Textron (TXT) 10-K risk factor changes: FY2019 vs FY2018

[removed: _We] [added: We] have customer concentration with the U.S. Government; reduction in U.S. Government defense spending [removed: may] [added: can] adversely affect our results of operations and financial [removed: condition._][added: condition.]

During [removed: 2018,] [added: 2019,] we derived approximately 24% of our revenues from sales to a variety of U.S. Government entities.

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 [added: from time to time has resulted and, in the future,] may result in a loss of anticipated [removed: future revenues that could materially and adversely impact our results of operations and financial condition.][added: revenues.]

Significant changes in national and international policies or priorities for defense spending, as well as the [added: 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.

An extended delay in the timely payment by the U.S. Government could have a material adverse effect on our [removed: cash flows, results of operations and financial condition.][added: liquidity.]

[added: U.S.] Government contracts [removed: may] [added: can] be terminated at any time and may contain other unfavorable [removed: provisions._][added: provisions.]

Such an event could also have an adverse effect on our ability to compete for future [added: contracts and orders.]

If any of our contracts are terminated by the U.S. Government whether for convenience or default, our backlog [removed: and anticipated revenues] would be reduced by the expected value of the remaining work under such contracts.

[removed: _As] [added: As] a U.S. Government contractor, we are subject to procurement rules and [removed: regulations._][added: regulations ; our failure to comply with these rules and regulations could adversely affect our business.]

New laws, regulations or procurement requirements or changes to current ones (including, for example, regulations related to cybersecurity) can significantly increase our [removed: costs and risks and reduce] [added: costs, reducing] our profitability.

[removed: _As] [added: 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 [removed: (DCMA)._][added: (DCMA).]

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 [added: or reduction] of profits, suspension [added: or reduction] of payments, fines, and, under certain circumstances, suspension or debarment from future contracts for a period of time.

[removed: _The] [added: The] use of multi-award contracts by the U.S. Government [removed: may increase competition and] [added: increases competition,] pricing [removed: pressure._][added: pressure and cost.]

In addition, multi-award contracts [added: increase our cost as they] require that we make sustained efforts to obtain task orders and delivery orders under the contract.

[removed: _Our] [added: Our] profitability and cash flow [removed: may vary] [added: varies] depending on the mix of our government contracts and our ability to control [removed: costs_.][added: costs.]

Changes in underlying assumptions, circumstances or estimates used in developing the pricing for such contracts [removed: may] [added: can] adversely affect our results of operations.

Additionally, fixed-price contracts [removed: may] [added: 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.

[removed: costs incurred in performing under the] [added: Under each type of] contract, [added: if we are unable to control costs or if] our [added: initial cost estimates are incorrect, our] cash flows, results of operations and financial condition could be adversely affected.

[removed: _Demand] [added: Demand] for our aircraft products is cyclical and [removed: could] [added: lower demand] adversely [removed: affect] [added: affects] our financial [removed: results._][added: results.]

Changes in economic conditions [added: has in the past caused, and in the future] may [removed: cause] [added: cause,] customers to request that firm orders be [removed: rescheduled] [added: rescheduled, deferred] or cancelled.

Reduced demand for our aircraft products or delays or cancellations of orders [added: previously has had and, in the future,] could have a material adverse effect on our cash flows, results of operations and financial condition.

[removed: _We] [added: We have made and] may [added: continue to] make acquisitions that increase the risks of our [removed: business._][added: business.]

We [removed: may] enter into acquisitions in an effort to expand our business and enhance shareholder value.

Acquisitions involve risks and uncertainties [removed: that] [added: that, in some cases, have resulted, and, in the future,] could result in our not achieving expected benefits.

Such risks include difficulties in integrating newly acquired businesses and operations in an efficient and cost-effective manner; challenges in achieving expected strategic objectives, cost savings and other benefits; the risk that the acquired businesses’ markets do not evolve as anticipated and that the acquired businesses’ products and technologies do not prove to be those needed to be successful in those markets; the risk that our due diligence reviews of the acquired business do not identify or adequately assess all of the material issues which impact valuation of the business or [removed: that may] result in costs or liabilities in excess of what we anticipated; the risk that we pay a purchase price that exceeds what the future results of operations would have merited; the risk that the acquired business may have significant internal control deficiencies or exposure to regulatory sanctions; and the potential loss of key customers, suppliers and employees of the acquired businesses.

[removed: _If] [added: If] our Finance segment is unable to maintain portfolio credit quality, our financial performance could be adversely [removed: affected._][added: affected.]

Portfolio quality [removed: may] [added: can] be adversely affected by several factors, including finance receivable underwriting procedures, collateral value, geographic or industry concentrations, and the effect of general economic conditions.

In addition, a substantial number of the new originations in our finance receivable portfolio are cross-border transactions for aircraft sold outside of the U.S. Cross-border transactions present additional challenges and risks in realizing upon collateral in the event of borrower default, which [removed: may] [added: can] result in difficulty or delay in collecting on the related finance receivables.

[removed: _We may] [added: We periodically] need to obtain financing [removed: in the future;] [added: and] such financing may not be available to us on satisfactory terms, if at [removed: all._][added: all.]

We [removed: may] periodically need to obtain financing in order to meet our debt obligations as they come due, to support our operations and/or to make acquisitions.

[removed: _Failure] [added: Failure] to perform by our subcontractors or suppliers could adversely affect our [removed: performance._][added: performance.]

Our ability to meet our obligations to our customers [removed: may] [added: could] be adversely affected if suppliers or subcontractors do not provide the agreed-upon supplies or perform the agreed-upon services in compliance with customer requirements and in a timely and cost-effective manner.

Likewise, the quality of our products [removed: may] [added: could] be adversely impacted if companies to whom we delegate manufacture of major components or subsystems for our products, or from whom we acquire such items, do not provide components or subsystems which meet required specifications and perform to our and our customers’ expectations.

