities
Finance group - Other liabilities
Net deferred tax asset
Our net operating loss and credit carryforwards at December 31, 2016 are as follows:
(In millions)
Non-U.S. net operating loss with no expiration
Non-U.S. net operating loss expiring through 2036
U.S. federal net operating losses expiring through 2034, related to 2014 acquisitions
State net operating loss and tax credits, net of tax benefits, expiring through 2036
Note 14. Commitments and Contingencies
December 31,
2016
January 2,
2016
$
$
793
(4)
(120)
669
$
$
$
778
(24)
(107)
647
182
65
193
127
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; production partners; product liability; patent and trademark infringement; employment disputes; and environmental,
safety and health 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 $525 million and $612 million at December 31, 2016 and January 2, 2016, 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 $150 million. At December 31, 2016, environmental reserves of approximately $70 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 $15 million as current liabilities. Expenditures to evaluate and remediate contaminated
sites were $15 million, $15 million and $13 million in 2016, 2015 and 2014, respectively.
(cid:55)(cid:72)(cid:91)(cid:87)(cid:85)(cid:82)(cid:81)(cid:3)(cid:21)(cid:19)(cid:20)(cid:25)(cid:3)(cid:36)(cid:81)(cid:81)(cid:88)(cid:68)(cid:79)(cid:3)(cid:53)(cid:72)(cid:83)(cid:82)(cid:85)(cid:87)(cid:3)(cid:3)(cid:3)(cid:3)(cid:3)(cid:3)(cid:3)(cid:25)(cid:24)
Leases
Rental expense was $126 million, $113 million and $121 million in 2016, 2015 and 2014, respectively. Future minimum rental
commitments for noncancelable operating leases in effect at December 31, 2016 totaled $79 million for 2017, $65 million for 2018,
$57 million for 2019, $54 million for 2020, $29 million for 2021 and $155 million thereafter. The total future minimum rental
receipts under noncancelable subleases at December 31, 2016 totaled $19 million.
Note 15. Supplemental Cash Flow Information
We have made the following cash payments:
(In millions)
Interest paid:
Manufacturing group
Finance group
Net taxes paid:
Manufacturing group
Finance group
Note 16. Segment and Geographic Data
$
2016
132
32
163
11
$
2015
123
34
187
11
$
2014
134
41
266
23
We operate in, and report financial information for, the following five business segments: Textron Aviation, Bell, Textron Systems,
Industrial and Finance. The accounting policies of the segments are the same as those described in Note 1.
Textron Aviation products include Citation jets, King Air turboprops, Caravan utility turboprops, piston engine aircraft, T-6 and AT-
6 military turboprop aircraft, and aftermarket sales and services sold to a diverse base of corporate and individual buyers.
Bell products include military and commercial helicopters, tiltrotor aircraft and related spare parts and services. Bell supplies
military helicopters and, in association with The Boeing Company, military tiltrotor aircraft, and aftermarket services to the U.S.
and non-U.S. governments. Bell also supplies commercial helicopters and aftermarket services to corporate, offshore petroleum
exploration and development, utility, charter, police, fire, rescue and emergency medical helicopter operators, and foreign
governments.
Textron Systems products include unmanned aircraft systems, marine and land systems, weapons and sensors, simulation, training
and other defense and aviation mission support products and services primarily for U.S. and non-U.S. governments. As discussed
in Note 12, in 2016, we announced a plan to discontinue production of our sensor-fuzed weapon product by the end of the first
quarter of 2017.
Industrial products and markets include the following:
(cid:120)
(cid:120) Kautex products include blow-molded plastic fuel systems, windshield and headlamp washer systems, selective catalytic
reduction systems and engine camshafts that are marketed primarily to automobile OEMs, as well as plastic bottles and
containers for various uses;
Specialized Vehicles and Equipment products include golf cars, off-road utility and light transportation vehicles, aviation
ground support equipment, professional turf-maintenance equipment and turf-care vehicles that are marketed primarily to
golf courses, resort communities, municipalities, sporting venues, consumers, and commercial and industrial users; and
Tools and Test Equipment products include powered equipment, electrical test and measurement instruments, mechanical
and hydraulic tools, cable connectors, fiber optic assemblies, underground and aerial transmission and distribution products,
and power utility products, principally used in the construction, maintenance, telecommunications, data communications,
electrical, utility and plumbing industries.
(cid:120)
The Finance segment provides financing primarily to purchasers of new and pre-owned Textron Aviation aircraft and Bell
helicopters.
(cid:25)(cid:25)(cid:1)(cid:1)(cid:1)(cid:1)(cid:1)(cid:1) (cid:55)(cid:72)(cid:91)(cid:87)(cid:85)(cid:82)(cid:81)(cid:3)(cid:21)(cid:19)(cid:20)(cid:25)(cid:3)(cid:36)(cid:81)(cid:81)(cid:88)(cid:68)(cid:79)(cid:3)(cid:53)(cid:72)(cid:83)(cid:82)(cid:85)(cid:87)
Segment profit is an important measure used for evaluating performance and for decision-making purposes. Segment profit for the
manufacturing segments excludes interest expense, certain corporate expenses and special charges. The measurement for the Finance
segment includes interest income and expense along with intercompany interest income and expense.
