202 0
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
INDUSTRIAL
TEXTRON SYSTEMS
Citation Longitude®
Bell V-280 Valor
Tracker Off Road 800SX
Ship-to-Shore Connector (SSC)
Citation Latitude®
Bell Boeing MV-22 Osprey
Blast-M Arctic Cat
Aerosonde® Small Unmanned
Aircraft System
Beechcraft® AT-6 Wolverine®
Bell 360 Invictus
E-Z-GO® RXV® ELiTETM
RIPSAW® M5
Beechcraft® King Air® 360
Bell 525 Relentless
Jacobsen Eclipse 360 Elite
LycomingTM iE2 Integrated
Electronic Engine
Cessna SkyCourier®
Bell 429 Global Ranger
Kautex Fuel Tank
ATAC’s Mirage F1B Fighter Jet
Beechcraft® King Air® 260
Bell 505 Jet Ranger X
Textron GSE TUGTM ALPHA 1
Common Unmanned Surface
Vehicle (CUSV®)
TEXTRON’S GLOBAL NETWORK OF BUSINESSES
TEXTRON
AVIATION
BELL
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 and aftermarket.
Aircraft includes sales of
business jet, turboprop
and piston aircraft, as
well as special mission
and military aircraft.
Aftermarket includes
commercial parts sales,
maintenance, inspection
and repair services.
SELECTED
YEAR-OVER-
YEAR
FINANCIAL
DATA
1. Adjusted Net Income,
Adjusted Diluted Earnings
Per Share and Manufacturing
Cash Flow Before Pension
Contributions are Non-GAAP
Measures. See page 7 for
a Reconciliation to GAAP.
Bell is a leading supplier
of helicopters and
related spare parts
and services. Bell
is the pioneer of the
revolutionary tiltrotor
aircraft. Globally
recognized for world-
class customer service,
innovation and superior
quality, Bell’s global
workforce serves
customers flying Bell
aircraft in more than
130 countries.
Our Industrial segment
offers two main product
lines: fuel systems and
functional components
produced by Kautex;
and specialized vehicles
such as golf cars,
recreational and utility
vehicles, aviation ground
support equipment and
professional mowers,
manufactured by Textron
Specialized Vehicles
businesses.
Textron Systems’
businesses provide
innovative solutions to
the defense, aerospace
and general aviation
markets. Product lines
include unmanned
systems, advanced
marine craft, armored
vehicles, intelligent
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.
(Dollars in Millions, Except Per Share Amounts)
Total Revenues
Total Segment Profit
Net Income—GAAP
Adjusted Net Income—Non-GAAP1
Per Share of Common Stock
Common Stock Price at Year-End
Diluted Net Income—GAAP
Adjusted Diluted Net Income—Non-GAAP1
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-GAAP1
2020
2019
$11,651
751
309
475
$ 48.33
1.35
2.07
$13,630
1,270
815
870
$ 44.74
3.50
3.74
228,979
226,444
232,709
227,956
$15,443
3,707
662
5,845
21%
39%
$15,018
3,124
686
5,518
26%
36%
$ 833
596
$ 960
642
TEXTRON 2020 ANNUAL REPORT 1
2020 was a challenging year for our
company as we worked through the
impacts of the COVID-19 pandemic.
FELLOW SHAREHOLDERS,
2020 was a challenging year for our
company as we worked through the
impacts of the COVID-19 pandemic.
Our operations have experienced and
continue to experience various degrees
of disruption due to the unprecedented
conditions surrounding the pandemic.
Across our businesses, we established
enterprise-wide pandemic response
teams and implemented processes and
procedures to enhance the safety of
our facilities and protect the health and
safety of our employees.
At our defense businesses, through
the hard work of our teams, we were
able to maintain our operations, meet
our customer commitments and deliver
strong results. At our commercial
businesses, we temporarily closed some
of our manufacturing facilities due to
reduced demand for certain products
during the first quarter and latter part of
the second quarter. In the second half
of the year, our commercial businesses
have generally experienced an increase in
customer demand compared with the first
half of 2020. Building on this momentum,
we delivered strong fourth quarter results
and look to carry this into 2021.
Our revenues for the year were $11.7
billion. We recorded a segment profit of
$751 million with a profit margin of 6.4
percent. Through a focus on working
capital management and cost control,
our manufacturing businesses generated
$833 million of net cash from operating
activities of continuing operations.
INVESTMENTS LEAD TO
NEW OPPORTUNITIES WITH
MILITARY CUSTOMERS
Despite the pandemic, our prior
investments in our new products and
technologies at our defense businesses
enabled us to move forward on a
number of military programs and win
new contract awards in 2020.
2 TEXTRON 2020 ANNUAL REPORT
Scott C. Donnelly
Chairman and
Chief Executive Officer
Our Future Vertical Lift programs at
Bell advanced in 2020. Both the Bell
V-280 Valor and Bell 360 Invictus were
down-selected by the U.S. Army for the
next rounds of the Future Long-Range
Assault Aircraft (FLRAA) and Future
Attack Reconnaissance Aircraft (FARA)
programs, respectively. The down-
selects illustrate the outstanding design,
innovation and tested technologies that
can fulfill the Army’s FLRAA and FARA
requirements at an affordable cost and
to our customers’ schedules.
By December, the V-280 had flown over
200 hours through more than 150 test
flights as part of a rigorous flight test
program. Throughout the program, the
team has worked closely with the Army
to demonstrate the V-280 is a low-risk,
affordable and sustainable aircraft that
will redefine the battlefield for decades
to come. As part of the test program,
multiple Army Experimental Test Pilots
have flown the V-280 and soldier
touchpoint events have enabled pilots,
maintainers and infantry soldiers to share
their input.
The Army’s down-select of the Invictus
followed almost one year of design
and risk-reduction work by the Bell
team as part of the initial contract phase.
Like the V-280, the Invictus design
combines innovation with tested
technologies to fulfill the customer’s
requirements at an affordable cost that
meets the Army’s schedule.
JANUARY
RIPSAW® M5 WINS ARMY’S ROBOTIC
COMBAT VEHICLE MEDIUM PROGRAM
FEBRUARY
BELL REVEALS NEW EDAT SYSTEM
MARCH
TWO FUTURE VERTICAL LIFT
PROGRAM MILESTONES: BELL
V-280 VALOR (TOP) AND BELL
360 INVICTUS (BOTTOM) DOWN-
SELECTED FOR ARMY’S FLRAA AND
FARA PROGRAMS, RESPECTIVELY
In late 2020, the Department of Defense
awarded Bell Boeing a contract that
includes recurring procurement of kits
and installs for nacelle improvements
onto the CV-22 aircraft for the Air Force.
These modifications to the nacelles
will improve maintainability, reduce
maintenance man-hours and improve
readiness rates.
Bell also reached delivery milestones with
its H-1 and V-22 programs. In May,
Bell successfully delivered the 150th Bell
AH-1Z helicopter and the 100th Zulu
Build New manufactured at our Fort
Worth and Amarillo facilities. Bell also
delivered its 400th V-22—this milestone
was a CV-22 aircraft to the U.S. Special
Operations Command—as well as
the first CMV-22B variant designed
specifically for carrier fleet operations for
the U.S. Navy. Japan became the first
international operator of a V-22 when the
U.S. government delivered the tiltrotor to
Camp Kisarazu that will be operated by
the Japan Ground Self Defense Force.
With its innovative products and
technologies and through partnerships
with our military customers, Textron
Systems won a number of new contracts
during the year.
Demonstrating its confidence in Textron
Systems’ Ship-to-Shore Connector
program, the U.S. Navy awarded
a follow-on production contract for
additional SSC craft. This brings the
current number of SSC craft being
produced by Textron Systems to 24.
The SSC program marked a significant
milestone with the fly-away of the first
two SSC craft from Systems’ New
Orleans shipyard to the Naval Surface
Warfare Center in Florida.
Textron Systems’ ATAC business won
four contract awards as part of the U.S.
Air Force’s Combat Air Forces (CAF)
Contracted Air Support (CAS) program.
With these contracts, ATAC will use its
fleet of fighter aircraft for adversary air
and close air support live training for
the Air Force as well as the U.S. Special
Operations Command. ATAC also
received an award to support the Navy
and Marine Corps, under the Fighter
Jet Services (FJS) program. ATAC has
been steadily building its fleet of Mirage
F1, F-21 Kfir and MK-58 Hawker Hunter
fighter aircraft to position itself for these
strategic wins.
TOTAL REVENUE
BY SEGMENT
TOTAL REVENUE
BY TYPE
TOTAL REVENUE
BY REGION
APRIL
U.S. NAVY AWARDS TEXTRON
SYSTEMS A FOLLOW-ON PRODUCTION
CONTRACT TO PRODUCE ADDITIONAL
SHIP-TO-SHORE CONNECTOR CRAFT
MAY
CESSNA SKYCOURIER MAKES FIRST
FLIGHT
JUNE
BELL DELIVERS FIRST CMV-22B FOR
FLEET OPERATIONS TO THE NAVY
Textron Aviation 34%
Bell 28%
Industrial 26%
Textron Systems 11%
Finance 1%
Commercial 70%
U.S. Government 30%
U.S. 68%
Europe 11%
Asia and Australia 10%
Other 11%
TEXTRON 2020 ANNUAL REPORT 3
Textron Systems was also awarded a
contract to support work on the U.S.
Air Force’s Ground Based Strategic
Deterrent (GBSD) missile system, under
prime contractor Northrop Grumman.
The GBSD is intended to serve as a
cornerstone of the nation’s nuclear triad
and to provide a reliable nuclear deterrent.
Textron Aviation delivered its first
Beechcraft AT-6 Wolverine to the Air Force.
This multi-mission aircraft is designed to
meet a wide-mission spectrum including
training, manned Intelligence Surveillance
and Reconnaissance (ISR), and light
precision attack. As government, military
and commercial customers look for
airborne solutions for critical missions,
Textron Aviation’s special missions and
defense business is well positioned to
meet their needs.
MOVING FORWARD ON NEW
PRODUCT PROGRAMS
In May, Textron Aviation’s Cessna
SkyCourier, the new clean-sheet twin-
engine, large-utility turboprop aircraft,
made its first flight. By the end of the
year, there were three test articles in the
certification program with more than 400
flight hours completed. The SkyCourier
is on track for entry into service in the
second half of 2021.
Demonstrating our commitment to
refreshing our product lineup, Textron
Aviation also brought innovation to its
iconic Beechcraft King Air turboprop
product line with the introduction of two
aircraft: the King Air 360, its updated
flagship turboprop, and the King Air
260, which builds on the platform’s rich
history of rugged reliability and versatility.
Both aircraft offer the latest technological
advancements in the cockpit and
enhancements to passenger comfort.
Textron Aviation began deliveries of the
King Air 360 during the fourth quarter,
delivering eight units.
Bell completed several key certification
activities with the Bell 525 Relentless
as it moves closer to becoming the
first certified commercial fly-by-wire
helicopter in the market. As Bell’s largest
commercial product, the Bell 525 features
best-in-class design, offers exceptional
visibility and superior payload and range
capabilities for customers.
For the third consecutive year, a Bell
innovation was named one of Popular
Science’s Best of What’s New in the
Aerospace category. For 2020, Bell’s
Electrically Distributed Anti-Torque
(EDAT) system was recognized.
EDAT is comprised of four small fans
electrically powered by four separate
motors that replace a conventional tail
rotor, enhancing on-the-ground safety
and reducing noise pollution, carbon
emissions and operating costs.
In addition to EDAT, Textron Systems’
RIPSAW® M5 unmanned ground vehicle
was also recognized by Popular Science
in the Security category. The RIPSAW M5
features an open architecture, giving the
Army a highly configurable and leading
unmanned ground system. With variants
that include hybrid-electric and all-electric
powertrains, the RIPSAW M5 provides
the Army with extreme mobility and speed
for multiple missions. The M5 delivers
full mobility using its powerful electric
drivetrain and can extend run-time with
a modular range extender in the hybrid-
electric variant. This vehicle keeps soldiers
safe by providing an unmanned system
to undertake the most hazardous and
strenuous missions.
As Textron Systems supports the Army
with Shadow unmanned aircraft in the
latest Block III configuration, the team
is leveraging its more than 30 years of
unmanned systems experience with
the Aerosonde Hybrid Quad (HQ) for
the Army’s Future Tactical Unmanned
4 TEXTRON 2020 ANNUAL REPORT
JULY
ATAC SELECTED TO PROVIDE
ADVERSARY AIR LIVE TRAINING
FOR TWO AIR FORCE BASES USING
RECENTLY ACQUIRED FLEET OF
MIRAGE F1 AIRCRAFT
AUGUST
TEXTRON AVIATION INTRODUCES
NEW BEECHCRAFT KING AIR 360,
REPRESENTING NEXT GENERATION
OF BEECHCRAFT’S FLAGSHIP
TURBOPROP AIRCRAFT
SEPTEMBER
BELL APT 70 SUCCESSFULLY
COMPLETES JOINT FLIGHT
DEMONSTRATION WITH NASA
OCTOBER
TUG UNVEILS NEW ALPHA 1
AIRCRAFT PUSHBACK
NOVEMBER
AEROSONDE SMALL UNMANNED
AIRCRAFT SYSTEM (SUAS) ACHIEVES
500,000 FLIGHT HOURS
DECEMBER
BEECHCRAFT KING AIR 260
TURBOPROP INTRODUCED,
OFFERING STATE-OF-THE-ART
UPGRADES AND NEXT-GENERATION
CAPABILITY
Systems (FTUAS) program. In 2019,
the Army selected Textron Systems to
participate in Phase 1 of the FTUAS
program. Over the past year, Textron
Systems has continued flight testing as
it competes for this program to protect
tomorrow’s warfighters.
TSV focused on new product
development, particularly leveraging
electric technology and connected-
vehicle experiences for its products.
Building on the success pioneered in
golf by E-Z-GO’s ELiTE series of lithium-
powered golf cars, TSV launched a
Jacobsen Eclipse 360 ELiTE riding
greens mower, a fully electric machine.
Powered by an energy-efficient,
zero-maintenance battery system, the
Eclipse 360 ELiTE performs silently
and provides course operators with
significant operational savings.
As a recognized leader in hybrid fuel
systems solutions, Kautex has a
solid understanding of its automotive
customers’ current and future
requirements. During the year, Kautex
won contracts with major OEMs for its
fuel systems while continuing its focus
on innovation, particularly around the
technologies for hybrid fuel systems,
electric and hybrid-electric battery
systems and sensor cleaning solutions
for autonomous driving technologies.
DELIVERING ON CUSTOMER
SERVICE AND SUPPORT
As we continued to move forward
with our products and technologies,
we kept our focus on strengthening
our customer service and support.
During the year, we acquired Zhenjiang
Aerochine Aviation Limited to increase
Bell’s helicopter maintenance, repair
and overhaul capabilities in China and
also opened three Bell Authorized
Maintenance Centers in Europe for
our rotorcraft customers. Meanwhile,
Textron Aviation’s acquisition of
Premiair Aviation Maintenance Pty Ltd.
in Australia strengthened and expanded
support for our Beechcraft, Cessna and
Hawker customers.
To ensure we’re building a pipeline
of future customers, Textron Aviation
continued to partner with leading pilot
training programs through its Top Hawk
initiative. This initiative provides training
programs and universities across the
country with a factory-new, custom
branded Cessna Skyhawk aircraft for
student pilot training and to promote
pilot training at air shows, aviation
contests and recruiting events. This is
an opportunity to introduce the next
generation of pilots to our products.
WELL POSITIONED FOR GROWTH
2020 was a challenging year for our
employees, personally and professionally.
I am proud of the way our teams
responded. While we dealt with significant
operational disruptions, we continued
to support our customers throughout
the pandemic and responded to both
dramatic reductions and increases
to customer demand over the course
of the year. Our teams also achieved
critical milestones on the programs and
product development efforts that are
important to our future growth.
As we enter 2021, we take a pragmatic
approach to the challenges that may
remain but are confident that our
teams will deliver for our customers
today while continuing to execute on
our growth strategies for tomorrow.
SCOTT C. DONNELLY
Chairman and Chief Executive Officer
TEXTRON 2020 ANNUAL REPORT 5
LEADERSHIP
BOARD OF DIRECTORS
Scott C. Donnelly (1)
Chairman, President and CEO
Textron Inc.
Paul E. Gagné (1) (2) (4) (5)
Chairman (Retired)
Wajax Corporation
Kathleen M. Bader (2) (3)
President and CEO (Retired)
NatureWorks LLC
R. Kerry Clark (1) (2)
Chairman and CEO (Retired)
Cardinal Health, Inc.
James T. Conway (1) (3)
General (Retired)
U.S. Marine Corps
Ralph D. Heath (2) (4)
Executive Vice President,
Aeronautics (Retired)
Lockheed Martin Corporation
Deborah Lee James (2) (3)
23rd Secretary of the
U.S. Air Force (Retired)
Lionel L. Nowell III (2) (3)
Senior Vice President and
Treasurer (Retired)
PepsiCo, Inc.
James L. Ziemer (1) (4)
President and CEO (Retired)
Harley-Davidson, Inc.
Maria T. Zuber (3) (4)
Vice President, Research
Massachusetts Institute of
Technology
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, James T. Conway
(4) Organization and
Compensation Committee:
Chair, James L. Ziemer
(5) Lead Director:
Paul E. Gagné
EXECUTIVE OFFICERS
Scott C. Donnelly
Chairman, President and
Chief Executive Officer
Textron Inc.
Frank T. Connor
Executive Vice President and
Chief Financial Officer
Textron Inc.
Julie G. Duffy
Executive Vice President –
Human Resources
Textron Inc.
E. Robert Lupone
Executive Vice President,
General Counsel, Secretary and
Chief Compliance Officer
Textron Inc.
SEGMENT AND
BUSINESS UNIT
PRESIDENTS
Lisa M. Atherton
President and CEO
Textron Systems
Ronald Draper
President and CEO
Textron Aviation
Gunnar Kleveland
President and CEO
Textron Specialized
Vehicles
R. Danny Maldonado
President and CEO
Textron Financial
Jörg Rautenstrauch
President and CEO
Industrial Segment and
Kautex
Mitch Snyder
President and CEO
Bell
CORPORATE
OFFICERS
Mark S. Bamford
Vice President and
Corporate Controller
Textron Inc.
Janet S. Fogarty
Vice President and
Deputy General Counsel
Textron Inc.
Dana L. Goldberg
Vice President – Tax
Textron Inc.
Scott P. Hegstrom
Vice President –
Mergers & Acquisitions and
Strategy
Textron Inc.
Stewart Holmes
Senior Vice President –
Washington Operations
Textron Inc.
Lawrence J. La Sala
Vice President and
Deputy General Counsel –
Litigation
Textron Inc.
Kimberly A. Mackenroth
Vice President and
Chief Information Officer
Textron Inc.
Thomas N. Nichipor
Vice President –
Textron Audit Services
Textron Inc.
Eric Salander
Vice President – Investor
Relations and Treasurer
Textron Inc.
6 TEXTRON 2020 ANNUAL REPORT
FOOTNOTE TO SELECTED YEAR-OVER-YEAR FINANCIAL DATA
ADJUSTED NET INCOME AND ADJUSTED DILUTED EARNINGS PER SHARE
Adjusted net income and adjusted diluted earnings per share exclude special charges, net of tax, and an inventory charge, net of tax and a tax
benefit both related to TRU Simulation + Training Canada Inc. (TRU Canada) in connection with the restructuring plan and disposition of
this company. We consider items recorded in special charges, such as enterprise-wide restructuring, certain asset impairment charges, and
acquisition-related restructuring, integration and transaction costs, to be of a non-recurring nature that is not indicative of ongoing operations. At
TRU Canada, the inventory charge is excluded as it relates to the write-down of inventory in connection with an action taken under the restructuring
plan. Due to the substantial decline in demand and order cancellations for flight simulators resulting from the impact of the pandemic on the
commercial air transportation business, we ceased manufacturing at TRU Canada’s Montreal facility, resulting in the production suspension of its
commercial air transport simulators. As a result of this action and market conditions, the related inventory was written down to its net realizable
value. In the fourth quarter of 2020, we reached a definitive agreement to sell TRU Canada, which resulted in the recognition of an $8 million tax
benefit. We believe this inventory charge and tax benefit are of a non-recurring nature and are not indicative of ongoing operations.
NET INCOME AND DILUTED EARNINGS PER SHARE GAAP TO NON-GAAP RECONCILIATION
(Dollars in Millions, Except Per Share Amounts)
Net income—GAAP
Special charges, net of taxes
Inventory charge, net of tax
Tax benefit—TRU assets held for sale
Adjusted net income—Non-GAAP
Diluted earnings per share:
Net income—GAAP
Special charges, net of taxes
Inventory charge, net of tax
Tax benefit—TRU assets held for sale
Adjusted net income—Non-GAAP
2020
$ 309
119
55
(8)
$ 475
$ 1.35
0.52
0.24
(0.04)
$ 2.07
2019
$ 815
55
—
—
$ 870
$3.50
0.24
—
—
$3.74
MANUFACTURING CASH FLOW BEFORE PENSION CONTRIBUTIONS
Manufacturing cash flow before pension contributions adjusts net cash from operating activities (GAAP) for the following:
• Deducts capital expenditures and includes proceeds from an insurance recovery and the sale of property, plant and equipment to arrive at the net
capital investment required to support ongoing manufacturing operations;
• 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;
significantly from period to period and we believe that they are not representative of cash used by our manufacturing operations during the period;
• Adds back pension contributions as we consider our pension obligations to be debt-like liabilities. Additionally, these contributions can fluctuate
• Excludes taxes paid related to the gain realized in 2018 on the Tools and Test business disposition. We have made this adjustment to the
non-GAAP measure because we believe this use of cash is not representative of cash used by our manufacturing operations.
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.
MANUFACTURING CASH FLOW BEFORE PENSION CONTRIBUTIONS GAAP TO NON-GAAP RECONCILIATION Millions)
2018
2017
(In Millions)
Net cash provided by operating activities of continuing operations—GAAP
Less: Capital expenditures
Dividends received from TFC
Plus: Total pension contributions
Proceeds from an insurance recovery and sale of property, plant and equipment
Taxes paid on gain on business disposition
Manufacturing cash flow before pension contributions—Non-GAAP
2020
2019
$ 833
(317)
—
47
33
—
$ 596
$ 960
(339)
(50)
51
9
11
$ 642
TEXTRON 2020 ANNUAL REPORT 7
SUPPORTING
OUR COMMUNITIES
THE GLOBAL PANDEMIC CAUSED BY COVID-19 HAD
A PROFOUND EFFECT ON THE WORLD. ACROSS
TEXTRON, OUR EMPLOYEES DISPLAYED REMARKABLE
DEDICATION AND COMMITMENT TO OUR CUSTOMERS,
OUR COMMUNITIES AND TO ONE ANOTHER.
We put into place measures to create safe work environments
to protect the health and safety of our teams for the continued
operation of our businesses. We also responded to the needs
within our communities. When there was a critical shortage of
supplies, we donated personal protective equipment and cleaning
supplies to local healthcare facilities and community organizations
and used our facilities to sew face masks and manufacture protective
plastic shields for healthcare workers and first responders. We are
grateful to our people for their work during difficult circumstances.
Our businesses donated masks and personal
protective equipment to local healthcare facilities
and hospitals.
With safeguards in place to protect our employees, we kept our
commitments to customers.
Employees volunteered their time to produce face
masks.
Teams manufactured plastic face shields for local healthcare workers.
Businesses used their expertise to help community
organizations.
8 Textron 2019 Annual Report
8 TEXTRON 2020 ANNUAL REPORT
UNITED STATES SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
Form 10-K
☒ ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the fiscal year ended January 2, 2021
or
☐ TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the transition period from to .
Commission File Number 1-5480
Textron Inc.
(Exact name of registrant as specified in its charter)
Delaware
(State or other jurisdiction of incorporation or organization)
40 Westminster Street, Providence, RI
(Address of principal executive offices)
05-0315468
(I.R.S. Employer Identification No.)
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
Trading Symbol(s)
TXT
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. xYes ¨ No
Indicate by check mark if the registrant is not required to file reports pursuant to Section 13 or Section 15(d) of the Act . ¨ Yes x No
Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the
preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the
past 90 days. x Yes ¨ No
Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation
S-T during the preceding 12 months (or for such shorter period that the registrant was required to submit such files). x Yes ¨No
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, smaller reporting company, or an emerging
growth company. See definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company” and “emerging growth company” in Rule 12b-2 of
the Exchange Act (Check one):
Large accelerated filer x
Non-accelerated filer ☐
Smaller reporting company ☐
Accelerated filer
☐
Emerging growth company ☐
If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or
revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ◻
Indicate by check mark whether the registrant has filed a report on and attestation to its management’s assessment of the effectiveness of its internal control over
financial reporting under Section 404(b) of the Sarbanes-Oxley Act (15 U.S.C. 7262(b)) by the registered public accounting firm that prepared or issued its audit
report. ☒ Yes ¨No
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Act). ☐ Yes ☒ No
The aggregate market value of the registrant’s Common Stock held by non-affiliates at July 4, 2020 was approximately $7.4 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 6, 2021, 226,284,488 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 28, 2021.
Textron 2020 Annual Report 1
Textron Inc.
Index to Annual Report on Form 10-K
For the Fiscal Year Ended January 2, 2021
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.
Item 14.
PART IV
Certain Relationships and Related Transactions and Director Independence
Principal Accountant Fees and Services
Item 15.
Exhibits and Financial Statement Schedules
Item 16.
Form 10-K Summary
Signatures
2 Textron 2020 Annual Report
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2
PART I
Item 1. Business
Textron Inc. is a multi-industry company that leverages its global network of aircraft, defense, industrial and finance businesses to
provide customers with innovative products and services around the world. References to “Textron Inc.,” the “Company,” “we,”
“our” and “us” in this Annual Report on Form 10-K, unless otherwise indicated, refer to Textron Inc. and its consolidated
subsidiaries.
We conduct our business through five operating segments: Textron Aviation, Bell, Textron Systems and Industrial, which
represent our manufacturing businesses, and Finance, which represents our captive finance business. Our segments include
operations that are unincorporated divisions of Textron Inc. and others that are separately incorporated subsidiaries. Total
revenues by segment and customer type for 2020 are presented below.
2020 Total Revenues by Segment
2020 Total Revenues by Customer Type
Textron Aviation
34%
Finance
1%
Textron Systems
11%
Bell
28%
Industrial
26%
Commercial
70%
U.S. Government
30%
The following description of our business and operating segments should be read in conjunction with Item 7. Management’s
Discussion and Analysis of Financial Condition and Results of Operations.
Textron Aviation Segment
Textron Aviation is a leader in general aviation. Textron Aviation manufactures, sells and services Beechcraft and Cessna aircraft,
and services the Hawker brand of business jets. The segment has two principal product lines: aircraft and aftermarket parts and
services. Aircraft includes sales of business jets, turboprop aircraft, military trainer and defense aircraft and piston engine aircraft.
Aftermarket parts and services includes commercial parts sales, and maintenance, inspection and repair services. Textron Aviation
markets its products worldwide through its own sales force, as well as through a network of authorized independent sales
representatives.
The family of jets currently offered by Textron Aviation includes the Citation M2, Citation CJ3+, Citation CJ4, Citation XLS+,
Citation Latitude and the Citation Longitude. Textron Aviation’s turboprop aircraft include the Beechcraft King Air 260, King Air
360ER and King Air 360, and the Cessna Caravan and Grand Caravan EX. In addition, Textron Aviation’s military trainer and
defense aircraft include the T-6 trainer, which has been used to train pilots from more than 20 countries, and the AT-6 light attack
military aircraft. Textron Aviation also offers piston engine aircraft including the Beechcraft Baron and Bonanza, and the Cessna
Skyhawk, Skylane, and the Turbo Stationair HD.
In support of its family of aircraft, Textron Aviation operates a global network of 20 service centers, two of which are co-located
with Bell, along with more than 300 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 approximately 70 mobile service units. In addition,
Able Aerospace Services, Inc., a subsidiary of Textron Aviation, provides component and maintenance, repair and overhaul
services in support of commercial and military fixed- and rotor-wing aircraft.
Product Development Programs
Textron Aviation is developing the Cessna Skycourier, a twin-engine, high-wing, large-utility turboprop aircraft, which achieved
its first flight in May 2020. The Denali, a high-performance single engine turboprop aircraft under development, is expected to
achieve its first flight in 2021.
Textron 2020 Annual Report 3
3
Bell Segment
Bell is one of the leading suppliers of military and commercial helicopters, tiltrotor aircraft, and related spare parts and services in
the world.
Bell supplies advanced military helicopters and provides parts and support services to the U.S. Government and to military
customers outside the United States. Bell’s primary U.S. Government programs are for the production and support of 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 primarily for the U.S. Department of Defense, and also offers this aircraft to other countries
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 also sell these helicopters 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,
private, law enforcement, utility and emergency medical helicopter operators, and the U.S. and foreign governments. Bell
produces a variety of commercial aircraft types, including light single- and twin-engine helicopters and medium twin-engine
helicopters, along with other related products. The commercial helicopters currently offered by Bell include the 429, 407GXi,
412EPX, 412EPI, 412EP, 505 Jet Ranger X and Huey II.
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 Company-operated service centers, four global parts distribution
centers and nearly 100 independent service centers located in over 35 countries. Collectively, these service sites offer a complete
range of logistics support, including parts, support equipment, technical data, training devices, pilot and maintenance training,
component repair and overhaul, engine repair and overhaul, aircraft modifications, aircraft customizing, accessory manufacturing,
contractor maintenance, field service and product support engineering.
Product Development Programs
In October 2019, Bell announced a new rotorcraft, the Bell 360 Invictus, which it is developing as its entrant for the U.S. Army's
Future Attack Reconnaissance Aircraft (FARA) Competitive Prototype Program, part of the U.S. government's Future Vertical
Lift (FVL) family of programs. The FARA program was initiated by the U.S. Army to develop a successor to the retired Bell
OH-58D Kiowa Warrior helicopter. In March 2020, the U.S. Army selected the 360 Invictus to move to the second phase of the
Competitive Prototype Program.
Bell continues its development and refinement of the V-280 Valor, a next generation vertical lift aircraft as part of the Joint Multi
Role Technology Demonstrator (JMR-TD) initiative. The JMR-TD program is the science and technology precursor to the FVL
program. The V-280 achieved its first flight in December 2017 and its first cruise mode flight in May 2018. In March 2020, the
U.S. Army awarded Bell a Competitive Demonstration and Risk Reduction contract for the next stage of its Future Long Range
Assault Aircraft program.
Bell’s first super medium commercial helicopter, the 525 Relentless, is currently in the certification process with the Federal
Aviation Administration (FAA).
Textron Systems Segment
Textron Systems is a supplier to the defense, aerospace and general aviation markets. This segment sells 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’ operating units are reported under the following product lines:
Unmanned Systems, Marine and Land Systems and Simulation, Training and Other.
Our Unmanned Systems product line includes unmanned aircraft systems, unmanned surface systems, mission command
hardware and solutions, and worldwide customer support and logistics. Unmanned aircraft systems includes the Shadow, the U.S.
Army’s premier tactical unmanned aircraft system, which has surpassed one million flight hours since its introduction, and the
Aerosonde Small Unmanned Aircraft System, a multi-mission capable unmanned aircraft system that has amassed more than
500,000 flight hours in commercial and military operations around the world. Unmanned Systems also provides complete systems
solutions to its government and commercial customers through comprehensive program management, operational and
maintenance training, technical assistance and logistics support, and end-to-end turnkey mission support.
4 Textron 2020 Annual Report
4
Our Marine and Land Systems product line includes advanced marine craft, armored vehicles and specialty vehicles supporting
fire and rescue applications. These products are in service with U.S. and international militaries, special operations forces, police
forces and civilian entities. Marine and Land Systems’ primary U.S. Government program is for the development and production
of the U.S. Navy’s next generation Landing Craft Air Cushion as part of the Ship-to-Shore Connector program.
The Simulation, Training and Other product line includes the following operating units and businesses: Electronic Systems,
Weapons and Sensors Systems, Lycoming, Airborne Tactical Advantage Company (ATAC) and TRU Simulation + Training
(TRU). Electronic Systems provides high technology test equipment, electronic warfare test and training solutions and
intelligence software solutions for U.S. and international defense, intelligence and law enforcement communities. Weapons and
Sensors Systems offers advanced precision guided weapons systems, airborne and ground-based sensors and surveillance systems,
and protection systems for the defense and aerospace industries. Lycoming specializes in the engineering, manufacture, service
and support of piston aircraft engines for the general aviation and remotely piloted aircraft markets. ATAC focuses on live
military air-to-air and air-to-ship training and support services for U.S. Navy, Marine and Air Force personnel. TRU designs,
develops, manufactures, installs, and provides maintenance of advanced flight training devices, including full flight simulators,
for commercial airlines, aircraft original equipment manufacturers (OEMs), flight training centers and training organizations. On
January 25, 2021, we sold TRU Simulation + Training Canada Inc., which manufactured and maintained flight simulators for
commercial airlines.
Industrial Segment
Our Industrial segment designs and manufactures a variety of products within the Fuel Systems and Functional Components and
Specialized Vehicles product lines.
Our Fuel Systems and Functional Components product line is produced by our Kautex business unit which is headquartered in
Bonn, Germany. Kautex is a leader in designing and manufacturing plastic fuel systems for automobiles and light trucks,
including blow-molded solutions for conventional plastic fuel tanks and pressurized plastic fuel tanks for hybrid vehicle
applications. Kautex also develops and manufactures clear-vision systems for automotive safety and advanced driver assistance
systems (ADAS). Our cleaning systems are comprised of nozzles, reservoirs, inlets and pumps to support onboard cleaning for
windscreens, headlamps and ADAS cameras and sensors. In addition, Kautex produces plastic tanks for selective catalytic
reduction systems used to reduce emissions from diesel engines and other fuel system components.
Kautex’s business model is focused on developing and maintaining long-term customer relationships with leading global OEMs.
Kautex operates over 30 plants in 14 countries in close proximity to our customers, along with 10 engineering/research and
development locations around the world.
Our Specialized Vehicles product line includes products sold by the Textron Specialized Vehicles businesses under our E-Z-GO,
Arctic Cat, TUG Technologies, Douglas Equipment, Premier, Safeaero, Ransomes, Jacobsen and Cushman brands. These
businesses design, manufacture and sell golf cars, off-road utility vehicles, recreational side-by-side and all-terrain vehicles,
snowmobiles, light transportation vehicles, aviation ground support equipment and professional turf-maintenance equipment, as
well as specialized turf-care vehicles. Their diversified customer base includes golf courses and resorts, government agencies and
municipalities, consumers, outdoor enthusiasts, and commercial and industrial users such as factories, warehouses, airlines,
planned communities, hunting preserves, educational and corporate campuses, sporting venues, municipalities and landscaping
professionals. Sales are made through a combination of a network of independent distributors and dealers worldwide, the Bass Pro
Shops and Cabela’s retail outlets, which sell our products under the Tracker Off-Road brand, and factory direct resources.
Finance Segment
Our Finance segment, or the Finance group, is a commercial finance business that consists of Textron Financial Corporation
(TFC) and its consolidated subsidiaries. The Finance segment provides financing primarily to purchasers of new and pre-owned
Textron Aviation aircraft and Bell helicopters. A substantial number of the originations in our finance receivable portfolio are
cross-border transactions for aircraft sold outside of the U.S. In 2020 and 2019, our Finance group paid our Manufacturing group
$195 million and $184 million, respectively, related to the sale of Textron-manufactured products to third parties that were
financed by the Finance group.
Our Finance segment’s largest business risk is the collectability of its finance receivable portfolio. See Finance Segment section
in Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations for information about the
Finance segment’s credit performance.
Textron 2020 Annual Report 5
5
Backlog
Backlog represents amounts allocated to contracts that we expect to recognize as revenue in future periods when we perform
under the contracts. Backlog excludes unexercised contract options and potential orders under ordering-type contracts, such as
Indefinite Delivery, Indefinite Quantity contracts.
Our backlog at the end of 2020 and 2019 is summarized below:
(In millions)
Bell
Textron Aviation
Textron Systems
Total backlog
January 2,
2021
5,342 $
1,603
2,556
9,501 $
January 4,
2020
6,902
1,714
1,211
9,827
$
$
U.S. Government Contracts and Other Governmental Regulation
Our operations, products and services are subject to various government regulations, including regulations related to U.S.
government business, international regulation of aviation products and services, and environmental regulations.
Contracts with the U.S. Government, including contracts under the U.S. Government-sponsored foreign military sales program,
generated approximately 30% of our consolidated revenues in 2020, primarily in our Bell and Textron Systems segments. We
must comply with and are affected by laws and regulations relating to the formation, administration and performance of U.S.
Government contracts. These laws and regulations, among other things, require certification and disclosure of all cost and pricing
data in connection with contract negotiation; define allowable and unallowable costs and otherwise govern our right to
reimbursement under certain cost-based U.S. Government contracts; and safeguard and restrict the use and dissemination of
classified and covered defense information and the exportation of certain products and technical data. New laws, regulations or
procurement requirements, or changes to current ones, can significantly increase our costs, reducing our profitability.
Our contracts with the U.S. Government generally may be terminated by the U.S. Government for convenience or if we default in
whole or in part by failing to perform under the terms of the applicable contract. If the U.S. Government terminates a contract for
convenience, we normally will be entitled to payment for the cost of contract work performed before the effective date of
termination, including, if applicable, reasonable profit on such work, as well as reasonable termination costs. If, however, the U.S.
Government terminates a contract for default, generally: (a) we will be paid the contract price for completed supplies delivered
and accepted and services rendered, an agreed-upon amount for manufacturing materials delivered and accepted and for the
protection and preservation of property, and an amount for partially completed products accepted by the U.S. Government; (b) the
U.S. Government may not be liable for our costs with respect to unaccepted items and may be entitled to repayment of advance
payments and progress payments related to the terminated portions of the contract; (c) the U.S. Government may not be liable for
assets we own and utilize to provide services under the “fee-for-service” contracts; and (d) we may be liable for excess costs
incurred by the U.S. Government in procuring undelivered items from another source. See Aerospace and Defense Industry
section in Item 1A. Risk Factors for additional information related to regulation of U.S. Government business herein.
Commercial aircraft products manufactured by our Textron Aviation and Bell segments are required to comply with FAA
regulations in the U.S. and the regulations of other similar aviation regulatory governing authorities internationally, including, the
European Aviation Safety Agency. Maintenance facilities and aftermarket services must also comply with FAA and international
regulations. These regulations address production and quality systems, airworthiness and installation approvals, repair procedures
and continuing operational safety. For an aircraft to be manufactured and sold, the model must receive a type certificate from the
appropriate aviation authority, and each aircraft must receive a certificate of airworthiness. Aircraft outfitting and completions
also require approval by the appropriate aviation authority. See Strategic Risks section in Item 1A. Risk Factors for additional
information with respect to risks related to obtaining certification of new aircraft products.
Our operations are subject to numerous laws and regulations designed to protect the environment. For additional information
regarding environmental matters, see Note 19 to the Consolidated Financial Statements in Item 8. Financial Statements and
Supplementary Data, and Business and Operational Risks and Risks Related to Regulatory and Legal Matters sections in Item 1A.
Risk Factors.
Based on current information and the applicable laws and regulations currently in effect, compliance with government
regulations, including environmental regulations, has not had, and we do not expect it to have, a material effect on our capital
expenditures, earnings or competitive position. However, laws and regulations may be changed or adopted that impose additional
compliance requirements which could necessitate capital expenditures or otherwise increase our costs of doing business, reducing
our profitability and negatively impacting our operating results.
6 Textron 2020 Annual Report
6
Human Capital Resources
At January 2, 2021, we employed approximately 33,000 employees worldwide, with approximately 75% located in the U.S. and
the remainder located outside of the U.S. Approximately 6,800, or 28%, of our U.S. employees, most of whom work for our Bell
and Textron Aviation segments, are represented by unions under collective bargaining agreements, and certain of our non-U.S.
employees are represented by organized works councils. From time to time our collective bargaining agreements expire and come
up for renegotiation.
Our success is highly dependent upon our ability to maintain a workforce with the skills necessary for our businesses to succeed.
We need highly skilled personnel in multiple areas including, among others, engineering, manufacturing, information technology,
cybersecurity, flight operations, business development and strategy and management. In order to attract and retain highly skilled
employees, we are committed to ensuring a safe and healthy work environment, offering comprehensive compensation and
benefit programs, creating great career opportunities and building an engaging, inclusive environment where all employees are
treated with dignity and respect.
Health and Safety
To maintain and enhance the safety of our employees, we promote a culture of continuous improvement and individual
accountability to provide safe workplaces. We use an annual goal setting process to drive injury rate improvements, and the injury
rate reduction goal is a performance metric that is reported to Textron’s Audit Committee and is tracked and reported to senior
leadership.
The safety of our employees has been a priority throughout our response to the COVID-19 pandemic. Our enterprise-wide
pandemic response teams, formed early in the pandemic, guided our operations in the processes and procedures to comply with
applicable government-imposed health and safety-related operating restrictions, to enhance the safety of our facilities to protect
the health of our employees and to monitor trends in infection rates at locations where we have facilities. These teams continue to
operate, updating enterprise guidance as the pandemic has continued and the medical science and government guidance and
orders have evolved. Our businesses continue to enforce COVID-19 health and safety protocols and have implemented protocols
to address actual and suspected cases of COVID-19 and resulting contact tracing and quarantine requirements. Throughout the
pandemic, we have been communicating regularly with our employees and monitoring their views on issues related to COVID-19
and the workplace as well as general levels of engagement through regular pulse surveys. In addition, management has regularly
updated our Board of Directors on our COVID-19 status and response, including with respect to employee safety.
Talent and Career Development
Our talent development programs are designed to prepare our employees at all levels to take on new career and growth
opportunities at Textron. Leadership, professional and functional training courses are tailored for employees at each stage of their
careers and include a mix of enterprise-wide and business unit-specific programs. Textron University, an internal corporate
function, provides (i) facilitated face-to-face professional and leadership development, (ii) web-based general and specialized
functional and technical courses and (iii) an online portal to access advanced skills technical training, manage recertification of
existing qualifications and other career planning tools and resources.
The current and future talent needs of each of our businesses are assessed annually through a formal talent review process which
enables us to develop leadership succession plans and provide our employees with potential new career opportunities. In addition,
leaders from functional areas within each business belong to enterprise-wide councils which conduct annual talent reviews. These
processes enable us to fill talent needs by matching employees who are ready to assume significant leadership roles with
opportunities that best fit their career path, which may be in other businesses within the enterprise.
Diversity and Inclusion
Textron is committed to having a diverse workforce and inclusive workplaces throughout our global operations. We believe by
employing highly talented, diverse employees, who feel valued, respected and are able to contribute fully, we will improve
performance, innovation and collaboration and drive talent retention, all of which contribute to stronger business results and
reinforce our reputation as leaders in our industries and communities.
For over a decade, Textron has allocated five percent of annual incentive compensation for management-level employees toward
achievement of diversity goals. Beginning in 2020, we focused these goals specifically on hiring diversity. To improve our
outreach to diverse candidates, we have increased our recruiting efforts at historically black colleges and universities, enhanced
our partnerships with diverse professional organizations and participated in diverse STEM conferences. In addition, we provide
inclusion and unconscious bias training to our employees and recruiters to improve diversity in recruiting.
For discussion of certain risks relating to human capital management, see Risks Related to Human Capital section in Item 1A.
Risk Factors.
Textron 2020 Annual Report 7
7
Patents and Trademarks
We own, or are licensed under, numerous patents throughout the world relating to products, services and methods of
manufacturing. Patents developed while under contract with the U.S. Government may be subject to use by the U.S. Government.
We also own or license active trademark registrations and pending trademark applications in the U.S. and in various foreign
countries or regions, as well as trade names and service marks. While our intellectual property rights in the aggregate are
important to the operation of our business, we do not believe that any existing patent, license, trademark or other intellectual
property right is of such importance that its loss or termination would have a material adverse effect on our business taken as a
whole.
Information about our Executive Officers
The following table sets forth certain information concerning our executive officers as of February 19, 2021.
Name
Scott C. Donnelly
Frank T. Connor
Julie G. Duffy
E. Robert Lupone
Age Current Position with Textron Inc.
59 Chairman, President and Chief Executive Officer
61
55
61
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. In July 2010, Mr. Donnelly was appointed Chairman of the Board of
Directors effective September 1, 2010. Previously, Mr. Donnelly was the President and CEO of General Electric Company’s
Aviation business unit, a position he had held since July 2005. GE’s Aviation business unit is a leading maker of commercial and
military jet engines and components, as well as integrated digital, electric power and mechanical systems for aircraft. Prior to
July 2005, Mr. Donnelly served as Senior Vice President of GE Global Research, one of the world’s largest and most diversified
industrial research organizations with facilities in the U.S., India, China and Germany and held various other management
positions since joining General Electric in 1989.
Mr. Connor joined Textron in August 2009 as Executive Vice President and Chief Financial Officer. Previously, Mr. Connor was
head of Telecom Investment Banking at Goldman, Sachs & Co. from 2003 to 2008. Prior to that position, he served as Chief
Operating Officer of Telecom, Technology and Media Investment Banking at Goldman, Sachs & Co. from 1998 to 2003.
Mr. Connor joined the Corporate Finance Department of Goldman, Sachs & Co. in 1986 and became a Vice President in 1990 and
a Managing Director in 1996.
Ms. Duffy was named Executive Vice President, Human Resources in July 2017. Ms. Duffy joined Textron in 1997 as a member
of the corporate legal team and has since held positions of increasing responsibility within the Company’s legal function,
previously serving as Vice President and Deputy General Counsel-Litigation, a position she had held since 2011. In that role she
was responsible for managing the corporate litigation staff with primary oversight of litigation throughout Textron. She has also
played an active role in developing, implementing and standardizing human resources policies across the Company and served as
the senior legal advisor on employment and benefits issues.
Mr. Lupone joined Textron in February 2012 as Executive Vice President, General Counsel, Secretary and Chief Compliance
Officer. Previously, he was senior vice president and general counsel of Siemens Corporation (U.S.) since 1999 and general
counsel of Siemens AG for the Americas since 2008. Prior to joining Siemens in 1992, Mr. Lupone was vice president and
general counsel of Price Communications Corporation.
Available Information
We make available free of charge on our Internet Web site (www.textron.com) our Annual Report on Form 10-K, Quarterly
Reports on Form 10-Q, Current Reports on Form 8-K and amendments to those reports filed or furnished pursuant to
Section 13(a) or 15(d) of the Securities Exchange Act of 1934 as soon as reasonably practicable after we electronically file such
material with, or furnish it to, the Securities and Exchange Commission.