The risk of these adverse effects [removed: may] [added: 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.

[removed: _Our] [added: Our] business could be negatively impacted by information technology disruptions and security [removed: threats._][added: threats.]

We maintain Information Systems Incident Management Standards applicable to all our businesses [added: intended] to ensure information security events and weaknesses associated with information systems are communicated and acted on in a timely manner.

Due to the evolving nature of security threats, the possibility of future material incidents cannot be completely [removed: mitigated] [added: mitigated,] and we may not [added: always] be successful in detecting, reporting or responding to cyber [removed: incidents in a timely manner.][added: incidents.]

[removed: _Developing] [added: Developing] new products and technologies entails significant risks and [removed: uncertainties._][added: uncertainties.]

Delays or cost overruns in the development and acceptance of new [removed: products,] [added: products] or certification of new aircraft and other [removed: products,] [added: products occur from time to time and] could adversely affect our results of operations.

We also could be adversely affected if our research and development [removed: investments] [added: efforts] are less successful than expected or if we do not adequately protect the intellectual property developed through these efforts.

A loss of such revenues could materially and adversely impact our results of operations and financial condition.

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.

Due to the nature of our work under government contracts, we sometimes experience unforeseen technological difficulties and cost overruns.

​

Both U.S. and foreign laws and regulations applicable to us have been increasing in scope and complexity.

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, industrial explosions or other 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.

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.

We also may voluntarily take such action and, from time to time, have done so, but within strictures recommended by the CPSC.

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.

For example, if the U.S. government is shut down for an extended period of time or the debt ceiling is not raised, our customer may not pay us on a timely basis.

_U.S.

contracts and orders.

Fixed-price incentive-based fee arrangements provide that allowable costs incurred are reimbursable but are subject to a cost-share which could negatively impact our profitability.

Under each type of contract, if we are unable to control

In some cases, we purchase derivatives or enter into contracts to insulate our results of operations from these fluctuations.

future taxable income, as well as changes to applicable statutory tax rates.

The Tax Cuts and Jobs Act was enacted on December 22, 2017 and significantly changed U.S. income tax law.

Any additional tax legislation in the United States or elsewhere, could adversely affect our effective tax rate, have a material impact on the value of our deferred tax assets or increase our future U.S. tax expense.

[removed: Overview and Consolidated] [added: Consolidated] Results of Operations

At the beginning of 2018, we adopted Accounting Standards Update No. 2014-09, _Revenue from Contracts with Customers (ASC 606)_ using [removed: the] [added: a] modified retrospective transition method applied to contracts that were not substantially complete at the end of 2017.

[removed: Revenues in 2018] [added: For 2019 and 2018, revenues] for our U.S. Government contracts [removed: are] [added: were] primarily recognized as costs are incurred, while revenues for 2017 were primarily recognized as units were delivered.

The comparative information [added: for 2017] has not been restated and is reported under the accounting standards in effect [removed: for those periods.][added: at that time.]

[removed: 2018] [added: 2019] Financial Highlights

[removed: ·] [added: |] Segment profit [removed: increased by 8% to $1.3 billion.][added: | | 28 | | 23 | | 22 |]

[removed: · Generated $1.1 billion] [added: | | ● | Our manufacturing businesses generated $960 million] of net cash from operating activities of continuing [removed: operations for our manufacturing businesses.][added: operations. |]

[removed: · Completed] [added: On July 2, 2018, we completed] the sale of the [added: businesses that manufacture and sell the products in the] Tools and Test Equipment product line within our Industrial [removed: segment and received $0.8 billion in net cash proceeds.][added: segment.]

[removed: ·] [added: | | ● |] Returned [removed: $1.8 billion] [added: $521 million] to our shareholders through share repurchases and dividend payments. [added: |]

[removed: ·] [added: | | ● |] Invested [removed: $643] [added: $647] million in research and development activities and [removed: $369] [added: $339] million in capital expenditures. [added: |]

| [added: *​*] | [added: ​] | [added: ​] | [added: ​] | [added: ​] | [added: ​] | [added: ​] | [added: ​ | ​ | ​ |] % Change | | | |

| _(Dollars in millions)_ | [added: 2019] | [added: | |] 2018 | | [added: |] 2017 | | [removed: 2016] | [added: 2019] | [removed: 2018] | [added: 2018] | [removed: 2017] |

| Revenues | $ | [removed: 13,972] [added: 13,630] | [added: ​ |] $ | [removed: 14,198] [added: 13,972] | [added: ​ |] $ | [removed: 13,788] [added: 14,198] | [added: ​] | [removed: (2)%] [added: (2)] | [added: %] | [removed: 3%] [added: (2)] | [added: % |]

[removed: ·] [added: | | ● |] Lower Textron Systems revenues of $376 million, primarily reflecting lower volume of $159 million in the Marine and Land Systems product line, along with a decrease due to the discontinuance of our sensor-fuzed weapon product in 2017. [added: |]

[removed: ·] [added: | | ● |] Lower Bell revenues of $137 million, [removed: primarily] due to lower commercial revenues of $91 million, largely reflecting the mix of aircraft sold in the year, and lower military revenues of $46 million. [added: |]

[removed: ·] [added: | | ● |] Higher Textron Aviation revenues of $285 million, due to higher volume and mix of $185 million and favorable pricing of $100 million. [added: |]

[removed: ·] [added: | | ● |] Higher Industrial revenues of $5 million, primarily due to higher volume of $149 million, largely related to the [removed: Textron] Specialized Vehicles product line, a favorable impact of $57 million from foreign exchange and the impact from the Arctic Cat acquisition of $49 million. [added: These increases were largely offset by $246 million in lower revenues due to the disposition of the Tools and Test Equipment product line. |]

The [removed: net] revenue [removed: increase] [added: decrease] included the following factors:

[removed: · Higher] [added: | | ● | Lower] Textron Systems revenues of [removed: $84] [added: $139] million, [removed: primarily due to higher] [added: largely reflecting lower] volume of [removed: $176] [added: $103] million in the Marine and Land Systems product [removed: line, partially offset by lower volume] [added: line and $41 million] in the [removed: other products lines.][added: Unmanned Systems product line. |]

| Cost of sales | [removed: $] [added: ​] | [added: 11,406 | ​ | ​ |] 11,594 | [removed: $] [added: ​] | [removed: 11,827] [added: ​] | [removed: $] [added: 11,827] | [removed: 11,337] [added: ​] | [added: (2)] | [removed: (2)%] [added: %] | [added: (2)] | [removed: 4%] [added: %] |

| Gross margin as a percentage of Manufacturing revenues | | [removed: 16.6%] [added: 15.9] | [added: %] | [removed: 16.3%] | [added: 16.6] | [removed: 17.3%] [added: %] | | [added: 16.3] | [added: %] | | [added: | | ​ |]

| Selling and administrative expense | [removed: $] [added: ​] | [added: 1,152 | ​ | ​ |] 1,275 | [removed: $] [added: ​] | [removed: 1,334] [added: ​] | [removed: $] [added: 1,334] | [removed: 1,317] [added: ​] | [added: (10)] | [removed: (4)%] [added: %] | [added: (4)] | [removed: 1%] [added: %] |

[removed: Interest Expense][added: Interest Expense]

| Interest expense | [removed: $] [added: ​] | [removed: 166] [added: 171] | [removed: $] [added: ​] | [removed: 174] [added: ​] | [removed: $] [added: 166] | [added: ​ | ​ |] 174 | [added: ​] | [removed: (5)%] [added: 3] | [added: %] | [removed: —] [added: (5)] | [added: % |]

[removed: Consolidated] [added: In 2018, consolidated] interest expense decreased $8 [removed: million in 2018,] [added: million,] compared with 2017, primarily due to lower average debt outstanding.

[removed: Gain] [added: Gain] on Business [removed: Disposition][added: Disposition]

[removed: Special Charges][added: Special Charges]

| [removed: 2017 | | | | | | | |] [added: _(In millions)_] | [added: 2017] | |

[removed: |] Industrial [removed: | $ | 26 | $ | 1 | $ | 19 | $ | 12 | $ | 58 |]

[removed: |] Textron Aviation [removed: | | 11 | | 17 | | — | | — | | 28 |][added: Backlog]

[removed: |] Bell [removed: | | 3 | | 12 | | 8 | | — | | 23 |]

[removed: |] Textron Systems [removed: | | 6 | | 16 | | (1) | | — | | 21 |]

[removed: |] Textron Aviation [removed: | | 33 | | 1 | | 1 | | — | | 35 |][added: Segment Profit]

[removed: |] Bell [removed: | | 4 | | 1 | | — | | — | | 5 |][added: Backlog]

[removed: |] Textron Systems [removed: | | 15 | | 34 | | 13 | | — | | 62 |][added: Backlog]

[removed: Income Taxes][added: Income Taxes]

| [removed: |] [added: *​*] | [added: 2019] | | 2018 | | 2017 | | [removed: 2016 |]

In 2018, our effective tax rate [added: of 11.7%] was lower than the U.S. federal statutory tax rate of 21%, primarily due to the disposition of the Tools and Test equipment product line which resulted in a gain taxable primarily in non-U.S. jurisdictions that partially exempt such gains from tax.

In addition, we finalized the 2017 impacts of the Tax Cut and Jobs Act (the [removed: “Tax Act”)] [added: Tax Act)] and recognized a $14 million benefit in the fourth quarter of 2018.

Our effective tax rate [added: of 59.8%] for 2017 was higher than the U.S. federal statutory tax rate of 35%, largely due to the impact from the Tax Act.

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| | ● | Backlog increased 8% to $9.8 billion, which includes new contracts with the U.S. Government for spares and logistic support for the V-22 tiltrotor aircraft and the H-1 helicopter programs at the Bell segment. |

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Revenues decreased $342 million, 2%, in 2019, compared with 2018.

| | ● | Lower Industrial revenues of $493 million, primarily reflecting a $248 million impact from the 2018 disposition of the Tools and Test Equipment product line and lower volume and mix of $233 million at the remaining product lines, primarily in the Specialized Vehicles product line. |

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| | ● | Higher Textron Aviation revenues of $216 million, largely due to higher Citation jet volume of $286 million, primarily reflecting the Longitude’s entry into service in the fourth quarter of 2019, and higher aftermarket volume of $44 million, partially offset by lower defense volume. |

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| | ● | Higher Bell revenues of $74 million, resulting from an increase in commercial revenues of $116 million, largely reflecting higher deliveries, partially offset by lower military volume. |

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Cost of sales decreased $188 million, 2%, in 2019, compared with 2018, largely resulting from the impact from the disposition of the Tools and Test Equipment product line, improved performance and a favorable impact of $48 million from foreign exchange rate fluctuations, partially offset by an unfavorable impact of $94 million from inflation.

Gross margin as a percentage of Manufacturing revenues decreased 70 basis points in 2019, compared with 2018, primarily due to lower margin at the Textron Aviation segment, reflecting the mix of aircraft sold in the year.

Selling and administrative expense decreased $123 million, 10% in 2019, compared with 2018, primarily reflecting the impact from the disposition of Tools and Test Equipment product line and cost reduction activities in the Specialized Vehicles product line.

Consolidated interest expense increased $5 million in 2019, compared with 2018, primarily due to higher average debt outstanding.

Special charges of $72 million, $73 million and $130 million in 2019, 2018 and 2017, respectively, primarily include restructuring activities as described in Note 17 to the Consolidated Financial Statements.