Our revenues by segment, along with a reconciliation of segment profit to income from continuing operations before income taxes,
are as follows:
(In millions)
Textron Aviation
Bell
Textron Systems
Industrial
Finance
Total
Corporate expenses and other, net
Interest expense, net for Manufacturing group
Special charges
Income from continuing operations before income taxes
Revenues by major product type are summarized below:
2014
2016
Segment Profit
3,239
1,756
3,794
78
Revenues
2015
$ 4,921 $ 4,822 $ 4,568 $
3,454
1,520
3,544
83
2014
234
529
150
280
21
$ 13,788 $ 13,423 $ 13,878 $ 1,309 $ 1,255 $ 1,214
(161)
(148)
(52)
853
2016
389 $
386
186
329
19
2015
400 $
400
129
302
24
(172)
(138)
(123)
876 $
4,245
1,624
3,338
103
(154)
(130)
—
971 $
$
(In millions)
Fixed-wing aircraft
Rotor aircraft
Unmanned aircraft systems, armored vehicles, precision weapons and other
Fuel systems and functional components
Specialized vehicles and equipment
Tools and test equipment
Finance
Total revenues
2016
$ 4,921
3,239
1,756
2,273
1,080
441
78
$ 13,788
2015
$ 4,822
3,454
1,520
2,078
1,021
445
83
$ 13,423
2014
$ 4,568
4,245
1,624
1,975
868
495
103
$ 13,878
Our revenues included sales to the U.S. Government of approximately $3.4 billion, $3.2 billion and $3.8 billion in 2016, 2015 and
2014, respectively, primarily in the Bell and Textron Systems segments.
Other information by segment is provided below:
(In millions)
Textron Aviation
Bell
Textron Systems
Industrial
Finance
Corporate
Total
Assets
Capital Expenditures
Depreciation and Amortization
December 31,
2016(cid:3)
$ 4,460
2,655
2,508
2,409
1,280
2,046
$ 15,358
January 2,
2016(cid:3)
$ 4,039 $
2,829
2,398
2,236
1,316
1,890
$ 14,708 $
2016(cid:3)
157 $
86
71
121
—
11
446 $
2015(cid:3)
124 $
97
86
105
—
8
420 $
2014(cid:3)
96 $
152
65
97
—
19
429 $
2016(cid:3)
140 $
132
75
81
12
9
449 $
2015(cid:3)
134 $
143
80
76
12
16
461 $
2014(cid:3)
137
132
84
76
13
17
459
(cid:55)(cid:72)(cid:91)(cid:87)(cid:85)(cid:82)(cid:81)(cid:3)(cid:21)(cid:19)(cid:20)(cid:25)(cid:3)(cid:36)(cid:81)(cid:81)(cid:88)(cid:68)(cid:79)(cid:3)(cid:53)(cid:72)(cid:83)(cid:82)(cid:85)(cid:87)(cid:3)(cid:3)(cid:3)(cid:3)(cid:3)(cid:3)(cid:3)(cid:25)(cid:26)
Geographic Data
Presented below is selected financial information of our continuing operations by geographic area:
(In millions)
United States
Europe
Asia and Australia
Latin and South America
Canada
Middle East and Africa
Total
* Revenues are attributed to countries based on the location of the customer.
** Property, plant and equipment, net are based on the location of the asset.
2016
$ 8,574
1,954
998
977
652
633
$ 13,788
Note 17. Subsequent Event
Revenues*
2015
$ 8,299
1,730
1,324
1,101
531
438
$ 13,423
Property, Plant
and Equipment, net**
2014
$ 8,677
1,761
1,155
1,261
383
641
$ 13,878
December 31,
2016
$ 2,116
247
78
68
72
—
$ 2,581
January 2,
2016
$ 2,039
251
72
51
79
—
$ 2,492
On January 24, 2017, we reached a definitive agreement to acquire Arctic Cat Inc. in a cash transaction valued at approximately
$247 million, plus the assumption of existing debt. Arctic Cat manufactures and markets all-terrain vehicles, side-by-sides and
snowmobiles, in addition to related parts, garments and accessories under the Arctic Cat® and Motorfist® brand names. Subject to
customary closing conditions, we expect the transaction to close in March 2017.
(cid:25)(cid:27)(cid:1)(cid:1)(cid:1)(cid:1)(cid:1)(cid:1) (cid:55)(cid:72)(cid:91)(cid:87)(cid:85)(cid:82)(cid:81)(cid:3)(cid:21)(cid:19)(cid:20)(cid:25)(cid:3)(cid:36)(cid:81)(cid:81)(cid:88)(cid:68)(cid:79)(cid:3)(cid:53)(cid:72)(cid:83)(cid:82)(cid:85)(cid:87)
Report of Independent Registered Public Accounting Firm
To the Board of Directors and Shareholders of Textron Inc.
We have audited the accompanying Consolidated Balance Sheets of Textron Inc. as of December 31, 2016 and January 2, 2016, 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 31, 2016. Our audits also included the financial statement schedule contained on page 71.
These financial statements and schedule are the responsibility of the Company’s management. Our responsibility is to express an
opinion on these financial statements and schedule based on our audits.
We conducted our audits in accordance with the standards of the Public Company Accounting Oversight Board (United States).
Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements
are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in
the financial statements. An audit also includes assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation. We believe that our audits provide a reasonable
basis for our opinion.
In our opinion, the financial statements referred to above present fairly, in all material respects, the consolidated financial position
of Textron Inc. at December 31, 2016 and January 2, 2016 and the consolidated results of its operations and its cash flows for each
of the three years in the period ended December 31, 2016, in conformity with U.S. generally accepted accounting principles. Also,
in our opinion, the related financial statement schedule, when considered in relation to the basic financial statements taken as a
whole, presents fairly in all material respects the information set forth therein.
We also have audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States), Textron
Inc.’s internal control over financial reporting as of December 31, 2016, 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 22, 2017 expressed an unqualified opinion thereon.