8 Textron 2020 Annual Report
8
Forward-Looking Information
Forward-Looking Information
Forward-Looking Information
Forward-Looking Information
Forward-Looking Information
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
Certain statements in this Annual Report on Form 10-K and other oral and written statements made by us from time to time are
Certain statements in this Annual Report on Form 10-K and other oral and written statements made by us from time to time are
Certain statements in this Annual Report on Form 10-K and other oral and written statements made by us from time to time are
Certain statements in this Annual Report on Form 10-K and other oral and written statements made by us from time to time are
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
“forward-looking statements” within the meaning of the Private Securities Litigation Reform Act of 1995. These forward-looking
“forward-looking statements” within the meaning of the Private Securities Litigation Reform Act of 1995. These forward-looking
“forward-looking statements” within the meaning of the Private Securities Litigation Reform Act of 1995. These forward-looking
“forward-looking statements” within the meaning of the Private Securities Litigation Reform Act of 1995. These forward-looking
“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
statements, which may describe strategies, goals, outlook or other non-historical matters, or project revenues, income, returns or
statements, which may describe strategies, goals, outlook or other non-historical matters, or project revenues, income, returns or
statements, which may describe strategies, goals, outlook or other non-historical matters, or project revenues, income, returns or
statements, which may describe strategies, goals, outlook or other non-historical matters, or project revenues, income, returns or
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,”
other financial measures, often include words such as “believe,” “expect,” “anticipate,” “intend,” “plan,” “estimate,” “guidance,”
other financial measures, often include words such as “believe,” “expect,” “anticipate,” “intend,” “plan,” “estimate,” “guidance,”
other financial measures, often include words such as “believe,” “expect,” “anticipate,” “intend,” “plan,” “estimate,” “guidance,”
other financial measures, often include words such as “believe,” “expect,” “anticipate,” “intend,” “plan,” “estimate,” “guidance,”
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-
“project,” “target,” “potential,” “will,” “should,” “could,” “likely” or “may” and similar expressions intended to identify forward-
“project,” “target,” “potential,” “will,” “should,” “could,” “likely” or “may” and similar expressions intended to identify forward-
“project,” “target,” “potential,” “will,” “should,” “could,” “likely” or “may” and similar expressions intended to identify forward-
“project,” “target,” “potential,” “will,” “should,” “could,” “likely” or “may” and similar expressions intended to identify forward-
“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
looking statements. These statements are only predictions and involve known and unknown risks, uncertainties, and other factors
looking statements. These statements are only predictions and involve known and unknown risks, uncertainties, and other factors
looking statements. These statements are only predictions and involve known and unknown risks, uncertainties, and other factors
looking statements. These statements are only predictions and involve known and unknown risks, uncertainties, and other factors
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
that may cause our actual results to differ materially from those expressed or implied by such forward-looking statements. Given
that may cause our actual results to differ materially from those expressed or implied by such forward-looking statements. Given
that may cause our actual results to differ materially from those expressed or implied by such forward-looking statements. Given
that may cause our actual results to differ materially from those expressed or implied by such forward-looking statements. Given
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
these uncertainties, you should not place undue reliance on these forward-looking statements. Forward-looking statements speak
these uncertainties, you should not place undue reliance on these forward-looking statements. Forward-looking statements speak
these uncertainties, you should not place undue reliance on these forward-looking statements. Forward-looking statements speak
these uncertainties, you should not place undue reliance on these forward-looking statements. Forward-looking statements speak
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
only as of the date on which they are made, and we undertake no obligation to update or revise any forward-looking statements. In
only as of the date on which they are made, and we undertake no obligation to update or revise any forward-looking statements. In
only as of the date on which they are made, and we undertake no obligation to update or revise any forward-looking statements. In
only as of the date on which they are made, and we undertake no obligation to update or revise any forward-looking statements. In
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
addition to those factors described herein under “Risk Factors,” among the factors that could cause actual results to differ
addition to those factors described herein under “Risk Factors,” among the factors that could cause actual results to differ
addition to those factors described herein under “Risk Factors,” among the factors that could cause actual results to differ
addition to those factors described herein under “Risk Factors,” among the factors that could cause actual results to differ
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:
materially from past and projected future results are the following:
materially from past and projected future results are the following:
materially from past and projected future results are the following:
materially from past and projected future results are the following:
materially from past and projected future results are the following:
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Interruptions in the U.S. Government’s ability to fund its activities and/or pay its obligations;
Interruptions in the U.S. Government’s ability to fund its activities and/or pay its obligations;
Interruptions in the U.S. Government’s ability to fund its activities and/or pay its obligations;
Interruptions in the U.S. Government’s ability to fund its activities and/or pay its obligations;
Interruptions in the U.S. Government’s ability to fund its activities and/or pay its obligations;
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
Changing priorities or reductions in the U.S. Government defense budget, including those related to military operations
Changing priorities or reductions in the U.S. Government defense budget, including those related to military operations
Changing priorities or reductions in the U.S. Government defense budget, including those related to military operations
Changing priorities or reductions in the U.S. Government defense budget, including those related to military operations
Changing priorities or reductions in the U.S. Government defense budget, including those related to military operations
in foreign countries;
in foreign countries;
in foreign countries;
in foreign countries;
in foreign countries;
in foreign countries;
Our ability to perform as anticipated and to control costs under contracts with the U.S. Government;
Our ability to perform as anticipated and to control costs under contracts with the U.S. Government;
Our ability to perform as anticipated and to control costs under contracts with the U.S. Government;
Our ability to perform as anticipated and to control costs under contracts with the U.S. Government;
Our ability to perform as anticipated and to control costs under contracts with the U.S. Government;
Our ability to perform as anticipated and to control costs under contracts with the U.S. Government;
The U.S. Government’s ability to unilaterally modify or terminate its contracts with us for the U.S. Government’s
The U.S. Government’s ability to unilaterally modify or terminate its contracts with us for the U.S. Government’s
The U.S. Government’s ability to unilaterally modify or terminate its contracts with us for the U.S. Government’s
The U.S. Government’s ability to unilaterally modify or terminate its contracts with us for the U.S. Government’s
The U.S. Government’s ability to unilaterally modify or terminate its contracts with us for the U.S. Government’s
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
convenience or for our failure to perform, to change applicable procurement and accounting policies, or, under certain
convenience or for our failure to perform, to change applicable procurement and accounting policies, or, under certain
convenience or for our failure to perform, to change applicable procurement and accounting policies, or, under certain
convenience or for our failure to perform, to change applicable procurement and accounting policies, or, under certain
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;
circumstances, to withhold payment or suspend or debar us as a contractor eligible to receive future contract awards;
circumstances, to withhold payment or suspend or debar us as a contractor eligible to receive future contract awards;
circumstances, to withhold payment or suspend or debar us as a contractor eligible to receive future contract awards;
circumstances, to withhold payment or suspend or debar us as a contractor eligible to receive future contract awards;
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
Changes in foreign military funding priorities or budget constraints and determinations, or changes in government
Changes in foreign military funding priorities or budget constraints and determinations, or changes in government
Changes in foreign military funding priorities or budget constraints and determinations, or changes in government
Changes in foreign military funding priorities or budget constraints and determinations, or changes in government
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;
regulations or policies on the export and import of military and commercial products;
regulations or policies on the export and import of military and commercial products;
regulations or policies on the export and import of military and commercial products;
regulations or policies on the export and import of military and commercial products;
regulations or policies on the export and import of military and commercial products;
Volatility in the global economy or changes in worldwide political conditions that adversely impact demand for our
Volatility in the global economy or changes in worldwide political conditions that adversely impact demand for our
Volatility in the global economy or changes in worldwide political conditions that adversely impact demand for our
Volatility in the global economy or changes in worldwide political conditions that adversely impact demand for our
Volatility in the global economy or changes in worldwide political conditions that adversely impact demand for our
Volatility in the global economy or changes in worldwide political conditions that adversely impact demand for our
products;
products;
products;
products;
products;
products;
Volatility in interest rates or foreign exchange rates;
Volatility in interest rates or foreign exchange rates;
Volatility in interest rates or foreign exchange rates;
Volatility in interest rates or foreign exchange rates;
Volatility in interest rates or foreign exchange rates;
Volatility in interest rates or foreign exchange rates;
Risks related to our international business, including establishing and maintaining facilities in locations around the world
Risks related to our international business, including establishing and maintaining facilities in locations around the world
Risks related to our international business, including establishing and maintaining facilities in locations around the world
Risks related to our international business, including establishing and maintaining facilities in locations around the world
Risks related to our international business, including establishing and maintaining facilities in locations around the world
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
and relying on joint venture partners, subcontractors, suppliers, representatives, consultants and other business partners
and relying on joint venture partners, subcontractors, suppliers, representatives, consultants and other business partners
and relying on joint venture partners, subcontractors, suppliers, representatives, consultants and other business partners
and relying on joint venture partners, subcontractors, suppliers, representatives, consultants and other business partners
and relying on joint venture partners, subcontractors, suppliers, representatives, consultants and other business partners
in connection with international business, including in emerging market countries;
in connection with international business, including in emerging market countries;
in connection with international business, including in emerging market countries;
in connection with international business, including in emerging market countries;
in connection with international business, including in emerging market countries;
in connection with international business, including in emerging market countries;
Our Finance segment’s ability to maintain portfolio credit quality or to realize full value of receivables;
Our Finance segment’s ability to maintain portfolio credit quality or to realize full value of receivables;
Our Finance segment’s ability to maintain portfolio credit quality or to realize full value of receivables;
Our Finance segment’s ability to maintain portfolio credit quality or to realize full value of receivables;
Our Finance segment’s ability to maintain portfolio credit quality or to realize full value of receivables;
Our Finance segment’s ability to maintain portfolio credit quality or to realize full value of receivables;
Performance issues with key suppliers or subcontractors;
Performance issues with key suppliers or subcontractors;
Performance issues with key suppliers or subcontractors;
Performance issues with key suppliers or subcontractors;
Performance issues with key suppliers or subcontractors;
Performance issues with key suppliers or subcontractors;
Legislative or regulatory actions, both domestic and foreign, impacting our operations or demand for our products;
Legislative or regulatory actions, both domestic and foreign, impacting our operations or demand for our products;
Legislative or regulatory actions, both domestic and foreign, impacting our operations or demand for our products;
Legislative or regulatory actions, both domestic and foreign, impacting our operations or demand for our products;
Legislative or regulatory actions, both domestic and foreign, impacting our operations or demand for our products;
Legislative or regulatory actions, both domestic and foreign, impacting our operations or demand for our products;
Our ability to control costs and successfully implement various cost-reduction activities;
Our ability to control costs and successfully implement various cost-reduction activities;
Our ability to control costs and successfully implement various cost-reduction activities;
Our ability to control costs and successfully implement various cost-reduction activities;
Our ability to control costs and successfully implement various cost-reduction activities;
Our ability to control costs and successfully implement various cost-reduction activities;
The efficacy of research and development investments to develop new products or unanticipated expenses in connection
The efficacy of research and development investments to develop new products or unanticipated expenses in connection
The efficacy of research and development investments to develop new products or unanticipated expenses in connection
The efficacy of research and development investments to develop new products or unanticipated expenses in connection
The efficacy of research and development investments to develop new products or unanticipated expenses in connection
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;
with the launching of significant new products or programs;
with the launching of significant new products or programs;
with the launching of significant new products or programs;
with the launching of significant new products or programs;
with the launching of significant new products or programs;
The timing of our new product launches or certifications of our new aircraft products;
The timing of our new product launches or certifications of our new aircraft products;
The timing of our new product launches or certifications of our new aircraft products;
The timing of our new product launches or certifications of our new aircraft products;
The timing of our new product launches or certifications of our new aircraft products;
The timing of our new product launches or certifications of our new aircraft products;
Our ability to keep pace with our competitors in the introduction of new products and upgrades with features and
Our ability to keep pace with our competitors in the introduction of new products and upgrades with features and
Our ability to keep pace with our competitors in the introduction of new products and upgrades with features and
Our ability to keep pace with our competitors in the introduction of new products and upgrades with features and
Our ability to keep pace with our competitors in the introduction of new products and upgrades with features and
Our ability to keep pace with our competitors in the introduction of new products and upgrades with features and
technologies desired by our customers;
technologies desired by our customers;
technologies desired by our customers;
technologies desired by our customers;
technologies desired by our customers;
technologies desired by our customers;
Pension plan assumptions and future contributions;
Pension plan assumptions and future contributions;
Pension plan assumptions and future contributions;
Pension plan assumptions and future contributions;
Pension plan assumptions and future contributions;
Pension plan assumptions and future contributions;
Demand softness or volatility in the markets in which we do business;
Demand softness or volatility in the markets in which we do business;
Demand softness or volatility in the markets in which we do business;
Demand softness or volatility in the markets in which we do business;
Demand softness or volatility in the markets in which we do business;
Demand softness or volatility in the markets in which we do business;
Cybersecurity threats, including the potential misappropriation of assets or sensitive information, corruption of data or
Cybersecurity threats, including the potential misappropriation of assets or sensitive information, corruption of data or
Cybersecurity threats, including the potential misappropriation of assets or sensitive information, corruption of data or
Cybersecurity threats, including the potential misappropriation of assets or sensitive information, corruption of data or
Cybersecurity threats, including the potential misappropriation of assets or sensitive information, corruption of data or
Cybersecurity threats, including the potential misappropriation of assets or sensitive information, corruption of data or
operational disruption;
operational disruption;
operational disruption;
operational disruption;
operational disruption;
operational disruption;
Difficulty or unanticipated expenses in connection with integrating acquired businesses;
Difficulty or unanticipated expenses in connection with integrating acquired businesses;
Difficulty or unanticipated expenses in connection with integrating acquired businesses;
Difficulty or unanticipated expenses in connection with integrating acquired businesses;
Difficulty or unanticipated expenses in connection with integrating acquired businesses;
Difficulty or unanticipated expenses in connection with integrating acquired businesses;
The risk that acquisitions do not perform as planned, including, for example, the risk that acquired businesses will not
The risk that acquisitions do not perform as planned, including, for example, the risk that acquired businesses will not
The risk that acquisitions do not perform as planned, including, for example, the risk that acquired businesses will not
The risk that acquisitions do not perform as planned, including, for example, the risk that acquired businesses will not
The risk that acquisitions do not perform as planned, including, for example, the risk that acquired businesses will not
The risk that acquisitions do not perform as planned, including, for example, the risk that acquired businesses will not
achieve revenues and profit projections;
achieve revenues and profit projections;
achieve revenues and profit projections;
achieve revenues and profit projections;
achieve revenues and profit projections;
achieve revenues and profit projections;
The impact of changes in tax legislation; and
The impact of changes in tax legislation; and
The impact of changes in tax legislation; and
The impact of changes in tax legislation; and
The impact of changes in tax legislation; and
The impact of changes in tax legislation; and
Risks and uncertainties related to the impact of the COVID-19 pandemic on our business and operations.
Risks and uncertainties related to the impact of the COVID-19 pandemic on our business and operations.
Risks and uncertainties related to the impact of the COVID-19 pandemic on our business and operations.
Risks and uncertainties related to the impact of the COVID-19 pandemic on our business and operations.
Risks and uncertainties related to the impact of the COVID-19 pandemic on our business and operations.
Risks and uncertainties related to the impact of the COVID-19 pandemic on our business and operations.
Item 1A. Risk Factors
Item 1A. Risk Factors
Item 1A. Risk Factors
Item 1A. Risk Factors
Item 1A. Risk Factors
Item 1A. Risk Factors
Our business, financial condition and results of operations are subject to various risks, including those discussed below, which
Our business, financial condition and results of operations are subject to various risks, including those discussed below, which
Our business, financial condition and results of operations are subject to various risks, including those discussed below, which
Our business, financial condition and results of operations are subject to various risks, including those discussed below, which
Our business, financial condition and results of operations are subject to various risks, including those discussed below, which
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
may affect the value of our securities. The risks discussed below are those that we believe currently are the most significant to our
may affect the value of our securities. The risks discussed below are those that we believe currently are the most significant to our
may affect the value of our securities. The risks discussed below are those that we believe currently are the most significant to our
may affect the value of our securities. The risks discussed below are those that we believe currently are the most significant to our
may affect the value of our securities. The risks discussed below are those that we believe currently are the most significant to our
business.
business.
business.
business.
business.
business.
Risks Related to the COVID-19 Pandemic
Risks Related to the COVID-19 Pandemic
Risks Related to the COVID-19 Pandemic
Risks Related to the COVID-19 Pandemic
Risks Related to the COVID-19 Pandemic
Risks Related to the COVID-19 Pandemic
Our business is being adversely impacted, and is expected to continue to be adversely impacted, by the coronavirus
Our business is being adversely impacted, and is expected to continue to be adversely impacted, by the coronavirus
Our business is being adversely impacted, and is expected to continue to be adversely impacted, by the coronavirus
Our business is being adversely impacted, and is expected to continue to be adversely impacted, by the coronavirus
Our business is being adversely impacted, and is expected to continue to be adversely impacted, by the coronavirus
Our business is being adversely impacted, and is expected to continue to be adversely impacted, by the coronavirus
(COVID-19) pandemic.
(COVID-19) pandemic.
(COVID-19) pandemic.
(COVID-19) pandemic.
(COVID-19) pandemic.
(COVID-19) pandemic.
Our businesses have experienced and continue to experience various degrees of disruption and reduced demand for certain of our
Our businesses have experienced and continue to experience various degrees of disruption and reduced demand for certain of our
Our businesses have experienced and continue to experience various degrees of disruption and reduced demand for certain of our
Our businesses have experienced and continue to experience various degrees of disruption and reduced demand for certain of our
Our businesses have experienced and continue to experience various degrees of disruption and reduced demand for certain of our
Our businesses have experienced and continue to experience various degrees of disruption and reduced demand for certain of our
products due to the unprecedented conditions surrounding the COVID-19 pandemic. The effects of COVID-19 have included and
products due to the unprecedented conditions surrounding the COVID-19 pandemic. The effects of COVID-19 have included and
products due to the unprecedented conditions surrounding the COVID-19 pandemic. The effects of COVID-19 have included and
products due to the unprecedented conditions surrounding the COVID-19 pandemic. The effects of COVID-19 have included and
products due to the unprecedented conditions surrounding the COVID-19 pandemic. The effects of COVID-19 have included and
products due to the unprecedented conditions surrounding the COVID-19 pandemic. The effects of COVID-19 have included and
could continue to include disruption of the operation or temporary closure of certain of our facilities or the facilities of our
could continue to include disruption of the operation or temporary closure of certain of our facilities or the facilities of our
could continue to include disruption of the operation or temporary closure of certain of our facilities or the facilities of our
could continue to include disruption of the operation or temporary closure of certain of our facilities or the facilities of our
could continue to include disruption of the operation or temporary closure of certain of our facilities or the facilities of our
could continue to include disruption of the operation or temporary closure of certain of our facilities or the facilities of our
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customers, suppliers or business partners as well as other disruptions in our supply chains. Challenges resulting from the
customers, suppliers or business partners as well as other disruptions in our supply chains. Challenges resulting from the
customers, suppliers or business partners as well as other disruptions in our supply chains. Challenges resulting from the
customers, suppliers or business partners as well as other disruptions in our supply chains. Challenges resulting from the
customers, suppliers or business partners as well as other disruptions in our supply chains. Challenges resulting from the
customers, suppliers or business partners as well as other disruptions in our supply chains. Challenges resulting from the
customers, suppliers or business partners as well as other disruptions in our supply chains. Challenges resulting from the
customers, suppliers or business partners as well as other disruptions in our supply chains. Challenges resulting from the
pandemic have impacted, and may continue to impact, the ability of many of our employees to work effectively, due to illness,
pandemic have impacted, and may continue to impact, the ability of many of our employees to work effectively, due to illness,
pandemic have impacted, and may continue to impact, the ability of many of our employees to work effectively, due to illness,
pandemic have impacted, and may continue to impact, the ability of many of our employees to work effectively, due to illness,
pandemic have impacted, and may continue to impact, the ability of many of our employees to work effectively, due to illness,
pandemic have impacted, and may continue to impact, the ability of many of our employees to work effectively, due to illness,
pandemic have impacted, and may continue to impact, the ability of many of our employees to work effectively, due to illness,
pandemic have impacted, and may continue to impact, the ability of many of our employees to work effectively, due to illness,
quarantines, facility closures, changes in manufacturing processes to accommodate social distancing guidelines, remote working
quarantines, facility closures, changes in manufacturing processes to accommodate social distancing guidelines, remote working
quarantines, facility closures, changes in manufacturing processes to accommodate social distancing guidelines, remote working
quarantines, facility closures, changes in manufacturing processes to accommodate social distancing guidelines, remote working
quarantines, facility closures, changes in manufacturing processes to accommodate social distancing guidelines, remote working
quarantines, facility closures, changes in manufacturing processes to accommodate social distancing guidelines, remote working
quarantines, facility closures, changes in manufacturing processes to accommodate social distancing guidelines, remote working
arrangements, or other government-imposed operating restrictions. We have experienced and may continue to experience
arrangements, or other government-imposed operating restrictions. We have experienced and may continue to experience
quarantines, facility closures, changes in manufacturing processes to accommodate social distancing guidelines, remote working
arrangements, or other government-imposed operating restrictions. We have experienced and may continue to experience
arrangements, or other government-imposed operating restrictions. We have experienced and may continue to experience
arrangements, or other government-imposed operating restrictions. We have experienced and may continue to experience
arrangements, or other government-imposed operating restrictions. We have experienced and may continue to experience
arrangements, or other government-imposed operating restrictions. We have experienced and may continue to experience
arrangements, or other government-imposed operating restrictions. We have experienced and may continue to experience
increased costs as a result of these business and production disruptions. Likewise, we have incurred and may continue to incur
increased costs as a result of these business and production disruptions. Likewise, we have incurred and may continue to incur
increased costs as a result of these business and production disruptions. Likewise, we have incurred and may continue to incur
increased costs as a result of these business and production disruptions. Likewise, we have incurred and may continue to incur
increased costs as a result of these business and production disruptions. Likewise, we have incurred and may continue to incur
increased costs as a result of these business and production disruptions. Likewise, we have incurred and may continue to incur
increased costs as a result of these business and production disruptions. Likewise, we have incurred and may continue to incur
increased costs as a result of these business and production disruptions. Likewise, we have incurred and may continue to incur
additional expenses related to implementing processes and procedures to comply with required operating restrictions and to
additional expenses related to implementing processes and procedures to comply with required operating restrictions and to
additional expenses related to implementing processes and procedures to comply with required operating restrictions and to
additional expenses related to implementing processes and procedures to comply with required operating restrictions and to
additional expenses related to implementing processes and procedures to comply with required operating restrictions and to
additional expenses related to implementing processes and procedures to comply with required operating restrictions and to
additional expenses related to implementing processes and procedures to comply with required operating restrictions and to
additional expenses related to implementing processes and procedures to comply with required operating restrictions and to
enhance the safety of our facilities to protect the health of our employees.
enhance the safety of our facilities to protect the health of our employees.
enhance the safety of our facilities to protect the health of our employees.
enhance the safety of our facilities to protect the health of our employees.
enhance the safety of our facilities to protect the health of our employees.
enhance the safety of our facilities to protect the health of our employees.
enhance the safety of our facilities to protect the health of our employees.
enhance the safety of our facilities to protect the health of our employees.
Our commercial businesses have been and may continue to be adversely impacted due to a general slowdown in demand for our
Our commercial businesses have been and may continue to be adversely impacted due to a general slowdown in demand for our
Our commercial businesses have been and may continue to be adversely impacted due to a general slowdown in demand for our
Our commercial businesses have been and may continue to be adversely impacted due to a general slowdown in demand for our
Our commercial businesses have been and may continue to be adversely impacted due to a general slowdown in demand for our
Our commercial businesses have been and may continue to be adversely impacted due to a general slowdown in demand for our
Our commercial businesses have been and may continue to be adversely impacted due to a general slowdown in demand for our
Our commercial businesses have been and may continue to be adversely impacted due to a general slowdown in demand for our
general aviation products and services, recreational and other specialized vehicles and automotive products. We have experienced
general aviation products and services, recreational and other specialized vehicles and automotive products. We have experienced
general aviation products and services, recreational and other specialized vehicles and automotive products. We have experienced
general aviation products and services, recreational and other specialized vehicles and automotive products. We have experienced
general aviation products and services, recreational and other specialized vehicles and automotive products. We have experienced
general aviation products and services, recreational and other specialized vehicles and automotive products. We have experienced
general aviation products and services, recreational and other specialized vehicles and automotive products. We have experienced
general aviation products and services, recreational and other specialized vehicles and automotive products. We have experienced
a decline in orders for our aviation products and services, as well as lower deliveries of commercial helicopters and fixed-wing
a decline in orders for our aviation products and services, as well as lower deliveries of commercial helicopters and fixed-wing
a decline in orders for our aviation products and services, as well as lower deliveries of commercial helicopters and fixed-wing
a decline in orders for our aviation products and services, as well as lower deliveries of commercial helicopters and fixed-wing
a decline in orders for our aviation products and services, as well as lower deliveries of commercial helicopters and fixed-wing
a decline in orders for our aviation products and services, as well as lower deliveries of commercial helicopters and fixed-wing
a decline in orders for our aviation products and services, as well as lower deliveries of commercial helicopters and fixed-wing
aircraft because of reduced demand and travel restrictions imposed in response to the pandemic. Economic and other impacts
aircraft because of reduced demand and travel restrictions imposed in response to the pandemic. Economic and other impacts
a decline in orders for our aviation products and services, as well as lower deliveries of commercial helicopters and fixed-wing
aircraft because of reduced demand and travel restrictions imposed in response to the pandemic. Economic and other impacts
aircraft because of reduced demand and travel restrictions imposed in response to the pandemic. Economic and other impacts
aircraft because of reduced demand and travel restrictions imposed in response to the pandemic. Economic and other impacts
aircraft because of reduced demand and travel restrictions imposed in response to the pandemic. Economic and other impacts
aircraft because of reduced demand and travel restrictions imposed in response to the pandemic. Economic and other impacts
aircraft because of reduced demand and travel restrictions imposed in response to the pandemic. Economic and other impacts
from the pandemic may also result in future weak demand for our aviation and commercial helicopter products and services, the
from the pandemic may also result in future weak demand for our aviation and commercial helicopter products and services, the
from the pandemic may also result in future weak demand for our aviation and commercial helicopter products and services, the
from the pandemic may also result in future weak demand for our aviation and commercial helicopter products and services, the
from the pandemic may also result in future weak demand for our aviation and commercial helicopter products and services, the
from the pandemic may also result in future weak demand for our aviation and commercial helicopter products and services, the
from the pandemic may also result in future weak demand for our aviation and commercial helicopter products and services, the
from the pandemic may also result in future weak demand for our aviation and commercial helicopter products and services, the
delay or cancellation of existing orders by our customers and lower flight hours, and consequently, lower demand for parts and
delay or cancellation of existing orders by our customers and lower flight hours, and consequently, lower demand for parts and
delay or cancellation of existing orders by our customers and lower flight hours, and consequently, lower demand for parts and
delay or cancellation of existing orders by our customers and lower flight hours, and consequently, lower demand for parts and
delay or cancellation of existing orders by our customers and lower flight hours, and consequently, lower demand for parts and
delay or cancellation of existing orders by our customers and lower flight hours, and consequently, lower demand for parts and
delay or cancellation of existing orders by our customers and lower flight hours, and consequently, lower demand for parts and
delay or cancellation of existing orders by our customers and lower flight hours, and consequently, lower demand for parts and
maintenance. In addition, new regulations by U.S. or foreign governments and government agencies addressed to the aviation or
maintenance. In addition, new regulations by U.S. or foreign governments and government agencies addressed to the aviation or
maintenance. In addition, new regulations by U.S. or foreign governments and government agencies addressed to the aviation or
maintenance. In addition, new regulations by U.S. or foreign governments and government agencies addressed to the aviation or
maintenance. In addition, new regulations by U.S. or foreign governments and government agencies addressed to the aviation or
maintenance. In addition, new regulations by U.S. or foreign governments and government agencies addressed to the aviation or
maintenance. In addition, new regulations by U.S. or foreign governments and government agencies addressed to the aviation or
travel industry could impose additional regulatory, aircraft security, travel restrictions or other requirements or restrictions related
travel industry could impose additional regulatory, aircraft security, travel restrictions or other requirements or restrictions related
maintenance. In addition, new regulations by U.S. or foreign governments and government agencies addressed to the aviation or
travel industry could impose additional regulatory, aircraft security, travel restrictions or other requirements or restrictions related
travel industry could impose additional regulatory, aircraft security, travel restrictions or other requirements or restrictions related
travel industry could impose additional regulatory, aircraft security, travel restrictions or other requirements or restrictions related
travel industry could impose additional regulatory, aircraft security, travel restrictions or other requirements or restrictions related
travel industry could impose additional regulatory, aircraft security, travel restrictions or other requirements or restrictions related
travel industry could impose additional regulatory, aircraft security, travel restrictions or other requirements or restrictions related
to the pandemic that could adversely impact demand for aircraft and rotorcraft or significantly reduce hours flown. As a result,
to the pandemic that could adversely impact demand for aircraft and rotorcraft or significantly reduce hours flown. As a result,
to the pandemic that could adversely impact demand for aircraft and rotorcraft or significantly reduce hours flown. As a result,
to the pandemic that could adversely impact demand for aircraft and rotorcraft or significantly reduce hours flown. As a result,
to the pandemic that could adversely impact demand for aircraft and rotorcraft or significantly reduce hours flown. As a result,
to the pandemic that could adversely impact demand for aircraft and rotorcraft or significantly reduce hours flown. As a result,
to the pandemic that could adversely impact demand for aircraft and rotorcraft or significantly reduce hours flown. As a result,
to the pandemic that could adversely impact demand for aircraft and rotorcraft or significantly reduce hours flown. As a result,
our costs may further increase as a result of the COVID-19 outbreak. These cost increases may not be fully recoverable,
our costs may further increase as a result of the COVID-19 outbreak. These cost increases may not be fully recoverable,
our costs may further increase as a result of the COVID-19 outbreak. These cost increases may not be fully recoverable,
our costs may further increase as a result of the COVID-19 outbreak. These cost increases may not be fully recoverable,
our costs may further increase as a result of the COVID-19 outbreak. These cost increases may not be fully recoverable,
our costs may further increase as a result of the COVID-19 outbreak. These cost increases may not be fully recoverable,
our costs may further increase as a result of the COVID-19 outbreak. These cost increases may not be fully recoverable,
our costs may further increase as a result of the COVID-19 outbreak. These cost increases may not be fully recoverable,
negatively impacting our profitability, and may continue even after the business environment has improved.
negatively impacting our profitability, and may continue even after the business environment has improved.
negatively impacting our profitability, and may continue even after the business environment has improved.
negatively impacting our profitability, and may continue even after the business environment has improved.
negatively impacting our profitability, and may continue even after the business environment has improved.
negatively impacting our profitability, and may continue even after the business environment has improved.
negatively impacting our profitability, and may continue even after the business environment has improved.
negatively impacting our profitability, and may continue even after the business environment has improved.
It is possible that the continued spread of COVID-19 and actions taken by various governmental authorities and other third parties
It is possible that the continued spread of COVID-19 and actions taken by various governmental authorities and other third parties
It is possible that the continued spread of COVID-19 and actions taken by various governmental authorities and other third parties
It is possible that the continued spread of COVID-19 and actions taken by various governmental authorities and other third parties
It is possible that the continued spread of COVID-19 and actions taken by various governmental authorities and other third parties
It is possible that the continued spread of COVID-19 and actions taken by various governmental authorities and other third parties
It is possible that the continued spread of COVID-19 and actions taken by various governmental authorities and other third parties
It is possible that the continued spread of COVID-19 and actions taken by various governmental authorities and other third parties
in response to the outbreak could also further cause disruption in our supply chain or in the operations of our business partners,
in response to the outbreak could also further cause disruption in our supply chain or in the operations of our business partners,
in response to the outbreak could also further cause disruption in our supply chain or in the operations of our business partners,
in response to the outbreak could also further cause disruption in our supply chain or in the operations of our business partners,
in response to the outbreak could also further cause disruption in our supply chain or in the operations of our business partners,
in response to the outbreak could also further cause disruption in our supply chain or in the operations of our business partners,
in response to the outbreak could also further cause disruption in our supply chain or in the operations of our business partners,
in response to the outbreak could also further cause disruption in our supply chain or in the operations of our business partners,
impacting their ability to perform their obligations, which could impact our ability to perform our contractual obligations; cause
impacting their ability to perform their obligations, which could impact our ability to perform our contractual obligations; cause
impacting their ability to perform their obligations, which could impact our ability to perform our contractual obligations; cause
impacting their ability to perform their obligations, which could impact our ability to perform our contractual obligations; cause
impacting their ability to perform their obligations, which could impact our ability to perform our contractual obligations; cause
impacting their ability to perform their obligations, which could impact our ability to perform our contractual obligations; cause
impacting their ability to perform their obligations, which could impact our ability to perform our contractual obligations; cause
impacting their ability to perform their obligations, which could impact our ability to perform our contractual obligations; cause
delay by, or limit the ability of, the U.S. Government and other customers to perform, including in making timely payments to us;
delay by, or limit the ability of, the U.S. Government and other customers to perform, including in making timely payments to us;
delay by, or limit the ability of, the U.S. Government and other customers to perform, including in making timely payments to us;
delay by, or limit the ability of, the U.S. Government and other customers to perform, including in making timely payments to us;
delay by, or limit the ability of, the U.S. Government and other customers to perform, including in making timely payments to us;
delay by, or limit the ability of, the U.S. Government and other customers to perform, including in making timely payments to us;
delay by, or limit the ability of, the U.S. Government and other customers to perform, including in making timely payments to us;
and cause other unpredictable events. Limitations on government operations could impact regulatory approvals such as export
and cause other unpredictable events. Limitations on government operations could impact regulatory approvals such as export
delay by, or limit the ability of, the U.S. Government and other customers to perform, including in making timely payments to us;
and cause other unpredictable events. Limitations on government operations could impact regulatory approvals such as export
and cause other unpredictable events. Limitations on government operations could impact regulatory approvals such as export
and cause other unpredictable events. Limitations on government operations could impact regulatory approvals such as export
and cause other unpredictable events. Limitations on government operations could impact regulatory approvals such as export
and cause other unpredictable events. Limitations on government operations could impact regulatory approvals such as export
and cause other unpredictable events. Limitations on government operations could impact regulatory approvals such as export
licenses that are needed for international sales and deliveries. In addition, there may be changes in our U.S. and foreign
licenses that are needed for international sales and deliveries. In addition, there may be changes in our U.S. and foreign
licenses that are needed for international sales and deliveries. In addition, there may be changes in our U.S. and foreign
licenses that are needed for international sales and deliveries. In addition, there may be changes in our U.S. and foreign
licenses that are needed for international sales and deliveries. In addition, there may be changes in our U.S. and foreign
licenses that are needed for international sales and deliveries. In addition, there may be changes in our U.S. and foreign
licenses that are needed for international sales and deliveries. In addition, there may be changes in our U.S. and foreign
licenses that are needed for international sales and deliveries. In addition, there may be changes in our U.S. and foreign
government customers’ priorities as they confront competing budget priorities and more limited resources. These changes may
government customers’ priorities as they confront competing budget priorities and more limited resources. These changes may
government customers’ priorities as they confront competing budget priorities and more limited resources. These changes may
government customers’ priorities as they confront competing budget priorities and more limited resources. These changes may
government customers’ priorities as they confront competing budget priorities and more limited resources. These changes may
government customers’ priorities as they confront competing budget priorities and more limited resources. These changes may
government customers’ priorities as they confront competing budget priorities and more limited resources. These changes may
government customers’ priorities as they confront competing budget priorities and more limited resources. These changes may
impact current and future programs, government payments and other practices, procurements and funding decisions.
impact current and future programs, government payments and other practices, procurements and funding decisions.
impact current and future programs, government payments and other practices, procurements and funding decisions.
impact current and future programs, government payments and other practices, procurements and funding decisions.
impact current and future programs, government payments and other practices, procurements and funding decisions.
impact current and future programs, government payments and other practices, procurements and funding decisions.
impact current and future programs, government payments and other practices, procurements and funding decisions.
impact current and future programs, government payments and other practices, procurements and funding decisions.
The outbreak of COVID-19 has resulted in a widespread health crisis that is adversely affecting the economies and financial
The outbreak of COVID-19 has resulted in a widespread health crisis that is adversely affecting the economies and financial
The outbreak of COVID-19 has resulted in a widespread health crisis that is adversely affecting the economies and financial
The outbreak of COVID-19 has resulted in a widespread health crisis that is adversely affecting the economies and financial
The outbreak of COVID-19 has resulted in a widespread health crisis that is adversely affecting the economies and financial
The outbreak of COVID-19 has resulted in a widespread health crisis that is adversely affecting the economies and financial
The outbreak of COVID-19 has resulted in a widespread health crisis that is adversely affecting the economies and financial
The outbreak of COVID-19 has resulted in a widespread health crisis that is adversely affecting the economies and financial
markets of many countries. The resulting economic downturn, the severity and length of which cannot be predicted, may cause
markets of many countries. The resulting economic downturn, the severity and length of which cannot be predicted, may cause
markets of many countries. The resulting economic downturn, the severity and length of which cannot be predicted, may cause
markets of many countries. The resulting economic downturn, the severity and length of which cannot be predicted, may cause
markets of many countries. The resulting economic downturn, the severity and length of which cannot be predicted, may cause
markets of many countries. The resulting economic downturn, the severity and length of which cannot be predicted, may cause
markets of many countries. The resulting economic downturn, the severity and length of which cannot be predicted, may cause
markets of many countries. The resulting economic downturn, the severity and length of which cannot be predicted, may cause
continued reduced demand for our products, delays or cancellations of customer orders, the inability of customers to obtain
continued reduced demand for our products, delays or cancellations of customer orders, the inability of customers to obtain
continued reduced demand for our products, delays or cancellations of customer orders, the inability of customers to obtain
continued reduced demand for our products, delays or cancellations of customer orders, the inability of customers to obtain
continued reduced demand for our products, delays or cancellations of customer orders, the inability of customers to obtain
continued reduced demand for our products, delays or cancellations of customer orders, the inability of customers to obtain
continued reduced demand for our products, delays or cancellations of customer orders, the inability of customers to obtain
financing to purchase our products, bankruptcies of our suppliers, customers or other business partners, adverse impact to
financing to purchase our products, bankruptcies of our suppliers, customers or other business partners, adverse impact to
continued reduced demand for our products, delays or cancellations of customer orders, the inability of customers to obtain
financing to purchase our products, bankruptcies of our suppliers, customers or other business partners, adverse impact to
financing to purchase our products, bankruptcies of our suppliers, customers or other business partners, adverse impact to
financing to purchase our products, bankruptcies of our suppliers, customers or other business partners, adverse impact to
financing to purchase our products, bankruptcies of our suppliers, customers or other business partners, adverse impact to
financing to purchase our products, bankruptcies of our suppliers, customers or other business partners, adverse impact to
financing to purchase our products, bankruptcies of our suppliers, customers or other business partners, adverse impact to
investment performance of our pension plans and continued volatility in the global capital markets adversely impacting our access
investment performance of our pension plans and continued volatility in the global capital markets adversely impacting our access
investment performance of our pension plans and continued volatility in the global capital markets adversely impacting our access
investment performance of our pension plans and continued volatility in the global capital markets adversely impacting our access
investment performance of our pension plans and continued volatility in the global capital markets adversely impacting our access
investment performance of our pension plans and continued volatility in the global capital markets adversely impacting our access
investment performance of our pension plans and continued volatility in the global capital markets adversely impacting our access
investment performance of our pension plans and continued volatility in the global capital markets adversely impacting our access
to capital. The extent to which the pandemic could impact our business, results of operations, financial condition and liquidity is
to capital. The extent to which the pandemic could impact our business, results of operations, financial condition and liquidity is
to capital. The extent to which the pandemic could impact our business, results of operations, financial condition and liquidity is
to capital. The extent to which the pandemic could impact our business, results of operations, financial condition and liquidity is
to capital. The extent to which the pandemic could impact our business, results of operations, financial condition and liquidity is
to capital. The extent to which the pandemic could impact our business, results of operations, financial condition and liquidity is
to capital. The extent to which the pandemic could impact our business, results of operations, financial condition and liquidity is
to capital. The extent to which the pandemic could impact our business, results of operations, financial condition and liquidity is
highly uncertain and also will depend on future developments, most of which are outside our control. Such developments may
highly uncertain and also will depend on future developments, most of which are outside our control. Such developments may
highly uncertain and also will depend on future developments, most of which are outside our control. Such developments may
highly uncertain and also will depend on future developments, most of which are outside our control. Such developments may
highly uncertain and also will depend on future developments, most of which are outside our control. Such developments may
highly uncertain and also will depend on future developments, most of which are outside our control. Such developments may
highly uncertain and also will depend on future developments, most of which are outside our control. Such developments may
highly uncertain and also will depend on future developments, most of which are outside our control. Such developments may
include the geographic spread and duration of the virus, the severity of the disease, the development of treatments or vaccines, and
include the geographic spread and duration of the virus, the severity of the disease, the development of treatments or vaccines, and
include the geographic spread and duration of the virus, the severity of the disease, the development of treatments or vaccines, and
include the geographic spread and duration of the virus, the severity of the disease, the development of treatments or vaccines, and
include the geographic spread and duration of the virus, the severity of the disease, the development of treatments or vaccines, and
include the geographic spread and duration of the virus, the severity of the disease, the development of treatments or vaccines, and
include the geographic spread and duration of the virus, the severity of the disease, the development of treatments or vaccines, and
the effects of actions that have been or may be taken by various governmental authorities and other third parties in response to the
the effects of actions that have been or may be taken by various governmental authorities and other third parties in response to the
include the geographic spread and duration of the virus, the severity of the disease, the development of treatments or vaccines, and
the effects of actions that have been or may be taken by various governmental authorities and other third parties in response to the
the effects of actions that have been or may be taken by various governmental authorities and other third parties in response to the
the effects of actions that have been or may be taken by various governmental authorities and other third parties in response to the
the effects of actions that have been or may be taken by various governmental authorities and other third parties in response to the
the effects of actions that have been or may be taken by various governmental authorities and other third parties in response to the
the effects of actions that have been or may be taken by various governmental authorities and other third parties in response to the
outbreak.
outbreak.
outbreak.
outbreak.
outbreak.
outbreak.
outbreak.
outbreak.
See also risks related to our Finance Segment under Financial Risks section below.
See also risks related to our Finance Segment under Financial Risks section below.
See also risks related to our Finance Segment under Financial Risks section below.
See also risks related to our Finance Segment under Financial Risks section below.
See also risks related to our Finance Segment under Financial Risks section below.
See also risks related to our Finance Segment under Financial Risks section below.
See also risks related to our Finance Segment under Financial Risks section below.
See also risks related to our Finance Segment under Financial Risks section below.
Aerospace and Defense Industry Risks
Aerospace and Defense Industry Risks
Aerospace and Defense Industry Risks
Aerospace and Defense Industry Risks
Aerospace and Defense Industry Risks
Aerospace and Defense Industry Risks
Aerospace and Defense Industry Risks
Aerospace and Defense Industry Risks
Demand for our aircraft products is cyclical and lower demand adversely affects our financial results.
Demand for our aircraft products is cyclical and lower demand adversely affects our financial results.
Demand for our aircraft products is cyclical and lower demand adversely affects our financial results.
Demand for our aircraft products is cyclical and lower demand adversely affects our financial results.
Demand for our aircraft products is cyclical and lower demand adversely affects our financial results.
Demand for our aircraft products is cyclical and lower demand adversely affects our financial results.
Demand for our aircraft products is cyclical and lower demand adversely affects our financial results.
Demand for business jets, turbo props and commercial helicopters has been cyclical and difficult to forecast. Unexpected events,
Demand for business jets, turbo props and commercial helicopters has been cyclical and difficult to forecast. Unexpected events,
Demand for our aircraft products is cyclical and lower demand adversely affects our financial results.
Demand for business jets, turbo props and commercial helicopters has been cyclical and difficult to forecast. Unexpected events,
Demand for business jets, turbo props and commercial helicopters has been cyclical and difficult to forecast. Unexpected events,
Demand for business jets, turbo props and commercial helicopters has been cyclical and difficult to forecast. Unexpected events,
Demand for business jets, turbo props and commercial helicopters has been cyclical and difficult to forecast. Unexpected events,
Demand for business jets, turbo props and commercial helicopters has been cyclical and difficult to forecast. Unexpected events,
such as the COVID-19 pandemic, have adversely impacted demand for our aircraft products and may continue to do so.
Demand for business jets, turbo props and commercial helicopters has been cyclical and difficult to forecast. Unexpected events,
such as the COVID-19 pandemic, have adversely impacted demand for our aircraft products and may continue to do so.
such as the COVID-19 pandemic, have adversely impacted demand for our aircraft products and may continue to do so.
such as the COVID-19 pandemic, have adversely impacted demand for our aircraft products and may continue to do so.
such as the COVID-19 pandemic, have adversely impacted demand for our aircraft products and may continue to do so.
such as the COVID-19 pandemic, have adversely impacted demand for our aircraft products and may continue to do so.
such as the COVID-19 pandemic, have adversely impacted demand for our aircraft products and may continue to do so.
such as the COVID-19 pandemic, have adversely impacted demand for our aircraft products and may continue to do so.
Therefore, future demand for these products could be significantly and unexpectedly less than anticipated and/or less than
Therefore, future demand for these products could be significantly and unexpectedly less than anticipated and/or less than
Therefore, future demand for these products could be significantly and unexpectedly less than anticipated and/or less than
Therefore, future demand for these products could be significantly and unexpectedly less than anticipated and/or less than
Therefore, future demand for these products could be significantly and unexpectedly less than anticipated and/or less than
Therefore, future demand for these products could be significantly and unexpectedly less than anticipated and/or less than
Therefore, future demand for these products could be significantly and unexpectedly less than anticipated and/or less than
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
previous period deliveries. Similarly, there is uncertainty as to when or whether our existing commercial backlog for aircraft
previous period deliveries. Similarly, there is uncertainty as to when or whether our existing commercial backlog for aircraft
previous period deliveries. Similarly, there is uncertainty as to when or whether our existing commercial backlog for aircraft
previous period deliveries. Similarly, there is uncertainty as to when or whether our existing commercial backlog for aircraft
previous period deliveries. Similarly, there is uncertainty as to when or whether our existing commercial backlog for aircraft
previous period deliveries. Similarly, there is uncertainty as to when or whether our existing commercial backlog for aircraft
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.
products will convert to revenues as the conversion depends on production capacity, customer needs and credit availability.
products will convert to revenues as the conversion depends on production capacity, customer needs and credit availability.
products will convert to revenues as the conversion depends on production capacity, customer needs and credit availability.
products will convert to revenues as the conversion depends on production capacity, customer needs and credit availability.
products will convert to revenues as the conversion depends on production capacity, customer needs and credit availability.
products will convert to revenues as the conversion depends on production capacity, customer needs and credit availability.
Changes in economic conditions has in the past caused, and in the future may cause, customers to request that firm orders be
products will convert to revenues as the conversion depends on production capacity, customer needs and credit availability.
Changes in economic conditions has in the past caused, and in the future may cause, customers to request that firm orders be
Changes in economic conditions has in the past caused, and in the future may cause, customers to request that firm orders be
Changes in economic conditions has in the past caused, and in the future may cause, customers to request that firm orders be
Changes in economic conditions has in the past caused, and in the future may cause, customers to request that firm orders be
Changes in economic conditions has in the past caused, and in the future may cause, customers to request that firm orders be
Changes in economic conditions has in the past caused, and in the future may cause, customers to request that firm orders be
Changes in economic conditions has in the past caused, and in the future may cause, customers to request that firm orders be
rescheduled, deferred or cancelled. Reduced demand for our aircraft products or delays or cancellations of orders previously has
rescheduled, deferred or cancelled. Reduced demand for our aircraft products or delays or cancellations of orders previously has
rescheduled, deferred or cancelled. Reduced demand for our aircraft products or delays or cancellations of orders previously has
rescheduled, deferred or cancelled. Reduced demand for our aircraft products or delays or cancellations of orders previously has
rescheduled, deferred or cancelled. Reduced demand for our aircraft products or delays or cancellations of orders previously has
rescheduled, deferred or cancelled. Reduced demand for our aircraft products or delays or cancellations of orders previously has
rescheduled, deferred or cancelled. Reduced demand for our aircraft products or delays or cancellations of orders previously has
rescheduled, deferred or cancelled. Reduced demand for our aircraft products or delays or cancellations of orders previously has
had and, in the future, could have a material adverse effect on our cash flows, results of operations and financial condition.
had and, in the future, could have a material adverse effect on our cash flows, results of operations and financial condition.
had and, in the future, could have a material adverse effect on our cash flows, results of operations and financial condition.
had and, in the future, could have a material adverse effect on our cash flows, results of operations and financial condition.
had and, in the future, could have a material adverse effect on our cash flows, results of operations and financial condition.
had and, in the future, could have a material adverse effect on our cash flows, results of operations and financial condition.
had and, in the future, could have a material adverse effect on our cash flows, results of operations and financial condition.
had and, in the future, could have a material adverse effect on our cash flows, results of operations and financial condition.
We have customer concentration with the U.S. Government; reduction in U.S. Government defense spending can adversely
We have customer concentration with the U.S. Government; reduction in U.S. Government defense spending can adversely
We have customer concentration with the U.S. Government; reduction in U.S. Government defense spending can adversely
We have customer concentration with the U.S. Government; reduction in U.S. Government defense spending can adversely
We have customer concentration with the U.S. Government; reduction in U.S. Government defense spending can adversely
We have customer concentration with the U.S. Government; reduction in U.S. Government defense spending can adversely
We have customer concentration with the U.S. Government; reduction in U.S. Government defense spending can adversely
We have customer concentration with the U.S. Government; reduction in U.S. Government defense spending can adversely
affect our results of operations and financial condition.
affect our results of operations and financial condition.
affect our results of operations and financial condition.
affect our results of operations and financial condition.
affect our results of operations and financial condition.
affect our results of operations and financial condition.
affect our results of operations and financial condition.
affect our results of operations and financial condition.