We recorded an after-tax gain of $419 million in 2018.

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| Effective tax rate | 13.5 | % | 11.7 | % | 59.8 | % |

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.

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| *​* | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | % Change | | | |

| Profit margin | | 8.7 | % | | 9.0 | % | | 6.5 | % | | | | ​ |

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| *​* | 2019 versus | |

| _(In millions)_ | 2018 | |

| Volume and mix | $ | 199 |

| Pricing | | 17 |

Textron Aviation’s revenues increased $216 million, 4%, in 2019, compared with 2018, largely due to higher volume and mix of $199 million.

A reconciliation of the financial statement line items impacted for 2018 under ASC 606 to the prior accounting standards is provided in Note 12.

· Backlog increased 27% to $9.1 billion.

Our backlog includes the award of our third multi-year V-22 contract at Bell for $2.4 billion and increased orders for our commercial aircraft at the Textron Aviation and Bell segments.

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These increases were largely offset by $246 million in lower revenues due to the disposition of the Tools and Test Equipment product line.

Revenues increased $410 million, 3%, in 2017, compared with 2016, largely driven by increases in the Industrial, Textron Systems and Bell segments, partially offset by lower revenues at the Textron Aviation segment.

· Higher Industrial revenues of $492 million, primarily due to the impact from the acquisition of Arctic Cat.

· Higher Bell revenues of $78 million, primarily due to an increase in commercial revenues of $89 million, largely reflecting higher commercial aircraft deliveries.

· Lower Textron Aviation revenues of $235 million, primarily due to lower volume and mix of $307 million, largely the result of lower military and commercial turboprop volume.

Cost of sales increased $490 million, 4%, and selling and administrative expense increased $17 million, 1%, in 2017, compared with 2016, primarily due to an increase from acquired businesses, largely Arctic Cat.

Gross margin as a percentage of Manufacturing revenues decreased 100 basis points from 2016, primarily due to lower margins at the Textron Systems segment, largely reflecting an unfavorable impact from net program adjustments, and the Industrial segment, which included the impact from the Arctic Cat acquisition.

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.

We received net cash proceeds of $807 million in connection with this disposition and recorded an after-tax gain of $419 million.

In the fourth quarter of 2018, we recorded $73 million in special charges in connection with a plan to restructure the Textron Specialized Vehicles businesses within our Industrial segment.

These businesses have undergone significant changes since the acquisition of Arctic Cat as we have expanded the product portfolio and integrated manufacturing operations and retail distribution.

In the third quarter of 2018, the operating results for these businesses were significantly below our expectations as dealer sell-through lagged despite the introduction of new products into our dealer network.

Based on our review and assessment of the acquired dealer network and go-to-market strategy for the Textron Off Road and Arctic Cat brands in the fourth quarter of 2018, along with a review of the other businesses within the product line, we initiated a restructuring plan.

This plan included product rationalization, closure of several factory-direct turf-care branch locations and a manufacturing facility and headcount reductions.

Under this plan, we recorded 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.

The actions taken under this plan were substantially completed at the end of 2018.

In 2017 and 2016, we recorded special charges of $90 million and $123 million, respectively, related to a plan that was initiated in 2016 to restructure and realign our businesses by implementing headcount reductions, facility consolidations and other actions in order to improve overall operating efficiency across Textron.

The 2016 plan was completed in 2017.

Special charges related to this plan included $97 million of severance costs, $84 million of asset impairments and $32 million in contract terminations and other costs.

Of these amounts, $83 million was incurred at Textron Systems, $63 million at Textron Aviation, $38 million at Industrial, $28 million at Bell and $1 million at Corporate.

The total headcount reduction under this plan was approximately 2,100 positions, representing 5% of our workforce.

In connection with the acquisition of Arctic Cat, we initiated a restructuring plan in the first quarter of 2017 and recorded restructuring charges of $28 million in 2017, which included $19 million of severance costs, largely related to change-of-control provisions, and $9 million of contract termination and other costs.

In addition, we recorded $12 million of acquisition-related integration and transaction costs in 2017.

For 2017 and 2016, special charges recorded by segment and type of cost are as follows:

| _(In millions)_ | | Severance Costs | | Asset Impairments | | Contract Terminations and Other | | Acquisition Integration/ Transaction Costs | | Total Special Charges |

| | $ | 46 | $ | 46 | $ | 26 | $ | 12 | $ | 130 |

| 2016 | | | | | | | | | | |

| Industrial | $ | 17 | $ | 2 | $ | 1 | $ | — | $ | 20 |

| Corporate | | 1 | | — | | — | | — | | 1 |

| | $ | 70 | $ | 38 | $ | 15 | $ | — | $ | 123 |

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| Effective tax rate | | | | 11.7% | | 59.8% | | 3.8% |

In 2016, our effective tax rate was lower than the U.S. federal statutory tax rate of 35%, largely due to a settlement with the U.S. Internal Revenue Service Office of Appeals for our 1998 to 2008 tax years.

This settlement resulted in a $206 million benefit recognized in continuing operations and a $113 million benefit in discontinued operations.