/s/ Ernst & Young LLP
Boston, Massachusetts
February 22, 2017
(cid:55)(cid:72)(cid:91)(cid:87)(cid:85)(cid:82)(cid:81)(cid:3)(cid:21)(cid:19)(cid:20)(cid:25)(cid:3)(cid:36)(cid:81)(cid:81)(cid:88)(cid:68)(cid:79)(cid:3)(cid:53)(cid:72)(cid:83)(cid:82)(cid:85)(cid:87)(cid:3)(cid:3)(cid:3)(cid:3)(cid:3)(cid:3)(cid:3)(cid:25)(cid:28)
Quarterly Data
(Unaudited)
(Dollars in millions, except per share amounts)
2016
2015
Q1
Q2
Q3
Q4
Q1
Q2
Q3
Q4
$
$
$
$
$
$
$
$
Revenues
Textron Aviation
Bell
Textron Systems
Industrial
Finance
Total revenues
Segment profit
Textron Aviation
Bell
Textron Systems
Industrial
Finance
Total segment profit
Corporate expenses and other, net
Interest expense, net for Manufacturing group
Special charges (a)
Income tax benefit (expense) (b)
Income from continuing operations
Income (loss) from discontinued operations, net of income taxes (b)
Net income
Basic earnings per share
Continuing operations
Discontinued operations
Basic earnings per share
Basic average shares outstanding (in thousands)
Diluted earnings per share
Continuing operations
Discontinued operations
Diluted earnings per share
Diluted average shares outstanding (in thousands)
Segment profit margins
Textron Aviation
Bell
Textron Systems
Industrial
Finance
Segment profit margin
1,091 $
814
324
952
20
3,201 $
1,196 $
804
487
1,004
20
3,511 $
1,198 $
734
413
886
20
3,251 $
1,436
887
532
952
18
3,825
73 $
82
29
91
5
280
(32)
(33)
—
(64)
151
(1)
150 $
81 $
81
60
99
7
328
(31)
(37)
—
(82)
178
(1)
177 $
100 $
97
44
66
3
310
(53)
(35)
(115)
192
299
122
421 $
135
126
53
73
4
391
(56)
(33)
(8)
(79)
215
(1)
214
0.55 $
—
0.55 $
0.66 $
—
0.66 $
1.11 $
0.45
1.56 $
271,660
269,888
270,560
0.79
—
0.79
270,986
0.55 $
—
0.55 $
0.66 $
(0.01)
0.65 $
1.10 $
0.45
1.55 $
0.78
—
0.78
273,114
273,022
271,316
272,099
$
$
$
$
$
$
$
$
1,051 $
813
315
872
22
3,073 $
1,124 $
850
322
927
24
3,247 $
1,159 $
756
420
828
17
3,180 $
1,488
1,035
463
917
20
3,923
67 $
76
28
82
6
259
(42)
(33)
—
(56)
128
—
128 $
88 $
101
21
86
10
306
(33)
(32)
—
(72)
169
(2)
167 $
107 $
99
39
61
6
312
(27)
(33)
—
(76)
176
—
176 $
138
124
41
73
2
378
(52)
(32)
—
(69)
225
1
226
0.46 $
—
0.46 $
0.61 $
(0.01)
0.60 $
0.64 $
—
0.64 $
277,902
277,715 276,334
0.46 $
—
0.46 $
0.60 $
—
0.60 $
0.63 $
—
0.63 $
280,077
279,935
278,039
0.81
0.01
0.82
274,776
0.81
0.01
0.82
276,653
6.7%
6.8%
8.3%
10.1
9.0
9.6
25.0
10.1
12.3
9.9
35.0
13.2
10.7
7.4
15.0
8.7%
9.3%
9.5%
9.4%
14.2
10.0
7.7
22.2
10.2%
6.4%
9.3
8.9
9.4
27.3
8.4%
7.8%
11.9
6.5
9.3
41.7
9.4%
9.2%
13.1
9.3
7.4
35.3
9.8%
9.3%
12.0
8.9
8.0
10.0
9.6%
Common stock information
Price range: High
Low
Dividends declared per share
(a)
43.93
38.18
0.02
In 2016, we initiated a plan to restructure and realign our businesses by implementing headcount reductions, facility consolidations and other actions in order to
improve overall operating efficiency across Textron. Special charges include restructuring charges for this plan, which primarily consist of severance costs of
$66 million and asset impairments of $36 million in the third quarter of 2016.
41.74 $
30.69 $
0.02 $
45.61 $
40.95 $
0.02 $
41.33 $
35.06 $
0.02 $
46.93 $
42.97 $
0.02 $
40.61 $
34.00 $
0.02 $
44.98 $
32.20 $
0.02 $
49.82
37.19
0.02
$
$
$
$
$
$
(b) The third quarter of 2016 includes an income tax benefit of $319 million, inclusive of interest, of which $206 million is attributable to continuing operations and
$113 million is attributable to discontinued operations. This benefit was a result of the final settlement with the Internal Revenue Service Office of Appeals for
our 1998 to 2008 tax years.
(cid:26)(cid:19)(cid:1)(cid:1)(cid:1)(cid:1)(cid:1)(cid:1) (cid:55)(cid:72)(cid:91)(cid:87)(cid:85)(cid:82)(cid:81)(cid:3)(cid:21)(cid:19)(cid:20)(cid:25)(cid:3)(cid:36)(cid:81)(cid:81)(cid:88)(cid:68)(cid:79)(cid:3)(cid:53)(cid:72)(cid:83)(cid:82)(cid:85)(cid:87)
Schedule II — Valuation and Qualifying Accounts
(In millions)
Allowance for doubtful accounts
Balance at beginning of year
Charged to costs and expenses
Deductions from reserves*
Balance at end of year
Inventory FIFO reserves
Balance at beginning of year
2016
2015
2014
$
$
33
3
(9)
27
$
$
30
5
(2)
33
$
$
22
11
(3)
30
Charged to costs and expenses
Deductions from reserves*
150
51
(32)
169
Balance at end of year
*Deductions primarily include amounts written off on uncollectable accounts (less recoveries), inventory disposals, changes to prior year estimates, and currency
translation adjustments.