During 2020, we derived approximately 30% of our revenues from sales to a variety of U.S. Government entities. Our revenues
During 2020, we derived approximately 30% of our revenues from sales to a variety of U.S. Government entities. Our revenues
During 2020, we derived approximately 30% of our revenues from sales to a variety of U.S. Government entities. Our revenues
During 2020, we derived approximately 30% of our revenues from sales to a variety of U.S. Government entities. Our revenues
During 2020, we derived approximately 30% of our revenues from sales to a variety of U.S. Government entities. Our revenues
During 2020, we derived approximately 30% of our revenues from sales to a variety of U.S. Government entities. Our revenues
During 2020, we derived approximately 30% of our revenues from sales to a variety of U.S. Government entities. Our revenues
During 2020, we derived approximately 30% 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.
from the U.S. Government largely result from contracts awarded to us under various U.S. Government defense-related programs.
from the U.S. Government largely result from contracts awarded to us under various U.S. Government defense-related programs.
from the U.S. Government largely result from contracts awarded to us under various U.S. Government defense-related programs.
from the U.S. Government largely result from contracts awarded to us under various U.S. Government defense-related programs.
from the U.S. Government largely result from contracts awarded to us under various U.S. Government defense-related programs.
from the U.S. Government largely result from contracts awarded to us under various U.S. Government defense-related programs.
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
The funding of these programs is subject to congressional appropriation decisions and the U.S. Government budget process which
The funding of these programs is subject to congressional appropriation decisions and the U.S. Government budget process which
The funding of these programs is subject to congressional appropriation decisions and the U.S. Government budget process which
The funding of these programs is subject to congressional appropriation decisions and the U.S. Government budget process which
The funding of these programs is subject to congressional appropriation decisions and the U.S. Government budget process which
The funding of these programs is subject to congressional appropriation decisions and the U.S. Government budget process which
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
includes enacting relevant legislation, such as appropriations bills and accords on the debt ceiling. Although multiple-year
includes enacting relevant legislation, such as appropriations bills and accords on the debt ceiling. Although multiple-year
includes enacting relevant legislation, such as appropriations bills and accords on the debt ceiling. Although multiple-year
includes enacting relevant legislation, such as appropriations bills and accords on the debt ceiling. Although multiple-year
includes enacting relevant legislation, such as appropriations bills and accords on the debt ceiling. Although multiple-year
includes enacting relevant legislation, such as appropriations bills and accords on the debt ceiling. Although multiple-year
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
contracts may be planned in connection with major procurements, Congress generally appropriates funds on a fiscal year basis
contracts may be planned in connection with major procurements, Congress generally appropriates funds on a fiscal year basis
contracts may be planned in connection with major procurements, Congress generally appropriates funds on a fiscal year basis
contracts may be planned in connection with major procurements, Congress generally appropriates funds on a fiscal year basis
contracts may be planned in connection with major procurements, Congress generally appropriates funds on a fiscal year basis
contracts may be planned in connection with major procurements, Congress generally appropriates funds on a fiscal year basis
contracts may be planned in connection with major procurements, Congress generally appropriates funds on a fiscal year basis
10 Textron 2020 Annual Report
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even though a program may continue for several years. Consequently, programs often are only partially funded initially, and
additional funds are committed only as Congress makes further appropriations. Further uncertainty with respect to ongoing
programs could also result in the event that the U.S. Government finances its operations through temporary funding measures
such as “continuing resolutions” rather than full-year appropriations. If we incur costs in advance or in excess of funds committed
on a contract, we are at risk for non-reimbursement of those costs until additional funds are appropriated. The reduction,
termination or delay in the timing of funding for U.S. Government programs for which we currently provide or propose to provide
products or services from time to time has resulted and, in the future, may result in a loss of anticipated revenues. A loss of such
revenues could materially and adversely impact our results of operations and financial condition. Significant changes in national
and international policies or priorities for defense spending, as well as the potential impact of sequestration, could affect the
funding, or the timing of funding, of our programs, which could negatively impact our results of operations and financial
condition. In addition, because our U.S. Government contracts generally require us to continue to perform even if the U.S.
Government is unable to make timely payments, we may need to finance our continued performance for the impacted contracts
from our other resources on an interim basis. An extended delay in the timely payment by the U.S. Government could have a
material adverse effect on our liquidity.
U.S. Government contracts can be terminated at any time and may contain other unfavorable provisions.
The U.S. Government typically can terminate or modify any of its contracts with us either for its convenience or if we default by
failing to perform under the terms of the applicable contract. In the event of termination for the U.S. Government’s convenience,
contractors are generally protected by provisions covering reimbursement for costs incurred on the contracts and profit on those
costs but not the anticipated profit that would have been earned had the contract been completed. A termination arising out of our
default for failure to perform could expose us to liability, including but not limited to, all costs incurred under the contract plus
potential liability for re-procurement costs in excess of the total original contract amount, less the value of work performed and
accepted by the customer under the contract. Such an event could also have an adverse effect on our ability to compete for future
contracts and orders. If any of our contracts are terminated by the U.S. Government whether for convenience or default, our
backlog would be reduced by the expected value of the remaining work under such contracts. We also enter into “fee for service”
contracts with the U.S. Government where we retain ownership of, and consequently the risk of loss on, aircraft and equipment
supplied to perform under these contracts. Termination of these contracts could materially and adversely impact our results of
operations. On contracts for which we are teamed with others and are not the prime contractor, the U.S. Government could
terminate a prime contract under which we are a subcontractor, irrespective of the quality of our products and services as a
subcontractor. In addition, in the event that the U.S. Government is unable to make timely payments, failure to continue contract
performance places the contractor at risk of termination for default. Any such event could have a material adverse effect on our
cash flows, results of operations and financial condition.
As a U.S. Government contractor, we are subject to procurement rules and regulations; our failure to comply with these rules
and regulations could adversely affect our business.
We must comply with and are affected by laws and regulations relating to the formation, administration and performance of U.S.
Government contracts. These laws and regulations, among other things, require certification and disclosure of all cost and pricing
data in connection with contract negotiation, define allowable and unallowable costs and otherwise govern our right to
reimbursement under certain cost-based U.S. Government contracts, and safeguard and restrict the use and dissemination of
classified information, covered defense information, and the exportation of certain products and technical data. New laws,
regulations or procurement requirements or changes to current ones (including, for example, regulations related to cybersecurity)
can significantly increase our costs, reducing our profitability. Our failure to comply with procurement regulations and
requirements could allow the U.S. Government to suspend or debar us from receiving new contracts for a period of time, reduce
the value of existing contracts, issue modifications to a contract, withhold cash on contract payments, and control and potentially
prohibit the export of our products, services and associated materials, any of which could negatively impact our results of
operations, financial condition or liquidity. A number of our U.S. Government contracts contain provisions that require us to
make disclosure to the Inspector General of the agency that is our customer if we have credible evidence that we have violated
U.S. criminal laws involving fraud, conflict of interest, or bribery; the U.S. civil False Claims Act; or received a significant
overpayment under a U.S. Government contract. Failure to properly and timely make disclosures under these provisions may
result in a termination for default or cause, suspension and/or debarment, and potential fines.
As a U.S. Government contractor, our businesses and systems are subject to audit and review by the Defense Contract Audit
Agency (DCAA) and the Defense Contract Management Agency (DCMA).
We operate in a highly regulated environment and are routinely audited and reviewed by the U.S. Government and its agencies
such as the DCAA and DCMA. These agencies review our performance under contracts, our cost structure and our compliance
with laws and regulations applicable to U.S. Government contractors. The systems that are subject to review include, but are not
limited to, our accounting, estimating, material management and accounting, earned value management, purchasing and
government property systems. If an audit uncovers improper or illegal activities, we may be subject to civil and criminal penalties
and administrative sanctions that may include the termination of our contracts, forfeiture or reduction of profits, suspension or
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reduction of payments, fines, and, under certain circumstances, suspension or debarment from future contracts for a period of
time. Whether or not illegal activities are alleged, the U.S. Government also has the ability to decrease or withhold certain
payments when it deems systems subject to its review to be inadequate. These laws and regulations affect how we conduct
business with our government customers and, in some instances, impose added costs on our business.
The use of multi-award contracts by the U.S. Government increases competition, pricing pressure and cost.
The U.S. Government increasingly relies upon competitive contract award types, including indefinite-delivery, indefinite-quantity
and multi-award contracts, which have the potential to create greater competition and increased pricing pressure, as well as to
increase our cost by requiring that we submit multiple bids. In addition, multi-award contracts increase our cost as they require
that we make sustained efforts to obtain task orders and delivery orders under the contract. Further, the competitive bidding
process is costly and demands managerial time to prepare bids and proposals for contracts that may not be awarded to us or may
be split among competitors.
Our profitability and cash flow varies depending on the mix of our government contracts and our ability to control costs.
Under fixed-price contracts, generally we receive a fixed price irrespective of the actual costs we incur, and, consequently, 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 can adversely affect our results of operations. Additionally, fixed-price contracts
generally require progress payments rather than performance-based payments which can delay our ability to recover a significant
amount of costs incurred on a contract and thus affect the timing of our cash flows. Under fixed-price incentive contracts, we
share with the U.S. Government cost underrun savings, which are derived from total cost being less than target costs; we also
share in cost overruns, which occur when total costs exceed target costs up to a negotiated cost ceiling, but are solely responsible
for costs above the ceiling. Under time and materials contracts, we are paid for labor at negotiated hourly billing rates and for
certain expenses. Under cost-reimbursement contracts that are subject to a contract-ceiling amount, we are reimbursed for
allowable costs and paid a fee, which may be fixed or performance based, however, if our costs exceed the contract ceiling or are
not allowable under the provisions of the contract or applicable regulations, we may not be able to obtain reimbursement for all
such costs. Due to the nature of our work under government contracts, we sometimes experience unforeseen technological
difficulties and cost overruns. Under each type of contract, if we are unable to control costs or if our initial cost estimates are
incorrect, our cash flows, results of operations and financial condition could be adversely affected. Cost overruns also may
adversely affect our ability to sustain existing programs and obtain future contract awards.
Strategic Risks
Developing new products and technologies entails significant risks and uncertainties.
To continue to grow our revenues and segment profit, we must successfully develop new products and technologies or modify our
existing products and technologies for our current and future markets. Our future performance depends, in part, on our ability to
identify emerging technological trends and customer requirements and to develop and maintain competitive products and services.
Delays or cost overruns in the development and acceptance of new products or certification of new aircraft and other products
occur from time to time and could adversely affect our results of operations. These delays 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 efforts 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, our investments in equipment or technology that we believe will
enable us to obtain future service contracts for our U.S. Government or other customers may not result in contracts or revenues
sufficient to offset such investment. The market for our product offerings does not always develop or continue to expand as we
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.
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We have made and may continue to make acquisitions that increase the risks of our business.
We have made and may continue to make acquisitions that increase the risks of our business.
We have made and may continue to make acquisitions that increase the risks of our business.
We have made and may continue to make acquisitions that increase the risks of our business.
We have made and may continue to make acquisitions that increase the risks of our business.
We have made and may continue to make acquisitions that increase the risks of our business.
We enter into acquisitions in an effort to expand our business and enhance shareholder value. Acquisitions involve risks and
We enter into acquisitions in an effort to expand our business and enhance shareholder value. Acquisitions involve risks and
We enter into acquisitions in an effort to expand our business and enhance shareholder value. Acquisitions involve risks and
We enter into acquisitions in an effort to expand our business and enhance shareholder value. Acquisitions involve risks and
We enter into acquisitions in an effort to expand our business and enhance shareholder value. Acquisitions involve risks and
We enter into acquisitions in an effort to expand our business and enhance shareholder value. Acquisitions involve risks and
uncertainties that, in some cases, have resulted, and, in the future, could result in our not achieving expected benefits. Such risks
uncertainties that, in some cases, have resulted, and, in the future, could result in our not achieving expected benefits. Such risks
uncertainties that, in some cases, have resulted, and, in the future, could result in our not achieving expected benefits. Such risks
uncertainties that, in some cases, have resulted, and, in the future, could result in our not achieving expected benefits. Such risks
uncertainties that, in some cases, have resulted, and, in the future, could result in our not achieving expected benefits. Such risks
uncertainties that, in some cases, have resulted, and, in the future, could result in our not achieving expected benefits. Such risks
include difficulties in integrating newly acquired businesses and operations in an efficient and cost-effective manner; challenges
include difficulties in integrating newly acquired businesses and operations in an efficient and cost-effective manner; challenges
include difficulties in integrating newly acquired businesses and operations in an efficient and cost-effective manner; challenges
include difficulties in integrating newly acquired businesses and operations in an efficient and cost-effective manner; challenges
include difficulties in integrating newly acquired businesses and operations in an efficient and cost-effective manner; challenges
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
in achieving expected strategic objectives, cost savings and other benefits; the risk that the acquired businesses’ markets do not
in achieving expected strategic objectives, cost savings and other benefits; the risk that the acquired businesses’ markets do not
in achieving expected strategic objectives, cost savings and other benefits; the risk that the acquired businesses’ markets do not
in achieving expected strategic objectives, cost savings and other benefits; the risk that the acquired businesses’ markets do not
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
evolve as anticipated and that the acquired businesses’ products and technologies do not prove to be those needed to be successful
evolve as anticipated and that the acquired businesses’ products and technologies do not prove to be those needed to be successful
evolve as anticipated and that the acquired businesses’ products and technologies do not prove to be those needed to be successful
evolve as anticipated and that the acquired businesses’ products and technologies do not prove to be those needed to be successful
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
in those markets; the risk that our due diligence reviews of the acquired business do not identify or adequately assess all of the
in those markets; the risk that our due diligence reviews of the acquired business do not identify or adequately assess all of the
in those markets; the risk that our due diligence reviews of the acquired business do not identify or adequately assess all of the
in those markets; the risk that our due diligence reviews of the acquired business do not identify or adequately assess all of the
in those markets; the risk that our due diligence reviews of the acquired business do not identify or adequately assess all of the
material issues which impact valuation of the business or result in costs or liabilities in excess of what we anticipated; the risk that
material issues which impact valuation of the business or result in costs or liabilities in excess of what we anticipated; the risk that
material issues which impact valuation of the business or result in costs or liabilities in excess of what we anticipated; the risk that
material issues which impact valuation of the business or result in costs or liabilities in excess of what we anticipated; the risk that
material issues which impact valuation of the business or result in costs or liabilities in excess of what we anticipated; the risk that
material issues which impact valuation of the business or result in costs or liabilities in excess of what we anticipated; the risk that
we pay a purchase price that exceeds what the future results of operations would have merited; the risk that the acquired business
we pay a purchase price that exceeds what the future results of operations would have merited; the risk that the acquired business
we pay a purchase price that exceeds what the future results of operations would have merited; the risk that the acquired business
we pay a purchase price that exceeds what the future results of operations would have merited; the risk that the acquired business
we pay a purchase price that exceeds what the future results of operations would have merited; the risk that the acquired business
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,
may have significant internal control deficiencies or exposure to regulatory sanctions; and the potential loss of key customers,
may have significant internal control deficiencies or exposure to regulatory sanctions; and the potential loss of key customers,
may have significant internal control deficiencies or exposure to regulatory sanctions; and the potential loss of key customers,
may have significant internal control deficiencies or exposure to regulatory sanctions; and the potential loss of key customers,
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.
suppliers and employees of the acquired businesses.
suppliers and employees of the acquired businesses.
suppliers and employees of the acquired businesses.
suppliers and employees of the acquired businesses.
suppliers and employees of the acquired businesses.
Business and Operational Risks
Business and Operational Risks
Business and Operational Risks
Business and Operational Risks
Business and Operational Risks
Business and Operational Risks
Our business could be negatively impacted by information technology disruptions and security threats.
Our business could be negatively impacted by information technology disruptions and security threats.
Our business could be negatively impacted by information technology disruptions and security threats.
Our business could be negatively impacted by information technology disruptions and security threats.
Our business could be negatively impacted by information technology disruptions and security threats.
Our business could be negatively impacted by information technology disruptions and security threats.
Our information technology (IT) and related systems are critical to the efficient operation of our business and essential to our
Our information technology (IT) and related systems are critical to the efficient operation of our business and essential to our
Our information technology (IT) and related systems are critical to the efficient operation of our business and essential to our
Our information technology (IT) and related systems are critical to the efficient operation of our business and essential to our
Our information technology (IT) and related systems are critical to the efficient operation of our business and essential to our
Our information technology (IT) and related systems are critical to the efficient operation of our business and essential to our
ability to perform day to day processes. From time to time, we update and/or replace IT systems used by our businesses. The
ability to perform day to day processes. From time to time, we update and/or replace IT systems used by our businesses. The
ability to perform day to day processes. From time to time, we update and/or replace IT systems used by our businesses. The
ability to perform day to day processes. From time to time, we update and/or replace IT systems used by our businesses. The
ability to perform day to day processes. From time to time, we update and/or replace IT systems used by our businesses. The
ability to perform day to day processes. 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
implementation of new systems can present temporary disruptions of business activities as existing processes are transitioned to
implementation of new systems can present temporary disruptions of business activities as existing processes are transitioned to
implementation of new systems can present temporary disruptions of business activities as existing processes are transitioned to
implementation of new systems can present temporary disruptions of business activities as existing processes are transitioned to
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. We also
the new systems, resulting in productivity issues, including delays in production, shipments or other business operations. We also
the new systems, resulting in productivity issues, including delays in production, shipments or other business operations. We also
the new systems, resulting in productivity issues, including delays in production, shipments or other business operations. We also
the new systems, resulting in productivity issues, including delays in production, shipments or other business operations. We also
the new systems, resulting in productivity issues, including delays in production, shipments or other business operations. We also
outsource certain support functions, including certain global IT infrastructure services, to third-party service providers, and any
outsource certain support functions, including certain global IT infrastructure services, to third-party service providers, and any
outsource certain support functions, including certain global IT infrastructure services, to third-party service providers, and any
outsource certain support functions, including certain global IT infrastructure services, to third-party service providers, and any
outsource certain support functions, including certain global IT infrastructure services, to third-party service providers, and any
outsource certain support functions, including certain global IT infrastructure services, to third-party service providers, and any
disruption of such outsourced processes or functions could have a material adverse effect on our operations. In addition, as a U.S.
disruption of such outsourced processes or functions could have a material adverse effect on our operations. In addition, as a U.S.
disruption of such outsourced processes or functions could have a material adverse effect on our operations. In addition, as a U.S.
disruption of such outsourced processes or functions could have a material adverse effect on our operations. In addition, as a U.S.
disruption of such outsourced processes or functions could have a material adverse effect on our operations. In addition, as a U.S.
disruption of such outsourced processes or functions could have a material adverse effect on our operations. In addition, as a U.S.
defense contractor, we face certain security threats, including threats to our IT infrastructure and unlawful attempts to gain access
defense contractor, we face certain security threats, including threats to our IT infrastructure and unlawful attempts to gain access
defense contractor, we face certain security threats, including threats to our IT infrastructure and unlawful attempts to gain access
defense contractor, we face certain security threats, including threats to our IT infrastructure and unlawful attempts to gain access
defense contractor, we face certain security threats, including threats to our IT infrastructure and unlawful attempts to gain access
defense contractor, we face certain security threats, including threats to our IT infrastructure and unlawful attempts to gain access
to our information via phishing / malware campaigns and other cyberattack methods, as well as threats to the physical security of
to our information via phishing / malware campaigns and other cyberattack methods, as well as threats to the physical security of
to our information via phishing / malware campaigns and other cyberattack methods, as well as threats to the physical security of
to our information via phishing / malware campaigns and other cyberattack methods, as well as threats to the physical security of
to our information via phishing / malware campaigns and other cyberattack methods, as well as threats to the physical security of
to our information via phishing / malware campaigns and other cyberattack methods, as well as threats to the physical security of
our facilities and employees, as do our customers, suppliers, subcontractors and joint venture partners. Attempts to gain
our facilities and employees, as do our customers, suppliers, subcontractors and joint venture partners. Attempts to gain
our facilities and employees, as do our customers, suppliers, subcontractors and joint venture partners. Attempts to gain
our facilities and employees, as do our customers, suppliers, subcontractors and joint venture partners. Attempts to gain
our facilities and employees, as do our customers, suppliers, subcontractors and joint venture partners. Attempts to gain
our facilities and employees, as do our customers, suppliers, subcontractors and joint venture partners. Attempts to gain
unauthorized access to our confidential, classified or otherwise proprietary information or that of our employees or customers, as
unauthorized access to our confidential, classified or otherwise proprietary information or that of our employees or customers, as
unauthorized access to our confidential, classified or otherwise proprietary information or that of our employees or customers, as
unauthorized access to our confidential, classified or otherwise proprietary information or that of our employees or customers, as
unauthorized access to our confidential, classified or otherwise proprietary information or that of our employees or customers, as
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.
well as other security breaches, are persistent, continue to evolve and require highly skilled IT resources.
well as other security breaches, are persistent, continue to evolve and require highly skilled IT resources.
well as other security breaches, are persistent, continue to evolve and require highly skilled IT resources.
well as other security breaches, are persistent, continue to evolve and require highly skilled IT resources.
well as other security breaches, are persistent, continue to evolve and require highly skilled IT resources.
We maintain Information Systems Incident Management Standards applicable to all our businesses intended to ensure information
We maintain Information Systems Incident Management Standards applicable to all our businesses intended to ensure information
We maintain Information Systems Incident Management Standards applicable to all our businesses intended to ensure information
We maintain Information Systems Incident Management Standards applicable to all our businesses intended to ensure information
We maintain Information Systems Incident Management Standards applicable to all our businesses intended to ensure information
We maintain Information Systems Incident Management Standards applicable to all our businesses intended to ensure information
security events and weaknesses associated with information systems are communicated and acted on in a timely manner. Our
security events and weaknesses associated with information systems are communicated and acted on in a timely manner. Our
security events and weaknesses associated with information systems are communicated and acted on in a timely manner. Our
security events and weaknesses associated with information systems are communicated and acted on in a timely manner. Our
security events and weaknesses associated with information systems are communicated and acted on in a timely manner. Our
security events and weaknesses associated with information systems are communicated and acted on in a timely manner. Our
enterprise risk management program includes cyber risk/network protection mitigation plans, and our disclosure controls and
enterprise risk management program includes cyber risk/network protection mitigation plans, and our disclosure controls and
enterprise risk management program includes cyber risk/network protection mitigation plans, and our disclosure controls and
enterprise risk management program includes cyber risk/network protection mitigation plans, and our disclosure controls and
enterprise risk management program includes cyber risk/network protection mitigation plans, and our disclosure controls and
enterprise risk management program includes cyber risk/network protection mitigation plans, and our disclosure controls and
procedures address cybersecurity and include processes intended to ensure that security breaches are analyzed for potential
procedures address cybersecurity and include processes intended to ensure that security breaches are analyzed for potential
procedures address cybersecurity and include processes intended to ensure that security breaches are analyzed for potential
procedures address cybersecurity and include processes intended to ensure that security breaches are analyzed for potential
procedures address cybersecurity and include processes intended to ensure that security breaches are analyzed for potential
procedures address cybersecurity and include processes intended to ensure that security breaches are analyzed for potential
disclosure. Additionally, we conduct periodic training for our employees regarding the protection of sensitive information which
disclosure. Additionally, we conduct periodic training for our employees regarding the protection of sensitive information which
disclosure. Additionally, we conduct periodic training for our employees regarding the protection of sensitive information which
disclosure. Additionally, we conduct periodic training for our employees regarding the protection of sensitive information which
disclosure. Additionally, we conduct periodic training for our employees regarding the protection of sensitive information which
disclosure. Additionally, we conduct periodic training for our employees regarding the protection of sensitive information which
includes training intended to prevent the success of cyberattacks. Further, our insider trading compliance program addresses
includes training intended to prevent the success of cyberattacks. Further, our insider trading compliance program addresses
includes training intended to prevent the success of cyberattacks. Further, our insider trading compliance program addresses
includes training intended to prevent the success of cyberattacks. Further, our insider trading compliance program addresses
includes training intended to prevent the success of cyberattacks. Further, our insider trading compliance program addresses
includes training intended to prevent the success of cyberattacks. Further, our insider trading compliance program addresses
restrictions against trading while in possession of material, nonpublic information in connection with a cybersecurity incident.
restrictions against trading while in possession of material, nonpublic information in connection with a cybersecurity incident.
restrictions against trading while in possession of material, nonpublic information in connection with a cybersecurity incident.
restrictions against trading while in possession of material, nonpublic information in connection with a cybersecurity incident.
restrictions against trading while in possession of material, nonpublic information in connection with a cybersecurity incident.
restrictions against trading while in possession of material, nonpublic information in connection with a cybersecurity incident.
While we have experienced cybersecurity attacks, we have not suffered any material losses relating to such attacks, and we
While we have experienced cybersecurity attacks, we have not suffered any material losses relating to such attacks, and we
While we have experienced cybersecurity attacks, we have not suffered any material losses relating to such attacks, and we
While we have experienced cybersecurity attacks, we have not suffered any material losses relating to such attacks, and we
While we have experienced cybersecurity attacks, we have not suffered any material losses relating to such attacks, and we
While we have experienced cybersecurity attacks, we have not suffered any material losses relating to such attacks, and we
believe our threat detection and mitigation processes and procedures are robust. Due to the evolving nature of security threats, the
believe our threat detection and mitigation processes and procedures are robust. Due to the evolving nature of security threats, the
believe our threat detection and mitigation processes and procedures are robust. Due to the evolving nature of security threats, the
believe our threat detection and mitigation processes and procedures are robust. Due to the evolving nature of security threats, the
believe our threat detection and mitigation processes and procedures are robust. Due to the evolving nature of security threats, the
believe our threat detection and mitigation processes and procedures are robust. Due to the evolving nature of security threats, the
possibility of future material incidents cannot be completely mitigated, and we may not always be successful in detecting,
possibility of future material incidents cannot be completely mitigated, and we may not always be successful in detecting,
possibility of future material incidents cannot be completely mitigated, and we may not always be successful in detecting,
possibility of future material incidents cannot be completely mitigated, and we may not always be successful in detecting,
possibility of future material incidents cannot be completely mitigated, and we may not always be successful in detecting,
possibility of future material incidents cannot be completely mitigated, and we may not always be successful in detecting,
reporting or responding to cyber incidents. Future attacks or breaches of data security, whether of our systems or the systems of
reporting or responding to cyber incidents. Future attacks or breaches of data security, whether of our systems or the systems of
reporting or responding to cyber incidents. Future attacks or breaches of data security, whether of our systems or the systems of
reporting or responding to cyber incidents. Future attacks or breaches of data security, whether of our systems or the systems of
reporting or responding to cyber incidents. Future attacks or breaches of data security, whether of our systems or the systems of
reporting or responding to cyber incidents. Future attacks or breaches 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,
our service providers or other third parties who may have access to our data for business purposes, could disrupt our operations,
our service providers or other third parties who may have access to our data for business purposes, could disrupt our operations,
our service providers or other third parties who may have access to our data for business purposes, could disrupt our operations,
our service providers or other third parties who may have access to our data for business purposes, could disrupt our operations,
our service providers or other third parties who may have access to our data for business purposes, could disrupt our operations,
cause the loss of business information or compromise confidential information, exposing us to liability or regulatory action. Such
cause the loss of business information or compromise confidential information, exposing us to liability or regulatory action. Such
cause the loss of business information or compromise confidential information, exposing us to liability or regulatory action. Such
cause the loss of business information or compromise confidential information, exposing us to liability or regulatory action. Such
cause the loss of business information or compromise confidential information, exposing us to liability or regulatory action. Such
cause the loss of business information or compromise confidential information, exposing us to liability or regulatory action. Such
an incident also could require significant management attention and resources, increase costs that may not be covered by
an incident also could require significant management attention and resources, increase costs that may not be covered by
an incident also could require significant management attention and resources, increase costs that may not be covered by
an incident also could require significant management attention and resources, increase costs that may not be covered by
an incident also could require significant management attention and resources, increase costs that may not be covered by
an incident also could require significant management attention and resources, increase costs that may not be covered by
insurance, and result in reputational damage, potentially adversely affecting our competitiveness and our results of operations.
insurance, and result in reputational damage, potentially adversely affecting our competitiveness and our results of operations.
insurance, and result in reputational damage, potentially adversely affecting our competitiveness and our results of operations.
insurance, and result in reputational damage, potentially adversely affecting our competitiveness and our results of operations.
insurance, and result in reputational damage, potentially adversely affecting our competitiveness and our results of operations.
insurance, and result in reputational damage, potentially adversely affecting our competitiveness and our results of operations.
Products and services that we provide to our customers may themselves be subject to cyberthreats which may not be detected or
Products and services that we provide to our customers may themselves be subject to cyberthreats which may not be detected or
Products and services that we provide to our customers may themselves be subject to cyberthreats which may not be detected or
Products and services that we provide to our customers may themselves be subject to cyberthreats which may not be detected or
Products and services that we provide to our customers may themselves be subject to cyberthreats which may not be detected or
Products and services that we provide to our customers may themselves be subject to cyberthreats which may not be detected or
effectively mitigated, resulting in potential losses that could adversely affect us and our customers. In addition, our customers,
effectively mitigated, resulting in potential losses that could adversely affect us and our customers. In addition, our customers,
effectively mitigated, resulting in potential losses that could adversely affect us and our customers. In addition, our customers,
effectively mitigated, resulting in potential losses that could adversely affect us and our customers. In addition, our customers,
effectively mitigated, resulting in potential losses that could adversely affect us and our customers. In addition, our customers,
effectively mitigated, resulting in potential losses that could adversely affect us and our customers. In addition, our customers,
including the U.S. Government, are increasingly requiring cybersecurity protections and mandating cybersecurity standards in our
including the U.S. Government, are increasingly requiring cybersecurity protections and mandating cybersecurity standards in our
including the U.S. Government, are increasingly requiring cybersecurity protections and mandating cybersecurity standards in our
including the U.S. Government, are increasingly requiring cybersecurity protections and mandating cybersecurity standards in our
including the U.S. Government, are increasingly requiring cybersecurity protections and mandating cybersecurity standards in our
including the U.S. Government, are increasingly requiring cybersecurity protections and mandating cybersecurity standards in our
products, and we may incur additional costs to comply with such demands.
products, and we may incur additional costs to comply with such demands.
products, and we may incur additional costs to comply with such demands.
products, and we may incur additional costs to comply with such demands.
products, and we may incur additional costs to comply with such demands.
products, and we may incur additional costs to comply with such demands.
Failure to perform by our subcontractors or suppliers could adversely affect our performance.
Failure to perform by our subcontractors or suppliers could adversely affect our performance.
Failure to perform by our subcontractors or suppliers could adversely affect our performance.
Failure to perform by our subcontractors or suppliers could adversely affect our performance.
Failure to perform by our subcontractors or suppliers could adversely affect our performance.
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
We rely on other companies to provide raw materials, major components and subsystems for our products. Subcontractors also
We rely on other companies to provide raw materials, major components and subsystems for our products. Subcontractors also
We rely on other companies to provide raw materials, major components and subsystems for our products. Subcontractors also
We rely on other companies to provide raw materials, major components and subsystems for our products. Subcontractors also
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
perform services that we provide to our customers in certain circumstances. We depend on these suppliers and subcontractors to
perform services that we provide to our customers in certain circumstances. We depend on these suppliers and subcontractors to
perform services that we provide to our customers in certain circumstances. We depend on these suppliers and subcontractors to
perform services that we provide to our customers in certain circumstances. We depend on these suppliers and subcontractors to
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
meet our contractual obligations to our customers and conduct our operations. Our ability to meet our obligations to our customers
meet our contractual obligations to our customers and conduct our operations. Our ability to meet our obligations to our customers
meet our contractual obligations to our customers and conduct our operations. Our ability to meet our obligations to our customers
meet our contractual obligations to our customers and conduct our operations. Our ability to meet our obligations to our customers
meet our contractual obligations to our customers and conduct our operations. Our ability to meet our obligations to our customers
could be adversely affected if suppliers or subcontractors do not provide the agreed-upon supplies or perform the agreed-upon
could be adversely affected if suppliers or subcontractors do not provide the agreed-upon supplies or perform the agreed-upon
could be adversely affected if suppliers or subcontractors do not provide the agreed-upon supplies or perform the agreed-upon
could be adversely affected if suppliers or subcontractors do not provide the agreed-upon supplies or perform the agreed-upon
could be adversely affected if suppliers or subcontractors do not provide the agreed-upon supplies or perform the agreed-upon
could be adversely affected if suppliers or subcontractors do not provide the agreed-upon supplies or perform the agreed-upon
services in compliance with customer requirements and in a timely and cost-effective manner. Likewise, the quality of our
services in compliance with customer requirements and in a timely and cost-effective manner. Likewise, the quality of our
services in compliance with customer requirements and in a timely and cost-effective manner. Likewise, the quality of our
services in compliance with customer requirements and in a timely and cost-effective manner. Likewise, the quality of our
services in compliance with customer requirements and in a timely and cost-effective manner. Likewise, the quality of our
services in compliance with customer requirements and in a timely and cost-effective manner. Likewise, the quality of our
products could be adversely impacted if companies to whom we delegate manufacture of major components or subsystems for our
products could be adversely impacted if companies to whom we delegate manufacture of major components or subsystems for our
products could be adversely impacted if companies to whom we delegate manufacture of major components or subsystems for our
products could be adversely impacted if companies to whom we delegate manufacture of major components or subsystems for our
products could be adversely impacted if companies to whom we delegate manufacture of major components or subsystems for our
products could be adversely impacted if companies to whom we delegate manufacture of major components or subsystems for our
products, or from whom we acquire such items, do not provide components or subsystems which meet required specifications and
products, or from whom we acquire such items, do not provide components or subsystems which meet required specifications and
products, or from whom we acquire such items, do not provide components or subsystems which meet required specifications and
products, or from whom we acquire such items, do not provide components or subsystems which meet required specifications and
products, or from whom we acquire such items, do not provide components or subsystems which meet required specifications and
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
perform to our and our customers’ expectations. Our suppliers may be less likely than us to be able to quickly recover from
perform to our and our customers’ expectations. Our suppliers may be less likely than us to be able to quickly recover from
perform to our and our customers’ expectations. Our suppliers may be less likely than us to be able to quickly recover from
perform to our and our customers’ expectations. Our suppliers may be less likely than us to be able to quickly recover from
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
natural disasters and other events beyond their control and may be subject to additional risks such as financial problems that limit
natural disasters and other events beyond their control and may be subject to additional risks such as financial problems that limit
natural disasters and other events beyond their control and may be subject to additional risks such as financial problems that limit
natural disasters and other events beyond their control and may be subject to additional risks such as financial problems that limit
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 would likely be greater in circumstances where we rely
their ability to conduct their operations. The risk of these adverse effects would likely be greater in circumstances where we rely
their ability to conduct their operations. The risk of these adverse effects would likely be greater in circumstances where we rely
their ability to conduct their operations. The risk of these adverse effects would likely be greater in circumstances where we rely
their ability to conduct their operations. The risk of these adverse effects would likely be greater in circumstances where we rely
their ability to conduct their operations. The risk of these adverse effects would likely be greater in circumstances where we rely
on only one or two subcontractors or suppliers for a particular raw material, product or service. In particular, in the aircraft
on only one or two subcontractors or suppliers for a particular raw material, product or service. In particular, in the aircraft
on only one or two subcontractors or suppliers for a particular raw material, product or service. In particular, in the aircraft
on only one or two subcontractors or suppliers for a particular raw material, product or service. In particular, in the aircraft
on only one or two subcontractors or suppliers for a particular raw material, product or service. In particular, in the aircraft
on only one or two subcontractors or suppliers for a particular raw material, product or service. In particular, in the aircraft
Textron 2020 Annual Report 13
13
13
13
13
13
13
industry, most vendor parts are certified by the regulatory agencies as part of the overall Type Certificate for the aircraft being
produced by the manufacturer. If a vendor does not or cannot supply its parts, then the manufacturer’s production line may be
stopped until the manufacturer can design, manufacture and certify a similar part itself or identify and certify another similar
vendor’s part, resulting in significant delays in the completion of aircraft. Such events may adversely affect our financial results,
damage our reputation and relationships with our customers, and result in regulatory actions and/or litigation.
We are subject to the risks of doing business in foreign countries that could adversely impact our business.
During 2020, we derived approximately 32% of our revenues from international business, including U.S. exports. Conducting
business internationally exposes us to additional risks than if we conducted our business solely within the U.S. We maintain
manufacturing facilities, service centers, supply centers and other facilities worldwide, including in various emerging market
countries. Risks related to international operations include import, export, economic sanctions and other trade restrictions;
changing U.S. and foreign procurement policies and practices; changes in international trade policies, including higher tariffs on
imported goods and materials and renegotiation of free trade agreements; potential retaliatory tariffs imposed by foreign countries
against U.S. goods; impacts related to the voluntary exit of the United Kingdom from the European Union (Brexit); restrictions on
technology transfer; difficulties in protecting intellectual property; increasing complexity of employment and environmental,
health and safety regulations; foreign investment laws; exchange controls; repatriation of earnings or cash settlement challenges;
compliance with increasingly rigorous data privacy and protection laws; competition from foreign and multinational firms with
home country advantages; economic and government instability, acts of terrorism and related safety concerns. The impact of any
one or more of these or other factors could adversely affect our business, financial condition or operating results.
Additionally, some international government customers require contractors to agree to specific in-country purchases, technology
transfers, manufacturing agreements or financial support arrangements, known as offsets, as a condition for a contract award.
These contracts generally extend over several years and may include penalties if we fail to perform in accordance with the offset
requirements which are often subjective. We also are exposed to risks associated with using foreign representatives and
consultants for international sales and operations and teaming with international subcontractors and suppliers in connection with
international programs. In many foreign countries, particularly in those with developing economies, it is common to engage in
business practices that are prohibited by laws and regulations applicable to us, such as the Foreign Corrupt Practices Act.
Although we maintain policies and procedures designed to facilitate compliance with these laws, a violation of such laws by any
of our international representatives, consultants, joint ventures, business partners, subcontractors or suppliers, even if prohibited
by our policies, could have an adverse effect on our business and reputation.
Natural disasters or other events outside of our control may disrupt our operations, adversely affect our results of operations
and financial condition, and may not be fully covered by insurance.
Natural disasters, including hurricanes, fires, tornados, floods and other forms of severe weather, the intensity and frequency of
which are being exacerbated by climate change, other impacts of climate change, such as rising sea waters, as well as other events
outside of our control including public health crises or pandemics, power outages and industrial accidents, have in the past and
could in the future disrupt our operations and adversely affect our business. Any of these events could result in physical damage
to and/or complete or partial closure of one or more of our facilities, temporary or long-term disruption of our operations or the
operations of our suppliers by causing business interruptions or by impacting the availability and cost of materials needed for
manufacturing or otherwise impacting our ability to deliver products and services to our customers. Existing insurance
arrangements may not provide full protection for the costs that may arise from such events. The occurrence of any of these events
could materially increase our costs and expenses and have a material adverse effect on our business, financial condition and
results of operations.
Financial Risks
If our Finance segment has difficulty collecting on its finance receivables, our financial performance could be adversely
affected.
The financial performance of our Finance segment depends on the quality of loans, leases and other assets in its portfolio.
Portfolio quality can be adversely affected by several factors, including finance receivable underwriting procedures, collateral
value, geographic or industry concentrations, and the effect of general economic conditions such as the recent deterioration of the
economy due to the impact from the COVID-19 pandemic. The pandemic has resulted in disruptions in the ability of many of our
customers to conduct business effectively because of illness, quarantines, government shut-down orders, facility closures, reduced
customer demand or other restrictions. As a result, our Finance segment has modified a significant number of the loans in its
portfolio in order to provide temporary payment relief to its customers. In addition, the Finance segment has provided extended
payment relief to certain customers. These modifications will delay our ultimate recovery on these assets. In addition, a
substantial number of the originations in our finance receivable portfolio are cross-border transactions for aircraft sold outside of
the U.S. Cross-border transactions present additional challenges and risks in the event of borrower default, which can result in
difficulty or delay in collecting on the related finance receivables. Should current economic conditions persist or worsen, our
14 Textron 2020 Annual Report
14
Finance segment may have difficulty successfully collecting on its finance receivable portfolio, and as a result our cash flow,
results of operations and financial condition could be adversely affected.
We periodically need to obtain financing and such financing may not be available to us on satisfactory terms, if at all.
We periodically need to obtain financing in order to meet our debt obligations as they come due, to support our operations and/or
to make acquisitions. Our access to the debt capital markets and the cost of borrowings are affected by a number of factors
including market conditions and the strength of our credit ratings. If we cannot obtain adequate sources of credit on favorable
terms, or at all, our business, operating results, and financial condition could be adversely affected.
Unanticipated changes in our tax rates or exposure to additional income tax liabilities could affect our profitability.
We are subject to income taxes in the U.S. and various non-U.S. jurisdictions, and our domestic and international tax liabilities are
subject to the location of income among these different jurisdictions. Our effective tax rate could be adversely affected by changes
in the mix of earnings in countries with differing statutory tax rates, changes in the valuation of deferred tax assets and liabilities,
changes in the amount of earnings indefinitely reinvested offshore, changes to unrecognized tax benefits or changes in tax laws,
which could affect our profitability. In particular, the carrying value of deferred tax assets is dependent on our ability to generate
future taxable income, as well as changes to applicable statutory tax rates. In addition, the amount of income taxes we pay is
subject to audits in various jurisdictions, and a material assessment by a tax authority could affect our profitability.
Risks Related to Regulatory and Legal Matters
We are subject to increasing compliance risks that could adversely affect our operating results.
As a global business, we are subject to laws and regulations in the U.S. and other countries in which we operate. International
sales and global operations require importing and exporting goods, software and technology, some of which have military
applications subjecting them to more stringent import-export controls across international borders on a regular basis. For example,
we sometimes initially must obtain licenses and authorizations from various U.S. Government agencies before we are permitted to
sell certain of our aerospace and defense products outside the U.S., and we are not always successful in obtaining these licenses or
authorizations in a timely manner. Both U.S. and foreign laws and regulations applicable to us have been increasing in scope and
complexity. For example, both U.S. and foreign governments and government agencies regulate the aviation industry, and they
have previously and may in the future impose new regulations for additional aircraft security or other requirements or restrictions,
including, for example, restrictions and/or fees related to carbon emissions levels. Changes in environmental and climate change
laws and regulations, including laws relating to greenhouse gas emissions, 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.
Certain of our products are subject to laws regulating consumer products and could be subject to repurchase or recall as a
result of safety issues.
As a distributor of consumer products in the U.S., certain of our products are subject to the Consumer Product Safety Act, which
empowers the U.S. Consumer Product Safety Commission (CPSC) to exclude from the market products that are found to be
unsafe or hazardous. Under certain circumstances, the CPSC 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. We also may voluntarily take such action and, from
time to time, have done so, but within strictures recommended by the CPSC. The CPSC also can impose fines or penalties on a
manufacturer for non-compliance with its requirements. Furthermore, failure to timely notify the CPSC of a potential safety
hazard can result in significant fines being assessed against us. Any repurchases or recalls of our products or an imposition of
fines or penalties could be costly to us and could damage the reputation or the value of our brands. Additionally, laws regulating
certain consumer products exist in some states, as well as in other countries in which we sell our products, and more restrictive
laws and regulations could be adopted in the future.
Increased regulation related to global climate change could negatively affect our business.
Increased public awareness and concern regarding global climate change may result in more international, regional and/or federal
requirements to reduce or mitigate global warming and these regulations could mandate stricter limits on greenhouse gas
emissions. If environmental or climate change laws or regulations are either changed or adopted and impose significant
operational restrictions and compliance requirements upon our business or our products, they could negatively impact our
business, capital expenditures, results of operations, financial condition and competitive position.
Textron 2020 Annual Report 15
15
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 are regularly subject to liability claims arising
from accidents involving our products, including claims for serious personal injuries or death caused by weather or by pilot, driver
or user error. In the case of litigation matters for which reserves have not been established because the loss is not deemed
probable, it is reasonably possible that such claims could be decided against us and could require us to pay damages or make other
expenditures in amounts that are not presently estimable. In addition, we cannot be certain that our reserves are adequate and that
our insurance coverage will be sufficient to cover one or more substantial claims. Furthermore, we may not be able to obtain
insurance coverage at acceptable levels and costs in the future. Litigation is inherently unpredictable, and we could incur
judgments, receive adverse arbitration awards or enter into settlements for current or future claims that could adversely affect our
results of operations in any particular period.
Intellectual property infringement claims of others and the inability to protect our intellectual property rights could harm our
business and our customers.
Intellectual property infringement claims are, from time to time, asserted by third parties against us or our customers. Any related
indemnification payments or legal costs we are obliged to pay on behalf of our businesses, our customers or other third parties can
be costly. Infringement claims also have resulted in legal restrictions on our businesses engaging in sales of allegedly infringing
products. If such a restriction were imposed upon a material product line, our business and results of operations could be
adversely impacted. In addition, we own the rights to many patents, trademarks, brand names, trade names and trade secrets that
are important to our business. The inability to enforce these intellectual property rights could have an adverse effect on our results
of operations. Additionally, our intellectual property could be at risk due to cybersecurity threats.
Risks Related to Human Capital
Our success is highly dependent on our ability to maintain a qualified workforce.
Our success is highly dependent upon our ability to maintain a workforce with the skills necessary for our businesses to succeed.
We need highly skilled personnel in multiple areas including, among others, engineering, manufacturing, information technology,
cybersecurity, flight operations, business development and strategy and management. From time to time we face challenges that
may impact employee retention such as workforce reductions and facility consolidations and closures. In addition, some of our
most experienced employees are retirement-eligible. To the extent that we lose experienced personnel through retirement or
otherwise, it is critical for us to develop other employees, hire new qualified employees and successfully manage the transfer of
critical knowledge. Competition for skilled employees is intense, and we may incur higher labor, recruiting and/or training costs
in order to attract and retain employees with the requisite skills. We may not be successful in hiring or retaining such employees
which could adversely impact our business and results of operations.
The increasing costs of certain employee and retiree benefits could adversely affect our results.
Our results of operations and cash flows may be adversely impacted by increasing costs and funding requirements related to our
employee benefit plans. The obligation for our defined benefit pension plans is driven by, among other things, our assumptions of
the expected long-term rate of return on plan assets and the discount rate used for future payment obligations. Additionally, as
part of our annual evaluation of these plans, significant changes in our assumptions, due to changes in economic, legislative and/
or demographic experience or circumstances, or changes in our actual investment returns could negatively impact the funded
status of our plans requiring us to substantially increase our pension liability with a resulting decrease in shareholders’ equity.
Also, changes in pension legislation and regulations could increase the cost associated with our defined benefit pension plans.
Our business could be adversely affected by strikes or work stoppages and other labor issues.
Approximately 6,800, 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, from time to time we experience work stoppages, which can negatively impact our ability to
manufacture our products on a timely basis, resulting in strain on our relationships with our customers, loss or delay of revenues
and/or increased cost. 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.
Item 1B. Unresolved Staff Comments
None.
16 Textron 2020 Annual Report
16
Item 2. Properties
On January 2, 2021, we operated a total of 54 plants located throughout the U.S. and 49 plants outside the U.S. We own 59 plants
and lease the remainder for a total manufacturing space of approximately 23.9 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
As previously reported in Textron’s Annual Report on Form 10-K for the fiscal year ended January 4, 2020, on August 22, 2019,
a purported shareholder class action lawsuit was filed in the United States District Court in the Southern District of New York
against Textron, its Chairman and Chief Executive Officer and its Chief Financial Officer. The suit, filed by Building Trades
Pension Fund of Western Pennsylvania, alleges that the defendants violated the federal securities laws by making materially false
and misleading statements and concealing material adverse facts related to the Arctic Cat acquisition and integration. The
complaint seeks unspecified compensatory damages. On November 12, 2019, the Court appointed IWA Forest Industry Pension
Fund (IWA) as the sole lead plaintiff in the case. On December 24, 2019, IWA filed an Amended Complaint in the now entitled
In re Textron Inc. Securities Litigation. On February 14, 2020, IWA filed a Second Amended Complaint, and on March 6, 2020,
Textron filed a motion to dismiss the Second Amended Complaint. On July 20, 2020, the Court granted Textron’s motion to
dismiss and closed the case. On August 18, 2020, plaintiffs filed a notice of appeal contesting the dismissal, which Textron has
opposed. That appeal remains pending.
As previously reported in Textron’s Annual Report on Form 10-K for the fiscal year ended December 31, 2016, 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 Textron Financial Corporation (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. 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. On September 27, 2018, after
reconsidering the remanded claims which were based upon civil conspiracy and intentional fraudulent transfer, the trial court
granted partial summary judgment in favor of TFC, dismissing the Trustee’s civil conspiracy claim, as well as a portion of the
Trustee’s claim for intentional fraudulent transfer, leaving only a portion of the intentional fraudulent transfer claim to be
adjudicated. A trial for this matter was held in February 2020, and on March 10, 2020, the jury returned a verdict in favor of TFC
and against the Trustee. On the same day, the Court entered judgment in TFC's favor. On March 23, 2020, the Trustee filed a
notice of appeal, which Textron has opposed. That appeal remains pending.