[removed: Foreign] [added: Foreign] Currency Exchange [removed: Risk][added: Risk]

The notional amount of outstanding foreign currency exchange contracts was [removed: $379] [added: $342] million and [removed: $426] [added: $379] million at [removed: December 29, 2018] [added: January 4, 2020] and December [removed: 30, 2017,] [added: 29, 2018,] respectively.

| _(In millions)_ | [removed: |] [added: 2019] | | 2018 | | 2017 | | [removed: 2016 |]

| Increase (decrease) in revenues | [added: $] | [added: (66)] | $ | 57 | $ | 27 | [removed: $ | (36) |]

| Increase (decrease) in segment profit | | [added: (10)] | | 1 | | (1) | [removed: | (12) |]

[removed: Interest] [added: Interest] Rate [removed: Risk][added: Risk]

[removed: Quantitative] [added: Quantitative] Risk [removed: Measures][added: Measures]

The financial instruments that are subject to market risk include finance receivables (excluding leases), debt (excluding [removed: capital] [added: finance] lease obligations) and foreign currency exchange contracts.

| [added: ​] | [removed: December 29, 2018] [added: January 4, 2020] | | | | | | December [removed: 30, 2017] [added: 29, 2018] | | | | | |

| (_In millions_) | [added: Value*] | [removed: Carrying Value*] | [added: Value*] | [removed: Fair Value*] | [added: Change] | [removed: Sensitivity of Fair Value to a 10% Change] | [added: Value*] | [removed: Carrying Value*] | [added: Value*] | [removed: Fair Value*] | [added: Change] | [removed: Sensitivity of Fair Value to a 10% Change] |

| Manufacturing group | [added: ​] | | [added: ​] | | [added: ​] | | [added: ​] | | [added: ​] | | [added: ​] | |

| _Foreign currency exchange risk_ | [added: ​] | | [added: ​] | | [added: ​] | | [added: ​] | | [added: ​] | | [added: ​] | |

| Debt | $ | [removed: (197)] [added: (210)] | $ | [removed: (208)] [added: (212)] | $ | (21) | $ | [removed: (212)] [added: (197)] | $ | [removed: (232)] [added: (208)] | $ | [removed: (23)] [added: (21)] |

| Foreign currency exchange contracts | | [removed: (8)] [added: (1)] | | [removed: (8)] [added: (1)] | | [removed: 50] [added: 20] | | [removed: 11] [added: (8)] | | [removed: 11] [added: (8)] | | [removed: 26] [added: 50] |

| _Interest rate risk_ | [added: ​] | [added: ​] | [added: ​] | [added: ​] | [added: ​] | [added: ​] | [added: ​] | [added: ​] | [added: ​] | [added: ​] | [added: ​] | [added: ​] |

| Debt | $ | [removed: (2,996)] [added: (3,097)] | $ | [removed: (2,971)] [added: (3,249)] | $ | [removed: (30)] [added: (21)] | $ | [removed: (3,007)] [added: (2,996)] | $ | [removed: (3,136)] [added: (2,971)] | $ | [removed: (33)] [added: (30)] |

| Finance receivables | $ | [removed: 582] [added: 493] | $ | [removed: 584] [added: 527] | $ | [removed: 14] [added: 9] | $ | [removed: 643] [added: 582] | $ | [removed: 675] [added: 584] | $ | 14 |

| Debt | | [removed: (718)] [added: (686)] | | [removed: (640)] [added: (634)] | | 1 | | [removed: (824)] [added: (718)] | | [removed: (799)] [added: (640)] | | [removed: 2] [added: 1] |

| ​ | ​ | ​ | ​ | ​ | ​ | ​ |

| --- | --- | --- | --- | --- | --- | --- |

| ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ |

| ​ | ​ | ​ | ​ | ​ | Sensitivity of | | ​ | ​ | ​ | ​ | Sensitivity of | |

| ​ | ​ | ​ | ​ | ​ | Fair Value | | ​ | ​ | ​ | ​ | Fair Value | |

| ​ | Carrying | | Fair | | to a 10% | | Carrying | | Fair | | to a 10% | |

| *​* | $ | (211) | $ | (213) | $ | (1) | $ | (205) | $ | (216) | $ | 29 |

​

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| | $ | (205) | $ | (216) | $ | 29 | $ | (201) | $ | (221) | $ | 3 |

The following description of our business should be read in conjunction with [removed: “Management’s] [added: Management’s] Discussion and Analysis of Financial Condition and Results of [removed: Operations”] [added: Operations] on pages [removed: 18] [added: 19] through 34 of this Annual Report on Form 10-K.

[removed: Textron] [added: Textron] Aviation [removed: Segment][added: Segment]

Revenues in the Textron Aviation segment accounted for [removed: 36%, 33% and] [added: 38%,] 36% [added: and 33%] of our total revenues in [removed: 2018, 2017] [added: 2019, 2018] and [removed: 2016,] [added: 2017,] respectively.

The family of jets currently offered by Textron Aviation includes the Citation M2, Citation CJ3+, Citation CJ4, Citation XLS+, Citation Latitude, Citation [removed: Sovereign+,] [added: Sovereign+] and the Citation [removed: X+, the fastest civilian jet] [added: Longitude, a super mid-size jet, which achieved type certification and began deliveries] in [removed: the world.][added: late 2019.]

The [removed: Cessna] Denali, a high-performance single engine turboprop [removed: aircraft,] [added: aircraft under development,] is [added: also] expected to achieve its first flight in [removed: 2019.][added: 2021.]

[removed: In addition,] Textron Aviation is developing the Cessna Skycourier, a twin-engine, high-wing, large-utility turboprop aircraft, which is targeted for first flight in [removed: 2019.][added: early 2020.]

[added: In addition,] Textron Aviation’s piston engine aircraft include the Beechcraft Baron and Bonanza, and the Cessna Skyhawk, Skylane, and the Turbo [removed: Stationair.][added: Stationair HD.]

Textron [removed: Aviation also offers] [added: Aviation’s military trainer and defense aircraft include] the T-6 trainer, which has been used to train pilots from more than 20 [removed: countries, the AT-6 light attack military aircraft, and the Scorpion.][added: countries.]

[removed: Both] [added: Textron Aviation also offers] the AT-6 [added: light attack military aircraft] and the [removed: Scorpion] [added: Scorpion, a highly affordable, multi-mission aircraft, both of which] are not yet in production, pending customer orders.

In support of its family of aircraft, Textron Aviation operates a global network of [removed: 18] [added: 20] service centers, two of which are co-located with Bell Helicopter, along with more than [removed: 350] [added: 300] authorized independent service centers located throughout the world.