169
56
(19)
206
206
59
(34)
231
$
$
$
$
$
$
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 31, 2016. 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 31, 2016.
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
31, 2016.
The independent registered public accounting firm, Ernst & Young LLP, 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 31, 2016, as
stated in its report, which is included herein.
(cid:55)(cid:72)(cid:91)(cid:87)(cid:85)(cid:82)(cid:81)(cid:3)(cid:21)(cid:19)(cid:20)(cid:25)(cid:3)(cid:36)(cid:81)(cid:81)(cid:88)(cid:68)(cid:79)(cid:3)(cid:53)(cid:72)(cid:83)(cid:82)(cid:85)(cid:87)(cid:3)(cid:3)(cid:3)(cid:3)(cid:3)(cid:3)(cid:3)(cid:26)(cid:20)
Report of Independent Registered Public Accounting Firm on Internal Control over Financial Reporting
The Board of Directors and Shareholders of Textron Inc.
We have audited Textron Inc.’s internal control over financial reporting as of December 31, 2016, 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). Textron Inc.’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 conducted our audit in accordance with the standards of the Public Company Accounting Oversight Board (United States).
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.
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.
In our opinion, Textron Inc. maintained, in all material respects, effective internal control over financial reporting as of December
31, 2016, based on the COSO criteria.
We also have audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States), the
Consolidated Balance Sheets of Textron Inc. as of December 31, 2016 and January 2, 2016, 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 31, 2016 of Textron Inc. and our report dated February 22, 2017 expressed an unqualified opinion thereon.
/s/ Ernst & Young LLP
Boston, Massachusetts
February 22, 2017
(cid:26)(cid:21)(cid:1)(cid:1)(cid:1)(cid:1)(cid:1)(cid:1) (cid:55)(cid:72)(cid:91)(cid:87)(cid:85)(cid:82)(cid:81)(cid:3)(cid:21)(cid:19)(cid:20)(cid:25)(cid:3)(cid:36)(cid:81)(cid:81)(cid:88)(cid:68)(cid:79)(cid:3)(cid:53)(cid:72)(cid:83)(cid:82)(cid:85)(cid:87)
PART III
Item 10. Directors, Executive Officers and Corporate Governance
The information appearing under “ELECTION OF DIRECTORS— Nominees for Director,” “CORPORATE GOVERNANCE—
Corporate Governance Guidelines and Policies,” “— Code of Ethics,” “–Board Committees— Audit Committee,” and “SECTION
16(a) BENEFICIAL OWNERSHIP REPORTING COMPLIANCE” in the Proxy Statement for our Annual Meeting of Shareholders
to be held on April 26, 2017 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 Annual Meeting of Shareholders to be held on April 26, 2017 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 Annual Meeting of Shareholders to be held on April 26, 2017 is incorporated by
reference into this Annual Report on Form 10-K.
Item 13. Certain Relationships and Related Transactions and Director Independence
information
The
“EXECUTIVE
“CORPORATE GOVERNANCE--Director
COMPENSATION — Transactions with Related Persons” in the Proxy Statement for our Annual Meeting of Shareholders to be
held on April 26, 2017 is incorporated by reference into this Annual Report on Form 10-K.
appearing under
Independence”
and
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 Annual Meeting of Shareholders to be held
on April 26, 2017 is incorporated by reference into this Annual Report on Form 10-K.
(cid:55)(cid:72)(cid:91)(cid:87)(cid:85)(cid:82)(cid:81)(cid:3)(cid:21)(cid:19)(cid:20)(cid:25)(cid:3)(cid:36)(cid:81)(cid:81)(cid:88)(cid:68)(cid:79)(cid:3)(cid:53)(cid:72)(cid:83)(cid:82)(cid:85)(cid:87)(cid:3)(cid:3)(cid:3)(cid:3)(cid:3)(cid:3)(cid:3)(cid:26)(cid:22)
PART IV
Item 15. Exhibits and Financial Statement Schedules
Financial Statements and Schedules — See Index on Page 36.
Exhibits
3.1A
3.1B
3.2
4.1A
4.1B
NOTE:
NOTE:
10.1A
10.1B
10.1C
10.1D
10.1E
10.1F
Restated Certificate of Incorporation of Textron as filed with the Secretary of State of Delaware on April 29,
2010. Incorporated by reference to Exhibit 3.1 to Textron’s Quarterly Report on Form 10-Q for the fiscal
quarter ended April 3, 2010. (SEC File No. 1-5480)
Certificate of Amendment of Restated Certificate of Incorporation of Textron Inc., filed with the Secretary of
State of Delaware on April 27, 2011. Incorporated by reference to Exhibit 3.1 to Textron’s Quarterly Report
on Form 10-Q for the fiscal quarter ended April 2, 2011. (SEC File No. 1-5480)
Amended and Restated By-Laws of Textron Inc., effective April 28, 2010 and further amended April 27, 2011,
July 23, 2013, February 25, 2015 and December 6, 2016. Incorporated by reference to Exhibit 3.2 to Textron’s
Current Report on Form 8-K filed on December 8, 2016.