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.
Textron 2020 Annual Report 17
17
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
January 2, 2021, there were approximately 7,600 record holders of Textron common stock.
Issuer Repurchases of Equity Securities
The following provides information about our fourth quarter 2020 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 4, 2020 – November 7, 2020
November 8, 2020 – December 5, 2020
December 6, 2020 – January 2, 2021
Total
Total
Number of
Shares
Purchased *
Average Price
Paid per Share
(excluding
commissions)
38.60
43.56
47.49
45.58
Total Number of
Shares Purchased as
part of Publicly
Announced Plan *
75
1,205
1,555
2,835
Maximum
Number of Shares
that may yet be
Purchased under
the Plan
24,050
22,845
21,290
75 $
1,205
1,555
2,835 $
* These shares were purchased pursuant to a plan authorizing the repurchase of up to 25 million shares of Textron common stock that was announced on
February 25,2020, which had no expiration date.
Stock Performance Graph
The following graph compares the total return on a cumulative basis at the end of each year of $100 invested in our common stock
on December 31, 2015 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 Inc.
S&P 500
S&P 500 A&D
S&P 500 Industrials
$250.00
$200.00
$150.00
$100.00
$50.00
$0.00
Textron Inc.
S&P 500
S&P 500 A&D
S&P 500 Industrials
$
2015
100.00 $
100.00
100.00
100.00
2016
115.82 $
111.96
118.90
110.12
2017
135.19 $
136.40
168.11
134.97
2018
109.20 $
129.31
152.51
129.69
2019
107.20 $
171.74
209.19
173.16
2020
116.07
203.04
169.05
212.71
18 Textron 2020 Annual Report
18
Item 6. Selected Financial Data
(Dollars in millions, except per share amounts)
Revenues (a)
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 (b)
Inventory charge (c)
Gain on business disposition (d)
Income tax (expense) benefit (e)
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
2020
2019
2018
2017
2016
3,974 $
3,309
1,313
3,000
55
11,651 $
5,187 $
3,254
1,325
3,798
66
13,630 $
4,971 $
3,180
1,464
4,291
66
13,972 $
4,686 $
3,317
1,840
4,286
69
14,198 $
16 $
462
152
111
10
751
(122)
(145)
(147)
(55)
—
27
309 $
1.35 $
1.35 $
449 $
435
141
217
28
1,270
(110)
(146)
(72)
—
—
(127)
815 $
445 $
425
156
218
23
1,267
(119)
(135)
(73)
—
444
(162)
1,222 $
303 $
415
139
290
22
1,169
(132)
(145)
(130)
—
—
(456)
306 $
3.52 $
3.50 $
4.88 $
4.83 $
1.15 $
1.14 $
228,536
228,979
231,315
232,709
250,196
253,237
266,380
268,750
0.08 $
25.81 $
48.33 $
15,443 $
3,707 $
662 $
5,845 $
21%
39%
0.08 $
24.21 $
44.74 $
15,018 $
3,124 $
686 $
5,518 $
26%
36%
0.08 $
22.04 $
45.65 $
14,264 $
3,066 $
718 $
5,192 $
29%
37%
0.08 $
21.60 $
56.59 $
15,340 $
3,088 $
824 $
5,647 $
26%
35%
4,921
3,239
1,756
3,794
78
13,788
389
386
186
329
19
1,309
(172)
(138)
(123)
—
—
(33)
843
3.11
3.09
270,774
272,365
0.08
20.62
48.56
15,358
2,777
903
5,574
23%
33%
317 $
325 $
339 $
346 $
369 $
358 $
423 $
362 $
446
368
$
$
$
$
$
$
$
$
$
$
$
$
$
$
$
(a) At the beginning of 2018, we adopted ASC 606 using a modified retrospective basis and as a result, the comparative information has not been restated and is
reported under the accounting standards in effect for these years.
(b)
In 2020, special charges included $108 million recorded under a restructuring plan, primarily impacting the TRU Simulation + Training (TRU) business
within the Textron Systems segment, and the Textron Aviation and Industrial segments, and $39 million of charges related to the impairment of indefinite-
lived trade name intangible assets, primarily in the Textron Aviation segment. In 2019, $72 million was recorded under a restructuring plan principally
impacting the Industrial and Textron Aviation segments. In 2018, $73 million was recorded under a restructuring plan for the Specialized Vehicles
businesses within our Industrial segment. In 2017 and 2016, special charges included $90 million and $123 million, respectively, related to our 2016
restructuring plan and $40 million in 2017, for a restructuring plan related to the Arctic Cat acquisition.
(c)
In connection with the 2020 restructuring plan, we ceased manufacturing at TRU's facility in Montreal, Canada, resulting in the production suspension of its
commercial air transport simulators. As a result of market conditions and the cessation of manufacturing at this facility, we incurred a $55 million charge to
write-down the related inventory to its net realizable value.
(d)
In 2018, we completed the sale of the Tools and Test Equipment product line which resulted in an after-tax gain of $419 million.
(e)
In 2017, income tax expense included a $266 million charge to reflect our provisional estimate of the net impact of the Tax Cuts and Jobs Act. We completed
our analysis of this legislation in the fourth quarter of 2018 and recorded a $14 million benefit. In 2016, we recognized a 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.
Textron 2020 Annual Report 19
19
Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations
Overview
During 2020, the global pandemic caused by the novel coronavirus, known as “COVID-19”, led to worldwide facility closures,
workforce disruptions, supply chain destabilizations, reduced demand for many products and services, volatility in the capital
markets and uncertainty in the economic outlook. Our operations experienced and continue to experience various degrees of
disruption due to the unprecedented conditions surrounding the pandemic. While some of our commercial manufacturing facilities
had temporarily closed during the first quarter of 2020 through the latter part of the second quarter due to reduced demand for
certain of our products, substantially all manufacturing activities had resumed in the third quarter. In the second half of the year,
our commercial businesses have generally experienced an increase in customer demand compared with the first half of 2020.
However, demand has not returned to pre-pandemic levels.
In the first quarter of 2020, following the onset of the pandemic, we strengthened our cash position by issuing $650 million in
senior debt and by borrowing $500 million under a new 364-Day Term Loan Credit Agreement. We also temporarily suspended
share repurchases and took other measures to reduce costs and conserve cash, including employee furloughs at many of our
commercial businesses and at corporate headquarters, reducing capital expenditures and delaying certain research and
development projects. In the second quarter, we continued most of the measures taken in the first quarter to reduce costs and
conserve cash and initiated a restructuring plan at certain of our businesses to further reduce costs. During the remainder of the
year, we continued our focus on managing our businesses through the impacts of the pandemic while investing in future products
and technologies. Key financial highlights for 2020 include:
•
Generated $833 million of net cash from operating activities from our manufacturing businesses.
• Maintained a strong cash position with $2.3 billion in cash and equivalents at the end of the year.
•
•
Invested $317 million in capital expenditures and $549 million in research and development projects.
Repurchased 4.1 million shares of our common stock.
While we expect our commercial businesses, which have been adversely impacted by the pandemic, to slowly recover with the
broader economic recovery, we cannot reasonably estimate when customer demand for our products and services may return to
pre-pandemic levels. There are many uncertainties regarding the pandemic, and we continue to closely monitor the impact of the
pandemic on all aspects of our business, including how it is impacting our customers, employees, suppliers, vendors,
business partners and distribution channels. See Item 1A. Risk Factors for additional risks and uncertainties related to the
pandemic’s impact on our business. The ultimate extent of the effects of the pandemic on the company and our consolidated
financial position is uncertain and will depend on future developments, including the length and severity of the pandemic, and
such effects could exist for an extended period of time, even after the pandemic ends.
For an overview of our business segments, including a discussion of our major products and services, refer to Item 1. Business. A
discussion of our financial condition and operating results for 2020 compared with 2019 is provided below, while a discussion of
2019 compared with 2018 can be found in Item 7. Management’s Discussion and Analysis of Financial Condition and Results of
Operations of our Annual Report on Form 10-K for the year ended January 4, 2020. The following discussion should be read in
conjunction with our Consolidated Financial Statements and related Notes included in Item 8. Financial Statements and
Supplementary Data.
Consolidated Results of Operations
(Dollars in millions)
Revenues
Cost of sales
Gross margin as a percentage of Manufacturing revenues
Selling and administrative expense
Interest expense
$
2020
11,651 $
10,094
13.0%
1,045
166
2019
13,630 $
11,406
15.9%
1,152
171
2018
13,972
11,594
16.6%
1,275
166
2020
(15) %
(12) %
(9) %
(3) %
2019
(2) %
(2) %
(10) %
3 %
% Change
20 Textron 2020 Annual Report
20
Revenues
Revenues decreased $2.0 billion, 15%, in 2020, compared with 2019. The revenue decrease included the following factors:
•
•
•
Textron Aviation revenues were lower by $1.2 billion, largely due to lower Citation jet and commercial turboprop
volume of $916 million, reflecting a decline in demand related to the pandemic, and lower aftermarket volume of $337
million, reflecting lower aircraft utilization resulting from the pandemic.
Industrial revenues were lower by $798 million, largely due to lower volume in the Fuel Systems and Functional
Components product line, primarily due to manufacturing facility closures in the first half of 2020, and lower volume
and mix in the Specialized Vehicles product line, primarily reflecting a decline in demand related to the pandemic.
Bell revenues were higher by $55 million, due to higher military revenues of $225 million, largely reflecting spares and
logistics support, partially offset by lower commercial revenues.
Cost of Sales and Selling and Administrative Expense
Cost of sales decreased $1.3 billion, 12%, in 2020, compared with 2019, largely due to lower net volume and mix described
above. The decrease in cost of sales was partially offset by idle facility costs of $142 million, primarily at the Textron Aviation
segment, reflecting unfavorable absorption of manufacturing costs attributable to abnormally low production levels resulting from
the pandemic and temporary manufacturing facility closures, and a $55 million inventory charge related to the TRU business
discussed in Note 17 to the Consolidated Financial Statements in Item 8. Financial Statements and Supplementary Data. Gross
margin as a percentage of Manufacturing revenues decreased 290 basis points in 2020, compared with 2019, primarily due to
lower margin at the Textron Aviation segment reflecting unfavorable impacts from the pandemic, including the idle facility costs
and inventory valuation charges.
Selling and administrative expense decreased $107 million, 9%, in 2020, compared with 2019, primarily due to cost reduction
activities across our manufacturing segments, principally at the Textron Aviation and Industrial segments.
Special Charges
Special charges of $147 million and $72 million in 2020 and 2019, respectively, primarily include restructuring activities and
intangible asset impairment charges as described in Note 17 to the Consolidated Financial Statements in Item 8. Financial
Statements and Supplementary Data.
Income Taxes
Effective tax rate
2020
(9.6%)
2019
13.5%
2018
11.7%
In 2020, the effective tax rate of (9.6)% was lower than the U.S. federal statutory tax rate of 21%, primarily due to an audit
settlement with respect to certain state income tax returns that resulted in a $52 million benefit and the favorable impact of
research credits. In 2019, the effective tax rate of 13.5% was lower than the U.S. federal statutory tax rate of 21%, primarily due
to $61 million in benefits recognized for additional tax credits related to prior years as a result of the completion of a research and
development tax credit analysis.
For a full reconciliation of our effective tax rate to the U.S. federal statutory tax rate, see Note 18 to the Consolidated Financial
Statements in Item 8. Financial Statements and Supplementary Data.
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, gains/
losses on major business dispositions, special charges and an inventory charge related to the 2020 COVID-19 restructuring plan,
as discussed in Note 17 to the Consolidated Financial Statements in Item 8. Financial Statements and Supplementary Data. The
measurement for the Finance segment includes interest income and expense along with intercompany interest income and
expense. Operating expenses for the Manufacturing segments include cost of sales, selling and administrative expense and other
non-service components of net periodic benefit cost/(credit), and exclude certain corporate expenses and special charges.
In our discussion of comparative results for the Manufacturing group, changes in revenues and segment profit for our commercial
businesses typically are expressed in terms of volume and mix, pricing, foreign exchange, acquisitions and dispositions, inflation
and performance. For revenues, volume and mix represents changes in revenues from increases or decreases in the number of
units delivered or services provided and the composition of products and/or services sold. For segment profit, volume and mix
represents a change due to the number of units delivered or services provided and the composition of products and/or services
Textron 2020 Annual Report 21
21
sold at different profit margins. Pricing represents changes in unit pricing. Foreign exchange is the change resulting from
translating foreign-denominated amounts into U.S. dollars at exchange rates that are different from the prior period. Revenues
generated by acquired businesses are reflected in Acquisitions for a twelve-month period, while reductions in revenues and
segment profit from the sale of businesses are reflected as Dispositions. Inflation represents higher material, wages, benefits,
pension service cost or other costs. Performance reflects an increase or decrease in research and development, depreciation,
selling and administrative costs, warranty, product liability, quality/scrap, labor efficiency, overhead, non-service pension cost/
(credit), product line profitability, start-up, ramp up and cost-reduction initiatives or other manufacturing inputs.
Approximately 30% of our 2020 revenues were derived from contracts with the U.S. Government, including those under the U.S.
Government-sponsored foreign military sales program. For our segments that contract with the U.S. Government, changes in
revenues related to these contracts are expressed in terms of volume. Changes in segment profit for these contracts are typically
expressed in terms of volume and mix and performance; these include cumulative catch-up adjustments associated with a)
revisions to the transaction price that may reflect contract modifications or changes in assumptions related to award fees and other
variable consideration or b) changes in the total estimated costs at completion due to improved or deteriorated operating
performance.
Textron Aviation
(Dollars in millions)
Revenues:
Aircraft
Aftermarket parts and services
Total revenues
Operating expenses
Segment profit
Profit margin
Backlog
2020
2019
2018
2020
2019
% Change
$
$
2,714 $
1,260
3,974
3,958
16
0.4%
1,603 $
3,592 $
1,595
5,187
4,738
449
8.7%
1,714 $
3,435
1,536
4,971
4,526
445
9.0%
1,791
(24) %
(21) %
(23) %
(16) %
(96) %
5 %
4 %
4 %
5 %
1 %
(6) %
(4) %
Textron Aviation Revenues and Operating Expenses
Factors contributing to the 2020 year-over-year revenue change are provided below:
(In millions)
Volume and mix
Pricing
Total change
2020 versus
2019
(1,218)
5
(1,213)
$
$
Textron Aviation’s revenues decreased $1.2 billion, 23%, in 2020, compared with 2019, largely due to lower Citation jet volume
of $688 million and lower commercial turboprop volume of $228 million, reflecting a decline in demand related to the pandemic,
and lower aftermarket volume of $337 million, reflecting lower aircraft utilization resulting from the pandemic. We delivered
132 Citation jets and 113 commercial turboprops in 2020, compared with 206 Citation jets and 176 commercial turboprops in
2019.
Textron Aviation’s operating expenses decreased $780 million, 16%, in 2020, compared with 2019, largely due to lower volume
and mix described above. A favorable impact from cost reduction activities, including employee furloughs and other actions, was
more than offset by $115 million of idle facility costs recognized in the period and higher inventory valuation charges of $60
million, largely resulting from the pandemic. Idle facility costs reflect unfavorable absorption of manufacturing costs attributable
to abnormally low production levels resulting from the pandemic and temporary manufacturing facility closures.
22 Textron 2020 Annual Report
22
Textron Aviation Segment Profit
Textron Aviation Segment Profit
Textron Aviation Segment Profit
Factors contributing to 2020 year-over-year segment profit change are provided below:
Factors contributing to 2020 year-over-year segment profit change are provided below:
Factors contributing to 2020 year-over-year segment profit change are provided below:
(In millions)
(In millions)
(In millions)
Volume and mix
Volume and mix
Volume and mix
Inflation and pricing
Inflation and pricing
Inflation and pricing
Performance
Performance
Performance
Total change
Total change
Total change
2020 versus
2020 versus
2019
2019
2020 versus
2019
(347)
(347)
(347)
(45)
(45)
(45)
(41)
(41)
(41)
(433)
(433)
(433)
$
$
$
$
$
$
Textron Aviation’s segment profit decreased $433 million, in 2020, compared with 2019, due to the impact from lower volume
Textron Aviation’s segment profit decreased $433 million, in 2020, compared with 2019, due to the impact from lower volume
Textron Aviation’s segment profit decreased $433 million, in 2020, compared with 2019, due to the impact from lower volume
and mix described above. Performance includes $115 million of idle facility costs, described above, and higher inventory
and mix described above. Performance includes $115 million of idle facility costs, described above, and higher inventory
and mix described above. Performance includes $115 million of idle facility costs, described above, and higher inventory
valuation charges of $60 million, largely resulting from the pandemic, partially offset by a favorable impact from cost reduction
valuation charges of $60 million, largely resulting from the pandemic, partially offset by a favorable impact from cost reduction
valuation charges of $60 million, largely resulting from the pandemic, partially offset by a favorable impact from cost reduction
activities described above.
activities described above.
activities described above.
Bell
Bell
Bell
Military aircraft and support programs
Military aircraft and support programs
Military aircraft and support programs
Commercial helicopters, parts and services
Commercial helicopters, parts and services
Commercial helicopters, parts and services
(Dollars in millions)
(Dollars in millions)
(Dollars in millions)
Revenues:
Revenues:
Revenues:
Total revenues
Total revenues
Total revenues
Operating expenses
Operating expenses
Operating expenses
Segment profit
Segment profit
Segment profit
Profit margin
Profit margin
Profit margin
Backlog
Backlog
Backlog
2020
2020
2020
2019
2019
2019
$
$
$
$
$
$
2,213 $
2,213 $
2,213 $
1,096
1,096
1,096
3,309
3,309
3,309
2,847
2,847
2,847
462
462
462
14.0%
14.0%
14.0%
5,342 $
5,342 $
5,342 $
1,988 $
1,988 $
1,988 $
1,266
1,266
1,266
3,254
3,254
3,254
2,819
2,819
2,819
435
435
435
13.4%
13.4%
13.4%
6,902 $
6,902 $
6,902 $
2018
2018
2018
2,030
2,030
2,030
1,150
1,150
1,150
3,180
3,180
3,180
2,755
2,755
2,755
425
425
425
13.4%
13.4%
13.4%
5,837
5,837
5,837
% Change
% Change
% Change
2020
2020
2020
11 %
11 %
11 %
(13) %
(13) %
(13) %
2 %
2 %
2 %
1 %
1 %
1 %
6 %
6 %
6 %
(23) %
(23) %
(23) %
2019
2019
2019
(2) %
(2) %
(2) %
10 %
10 %
10 %
2 %
2 %
2 %
2 %
2 %
2 %
2 %
2 %
2 %
18 %
18 %
18 %
Bell’s major U.S. Government programs at this time are the V-22 tiltrotor aircraft and the H-1 helicopter platforms, which are
Bell’s major U.S. Government programs at this time are the V-22 tiltrotor aircraft and the H-1 helicopter platforms, which are
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 and support stage and represent a significant portion of Bell’s revenues from the U.S. Government.
both in the production and support stage and represent a significant portion of Bell’s revenues from the U.S. Government.
both in the production and support stage and represent a significant portion of Bell’s revenues from the U.S. Government.
Bell Revenues and Operating Expenses
Bell Revenues and Operating Expenses
Bell Revenues and Operating Expenses
Factors contributing to the 2020 year-over-year revenue change are provided below:
Factors contributing to the 2020 year-over-year revenue change are provided below:
Factors contributing to the 2020 year-over-year revenue change are provided below:
(In millions)
(In millions)
(In millions)
Volume and mix
Volume and mix
Volume and mix
Other
Other
Other
Total change
Total change
Total change
2020 versus
2020 versus
2019
2019
2020 versus
2019
41
41
41
14
14
14
55
55
55
$
$
$
$
$
$
Bell’s revenues increased $55 million, 2%, in 2020, compared with 2019, due to higher military revenues of $225 million, largely
Bell’s revenues increased $55 million, 2%, in 2020, compared with 2019, due to higher military revenues of $225 million, largely
Bell’s revenues increased $55 million, 2%, in 2020, compared with 2019, due to higher military revenues of $225 million, largely
reflecting spares and logistics support, partially offset by lower commercial revenues. We delivered 140 commercial helicopters
reflecting spares and logistics support, partially offset by lower commercial revenues. We delivered 140 commercial helicopters
reflecting spares and logistics support, partially offset by lower commercial revenues. We delivered 140 commercial helicopters
in 2020, compared with 201 commercial helicopters in 2019.
in 2020, compared with 201 commercial helicopters in 2019.
in 2020, compared with 201 commercial helicopters in 2019.
Bell’s operating expenses increased $28 million, 1%, in 2020, compared with 2019, primarily due to higher net volume and mix
Bell’s operating expenses increased $28 million, 1%, in 2020, compared with 2019, primarily due to higher net volume and mix
Bell’s operating expenses increased $28 million, 1%, in 2020, compared with 2019, primarily due to higher net volume and mix
as described above.
as described above.
as described above.
Bell Segment Profit
Bell Segment Profit
Bell Segment Profit
Factors contributing to 2020 year-over-year segment profit change are provided below:
Factors contributing to 2020 year-over-year segment profit change are provided below:
Factors contributing to 2020 year-over-year segment profit change are provided below:
(In millions)
(In millions)
(In millions)
Volume and mix
Volume and mix
Volume and mix
Performance and other
Performance and other
Performance and other
Total change
Total change
Total change
2020 versus
2020 versus
2019
2019
2020 versus
2019
16
16
16
11
11
11
27
27
27
$
$
$
$
$
$
Bell’s segment profit increased $27 million, 6%, in 2020, compared with 2019, primarily due to the impact from higher volume
Bell’s segment profit increased $27 million, 6%, in 2020, compared with 2019, primarily due to the impact from higher volume
Bell’s segment profit increased $27 million, 6%, in 2020, compared with 2019, primarily due to the impact from higher volume
and mix described above, and a favorable impact from performance and other of $11 million. Performance and other includes
and mix described above, and a favorable impact from performance and other of $11 million. Performance and other includes
and mix described above, and a favorable impact from performance and other of $11 million. Performance and other includes
Textron 2020 Annual Report 23
23
23
23
lower research and development and selling and administrative costs, partially offset by $25 million in lower net favorable
program adjustments.
Bell Backlog
Bell’s backlog decreased $1.6 billion, 23%, in 2020, primarily as a result of revenues recognized on our U.S. Government
contracts in excess of new contracts received.
Textron Systems
(Dollars in millions)
Revenues
Operating expenses
Segment profit
Profit margin
Backlog
2020
1,313 $
1,161
152
11.6%
2,556 $
2019
1,325 $
1,184
141
10.6%
1,211 $
2018
1,464
1,308
156
10.7%
1,469
$
$
% Change
2020
(1) %
(2) %
8 %
2019
(9) %
(9) %
(10) %
111 %
(18) %
Textron Systems Revenues and Operating Expenses
Factors contributing to the 2020 year-over-year revenue change are provided below:
(In millions)
Volume
Other
Total change
2020 versus
2019
(16)
4
(12)
$
$
Revenues at Textron Systems decreased $12 million in 2020, compared with 2019, primarily due to lower volume of $36 million
in the Simulation, Training and Other product line and $29 million in the Marine and Land Systems product line, partially offset
by higher volume of $49 million in the Unmanned Systems product line. Within the Simulation, Training and Other product line,
lower volume of $107 million in the TRU Simulation + Training business, largely due to a decline in demand and order
cancellations related to the pandemic, was largely offset by higher volumes at other businesses included in this product line.
Textron Systems’ operating expenses decreased $23 million, 2%, in 2020, compared with 2019, primarily due to lower net
volume described above.
Textron Systems Segment Profit
Factors contributing to 2020 year-over-year segment profit change are provided below:
(In millions)
Volume and mix
Performance and other
Total change
2020 versus
2019
13
(2)
11
$
$
Textron Systems’ segment profit increased $11 million, 8%, in 2020, compared with 2019, primarily due to favorable product
mix. Performance and other includes the impact of an $18 million gain recognized in the second quarter of 2019 related to our
contribution of assets to a training business formed with FlightSafety International, Inc.
Textron Systems Backlog
Backlog at Textron Systems’ increased $1.3 billion in 2020, primarily due to new contracts received in excess of revenues
recognized across all product lines.
24 Textron 2020 Annual Report
24
Industrial
(Dollars in millions)
Revenues:
Fuel Systems and Functional Components
Specialized Vehicles
Tools and Test Equipment
Total revenues
Operating expenses
Segment profit
Profit margin
2020
2019
2018
2020
2019
% Change
$
1,751 $
1,249
—
3,000
2,889
111
3.7%
2,237 $
1,561
—
3,798
3,581
217
5.7%
2,352
1,691
248
4,291
4,073
218
5.1%
(22) %
(20) %
— %
(21) %
(19) %
(49) %
(5) %
(8) %
(100) %
(11) %
(12) %
— %
Industrial Revenues and Operating Expenses
Factors contributing to the 2020 year-over-year revenue change are provided below:
(In millions)
Volume and mix
Foreign exchange
Other
Total change
2020 versus
2019
(817)
7
12
(798)
$
$
Industrial segment revenues decreased $798 million, 21%, in 2020, compared with 2019, largely due to lower volume and mix, in
both product lines. Lower volume in the Fuel Systems and Functional Components product line was primarily related to
manufacturing facility closures in the first half of 2020 as a result of the pandemic. As our OEM customers reopened and resumed
production, all of our manufacturing facilities had reopened by the end of the second quarter. In the Specialized Vehicles product
line, lower volume and mix was primarily related to reduced demand in the ground support equipment business, which has been
impacted by the reduction in global air travel, as well as reduced demand in certain consumer and commercial markets that have
been impacted by the pandemic.
Operating expenses for the Industrial segment decreased $692 million, 19%, in 2020 compared with 2019, primarily due to lower
volume and mix described above.
Industrial Segment Profit
Factors contributing to 2020 year-over-year segment profit change are provided below:
(In millions)
Volume and mix
Performance
Pricing and inflation
Foreign exchange
Total change
2020 versus
2019
(195)
61
26
2
(106)
$
$
Segment profit for the Industrial segment decreased $106 million in 2020, compared with 2019, largely resulting from lower
volume and mix described above, partially offset by favorable performance of $61 million. Performance includes the impact from
cost reduction activities, partially offset by idle facility costs of $27 million recognized in 2020, reflecting unfavorable absorption
of manufacturing costs attributable to abnormally low production levels resulting from the pandemic and temporary
manufacturing facility closures.
Textron 2020 Annual Report 25
25
Finance
(In millions)
Revenues
Segment profit
$
2020
55 $
10
2019
66 $
28
2018
66
23
Finance segment revenues decreased $11 million in 2020, compared with 2019, and segment profit decreased $18 million in 2020,
compared with 2019, primarily due to higher provision for loan losses. The following table reflects information about the Finance
segment’s credit performance related to finance receivables.
(Dollars in millions)
Finance receivables
Allowance for credit losses
Ratio of allowance for credit losses to 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
$
January 2,
2021
779 $
35
4.49 %
93
11.94 %
29
3.72 %
January 4,
2020
707
25
3.54 %
39
5.52 %
17
2.40 %
The Finance segment has provided temporary payment relief through loan modifications at the request of certain customers and
continues to work with certain customers to provide extended payment relief as needed. If the current economic conditions
continue to persist or worsen, we may experience increased customer delinquencies, however, we believe our allowance for credit
losses adequately covers our exposure on these loans as our estimated collateral values largely exceed the outstanding loan
amounts. Loan modifications and key portfolio quality indicators are discussed in Note 4 to the Consolidated Financial Statements
in Item 8. Financial Statements and Supplementary Data.
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
January 2,
2021
January 4,
2020
$
$
2,146 $
3,707
5,845
9,552
21%
39%
108 $
662
1,181
3,124
5,518
8,642
26%
36%
176
686
The unprecedented conditions surrounding the COVID-19 pandemic led to volatility in the capital markets and uncertainty in the
economic outlook, in addition to causing various degrees of disruption in our operations. In light of these conditions, we have
strengthened our cash position since the onset of the pandemic by taking various measures to reduce costs and conserve cash, and
by increasing our borrowings as discussed below. Given our strengthened liquidity position and stabilization of the capital
markets in the second half of 2020, we reactivated our share repurchase plan in the fourth quarter. We believe that we will have
26 Textron 2020 Annual Report
26
sufficient cash to meet our needs based on our existing cash balances, the cash we expect to generate from our manufacturing
sufficient cash to meet our needs based on our existing cash balances, the cash we expect to generate from our manufacturing
operations and the availability of our existing credit facility.
operations and the availability of our existing credit facility.
Credit Facilities and Other Sources of Capital
Credit Facilities and Other Sources of Capital
Textron has a senior unsecured revolving credit facility for an aggregate principal amount of Textron has a senior unsecured
Textron has a senior unsecured revolving credit facility for an aggregate principal amount of Textron has a senior unsecured
revolving credit facility for an aggregate principal amount of $1.0 billion, of which up to $100 million is available for the issuance
revolving credit facility for an aggregate principal amount of $1.0 billion, of which up to $100 million is available for the issuance
of letters of credit. We may elect to increase the aggregate amount of commitments under the facility to up to $1.3 billion by
of letters of credit. We may elect to increase the aggregate amount of commitments under the facility to up to $1.3 billion by
designating an additional lender or by an existing lender agreeing to increase its commitment. The facility expires in October
designating an additional lender or by an existing lender agreeing to increase its commitment. The facility expires in October
2024, subject to up to two one-year extensions at our option with the consent of lenders representing a majority of the
2024, subject to up to two one-year extensions at our option with the consent of lenders representing a majority of the
commitments under the facility. At January 2, 2021 and January 4, 2020, there were no amounts borrowed against the facility and
commitments under the facility. At January 2, 2021 and January 4, 2020, there were no amounts borrowed against the facility and
there were $9 million and $10 million, respectively, of outstanding letters of credit issued under the facility.
there were $9 million and $10 million, respectively, of outstanding letters of credit issued under the facility.
We also maintain an effective shelf registration statement filed with the Securities and Exchange Commission that allows us to
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 2020, we issued $650 million in SEC-registered fixed-rate
issue an unlimited amount of public debt and other securities. In March 2020, we issued $650 million in SEC-registered fixed-rate
notes due June 2030, with an annual interest rate of 3.00%. In August 2020, we issued $500 million of SEC-registered fixed-rate
notes due June 2030, with an annual interest rate of 3.00%. In August 2020, we issued $500 million of SEC-registered fixed-rate
notes due March 2031 with an annual interest rate of 2.45%, the proceeds of which were used to repay $500 million of
notes due March 2031 with an annual interest rate of 2.45%, the proceeds of which were used to repay $500 million of
outstanding borrowings under a new 364-Day Term Loan Credit Agreement entered into in April 2020.
outstanding borrowings under a new 364-Day Term Loan Credit Agreement entered into in April 2020.
In September 2020, the Finance Group’s $150 million variable-rate loan due December 2020 was amended to extend its maturity
In September 2020, the Finance Group’s $150 million variable-rate loan due December 2020 was amended to extend its maturity
date to September 2021, with an option to extend for an additional year. The annual interest rate was modified from the London
date to September 2021, with an option to extend for an additional year. The annual interest rate was modified from the London
interbank offered rate (LIBOR) plus 1.125% to LIBOR plus 1.55%, which is an annual interest rate of 1.70% at January 2, 2021.
interbank offered rate (LIBOR) plus 1.125% to LIBOR plus 1.55%, which is an annual interest rate of 1.70% at January 2, 2021.
Manufacturing Group Cash Flows
Manufacturing Group Cash Flows
Cash flows from continuing operations for the Manufacturing group as presented in our Consolidated Statements of Cash Flows
Cash flows from continuing operations for the Manufacturing group as presented in our Consolidated Statements of Cash Flows
are summarized below:
are summarized below:
(In millions)
(In millions)
Operating activities
Operating activities
Investing activities
Investing activities
Financing activities
Financing activities
$
$
2020
2020
833 $
833 $
(277)
(277)
393
393
2019
2019
960 $
960 $
(329)
(329)
(439)
(439)
2018
2018
1,127
1,127
539
539
(1,738)
(1,738)
Cash flows from operating activities were $833 million in 2020 compared with $960 million in 2019, a decrease of $127 million.
Cash flows from operating activities were $833 million in 2020 compared with $960 million in 2019, a decrease of $127 million.
The change in cash flows primarily reflected an $893 million year over year increase in cash used to settle accounts payable,
The change in cash flows primarily reflected an $893 million year over year increase in cash used to settle accounts payable,
principally at the Textron Aviation segment, and lower earnings, partially offset by a $753 million reduction in cash used for
principally at the Textron Aviation segment, and lower earnings, partially offset by a $753 million reduction in cash used for
inventories, primarily at the Textron Aviation segment, a $299 million increase in cash flows from contract assets/liabilities,
inventories, primarily at the Textron Aviation segment, a $299 million increase in cash flows from contract assets/liabilities,
primarily at the Bell segment, and other favorable improvements in working capital accounts.
primarily at the Bell segment, and other favorable improvements in working capital accounts.
Net tax payments were $34 million and $120 million in 2020 and 2019, respectively. Pension contributions were $47 million and
Net tax payments were $34 million and $120 million in 2020 and 2019, respectively. Pension contributions were $47 million and
$51 million in 2020 and 2019, respectively.
$51 million in 2020 and 2019, respectively.
In 2020 and 2019, investing cash flows included capital expenditures of $317 million and $339 million, respectively. Cash flows
In 2020 and 2019, investing cash flows included capital expenditures of $317 million and $339 million, respectively. Cash flows
provided by financing activities in 2020 primarily included $1.1 billion of net proceeds from the issuance of long-term debt and
provided by financing activities in 2020 primarily included $1.1 billion of net proceeds from the issuance of long-term debt and
$377 million of proceeds from borrowings against corporate-owned life insurance policies. These cash inflows were partially
$377 million of proceeds from borrowings against corporate-owned life insurance policies. These cash inflows were partially
offset by $548 million of payments on long-term debt, $377 million of payments on borrowings against corporate-owned life
offset by $548 million of payments on long-term debt, $377 million of payments on borrowings against corporate-owned life
insurance policies, and $183 million of cash paid to repurchase an aggregate of 4.1 million shares of our common stock under
insurance policies, and $183 million of cash paid to repurchase an aggregate of 4.1 million shares of our common stock under
both a prior 2018 share repurchase plan and a 2020 share repurchase plan described below. In 2019, cash flows used in financing
both a prior 2018 share repurchase plan and a 2020 share repurchase plan described below. In 2019, cash flows used in financing
activities primarily included $503 million of cash paid to repurchase an aggregate of 10.0 million shares of our outstanding
activities primarily included $503 million of cash paid to repurchase an aggregate of 10.0 million shares of our outstanding
common stock under a 2018 share repurchase authorization and $252 million of payments on long-term debt, partially offset by
common stock under a 2018 share repurchase authorization and $252 million of payments on long-term debt, partially offset by
net proceeds of $301 million from the issuance of long-term debt.
net proceeds of $301 million from the issuance of long-term debt.
On February 25, 2020, our Board of Directors authorized the repurchase of up to 25 million shares of our common stock. This
On February 25, 2020, our Board of Directors authorized the repurchase of up to 25 million shares of our common stock. This
plan allows us to opportunistically repurchase shares and to continue our practice of repurchasing shares to offset the impact of
plan allows us to opportunistically repurchase shares and to continue our practice of repurchasing shares to offset the impact of
dilution from shares issued under compensation and benefit plans. The 2020 plan has no expiration date and replaced the prior
dilution from shares issued under compensation and benefit plans. The 2020 plan has no expiration date and replaced the prior
2018 share repurchase authorization.
2018 share repurchase authorization.
Dividend payments to shareholders totaled $18 million in both 2020 and 2019. In 2019, dividends of $50 million received from
Dividend payments to shareholders totaled $18 million in both 2020 and 2019. In 2019, dividends of $50 million received from
the Finance group are included within cash flows from operating activities for the Manufacturing group as they represent a return
the Finance group are included within cash flows from operating activities for the Manufacturing group as they represent a return
on investment.
on investment.
Textron 2020 Annual Report 27
27
27
Finance Group Cash Flows
The cash flows from continuing operations for the Finance group as presented in our Consolidated Statements of Cash Flows are
summarized below:
(In millions)
Operating activities
Investing activities
Financing activities
$
2020
13 $
(48)
(33)
2019
34 $
135
(113)
2018
14
99
(176)
The Finance group’s cash flows from operating activities were $13 million in 2020, compared with $34 million in 2019, a
decrease of $21 million, primarily reflecting higher net tax payments and lower earnings. Cash flows from investing activities
primarily included collections on finance receivables totaling $128 million and $277 million in 2020 and 2019, respectively,
partially offset by finance receivable originations of $195 million and $184 million, respectively.
Cash flows used in financing activities included payments on long-term and nonrecourse debt of $45 million and $51 million in
2020 and 2019, respectively. Dividend payments to the Manufacturing group totaled $50 million in 2019.
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
$
2020
769 $
(248)
360
2019
1,016 $
(266)
(502)
2018
1,109
620
(1,864)
Consolidated cash flows from operating activities were $769 million in 2020, compared with $1.0 billion in 2019, a decrease of
$247 million. The change in cash flows primarily reflected an $893 million year over year increase in cash used to settle accounts
payable, principally at the Textron Aviation segment, lower earnings, and a $134 million net cash outflow from captive finance
receivables, partially offset by a $726 million reduction in cash used for inventories, primarily at the Textron Aviation segment, a
$299 million increase in cash flows from contract assets/liabilities, primarily at the Bell segment, and other favorable
improvements in working capital accounts.
Net tax payments were $42 million and $121 million in 2020 and 2019, respectively. Pension contributions were $47 million and
$51 million in 2020 and 2019, respectively.
In 2020 and 2019, investing cash flows included capital expenditures of $317 million and $339 million, respectively. Cash flows
provided by financing activities in 2020 primarily included $1.1 billion of net proceeds from the issuance of long-term debt and
$377 million from borrowings against corporate-owned life insurance policies. These cash inflows were partially offset by $593
million of payments on outstanding debt, $377 million of payments on borrowings against corporate-owned life insurance
policies, and $183 million of share repurchases. In 2019, cash flows used in financing activities primarily included $503 million
of share repurchases and $303 million of payments on outstanding debt, partially offset by $301 million of proceeds from the
issuance of long-term debt.
Captive Financing and Other Intercompany Transactions
The Finance group provides financing primarily to purchasers of new and pre-owned Textron Aviation aircraft and Bell
helicopters manufactured by our Manufacturing group, otherwise known as captive financing. In the Consolidated Statements of
Cash Flows, cash received from customers is reflected as operating activities when received from third parties. However, in the
cash flow information provided for the separate borrowing groups, cash flows related to captive financing activities are reflected
based on the operations of each group. For example, when product is sold by our Manufacturing group to a customer and is
financed by the Finance group, the origination of the finance receivable is recorded within investing activities as a cash outflow in
the Finance group’s statement of cash flows. Meanwhile, in the Manufacturing group’s statement of cash flows, the cash received
from the Finance group on the customer’s behalf is recorded within operating cash flows as a cash inflow. Although cash is
transferred between the two borrowing groups, there is no cash transaction reported in the consolidated cash flows at the time of
the original financing. These captive financing activities, along with all significant intercompany transactions, are reclassified or
eliminated from the Consolidated Statements of Cash Flows.
28 Textron 2020 Annual Report
28
Reclassification adjustments included in the Consolidated Statements of Cash Flows are summarized below:
Reclassification adjustments included in the Consolidated Statements of Cash Flows are summarized below:
(In millions)
(In millions)
Reclassification adjustments from investing activities:
Reclassification adjustments from investing activities:
Finance receivable originations for Manufacturing group inventory sales
Finance receivable originations for Manufacturing group inventory sales
Cash received from customers
Cash received from customers
Other
Other
Total reclassification adjustments from investing activities
Total reclassification adjustments from investing activities
Reclassification adjustments from financing activities:
Reclassification adjustments from financing activities:
$
$
2020
2020
(195) $
(195) $
106
106
12
12
(77)
(77)
2019
2019
(184) $
(184) $
229
229
27
27
72
72
2018
2018
(177)
(177)
199
199
(4)
(4)
18
18
(50)
Dividends received by Manufacturing group from Finance group
(50)
Dividends received by Manufacturing group from Finance group
(32)
Total reclassification adjustments to cash flow from operating activities
(32)
Total reclassification adjustments to cash flow from operating activities
Under a Support Agreement between Textron and TFC, Textron is required to maintain a controlling interest in TFC. The
Under a Support Agreement between Textron and TFC, Textron is required to maintain a controlling interest in TFC. The
agreement, as amended in December 2015, also requires Textron to ensure that TFC maintains fixed charge coverage of no less
agreement, as amended in December 2015, also requires Textron to ensure that TFC maintains fixed charge coverage of no less
than 125% and consolidated shareholders' equity of no less than $125 million. There were no cash contributions required to be
than 125% and consolidated shareholders' equity of no less than $125 million. There were no cash contributions required to be
paid to TFC in 2020 and 2019 to maintain compliance with the support agreement.
paid to TFC in 2020 and 2019 to maintain compliance with the support agreement.
Contractual Obligations
Contractual Obligations
Manufacturing Group
Manufacturing Group
The following table summarizes the known contractual obligations, as defined by reporting regulations, of our Manufacturing
The following table summarizes the known contractual obligations, as defined by reporting regulations, of our Manufacturing
group as of January 2, 2021:
group as of January 2, 2021:
—
—
(77) $
(77) $
(50)
(50)
22 $
22 $
$
$
Payments Due by Period
$
$
$
$
Year 1
Years 4-5
Years 2-3
509 $
Payments Due by Period
More Than 5
Years
More Than 5
2,488
Years
—
2,488
266
—
232
266
308
232
129
308
96
129
3,519
96
3,519
Year 1
2,284
509 $
134
2,284
59
134
28
59
23
28
63
23
3,100 $
63
3,100 $
Total
3,731 $
Total
3,103
3,731 $
819
3,103
456
819
440
456
230
440
293
230
9,072 $
293
9,072 $
718 $
Years 4-5
45
718 $
194
45
68
194
50
68
36
50
30
36
1,141 $
30
1,141 $
16 $
Years 2-3
774
16 $
225
774
97
225
54
97
42
54
104
42
1,312 $
104
1,312 $
(In millions)
Debt
(In millions)
Purchase obligations not reflected in balance sheet
Debt
Interest on borrowings
Purchase obligations not reflected in balance sheet
Operating leases
Interest on borrowings
Pension benefits for unfunded plans
Operating leases
Postretirement benefits other than pensions
Pension benefits for unfunded plans
Other long-term liabilities
Postretirement benefits other than pensions
Total Manufacturing group
Other long-term liabilities
Total Manufacturing group
Pension and Postretirement Benefits
We maintain defined benefit pension plans and postretirement benefit plans other than pensions as described in Note 16 to the
Pension and Postretirement Benefits
Consolidated Financial Statements in Item 8. Financial Statements and Supplementary Data. Included in the above table are
We maintain defined benefit pension plans and postretirement benefit plans other than pensions as described in Note 16 to the
discounted estimated benefit payments we expect to make related to unfunded pension and other postretirement benefit plans.
Consolidated Financial Statements in Item 8. Financial Statements and Supplementary Data. Included in the above table are
Actual benefit payments are dependent on a number of factors, including mortality assumptions, expected retirement age, rate of
discounted estimated benefit payments we expect to make related to unfunded pension and other postretirement benefit plans.
compensation increases and medical trend rates, which are subject to change in future years. Our policy for funding pension plans
Actual benefit payments are dependent on a number of factors, including mortality assumptions, expected retirement age, rate of
is to make contributions annually, consistent with applicable laws and regulations; however, future contributions to our pension
compensation increases and medical trend rates, which are subject to change in future years. Our policy for funding pension plans
plans are not included in the above table. In 2021, we expect to make approximately $22 million of contributions to our funded
is to make contributions annually, consistent with applicable laws and regulations; however, future contributions to our pension
pension plans. Based on our current assumptions, which may vary with changes in market conditions, our current contribution for
plans are not included in the above table. In 2021, we expect to make approximately $22 million of contributions to our funded
each of the years from 2022 through 2025 is estimated to be approximately $51 million under the plan provisions in place at this
pension plans. Based on our current assumptions, which may vary with changes in market conditions, our current contribution for
time.
each of the years from 2022 through 2025 is estimated to be approximately $51 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
Other Long-Term Liabilities
under deferred compensation arrangements and estimated environmental remediation costs. Payments under deferred
Other long-term liabilities consist of undiscounted amounts in the Consolidated Balance Sheets that primarily include obligations
compensation arrangements have been estimated based on management’s assumptions of expected retirement age, mortality,
under deferred compensation arrangements and estimated environmental
remediation costs. Payments under deferred
stock price and rates of return on participant deferrals. The timing of cash flows associated with environmental remediation costs
compensation arrangements have been estimated based on management’s assumptions of expected retirement age, mortality,
is largely based on historical experience. Certain other long-term liabilities, such as deferred taxes, unrecognized tax benefits, and
stock price and rates of return on participant deferrals. The timing of cash flows associated with environmental remediation costs
reserves for product liability, warranty, product maintenance and litigation, have been excluded from the table due to the
is largely based on historical experience. Certain other long-term liabilities, such as deferred taxes, unrecognized tax benefits, and
uncertainty of the timing of payments combined with the absence of historical trends to be used as a predictor for such payments.
reserves for product liability, warranty, product maintenance and litigation, 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
Purchase Obligations
and services with defined terms as to price, quantity and delivery dates. Approximately 42% of the purchase obligations we
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 42% of the purchase obligations we
Textron 2020 Annual Report 29
29
29
disclose represent purchase orders issued for goods and services to be delivered under firm contracts with the U.S. Government
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.
for which we have full recourse under customary contract termination clauses.
Finance Group
Finance Group
The following table summarizes the known contractual obligations, as defined by reporting regulations, of our Finance group as
The following table summarizes the known contractual obligations, as defined by reporting regulations, of our Finance group as
of January 2, 2021:
of January 2, 2021:
(In millions)
(In millions)
Term debt
Term debt
Subordinated debt
Subordinated debt
Interest on borrowings
Interest on borrowings
Total Finance group
Total Finance group
Total
Total
368 $
368 $
294
294
140
140
802 $
802 $
Year 1
Year 1
13 $
13 $
—
—
15
15
28 $
28 $
Years 2-3
Years 2-3
332 $
332 $
—
—
19
19
351 $
351 $
$
$
$
$
Years 4-5
Years 4-5
More Than 5
More Than 5
Years
Years
3
3
294
294
94
94
391
391
20 $
20 $
—
—
12
12
32 $
32 $
Payments Due by Period
Payments Due by Period
Critical Accounting Estimates
Critical Accounting Estimates
To prepare our Consolidated Financial Statements to be in conformity with generally accepted accounting principles, we must
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
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
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
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 in Item 8. Financial Statements and
section should be read in conjunction with Note 1 to the Consolidated Financial Statements in Item 8. Financial Statements and
Supplementary Data, which includes other significant accounting policies.
Supplementary Data, which includes other significant accounting policies.
Revenue Recognition
Revenue Recognition
A substantial portion of our revenues is related to long-term contracts with the U.S. Government, including those under the U.S.
A substantial portion of our revenues is related to long-term contracts with the U.S. Government, including those under the U.S.
Government-sponsored foreign military sales program, for the design, development, manufacture or modification of aerospace
Government-sponsored foreign military sales program, for the design, development, manufacture or modification of aerospace
and defense products as well as related parts and services. We generally use the cost-to-cost method to measure progress for these
and defense products as well as related parts and services. We generally use the cost-to-cost method to measure progress for these
contracts because it best depicts the transfer of control to the customer that occurs as we incur costs on our contracts. Under this
contracts because it best depicts the transfer of control to the customer that occurs as we incur costs on our contracts. Under this
measure, the extent of progress towards completion is measured based on the ratio of costs incurred to date to the estimated costs
measure, the extent of progress towards completion is measured based on the ratio of costs incurred to date to the estimated costs
at completion of the performance obligation, and revenue is recorded proportionally as costs are incurred.
at completion of the performance obligation, and revenue is recorded proportionally as costs are incurred.
Approximately 75% of our 2020 revenues with the U.S. Government were under fixed-price and fixed-price incentive contracts.
Approximately 75% of our 2020 revenues with the U.S. Government were under fixed-price and fixed-price incentive contracts.