Textron Aviation also provides its customers with around-the-clock parts support and offers a mobile support program with over 70 mobile service [removed: units and several dedicated support aircraft.][added: units.]

[removed: Bell Segment][added: Bell Segment]

Bell [removed: Helicopter] is one of the leading suppliers of military and commercial helicopters, tiltrotor aircraft, and related spare parts and services in the world.

Revenues for Bell accounted for [removed: 23%,] [added: 24%,] 23% and 23% of our total revenues in [removed: 2018, 2017] [added: 2019, 2018] and [removed: 2016,] [added: 2017,] respectively.

[removed: Through its strategic] alliance with Boeing, Bell produces and supports the V-22 tiltrotor aircraft for the U.S. Department of Defense (DoD), and also for Japan under the U.S. Government-sponsored foreign military sales program.

In addition, the 525 Relentless, Bell’s first super medium commercial helicopter, continues flight test activities [removed: with] [added: and is working on] certification [removed: targeted in late 2019.][added: with the Federal Aviation Administration.]

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 [removed: over] [added: nearly] 100 independent service centers located in [added: over] 35 countries.

[removed: Textron] [added: Textron] Systems [removed: Segment][added: Segment]

Textron Systems is a supplier to the defense, aerospace and general aviation markets, and represents 10%, [removed: 13%] [added: 10%] and 13% of our total revenues in [removed: 2018, 2017] [added: 2019, 2018] and [removed: 2016,] [added: 2017,] respectively.

[removed: _Unmanned Systems_][added: Unmanned Systems]

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 [removed: 300,000] [added: 400,000] flight hours in commercial and military operations around the world.

[removed: _Marine] [added: Marine] and Land [removed: Systems_][added: Systems]

[removed: Our Marine and Land Systems product line includes advanced marine craft, armored vehicles, turrets and related subsystems,] [added: These products are] in service with U.S. and international militaries, special operations forces, police forces and civilian entities.

[removed: _Simulation,] [added: Simulation,] Training and [removed: Other_][added: Other]

[removed: Our] [added: The] Simulation, Training and Other product line includes products and services provided by the following businesses: TRU Simulation + Training, Textron Airborne Solutions, Electronic Systems, Lycoming, and Weapons and Sensors Systems.

TRU Simulation + Training designs, develops, manufactures, installs, and provides maintenance of advanced flight training [removed: courseware and] devices, including full flight simulators, for both rotary- and fixed-wing aircraft for commercial airlines, aircraft original equipment manufacturers (OEMs), flight training centers and training organizations worldwide.

[removed: Industrial Segment][added: Industrial Segment]

Industrial segment revenues represented [removed: 31%, 30%] [added: 28%, 31%] and [removed: 28%] [added: 30%] of our total revenues in [removed: 2018, 2017] [added: 2019, 2018] and [removed: 2016,] [added: 2017,] respectively.

[removed: _Fuel] [added: Fuel] Systems and Functional [removed: Components_][added: Components]

Our Fuel Systems and Functional Components product line is produced by our Kautex business unit which is headquartered in Bonn, [removed: Germany and operates over 30 plants in 14 countries.][added: Germany.]

Kautex is a [removed: leading developer] [added: leader in designing] and [removed: manufacturer of blow-molded] [added: manufacturing] plastic fuel systems [added: for automobiles] and [removed: advanced fuel systems,] [added: light trucks,] including [added: blow-molded solutions for conventional plastic fuel tanks and] pressurized [added: plastic] fuel tanks for hybrid [removed: applications, for cars, light trucks and all-terrain vehicles.][added: vehicle applications.]

[added: In addition,] Kautex [removed: also develops and manufactures clear-vision systems] [added: produces plastic tanks] for [removed: automobiles,] selective catalytic reduction systems used to reduce emissions from diesel [removed: engines,] [added: engines] and other fuel system [removed: components, as well as plastic bottles and containers for medical, household, agricultural, laboratory and industrial uses.][added: components.]

[removed: _Specialized Vehicles_][added: Specialized Vehicles]

Our Specialized Vehicles product line includes products sold by the Textron Specialized Vehicles businesses under [removed: the] [added: our] E-Z-GO, Arctic Cat, TUG Technologies, Douglas Equipment, Premier, Safeaero, Ransomes, [removed: Jacobsen, Cushman] [added: Jacobsen] and [removed: Dixie Chopper] [added: Cushman] brands.

These businesses have a diversified customer base that includes golf courses and resorts, government agencies and municipalities, consumers, outdoor enthusiasts, and commercial and industrial users such as factories, warehouses, [removed: airports,] [added: airlines,] planned communities, hunting preserves, educational and corporate campuses, sporting venues, municipalities and landscaping professionals.

[removed: Finance Segment][added: Finance Segment]

In [removed: 2018, 2017] [added: 2019, 2018] and [removed: 2016,] [added: 2017,] our Finance group paid our Manufacturing group [removed: $177] [added: $184] million, [removed: $174] [added: $177] million and [removed: $173] [added: $174] million, respectively, related to the sale of Textron-manufactured products to third parties that were financed by the Finance group.

See [removed: “Finance Portfolio Quality”] [added: Finance segment section] in [removed: “Management’s] [added: Management’s] Discussion and Analysis of Financial Condition and Results of [removed: Operations”] [added: Operations] on page 27 for information about the Finance segment’s credit performance.

[removed: Backlog][added: Backlog]

Our backlog at the end of [removed: 2018] [added: 2019] and [removed: 2017] [added: 2018] is summarized below:

We are no longer developing the previously announced Hemisphere, a large-cabin jet.

Through its strategic

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.

This program was initiated by the Army to develop a successor to the retired Bell OH-58D Kiowa Warrior helicopter.