Support Agreement dated as of May 25, 1994, between Textron Inc. and Textron Financial Corporation.
Incorporated by reference to Exhibit 4.1 to Textron’s Annual Report on Form 10-K for the fiscal year ended
December 31, 2011. (SEC File No. 1-5480)
Amendment to Support Agreement, dated as of December 23, 2015, by and between Textron Inc. and Textron
Financial Corporation. Incorporated by reference to Exhibit 4.1B to Textron’s Annual Report on Form 10-K
for the fiscal year ended January 2, 2016.
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.
Exhibits 10.1 through 10.16 below are management contracts or compensatory plans, contracts or agreements.
Textron Inc. 2007 Long-Term Incentive Plan (Amended and Restated as of April 28, 2010). Incorporated by
reference to Exhibit 10.1 to Textron’s Quarterly Report on Form 10-Q for the fiscal quarter ended March 31,
2012.
Form of Non-Qualified Stock Option Agreement. Incorporated by reference to Exhibit 10.2 to Textron’s
Quarterly Report on Form 10-Q for the fiscal quarter ended June 30, 2007. (SEC File No. 1-5480)
Form of Incentive Stock Option Agreement. Incorporated by reference to Exhibit 10.3 to Textron’s Quarterly
Report on Form 10-Q for the fiscal quarter ended June 30, 2007. (SEC File No. 1-5480)
Form of Restricted Stock Unit Grant Agreement. Incorporated by reference to Exhibit 10.4 to Textron’s
Quarterly Report on Form 10-Q for the fiscal quarter ended June 30, 2007. (SEC File No. 1-5480)
Form of Restricted Stock Unit Grant Agreement with Dividend Equivalents. Incorporated by reference to
Exhibit 10.2 to Textron’s Quarterly Report on Form 10-Q for the fiscal quarter ended March 29, 2008. (SEC
File No. 1-5480)
Form of Cash-Settled Restricted Stock Unit Grant Agreement with Dividend Equivalents. Incorporated by
reference to Exhibit 10.1G to Textron’s Annual Report on Form 10-K for the fiscal year ended January 3,
2009. (SEC File No. 1-5480)
(cid:26)(cid:23)(cid:1)(cid:1)(cid:1)(cid:1)(cid:1)(cid:1) (cid:55)(cid:72)(cid:91)(cid:87)(cid:85)(cid:82)(cid:81)(cid:3)(cid:21)(cid:19)(cid:20)(cid:25)(cid:3)(cid:36)(cid:81)(cid:81)(cid:88)(cid:68)(cid:79)(cid:3)(cid:53)(cid:72)(cid:83)(cid:82)(cid:85)(cid:87)
10.1G
10.1H
10.1I
10.1J
10.2A
10.2B
10.3A
10.3B
10.3C
10.3D
10.4
10.5A
10.5B
10.5C
10.6
10.7A
Form of Performance Share Unit Grant Agreement. Incorporated by reference to Exhibit 10.1H to Textron’s
Annual Report on Form 10-K for the fiscal year ended January 3, 2009. (SEC File No. 1-5480)
Form of Non-Qualified Stock Option Agreement. Incorporated by reference to Exhibit 10.1 to Textron’s
Quarterly Report on Form 10-Q for the fiscal quarter ended March 29, 2014.
Form of Stock-Settled Restricted Stock Unit Grant Agreement with Dividend Equivalents. Incorporated by
reference to Exhibit 10.2 to Textron’s Quarterly Report on Form 10-Q for the fiscal quarter ended March 29,
2014.
Form of Performance Share Unit Grant Agreement. Incorporated by reference to Exhibit 10.3 to Textron’s
Quarterly Report on Form 10-Q for the fiscal quarter ended March 29, 2014.
Textron Inc. Short-Term Incentive Plan (As amended and restated effective January 3, 2010). Incorporated by
reference to Exhibit 10.1 to Textron’s Quarterly Report on Form 10-Q for the fiscal quarter ended April 3,
2010. (SEC File No. 1-5480)
Amendment No. 1 to Textron Inc. Short-Term Incentive Plan (As amended and restated effective January 3,
2010), dated July 22, 2015. Incorporated by reference to Exhibit 10.1 to Textron’s Quarterly Report on Form
10-Q for the fiscal quarter ended October 3, 2015.
Textron Inc. 2015 Long-Term Incentive Plan. Incorporated by reference to Exhibit 10.1 to Textron’s Quarterly
Report on Form 10-Q for the fiscal quarter ended July 4, 2015.
Form of Non-Qualified Stock Option Agreement under 2015 Long-Term Incentive Plan. Incorporated by
reference to Exhibit 10.1 to Textron’s Quarterly Report on Form 10-Q for the fiscal quarter ended April 2,
2016.
Form of Stock-Settled Restricted Stock Unit (with Dividend Equivalents) Grant Agreement under 2015 Long-
Term Incentive Plan. Incorporated by reference to Exhibit 10.2 to Textron’s Quarterly Report on Form 10-Q
for the fiscal quarter ended April 2, 2016.
Form of Performance Share Unit Grant Agreement under 2015 Long-Term Incentive Plan. Incorporated by
reference to Exhibit 10.3 to Textron’s Quarterly Report on Form 10-Q for the fiscal quarter ended April 2,
2016.
Textron Spillover Savings Plan, effective October 5, 2015. Incorporated by reference to Exhibit 10.4 to
Textron’s Annual Report on Form 10-K for the fiscal year ended January 2, 2016.