To the extent our actual costs vary from the estimates upon which the price was negotiated, we will generate more or less profit
To the extent our actual costs vary from the estimates upon which the price was negotiated, we will generate more or less profit
and could potentially incur a loss.
and could potentially incur a loss.
The transaction price for our contracts represents our best estimate of the consideration we will receive and includes assumptions
The transaction price for our contracts represents our best estimate of the consideration we will receive and includes assumptions
regarding variable consideration as applicable. Certain of our long-term contracts contain incentive fees or other provisions that
regarding variable consideration as applicable. Certain of our long-term contracts contain incentive fees or other provisions that
can either increase or decrease the transaction price. These variable amounts generally are awarded upon achievement of certain
can either increase or decrease the transaction price. These variable amounts generally are awarded upon achievement of certain
performance metrics, program milestones or cost targets and can be based upon customer discretion. We include estimated
performance metrics, program milestones or cost targets and can be based upon customer discretion. We include estimated
amounts in the transaction price to the extent it is probable that a significant reversal of cumulative revenue recognized will not
amounts in the transaction price to the extent it is probable that a significant reversal of cumulative revenue recognized will not
occur when the uncertainty associated with the variable consideration is resolved. Our estimates of variable consideration and
occur when the uncertainty associated with the variable consideration is resolved. Our estimates of variable consideration and
determination of whether to include estimated amounts in the transaction price are based largely on an assessment of our
determination of whether to include estimated amounts in the transaction price are based largely on an assessment of our
anticipated performance, historical performance, and all other information that is reasonably available to us.
anticipated performance, historical performance, and all other information that is reasonably available to us.
Due to the number of years it may take to complete many of our contracts and the scope and nature of the work required to be
Due to the number of years it may take to complete many of our contracts and the scope and nature of the work required to be
performed on those contracts, the estimation of total transaction price and costs at completion is complicated and subject to many
performed on those contracts, the estimation of total transaction price and costs at completion is complicated and subject to many
variables and, accordingly, is subject to change. In estimating total costs at completion, we are required to make numerous
variables and, accordingly, is subject to change. In estimating total costs at completion, we are required to make numerous
assumptions related to the complexity of design and related development work to be performed; engineering requirements;
assumptions related to the complexity of design and related development work to be performed; engineering requirements;
product performance; subcontractor performance; availability and cost of materials; labor productivity, availability and cost;
product performance; subcontractor performance; availability and cost of materials; labor productivity, availability and cost;
overhead and capital costs; manufacturing efficiencies; the length of time to complete the contract (to estimate increases in wages
overhead and capital costs; manufacturing efficiencies; the length of time to complete the contract (to estimate increases in wages
and prices for materials); and costs of satisfying offset obligations, among other variables. Our cost estimation process is based on
and prices for materials); and costs of satisfying offset obligations, among other variables. Our cost estimation process is based on
the professional knowledge and experience of engineers and program managers along with finance professionals. We review and
the professional knowledge and experience of engineers and program managers along with finance professionals. We review and
update our cost projections quarterly or more frequently when circumstances significantly change. When estimates of total costs
update our cost projections quarterly or more frequently when circumstances significantly change. When estimates of total costs
to be incurred on a contract exceed estimates of total sales to be earned, a provision for the entire loss on the contract is recorded
to be incurred on a contract exceed estimates of total sales to be earned, a provision for the entire loss on the contract is recorded
in the period in which the loss is determined.
in the period in which the loss is determined.
At the outset of each contract, we estimate an initial profit booking rate considering the risks surrounding our ability to achieve
At the outset of each contract, we estimate an initial profit booking rate considering the risks surrounding our ability to achieve
the technical requirements (e.g., a newly-developed product versus a mature product), schedule (e.g., the number and type of
the technical requirements (e.g., a newly-developed product versus a mature product), schedule (e.g., the number and type of
milestone events), and costs by contract requirements in the initial estimated costs at completion. Profit booking rates may
milestone events), and costs by contract requirements in the initial estimated costs at completion. Profit booking rates may
30 Textron 2020 Annual Report
30
30
increase during the performance of the contract if we successfully retire risks surrounding the technical, schedule, and cost aspects
of the contract. Conversely, the profit booking rate may decrease if we are not successful in retiring the risks; and, as a result, our
estimated costs at completion increase. All estimates are subject to change during the performance of the contract and, therefore,
may affect the profit booking rate.
Changes in our estimate of the total expected cost or in the transaction price for a contract typically impact our profit booking rate.
We utilize the cumulative catch-up method of accounting to recognize the impact of these changes on our profit booking rate for a
contract. Under this method, the inception-to-date impact of a profit adjustment on a contract is recognized in the period the
adjustment is identified. The impact of our cumulative catch-up adjustments on segment profit recognized in prior periods is
presented below:
(In millions)
Gross favorable
Gross unfavorable
Net adjustments
$
$
2020
148 $
(76)
72 $
2019
173 $
(82)
91 $
2018
249
(53)
196
Due to the significance of judgment in the estimation process described above, it is likely that materially different revenues and/or
cost of sales amounts could be recorded if we used different assumptions or if the underlying circumstances were to change. Our
earnings could be reduced by a material amount resulting in a charge to earnings if (a) total estimated contract costs are
significantly higher than expected due to changes in customer specifications prior to contract amendment, (b) total estimated
contract costs are significantly higher than previously estimated due to cost overruns or inflation, (c) there is a change in
engineering efforts required during the development stage of the contract or (d) we are unable to meet contract milestones.
Goodwill
We evaluate the recoverability of goodwill annually in the fourth quarter or more frequently if events or changes in
circumstances, such as declines in sales, earnings or cash flows, or material adverse changes in the business climate, indicate a
potential impairment of a reporting unit. 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.
We calculate the fair value of each reporting unit using discounted cash flows. These cash flows incorporate assumptions for
revenue growth rates, operating margins and discount rates that represent our best estimates of current and forecasted market
conditions, cost structure, anticipated net cost reductions, and the implied rate of return that we believe a market participant would
require for an investment in a business having similar risks and characteristics to the reporting unit being assessed. The revenue
growth rates and operating margins are based on our strategic plans and long-range planning forecasts. The long-term revenue
growth rate we use to determine the terminal value of the business is based on our assessment of its minimum expected terminal
growth rate, as well as its past historical growth and broader economic considerations such as gross domestic product, inflation
and the maturity of the markets we serve. The discount rates utilized in this analysis are based on each reporting unit’s weighted
average cost of capital, which takes into account the relative weights of each component of capital structure (equity and debt) and
represents the expected cost of new capital, adjusted as appropriate to consider the risk inherent in future cash flows of the
respective reporting unit. We believe this approach yields a discount rate that is consistent with an implied rate of return that an
independent investor or market participant would require for an investment in a company having similar risks and business
characteristics to the reporting unit being assessed.
If the reporting unit’s estimated fair value exceeds its carrying value, there is no impairment, and no further analysis is performed.
Otherwise, an impairment loss is recognized in an amount equal to that excess carrying value over the estimated fair value
amount. 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 impairment test in the foreseeable future.
Retirement Benefits
We sponsor funded and unfunded domestic and international pension and postretirement plans for certain of our employees.
Beginning on January 1, 2010, we initiated actions to commence the closure of the pension plans to new entrants. We provide
employees hired subsequent to these closures with defined contribution benefits. Our pension and postretirement benefit
obligations are calculated based on actuarial valuations. Key assumptions used in determining these obligations and related
expenses or benefits include the expected long-term rates of return on plan assets, 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.
Textron 2020 Annual Report 31
31
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 2020 and 2019, the assumed expected long-term rate of return on plan assets used in calculating
pension expense was 7.55%. For 2020, the assumed rate of return for our domestic plans, which represent approximately 90% of
our total pension assets, was 7.75%. For 2021, to reflect the impact of current expectations of long-term market conditions on
certain investment returns, we have assumed a long-term rate of return for our domestic plans of 7.25%. The change in this
assumption will increase pension cost for our domestic plans by approximately $35 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 2020, the weighted-
average discount rate used in calculating pension expense was 3.36%, compared with 4.24% in 2019. For our domestic plans, the
assumed discount rate was 3.45% in 2020, compared with 4.35% in 2019. A decrease of 50 basis-points in this weighted-average
discount rate in 2020 would have increased pension cost for our domestic plans by approximately $64 million.
Actuarial gains and losses, representing differences between the assumptions utilized to develop estimated obligations and actual
results or experience, that exceed 10% of the higher of the market related value of assets or the benefit obligation in a year, are
initially recognized as a component of accumulated other comprehensive income (loss) and amortized over future years as a
component of our annual benefit cost. We amortize actuarial differences over the average remaining service period of eligible
employees. If all or almost all of a plan’s participants are inactive or are not accruing additional benefits, we amortize these
differences over the average remaining life expectancy of the plan participants. As of the end of 2020, almost all of the
participants in one of our domestic plans, the Textron Master Retirement Plan (TMRP), are no longer active. Beginning in 2021,
actuarial gains and losses for this plan will be amortized over the remaining life expectancy of the participants. A change in the
TMRP amortization period in 2021 from 7 years to 20 years will reduce pension cost by approximately $85 million. The deferral
of these differences reduces the volatility of our annual benefit cost that can result either from year-to-year changes in the
assumptions or from actual results that are not necessarily representative of the long-term financial position of these plans.
The trend in healthcare costs is difficult to estimate and has an important effect on postretirement liabilities. The 2020 medical
and prescription drug cost trend rates represent the weighted-average annual projected rate of increase in the per capita cost of
covered benefits. In 2020, we assumed a trend rate of 7% for both medical and prescription drug cost and assumed this rate would
gradually decline to 5% by 2024 and then remain at that level.
Item 7A. Quantitative and Qualitative Disclosures About Market Risk
Foreign Currency Exchange Risk
Our financial results are affected by changes in foreign currency exchange rates in the various countries in which our products are
manufactured and/or sold. For our manufacturing operations, we manage our foreign currency transaction exposures by entering
into foreign currency exchange contracts. These contracts generally are used to fix the local currency cost of purchased goods or
services or selling prices denominated in currencies other than the functional currency. The notional amount of outstanding
foreign currency exchange contracts was $318 million and $342 million at January 2, 2021 and January 4, 2020, respectively. We
also may hedge exposures to certain of our foreign currency assets and earnings by funding those asset positions with debt in the
same foreign currency so the exposures are naturally offset.
Interest Rate Risk
Our financial results are affected by changes in interest rates. As part of managing this risk, we seek to achieve a prudent balance
between floating- and fixed-rate exposures. We continually monitor our mix of these exposures and adjust the mix, as necessary.
For our Finance group, we generally limit our risk to changes in interest rates with a strategy of matching floating-rate assets with
floating-rate liabilities. This strategy includes the use of interest rate swap agreements. At the end of 2020, we had an interest
rate swap agreement for a notional amount of $294 million, which effectively converted certain floating-rate debt to a fixed-rate
equivalent.
Quantitative Risk Measures
In the normal course of business, we enter into financial instruments for purposes other than trading. The financial instruments
that are subject to market risk include finance receivables (excluding leases), debt (excluding finance lease obligations) and
foreign currency exchange contracts. To quantify the market risk inherent in these financial instruments, we utilize a sensitivity
analysis that includes a hypothetical change in fair value assuming a 10% decrease in interest rates and a 10% strengthening in
foreign exchange rates against the U.S. dollar. The fair value of these financial instruments is estimated using discounted cash
flow analysis and indicative market pricing as reported by leading financial news and data providers.
32 Textron 2020 Annual Report
32
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 currency exchange 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).
$
$
$
$
January 2, 2021
January 4, 2020
Carrying
Value*
Fair
Value*
Sensitivity of
Fair Value
to a 10%
Change
Carrying
Value*
Fair
Value*
Sensitivity of
Fair Value
to a 10%
Change
(10) $
3
(7) $
(10) $
3
(7) $
(1) $
22
21 $
(210) $
(1)
(211) $
(212) $
(1)
(213) $
(3,690) $
(3,986) $
(16) $
(3,097) $
(3,249) $
549 $
(662)
599 $
(587)
9 $
—
493 $
(686)
527 $
(634)
(21)
20
(1)
(21)
9
1
Textron 2020 Annual Report 33
33
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 January 2, 2021
Consolidated Statements of Comprehensive Income for each of the years in the three-year period ended January 2, 2021
Consolidated Balance Sheets as of January 2, 2021 and January 4, 2020
Consolidated Statements of Shareholders’ Equity for each of the years in the three-year period ended January 2, 2021
Consolidated Statements of Cash Flows for each of the years in the three-year period ended January 2, 2021
Notes to the Consolidated Financial Statements
Note 1.
Note 2.
Note 3.
Note 4.
Note 5.
Note 6.
Note 7.
Note 8.
Note 9.
Note 10.
Note.11.
Note 12.
Note 13.
Note 14.
Note 15.
Note 16.
Note 17.
Note 18.
Note 19.
Note 20.
Summary of Significant Accounting Policies
Business Dispositions
Goodwill and Intangible Assets
Accounts Receivable and Finance Receivables
Inventories
Property, Plant and Equipment, Net
Other Assets
Other Current Liabilities
Leases
Debt and Credit Facilities
Derivative Instruments and Fair Value Measurements
Shareholders’ Equity
Segment and Geographic Data
Revenues
Share-Based Compensation
Retirement Plans
Special Charges
Income Taxes
Commitments and Contingencies
Supplemental Cash Flow Information
Report of Independent Registered Public Accounting Firm
Supplementary Information:
Quarterly Data for 2020 and 2019 (Unaudited)
Schedule II – Valuation and Qualifying Accounts
Page
35
36
37
38
39
41
47
47
48
50
50
50
51
51
52
53
54
55
57
59
61
65
66
69
69
70
72
73
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.
34 Textron 2020 Annual Report
34
Consolidated Statements of Operations
For each of the years in the three-year period ended January 2, 2021
(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
Non-service components of pension and postretirement income, net
Gain on business disposition
Total costs, expenses and other
Income before income taxes
Income tax expense (benefit)
Net income
Earnings per share
Basic
Diluted
See Notes to the Consolidated Financial Statements.
2020
2019
2018
11,596 $
55
11,651
10,094
1,045
166
147
(83)
—
11,369
282
(27)
309 $
13,564 $
66
13,630
11,406
1,152
171
72
(113)
—
12,688
942
127
815 $
13,906
66
13,972
11,594
1,275
166
73
(76)
(444)
12,588
1,384
162
1,222
1.35 $
1.35 $
3.52 $
3.50 $
4.88
4.83
$
$
$
$
Textron 2020 Annual Report 35
35
Consolidated Statements of Comprehensive Income
For each of the years in the three-year period ended January 2, 2021
(In millions)
Net income
Other comprehensive income (loss), net of tax
Pension and postretirement benefits adjustments, net of reclassifications
Foreign currency translation adjustments, net of reclassifications
Deferred gains (losses) on hedge contracts, net of reclassifications
Total other comprehensive income (loss), net of tax
Comprehensive income
See Notes to the Consolidated Financial Statements.
$
$
2020
309 $
31
78
(1)
108
417 $
2019
815 $
2018
1,222
(84)
(4)
3
(85)
730 $
(74)
(43)
(13)
(130)
1,092
36 Textron 2020 Annual Report
36
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
Current portion of long-term debt
Accounts payable
Other current liabilities
Total current liabilities
Other liabilities
Long-term debt
Total Manufacturing group liabilities
Finance group
Other liabilities
Debt
Total Finance group liabilities
Total liabilities
Shareholders’ equity
Common stock (231.0 million and 228.4 million shares issued, respectively,
and 226.4 million and 228.0 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.
$
$
$
January 2,
2021
January 4,
2020
2,146 $
787
3,513
950
7,396
2,516
2,157
2,436
14,505
108
744
86
938
15,443 $
509 $
776
1,985
3,270
2,357
3,198
8,825
111
662
773
9,598
1,181
921
4,069
894
7,065
2,527
2,150
2,312
14,054
176
682
106
964
15,018
561
1,378
1,907
3,846
2,288
2,563
8,697
117
686
803
9,500
29
1,785
(203)
5,973
(1,739)
5,845
15,443 $
29
1,674
(20)
5,682
(1,847)
5,518
15,018
$
Textron 2020 Annual Report 37
37
Consolidated Statements of Shareholders’ Equity
(In millions, except per share data)
Balance at December 30, 2017
Adoption of ASC 606
Net income
Other comprehensive loss
Reclassification of stranded tax effects
Dividends declared ($0.08 per share)
Share-based compensation activity
Purchases of common stock
Retirement of treasury stock
Balance at December 29, 2018
Net income
Other comprehensive loss
Dividends declared ($0.08 per share)
Share-based compensation activity
Purchases of common stock
Retirement of treasury stock
Balance at January 4, 2020
Net income
Other comprehensive income
Dividends declared ($0.08 per share)
Share-based compensation activity
Purchases of common stock
Balance at January 2, 2021
Common
Stock
33 $
—
—
—
—
—
—
—
(3)
30
—
—
—
—
—
(1)
29
—
—
—
—
—
29 $
$
$
Capital
Surplus
1,669 $
—
—
—
—
—
166
—
(189)
1,646
—
—
—
117
—
(89)
1,674
—
—
—
111
—
1,785 $
Treasury
Stock
(48) $
—
—
—
—
—
—
(1,783)
1,702
(129)
—
—
—
—
(503)
612
(20)
—
—
—
—
(183)
(203) $
See Notes to the Consolidated Financial Statements.
Retained
Earnings
Accumulated
Other
Comprehensive
Loss
(1,375) $
—
—
(130)
(257)
—
—
—
—
(1,762)
—
(85)
—
—
—
—
(1,847)
—
108
—
—
—
(1,739) $
5,368 $
90
1,222
—
257
(20)
—
—
(1,510)
5,407
815
—
(18)
—
—
(522)
5,682
309
—
(18)
—
—
5,973 $
Total
Shareholders’
Equity
5,647
90
1,222
(130)
—
(20)
166
(1,783)
—
5,192
815
(85)
(18)
117
(503)
—
5,518
309
108
(18)
111
(183)
5,845
38 Textron 2020 Annual Report
38
Consolidated Statements of Cash Flows
For each of the years in the three-year period ended January 2, 2021
(In millions)
Cash flows from operating activities
Net income
Adjustments to reconcile net income to net cash provided by
operating activities of continuing operations:
Non-cash items:
Depreciation and amortization
Deferred income taxes
Asset impairments and TRU inventory charge
Gain on business disposition
Other, net
Changes in assets and liabilities:
Accounts receivable, net
Inventories
Other assets
Accounts payable
Other liabilities
Income taxes, net
Pension, net
Captive finance receivables, net
Other operating activities, net
Net cash provided by operating activities of continuing operations
Net cash used in operating activities of discontinued operations
Net cash provided by operating activities
Cash flows from investing activities
Capital expenditures
Proceeds from an insurance recovery and sale of property, plant and equipment
Net proceeds from corporate-owned life insurance policies
Net proceeds from business disposition
Net cash used in acquisitions
Finance receivables repaid
Other investing activities, net
Net cash provided by (used in) investing activities
Cash flows from financing activities
Net proceeds from long-term debt
Proceeds from borrowings against corporate-owned life insurance policies
Payments on borrowings against corporate-owned life insurance policies
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.
Consolidated
2020
2019
2018
$
309 $
815 $
1,222
391
(7)
116
—
79
149
434
66
(613)
(5)
(62)
(15)
(89)
16
769
(1)
768
(317)
33
22
—
(15)
22
7
(248)
416
89
15
—
79
99
(292)
(37)
280
(348)
(83)
(62)
45
—
1,016
(2)
1,014
(339)
9
2
—
(2)
48
16
(266)
1,137
377
(377)
(593)
(183)
22
(18)
(5)
360
17
897
1,357
2,254 $
301
—
—
(303)
(503)
24
(18)
(3)
(502)
4
250
1,107
1,357 $
$
437
49
48
(444)
102
50
41
(88)
(63)
(223)
(33)
(14)
22
3
1,109
(2)
1,107
(369)
14
110
807
(23)
27
54
620
—
—
—
(131)
(1,783)
74
(20)
(4)
(1,864)
(18)
(155)
1,262
1,107
Textron 2020 Annual Report 39
39
Consolidated Statements of Cash Flows continued
For each of the years in the three-year period ended January 2, 2021
(In millions)
Cash flows from operating activities
Net income
Adjustments to reconcile net income to net cash provided by
operating activities of continuing operations:
Non-cash items:
Depreciation and amortization
Deferred income taxes
Asset impairments and TRU inventory charge
Gain on business disposition
Other, net
Changes in assets and liabilities:
Accounts receivable, net
Inventories
Other assets
Accounts payable
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
Proceeds from an insurance recovery and sale of property, plant and equipment
Net proceeds from corporate-owned life insurance policies
Net proceeds from business disposition
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
Net proceeds from long-term debt
Proceeds from borrowings against corporate-owned life insurance policies
Payments on borrowings against corporate-owned life insurance policies
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
Finance Group
2020
2019
2018
2020
2019
2018
$
301 $
793 $ 1,198 $
8 $
22 $
24
386
(2)
116
—
69
149
434
68
(613)
(15)
(61)
(15)
—
16
833
(1)
832
(317)
33
22
—
(15)
—
—
—
(277)
1,137
377
(377)
(548)
(183)
22
(18)
(17)
393
17
965
1,181
410
91
15
—
79
99
(319)
(34)
280
(352)
(90)
(62)
50
—
960
(2)
958
(339)
9
2
—
(2)
—
—
1
(329)
301
—
—
(252)
(503)
24
(18)
9
(439)
4
194
987
429
54
48
(444)
97
50
45
(87)
(63)
(219)
(20)
(14)
50
3
1,127
(2)
1,125
(369)
14
110
807
(23)
—
—
—
539
—
—
—
(5)
(1,783)
74
(20)
(4)
(1,738)
(18)
(92)
1,079
$ 2,146 $ 1,181 $
987 $
5
(5)
—
—
10
—
—
(2)
—
(2)
(1)
—
—
—
13
—
13
6
(2)
—
—
—
—
—
(3)
—
4
7
—
—
—
34
—
34
—
—
—
—
—
128
(195)
19
(48)
—
—
—
(45)
—
—
—
12
(33)
—
(68)
176
108 $
—
—
—
—
—
277
(184)
42
135
—
—
—
(51)
—
—
(50)
(12)
(113)
—
56
120
176 $
8
(5)
—
—
5
—
—
(1)
—
(4)
(13)
—
—
—
14
—
14
—
—
—
—
—
226
(177)
50
99
—
—
—
(126)
—
—
(50)
—
(176)
—
(63)
183
120
40 Textron 2020 Annual Report
40
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.
At the beginning of 2020, we adopted Accounting Standards Update No. 2016-13, Financial Instruments - Credit Losses. This
standard changed the prior incurred loss model to a forward-looking current expected credit loss model for most financial assets,
such as trade and finance receivables, contract assets and other instruments. There was no significant impact on our Consolidated
Financial Statements upon adoption of the standard.
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 cost-to-cost method. We include all assets used in performance of the V-22 Contracts that we own and all
liabilities arising from our obligations under the V-22 Contracts in our Consolidated Balance Sheets.
Use of Estimates
We prepare our financial statements in conformity with generally accepted accounting principles, which require us to make
estimates and assumptions that affect the amounts reported in the financial statements. Actual results could differ from those
estimates. Our estimates and assumptions are reviewed periodically, and the effects of changes, if any, are reflected in the
Consolidated Statements of Operations in the period that they are determined.
Revenue Recognition
Revenue is recognized when control of the goods or services promised under the contract is transferred to the customer either at a
point in time (e.g., upon delivery) or over time (e.g., as we perform under the contract). We account for a contract when it has
approval and commitment from both parties, the rights and payment terms of the parties are identified, the contract has
commercial substance and collectability of consideration is probable. Contracts are reviewed to determine whether there is one or
Textron 2020 Annual Report 41
41
multiple performance obligations. A performance obligation is a promise to transfer a distinct good or service to a customer and
multiple performance obligations. A performance obligation is a promise to transfer a distinct good or service to a customer and
multiple performance obligations. A performance obligation is a promise to transfer a distinct good or service to a customer and
multiple performance obligations. A performance obligation is a promise to transfer a distinct good or service to a customer and
multiple performance obligations. A performance obligation is a promise to transfer a distinct good or service to a customer and
multiple performance obligations. A performance obligation is a promise to transfer a distinct good or service to a customer and
multiple performance obligations. A performance obligation is a promise to transfer a distinct good or service to a customer and
represents the unit of accounting for revenue recognition. For contracts with multiple performance obligations, the expected
represents the unit of accounting for revenue recognition. For contracts with multiple performance obligations, the expected
multiple performance obligations. A performance obligation is a promise to transfer a distinct good or service to a customer and
represents the unit of accounting for revenue recognition. For contracts with multiple performance obligations, the expected
represents the unit of accounting for revenue recognition. For contracts with multiple performance obligations, the expected
represents the unit of accounting for revenue recognition. For contracts with multiple performance obligations, the expected
represents the unit of accounting for revenue recognition. For contracts with multiple performance obligations, the expected
represents the unit of accounting for revenue recognition. For contracts with multiple performance obligations, the expected
consideration, or the transaction price, is allocated to each performance obligation identified in the contract based on the relative
consideration, or the transaction price, is allocated to each performance obligation identified in the contract based on the relative
represents the unit of accounting for revenue recognition. For contracts with multiple performance obligations, the expected
consideration, or the transaction price, is allocated to each performance obligation identified in the contract based on the relative
consideration, or the transaction price, is allocated to each performance obligation identified in the contract based on the relative
consideration, or the transaction price, is allocated to each performance obligation identified in the contract based on the relative
consideration, or the transaction price, is allocated to each performance obligation identified in the contract based on the relative
standalone selling price of each performance obligation. Revenue is then recognized for the transaction price allocated to the
consideration, or the transaction price, is allocated to each performance obligation identified in the contract based on the relative
standalone selling price of each performance obligation. Revenue is then recognized for the transaction price allocated to the
consideration, or the transaction price, is allocated to each performance obligation identified in the contract based on the relative
standalone selling price of each performance obligation. Revenue is then recognized for the transaction price allocated to the
standalone selling price of each performance obligation. Revenue is then recognized for the transaction price allocated to the
standalone selling price of each performance obligation. Revenue is then recognized for the transaction price allocated to the
standalone selling price of each performance obligation. Revenue is then recognized for the transaction price allocated to the
standalone selling price of each performance obligation. Revenue is then recognized for the transaction price allocated to the
performance obligation when control of the promised goods or services underlying the performance obligation is transferred.
performance obligation when control of the promised goods or services underlying the performance obligation is transferred.
standalone selling price of each performance obligation. Revenue is then recognized for the transaction price allocated to the
performance obligation when control of the promised goods or services underlying the performance obligation is transferred.
performance obligation when control of the promised goods or services underlying the performance obligation is transferred.
performance obligation when control of the promised goods or services underlying the performance obligation is transferred.
performance obligation when control of the promised goods or services underlying the performance obligation is transferred.
performance obligation when control of the promised goods or services underlying the performance obligation is transferred.
Contract consideration is not adjusted for the effects of a significant financing component when, at contract inception, the period
Contract consideration is not adjusted for the effects of a significant financing component when, at contract inception, the period
performance obligation when control of the promised goods or services underlying the performance obligation is transferred.
Contract consideration is not adjusted for the effects of a significant financing component when, at contract inception, the period
Contract consideration is not adjusted for the effects of a significant financing component when, at contract inception, the period
Contract consideration is not adjusted for the effects of a significant financing component when, at contract inception, the period
Contract consideration is not adjusted for the effects of a significant financing component when, at contract inception, the period
Contract consideration is not adjusted for the effects of a significant financing component when, at contract inception, the period
between when control transfers and when the customer will pay for that good or service is one year or less.
between when control transfers and when the customer will pay for that good or service is one year or less.
Contract consideration is not adjusted for the effects of a significant financing component when, at contract inception, the period
between when control transfers and when the customer will pay for that good or service is one year or less.
between when control transfers and when the customer will pay for that good or service is one year or less.
between when control transfers and when the customer will pay for that good or service is one year or less.
between when control transfers and when the customer will pay for that good or service is one year or less.
between when control transfers and when the customer will pay for that good or service is one year or less.
between when control transfers and when the customer will pay for that good or service is one year or less.
Commercial Contracts
Commercial Contracts
Commercial Contracts
Commercial Contracts
Commercial Contracts
Commercial Contracts
The majority of our contracts with commercial customers have a single performance obligation as there is only one good or
Commercial Contracts
The majority of our contracts with commercial customers have a single performance obligation as there is only one good or
Commercial Contracts
The majority of our contracts with commercial customers have a single performance obligation as there is only one good or
The majority of our contracts with commercial customers have a single performance obligation as there is only one good or
The majority of our contracts with commercial customers have a single performance obligation as there is only one good or
The majority of our contracts with commercial customers have a single performance obligation as there is only one good or
The majority of our contracts with commercial customers have a single performance obligation as there is only one good or
service promised or the promise to transfer the goods or services is not distinct or separately identifiable from other promises in
service promised or the promise to transfer the goods or services is not distinct or separately identifiable from other promises in
The majority of our contracts with commercial customers have a single performance obligation as there is only one good or
service promised or the promise to transfer the goods or services is not distinct or separately identifiable from other promises in
service promised or the promise to transfer the goods or services is not distinct or separately identifiable from other promises in
service promised or the promise to transfer the goods or services is not distinct or separately identifiable from other promises in
service promised or the promise to transfer the goods or services is not distinct or separately identifiable from other promises in
service promised or the promise to transfer the goods or services is not distinct or separately identifiable from other promises in
the contract. Revenue is primarily recognized at a point in time, which is generally when the customer obtains control of the asset
the contract. Revenue is primarily recognized at a point in time, which is generally when the customer obtains control of the asset
service promised or the promise to transfer the goods or services is not distinct or separately identifiable from other promises in
the contract. Revenue is primarily recognized at a point in time, which is generally when the customer obtains control of the asset
the contract. Revenue is primarily recognized at a point in time, which is generally when the customer obtains control of the asset
the contract. Revenue is primarily recognized at a point in time, which is generally when the customer obtains control of the asset
the contract. Revenue is primarily recognized at a point in time, which is generally when the customer obtains control of the asset
the contract. Revenue is primarily recognized at a point in time, which is generally when the customer obtains control of the asset
upon delivery and customer acceptance. Contract modifications that provide for additional distinct goods or services at the
upon delivery and customer acceptance. Contract modifications that provide for additional distinct goods or services at the
the contract. Revenue is primarily recognized at a point in time, which is generally when the customer obtains control of the asset
upon delivery and customer acceptance. Contract modifications that provide for additional distinct goods or services at the
upon delivery and customer acceptance. Contract modifications that provide for additional distinct goods or services at the
upon delivery and customer acceptance. Contract modifications that provide for additional distinct goods or services at the
upon delivery and customer acceptance. Contract modifications that provide for additional distinct goods or services at the
upon delivery and customer acceptance. Contract modifications that provide for additional distinct goods or services at the
standalone selling price are treated as separate contracts.
standalone selling price are treated as separate contracts.
upon delivery and customer acceptance. Contract modifications that provide for additional distinct goods or services at the
standalone selling price are treated as separate contracts.
standalone selling price are treated as separate contracts.
standalone selling price are treated as separate contracts.
standalone selling price are treated as separate contracts.
standalone selling price are treated as separate contracts.
standalone selling price are treated as separate contracts.
For commercial aircraft, we contract with our customers to sell fully outfitted fixed-wing aircraft, which may include
For commercial aircraft, we contract with our customers to sell fully outfitted fixed-wing aircraft, which may include
For commercial aircraft, we contract with our customers to sell fully outfitted fixed-wing aircraft, which may include
For commercial aircraft, we contract with our customers to sell fully outfitted fixed-wing aircraft, which may include
For commercial aircraft, we contract with our customers to sell fully outfitted fixed-wing aircraft, which may include
For commercial aircraft, we contract with our customers to sell fully outfitted fixed-wing aircraft, which may include
For commercial aircraft, we contract with our customers to sell fully outfitted fixed-wing aircraft, which may include
configuration options. The aircraft typically represents a single performance obligation and revenue is recognized upon customer
configuration options. The aircraft typically represents a single performance obligation and revenue is recognized upon customer
For commercial aircraft, we contract with our customers to sell fully outfitted fixed-wing aircraft, which may include
configuration options. The aircraft typically represents a single performance obligation and revenue is recognized upon customer
configuration options. The aircraft typically represents a single performance obligation and revenue is recognized upon customer
configuration options. The aircraft typically represents a single performance obligation and revenue is recognized upon customer
configuration options. The aircraft typically represents a single performance obligation and revenue is recognized upon customer
configuration options. The aircraft typically represents a single performance obligation and revenue is recognized upon customer
acceptance and delivery. For commercial helicopters, our customers generally contract with us for fully functional basic
acceptance and delivery. For commercial helicopters, our customers generally contract with us for fully functional basic
configuration options. The aircraft typically represents a single performance obligation and revenue is recognized upon customer
acceptance and delivery. For commercial helicopters, our customers generally contract with us for fully functional basic
acceptance and delivery. For commercial helicopters, our customers generally contract with us for fully functional basic
acceptance and delivery. For commercial helicopters, our customers generally contract with us for fully functional basic
acceptance and delivery. For commercial helicopters, our customers generally contract with us for fully functional basic
acceptance and delivery. For commercial helicopters, our customers generally contract with us for fully functional basic
configuration aircraft and control is transferred upon customer acceptance and delivery. At times, customers may separately
configuration aircraft and control is transferred upon customer acceptance and delivery. At times, customers may separately
acceptance and delivery. For commercial helicopters, our customers generally contract with us for fully functional basic
configuration aircraft and control is transferred upon customer acceptance and delivery. At times, customers may separately
configuration aircraft and control is transferred upon customer acceptance and delivery. At times, customers may separately
configuration aircraft and control is transferred upon customer acceptance and delivery. At times, customers may separately
configuration aircraft and control is transferred upon customer acceptance and delivery. At times, customers may separately
configuration aircraft and control is transferred upon customer acceptance and delivery. At times, customers may separately
contract with us for the installation of accessories and customization to the basic aircraft. If these contracts are entered into at or
contract with us for the installation of accessories and customization to the basic aircraft. If these contracts are entered into at or
configuration aircraft and control is transferred upon customer acceptance and delivery. At times, customers may separately
contract with us for the installation of accessories and customization to the basic aircraft. If these contracts are entered into at or
contract with us for the installation of accessories and customization to the basic aircraft. If these contracts are entered into at or
contract with us for the installation of accessories and customization to the basic aircraft. If these contracts are entered into at or
contract with us for the installation of accessories and customization to the basic aircraft. If these contracts are entered into at or
near the same time of the basic aircraft contract, we assess whether the contracts meet the criteria to be combined. For contracts
contract with us for the installation of accessories and customization to the basic aircraft. If these contracts are entered into at or
near the same time of the basic aircraft contract, we assess whether the contracts meet the criteria to be combined. For contracts
contract with us for the installation of accessories and customization to the basic aircraft. If these contracts are entered into at or
near the same time of the basic aircraft contract, we assess whether the contracts meet the criteria to be combined. For contracts
near the same time of the basic aircraft contract, we assess whether the contracts meet the criteria to be combined. For contracts
near the same time of the basic aircraft contract, we assess whether the contracts meet the criteria to be combined. For contracts
near the same time of the basic aircraft contract, we assess whether the contracts meet the criteria to be combined. For contracts
near the same time of the basic aircraft contract, we assess whether the contracts meet the criteria to be combined. For contracts
that are combined, the basic aircraft and the accessories and customization, are typically considered to be distinct, and therefore,
that are combined, the basic aircraft and the accessories and customization, are typically considered to be distinct, and therefore,
near the same time of the basic aircraft contract, we assess whether the contracts meet the criteria to be combined. For contracts
that are combined, the basic aircraft and the accessories and customization, are typically considered to be distinct, and therefore,
that are combined, the basic aircraft and the accessories and customization, are typically considered to be distinct, and therefore,
that are combined, the basic aircraft and the accessories and customization, are typically considered to be distinct, and therefore,
that are combined, the basic aircraft and the accessories and customization, are typically considered to be distinct, and therefore,
that are combined, the basic aircraft and the accessories and customization, are typically considered to be distinct, and therefore,
are separate performance obligations. For these contracts, revenue is recognized on the basic aircraft upon customer acceptance
are separate performance obligations. For these contracts, revenue is recognized on the basic aircraft upon customer acceptance
that are combined, the basic aircraft and the accessories and customization, are typically considered to be distinct, and therefore,
are separate performance obligations. For these contracts, revenue is recognized on the basic aircraft upon customer acceptance
are separate performance obligations. For these contracts, revenue is recognized on the basic aircraft upon customer acceptance
are separate performance obligations. For these contracts, revenue is recognized on the basic aircraft upon customer acceptance
are separate performance obligations. For these contracts, revenue is recognized on the basic aircraft upon customer acceptance
are separate performance obligations. For these contracts, revenue is recognized on the basic aircraft upon customer acceptance
and transfer of title and risk of loss, and on the accessories and customization, upon delivery and customer acceptance. We utilize
and transfer of title and risk of loss, and on the accessories and customization, upon delivery and customer acceptance. We utilize
are separate performance obligations. For these contracts, revenue is recognized on the basic aircraft upon customer acceptance
and transfer of title and risk of loss, and on the accessories and customization, upon delivery and customer acceptance. We utilize
and transfer of title and risk of loss, and on the accessories and customization, upon delivery and customer acceptance. We utilize
and transfer of title and risk of loss, and on the accessories and customization, upon delivery and customer acceptance. We utilize
and transfer of title and risk of loss, and on the accessories and customization, upon delivery and customer acceptance. We utilize
observable prices to determine the standalone selling prices when allocating the transaction price to these performance
and transfer of title and risk of loss, and on the accessories and customization, upon delivery and customer acceptance. We utilize
observable prices to determine the standalone selling prices when allocating the transaction price to these performance
and transfer of title and risk of loss, and on the accessories and customization, upon delivery and customer acceptance. We utilize
observable prices to determine the standalone selling prices when allocating the transaction price to these performance
observable prices to determine the standalone selling prices when allocating the transaction price to these performance
observable prices to determine the standalone selling prices when allocating the transaction price to these performance
observable prices to determine the standalone selling prices when allocating the transaction price to these performance
observable prices to determine the standalone selling prices when allocating the transaction price to these performance
obligations.
obligations.
observable prices to determine the standalone selling prices when allocating the transaction price to these performance
obligations.
obligations.
obligations.
obligations.
obligations.
obligations.
The transaction price for our commercial contracts reflects our estimate of returns, rebates and discounts, which are based on
The transaction price for our commercial contracts reflects our estimate of returns, rebates and discounts, which are based on
The transaction price for our commercial contracts reflects our estimate of returns, rebates and discounts, which are based on
The transaction price for our commercial contracts reflects our estimate of returns, rebates and discounts, which are based on
The transaction price for our commercial contracts reflects our estimate of returns, rebates and discounts, which are based on
The transaction price for our commercial contracts reflects our estimate of returns, rebates and discounts, which are based on
The transaction price for our commercial contracts reflects our estimate of returns, rebates and discounts, which are based on
historical, current and forecasted information. Amounts billed to customers for shipping and handling are included in the
historical, current and forecasted information. Amounts billed to customers for shipping and handling are included in the
The transaction price for our commercial contracts reflects our estimate of returns, rebates and discounts, which are based on
historical, current and forecasted information. Amounts billed to customers for shipping and handling are included in the
historical, current and forecasted information. Amounts billed to customers for shipping and handling are included in the
historical, current and forecasted information. Amounts billed to customers for shipping and handling are included in the
historical, current and forecasted information. Amounts billed to customers for shipping and handling are included in the
historical, current and forecasted information. Amounts billed to customers for shipping and handling are included in the
transaction price and generally are not treated as separate performance obligations as these costs fulfill a promise to transfer the
transaction price and generally are not treated as separate performance obligations as these costs fulfill a promise to transfer the
historical, current and forecasted information. Amounts billed to customers for shipping and handling are included in the
transaction price and generally are not treated as separate performance obligations as these costs fulfill a promise to transfer the
transaction price and generally are not treated as separate performance obligations as these costs fulfill a promise to transfer the
transaction price and generally are not treated as separate performance obligations as these costs fulfill a promise to transfer the
transaction price and generally are not treated as separate performance obligations as these costs fulfill a promise to transfer the
transaction price and generally are not treated as separate performance obligations as these costs fulfill a promise to transfer the
product to the customer. Taxes collected from customers and remitted to government authorities are recorded on a net basis.
product to the customer. Taxes collected from customers and remitted to government authorities are recorded on a net basis.
transaction price and generally are not treated as separate performance obligations as these costs fulfill a promise to transfer the
product to the customer. Taxes collected from customers and remitted to government authorities are recorded on a net basis.
product to the customer. Taxes collected from customers and remitted to government authorities are recorded on a net basis.
product to the customer. Taxes collected from customers and remitted to government authorities are recorded on a net basis.
product to the customer. Taxes collected from customers and remitted to government authorities are recorded on a net basis.
product to the customer. Taxes collected from customers and remitted to government authorities are recorded on a net basis.
product to the customer. Taxes collected from customers and remitted to government authorities are recorded on a net basis.
We primarily provide standard warranty programs for products in our commercial businesses for periods that typically range from
We primarily provide standard warranty programs for products in our commercial businesses for periods that typically range from
We primarily provide standard warranty programs for products in our commercial businesses for periods that typically range from
We primarily provide standard warranty programs for products in our commercial businesses for periods that typically range from
We primarily provide standard warranty programs for products in our commercial businesses for periods that typically range from
We primarily provide standard warranty programs for products in our commercial businesses for periods that typically range from
We primarily provide standard warranty programs for products in our commercial businesses for periods that typically range from
one year to five years. These assurance-type programs typically cannot be purchased separately and do not meet the criteria to be
one year to five years. These assurance-type programs typically cannot be purchased separately and do not meet the criteria to be
We primarily provide standard warranty programs for products in our commercial businesses for periods that typically range from
one year to five years. These assurance-type programs typically cannot be purchased separately and do not meet the criteria to be
one year to five years. These assurance-type programs typically cannot be purchased separately and do not meet the criteria to be
one year to five years. These assurance-type programs typically cannot be purchased separately and do not meet the criteria to be
one year to five years. These assurance-type programs typically cannot be purchased separately and do not meet the criteria to be
one year to five years. These assurance-type programs typically cannot be purchased separately and do not meet the criteria to be
considered a performance obligation.
considered a performance obligation.
one year to five years. These assurance-type programs typically cannot be purchased separately and do not meet the criteria to be
considered a performance obligation.
considered a performance obligation.
considered a performance obligation.
considered a performance obligation.
considered a performance obligation.
considered a performance obligation.
U.S. Government Contracts
U.S. Government Contracts
U.S. Government Contracts
U.S. Government Contracts
U.S. Government Contracts
U.S. Government Contracts
Our contracts with the U.S. Government generally include the design, development, manufacture or modification of aerospace
U.S. Government Contracts
Our contracts with the U.S. Government generally include the design, development, manufacture or modification of aerospace
U.S. Government Contracts
Our contracts with the U.S. Government generally include the design, development, manufacture or modification of aerospace
Our contracts with the U.S. Government generally include the design, development, manufacture or modification of aerospace
Our contracts with the U.S. Government generally include the design, development, manufacture or modification of aerospace
Our contracts with the U.S. Government generally include the design, development, manufacture or modification of aerospace
Our contracts with the U.S. Government generally include the design, development, manufacture or modification of aerospace
and defense products as well as related parts and services. These contracts, which also include those under the U.S. Government-
and defense products as well as related parts and services. These contracts, which also include those under the U.S. Government-
Our contracts with the U.S. Government generally include the design, development, manufacture or modification of aerospace
and defense products as well as related parts and services. These contracts, which also include those under the U.S. Government-
and defense products as well as related parts and services. These contracts, which also include those under the U.S. Government-
and defense products as well as related parts and services. These contracts, which also include those under the U.S. Government-
and defense products as well as related parts and services. These contracts, which also include those under the U.S. Government-
and defense products as well as related parts and services. These contracts, which also include those under the U.S. Government-
sponsored foreign military sales program, accounted for approximately 30% of total revenues in 2020. The customer typically
sponsored foreign military sales program, accounted for approximately 30% of total revenues in 2020. The customer typically
and defense products as well as related parts and services. These contracts, which also include those under the U.S. Government-
sponsored foreign military sales program, accounted for approximately 30% of total revenues in 2020. The customer typically
sponsored foreign military sales program, accounted for approximately 30% of total revenues in 2020. The customer typically
sponsored foreign military sales program, accounted for approximately 30% of total revenues in 2020. The customer typically
sponsored foreign military sales program, accounted for approximately 30% of total revenues in 2020. The customer typically
sponsored foreign military sales program, accounted for approximately 30% of total revenues in 2020. The customer typically
contracts with us to provide a significant service of integrating a complex set of tasks and components into a single project or
contracts with us to provide a significant service of integrating a complex set of tasks and components into a single project or
sponsored foreign military sales program, accounted for approximately 30% of total revenues in 2020. The customer typically
contracts with us to provide a significant service of integrating a complex set of tasks and components into a single project or
contracts with us to provide a significant service of integrating a complex set of tasks and components into a single project or
contracts with us to provide a significant service of integrating a complex set of tasks and components into a single project or
contracts with us to provide a significant service of integrating a complex set of tasks and components into a single project or
capability, which often results in the delivery of multiple units. Accordingly, the entire contract is accounted for as one
contracts with us to provide a significant service of integrating a complex set of tasks and components into a single project or
capability, which often results in the delivery of multiple units. Accordingly, the entire contract is accounted for as one
contracts with us to provide a significant service of integrating a complex set of tasks and components into a single project or
capability, which often results in the delivery of multiple units. Accordingly, the entire contract is accounted for as one
capability, which often results in the delivery of multiple units. Accordingly, the entire contract is accounted for as one
capability, which often results in the delivery of multiple units. Accordingly, the entire contract is accounted for as one
capability, which often results in the delivery of multiple units. Accordingly, the entire contract is accounted for as one
capability, which often results in the delivery of multiple units. Accordingly, the entire contract is accounted for as one
performance obligation. In certain circumstances, a contract may include both production and support services, such as logistics
performance obligation. In certain circumstances, a contract may include both production and support services, such as logistics
capability, which often results in the delivery of multiple units. Accordingly, the entire contract is accounted for as one
performance obligation. In certain circumstances, a contract may include both production and support services, such as logistics
performance obligation. In certain circumstances, a contract may include both production and support services, such as logistics
performance obligation. In certain circumstances, a contract may include both production and support services, such as logistics
performance obligation. In certain circumstances, a contract may include both production and support services, such as logistics
performance obligation. In certain circumstances, a contract may include both production and support services, such as logistics
and parts plans, which are considered to be distinct in the context of the contract and represent separate performance obligations.
and parts plans, which are considered to be distinct in the context of the contract and represent separate performance obligations.
performance obligation. In certain circumstances, a contract may include both production and support services, such as logistics
and parts plans, which are considered to be distinct in the context of the contract and represent separate performance obligations.
and parts plans, which are considered to be distinct in the context of the contract and represent separate performance obligations.
and parts plans, which are considered to be distinct in the context of the contract and represent separate performance obligations.
and parts plans, which are considered to be distinct in the context of the contract and represent separate performance obligations.
and parts plans, which are considered to be distinct in the context of the contract and represent separate performance obligations.
When a contract is separated into more than one performance obligation, we generally utilize the expected cost plus a margin
When a contract is separated into more than one performance obligation, we generally utilize the expected cost plus a margin
and parts plans, which are considered to be distinct in the context of the contract and represent separate performance obligations.
When a contract is separated into more than one performance obligation, we generally utilize the expected cost plus a margin
When a contract is separated into more than one performance obligation, we generally utilize the expected cost plus a margin
When a contract is separated into more than one performance obligation, we generally utilize the expected cost plus a margin
When a contract is separated into more than one performance obligation, we generally utilize the expected cost plus a margin
When a contract is separated into more than one performance obligation, we generally utilize the expected cost plus a margin
approach to determine the standalone selling prices when allocating the transaction price.
approach to determine the standalone selling prices when allocating the transaction price.
When a contract is separated into more than one performance obligation, we generally utilize the expected cost plus a margin
approach to determine the standalone selling prices when allocating the transaction price.
approach to determine the standalone selling prices when allocating the transaction price.
approach to determine the standalone selling prices when allocating the transaction price.
approach to determine the standalone selling prices when allocating the transaction price.
approach to determine the standalone selling prices when allocating the transaction price.
approach to determine the standalone selling prices when allocating the transaction price.