Our Marine and Land Systems product line includes advanced marine craft, armored vehicles and specialty vehicles supporting fire and rescue 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.

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 9 engineering/research and development locations around the world.

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.

| ​ | ​ | ​ | ​ | ​ |

| *​* | January 4, | | December 29, | |

Backlog represents amounts allocated to contracts that we expect to recognize as revenue in future periods when we perform under the contracts.

Information about our Executive Officers

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The Citation Longitude, a super-midsize jet, achieved provisional type certification in December 2018, which allows operators to begin flight training in preparation for deliveries in early 2019.

Textron Aviation is also continuing the development of the Citation Hemisphere, a large-cabin jet.

The Scorpion is a highly affordable, multi-mission aircraft designed primarily for the tactical military jet aviation market.

In 2018, the Bell Boeing V-22 program was awarded a third multi-year contract for the production and delivery of an additional 63 units along with related supplies and services through 2024.

Through its training centers, TRU Simulation + Training provides initial type-rating and recurrency training for pilots, as well as maintenance training in its Aviation Maintenance Training Academy.

In October 2018, TRU Simulation + Training entered into a letter of intent to form a joint venture with FlightSafety International to provide training solutions for Textron Aviation’s business and general aviation aircraft.

This transaction is subject to a final agreement and regulatory approvals.

Additionally, Kautex operates a business that produces cast iron engine camshafts, crankshafts and other engine components.

Kautex serves the global automobile market, with operating facilities near its major customers around the world.

Sales are made through a combination of factory direct resources and a network of independent distributors and dealers worldwide.

| --- | --- | --- | --- | --- | --- | --- | --- | --- |

With the adoption of ASC 606 at the beginning of 2018, as discussed in Note 1 to the Consolidated Financial Statements on page 43 of this Annual Report on Form 10-K, backlog now includes amounts under contracts with the U.S. Government and certain other agreements when contract criteria have been met.

Prior to the adoption, our backlog excluded firm orders with the U.S. Government for which funding had not been appropriated.

Upon adoption, Bell’s backlog decreased $760 million, largely resulting from the acceleration of revenues upon conversion to the cost-to-cost method of revenue recognition, and Textron Aviation’s backlog increased $170 million.

At December 29, 2018, Bell’s backlog included $2.4 billion for its portion of the third multi-year V-22 contract received in 2018 for the production and delivery of 63 units along with related supplies and services through 2024.

Executive Officers of the Registrant

The Trustee [removed: seeks] [added: sought] avoidance and recovery of alleged fraudulent transfers in the amount of $316 million as well as damages of $223 million on the other claims.

The Trustee also [removed: seeks] [added: sought] trebled damages on all claims under Ohio law.

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_.

Textron intends to vigorously defend this lawsuit.

The trial for this matter began on February 24, 2020.

[removed: Form 10-K][added: Form 10-K]

[removed: \[ x \]] [added: | ☒ |] ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 [added: |]

For the fiscal year [removed: ended December 29, 2018][added: ended January 4, 2020]

[removed: \[ \]] [added: | ☐ |] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 [added: |]

For the transition period [removed: from to .][added: from to .]

Commission File [removed: Number 1-5480][added: Number 1-5480]

| [added: ​ |] Delaware | [added: ​] | 05-0315468 | [added: ​ |]

| [added: ​ |] (State or other jurisdiction of incorporation or organization) | [added: ​] | (I.R.S. Employer Identification No.) | [added: ​ |]

| [added: ​ |] 40 Westminster [removed: Street, Providence, RI] [added: Street, Providence, RI] | [added: ​] | 02903 | [added: ​ |]

| [added: ​ |] (Address of principal executive offices) | [added: ​] | (Zip code) | [added: ​ |]

Registrant’s Telephone Number, Including Area Code: [removed: (401) 421-2800][added: (401) 421-2800]

| [added: ​] | Title of Each Class | [added: Trading Symbol(s)] | Name of Each Exchange on Which Registered | [added: ​] |

| [added: ​] | Common Stock — par value $0.125 | [added: TXT] | New York Stock Exchange | [added: ​] |

[removed: Yes ü No___][added: ⌧Yes ◻ No]

Indicate by check mark if the registrant is not required to file reports pursuant to Section 13 or Section 15(d) of the [removed: Act.][added: Act .]

[added: ◻] Yes [added: ⌧] No [removed: ü]

Indicate by check mark whether the registrant has submitted electronically [removed: and posted on its corporate Web site, if any,] every Interactive Data File required to be submitted [removed: and posted] pursuant to Rule 405 of Regulation S-T during the preceding 12 months (or for such shorter period that the registrant was required to submit [removed: and post] such files).

[added: ⌧] Yes [removed: ü No____][added: ◻ No]

| Large accelerated filer [removed: \[ ü \] |] [added: ⌧] | Accelerated filer [removed: \[ \] |] [added: ◻] |

| Non-accelerated filer [removed: \[ \]] [added: ◻] | Smaller reporting company [removed: \[ \] | | Emerging growth company \[ \]] [added: ☐] |

The aggregate market value of the registrant’s Common Stock held by non-affiliates at June [removed: 30, 2018] [added: 29, 2019] was approximately [removed: $16.4] [added: $12.2] billion based on the New York Stock Exchange closing price for such shares on that date.

At February [removed: 2, 2019, 234,679,051] [added: 8, 2020, 228,049,518] shares of Common Stock were outstanding.