Textron Spillover Pension Plan, As Amended and Restated Effective January 3, 2010, including Appendix A
(as amended and restated effective January 3, 2010), Defined Benefit Provisions of the Supplemental Benefits
Plan for Textron Key Executives (As in effect before January 1, 2007). Incorporated by reference to Exhibit
10.4 to Textron’s Quarterly Report on Form 10-Q for the fiscal quarter ended April 3, 2010. (SEC File No. 1-
5480)
Amendments to the Textron Spillover Pension Plan, dated October 12, 2011. Incorporated by reference to
Exhibit 10.5B to Textron’s Annual Report on Form 10-K for the fiscal year ended December 31, 2011. (SEC
File No. 1-5480)
Second Amendment to the Textron Spillover Pension Plan, dated October 7, 2013. Incorporated by reference
to Exhibit 10.5C to Textron’s Annual Report on Form 10-K for the fiscal year ended December 28, 2013.
Deferred Income Plan for Textron Executives, Effective October 5, 2015. Incorporated by reference to Exhibit
10.6 to Textron’s Annual Report on Form 10-K for the fiscal year ended January 2, 2016.
Deferred Income Plan for Non-Employee Directors, As Amended and Restated Effective January 1, 2009,
including Appendix A, Prior Plan Provisions (As in effect before January 1, 2008). Incorporated by reference
to Exhibit 10.9 to Textron’s Annual Report on Form 10-K for the fiscal year ended January 3, 2009. (SEC File
No. 1-5480)
(cid:55)(cid:72)(cid:91)(cid:87)(cid:85)(cid:82)(cid:81)(cid:3)(cid:21)(cid:19)(cid:20)(cid:25)(cid:3)(cid:36)(cid:81)(cid:81)(cid:88)(cid:68)(cid:79)(cid:3)(cid:53)(cid:72)(cid:83)(cid:82)(cid:85)(cid:87)(cid:3)(cid:3)(cid:3)(cid:3)(cid:3)(cid:3)(cid:3)(cid:26)(cid:24)
10.7B
10.8A
10.8B
10.8C
10.9
10.10
10.11A
10.11B
10.11C
10.11D
10.11E
10.12A
10.12B
Amendment No. 1 to Deferred Income Plan for Non-Employee Directors, as Amended and Restated Effective
January 1, 2009, dated as of November 6, 2012. Incorporated by reference to Exhibit 10.8B to Textron’s
Annual Report on Form 10-K for the fiscal year ended December 29, 2012.
Severance Plan for Textron Key Executives, As Amended and Restated Effective January 1, 2010.
Incorporated by reference to Exhibit 10.10 to Textron’s Annual Report on Form 10-K for the fiscal year ended
January 2, 2010. (SEC File No. 1-5480)
First Amendment to the Severance Plan for Textron Key Executives, dated October 26, 2010. Incorporated by
reference to Exhibit 10.10B to Textron’s Annual Report on Form 10-K for the fiscal year ended January 1,
2011. (SEC File No. 1-5480)
Second Amendment to the Severance Plan for Textron Key Executives, dated March 24, 2014. Incorporated
by reference to Exhibit 10.5 to Textron’s Quarterly Report on Form 10-Q for the fiscal quarter ended March
29, 2014.
Form of Indemnity Agreement between Textron and its executive officers. Incorporated by reference to Exhibit
A to Textron’s Proxy Statement for its Annual Meeting of Shareholders on April 29, 1987. (SEC File No. 1-
5480)
Form of Indemnity Agreement between Textron and its non-employee directors (approved by the Nominating
and Corporate Governance Committee of the Board of Directors on July 21, 2009 and entered into with all
non-employee directors, effective as of August 1, 2009). Incorporated by reference to Exhibit 10.1 to Textron’s
Quarterly Report on Form 10-Q for the fiscal quarter ended October 3, 2009. (SEC File No. 1-5480)
Letter Agreement between Textron and Scott C. Donnelly, dated June 26, 2008. Incorporated by reference to
Exhibit 10.1 to Textron’s Quarterly Report on Form 10-Q for the fiscal quarter ended June 28, 2008. (SEC File
No. 1-5480)
Amendment to Letter Agreement between Textron and Scott C. Donnelly, dated December 16, 2008, together
with Addendum No.1 thereto, dated December 23, 2008. Incorporated by reference to Exhibit 10.15B to
Textron’s Annual Report on Form 10-K for the fiscal year ended January 3, 2009. (SEC File No. 1-5480)
Agreement between Textron and Scott C. Donnelly, dated May 1, 2009, related to Mr. Donnelly’s personal
use of a portion of hangar space at T.F. Green Airport which is leased by Textron. Incorporated by reference
to Exhibit 10.1 to Textron’s Quarterly Report on Form 10-Q for the fiscal quarter ended July 4, 2009. (SEC
File No. 1-5480)
Hangar License and Services Agreement made and entered into on April 25, 2011 to be effective as of
December 5, 2010, between Textron Inc. and Mr. Donnelly’s limited liability company. Incorporated by
reference to Exhibit 10.1 to Textron’s Quarterly Report on Form 10-Q for the fiscal quarter ended April 2,
2011. (SEC File No. 1-5480)
Amended and Restated Hangar License and Services Agreement, made and entered into as of October 1, 2015,
between Textron Inc. and Mr. Donnelly’s limited liability company. Incorporated by reference to Exhibit 10.2
to Textron’s Quarterly Report on Form 10-Q for the fiscal quarter ended October 3, 2015.