Our contracts are frequently modified for changes in contract specifications and requirements. Most of our contract modifications
Our contracts are frequently modified for changes in contract specifications and requirements. Most of our contract modifications
Our contracts are frequently modified for changes in contract specifications and requirements. Most of our contract modifications
Our contracts are frequently modified for changes in contract specifications and requirements. Most of our contract modifications
Our contracts are frequently modified for changes in contract specifications and requirements. Most of our contract modifications
Our contracts are frequently modified for changes in contract specifications and requirements. Most of our contract modifications
Our contracts are frequently modified for changes in contract specifications and requirements. Most of our contract modifications
with the U.S. Government are for goods and services that are not distinct from the existing contract due to the significant
with the U.S. Government are for goods and services that are not distinct from the existing contract due to the significant
Our contracts are frequently modified for changes in contract specifications and requirements. Most of our contract modifications
with the U.S. Government are for goods and services that are not distinct from the existing contract due to the significant
with the U.S. Government are for goods and services that are not distinct from the existing contract due to the significant
with the U.S. Government are for goods and services that are not distinct from the existing contract due to the significant
with the U.S. Government are for goods and services that are not distinct from the existing contract due to the significant
with the U.S. Government are for goods and services that are not distinct from the existing contract due to the significant
integration service provided in the context of the contract and are accounted for as part of that existing contract. The effect of
integration service provided in the context of the contract and are accounted for as part of that existing contract. The effect of
with the U.S. Government are for goods and services that are not distinct from the existing contract due to the significant
integration service provided in the context of the contract and are accounted for as part of that existing contract. The effect of
integration service provided in the context of the contract and are accounted for as part of that existing contract. The effect of
integration service provided in the context of the contract and are accounted for as part of that existing contract. The effect of
integration service provided in the context of the contract and are accounted for as part of that existing contract. The effect of
these contract modifications on our estimates is recognized using the cumulative catch-up method of accounting.
integration service provided in the context of the contract and are accounted for as part of that existing contract. The effect of
these contract modifications on our estimates is recognized using the cumulative catch-up method of accounting.
integration service provided in the context of the contract and are accounted for as part of that existing contract. The effect of
these contract modifications on our estimates is recognized using the cumulative catch-up method of accounting.
these contract modifications on our estimates is recognized using the cumulative catch-up method of accounting.
these contract modifications on our estimates is recognized using the cumulative catch-up method of accounting.
these contract modifications on our estimates is recognized using the cumulative catch-up method of accounting.
these contract modifications on our estimates is recognized using the cumulative catch-up method of accounting.
these contract modifications on our estimates is recognized using the cumulative catch-up method of accounting.
Contracts with the U.S. Government generally contain clauses that provide lien rights to work-in-process along with clauses that
Contracts with the U.S. Government generally contain clauses that provide lien rights to work-in-process along with clauses that
Contracts with the U.S. Government generally contain clauses that provide lien rights to work-in-process along with clauses that
Contracts with the U.S. Government generally contain clauses that provide lien rights to work-in-process along with clauses that
Contracts with the U.S. Government generally contain clauses that provide lien rights to work-in-process along with clauses that
Contracts with the U.S. Government generally contain clauses that provide lien rights to work-in-process along with clauses that
Contracts with the U.S. Government generally contain clauses that provide lien rights to work-in-process along with clauses that
allow the customer to unilaterally terminate the contract for convenience, pay us for costs incurred plus a reasonable profit and
allow the customer to unilaterally terminate the contract for convenience, pay us for costs incurred plus a reasonable profit and
Contracts with the U.S. Government generally contain clauses that provide lien rights to work-in-process along with clauses that
allow the customer to unilaterally terminate the contract for convenience, pay us for costs incurred plus a reasonable profit and
allow the customer to unilaterally terminate the contract for convenience, pay us for costs incurred plus a reasonable profit and
allow the customer to unilaterally terminate the contract for convenience, pay us for costs incurred plus a reasonable profit and
allow the customer to unilaterally terminate the contract for convenience, pay us for costs incurred plus a reasonable profit and
allow the customer to unilaterally terminate the contract for convenience, pay us for costs incurred plus a reasonable profit and
take control of any work-in-process. Due to the continuous transfer of control to the U.S. Government, we recognize revenue over
take control of any work-in-process. Due to the continuous transfer of control to the U.S. Government, we recognize revenue over
allow the customer to unilaterally terminate the contract for convenience, pay us for costs incurred plus a reasonable profit and
take control of any work-in-process. Due to the continuous transfer of control to the U.S. Government, we recognize revenue over
take control of any work-in-process. Due to the continuous transfer of control to the U.S. Government, we recognize revenue over
take control of any work-in-process. Due to the continuous transfer of control to the U.S. Government, we recognize revenue over
take control of any work-in-process. Due to the continuous transfer of control to the U.S. Government, we recognize revenue over
take control of any work-in-process. Due to the continuous transfer of control to the U.S. Government, we recognize revenue over
the time that we perform under the contract. Selecting the method to measure progress towards completion requires judgment and
the time that we perform under the contract. Selecting the method to measure progress towards completion requires judgment and
take control of any work-in-process. Due to the continuous transfer of control to the U.S. Government, we recognize revenue over
the time that we perform under the contract. Selecting the method to measure progress towards completion requires judgment and
the time that we perform under the contract. Selecting the method to measure progress towards completion requires judgment and
the time that we perform under the contract. Selecting the method to measure progress towards completion requires judgment and
the time that we perform under the contract. Selecting the method to measure progress towards completion requires judgment and
the time that we perform under the contract. Selecting the method to measure progress towards completion requires judgment and
is based on the nature of the products or service to be provided. We generally use the cost-to-cost method to measure progress for
is based on the nature of the products or service to be provided. We generally use the cost-to-cost method to measure progress for
the time that we perform under the contract. Selecting the method to measure progress towards completion requires judgment and
is based on the nature of the products or service to be provided. We generally use the cost-to-cost method to measure progress for
is based on the nature of the products or service to be provided. We generally use the cost-to-cost method to measure progress for
is based on the nature of the products or service to be provided. We generally use the cost-to-cost method to measure progress for
is based on the nature of the products or service to be provided. We generally use the cost-to-cost method to measure progress for
is based on the nature of the products or service to be provided. We generally use the cost-to-cost method to measure progress for
our contracts because it best depicts the transfer of control to the customer that occurs as we incur costs on our contracts. Under
our contracts because it best depicts the transfer of control to the customer that occurs as we incur costs on our contracts. Under
is based on the nature of the products or service to be provided. We generally use the cost-to-cost method to measure progress for
our contracts because it best depicts the transfer of control to the customer that occurs as we incur costs on our contracts. Under
our contracts because it best depicts the transfer of control to the customer that occurs as we incur costs on our contracts. Under
our contracts because it best depicts the transfer of control to the customer that occurs as we incur costs on our contracts. Under
our contracts because it best depicts the transfer of control to the customer that occurs as we incur costs on our contracts. Under
our contracts because it best depicts the transfer of control to the customer that occurs as we incur costs on our contracts. Under
this measure, the extent of progress towards completion is measured based on the ratio of costs incurred to date to the estimated
this measure, the extent of progress towards completion is measured based on the ratio of costs incurred to date to the estimated
our contracts because it best depicts the transfer of control to the customer that occurs as we incur costs on our contracts. Under
this measure, the extent of progress towards completion is measured based on the ratio of costs incurred to date to the estimated
this measure, the extent of progress towards completion is measured based on the ratio of costs incurred to date to the estimated
this measure, the extent of progress towards completion is measured based on the ratio of costs incurred to date to the estimated
this measure, the extent of progress towards completion is measured based on the ratio of costs incurred to date to the estimated
this measure, the extent of progress towards completion is measured based on the ratio of costs incurred to date to the estimated
costs at completion of the performance obligation, and revenue is recorded proportionally as costs are incurred.
costs at completion of the performance obligation, and revenue is recorded proportionally as costs are incurred.
this measure, the extent of progress towards completion is measured based on the ratio of costs incurred to date to the estimated
costs at completion of the performance obligation, and revenue is recorded proportionally as costs are incurred.
costs at completion of the performance obligation, and revenue is recorded proportionally as costs are incurred.
costs at completion of the performance obligation, and revenue is recorded proportionally as costs are incurred.
costs at completion of the performance obligation, and revenue is recorded proportionally as costs are incurred.
costs at completion of the performance obligation, and revenue is recorded proportionally as costs are incurred.
costs at completion of the performance obligation, and revenue is recorded proportionally as costs are incurred.
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The transaction price for our contracts represents our best estimate of the consideration we will receive and includes assumptions
regarding variable consideration as applicable. Certain of our long-term contracts contain incentive fees or other provisions that
can either increase or decrease the transaction price. These variable amounts generally are awarded upon achievement of certain
performance metrics, program milestones or cost targets and can be based upon customer discretion. We include estimated
amounts in the transaction price to the extent it is probable that a significant reversal of cumulative revenue recognized will not
occur when the uncertainty associated with the variable consideration is resolved. Our estimates of variable consideration and
determination of whether to include estimated amounts in the transaction price are based largely on an assessment of our
anticipated performance, historical performance, and all other information that is reasonably available to us.
Total contract cost is estimated utilizing current contract specifications and expected engineering requirements. Contract costs
typically are incurred over a period of several years, and the estimation of these costs requires substantial judgment. Our cost
estimation process is based on the professional knowledge and experience of engineers and program managers along with finance
professionals. We review and update our projections of costs quarterly or more frequently when circumstances significantly
change.
Approximately 75% of our 2020 revenues with the U.S. Government were under fixed-price and fixed-price incentive contracts.
Under the typical payment terms of these contracts, the customer pays us either performance-based or progress payments.
Performance-based payments represent interim payments of up to 90% of the contract price based on quantifiable measures of
performance or on the achievement of specified events or milestones. Progress payments are interim payments of up to 80% of
costs incurred as the work progresses. Because the customer retains a small portion of the contract price until completion of the
contract, these contracts generally result in revenue recognized in excess of billings, which we present as contract assets in the
Consolidated Balance Sheets. Amounts billed and due from our customers are classified in Accounts receivable, net. The portion
of the payments retained by the customer until final contract settlement is not considered a significant financing component
because the intent is to protect the customer. For cost-type contracts, we are generally paid for our actual costs incurred within a
short period of time.
Finance Revenues
Finance revenues primarily include interest on finance receivables, finance lease earnings and portfolio gains/losses. 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.
Contract Estimates
For contracts where revenue is recognized over time, we recognize changes in estimated contract revenues, costs and profits using
the cumulative catch-up method of accounting. This method recognizes the cumulative effect of changes on current and prior
periods 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.
In 2020, 2019 and 2018, our cumulative catch-up adjustments increased segment profit by $72 million, $91 million and $196
million, respectively, and net income by $55 million, $69 million and $149 million, respectively ($0.24, $0.30 and $0.59 per
diluted share, respectively). In 2020, 2019 and 2018, we recognized revenue from performance obligations satisfied in prior
periods of $77 million, $97 million and $190 million, which related to changes in profit booking rates that impacted revenue.
For 2020, 2019 and 2018, gross favorable adjustments totaled $148 million, $173 million and $249 million, respectively. The
2018 favorable adjustments included $145 million, largely related to overhead rate improvements and risk retirements associated
with contracts in the Bell segment. In 2020, 2019 and 2018, gross unfavorable adjustments totaled $76 million, $82 million and
$53 million, respectively.
Contract Assets and Liabilities
Contract assets arise from contracts when revenue is recognized over time and the amount of revenue recognized exceeds the
amount billed to the customer. These amounts are included in contract assets until the right to payment is no longer conditional on
events other than the passage of time and are included in Other current assets in the Consolidated Balance Sheet. Contract
liabilities, which are primarily included in Other current liabilities, include deposits, largely from our commercial aviation
customers, and billings in excess of revenue recognized.
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The incremental costs of obtaining a contract with a customer that is expected to be recovered is expensed as incurred when the
period to be benefitted is one year or less.
Accounts Receivable, Net
Accounts receivable, net includes amounts billed to customers where the right to payment is unconditional. We maintain an
allowance for credit losses for our commercial accounts receivable to provide for the estimated amount that will not be collected,
even when the risk of loss is remote. The allowance is measured on a collective pool basis when similar risk characteristics exists
and is established as a percentage of accounts receivable. We have identified pools with similar risk characteristics, based on
customer and industry type and geographic location. The percentage is based on all available and relevant information including
age of outstanding receivables and collateral value, if any, historical payment experience and loss history, current economic
conditions, and, when reasonable and supportable factors exist, management’s expectation of future economic conditions. For
amounts due from the U.S. Government, we have not established an allowance for credit losses as we have zero loss expectation
based on a long history of no credit losses and the explicit guarantee of a sovereign entity.
Cash and Equivalents
Cash and equivalents consist of cash and short-term, highly liquid investments with original maturities of three months or less.
Inventories
Inventories are stated at the lower of cost or estimated 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.
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 goodwill impairment test, we calculate the fair value of each reporting unit using discounted cash flows. A reporting unit
represents the operating segment unless discrete financial information is prepared and reviewed by segment management for
businesses one level below that operating segment, in which case such component is the reporting unit. In certain instances, we
have aggregated components of an operating segment into a single reporting unit based on similar economic characteristics. The
discounted cash flows incorporate assumptions for revenue growth rates, operating margins and discount rates that represent our
best estimates of current and forecasted market conditions, cost structure, anticipated net cost reductions, and the implied rate of
return that we believe a market participant would require for an investment in a business having similar risks and characteristics to
the reporting unit being assessed. The fair value of our indefinite-lived intangible assets is primarily determined using the relief of
royalty method based on forecasted revenues and royalty rates. If the estimated fair value of the reporting unit or indefinite-lived
intangible asset exceeds the carrying value, there is no impairment. Otherwise, an impairment loss is recognized for the amount
by which the carrying value exceeds the estimated fair value.
Acquired intangible assets with finite lives are subject to amortization. These assets are reviewed for impairment whenever events
or changes in circumstances indicate that the carrying amount of the asset may not be recoverable. Amortization of these
intangible assets is recognized over their estimated useful lives using a method that reflects the pattern in which the economic
benefits of the intangible assets are consumed or otherwise realized. Approximately 86% 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.
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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 establish an allowance for credit losses to cover probable but specifically unknown losses existing in the portfolio. This
allowance is established as a percentage of finance receivables categorized by pools with similar risk characteristics, such as
collateral or customer type and geographic location. The percentage is based on a combination of factors, including historical loss
experience, current delinquency and default trends, collateral values, current economic conditions, and, when reasonable and
supportable factors exist, management’s expectation of future economic conditions.
For those finance receivables that do not have similar risk characteristics, including 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.
Finance receivables are charged off at the earlier of the date the collateral is repossessed or when management no longer deems
the receivable collectible. Repossessed assets are recorded at their fair value, less estimated cost to sell.
Pension and Postretirement Benefit Obligations
We maintain various pension and postretirement plans for our employees globally. Our pension plans include significant benefit
obligations, which are calculated based on actuarial valuations. Key assumptions used in determining these obligations and
related expenses include expected long-term rates of return on plan assets, discount rates and healthcare cost projections. We
evaluate and update these assumptions annually in consultation with third-party actuaries and investment advisors. We also make
assumptions regarding employee demographic factors such as retirement patterns, mortality, turnover and rate of compensation
increases.
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
(loss) in the year in which they occur. To the extent actuarial gains and losses exceed 10% of the higher of the market-related
value of assets or the benefit obligation in a year, the excess is recognized as a component of accumulated other comprehensive
income (loss) and is amortized into net periodic pension cost over the remaining service period of the active participants. For
plans in which all or almost all of the plan’s participants are inactive, the amortization period is the remaining life expectancy of
the inactive participants. This determination is made on a plan-by-plan basis.
Derivatives and Hedging Activities
We are exposed to market risk primarily from changes in currency exchange rates and interest rates. We do not hold or issue
derivative financial instruments for trading or speculative purposes. To manage the volatility relating to our exposures, we net
these exposures on a consolidated basis to take advantage of natural offsets. For the residual portion, we enter into various
derivative transactions pursuant to our policies in areas such as counterparty exposure and hedging practices. Credit risk related
to derivative financial instruments is considered minimal and is managed by requiring high credit standards for counterparties and
through periodic settlements of positions.
All derivative instruments are reported at fair value in the Consolidated Balance Sheets. Designation to support hedge accounting
is performed on a specific exposure basis. For financial instruments qualifying as cash flow hedges, we record changes in the fair
value of derivatives (to the extent they are effective as hedges) in other comprehensive income (loss), net of deferred taxes.
Changes in fair value of derivatives not qualifying as hedges are recorded in earnings.
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.
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Leases
Leases
Leases
Leases
Leases
Leases
Leases
We identify leases by evaluating our contracts to determine if the contract conveys the right to use an identified asset for a stated
We identify leases by evaluating our contracts to determine if the contract conveys the right to use an identified asset for a stated
Leases
We identify leases by evaluating our contracts to determine if the contract conveys the right to use an identified asset for a stated
We identify leases by evaluating our contracts to determine if the contract conveys the right to use an identified asset for a stated
We identify leases by evaluating our contracts to determine if the contract conveys the right to use an identified asset for a stated
We identify leases by evaluating our contracts to determine if the contract conveys the right to use an identified asset for a stated
We identify leases by evaluating our contracts to determine if the contract conveys the right to use an identified asset for a stated
period of time in exchange for consideration. Specifically, we consider whether we can control the underlying asset and have the
period of time in exchange for consideration. Specifically, we consider whether we can control the underlying asset and have the
We identify leases by evaluating our contracts to determine if the contract conveys the right to use an identified asset for a stated
period of time in exchange for consideration. Specifically, we consider whether we can control the underlying asset and have the
period of time in exchange for consideration. Specifically, we consider whether we can control the underlying asset and have the
period of time in exchange for consideration. Specifically, we consider whether we can control the underlying asset and have the
period of time in exchange for consideration. Specifically, we consider whether we can control the underlying asset and have the
right to obtain substantially all of the economic benefits or outputs from the asset. For our contracts that contain both lease
period of time in exchange for consideration. Specifically, we consider whether we can control the underlying asset and have the
right to obtain substantially all of the economic benefits or outputs from the asset. For our contracts that contain both lease
period of time in exchange for consideration. Specifically, we consider whether we can control the underlying asset and have the
right to obtain substantially all of the economic benefits or outputs from the asset. For our contracts that contain both lease
right to obtain substantially all of the economic benefits or outputs from the asset. For our contracts that contain both lease
right to obtain substantially all of the economic benefits or outputs from the asset. For our contracts that contain both lease
right to obtain substantially all of the economic benefits or outputs from the asset. For our contracts that contain both lease
right to obtain substantially all of the economic benefits or outputs from the asset. For our contracts that contain both lease
components (e.g., fixed payments including rent, real estate taxes and insurance costs) and non-lease components (e.g., common-
components (e.g., fixed payments including rent, real estate taxes and insurance costs) and non-lease components (e.g., common-
right to obtain substantially all of the economic benefits or outputs from the asset. For our contracts that contain both lease
components (e.g., fixed payments including rent, real estate taxes and insurance costs) and non-lease components (e.g., common-
components (e.g., fixed payments including rent, real estate taxes and insurance costs) and non-lease components (e.g., common-
components (e.g., fixed payments including rent, real estate taxes and insurance costs) and non-lease components (e.g., common-
components (e.g., fixed payments including rent, real estate taxes and insurance costs) and non-lease components (e.g., common-
components (e.g., fixed payments including rent, real estate taxes and insurance costs) and non-lease components (e.g., common-
area maintenance costs, other goods/services), we allocate the consideration in the contract to each component based on its
area maintenance costs, other goods/services), we allocate the consideration in the contract to each component based on its
components (e.g., fixed payments including rent, real estate taxes and insurance costs) and non-lease components (e.g., common-
area maintenance costs, other goods/services), we allocate the consideration in the contract to each component based on its
area maintenance costs, other goods/services), we allocate the consideration in the contract to each component based on its
area maintenance costs, other goods/services), we allocate the consideration in the contract to each component based on its
area maintenance costs, other goods/services), we allocate the consideration in the contract to each component based on its
area maintenance costs, other goods/services), we allocate the consideration in the contract to each component based on its
standalone price. Leases with terms greater than 12 months are classified as either operating or finance leases at the
standalone price. Leases with terms greater than 12 months are classified as either operating or finance leases at the
area maintenance costs, other goods/services), we allocate the consideration in the contract to each component based on its
standalone price. Leases with terms greater than 12 months are classified as either operating or finance leases at the
standalone price. Leases with terms greater than 12 months are classified as either operating or finance leases at the
standalone price. Leases with terms greater than 12 months are classified as either operating or finance leases at the
standalone price. Leases with terms greater than 12 months are classified as either operating or finance leases at the
commencement date. For these leases, we capitalize the lesser of a) the present value of the minimum lease payments over the
standalone price. Leases with terms greater than 12 months are classified as either operating or finance leases at the
commencement date. For these leases, we capitalize the lesser of a) the present value of the minimum lease payments over the
standalone price. Leases with terms greater than 12 months are classified as either operating or finance leases at the
commencement date. For these leases, we capitalize the lesser of a) the present value of the minimum lease payments over the
commencement date. For these leases, we capitalize the lesser of a) the present value of the minimum lease payments over the
commencement date. For these leases, we capitalize the lesser of a) the present value of the minimum lease payments over the
commencement date. For these leases, we capitalize the lesser of a) the present value of the minimum lease payments over the
commencement date. For these leases, we capitalize the lesser of a) the present value of the minimum lease payments over the
lease term, or b) the fair value of the asset, as a right-of-use asset with an offsetting lease liability. The discount rate used to
lease term, or b) the fair value of the asset, as a right-of-use asset with an offsetting lease liability. The discount rate used to
commencement date. For these leases, we capitalize the lesser of a) the present value of the minimum lease payments over the
lease term, or b) the fair value of the asset, as a right-of-use asset with an offsetting lease liability. The discount rate used to
lease term, or b) the fair value of the asset, as a right-of-use asset with an offsetting lease liability. The discount rate used to
lease term, or b) the fair value of the asset, as a right-of-use asset with an offsetting lease liability. The discount rate used to
lease term, or b) the fair value of the asset, as a right-of-use asset with an offsetting lease liability. The discount rate used to
lease term, or b) the fair value of the asset, as a right-of-use asset with an offsetting lease liability. The discount rate used to
calculate the present value of the minimum lease payments is typically our incremental borrowing rate, as the rate implicit in the
calculate the present value of the minimum lease payments is typically our incremental borrowing rate, as the rate implicit in the
lease term, or b) the fair value of the asset, as a right-of-use asset with an offsetting lease liability. The discount rate used to
calculate the present value of the minimum lease payments is typically our incremental borrowing rate, as the rate implicit in the
calculate the present value of the minimum lease payments is typically our incremental borrowing rate, as the rate implicit in the
calculate the present value of the minimum lease payments is typically our incremental borrowing rate, as the rate implicit in the
calculate the present value of the minimum lease payments is typically our incremental borrowing rate, as the rate implicit in the
calculate the present value of the minimum lease payments is typically our incremental borrowing rate, as the rate implicit in the
lease is generally not known or determinable. The lease term includes any noncancelable period for which we have the right to
lease is generally not known or determinable. The lease term includes any noncancelable period for which we have the right to
calculate the present value of the minimum lease payments is typically our incremental borrowing rate, as the rate implicit in the
lease is generally not known or determinable. The lease term includes any noncancelable period for which we have the right to
lease is generally not known or determinable. The lease term includes any noncancelable period for which we have the right to
lease is generally not known or determinable. The lease term includes any noncancelable period for which we have the right to
lease is generally not known or determinable. The lease term includes any noncancelable period for which we have the right to
lease is generally not known or determinable. The lease term includes any noncancelable period for which we have the right to
use the asset and may include options to extend or terminate the lease when it is reasonably certain that we will exercise the
use the asset and may include options to extend or terminate the lease when it is reasonably certain that we will exercise the
lease is generally not known or determinable. The lease term includes any noncancelable period for which we have the right to
use the asset and may include options to extend or terminate the lease when it is reasonably certain that we will exercise the
use the asset and may include options to extend or terminate the lease when it is reasonably certain that we will exercise the
use the asset and may include options to extend or terminate the lease when it is reasonably certain that we will exercise the
use the asset and may include options to extend or terminate the lease when it is reasonably certain that we will exercise the
use the asset and may include options to extend or terminate the lease when it is reasonably certain that we will exercise the
option. Operating leases are recognized as a single lease cost on a straight-line basis over the lease term, while finance lease cost
option. Operating leases are recognized as a single lease cost on a straight-line basis over the lease term, while finance lease cost
use the asset and may include options to extend or terminate the lease when it is reasonably certain that we will exercise the
option. Operating leases are recognized as a single lease cost on a straight-line basis over the lease term, while finance lease cost
option. Operating leases are recognized as a single lease cost on a straight-line basis over the lease term, while finance lease cost
option. Operating leases are recognized as a single lease cost on a straight-line basis over the lease term, while finance lease cost
option. Operating leases are recognized as a single lease cost on a straight-line basis over the lease term, while finance lease cost
option. Operating leases are recognized as a single lease cost on a straight-line basis over the lease term, while finance lease cost
is recognized separately as amortization and interest expense.
is recognized separately as amortization and interest expense.
option. Operating leases are recognized as a single lease cost on a straight-line basis over the lease term, while finance lease cost
is recognized separately as amortization and interest expense.
is recognized separately as amortization and interest expense.
is recognized separately as amortization and interest expense.
is recognized separately as amortization and interest expense.
is recognized separately as amortization and interest expense.
is recognized separately as amortization and interest expense.
Product Liabilities
Product Liabilities
Product Liabilities
Product Liabilities
Product Liabilities
Product Liabilities
Product Liabilities
We accrue for product liability claims and related defense costs when a loss is probable and reasonably estimable. Our estimates
We accrue for product liability claims and related defense costs when a loss is probable and reasonably estimable. Our estimates
Product Liabilities
We accrue for product liability claims and related defense costs when a loss is probable and reasonably estimable. Our estimates
We accrue for product liability claims and related defense costs when a loss is probable and reasonably estimable. Our estimates
We accrue for product liability claims and related defense costs when a loss is probable and reasonably estimable. Our estimates
We accrue for product liability claims and related defense costs when a loss is probable and reasonably estimable. Our estimates
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
are generally based on the specifics of each claim or incident and our best estimate of the probable loss using historical
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
are generally based on the specifics of each claim or incident and our best estimate of the probable loss using historical
are generally based on the specifics of each claim or incident and our best estimate of the probable loss using historical
are generally based on the specifics of each claim or incident and our best estimate of the probable loss using historical
are generally based on the specifics of each claim or incident and our best estimate of the probable loss using historical
experience.
experience.
are generally based on the specifics of each claim or incident and our best estimate of the probable loss using historical
experience.
experience.
experience.
experience.
experience.
experience.
Environmental Liabilities and Asset Retirement Obligations
Environmental Liabilities and Asset Retirement Obligations
Environmental Liabilities and Asset Retirement Obligations
Environmental Liabilities and Asset Retirement Obligations
Environmental Liabilities and Asset Retirement Obligations
Environmental Liabilities and Asset Retirement Obligations
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
Liabilities for environmental matters are recorded on a site-by-site basis when it is probable that an obligation has been incurred
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
Liabilities for environmental matters are recorded on a site-by-site basis when it is probable that an obligation has been incurred
Liabilities for environmental matters are recorded on a site-by-site basis when it is probable that an obligation has been incurred
Liabilities for environmental matters are recorded on a site-by-site basis when it is probable that an obligation has been incurred
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,
and the cost can be reasonably estimated. We estimate our accrued environmental liabilities using currently available facts,
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,
and the cost can be reasonably estimated. We estimate our accrued environmental liabilities using currently available facts,
and the cost can be reasonably estimated. We estimate our accrued environmental liabilities using currently available facts,
and the cost can be reasonably estimated. We estimate our accrued environmental liabilities using currently available facts,
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.
existing technology, and presently enacted laws and regulations, all of which are subject to a number of factors and uncertainties.
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.
existing technology, and presently enacted laws and regulations, all of which are subject to a number of factors and uncertainties.
existing technology, and presently enacted laws and regulations, all of which are subject to a number of factors and uncertainties.
existing technology, and presently enacted laws and regulations, all of which are subject to a number of factors and uncertainties.
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
Our environmental liabilities are not discounted and do not take into consideration possible future insurance proceeds or
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
Our environmental liabilities are not discounted and do not take into consideration possible future insurance proceeds or
Our environmental liabilities are not discounted and do not take into consideration possible future insurance proceeds or
Our environmental liabilities are not discounted and do not take into consideration possible future insurance proceeds or
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.
significant amounts from claims against other third parties.
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.
significant amounts from claims against other third parties.
significant amounts from claims against other third parties.
significant amounts from claims against other third parties.
significant amounts from claims against other third parties.
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
We have incurred asset retirement obligations primarily related to costs to remove and dispose of underground storage tanks and
We have incurred asset retirement obligations primarily related to costs to remove and dispose of underground storage tanks and
We have incurred asset retirement obligations primarily related to costs to remove and dispose of underground storage tanks and
We have incurred asset retirement obligations primarily related to costs to remove and dispose of underground storage tanks and
We have incurred asset retirement obligations primarily related to costs to remove and dispose of underground storage tanks and
We have incurred asset retirement obligations primarily related to costs to remove and dispose of underground storage tanks and
asbestos materials used in insulation, adhesive fillers and floor tiles. Currently, there is no legal requirement to remove these items
asbestos materials used in insulation, adhesive fillers and floor tiles. Currently, there is no legal requirement to remove these items
We have incurred asset retirement obligations primarily related to costs to remove and dispose of underground storage tanks and
asbestos materials used in insulation, adhesive fillers and floor tiles. Currently, there is no legal requirement to remove these items
asbestos materials used in insulation, adhesive fillers and floor tiles. Currently, there is no legal requirement to remove these items
asbestos materials used in insulation, adhesive fillers and floor tiles. Currently, there is no legal requirement to remove these items
asbestos materials used in insulation, adhesive fillers and floor tiles. Currently, there is no legal requirement to remove these items
asbestos materials used in insulation, adhesive fillers and floor tiles. Currently, there is no legal requirement to remove these items
and there is no plan to remodel the related facilities or otherwise cause the impacted items to require disposal. Since these asset
and there is no plan to remodel the related facilities or otherwise cause the impacted items to require disposal. Since these asset
asbestos materials used in insulation, adhesive fillers and floor tiles. Currently, there is no legal requirement to remove these items
and there is no plan to remodel the related facilities or otherwise cause the impacted items to require disposal. Since these asset
and there is no plan to remodel the related facilities or otherwise cause the impacted items to require disposal. Since these asset
and there is no plan to remodel the related facilities or otherwise cause the impacted items to require disposal. Since these asset
and there is no plan to remodel the related facilities or otherwise cause the impacted items to require disposal. Since these asset
and there is no plan to remodel the related facilities or otherwise cause the impacted items to require disposal. Since these asset
retirement obligations are not probable, there is no related liability recorded in the Consolidated Balance Sheets.
retirement obligations are not probable, there is no related liability recorded in the Consolidated Balance Sheets.
and there is no plan to remodel the related facilities or otherwise cause the impacted items to require disposal. Since these asset
retirement obligations are not probable, there is no related liability recorded in the Consolidated Balance Sheets.
retirement obligations are not probable, there is no related liability recorded in the Consolidated Balance Sheets.
retirement obligations are not probable, there is no related liability recorded in the Consolidated Balance Sheets.
retirement obligations are not probable, there is no related liability recorded in the Consolidated Balance Sheets.
retirement obligations are not probable, there is no related liability recorded in the Consolidated Balance Sheets.
retirement obligations are not probable, there is no related liability recorded in the Consolidated Balance Sheets.
Warranty Liabilities
Warranty Liabilities
Warranty Liabilities
Warranty Liabilities
Warranty Liabilities
Warranty Liabilities
Warranty Liabilities
For our assurance-type warranty programs, we estimate the costs that may be incurred and record a liability in the amount of such
For our assurance-type warranty programs, we estimate the costs that may be incurred and record a liability in the amount of such
Warranty Liabilities
For our assurance-type warranty programs, we estimate the costs that may be incurred and record a liability in the amount of such
For our assurance-type warranty programs, we estimate the costs that may be incurred and record a liability in the amount of such
For our assurance-type warranty programs, we estimate the costs that may be incurred and record a liability in the amount of such
For our assurance-type warranty programs, we estimate the costs that may be incurred and record a liability in the amount of such
For our assurance-type warranty programs, we estimate the costs that may be incurred and record a liability in the amount of such
costs at the time product revenues are recognized. Factors that affect this liability include the number of products sold, historical
costs at the time product revenues are recognized. Factors that affect this liability include the number of products sold, historical
For our assurance-type warranty programs, we estimate the costs that may be incurred and record a liability in the amount of such
costs at the time product revenues are recognized. Factors that affect this liability include the number of products sold, historical
costs at the time product revenues are recognized. Factors that affect this liability include the number of products sold, historical
costs at the time product revenues are recognized. Factors that affect this liability include the number of products sold, historical
costs at the time product revenues are recognized. Factors that affect this liability include the number of products sold, historical
costs at the time product revenues are recognized. Factors that affect this liability include the number of products sold, historical
costs per claim, length of warranty period, contractual recoveries from vendors and historical and anticipated rates of warranty
costs per claim, length of warranty period, contractual recoveries from vendors and historical and anticipated rates of warranty
costs at the time product revenues are recognized. Factors that affect this liability include the number of products sold, historical
costs per claim, length of warranty period, contractual recoveries from vendors and historical and anticipated rates of warranty
costs per claim, length of warranty period, contractual recoveries from vendors and historical and anticipated rates of warranty
costs per claim, length of warranty period, contractual recoveries from vendors and historical and anticipated rates of warranty
costs per claim, length of warranty period, contractual recoveries from vendors and historical and anticipated rates of warranty
costs per claim, length of warranty period, contractual recoveries from vendors and historical and anticipated rates of warranty
claims, including production and warranty patterns for new models. We assess the adequacy of our recorded warranty liability
claims, including production and warranty patterns for new models. We assess the adequacy of our recorded warranty liability
costs per claim, length of warranty period, contractual recoveries from vendors and historical and anticipated rates of warranty
claims, including production and warranty patterns for new models. We assess the adequacy of our recorded warranty liability
claims, including production and warranty patterns for new models. We assess the adequacy of our recorded warranty liability
claims, including production and warranty patterns for new models. We assess the adequacy of our recorded warranty liability
claims, including production and warranty patterns for new models. We assess the adequacy of our recorded warranty liability
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
periodically and adjust the amounts as necessary. Additionally, we may establish a warranty liability related to the issuance of
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
periodically and adjust the amounts as necessary. Additionally, we may establish a warranty liability related to the issuance of
periodically and adjust the amounts as necessary. Additionally, we may establish a warranty liability related to the issuance of
periodically and adjust the amounts as necessary. Additionally, we may establish a warranty liability related to the issuance of
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.
aircraft service bulletins for aircraft no longer covered under the limited warranty programs.
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.
aircraft service bulletins for aircraft no longer covered under the limited warranty programs.
aircraft service bulletins for aircraft no longer covered under the limited warranty programs.
aircraft service bulletins for aircraft no longer covered under the limited warranty programs.
aircraft service bulletins for aircraft no longer covered under the limited warranty programs.
aircraft service bulletins for aircraft no longer covered under the limited warranty programs.
Research and Development Costs
Research and Development Costs
Research and Development Costs
Research and Development Costs
Research and Development Costs
Research and Development Costs
Research and Development Costs
Our customer-funded research and development costs are charged directly to the related contracts, which primarily consist of U.S.
Our customer-funded research and development costs are charged directly to the related contracts, which primarily consist of U.S.
Research and Development Costs
Our customer-funded research and development costs are charged directly to the related contracts, which primarily consist of U.S.
Our customer-funded research and development costs are charged directly to the related contracts, which primarily consist of U.S.
Our customer-funded research and development costs are charged directly to the related contracts, which primarily consist of U.S.
Our customer-funded research and development costs are charged directly to the related contracts, which primarily consist of U.S.
Our customer-funded research and development costs are charged directly to the related contracts, which primarily consist of U.S.
In accordance with government regulations, we recover a portion of company-funded research and
Government contracts.
In accordance with government regulations, we recover a portion of company-funded research and
Government contracts.
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
In accordance with government regulations, we recover a portion of company-funded research and
Government contracts.
In accordance with government regulations, we recover a portion of company-funded research and
Government contracts.
In accordance with government regulations, we recover a portion of company-funded research and
Government contracts.
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
development costs through overhead rate charges on our U.S. Government contracts. Research and development costs that are not
In accordance with government regulations, we recover a portion of company-funded research and
Government contracts.
development costs through overhead rate charges on our U.S. Government contracts. Research and development costs that are not
development costs through overhead rate charges on our U.S. Government contracts. Research and development costs that are not
development costs through overhead rate charges on our U.S. Government contracts. Research and development costs that are not
development costs through overhead rate charges on our U.S. Government contracts. Research and development costs that are not
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-
reimbursable under a contract with the U.S. Government or another customer are charged to expense as incurred. Company-
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-
reimbursable under a contract with the U.S. Government or another customer are charged to expense as incurred. Company-
reimbursable under a contract with the U.S. Government or another customer are charged to expense as incurred. Company-
reimbursable under a contract with the U.S. Government or another customer are charged to expense as incurred. Company-
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 $549 million, $647 million and $643 million in 2020, 2019 and 2018, respectively,
funded research and development costs were $549 million, $647 million and $643 million in 2020, 2019 and 2018, respectively,
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 $549 million, $647 million and $643 million in 2020, 2019 and 2018, respectively,
funded research and development costs were $549 million, $647 million and $643 million in 2020, 2019 and 2018, respectively,
funded research and development costs were $549 million, $647 million and $643 million in 2020, 2019 and 2018, respectively,
funded research and development costs were $549 million, $647 million and $643 million in 2020, 2019 and 2018, respectively,
funded research and development costs were $549 million, $647 million and $643 million in 2020, 2019 and 2018, respectively,
and are included in cost of sales.
and are included in cost of sales.
funded research and development costs were $549 million, $647 million and $643 million in 2020, 2019 and 2018, respectively,
and are included in cost of sales.
and are included in cost of sales.
and are included in cost of sales.
and are included in cost of sales.
and are included in cost of sales.
and are included in cost of sales.
Income Taxes
Income Taxes
Income Taxes
Income Taxes
Income Taxes
Income Taxes
Income Taxes
The provision for income tax expense is calculated on reported income before income taxes based on current tax law and includes,
The provision for income tax expense is calculated on reported income before income taxes based on current tax law and includes,
Income Taxes
The provision for income tax expense is calculated on reported income before income taxes based on current tax law and includes,
The provision for income tax expense is calculated on reported income before income taxes based on current tax law and includes,
The provision for income tax expense is calculated on reported income before income taxes based on current tax law and includes,
The provision for income tax expense is calculated on reported income before income taxes based on current tax law and includes,
The provision for income tax expense is calculated on reported income before income taxes based on current tax law and includes,
in the current period, the cumulative effect of any changes in tax rates from those used previously in determining deferred tax
in the current period, the cumulative effect of any changes in tax rates from those used previously in determining deferred tax
The provision for income tax expense is calculated on reported income before income taxes based on current tax law and includes,
in the current period, the cumulative effect of any changes in tax rates from those used previously in determining deferred tax
in the current period, the cumulative effect of any changes in tax rates from those used previously in determining deferred tax
in the current period, the cumulative effect of any changes in tax rates from those used previously in determining deferred tax
in the current period, the cumulative effect of any changes in tax rates from those used previously in determining deferred tax
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
assets and liabilities. Tax laws may require items to be included in the determination of taxable income at different times from
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
assets and liabilities. Tax laws may require items to be included in the determination of taxable income at different times from
assets and liabilities. Tax laws may require items to be included in the determination of taxable income at different times from
assets and liabilities. Tax laws may require items to be included in the determination of taxable income at different times from
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
when the items are reflected in the financial statements. Deferred tax balances reflect the effects of temporary differences between
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
when the items are reflected in the financial statements. Deferred tax balances reflect the effects of temporary differences between
when the items are reflected in the financial statements. Deferred tax balances reflect the effects of temporary differences between
when the items are reflected in the financial statements. Deferred tax balances reflect the effects of temporary differences between
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
the financial reporting carrying amounts of assets and liabilities and their tax bases, as well as from net operating losses and tax
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
the financial reporting carrying amounts of assets and liabilities and their tax bases, as well as from net operating losses and tax
the financial reporting carrying amounts of assets and liabilities and their tax bases, as well as from net operating losses and tax
the financial reporting carrying amounts of assets and liabilities and their tax bases, as well as from net operating losses and tax
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.
credit carryforwards, and are stated at enacted tax rates in effect for the year taxes are expected to be paid or recovered.
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.
credit carryforwards, and are stated at enacted tax rates in effect for the year taxes are expected to be paid or recovered.
credit carryforwards, and are stated at enacted tax rates in effect for the year taxes are expected to be paid or recovered.
credit carryforwards, and are stated at enacted tax rates in effect for the year taxes are expected to be paid or recovered.
credit carryforwards, and are stated at enacted tax rates in effect for the year taxes are expected to be paid or recovered.
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
Deferred tax assets represent tax benefits for tax deductions or credits available in future years and require certain estimates and
Deferred tax assets represent tax benefits for tax deductions or credits available in future years and require certain estimates and
Deferred tax assets represent tax benefits for tax deductions or credits available in future years and require certain estimates and
Deferred tax assets represent tax benefits for tax deductions or credits available in future years and require certain estimates and
Deferred tax assets represent tax benefits for tax deductions or credits available in future years and require certain estimates and
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
assumptions to determine whether it is more likely than not that all or a portion of the benefit will not be realized. The
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
assumptions to determine whether it is more likely than not that all or a portion of the benefit will not be realized. The
assumptions to determine whether it is more likely than not that all or a portion of the benefit will not be realized. The
assumptions to determine whether it is more likely than not that all or a portion of the benefit will not be realized. The
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
recoverability of these future tax deductions and credits is determined by assessing the adequacy of future expected taxable
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
recoverability of these future tax deductions and credits is determined by assessing the adequacy of future expected taxable
recoverability of these future tax deductions and credits is determined by assessing the adequacy of future expected taxable
recoverability of these future tax deductions and credits is determined by assessing the adequacy of future expected taxable
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
income from all sources, including the future reversal of existing taxable temporary differences, taxable income in carryback
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
income from all sources, including the future reversal of existing taxable temporary differences, taxable income in carryback
income from all sources, including the future reversal of existing taxable temporary differences, taxable income in carryback
income from all sources, including the future reversal of existing taxable temporary differences, taxable income in carryback
income from all sources, including the future reversal of existing taxable temporary differences, taxable income in carryback
income from all sources, including the future reversal of existing taxable temporary differences, taxable income in carryback
46 Textron 2020 Annual Report
46
46
46
46
46
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years, estimated future taxable income and available tax planning strategies. Should a change in facts or circumstances lead to a
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
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
the period that the change in facts and circumstances occurs, along with a corresponding increase or decrease in income tax
expense.
expense.
We record tax benefits for uncertain tax positions based upon management’s evaluation of the information available at the
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
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
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
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
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-
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.
related interest and penalties for continuing operations in income tax expense.
Note 2. Business Dispositions
Note 2. Business Dispositions
On November 25, 2020, we reached a definitive agreement to sell TRU Simulation + Training Canada Inc. within our Textron
On November 25, 2020, we reached a definitive agreement to sell TRU Simulation + Training Canada Inc. within our Textron
Systems segment. At January 2, 2021, the assets and liabilities of this business met the criteria to be classified as held for sale and
Systems segment. At January 2, 2021, the assets and liabilities of this business met the criteria to be classified as held for sale and
are recorded at the lower of the carrying value or fair value, less cost to sell. The net carrying amounts classified as held for sale in
are recorded at the lower of the carrying value or fair value, less cost to sell. The net carrying amounts classified as held for sale in
the Consolidated Balance Sheet included $78 million of assets, primarily inventories, recorded in Other current assets and
the Consolidated Balance Sheet included $78 million of assets, primarily inventories, recorded in Other current assets and
$77 million of liabilities, primarily contract liabilities, recorded in Other current liabilities. The transaction closed on January 25,
$77 million of liabilities, primarily contract liabilities, recorded in Other current liabilities. The transaction closed on January 25,
2021, and we expect to record an after-tax gain of approximately $10 million in the first quarter of 2021.
2021, and we expect to record an after-tax gain of approximately $10 million in the first quarter of 2021.
On July 2, 2018, we completed the sale of the businesses that manufacture and sell the products in our Tools and Test Equipment
On July 2, 2018, we completed the sale of the businesses that manufacture and sell the products in our Tools and Test Equipment
product line within our Industrial segment for net cash proceeds of $807 million. We recorded an after-tax gain of $419 million
product line within our Industrial segment for net cash proceeds of $807 million. We recorded an after-tax gain of $419 million
related to this disposition.
related to this disposition.
Note 3. Goodwill and Intangible Assets
Note 3. Goodwill and Intangible Assets
Goodwill
Goodwill
The changes in the carrying amount of goodwill by segment are as follows:
The changes in the carrying amount of goodwill by segment are as follows:
Textron
Textron
Aviation
Aviation
(In millions)
(In millions)
Balance at December 29, 2018
Balance at December 29, 2018
Disposition (a)
Disposition (a)
Acquisition
Acquisition
Foreign currency translation
Foreign currency translation
Balance at January 4, 2020
Balance at January 4, 2020
Acquisitions
Acquisitions
Reclassifications (b)
Reclassifications (b)
Foreign currency translation
Foreign currency translation
Balance at January 2, 2021
Balance at January 2, 2021
(a)
(a)
(b) Reclassifications include $12 million of goodwill classified as held for sale in connection with a business disposition described in Note 2 and amounts
(b) Reclassifications include $12 million of goodwill classified as held for sale in connection with a business disposition described in Note 2 and amounts
Textron
Textron
Systems
Systems
1,100 $
1,100 $
(71)
(71)
4
4
—
—
1,033
1,033
—
—
(24)
(24)
—
—
1,009 $
1,009 $
Total
Total
2,218
2,218
(71)
(71)
4
4
(1)
(1)
2,150
2,150
8
8
(12)
(12)
11
11
2,157
2,157
473 $
473 $
—
—
—
—
(1)
(1)
472
472
—
—
—
—
10
10
482 $
482 $
614 $
614 $
—
—
—
—
—
—
614
614
4
4
12
12
1
1
631 $
631 $
Bell
Bell
31 $
31 $
—
—
—
—
—
—
31
31
4
4
—
—
—
—
35 $
35 $
See Note 7 for additional information.
See Note 7 for additional information.
Industrial
Industrial
$
$
$
$
transferred between segments.
transferred between segments.
Intangible Assets
Intangible Assets
Our intangible assets are summarized below:
Our intangible assets are summarized below:
(Dollars in millions)
(Dollars in millions)
Patents and technology
Patents and technology
Trade names and trademarks
Trade names and trademarks
Customer relationships and
Customer relationships and
contractual agreements
contractual agreements
Other
Other
Total
Total
Weighted-Average
Weighted-Average
Amortization
Amortization
Period (in years)
Period (in years)
14
14
14
14
15
15
4
4
$
$
$
$
January 2, 2021
January 2, 2021
Accumulated
Accumulated
Amortization
Amortization
Gross
Gross
Carrying
Carrying
Amount
Amount
484 $
484 $
182
182
(263) $
(263) $
(8)
(8)
412
412
6
6
1,084 $
1,084 $
(318)
(318)
(6)
(6)
(595) $
(595) $
Net
Net
221 $
221 $
174
174
94
94
—
—
489 $
489 $
January 4, 2020
January 4, 2020
Accumulated
Accumulated
Amortization
Amortization
Gross
Gross
Carrying
Carrying
Amount
Amount
501 $
501 $
223
223
(242) $
(242) $
(8)
(8)
413
413
6
6
1,143 $
1,143 $
(298)
(298)
(6)
(6)
(554) $
(554) $
Net
Net
259
259
215
215
115
115
—
—
589
589
Textron 2020 Annual Report 47
47
47
Trade names and trademarks in the table above include $169 million and $208 million of indefinite-lived intangible assets at
January 2, 2021 and January 4, 2020, respectively. In 2020, we recognized $47 million of intangible asset impairment charges,
primarily related to indefinite-lived assets as discussed in Note 17. Amortization expense totaled $54 million, $59 million and
$66 million in 2020, 2019 and 2018, respectively. Amortization expense is estimated to be approximately $51 million, $51
million, $35 million, $32 million and $30 million in 2021, 2022, 2023, 2024 and 2025, respectively.