Letter Agreement between Textron and Frank Connor, dated July 27, 2009. Incorporated by reference to
Exhibit 10.2 to Textron’s Quarterly Report on Form 10-Q for the fiscal quarter ended October 3, 2009. (SEC
File No. 1-5480)
Hangar License and Services Agreement made and entered into on April 25, 2011 to be effective as of
December 5, 2010, between Textron Inc. and Mr. Connor’s limited liability company. Incorporated by
reference to Exhibit 10.2 to Textron’s Quarterly Report on Form 10-Q for the fiscal quarter ended April 2,
2011. (SEC File No. 1-5480)
(cid:26)(cid:25)(cid:1)(cid:1)(cid:1)(cid:1)(cid:1)(cid:1) (cid:55)(cid:72)(cid:91)(cid:87)(cid:85)(cid:82)(cid:81)(cid:3)(cid:21)(cid:19)(cid:20)(cid:25)(cid:3)(cid:36)(cid:81)(cid:81)(cid:88)(cid:68)(cid:79)(cid:3)(cid:53)(cid:72)(cid:83)(cid:82)(cid:85)(cid:87)
10.12C
10.13
10.14A
10.14B
10.15
10.16
10.17
10.18A
10.18B
10.18C
10.18D
10.18E
10.19
10.20
12.1
12.2
Amended and Restated Hangar License and Services Agreement, made and entered into on July 24, 2015,
between Textron Inc. and Mr. Connor’s limited liability company. Incorporated by reference to Exhibit 10.3
to Textron’s Quarterly Report on Form 10-Q for the fiscal quarter ended October 3, 2015.
Letter Agreement between Textron and Cheryl H. Johnson, dated June 12, 2012. Incorporated by reference to
Exhibit 10.2 to Textron’s Quarterly Report on Form 10-Q for the fiscal quarter ended June 30, 2012.
Letter Agreement between Textron and E. Robert Lupone, dated December 22, 2011. Incorporated by
reference to Exhibit 10.17 to Textron’s Annual Report on Form 10-K for the fiscal year ended December 31,
2011. (SEC File No. 1-5480)
Amendment to letter agreement between Textron and E. Robert Lupone, dated July 27, 2012. Incorporated by
reference to Exhibit 10.5 to Textron’s Quarterly Report on Form 10-Q for the fiscal quarter ended September
29, 2012.
Director Compensation. Incorporated by reference to Exhibit 10.15 to Textron’s Annual Report on Form 10-
K for the fiscal year ended January 2, 2016.
Form of Aircraft Time Sharing Agreement between Textron and its executive officers. Incorporated by
reference to Exhibit 10.3 to Textron’s Quarterly Report on Form 10-Q for the fiscal quarter ended September
27, 2008. (SEC File No. 1-5480)
Credit Agreement, dated as of October 4, 2013, among Textron, the Lenders listed therein, JPMorgan Chase
Bank, N.A., as Administrative Agent, Citibank, N.A. and Bank of America, N.A., as Syndication Agents, and
The Bank of Tokyo-Mitsubishi UFJ, Ltd., as Documentation Agent. Incorporated by reference to Exhibit 10.1
to Textron’s Current Report on Form 8-K filed on October 4, 2013.
Master Services Agreement between Textron Inc. and Computer Sciences Corporation dated October 27, 2004.
Incorporated by reference to Exhibit 10.26 to Textron’s Annual Report on Form 10-K for the fiscal year ended
January 1, 2005. * (SEC File No. 1-5480)
Amendment No. 4 to Master Services Agreement between Textron Inc. and Computer Sciences Corporation,
dated July 1, 2007. Incorporated by reference to Exhibit 10.1 to Textron’s Quarterly Report on Form 10-Q for
the fiscal quarter ended September 29, 2007. (SEC File No. 1-5480)
Amendment No. 5 to Master Services Agreement between Textron Inc. and Computer Sciences Corporation,
dated as of March 13, 2008. * Incorporated by reference to Exhibit 10.22C to Textron’s Annual Report on
Form 10-K for the fiscal year ended January 1, 2011. (SEC File No. 1-5480)
Amendment No. 6 to Master Services Agreement between Textron Inc. and Computer Sciences Corporation,
dated as of June 17, 2009. Incorporated by reference to Exhibit 10.22D to Textron’s Annual Report on Form
10-K for the fiscal year ended January 1, 2011. (SEC File No. 1-5480)
Amendment No. 7 to Master Services Agreement between Textron Inc. and Computer Sciences Corporation,
dated as of September 30, 2010. * Incorporated by reference to Exhibit 10.22E to Textron’s Annual Report on
Form 10-K for the fiscal year ended January 1, 2011. (SEC File No. 1-5480)
[Intentionally omitted]
Term Credit Agreement, dated as of January 24, 2014 Among Textron, JPMorgan Chase Bank, N.A., as
administrative agent, Citibank, N.A. and Bank of America, N.A., as syndication agents, The Bank of Tokyo-
Mitsubishi UFJ, Ltd., as documentation agent, and other lenders named therein. Incorporated by reference to
Exhibit 10.20 to Textron’s Annual Report on Form 10-K for the fiscal year ended December 28, 2013.
Computation of ratio of income to fixed charges of Textron Inc.’s Manufacturing group.
Computation of ratio of income to fixed charges of Textron Inc., including all majority-owned subsidiaries.
(cid:55)(cid:72)(cid:91)(cid:87)(cid:85)(cid:82)(cid:81)(cid:3)(cid:21)(cid:19)(cid:20)(cid:25)(cid:3)(cid:36)(cid:81)(cid:81)(cid:88)(cid:68)(cid:79)(cid:3)(cid:53)(cid:72)(cid:83)(cid:82)(cid:85)(cid:87)(cid:3)(cid:3)(cid:3)(cid:3)(cid:3)(cid:3)(cid:3)(cid:26)(cid:26)
21
23
24
31.1
31.2
32.1
32.2
101
Certain subsidiaries of Textron. Other subsidiaries, which considered in the aggregate do not constitute a
significant subsidiary, are omitted from such list.