Note 4. 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
Finance Receivables
Finance receivables are presented in the following table:
(In millions)
Finance receivables
Allowance for losses
Total finance receivables, net
January 2,
2021
668 $
155
823
(36)
787 $
January 4,
2020
835
115
950
(29)
921
$
$
January 2,
2021
779 $
(35)
744 $
January 4,
2020
707
(25)
682
$
$
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 twelve years, amortization terms ranging from eight to
fifteen years and an average balance of $1.6 million at January 2, 2021. 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 both January 2, 2021 and January 4,
2020, 59% of our finance receivables were distributed internationally and 41% throughout the U.S. At January 2, 2021 and
January 4, 2020, finance receivables of $125 million and $148 million, respectively, have been pledged as collateral for TFC’s
debt of $68 million and $87 million, respectively.
Finance Receivable Portfolio Quality
We internally assess the quality of our finance receivables based on a number of key credit quality indicators and statistics such as
delinquency, loan balance to estimated collateral value and the financial strength of individual borrowers and guarantors. Because
many of these indicators are difficult to apply across an entire class of receivables, we evaluate individual loans on a quarterly
basis and classify these loans into three categories based on the key credit quality indicators for the individual loan.
These three categories are performing, watchlist and nonaccrual.
We classify finance receivables as nonaccrual if credit quality indicators suggest full collection of principal and interest is
doubtful. In addition, we automatically classify accounts as nonaccrual once they are contractually delinquent by more than three
months unless collection of principal and interest is not doubtful. Accounts are classified as watchlist when credit quality
indicators have deteriorated as compared with typical underwriting criteria, and we believe collection of full principal and interest
is probable but not certain. All other finance receivables that do not meet the watchlist or nonaccrual categories are classified as
performing.
We measure delinquency based on the contractual payment terms of our finance receivables. In determining the delinquency
aging category of an account, any/all principal and interest received is applied to the most past-due principal and/or interest
amounts due. If a significant portion of the contractually due payment is delinquent, the entire finance receivable balance is
reported in accordance with the most past-due delinquency aging category.
48 Textron 2020 Annual Report
48
In March 2020, due to the economic impact of the COVID-19 pandemic and at the request of certain of our customers, we began
working with them to provide temporary payment relief through loan modifications. The types of temporary payment relief we
offered to these customers included delays in the timing of required principal payments, deferrals of interest payments and/or
interest-only payments. For loan modifications that cover payment-relief periods in excess of six months, even if the loan was
previously current, the loan is deemed a troubled debt restructuring and considered impaired. These impaired loans are classified
as either nonaccrual or watchlist based on a review of the credit quality indicators as discussed above.
During 2020, we modified finance receivable contracts for 94 customers with an outstanding balance totaling $278 million at
January 2, 2021. Of the modifications occurring during 2020, contracts for 32 customers, or $129 million of finance receivables,
were categorized as troubled debt restructurings. Due to the nature of these restructurings, the financial effects were not
significant. We had two customer defaults related to finance receivables previously modified as a troubled debt restructuring that
had an insignificant outstanding balance. We believe our allowance for credit losses adequately covers our exposure on these
loans as our estimated collateral values largely exceed the outstanding loan amounts.
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
$
$
January 2,
2021
612 $
74
93
11.94 %
January 4,
2020
664
4
39
5.52 %
738 $
12
11
18
637
53
7
10
3.72 %
2.40 %
At January 2, 2021, 48% of our performing finance receivables were originated since the beginning of 2019 and 26% were
originated from 2016 to 2018. For finance receivables categorized as watchlist and nonaccrual, 9% and 25%, respectively, were
originated since the beginning of 2019, and 47% and 36%, respectively, from 2016 to 2018. For accounts modified in 2020, the
origination date prior to the modification was maintained based on the types of temporary payment relief provided.
On a quarterly basis, we evaluate individual larger balance accounts for impairment. A finance receivable is considered impaired
when it is probable that we will be unable to collect all amounts due according to the contractual terms of the loan agreement
based on our review of the credit quality indicators described above. Impaired finance receivables include both nonaccrual
accounts and accounts for which full collection of principal and interest remains probable, but the account’s original terms have
been, or are expected to be, significantly modified. If the modification specifies an interest rate equal to or greater than a market
rate for a finance receivable with comparable risk, the account is not considered impaired in years subsequent to the modification.
A summary of impaired finance receivables, excluding leveraged leases, and the average recorded investment is provided below:
(In millions)
Recorded investment:
Impaired loans with specific allowance for losses
Impaired loans with no specific allowance for losses
Total
Unpaid principal balance
Allowance for losses on impaired loans
Average recorded investment
January 2,
2021
January 4,
2020
$
$
$
46 $
117
163 $
175 $
7
126
17
22
39
50
3
40
Textron 2020 Annual Report 49
49
A summary of the allowance for losses on finance receivables based on how the underlying finance receivables are evaluated for
impairment, is provided below. The finance receivables reported in this table exclude $95 million and $104 million of leveraged
leases at January 2, 2021 and January 4, 2020, respectively, in accordance with U.S. generally accepted accounting principles.
(In millions)
Allowance based on collective evaluation
Allowance based on individual evaluation
Finance receivables evaluated collectively
Finance receivables evaluated individually
Note 5. Inventories
Inventories are composed of the following:
(In millions)
Finished goods
Work in process
Raw materials and components
Total
$
January 2,
2021
28 $
7
521
163
January 4,
2020
22
3
564
39
January 2,
2021
1,228 $
1,455
830
3,513 $
January 4,
2020
1,557
1,616
896
4,069
$
$
Inventories valued by the LIFO method totaled $2.2 billion and $2.5 billion at January 2, 2021 and January 4, 2020, respectively,
and the carrying values of these inventories would have been higher by approximately $507 million and $475 million,
respectively, had our LIFO inventories been valued at current costs.
Note 6. Property, Plant and Equipment, Net
Our Manufacturing group’s property, plant and equipment, net is composed of the following:
(Dollars in millions)
Land, buildings and improvements
Machinery and equipment
Accumulated depreciation and amortization
Total
Useful Lives
(in years)
2
2
- 40 $
- 20
$
January 2,
2021
2,031 $
5,181
7,212
(4,696)
2,516 $
January 4,
2020
1,991
4,941
6,932
(4,405)
2,527
The Manufacturing group’s depreciation expense, which included amortization expense on finance leases, totaled $325 million,
$346 million and $358 million in 2020, 2019 and 2018, respectively.
Note 7. Other Assets
Other assets includes the cash surrender value of corporate-owned life insurance policies, net of any borrowings against these
policies. During the first quarter of 2020, we borrowed $377 million against the policies as we strengthened our cash position in
light of disruptions caused by the COVID-19 pandemic. These borrowings were subsequently repaid and there were no
outstanding borrowings against these policies at January 2, 2021. Proceeds from these borrowings and subsequent payments have
been classified as financing activities in the consolidated statement of cash flows. Interest expense incurred on borrowings against
corporate-owned life insurance policies is recorded as an offset with policy income.
In 2019, TRU Simulation + Training Inc., a business within our Textron Systems segment, contributed assets associated with its
training business into FlightSafety Textron Aviation Training LLC, a company formed by FlightSafety International Inc. and
TRU to provide training solutions for Textron Aviation’s commercial business and general aviation aircraft. We have a 30%
interest in this company and our investment is accounted for under the equity method of accounting. We contributed assets with a
carrying value of $69 million to the company, which primarily included property, plant and equipment. In addition, $71 million
of the Textron Systems segment’s goodwill was allocated to this transaction. Based on the fair value of our share of the business,
we recorded a pre-tax net gain of $18 million in 2019 to cost of sales in our Consolidated Statements of Operations.
50 Textron 2020 Annual Report
50
Note 8. Other Current Liabilities
The other current liabilities of our Manufacturing group are summarized below:
(In millions)
Contract liabilities
Salaries, wages and employer taxes
Current portion of warranty and product maintenance liabilities
Other
Total
Changes in our warranty liability are as follows:
(In millions)
Balance at beginning of year
Provision
Settlements
Adjustments*
Balance at end of year
January 2,
2021
758 $
381
133
713
1,985 $
January 4,
2020
715
362
147
683
1,907
$
$
$
$
2020
141 $
54
(64)
(12)
119 $
2019
149 $
68
(70)
(6)
141 $
2018
164
72
(78)
(9)
149
* Adjustments include changes to prior year estimates, new issues on prior year sales, reclassifications to held for sale, business acquisitions/dispositions and
currency translation adjustments.
Note 9. Leases
We primarily lease certain manufacturing plants, offices, warehouses, training and service centers at various locations worldwide
that are classified as either operating or finance leases. Our leases have remaining lease terms up to 28 years, which include
options to extend the lease term for periods up to 25 years when it is reasonably certain the option will be exercised.
Operating lease cost totaled $61 million and $64 million, in 2020 and 2019, respectively. Finance lease cost and variable and
short-term lease costs were not significant. In 2020 and 2019, cash paid for operating lease liabilities totaled $60 million and $62
million, respectively, which is classified as cash flows from operating activities. Noncash transactions totaled $119 million in
2020 and $25 million in 2019, reflecting the recognition of operating lease assets and liabilities for new or extended leases.
Balance sheet and other information related to our leases is as follows:
(Dollars in millions)
Operating leases:
Other assets
Other current liabilities
Other liabilities
Finance leases:
Property, plant and equipment, net
Current portion of long-term debt
Long-term debt
Weighted-average remaining lease term (in years)
Operating leases
Finance leases
Weighted-average discount rate
Operating leases
Finance leases
$
$
January 2,
2021
January 4,
2020
349 $
47
306
35 $
2
38
11.6
16.8
4.17%
4.35%
277
48
233
39
2
40
10.2
17.9
4.42%
4.37%
Textron 2020 Annual Report 51
51
Maturities of our lease liabilities at January 2, 2021 are as follows:
Maturities of our lease liabilities at January 2, 2021 are as follows:
(In millions)
(In millions)
2021
2021
2022
2022
2023
2023
2024
2024
2025
2025
Thereafter
Thereafter
Total lease payments
Total lease payments
Less: interest
Less: interest
Total lease liabilities
Total lease liabilities
Note 10. Debt and Credit Facilities
Note 10. Debt and Credit Facilities
Our debt is summarized in the table below:
Our debt is summarized in the table below:
Operating
Operating
Leases
Leases
59 $
59 $
53
53
44
44
35
35
33
33
232
232
456
456
(103)
(103)
353 $
353 $
$
$
$
$
Finance
Finance
Leases
Leases
4
4
4
4
4
4
4
4
5
5
42
42
63
63
(23)
(23)
40
40
January 2,
January 2,
2021
2021
$
$
(In millions)
(In millions)
Manufacturing group
Manufacturing group
6.625% due 2020
6.625% due 2020
Variable-rate notes due 2020 (2.45%)
Variable-rate notes due 2020 (2.45%)
3.65% due 2021
3.65% due 2021
5.95% due 2021
5.95% due 2021
4.30% due 2024
4.30% due 2024
3.875% due 2025
3.875% due 2025
4.00% due 2026
4.00% due 2026
3.65% due 2027
3.65% due 2027
3.375% due 2028
3.375% due 2028
3.90% due 2029
3.90% due 2029
3.00% due 2030
3.00% due 2030
2.45% due 2031
2.45% due 2031
Other (weighted-average rate of 2.60% and 3.01%, respectively)
Other (weighted-average rate of 2.60% and 3.01%, respectively)
Total Manufacturing group debt
Total Manufacturing group debt
Less: Current portion of long-term debt
Less: Current portion of long-term debt
Total Long-term debt
Total Long-term debt
Finance group
Finance group
Variable-rate note due 2022 (1.70% and 2.87%, respectively)
Variable-rate note due 2022 (1.70% and 2.87%, respectively)
2.88% note due 2022
2.88% note due 2022
Fixed-rate notes due 2020-2028 (weighted-average rate of 3.25% and 3.20%, respectively)*
Fixed-rate notes due 2020-2028 (weighted-average rate of 3.25% and 3.20%, respectively)*
Variable-rate notes due 2020-2027 (weighted-average rate of 1.73% and 3.31%, respectively)*
Variable-rate notes due 2020-2027 (weighted-average rate of 1.73% and 3.31%, respectively)*
Fixed-to-Floating Rate Junior Subordinated Notes (1.96% and 3.64%, respectively)
Fixed-to-Floating Rate Junior Subordinated Notes (1.96% and 3.64%, respectively)
Total Finance group debt
Total Finance group debt
* Notes amortize on a monthly basis and are secured by finance receivables as described in Note 4.
* Notes amortize on a monthly basis and are secured by finance receivables as described in Note 4.
The following table shows required payments during the next five years on debt outstanding at January 2, 2021:
The following table shows required payments during the next five years on debt outstanding at January 2, 2021:
(In millions)
(In millions)
Manufacturing group
Manufacturing group
Finance group
Finance group
Total
Total
2021
2021
509 $
509 $
13
13
522 $
522 $
8 $
8 $
16
16
24 $
24 $
316
316
324 $
324 $
8 $
8 $
2022
2022
2023
2023
$
$
$
$
$
$
$
$
$
$
$
$
— $
— $
—
—
250
250
250
250
350
350
350
350
350
350
350
350
300
300
300
300
650
650
500
500
57
57
3,707 $
3,707 $
(509)
(509)
3,198 $
3,198 $
150 $
150 $
150
150
51
51
17
17
294
294
662 $
662 $
2024
2024
361 $
361 $
15
15
376 $
376 $
January 4,
January 4,
2020
2020
199
199
350
350
250
250
250
250
350
350
350
350
350
350
350
350
300
300
300
300
—
—
—
—
75
75
3,124
3,124
(561)
(561)
2,563
2,563
150
150
150
150
65
65
22
22
299
299
686
686
2025
2025
357
357
5
5
362
362
Textron has a senior unsecured revolving credit facility for an aggregate principal amount of $1.0 billion, of which up to $100
Textron has a senior unsecured revolving credit facility for an aggregate principal amount of $1.0 billion, of which up to $100
million is available for the issuance of letters of credit. We may elect to increase the aggregate amount of commitments under the
million is available for the issuance of letters of credit. We may elect to increase the aggregate amount of commitments under the
facility to up to $1.3 billion by designating an additional lender or by an existing lender agreeing to increase its commitment. The
facility to up to $1.3 billion by designating an additional lender or by an existing lender agreeing to increase its commitment. The
facility expires in October 2024, subject to up to two one-year extensions at our option with the consent of lenders representing a
facility expires in October 2024, subject to up to two one-year extensions at our option with the consent of lenders representing a
52 Textron 2020 Annual Report
52
52
majority of the commitments under the facility. At January 2, 2021 and January 4, 2020, there were no amounts borrowed against
the facility and there were $9 million and $10 million, respectively, of outstanding letters of credit issued under the facility.
Fixed-to-Floating Rate Junior Subordinated Notes
The Finance group’s $294 million of 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 at
any time and we are obligated to redeem the notes beginning on February 15, 2042. During 2020, TFC repurchased $5 million of
these notes. Interest on the notes was fixed at 6% through February 15, 2017 and is now variable at the three-month London
Interbank Offered Rate + 1.735%.
Support Agreement
Under a Support Agreement between Textron and TFC, Textron is required to maintain a controlling interest in TFC. The
agreement, as amended in December 2015, also requires Textron to ensure that TFC maintains fixed charge coverage of no less
than 125% and consolidated shareholders' equity of no less than $125 million. There were no cash contributions required to be
paid to TFC in 2020, 2019 and 2018 to maintain compliance with the support agreement.
Note 11. 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 January 2, 2021 and January 4,
2020, we had foreign currency exchange contracts with notional amounts upon which the contracts were based of $318 million
and $342 million, respectively. At January 2, 2021, the fair value amounts of our foreign currency exchange contracts were a $5
million asset and a $2 million liability. At January 4, 2020, the fair value amounts of our foreign currency exchange contracts
were a $2 million asset and a $2 million liability.
Our Finance group enters into interest rate swap agreements to mitigate exposure to fluctuations in interest rates. By using these
contracts, we are able to convert floating-rate cash flows to fixed-rate cash flows. These agreements are designated as cash flow
hedges. At January 2, 2021, we had one swap agreement that matures in February 2022 for a notional amount of $294 million
with a fair value of a $4 million liability.
Textron 2020 Annual Report 53
53
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
January 2, 2021
January 4, 2020
Carrying
Value
Estimated
Fair Value
Carrying
Value
Estimated
Fair Value
$
(3,690) $
(3,986) $
(3,097) $
(3,249)
549
(662)
599
(587)
493
(686)
527
(634)
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 12. Shareholders’ Equity
Capital Stock
We have authorization for 15 million shares of preferred stock with a par value of $0.01 and 500 million shares of common stock
with a par value of $0.125. Outstanding common stock activity is presented below:
(In thousands)
Balance at beginning of year
Share repurchases
Share-based compensation activity
Balance at end of year
2020
227,956
(4,145)
2,633
226,444
2019
235,621
(10,011)
2,346
227,956
2018
261,471
(29,094)
3,244
235,621
Earnings Per Share
We calculate basic and diluted earnings per share (EPS) based on net income, which approximates income available to common
shareholders for each period. Basic EPS is calculated using the two-class method, which includes the weighted-average number
of common shares outstanding during the period and restricted stock units to be paid in stock that are deemed participating
securities as they provide nonforfeitable rights to dividends. Diluted EPS considers the dilutive effect of all potential future
common stock, including stock options.
The weighted-average shares outstanding for basic and diluted EPS are as follows:
(In thousands)
Basic weighted-average shares outstanding
Dilutive effect of stock options
Diluted weighted-average shares outstanding
2020
228,536
443
228,979
2019
231,315
1,394
232,709
2018
250,196
3,041
253,237
In 2020, 2019 and 2018, stock options to purchase 7.6 million, 4.3 million and 1.3 million shares, respectively, of common stock
are excluded from the calculation of diluted weighted-average shares outstanding as their effect would have been anti-dilutive.
54 Textron 2020 Annual Report
54
Accumulated Other Comprehensive Loss
The components of Accumulated other comprehensive loss are presented below:
Pension and
Postretirement
Benefits
Adjustments
Foreign
Currency
Translation
Adjustments
Deferred
Gains (Losses)
on Hedge
Contracts
(In millions)
Balance at December 29, 2018
Other comprehensive loss before reclassifications
Reclassified from Accumulated other comprehensive loss
Balance at January 4, 2020
Other comprehensive loss before reclassifications
Reclassified from Accumulated other comprehensive loss
Balance at January 2, 2021
$
$
$
(1,727) $
(166)
82
(1,811) $
(115)
146
(1,780) $
(32) $
(4)
—
(36) $
78
—
42 $
Accumulated
Other
Comprehensive
Loss
(1,762)
(165)
80
(1,847)
(34)
142
(1,739)
(3) $
5
(2)
— $
3
(4)
(1) $
Other comprehensive income (loss)
The before and after-tax components of other comprehensive income (loss) are presented below:
(In millions)
Pension and postretirement benefits
adjustments:
Unrealized losses
Amortization of net actuarial loss*
Amortization of prior service cost*
Recognition of prior service cost
Business disposition
2020
2019
2018
Pre-Tax
Amount
Tax
(Expense)
Benefit
After-
Tax
Amount
Pre-Tax
Amount
Tax
(Expense)
Benefit
After-
Tax
Amount
Pre-Tax
Amount
Tax
(Expense)
Benefit
After-
Tax
Amount
$ (144) $
35 $ (109) $ (218) $
184
(43)
6
(1)
2
(8)
— —
141
5
(6)
—
99
8
—
—
52 $ (166) $ (248) $
(23)
(2)
—
—
152
9
(20)
7
76
6
—
—
58 $ (190)
(35)
(2)
5
—
117
7
(15)
7
Pension and postretirement benefits
adjustments, net
Foreign currency translation adjustments:
Foreign currency translation adjustments
Business disposition
Foreign currency translation adjustments, net
Deferred gains (losses) on hedge contracts:
Current deferrals
Reclassification adjustments
Deferred gains (losses) on hedge
contracts, net
Total
38
81
—
81
4
(6)
(2)
$ 117 $
(7)
(3)
—
(3)
(1)
2
31
78
—
78
3
(4)
(111)
27
(84)
(100)
26
(74)
(6)
2
— —
2
(6)
8
(2)
(3)
—
(4)
—
(4)
5
(2)
(46)
(3)
6 —
(3)
(40)
(8)
(7)
—
2
(49)
6
(43)
(8)
(5)
1
(1)
(9) $ 108 $ (111) $
6
(3)
26 $
3
(15)
(85) $ (155) $
2
(13)
25 $ (130)
* These components of other comprehensive income (loss) are included in the computation of net periodic pension cost. See Note 16 for additional information.
Note 13. Segment and Geographic Data
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 and Caravan turboprop aircraft, military trainer and defense aircraft,
piston engine aircraft, and aftermarket part sales and services sold to a diverse base of corporate and individual buyers, and U.S.
and non-U.S. governments.
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, private, law
enforcement, utility and emergency medical helicopter operators, and foreign governments.
Textron 2020 Annual Report 55
55
Textron Systems products include unmanned aircraft and surface systems, marine craft, armored vehicles and specialty vehicles,
and other defense and aviation mission support products and services primarily for U.S. and non-U.S. governments.
Industrial products and markets include the following:
•
•
Fuel Systems and Functional Components products consist of blow-molded plastic fuel systems, including conventional
plastic fuel tanks and pressurized fuel tanks for hybrid applications, clear-vision systems and plastic tanks for selective
catalytic reduction systems that are marketed primarily to automobile OEMs; and
Specialized Vehicles products include golf cars, off-road utility vehicles, recreational side-by-side and all-terrain
vehicles, snowmobiles, light transportation vehicles, aviation ground support equipment, professional turf-maintenance
equipment and turf-care vehicles that are marketed primarily to golf courses and resorts, government agencies and
municipalities, consumers, outdoor enthusiasts, and commercial and industrial users.
The Finance segment provides financing primarily to purchasers of new and pre-owned Textron Aviation aircraft and Bell
helicopters.
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, gains/losses on major business dispositions,
special charges and an inventory charge related to the 2020 COVID-19 restructuring plan, as discussed in Note 17. 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 before income taxes, are as follows:
Revenues
Segment Profit
(In millions)
Textron Aviation
Bell
Textron Systems
Industrial
Finance
Total
Corporate expenses and other, net
Interest expense, net for Manufacturing group
Special charges*
Inventory charge*
Gain on business disposition
Income before income taxes
* See Note 17 for additional information.
Other information by segment is provided below:
$
2020
3,974 $
3,309
1,313
3,000
55
2019
5,187 $
3,254
1,325
3,798
66
2018
4,971 $
3,180
1,464
4,291
66
$ 11,651 $ 13,630 $ 13,972 $
$
2020
16 $
462
152
111
10
751 $
(122)
(145)
(147)
(55)
—
282 $
2019
449 $
435
141
217
28
1,270 $
(110)
(146)
(72)
—
—
942 $
2018
445
425
156
218
23
1,267
(119)
(135)
(73)
—
444
1,384
Assets
Capital Expenditures
Depreciation and Amortization
(In millions)
Textron Aviation
Bell
Textron Systems
Industrial
Finance
Corporate
Total
$
January 2,
2021
4,380 $
2,984
2,054
2,500
938
2,587
January 4,
2020
4,692 $
2,783
2,352
2,781
964
1,446
$ 15,443 $ 15,018 $
2020
94 $
117
42
62
—
2
317 $
2019
122 $
81
38
97
—
1
339 $
2018
132 $
65
39
132
—
1
369 $
2020
138 $
91
43
102
5
12
391 $
2019
137 $
107
48
108
6
10
416 $
2018
145
108
54
112
8
10
437
56 Textron 2020 Annual Report
56
Geographic Data
Presented below is selected financial information by geographic area:
(In millions)
United States
Europe
Asia and Australia
Other international
Total
Revenues*
2020
7,943 $
1,336
1,106
1,266
11,651 $
2019
8,963 $
1,986
1,070
1,611
13,630 $
2018
8,667 $
2,187
1,253
1,865
13,972 $
$
$
Property, Plant
and Equipment, net**
January 2,
2021
2,068 $
237
95
116
2,516 $
January 4,
2020
2,054
244
97
132
2,527
* Revenues are attributed to countries based on the location of the customer.
** Property, plant and equipment, net is based on the location of the asset.
Note 14. Revenues
Disaggregation of Revenues
Our revenues disaggregated by major product type are presented below:
(In millions)
Aircraft
Aftermarket parts and services
Textron Aviation
Military aircraft and support programs
Commercial helicopters, parts and services
Bell
Unmanned systems
Marine and land systems
Simulation, training and other
Textron Systems
Fuel systems and functional components
Specialized vehicles
Tools and test equipment
Industrial
Finance
Total revenues
2020
2,714 $
1,260
3,974
2,213
1,096
3,309
621
179
513
1,313
1,751
1,249
—
3,000
55
11,651 $
2019
3,592 $
1,595
5,187
1,988
1,266
3,254
572
208
545
1,325
2,237
1,561
—
3,798
66
13,630 $
2018
3,435
1,536
4,971
2,030
1,150
3,180
612
311
541
1,464
2,352
1,691
248
4,291
66
13,972
$
$
Textron 2020 Annual Report 57
57
Our revenues for our segments by customer type and geographic location are presented below:
(In millions)
2020
Customer type:
Commercial
U.S. Government
Total revenues
Geographic location:
United States
Europe
Asia and Australia
Other international
Total revenues
2019
Customer type:
Commercial
U.S. Government
Total revenues
Geographic location:
United States
Europe
Asia and Australia
Other international
Total revenues
2018
Customer type:
Commercial
U.S. Government
Total revenues
Geographic location:
United States
Europe
Asia and Australia
Other international
Total revenues
Textron
Aviation
Bell
Textron
Systems
Industrial
Finance
Total
$
$
$
$
$
$
$
$
$
$
$
$
3,826 $
148
3,974 $
2,825 $
356
379
414
3,974 $
4,956 $
231
5,187 $
3,708 $
678
244
557
5,187 $
4,734 $
237
4,971 $
3,379 $
612
336
644
4,971 $
1,079 $
2,230
3,309 $
2,564 $
148
330
267
3,309 $
1,238 $
2,016
3,254 $
2,440 $
142
348
324
3,254 $
1,114 $
2,066
3,180 $
2,186 $
162
427
405
3,180 $
249 $
1,064
1,313 $
1,129 $
44
67
73
1,313 $
359 $
966
1,325 $
1,083 $
73
103
66
1,325 $
431 $
1,033
1,464 $
1,118 $
74
127
145
1,464 $
2,993 $
7
3,000 $
1,398 $
786
328
488
3,000 $
3,775 $
23
3,798 $
1,698 $
1,091
374
635
3,798 $
4,277 $
14
4,291 $
1,957 $
1,333
357
644
4,291 $
55 $
—
55 $
27 $
2
2
24
55 $
66 $
—
66 $
34 $
2
1
29
66 $
66 $
—
66 $
27 $
6
6
27
66 $
8,202
3,449
11,651
7,943
1,336
1,106
1,266
11,651
10,394
3,236
13,630
8,963
1,986
1,070
1,611
13,630
10,622
3,350
13,972
8,667
2,187
1,253
1,865
13,972
Remaining Performance Obligations
Our remaining performance obligations, which is the equivalent of our backlog, represent the expected transaction price allocated
to our contracts that we expect to recognize as revenue in future periods when we perform under the contracts. These remaining
obligations exclude unexercised contract options and potential orders under ordering-type contracts such as Indefinite Delivery,
Indefinite Quantity contracts. At January 2, 2021, we had $9.5 billion in remaining performance obligations of which we expect to
recognize revenues of approximately 76% through 2022, an additional 20% through 2024, and the balance thereafter.
Contract Assets and Liabilities
Assets and liabilities related to our contracts with customers are reported on a contract-by-contract basis at the end of each
reporting period. At January 2, 2021 and January 4, 2020, contract assets totaled $561 million and $567 million, respectively, and
contract liabilities totaled $842 million and $830 million, respectively, reflecting timing differences between revenues recognized,
billings and payments from customers. During 2020, 2019 and 2018, we recognized revenues of $506 million, $590 million and
$817 million, respectively, that were included in the contract liability balance at the beginning of each year.
58 Textron 2020 Annual Report
58
Note 15. Share-Based Compensation
Under our 2015 Long-Term Incentive Plan (Plan), which replaced our 2007 Long-Term Incentive Plan in April 2015, we have
authorization to provide awards to selected employees and non-employee directors in the form of stock options, restricted stock,
restricted stock units, stock appreciation rights, performance stock, performance share units and other awards. A maximum of 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. For 2020, 2019 and 2018, the awards
granted under this Plan primarily included stock options, restricted stock units and performance share units.
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 2020, 2019 and 2018.
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 compensation expense included in net income
$
$
2020
57 $
(14)
43 $
2019
52 $
(12)
40 $
2018
35
(8)
27
Compensation cost for awards subject only to service conditions that vest ratably is recognized on a straight-line basis over the
requisite service period for each separately vesting portion of the award. Our awards include continued vesting provisions for
retirement eligible employees. Upon reaching retirement eligibility, the service requirement for these individuals is considered to
have been satisfied and compensation expense for future awards is recognized on the date of the grant.
As of January 2, 2021, we had not recognized $30 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
Stock option compensation expense was $20 million, $22 million and $23 million in 2020, 2019 and 2018, respectively. Options
to purchase our shares have a maximum term of ten years and generally vest ratably over a three-year period. Stock option
compensation cost is calculated under the fair value approach using the Black-Scholes option-pricing model to determine the fair
value of options granted on the date of grant. The expected volatility used in this model is based on historical volatilities and
implied volatilities from traded options on our common stock. The expected term is based on historical option exercise data,
which is adjusted to reflect any anticipated changes in expected behavior.
We grant options annually on the first day of March. The assumptions used in our option-pricing model for these grants and the
weighted-average fair value for these options are as follows:
Fair value of options at grant date
Dividend yield
Expected volatility
Risk-free interest rate
Expected term (in years)
$
2020
10.66 $
0.2 %
29.3 %
1.1 %
4.7
2019
14.62 $
0.2 %
26.6 %
2.5 %
4.7
2018
15.83
0.1 %
26.6 %
2.6 %
4.7
Textron 2020 Annual Report 59
59
The stock option activity during 2020 is provided below:
The stock option activity during 2020 is provided below:
The stock option activity during 2020 is provided below:
The stock option activity during 2020 is provided below:
Number of
Number of
Number of
Options
Number of
Options
Options
8,744 $
Options
8,744 $
8,744 $
2,003
8,744 $
2,003
2,003
(723)
2,003
(723)
(723)
(214)
(723)
(214)
(214)
9,810 $
(214)
9,810 $
9,810 $
6,484 $
9,810 $
6,484 $
6,484 $
6,484 $
Weighted-
Weighted-
Weighted-
Average
Weighted-
Average
Average
Exercise Price
(Options in thousands)
Average
Exercise Price
(Options in thousands)
Exercise Price
(Options in thousands)
44.00
Outstanding at beginning of year
Exercise Price
(Options in thousands)
44.00
Outstanding at beginning of year
44.00
Outstanding at beginning of year
39.48
Granted
44.00
Outstanding at beginning of year
39.48
Granted
39.48
Granted
(29.71)
Exercised
39.48
Granted
(29.71)
Exercised
(29.71)
Exercised
(48.75)
Forfeited or expired
(29.71)
Exercised
(48.75)
Forfeited or expired
(48.75)
Forfeited or expired
44.03
Outstanding at end of year
(48.75)
Forfeited or expired
44.03
Outstanding at end of year
44.03
Outstanding at end of year
43.02
Exercisable at end of year
44.03
Outstanding at end of year
43.02
Exercisable at end of year
43.02
Exercisable at end of year
43.02
Exercisable at end of year
At January 2, 2021, our outstanding options had an aggregate intrinsic value of $65 million and a weighted-average remaining
At January 2, 2021, our outstanding options had an aggregate intrinsic value of $65 million and a weighted-average remaining
At January 2, 2021, our outstanding options had an aggregate intrinsic value of $65 million and a weighted-average remaining
contractual life of 5.8 years. Our exercisable options had an aggregate intrinsic value of $48 million and a weighted-average
At January 2, 2021, our outstanding options had an aggregate intrinsic value of $65 million and a weighted-average remaining
contractual life of 5.8 years. Our exercisable options had an aggregate intrinsic value of $48 million and a weighted-average
contractual life of 5.8 years. Our exercisable options had an aggregate intrinsic value of $48 million and a weighted-average
remaining contractual life of 4.4 years at January 2, 2021. The total intrinsic value of options exercised during 2020, 2019 and
contractual life of 5.8 years. Our exercisable options had an aggregate intrinsic value of $48 million and a weighted-average
remaining contractual life of 4.4 years at January 2, 2021. The total intrinsic value of options exercised during 2020, 2019 and
remaining contractual life of 4.4 years at January 2, 2021. The total intrinsic value of options exercised during 2020, 2019 and
2018 was $10 million, $22 million and $62 million, respectively.
remaining contractual life of 4.4 years at January 2, 2021. The total intrinsic value of options exercised during 2020, 2019 and
2018 was $10 million, $22 million and $62 million, respectively.
2018 was $10 million, $22 million and $62 million, respectively.
2018 was $10 million, $22 million and $62 million, respectively.
Restricted Stock Units
Restricted Stock Units
Restricted Stock Units
We issue restricted stock units that include the right to receive dividend equivalents and are settled in both cash and stock.
Restricted Stock Units
We issue restricted stock units that include the right to receive dividend equivalents and are settled in both cash and stock.
We issue restricted stock units that include the right to receive dividend equivalents and are settled in both cash and stock.
Beginning in 2020, new grants of restricted stock units will vest in full on the third anniversary of the grant date. Restricted stock
We issue restricted stock units that include the right to receive dividend equivalents and are settled in both cash and stock.
Beginning in 2020, new grants of restricted stock units will vest in full on the third anniversary of the grant date. Restricted stock
Beginning in 2020, new grants of restricted stock units will vest in full on the third anniversary of the grant date. Restricted stock
units granted prior to 2020 vest one-third each in the third, fourth and fifth year following the year of the grant. The fair value of
Beginning in 2020, new grants of restricted stock units will vest in full on the third anniversary of the grant date. Restricted stock
units granted prior to 2020 vest one-third each in the third, fourth and fifth year following the year of the grant. The fair value of
units granted prior to 2020 vest one-third each in the third, fourth and fifth year following the year of the grant. The fair value of
these units is based on the trading price of our common stock. For units payable in stock, we use the trading price on the grant
units granted prior to 2020 vest one-third each in the third, fourth and fifth year following the year of the grant. The fair value of
these units is based on the trading price of our common stock. For units payable in stock, we use the trading price on the grant
these units is based on the trading price of our common stock. For units payable in stock, we use the trading price on the grant
date, while units payable in cash are remeasured using the price at each reporting period date.
these units is based on the trading price of our common stock. For units payable in stock, we use the trading price on the grant
date, while units payable in cash are remeasured using the price at each reporting period date.
date, while units payable in cash are remeasured using the price at each reporting period date.
date, while units payable in cash are remeasured using the price at each reporting period date.
The 2020 activity for restricted stock units is provided below:
The 2020 activity for restricted stock units is provided below:
The 2020 activity for restricted stock units is provided below:
The 2020 activity for restricted stock units is provided below:
Units Payable in Stock
Units Payable in Stock
Units Payable in Stock
Units Payable in Stock
Number of
Number of
Number of
Shares
Number of
Shares
Shares
543 $
Shares
543 $
543 $
179
543 $
179
179
(139)
179
(139)
(139)
—
(139)
—
—
583 $
—
583 $
583 $
583 $
Weighted-
Weighted-
Weighted-
Average Grant
Weighted-
Average Grant
Average Grant
Date Fair Value
Average Grant
Date Fair Value
Date Fair Value
49.44
Date Fair Value
49.44
49.44
37.93
49.44
37.93
37.93
(42.34)
37.93
(42.34)
(42.34)
—
(42.34)
—
—
47.60
—
47.60
47.60
47.60
Units Payable in Cash
Units Payable in Cash
Units Payable in Cash
Units Payable in Cash
Number of
Number of
Number of
Units
Number of
Units
Units
1,104 $
Units
1,104 $
1,104 $
360
1,104 $
360
360
(276)
360
(276)
(276)
(43)
(276)
(43)
(43)
1,145 $
(43)
1,145 $
1,145 $
1,145 $
Weighted-
Weighted-
Weighted-
Average Grant
Weighted-
Average Grant
Average Grant
Date Fair Value
Average Grant
Date Fair Value
Date Fair Value
49.61
Date Fair Value
49.61
49.61
40.57
49.61
40.57
40.57
(42.34)
40.57
(42.34)
(42.34)
(49.29)
(42.34)
(49.29)
(49.29)
48.53
(49.29)
48.53
48.53
48.53
(Shares/Units in thousands)
(Shares/Units in thousands)
(Shares/Units in thousands)
Outstanding at beginning of year, nonvested
(Shares/Units in thousands)
Outstanding at beginning of year, nonvested
Outstanding at beginning of year, nonvested
Granted
Outstanding at beginning of year, nonvested
Granted
Granted
Vested
Granted
Vested
Vested
Forfeited
Vested
Forfeited
Forfeited
Outstanding at end of year, nonvested
Forfeited
Outstanding at end of year, nonvested
Outstanding at end of year, nonvested
Outstanding at end of year, nonvested
The fair value of the restricted stock unit awards that vested and/or amounts paid under these awards is as follows:
The fair value of the restricted stock unit awards that vested and/or amounts paid under these awards is as follows:
The fair value of the restricted stock unit awards that vested and/or amounts paid under these awards is as follows:
The fair value of the restricted stock unit awards that vested and/or amounts paid under these awards is as follows:
(In millions)
(In millions)
(In millions)
Fair value of awards vested
(In millions)
Fair value of awards vested
Fair value of awards vested
Cash paid
Fair value of awards vested
Cash paid
Cash paid
Cash paid
Performance Share Units
Performance Share Units
Performance Share Units
The fair value of share-based compensation awards accounted for as liabilities includes performance share units, which are paid in
Performance Share Units
The fair value of share-based compensation awards accounted for as liabilities includes performance share units, which are paid in
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. Beginning with grants made in 2020, performance share units are subject to
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. Beginning with grants made in 2020, performance share units are subject to
cash in the first quarter of the year following vesting. Beginning with grants made in 2020, performance share units are subject to
performance goals set at the beginning of the three-year performance period. Performance share units granted prior to 2020 are
cash in the first quarter of the year following vesting. Beginning with grants made in 2020, performance share units are subject to
performance goals set at the beginning of the three-year performance period. Performance share units granted prior to 2020 are
performance goals set at the beginning of the three-year performance period. Performance share units granted prior to 2020 are
subject to performance goals set for each year of the three-year performance period. Performance share units vest at the end of
performance goals set at the beginning of the three-year performance period. Performance share units granted prior to 2020 are
subject to performance goals set for each year of the three-year performance period. Performance share units vest at the end of
subject to performance goals set for each year of the three-year performance period. Performance share units vest at the end of
the three-year performance period. The fair value of these units is based on the trading price of our common stock and is
subject to performance goals set for each year of the three-year performance period. Performance share units vest at the end of
the three-year performance period. The fair value of these units is based on the trading price of our common stock and is
the three-year performance period. The fair value of these units is based on the trading price of our common stock and is
remeasured at each reporting period date.
the three-year performance period. The fair value of these units is based on the trading price of our common stock and is
remeasured at each reporting period date.
remeasured at each reporting period date.
remeasured at each reporting period date.
The 2020 activity for our performance share units is as follows:
The 2020 activity for our performance share units is as follows:
The 2020 activity for our performance share units is as follows:
The 2020 activity for our performance share units is as follows:
2020
2020
2020
17 $
2020
17 $
17 $
11
17 $
11
11
11
2019
2019
2019
23 $
2019
23 $
23 $
16
23 $
16
16
16
2018
2018
2018
25
2018
25
25
18
25
18
18
18
$
$
$
$
(Units in thousands)
(Units in thousands)
(Units in thousands)
Outstanding at beginning of year, nonvested
(Units in thousands)
Outstanding at beginning of year, nonvested
Outstanding at beginning of year, nonvested
Granted
Outstanding at beginning of year, nonvested
Granted
Granted
Vested
Granted
Vested
Vested
Outstanding at end of year, nonvested
Vested
Outstanding at end of year, nonvested
Outstanding at end of year, nonvested
Outstanding at end of year, nonvested
60 Textron 2020 Annual Report
Number of
Number of
Number of
Units
Number of
Units
Units
411 $
Units
411 $
411 $
276
411 $
276
276
(173)
276
(173)
(173)
514 $
(173)
514 $
514 $
514 $
Weighted-
Weighted-
Weighted-
Average Grant
Weighted-
Average Grant
Average Grant
Date Fair Value
Average Grant
Date Fair Value
Date Fair Value
56.03
Date Fair Value
56.03
56.03
40.60
56.03
40.60
40.60
(58.24)
40.60
(58.24)
(58.24)
47.02
(58.24)
47.02
47.02
47.02
60
60
60
60
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
$
2020
8 $
7
2019
9 $
10
2018
12
11
Note 16. Retirement Plans
We provide defined-contribution benefits to eligible employees, as well as some remaining defined-benefit pension and other
post-retirement benefits covering certain of our U.S. and Non-U.S. employees. Substantially all of our employees are covered by
defined contribution plans. The largest of these plans, the Textron Savings Plan, is a qualified 401(k) plan subject to the
Employee Retirement Income Security Act of 1974 (ERISA). Our defined contribution plans cost $128 million, $130 million and
$125 million in 2020, 2019 and 2018, respectively. We also provide postretirement benefits other than pensions for certain retired
employees in the U.S. that include healthcare, dental care, Medicare Part B reimbursement and life insurance.
A portion of our U.S. employees participate in the legacy defined benefit pension plans which were closed to new participants
beginning on January 1, 2010. These plans; the Textron Master Retirement Plan, the Bell Helicopter Textron Master Retirement
Plan, and the CWC Castings Division of Textron Inc. Hourly-Rated Employees' Pension Plan, are subject to the provisions of
ERISA and provide a minimum guaranteed benefit to participants. The primary factors affecting the benefits earned by
participants in our pension plans are employees’ years of service and compensation levels. Employees hired subsequent to the
closure of these plans receive an additional annual cash contribution to their Textron Savings Plan account based on their eligible
compensation of up to 4%.
Periodic Benefit Cost (Credit)
The components of net periodic benefit cost (credit) and other amounts recognized in other comprehensive income (loss) (OCI)
are as follows:
$
(In millions)
Net periodic benefit cost (credit)
Service cost
Interest cost
Expected return on plan assets
Amortization of prior service cost (credit)
Amortization of net actuarial loss (gain)
Net periodic benefit cost (credit)*
Other changes in plan assets and benefit obligations
recognized in OCI
Current year actuarial loss (gain)
Current year prior service cost
Amortization of net actuarial gain (loss)
Amortization of prior service credit (cost)
Business disposition
$
Total recognized in OCI, before taxes
Total recognized in net periodic benefit cost (credit) and OCI $
$
$
Pension Benefits
Postretirement Benefits
Other than Pensions
2020
2019
2018
2020
2019
2018
106 $
293
(574)
11
185
21 $
146 $
8
(185)
(11)
—
(42) $
(21) $
91 $
326
(556)
14
101
(24) $
207 $
—
(101)
(14)
—
92 $
68 $
104 $
306
(553)
15
153
25 $
270 $
20
(153)
(15)
(7)
115 $
140 $
2 $
8
—
(5)
(1)
4 $
(2) $
—
1
5
—
4 $
8 $
3 $
10
—
(6)
(2)
5 $
11 $
—
2
6
—
19 $
24 $
3
10
—
(6)
(1)
6
(22)
—
1
6
—
(15)
(9)
* Excludes the cost associated with the defined contribution component, included in certain of our U.S.-based defined benefit pension plans, that totaled $11
million in 2020 and $13 million for both 2019 and 2018.
Textron 2020 Annual Report 61
61
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 projected benefit obligation
Projected benefit obligation at beginning of year
Service cost
Interest cost
Plan participants’ contributions
Actuarial losses (gains)
Benefits paid
Plan amendment
Foreign exchange rate changes and other
Projected benefit obligation at end of year
Change in fair value of plan assets
Fair value of plan assets at beginning of year
Actual return on plan assets
Employer contributions
Benefits paid
Foreign exchange rate changes and other
Fair value of plan assets at end of year
Funded status at end of year
Pension Benefits
Postretirement Benefits
Other than Pensions
January 2,
2021
January 4,
2020
January 2,
2021
January 4,
2020
$
$
$
$
$
8,938 $
106
293
—
888
(429)
8
29
9,833 $
8,129 $
1,312
37
(429)
31
9,080 $
(753) $
7,901 $
91
326
—
1,001
(421)
—
40
8,938 $
7,122
1,350
38
(421)
40
8,129
(809) $
246 $
2
8
5
(2)
(29)
—
—
230 $
250
3
10
5
11
(33)
—
—
246
(230) $
(246)
Actuarial losses (gains) reflected in the table above for both 2020 and 2019 were largely the result of changes in the discount rate
utilized.
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 (gain)
Prior service cost (credit)
Pension Benefits
Postretirement Benefits
Other than Pensions
$
January 2,
2021
216 $
(28)
(941)
January 4,
2020
152 $
(27)
(934)
January 2,
2021
— $
(23)
(207)
January 4,
2020
—
(26)
(220)
2,238
52
2,271
55
(23)
(15)
(21)
(20)
The accumulated benefit obligation for all defined benefit pension plans was $9.3 billion and $8.5 billion at January 2, 2021 and
January 4, 2020, respectively, which included $440 million and $404 million, respectively, in accumulated benefit obligations for
unfunded plans where funding is not permitted or in foreign environments where funding is not feasible.