Consent of Independent Registered Public Accounting Firm.
Power of attorney.
Certification of Chief Executive Officer Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.
Certification of Chief Financial Officer Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.
Certification of Chief Executive Officer Pursuant to 18 U.S.C. 1350, as adopted pursuant to Section 906 of the
Sarbanes-Oxley Act of 2002.
Certification of Chief Financial Officer Pursuant to 18 U.S.C. 1350, as adopted pursuant to Section 906 of the
Sarbanes-Oxley Act of 2002.
The following materials from Textron Inc.’s Annual Report on Form 10-K for the year ended December 31,
2016, formatted in 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.
* Confidential Treatment has been requested for portions of this document.
(cid:26)(cid:27)(cid:1)(cid:1)(cid:1)(cid:1)(cid:1)(cid:1) (cid:55)(cid:72)(cid:91)(cid:87)(cid:85)(cid:82)(cid:81)(cid:3)(cid:21)(cid:19)(cid:20)(cid:25)(cid:3)(cid:36)(cid:81)(cid:81)(cid:88)(cid:68)(cid:79)(cid:3)(cid:53)(cid:72)(cid:83)(cid:82)(cid:85)(cid:87)
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 22nd day of February 2017.
TEXTRON INC.
Registrant
By:
/s/ Frank T. Connor
Frank T. Connor
Executive Vice President and Chief Financial Officer
(cid:55)(cid:72)(cid:91)(cid:87)(cid:85)(cid:82)(cid:81)(cid:3)(cid:21)(cid:19)(cid:20)(cid:25)(cid:3)(cid:36)(cid:81)(cid:81)(cid:88)(cid:68)(cid:79)(cid:3)(cid:53)(cid:72)(cid:83)(cid:82)(cid:85)(cid:87)(cid:3)(cid:3)(cid:3)(cid:3)(cid:3)(cid:3)(cid:3)(cid:26)(cid:28)
Pursuant to the requirements of the Securities Exchange Act of 1934, this Annual Report on Form 10-K has been signed below on
this 22nd day of February 2017 by the following persons on behalf of the registrant and in the capacities indicated:
Name
Title
/s/ Scott C. Donnelly
Scott C. Donnelly
*
Kathleen M. Bader
*
R. Kerry Clark
*
James T. Conway
*
Ivor J. Evans
*
Lawrence K. Fish
*
Paul E. Gagné
*
Dain M. Hancock
*
Ralph D. Heath
*
Lord Powell of Bayswater KCMG
*
Lloyd G. Trotter
*
James L. Ziemer
*
Maria T. Zuber
/s/ Frank T. Connor
Frank T. Connor
/s/ Mark S. Bamford
Mark S. Bamford
*By:
/s/ Jayne M. Donegan
Jayne M. Donegan, Attorney-in-fact
(cid:27)(cid:19)(cid:1)(cid:1)(cid:1)(cid:1)(cid:1)(cid:1) (cid:55)(cid:72)(cid:91)(cid:87)(cid:85)(cid:82)(cid:81)(cid:3)(cid:21)(cid:19)(cid:20)(cid:25)(cid:3)(cid:36)(cid:81)(cid:81)(cid:88)(cid:68)(cid:79)(cid:3)(cid:53)(cid:72)(cid:83)(cid:82)(cid:85)(cid:87)
Chairman, President and Chief Executive Officer
(principal executive officer)
Director
Director
Director
Director
Director
Director
Director
Director
Director
Director
Director
Director
Executive Vice President and Chief Financial Officer
(principal financial officer)
Vice President and Corporate Controller
(principal accounting officer)
Corporate Information
Corporate Headquarters
Textron Inc.
40 Westminster Street
Providence, RI 02903
(401) 421-2800
www.textron.com
Annual Meeting
Textron’s annual meeting of shareholders will be
held on Wednesday, April 26, 2017, at 11 a.m.
at Textron Inc., 40 Westminster Street, 18th Floor,
Providence, RI 02903.
Transfer Agent, Registrar and
Dividend Paying Agent
For shareholder services such as change of address,
lost certificates or dividend checks, change in
registered ownership or the Dividend Reinvestment
Plan, write or call:
American Stock Transfer & Trust
Company, LLC
Operations Center
6201 15th Avenue
Brooklyn, NY 11219
phone: (866) 621-2790
email: info@amstock.com
Stock Exchange Information
(Symbol: TXT)
Textron common stock is listed on the New York
Stock Exchange.
Investor Relations
Textron Inc.
Investor Relations
40 Westminster Street
Providence, RI 02903
Investor Relations phone line:
(401) 457-2288
News media phone line:
(401) 457-2362
For more information, visit our website at
www.textron.com.
Company Publications and
General Information
To receive a copy of Textron’s Forms 10-K and 10-Q,
Proxy Statement or Annual Report without charge,
visit our website at www.textron.com or send a
written request to Textron Investor Relations at the
address listed above. For the most recent company
news and earnings press releases, visit our website
at www.textron.com.
Textron is an Equal Opportunity Employer.
Textron Board of Directors
To contact the Textron Board of Directors or to
report concerns or complaints about accounting,
internal accounting controls or auditing matters,
you may write to Board of Directors, Textron Inc.,
40 Westminster Street, Providence, RI 02903;
call (866) 698-6655 or (401) 457-2269; or send
an email to textrondirectors@textron.com.
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© 2017 Textron Inc.