Pension plans with accumulated benefit obligation exceeding the fair value of plan assets are as follows:
(In millions)
Accumulated benefit obligation
Fair value of plan assets
62 Textron 2020 Annual Report
January 2,
2021
789 $
282
January 4,
2020
8,050
7,500
$
62
Pension plans with projected benefit obligation exceeding the fair value of plan assets are as follows:
Pension plans with projected benefit obligation exceeding the fair value of plan assets are as follows:
Pension plans with projected benefit obligation exceeding the fair value of plan assets are as follows:
Pension plans with projected benefit obligation exceeding the fair value of plan assets are as follows:
(In millions)
(In millions)
(In millions)
(In millions)
Projected benefit obligation
Projected benefit obligation
Projected benefit obligation
Projected benefit obligation
Fair value of plan assets
Fair value of plan assets
Fair value of plan assets
Fair value of plan assets
January 2,
January 2,
January 2,
January 2,
2021
2021
2021
2021
9,333 $
9,333 $
9,333 $
9,333 $
8,363
8,363
8,363
8,363
January 4,
January 4,
January 4,
January 4,
2020
2020
2020
2020
8,462
8,462
8,462
8,462
7,500
7,500
7,500
7,500
$
$
$
$
Assumptions
Assumptions
Assumptions
Assumptions
The weighted-average assumptions we use for our pension and postretirement plans are as follows:
The weighted-average assumptions we use for our pension and postretirement plans are as follows:
The weighted-average assumptions we use for our pension and postretirement plans are as follows:
The weighted-average assumptions we use for our pension and postretirement plans are as follows:
Net periodic benefit cost
Net periodic benefit cost
Net periodic benefit cost
Net periodic benefit cost
Discount rate
Discount rate
Discount rate
Discount rate
Expected long-term rate of return on assets
Expected long-term rate of return on assets
Expected long-term rate of return on assets
Expected long-term rate of return on assets
Rate of compensation increase
Rate of compensation increase
Rate of compensation increase
Rate of compensation increase
Benefit obligations at year-end
Benefit obligations at year-end
Benefit obligations at year-end
Benefit obligations at year-end
Discount rate
Discount rate
Discount rate
Discount rate
Rate of compensation increase
Rate of compensation increase
Rate of compensation increase
Rate of compensation increase
Interest crediting rate for cash balance plans
Interest crediting rate for cash balance plans
Interest crediting rate for cash balance plans
Interest crediting rate for cash balance plans
Pension Benefits
Pension Benefits
Pension Benefits
Pension Benefits
2019
2019
2019
2019
4.24 %
4.24 %
4.24 %
4.24 %
7.55 %
7.55 %
7.55 %
7.55 %
3.50 %
3.50 %
3.50 %
3.50 %
3.36 %
3.36 %
3.36 %
3.36 %
3.50 %
3.50 %
3.50 %
3.50 %
5.25 %
5.25 %
5.25 %
5.25 %
2018
2018
2018
2018
3.67 %
3.67 %
3.67 %
3.67 %
7.58 %
7.58 %
7.58 %
7.58 %
3.50 %
3.50 %
3.50 %
3.50 %
4.24 %
4.24 %
4.24 %
4.24 %
3.50 %
3.50 %
3.50 %
3.50 %
5.25 %
5.25 %
5.25 %
5.25 %
2020
2020
2020
2020
3.36 %
3.36 %
3.36 %
3.36 %
7.55 %
7.55 %
7.55 %
7.55 %
3.50 %
3.50 %
3.50 %
3.50 %
2.62 %
2.62 %
2.62 %
2.62 %
3.50 %
3.50 %
3.50 %
3.50 %
5.25 %
5.25 %
5.25 %
5.25 %
Postretirement Benefits
Postretirement Benefits
Postretirement Benefits
Postretirement Benefits
Other than Pensions
Other than Pensions
Other than Pensions
Other than Pensions
2020
2020
2020
2020
2019
2019
2019
2019
2018
2018
2018
2018
3.20 %
3.20 %
3.20 %
3.20 %
4.25 %
4.25 %
4.25 %
4.25 %
3.50 %
3.50 %
3.50 %
3.50 %
2.35 %
2.35 %
2.35 %
2.35 %
3.20 %
3.20 %
3.20 %
3.20 %
4.25 %
4.25 %
4.25 %
4.25 %
For 2021, the long-term rate of return on assets for our domestic plans will be reduced from 7.75% to 7.25%, principally
For 2021, the long-term rate of return on assets for our domestic plans will be reduced from 7.75% to 7.25%, principally
For 2021, the long-term rate of return on assets for our domestic plans will be reduced from 7.75% to 7.25%, principally
For 2021, the long-term rate of return on assets for our domestic plans will be reduced from 7.75% to 7.25%, principally
reflecting the impact of current expectations of long-term market conditions on certain investment returns. As discussed in Note
reflecting the impact of current expectations of long-term market conditions on certain investment returns. As discussed in Note
reflecting the impact of current expectations of long-term market conditions on certain investment returns. As discussed in Note
reflecting the impact of current expectations of long-term market conditions on certain investment returns. As discussed in Note
1, actuarial gains and losses are amortized into net periodic pension cost based on either the remaining service period of the active
1, actuarial gains and losses are amortized into net periodic pension cost based on either the remaining service period of the active
1, actuarial gains and losses are amortized into net periodic pension cost based on either the remaining service period of the active
1, actuarial gains and losses are amortized into net periodic pension cost based on either the remaining service period of the active
participants or the remaining life expectancy of the inactive participants. As of January 2, 2021, almost all of the participants for
participants or the remaining life expectancy of the inactive participants. As of January 2, 2021, almost all of the participants for
participants or the remaining life expectancy of the inactive participants. As of January 2, 2021, almost all of the participants for
participants or the remaining life expectancy of the inactive participants. As of January 2, 2021, almost all of the participants for
our largest domestic plan, the TMRP, were considered inactive largely due to actions taken in prior years to close the plan to new
our largest domestic plan, the TMRP, were considered inactive largely due to actions taken in prior years to close the plan to new
our largest domestic plan, the TMRP, were considered inactive largely due to actions taken in prior years to close the plan to new
our largest domestic plan, the TMRP, were considered inactive largely due to actions taken in prior years to close the plan to new
entrants. Accordingly, the amortization period for this plan will change to the average remaining life expectancy of the
entrants. Accordingly, the amortization period for this plan will change to the average remaining life expectancy of the
entrants. Accordingly, the amortization period for this plan will change to the average remaining life expectancy of the
entrants. Accordingly, the amortization period for this plan will change to the average remaining life expectancy of the
participant; this change from 7 years to 20 years will reduce 2021 pension cost by approximately $85 million.
participant; this change from 7 years to 20 years will reduce 2021 pension cost by approximately $85 million.
participant; this change from 7 years to 20 years will reduce 2021 pension cost by approximately $85 million.
participant; this change from 7 years to 20 years will reduce 2021 pension cost by approximately $85 million.
Our assumed healthcare cost trend rate for both the medical and prescription drug cost was 7.00% in both 2020 and 2019. We
Our assumed healthcare cost trend rate for both the medical and prescription drug cost was 7.00% in both 2020 and 2019. We
Our assumed healthcare cost trend rate for both the medical and prescription drug cost was 7.00% in both 2020 and 2019. We
Our assumed healthcare cost trend rate for both the medical and prescription drug cost was 7.00% in both 2020 and 2019. We
expect this rate to gradually decline to 5% by 2024 where we assume it will remain.
expect this rate to gradually decline to 5% by 2024 where we assume it will remain.
expect this rate to gradually decline to 5% by 2024 where we assume it will remain.
expect this rate to gradually decline to 5% by 2024 where we assume it will remain.
Pension Assets
Pension Assets
Pension Assets
Pension Assets
The expected long-term rate of return on plan assets is determined based on a variety of considerations, including the established
The expected long-term rate of return on plan assets is determined based on a variety of considerations, including the established
The expected long-term rate of return on plan assets is determined based on a variety of considerations, including the established
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
asset allocation targets and expectations for those asset classes, historical returns of the plans’ assets and other market
asset allocation targets and expectations for those asset classes, historical returns of the plans’ assets and other market
asset allocation targets and expectations for those asset classes, historical returns of the plans’ assets and other market
considerations. We invest our pension assets with the objective of achieving a total rate of return over the long term that will be
considerations. We invest our pension assets with the objective of achieving a total rate of return over the long term that will be
considerations. We invest our pension assets with the objective of achieving a total rate of return over the long term that will be
considerations. We invest our pension assets with the objective of achieving a total rate of return over the long term that will be
sufficient to fund future pension obligations and to minimize future pension contributions. We are willing to tolerate a
sufficient to fund future pension obligations and to minimize future pension contributions. We are willing to tolerate a
sufficient to fund future pension obligations and to minimize future pension contributions. We are willing to tolerate a
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
commensurate level of risk to achieve this objective based on the funded status of the plans and the long-term nature of our
commensurate level of risk to achieve this objective based on the funded status of the plans and the long-term nature of our
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,
pension liability. Risk is controlled by maintaining a portfolio of assets that is diversified across a variety of asset classes,
pension liability. Risk is controlled by maintaining a portfolio of assets that is diversified across a variety of asset classes,
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
investment styles and investment managers. Where possible, investment managers are prohibited from owning our securities in
investment styles and investment managers. Where possible, investment managers are prohibited from owning our securities in
investment styles and investment managers. Where possible, investment managers are prohibited from owning our securities in
the portfolios that they manage on our behalf.
the portfolios that they manage on our behalf.
the portfolios that they manage on our behalf.
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
For U.S. plan assets, which represent the majority of our plan assets, asset allocation target ranges are established consistent with
For U.S. plan assets, which represent the majority of our plan assets, asset allocation target ranges are established consistent with
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
our investment objectives, and the assets are rebalanced periodically. For Non-U.S. plan assets, allocations are based on expected
our investment objectives, and the assets are rebalanced periodically. For Non-U.S. plan assets, allocations are based on expected
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:
cash flow needs and assessments of the local practices and markets. Our target allocation ranges are as follows:
cash flow needs and assessments of the local practices and markets. Our target allocation ranges are as follows:
cash flow needs and assessments of the local practices and markets. Our target allocation ranges are as follows:
U.S. Plan Assets
U.S. Plan Assets
U.S. Plan Assets
U.S. Plan Assets
Domestic equity securities
Domestic equity securities
Domestic equity securities
Domestic equity securities
International equity securities
International equity securities
International equity securities
International equity securities
Global equities
Global equities
Global equities
Global equities
Debt securities
Debt securities
Debt securities
Debt securities
Real estate
Real estate
Real estate
Real estate
Private investment partnerships
Private investment partnerships
Private investment partnerships
Private investment partnerships
Non-U.S. Plan Assets
Non-U.S. Plan Assets
Non-U.S. Plan Assets
Non-U.S. Plan Assets
Equity securities
Equity securities
Equity securities
Equity securities
Debt securities
Debt securities
Debt securities
Debt securities
Real estate
Real estate
Real estate
Real estate
17% to 33%
17% to 33%
17% to 33%
17% to 33%
8% to 19%
8% to 19%
8% to 19%
8% to 19%
5% to 17%
5% to 17%
5% to 17%
5% to 17%
27% to 38%
27% to 38%
27% to 38%
27% to 38%
7% to 13%
7% to 13%
7% to 13%
7% to 13%
5% to 11%
5% to 11%
5% to 11%
5% to 11%
55% to 75%
55% to 75%
55% to 75%
55% to 75%
25% to 45%
25% to 45%
25% to 45%
25% to 45%
0% to 13%
0% to 13%
0% to 13%
0% to 13%
Textron 2020 Annual Report 63
63
63
63
63
The fair value of our pension plan assets by major category and valuation method is as follows:
January 2, 2021
January 4, 2020
(In millions)
Cash and equivalents
Equity securities:
Domestic
International
Mutual funds
Debt securities:
National, state and local governments
Corporate debt
Asset-backed securities
Private investment partnerships
Real estate
Total
Level 1
$
49 $
Level 2
Level 3
3 $ — $
Level 1
Level 2
Level 3
132 $
18 $
12 $ — $
Not
Subject to
Leveling
Not
Subject to
Leveling
174
1,591
1,221
195
482
69
—
—
—
—
—
—
306
1,134
—
—
—
$ 3,607 $ 1,443 $
—
—
—
1,241
735
—
1,257
929
176
—
—
—
—
—
—
1,160
780
—
—
—
—
—
458
458 $ 3,572 $ 2,808 $ 1,382 $
308
1,062
—
—
—
95
236
—
819
314
414
14
—
—
—
56
—
240
—
18
—
745
—
473
293
473 $ 3,466
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 represents interests in funds which invest in equity, debt and other financial assets. These funds
are generally not publicly traded so the interests therein are valued using income and market methods that include cash flow
projections and market multiples for various comparable investments. Real estate includes owned properties and limited
partnership interests in real estate partnerships. Owned properties are valued using certified appraisals at least every three
years that are updated at least annually by the real estate investment manager based on current market trends and other available
information. These appraisals generally use the standard methods for valuing real estate, including forecasting income and
identifying current transactions for comparable real estate to arrive at a fair value. Limited partnership interests in real estate
partnerships are valued similarly to private investment partnerships, with the general partner using standard real estate valuation
methods to value the real estate properties and securities held within their portfolios. Neither private investment nor real estate
partnerships are subject to leveling within the fair value hierarchy.
The table below presents a reconciliation of the fair value measurements for owned real estate properties, which use significant
unobservable inputs (Level 3):
(In millions)
Balance at beginning of year
Unrealized gains (losses), net
Realized gains, net
Purchases, sales and settlements, net
Balance at end of year
$
$
2020
473 $
(18)
6
(3)
458 $
2019
460
7
5
1
473
64 Textron 2020 Annual Report
64
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 2021, we
expect to contribute approximately $51 million to our pension plans. Benefit payments provided below reflect expected future
employee service, as appropriate, and are expected to be paid, net of estimated participant contributions. These payments are
based on the same assumptions used to measure our benefit obligation at the end of 2020. 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
Postretirement benefits other than pensions
$
2021
434 $
24
2022
441 $
23
2023
450 $
22
2024
459 $
20
2025
470 $
19
2026-2030
2,460
77
Note 17. Special Charges
Special charges recorded by segment and type of cost are as follows:
(In millions)
2020
Textron Aviation
Industrial
Textron Systems
Corporate
Total special charges
2019
Industrial
Textron Aviation
Corporate
Total special charges
2018
Industrial
Total special charges
Severance
Costs
Contract
Terminations
and Other
Asset
Impairments
Total
Restructuring
Charges
Other
Charges
$
$
$
$
$
$
31 $
27
11
4
73 $
21 $
25
—
46 $
8 $
8 $
— $
1
12
—
13 $
11 $
—
—
11 $
18 $
18 $
2 $
6
14
—
22 $
6 $
4
—
10 $
47 $
47 $
33 $
34
37
4
108 $
38 $
29
—
67 $
73 $
73 $
32 $
7
—
—
39 $
— $
—
5
5 $
— $
— $
Total
65
41
37
4
147
38
29
5
72
73
73
2020 COVID-19 Restructuring Plan
In the second quarter of 2020, we initiated a restructuring plan to reduce operating expenses through headcount reductions,
facility consolidations and other actions in response to the economic challenges and uncertainty resulting from the COVID-19
pandemic. As a result of ongoing evaluations, this plan was expanded in the third quarter of 2020 to include additional headcount
reductions and facility consolidations in the Industrial segment. The plan primarily impacts the TRU business within the Textron
Systems segment, and the Industrial and Textron Aviation segments. At TRU, there has been a substantial decline in demand and
order cancellations for flight simulators in light of the expected long-term impact of the pandemic on the commercial air
transportation business. Accordingly, we ceased manufacturing at TRU’s facility in Montreal, Canada, resulting in a production
suspension of its commercial air transport simulators, along with workforce reductions, contract terminations, facility closures and
asset impairments. As a result of market conditions and the cessation of manufacturing at this facility, we incurred an inventory
valuation charge of $55 million in the second quarter of 2020, which was recorded in Cost of Sales, to write-down TRU’s
inventory to its net realizable value. In the fourth quarter of 2020, we reached a definitive agreement to sell TRU Simulation +
Training Canada Inc. as described in Note 2.
Through the end of 2020, we recorded pre-tax charges of $108 million since the inception of the plan. In 2021, we expect to incur
additional contract termination costs and other charges in the range of $20 million to $30 million, primarily in the Industrial
segment. We estimate a total reduction of 2,700 positions, representing 8% of our workforce, and expect the plan to be
substantially completed in the first half of 2021.
Textron 2020 Annual Report 65
65
2020 Other Charges
In the first quarter of 2020, we recognized $39 million of intangible asset impairment charges at the Textron Aviation and
Industrial segments. Due to the impact of the COVID-19 pandemic, we experienced decreased demand for our products and
services as our customers delayed or ceased orders due to the environment of economic uncertainty. In light of these conditions,
Textron Aviation had temporarily shut down most aircraft production, including the King Air turboprop and Beechcraft piston
product lines, and had instituted employee furloughs. Based on these events, we performed an interim impairment test of the
indefinite-lived Beechcraft and King Air trade name intangible assets at April 4, 2020. Fair value of these assets was determined
utilizing the relief of royalty method assuming an increase in the discount rate based on market data to 9.7% and revised
expectations of future revenues for the products and services associated with the tradenames. This analysis resulted in an
impairment charge of $32 million. At January 2, 2021, these intangible assets totaled $169 million. In the Industrial segment, we
fully impaired the Arctic Cat trade name intangible asset within the Specialized Vehicles product line and recorded a $7 million
impairment charge.
Other Restructuring Plans
In 2019, we recorded $67 million of special charges in connection with a restructuring plan that was designed to reduce costs and
improve overall operating efficiency through headcount reductions, facility consolidations and other actions in the Industrial and
Textron Aviation segments. In the Industrial segment, in connection with the strategic review of our Kautex business, cost
reduction and other measures were initiated to maximize its operating margin, and we took further cost cutting actions in our
Textron Specialized Vehicles businesses. In the Textron Aviation segment, we conducted a review of our ongoing workforce
requirements, resulting in targeted headcount reductions and other actions to realign our cost structure. Headcount reductions
totaling approximately 1,000 positions, which included business support and administrative functions within both segments, were
completed in 2020. The headcount reductions at Textron Aviation were primarily related to engineering positions, reflecting
completion of the Longitude certification activities and reduced requirements for ongoing development programs.
In 2018, we recorded $73 million of special charges in connection with a plan to restructure the Textron Specialized Vehicles
businesses within our Industrial segment, which included asset impairment charges of $47 million, primarily intangible assets
related to product rationalization, contract termination and other costs of $18 million and severance costs of $8 million.
Headcount reductions totaled approximately 400 positions, representing 10% of Textron Specialized Vehicles’ workforce.
Restructuring Reserve
Our restructuring reserve activity is summarized below:
(In millions)
Balance at December 29, 2018
Provision for 2019 plan
Cash paid
Foreign currency translation
Balance at January 4, 2020
Provision for 2020 COVID-19 restructuring plan
Cash paid
Reclassifications*
Foreign currency translation
Balance at January 2, 2021
Severance
Costs
Contract
Terminations
and Other
$
$
$
8 $
46
(8)
—
46 $
73
(77)
(1)
2
43 $
32 $
11
(23)
(1)
19 $
13
(11)
(12)
—
9 $
Total
40
57
(31)
(1)
65
86
(88)
(13)
2
52
* Reclassifications include amounts classified as held for sale in connection with a business disposition described in Note 2.
The majority of the remaining cash outlays of $52 million is expected to be paid in the first half of 2021. Severance costs
generally are paid on a lump-sum basis and include outplacement costs, which are paid in accordance with normal payment terms.
Note 18. 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 before income taxes is as follows:
(In millions)
U.S.
Non-U.S.
Income before income taxes
66 Textron 2020 Annual Report
$
$
2020
202 $
80
282 $
2019
668 $
274
942 $
2018
557
827
1,384
66
Income tax expense (benefit) is summarized as follows:
Income tax expense (benefit) is summarized as follows:
(In millions)
(In millions)
Current expense (benefit):
Current expense (benefit):
Federal
Federal
State
State
Non-U.S.
Non-U.S.
Deferred expense (benefit):
Deferred expense (benefit):
Federal
Federal
State
State
Non-U.S.
Non-U.S.
Income tax expense (benefit)
Income tax expense (benefit)
2020
2020
(1) $
(1) $
(76)
(76)
57
57
(20)
(20)
3
3
5
5
(15)
(15)
(7)
(7)
(27) $
(27) $
2019
2019
(48) $
(48) $
16
16
70
70
38
38
112
112
(20)
(20)
(3)
(3)
89
89
127 $
127 $
2018
2018
3
3
9
9
101
101
113
113
60
60
(5)
(5)
(6)
(6)
49
49
162
162
$
$
$
$
The following table reconciles the federal statutory income tax rate to our effective income tax rate:
The following table reconciles the federal statutory income tax rate to our effective income tax rate:
U.S. Federal statutory income tax rate
U.S. Federal statutory income tax rate
Increase (decrease) resulting from:
Increase (decrease) resulting from:
State income tax audit settlement (net of federal impact)
State income tax audit settlement (net of federal impact)
Research and development tax credits (a)
Research and development tax credits (a)
Outside basis difference in assets held for sale
Outside basis difference in assets held for sale
State income taxes (net of federal impact)
State income taxes (net of federal impact)
Non-U.S. tax rate differential and foreign tax credits (b)
Non-U.S. tax rate differential and foreign tax credits (b)
U.S. tax reform enactment impact
U.S. tax reform enactment impact
U.S. amended returns tax rate differential
U.S. amended returns tax rate differential
Gain on business disposition, primarily in non-U.S. jurisdictions
Gain on business disposition, primarily in non-U.S. jurisdictions
Other, net
Other, net
Effective income tax rate
Effective income tax rate
(a)
(a)
2020
2020
21.0 %
21.0 %
2019
2019
21.0 %
21.0 %
2018
2018
21.0 %
21.0 %
(18.6)
(18.6)
(18.2)
(18.2)
(2.7)
(2.7)
(1.2)
(1.2)
10.8
10.8
—
—
—
—
—
—
(0.7)
(0.7)
(9.6) %
(9.6) %
—
—
(7.6)
(7.6)
—
—
0.3
0.3
1.4
1.4
—
—
(1.2)
(1.2)
—
—
(0.4)
(0.4)
13.5 %
13.5 %
—
—
(2.9)
(2.9)
—
—
(0.1)
(0.1)
1.3
1.3
(1.0)
(1.0)
—
—
(5.0)
(5.0)
(1.6)
(1.6)
11.7 %
11.7 %
In 2020, the benefit of research and development tax credits as a percentage of pre-tax income was higher than prior periods primarily due to lower pre-tax
income. In 2019, $61 million in benefits were recognized for additional tax credits related to prior years as a result of the completion of a research and
In 2020, the benefit of research and development tax credits as a percentage of pre-tax income was higher than prior periods primarily due to lower pre-tax
development tax analysis.
income. In 2019, $61 million in benefits were recognized for additional tax credits related to prior years as a result of the completion of a research and
development tax analysis.
In 2020, the effective tax rate was unfavorably impacted by a $55 million inventory charge and special charges in a non-U.S. jurisdiction where tax benefits
cannot be realized, along with a $10 million tax expense related to a decision to dividend cash back from select non-U.S. jurisdictions to the U.S., partially
In 2020, the effective tax rate was unfavorably impacted by a $55 million inventory charge and special charges in a non-U.S. jurisdiction where tax benefits
offset by a $14 million valuation allowance release.
cannot be realized, along with a $10 million tax expense related to a decision to dividend cash back from select non-U.S. jurisdictions to the U.S., partially
offset by a $14 million valuation allowance release.
(b)
(b)
Unrecognized Tax Benefits
Unrecognized Tax Benefits
Our unrecognized tax benefits represent tax positions for which reserves have been established, with unrecognized state tax
Our unrecognized tax benefits represent tax positions for which reserves have been established, with unrecognized state tax
benefits reflected net of applicable federal tax benefits. At the end of 2020, 2019 and 2018, if our unrecognized tax benefits were
benefits reflected net of applicable federal tax benefits. At the end of 2020, 2019 and 2018, if our unrecognized tax benefits were
recognized in future periods, they would favorably impact our effective tax rate. A reconciliation of these unrecognized tax
recognized in future periods, they would favorably impact our effective tax rate. A reconciliation of these unrecognized tax
benefits is as follows:
benefits is as follows:
(In millions)
(In millions)
Balance at beginning of year
Balance at beginning of year
Additions for tax positions related to current year
Additions for tax positions related to current year
Additions for tax positions of prior years
Additions for tax positions of prior years
Reductions for settlements and expiration of statute of limitations
Reductions for settlements and expiration of statute of limitations
Reductions for tax positions of prior years
Reductions for tax positions of prior years
Balance at end of year
Balance at end of year
$
$
$
$
2020
2020
221 $
221 $
11
11
21
21
(69)
(69)
(1)
(1)
183 $
183 $
2019
2019
141 $
141 $
9
9
74
74
(1)
(1)
(2)
(2)
221 $
221 $
2018
2018
182
182
5
5
13
13
(22)
(22)
(37)
(37)
141
141
In 2020, certain tax positions related to state tax attributes were reduced by $68 million based on an audit settlement with respect
In 2020, certain tax positions related to state tax attributes were reduced by $68 million based on an audit settlement with respect
to certain state income tax returns. In 2019, additional tax positions primarily reflect the completion of a research and
to certain state income tax returns. In 2019, additional tax positions primarily reflect the completion of a research and
development tax credit analysis for tax credits related to prior years. In 2018, certain tax positions related to research and
development tax credit analysis for tax credits related to prior years. In 2018, certain tax positions related to research and
development tax credits were reduced by $25 million based on new information, including interactions with the tax authorities
development tax credits were reduced by $25 million based on new information, including interactions with the tax authorities
and recent audit settlements.
and recent audit settlements.
Textron 2020 Annual Report 67
67
67
In the normal course of business, we are subject to examination by tax authorities throughout the world. We are generally no
longer subject to U.S. federal tax examinations for years before 2014, state and local income tax examinations for years before
2015, and non-U.S. income tax examinations for years before 2011. In 2019, we filed U.S. federal amended returns for 2012 and
2013 for additional research and development tax credits that are subject to examination.
Deferred Taxes
The significant components of our net deferred tax assets/(liabilities) are provided below:
(In millions)
U.S. operating loss and tax credit carryforwards (a)
Obligation for pension and postretirement benefits
Accrued liabilities (b)
Deferred compensation
Operating lease liabilities
Non-U.S. operating loss and tax credit carryforwards (c)
Property, plant and equipment, principally depreciation
Amortization of goodwill and other intangibles
Valuation allowance on deferred tax assets
Operating lease right-of-use assets
Other leasing transactions, principally leveraged leases
Prepaid pension benefits
Other, net
Deferred taxes, net
January 2,
2021
320 $
287
202
100
97
65
(199)
(171)
(157)
(95)
(79)
(44)
16
342 $
January 4,
2020
235
289
214
95
70
52
(153)
(160)
(145)
(68)
(80)
(29)
(51)
269
$
$
(a) At January 2, 2021, U.S. operating loss and tax credit carryforward benefits of $283 million expire through 2040 if not utilized and $37 million may be
carried forward indefinitely.
(b) Accrued liabilities include warranty reserves, self-insured liabilities and interest.
(c) At January 2, 2021, non-U.S. operating loss and tax credit carryforward benefits of $29 million expire through 2040 if not utilized and $36 million may be
carried forward indefinitely.
We believe earnings during the period when the temporary differences become deductible will be sufficient to realize the related
future income tax benefits. For those jurisdictions where the expiration date of tax carryforwards or the projected operating
results indicate that realization is not more than likely, a valuation allowance is provided.
The following table presents the breakdown of our deferred taxes:
(In millions)
Manufacturing group:
Deferred tax assets, net of valuation allowance
Deferred tax liabilities
Finance group – Deferred tax liabilities
Net deferred tax asset
January 2,
2021
January 4,
2020
$
$
423 $
(19)
(62)
342 $
341
(4)
(68)
269
Non-U.S. and U.S. state income taxes have not been provided for on basis differences in certain investments, primarily as a result
of unremitted earnings in foreign subsidiaries that are indefinitely reinvested, totaled $1.7 billion at January 2, 2021 and
January 4, 2020. Should these earnings be distributed in the future in the form of dividends or otherwise, we would be subject to
withholding and income taxes payable to various non-U.S. jurisdictions and U.S. states. Determination of the deferred tax
liability associated with indefinitely reinvested earnings is not practicable due to multiple factors, including the complexity of
non-U.S. tax laws and tax treaty interpretations, exchange rate fluctuations, and the uncertainty of available credits or exemptions
under U.S. federal and state tax laws.
68 Textron 2020 Annual Report
68
Note 19. Commitments and Contingencies
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 $216 million and $247 million at January 2, 2021 and January 4, 2020, 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 January 2, 2021, environmental reserves of $76 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 $7
million, $13 million and $13 million in 2020, 2019 and 2018, respectively.
Note 20. Supplemental Cash Flow Information
Our cash payments and receipts are as follows:
(In millions)
Interest paid:
Manufacturing group
Finance group
Net taxes paid:
Manufacturing group
Finance group
2020
2019
$
139 $
20
138 $
23
34
8
120
1
2018
132
25
129
17
Textron 2020 Annual Report 69
69
Report of Independent Registered Public Accounting Firm
To the Shareholders and the Board of Directors of Textron Inc.
Opinion on the Financial Statements
We have audited the accompanying Consolidated Balance Sheets of Textron Inc. (the Company) as of January 2, 2021 and
January 4, 2020, the related Consolidated Statements of Operations, Comprehensive Income, Shareholders’ Equity and Cash
Flows for each of the three years in the period ended January 2, 2021, and the related notes and the financial statement schedule
contained on page 73 (collectively referred to as the “consolidated financial statements”). In our opinion, the consolidated
financial statements present fairly, in all material respects, the financial position of the Company at January 2, 2021 and
January 4, 2020 and the results of its operations and its cash flows for each of the three years in the period ended January 2, 2021,
in conformity with U.S. generally accepted accounting principles.
We also have audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States)
(PCAOB), the Company’s internal control over financial reporting as of January 2, 2021, 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 19, 2021 expressed an unqualified opinion thereon.
Basis for Opinion
These financial statements are the responsibility of the Company’s management. Our responsibility is to express an opinion on the
Company’s financial statements based on our audits. We are a public accounting firm registered with the PCAOB and are
required to be independent with respect to the Company in accordance with the U.S. federal securities laws and the applicable
rules and regulations of the Securities and Exchange Commission and the PCAOB.
We conducted our audits in accordance with the standards of the PCAOB. Those standards require that we plan and perform the
audit to obtain reasonable assurance about whether the financial statements are free of material misstatement, whether due to error
or fraud. Our audits included performing procedures to assess the risks of material misstatement of the financial statements,
whether due to error or fraud, and performing procedures that respond to those risks. Such procedures included examining, on a
test basis, evidence regarding the amounts and disclosures in the financial statements. Our audits also included evaluating the
accounting principles used and significant estimates made by management, as well as evaluating the overall presentation of the
financial statements. We believe that our audits provide a reasonable basis for our opinion.
Critical Audit Matters
The critical audit matters communicated below are matters arising from the current period audit of the consolidated financial
statements that were communicated or required to be communicated to the audit committee and that: (1) relate to accounts or
disclosures that are material to the consolidated financial statements and (2) involved our especially challenging, subjective or
complex judgments. The communication of critical audit matters does not alter in any way our opinion on the consolidated
financial statements, taken as a whole, and we are not, by communicating the critical audit matters below, providing separate
opinions on the critical audit matters or on the accounts or disclosures to which they relate.
Description of the
Matter
Long Term Contracts
As described in Note 1 to the consolidated financial statements, revenues under long-term contracts with
the U.S. Government are generally recognized over time using the cost-to-cost method of accounting.
Under this method, the extent of progress towards completion is measured based on the ratio of costs
incurred to date to the estimated costs at completion, and revenue is recorded proportionally as costs are
incurred. Contract costs, which are estimated utilizing current contract specifications and expected
engineering requirements, typically are incurred over a period of several years, and the estimation of
these costs at completion requires substantial judgment. The Company’s cost estimation process is
based on professional knowledge and experience of engineers and program managers along with finance
professionals. The Company updates its projections of costs quarterly or more frequently when
circumstances significantly change. When adjustments are required, any changes from prior estimates
are recognized using the cumulative catch-up method with the impact of the change from inception-to-
date of the contract recorded in the current period and required disclosure is provided in the
consolidated financial statements. Anticipated losses on contracts are recognized in full in the period in
which losses become probable and estimable.
70 Textron 2020 Annual Report
70
Auditing the Company’s estimated costs at completion was challenging and complex due to the
judgment involved in evaluating management’s assumptions and key estimates over the duration of
long-term contracts. The estimated costs at completion consider risks surrounding the Company’s
ability to achieve the technical requirements and specifications of the contract, schedule, and other cost
elements of the contract, and depend on whether the Company is able to successfully retire risks
surrounding such aspects of the contract.
How We Addressed
the Matter in Our
Audit
We obtained an understanding, evaluated the design and tested the operating effectiveness of the
controls related to the Company’s revenue recognition process, including controls over management’s
review of the estimated costs at completion and related key assumptions and management’s review that
the data underlying the estimated costs at completion was complete and accurate.
Description of the
Matter
To test the accuracy of the Company’s estimated costs at completion, our audit procedures included,
among others, evaluating the key assumptions used by management to determine such estimates. This
included evaluating the historical accuracy of management’s estimates by comparing planned costs to
actual costs incurred to date. We also tested the completeness and accuracy of the underlying data back
to source documents and contracts.
Defined Benefit Pension Obligations
As described in Note 16 to the consolidated financial statements, at January 2, 2021, the aggregate
qualified defined benefit pension obligation was $9.8 billion and exceeded the fair value of pension plan
assets of $9.1 billion, resulting in an unfunded defined benefit pension obligation of $753 million. As
explained in Note 1 to the consolidated financial statements, the Company updates the estimates used to
measure the defined benefit pension obligation and plan assets annually in the fourth quarter or upon a
remeasurement event to reflect the actual return on plan assets and updated actuarial assumptions.
Auditing the defined benefit pension obligations was complex due to the highly judgmental nature of
the actuarial assumptions (e.g., discount rate, mortality rate, expected return on plan assets) used in the
measurement process. These assumptions have a significant effect on the projected benefit obligation.
How We Addressed
the Matter in Our
Audit
We obtained an understanding, evaluated the design and tested the operating effectiveness of the
controls that address the risks of material misstatement relating to the measurement and valuation of the
defined benefit pension obligation. For example, we tested controls over management’s review of the
defined benefit pension obligation actuarial calculations, the significant actuarial assumptions, and the
data inputs provided to the actuaries.
To test the defined benefit pension obligation, our audit procedures included, among others, evaluating
the methodology used, the significant actuarial assumptions discussed above, and the underlying data
used by management and its actuaries. We compared the actuarial assumptions used by management to
historical trends and evaluated the change in the defined benefit pension obligation from the prior year
due to the change in service cost, interest cost, benefit payments, actuarial gains and losses,
contributions, new longevity assumptions and plan amendments, as applicable. In addition, we involved
an actuarial specialist to assist in evaluating management’s methodology for determining the discount
rate that reflects the maturity and duration of the benefit payments and is used to measure the defined
benefit pension obligation. As part of this assessment, we compared the projected cash flows to prior
year and compared the current year benefits paid to the prior year projected cash flows. To evaluate the
mortality rate, we assessed whether the information is consistent with publicly available information and
entity-specific data. We also tested the completeness and accuracy of the underlying data, including the
participant data provided to the Company’s actuaries. Lastly, to evaluate the expected return on plan
assets, we assessed whether management’s assumption is consistent with a range of returns for a
portfolio of comparative investments.
/s/ Ernst & Young LLP
We have served as the Company’s auditor since 1957.
Boston, Massachusetts
February 19, 2021
Textron 2020 Annual Report 71
71
Quarterly Data
(Unaudited)
(Dollars in millions, except per share amounts)
Revenues
Textron Aviation
Bell
Textron Systems
Industrial
Finance
Total revenues
Segment profit (loss)
Textron Aviation
Bell
Textron Systems
Industrial
Finance
Total segment profit
Corporate expenses and other, net
Interest expense, net for Manufacturing group
Special charges *
Inventory charge *
Income tax (expense) benefit
Net income (loss)
Earnings per share
Basic
Diluted
Basic average shares outstanding (in thousands)
Diluted average shares outstanding (in thousands)
Segment profit (loss) margins
Textron Aviation
Bell
Textron Systems
Industrial
Finance
Segment profit margin
* See Note 17 for additional information.
2020
2019
Q1
Q2
Q3
Q4
Q1
Q2
Q3
Q4
$
872 $
823
328
740
14
795 $ 1,560 $ 1,134 $ 1,123 $ 1,201 $ 1,729
961
793
399
302
927
832
19
13
$ 2,777 $ 2,472 $ 2,735 $ 3,667 $ 3,109 $ 3,227 $ 3,259 $ 4,035
747 $
822
326
562
15
771
308
1,009
16
783
311
950
14
871
357
866
13
739
307
912
17
$
3 $
115
26
9
3
156
(14)
(34)
(39)
—
(19)
50 $
$
(66) $
118
37
(11)
4
82
(30)
(37)
(78)
(55)
26
(92) $
(29) $
119
40
58
1
189
(28)
(38)
(7)
—
(1)
115 $
108 $
110
49
55
2
324
(50)
(36)
(23)
—
21
236 $
106 $
104
28
50
6
294
(47)
(35)
—
—
(33)
179 $
105 $
103
49
76
6
339
(24)
(36)
—
—
(62)
217 $
104 $
110
31
47
5
297
(17)
(39)
—
—
(21)
220 $
134
118
33
44
11
340
(22)
(36)
(72)
—
(11)
199
$
0.22 $
0.22
228,311
228,927
(0.40) $
(0.40)
228,247
228,247
0.50 $
0.50
228,918
229,279
1.03 $
1.03
228,666
229,365
0.76 $
0.76
234,839
236,437
0.94 $
0.93
232,013
233,545
0.96 $
0.95
229,755
231,097
0.87
0.87
228,653
229,790
0.3%
14.0
7.9
1.2
21.4
5.6%
(8.8%)
14.4
11.3
(2.0)
26.7
3.3%
(3.6%)
15.0
13.2
7.0
7.7
6.9%
6.9%
12.6
13.7
6.4
15.4
8.8%
9.3%
14.1
9.1
5.5
35.3
9.5%
9.4%
13.4
15.9
7.5
37.5
10.5%
8.7%
14.0
10.0
4.9
35.7
9.1%
7.8%
12.3
8.3
4.7
57.9
8.4%
72 Textron 2020 Annual Report
72
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
Allowance for losses on finance receivables
Balance at beginning of year
Provision (reversal) for losses
Charge-offs
Recoveries
Balance at end of year
Inventory FIFO reserves
Balance at beginning of year
Charged to costs and expenses
Deductions from reserves*
Balance at end of year
2020
2019
2018
$
$
$
$
$
$
29 $
25
(18)
36 $
25 $
7
—
3
35 $
309 $
105
(57)
357 $
27 $
7
(5)
29 $
29 $
(6)
(4)
6
25 $
280 $
58
(29)
309 $
27
5
(5)
27
31
(3)
(4)
5
29
262
56
(38)
280
* Deductions primarily include amounts written off on uncollectible accounts (less recoveries), inventory disposals, changes to prior year estimates,
reclassifications to held for sale, business dispositions and currency translation adjustments.
Item 9. Changes In and Disagreements With Accountants on Accounting and Financial Disclosure
None.
Item 9A. Controls and Procedures
Disclosure Controls and Procedures
We performed an evaluation of the effectiveness of our disclosure controls and procedures as of January 2, 2021. 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 January 2, 2021.
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 January 2,
2021.
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 January 2, 2021, as
stated in its report, which is included herein.
Textron 2020 Annual Report 73
73
Report of Independent Registered Public Accounting Firm
To the Shareholders and the Board of Directors of Textron Inc.
Opinion on Internal Control over Financial Reporting
We have audited Textron Inc.’s internal control over financial reporting as of January 2, 2021, based on criteria established in
Internal Control— Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission
(2013 Framework), (the COSO criteria). In our opinion, Textron, Inc. (the Company) maintained, in all material respects,
effective internal control over financial reporting as of January 2, 2021, based on the COSO criteria.
We also have audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States)
(PCAOB), the Consolidated Balance Sheets of the Company as of January 2, 2021 and January 4, 2020, and the related
Consolidated Statements of Operations, Comprehensive Income, Shareholder’s Equity and Cash Flows for each of the three years
in the period ended January 2, 2021, and the related notes and the financial statement schedule contained on page 73, of the
Company and our report dated February 19, 2021 expressed an unqualified opinion thereon.
Basis for Opinion
The Company’s management is responsible for maintaining effective internal control over financial reporting and for its
assessment of the effectiveness of internal control over financial reporting included in the accompanying Management’s Report
on Internal Control Over Financial Reporting. Our responsibility is to express an opinion on the Company’s internal control over
financial reporting based on our audit. We are a public accounting firm registered with the PCAOB and are required to be
independent with respect to the Company in accordance with the U.S. federal securities laws and the applicable rules and
regulations of the Securities and Exchange Commission and the PCAOB.
We conducted our audit in accordance with the standards of the PCAOB. Those standards require that we plan and perform the
audit to obtain reasonable assurance about whether effective internal control over financial reporting was maintained in all
material respects.
Our audit included obtaining an understanding of internal control over financial reporting, assessing the risk that a material
weakness exists, testing and evaluating the design and operating effectiveness of internal control based on the assessed risk, and
performing such other procedures as we considered necessary in the circumstances. We believe that our audit provides a
reasonable basis for our opinion.
Definition and Limitations of Internal Control Over Financial Reporting
A company’s internal control over financial reporting is a process designed to provide reasonable assurance regarding the
reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally
accepted accounting principles. A company’s internal control over financial reporting includes those policies and procedures that
(1) pertain to the maintenance of records that, in reasonable detail, accurately and fairly reflect the transactions and dispositions of
the assets of the company; (2) provide reasonable assurance that transactions are recorded as necessary to permit preparation of
financial statements in accordance with generally accepted accounting principles, and that receipts and expenditures of the
company are being made only in accordance with authorizations of management and directors of the company; and (3) provide
reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use, or disposition of the company’s
assets that could have a material effect on the financial statements.
Because of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements. Also,
projections of any evaluation of effectiveness to future periods are subject to the risk that controls may become inadequate
because of changes in conditions, or that the degree of compliance with the policies or procedures may deteriorate.
/s/ Ernst & Young LLP
Boston, Massachusetts
February 19, 2021
74 Textron 2020 Annual Report
74
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,” and “— Board Committees — Audit Committee,” in the
Proxy Statement for our 2021 Annual Meeting of Shareholders is incorporated by reference into this Annual Report on Form 10-
K.
Information regarding our executive officers is contained in Part I of this Annual Report on Form 10-K.
Item 11. Executive Compensation
The information appearing under “CORPORATE GOVERNANCE — Compensation of Directors,” “COMPENSATION
COMMITTEE REPORT,” “COMPENSATION DISCUSSION AND ANALYSIS” and “EXECUTIVE COMPENSATION” in
the Proxy Statement for our 2021 Annual Meeting of Shareholders is incorporated by reference into this Annual Report on
Form 10-K.
Item 12. Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters
The information appearing under “SECURITY OWNERSHIP” and “EXECUTIVE COMPENSATION – Equity Compensation
Plan Information” in the Proxy Statement for our 2021 Annual Meeting of Shareholders is incorporated by reference into this
Annual Report on Form 10-K.
Item 13. Certain Relationships and Related Transactions and Director Independence
The
information appearing under “CORPORATE GOVERNANCE — Director Independence” and “EXECUTIVE
COMPENSATION — Transactions with Related Persons” in the Proxy Statement for our 2021 Annual Meeting of Shareholders
is incorporated by reference into this Annual Report on Form 10-K.
Item 14. Principal Accountant Fees and Services
The information appearing under “RATIFICATION OF APPOINTMENT OF INDEPENDENT REGISTERED PUBLIC
ACCOUNTING FIRM — Fees to Independent Auditors” in the Proxy Statement for our 2021 Annual Meeting of Shareholders is
incorporated by reference into this Annual Report on Form 10-K.
Textron 2020 Annual Report 75
75
PART IV
Item 15. Exhibits and Financial Statement Schedules
Financial Statements and Schedules — See Index on Page 34.
Exhibits
3.1A
3.1B
3.2
4.1A
4.1B
4.2
NOTE:
NOTE:
10.1A
10.1B
10.1C
10.2A
10.2B
10.3A
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.
Description of registrant’s securities. Incorporated by reference to Exhibit 4.6 to Textron's Annual Report on
Form 10-K for the fiscal year ended January 4, 2020.
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 10.17 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. (SEC File No. 1-5480)
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 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. (SEC File No. 1-5480)
Textron Inc. Short-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 1, 2017.
Amended and Restated Textron Inc. Short-Term Incentive Plan. Incorporated by reference to Exhibit 10.1 to
Textron’s Quarterly Report on Form 10-Q for the fiscal quarter ended October 3, 2020.
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.
76 Textron 2020 Annual Report
76
10.3B
10.3C
10.3D
10.3E
10.3F
10.4
10.5A
10.5B
10.5C
10.6
10.7A
10.7B
10.7C
10.7D
10.7E
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.
Form of Performance Share Unit 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 4, 2020.
Form of Stock-Settled Restricted Stock Unit (with Dividend Equivalents) Grant 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 4, 2020.
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. (SEC
File No. 1-5480)
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)
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. (SEC File No. 1-5480)
Amendment No. 2 to Deferred Income Plan for Non-Employee Directors, as Amended and Restated Effective
January 1, 2009. Incorporated by reference to Exhibit 10.1 to Textron’s Quarterly Report on Form 10-Q for
the fiscal quarter ended April 1, 2017.
Amendment No. 3 to Deferred Income Plan for Non-Employee Directors, as Amended and Restated Effective
January 1, 2009. Incorporated by reference to Exhibit 10.1 to Textron’s Quarterly Report on Form 10-Q for
the fiscal quarter ended September 29, 2018.
Amendment No. 4 to Deferred Income Plan for Non-Employee Directors, as Amended and Restated Effective
January 1, 2009. Incorporated by reference to Exhibit 10.7E to Textron's Annual Report on Form 10-K for
the fiscal year ended January 4, 2020.
Textron 2020 Annual Report 77
77
10.8A
10.8B
10.8C
10.9
10.10
10.11A
10.11B
10.11C
10.11D
10.12A
10.12B
10.13
10.14A
10.14B
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. (SEC File No. 1-5480)
Form of Indemnity Agreement between Textron and its executive officers. Incorporated by reference to Exhibit
10.9 to Textron’s Annual Report on Form 10-K for the fiscal year ended December 30, 2017.
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)
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.
Aircraft Dry Lease Agreement, made and entered into as of December 18, 2018, between Mr. Donnelly’s
limited liability company and Textron Inc. Incorporated by reference to Exhibit 10.11D to Textron's Annual
Report on Form 10-K for the fiscal year ended December 29, 2018.
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)
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 Julie G. Duffy, dated July 27, 2017. Incorporated by reference to Exhibit
10.1 to Textron’s Quarterly Report on Form 10-Q for the fiscal quarter ended September 30, 2017.
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. (SEC File No. 1-5480)
78 Textron 2020 Annual Report
78
10.15
10.16
10.17
10.18
21
23
24
31.1
31.2
32.1
32.2
101
Textron Inc. 2015 Long-Term Incentive Plan Equity Program for Non-Employee Directors. Incorporated by
reference to Exhibit 10.15 to Textron's Annual Report on Form 10-K for the fiscal year ended January 4,
2020. (SEC File No. 1-5480).
Director Compensation. Incorporated by reference to Exhibit 10.16 to Textron's Annual Report on Form 10-K
for the fiscal year ended January 4, 2020 (SEC File No. 1-5480).
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 18, 2019, among Textron, the Lenders listed therein, JPMorgan Chase
Bank, N.A., as Administrative Agent, Bank of America, N.A. and Citibank, N.A., as Syndication Agents, and
MUFG Bank, Ltd., as Documentation Agent. Incorporated by reference to Exhibit 10.1 to Textron’s Quarterly
Report on Form 10-Q for the fiscal quarter ended September 28, 2019.
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 January 2, 2021,
formatted in Inline XBRL (eXtensible Business Reporting Language): (i) the Consolidated Statements of
Operations, (ii) the Consolidated Statements of Comprehensive Income (iii) the Consolidated Balance Sheets,
(iv) the Consolidated Statements of Shareholders’ Equity, (v) the Consolidated Statements of Cash Flows, (vi)
the Notes to the Consolidated Financial Statements, and (vii) Schedule II – Valuation and Qualifying Accounts.
104
Cover Page Interactive Data File (formatted as Inline XBRL and contained in Exhibit 101).
Item 16. Form 10-K Summary
Not applicable.
Textron 2020 Annual Report 79
79
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 19th day of
February 2021.
TEXTRON INC.
Registrant
By:
/s/ Frank T. Connor
Frank T. Connor
Executive Vice President and Chief Financial Officer
80 Textron 2020 Annual Report
80
Pursuant to the requirements of the Securities Exchange Act of 1934, this Annual Report on Form 10-K has been signed below on
this 19th day of February 2021 by the following persons on behalf of the registrant and in the capacities indicated:
Name
Title
/s/ Scott C. Donnelly
Scott C. Donnelly
*
Chairman, President and Chief Executive Officer
(principal executive officer)
Kathleen M. Bader
Director
*
R. Kerry Clark
*
Director
James T. Conway
Director
*
Paul E. Gagné
*
Ralph D. Heath
*
Director
Director
Deborah Lee James
Director
*
Lionel L. Nowell III
Director
*
James L. Ziemer
Director
*
Maria T. Zuber
/s/ Frank T. Connor
Frank T. Connor
/s/ Mark S. Bamford
Mark S. Bamford
Director
Executive Vice President and Chief Financial Officer
(principal financial officer)
Vice President and Corporate Controller
(principal accounting officer)
*By:
/s/ Jayne M. Donegan
Jayne M. Donegan, Attorney-in-fact
Textron 2020 Annual Report 81
81
NOTES
82 Textron 2020 Annual Report
NOTES
Textron 2020 Annual Report 83
NOTES
84 Textron 2020 Annual Report
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 28, 2021, at 11 a.m.
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
at Textron Inc., 40 Westminster Street, 18th Floor,
For more information, visit our website at
Providence, RI 02903.
www.textron.com.
Transfer Agent, Registrar and
Dividend Paying Agent
Company Publications and
General Information
For shareholder services such as change of address,
To receive a copy of Textron’s Forms 10-K and
lost certificates or dividend checks, change in
10-Q, Proxy Statement or Annual Report without
registered ownership or the Dividend Reinvestment
charge, visit our website at www.textron.com or send
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)
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.,
Textron common stock is listed on the New York
40 Westminster Street, Providence, RI 02903;
Stock Exchange.
call (866) 698-6655; or send an email to
textrondirectors@textron.com.
Textron provides a multimedia interactive version of the Annual Report in the Investor Resources section of
its website at www.textron.com.
www.textron.com
© 2021 Textron Inc.