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 [removed: 24, 2019.][added: 29, 2020.]

| [Item [removed: 1A.](#Item1A_RiskFactors_102256)] [added: 1A.](#Item1ARiskFactors_649083)] | [Risk [removed: Factors](#Item1A_RiskFactors_102256)] [added: Factors](#Item1ARiskFactors_649083)] | [added: ​ |] 9 |

| [Item [removed: 1B.](#Item1B_UnresolvedStaffComments_102331)] [added: 1B.](#Item1BUnresolvedStaffComments_295452)] | [Unresolved Staff [removed: Comments](#Item1B_UnresolvedStaffComments_102331)] [added: Comments](#Item1BUnresolvedStaffComments_295452)] | [added: ​ |] 15 |

| [Item [removed: 4.](#Item4_MineSafetyDisclosures_102338)] [added: 4.](#Item4MineSafetyDisclosures_224985)] | [Mine Safety [removed: Disclosures](#Item4_MineSafetyDisclosures_102338)] [added: Disclosures](#Item4MineSafetyDisclosures_224985)] | [removed: 15] [added: ​] | [added: 16 |]

| [Item [removed: 5.](#Item5_MarketforRegistrantsCommon_102345)] [added: 5.](#Item5MarketforRegistrantsCommonEquityRel)] | [Market for Registrant’s Common Equity, Related Stockholder Matters and Issuer Purchases of Equity [removed: Securities](#Item5_MarketforRegistrantsCommon_102345)] [added: Securities](#Item5MarketforRegistrantsCommonEquityRel)] | [removed: 16] [added: ​] | [added: 17 |]

| [Item [removed: 6.](#Item6_SelectedFinancialData_112940)] [added: 6.](#Item6SelectedFinancialData_592994)] | [Selected Financial [removed: Data](#Item6_SelectedFinancialData_112940)] [added: Data](#Item6SelectedFinancialData_592994)] | [removed: 17] [added: ​] | [added: 18 |]

| [Item [removed: 7.](#Item7_ManagementsDiscussionandAn_112950)] [added: 7.](#Item7ManagementsDiscussionandAnalysisofF)] | [Management’s Discussion and Analysis of Financial Condition and Results of [removed: Operations](#Item7_ManagementsDiscussionandAn_112950)] [added: Operations](#Item7ManagementsDiscussionandAnalysisofF)] | [removed: 18] [added: ​] | [added: 19 |]

| [Item [removed: 7A.](#Item7A_QuantitativeandQualitativ_015056)] [added: 7A.](#Item7AQuantitativeandQualitativeDisclosu)] | [Quantitative and Qualitative Disclosures About Market [removed: Risk](#Item7A_QuantitativeandQualitativ_015056)] [added: Risk](#Item7AQuantitativeandQualitativeDisclosu)] | [added: ​ |] 35 |

| [Item [removed: 8.](#Item8_FinancialStatementsandSupp_060344)] [added: 8.](#Item8FinancialStatementsandSupplementary)] | [Financial Statements and Supplementary [removed: Data](#Item8_FinancialStatementsandSupp_060344)] [added: Data](#Item8FinancialStatementsandSupplementary)] | [added: ​ |] 36 |

| [Item [removed: 9.](#Item9_ChangesInandDisagreementsW_042601)] [added: 9.](#Item9ChangesInandDisagreementsWithAccoun)] | [Changes In and Disagreements With Accountants on Accounting and Financial [removed: Disclosure](#Item9_ChangesInandDisagreementsW_042601)] [added: Disclosure](#Item9ChangesInandDisagreementsWithAccoun)] | [removed: 75] [added: ​] | [added: 77 |]

| [Item [removed: 9A.](#Item9A_ControlsandProcedures_042609)] [added: 9A.](#Item9AControlsandProcedures_95948)] | [Controls and [removed: Procedures](#Item9A_ControlsandProcedures_042609)] [added: Procedures](#Item9AControlsandProcedures_95948)] | [removed: 75] [added: ​] | [added: 77 |]

| [PART [removed: III](#PARTIII_043234 "Click to goto ")] [added: III](#PARTIII_691567)] | [added: ​] | [added: ​] | [added: ​ |]

| [Item [removed: 10.](#Item10_DirectorsExecutiveOfficer_043307)] [added: 10.](#Item10DirectorsExecutiveOfficersandCorpo)] | [Directors, Executive Officers and Corporate [removed: Governance](#Item10_DirectorsExecutiveOfficer_043307)] [added: Governance](#Item10DirectorsExecutiveOfficersandCorpo)] | [removed: 77] [added: ​] | [added: 79 |]

| [Item [removed: 11.](#Item11_ExecutiveCompensation_043312)] [added: 11.](#Item11ExecutiveCompensation_417717)] | [Executive [removed: Compensation](#Item11_ExecutiveCompensation_043312)] [added: Compensation](#Item11ExecutiveCompensation_417717)] | [removed: 77] [added: ​] | [added: 79 |]

| [Item [removed: 12.](#Item12_SecurityOwnershipofCertai_043317)] [added: 12.](#Item12SecurityOwnershipofCertainBenefici)] | [Security Ownership of Certain Beneficial Owners and Management and Related Stockholder [removed: Matters](#Item12_SecurityOwnershipofCertai_043317)] [added: Matters](#Item12SecurityOwnershipofCertainBenefici)] | [removed: 77] [added: ​] | [added: 79 |]

| [Item [removed: 13.](#Item13_CertainRelationshipsandRe_043322)] [added: 13.](#Item13CertainRelationshipsandRelatedTran)] | [Certain Relationships and Related Transactions and Director [removed: Independence](#Item13_CertainRelationshipsandRe_043322)] [added: Independence](#Item13CertainRelationshipsandRelatedTran)] | [removed: 77] [added: ​] | [added: 79 |]

| [Item [removed: 14.](#Item14_PrincipalAccountantFeesan_043329)] [added: 14.](#Item14PrincipalAccountantFeesandServices)] | [Principal Accountant Fees and [removed: Services](#Item14_PrincipalAccountantFeesan_043329)] [added: Services](#Item14PrincipalAccountantFeesandServices)] | [removed: 77] [added: ​] | [added: 79 |]

| [Item [removed: 15.](#Item15_ExhibitsandFinancialState_053946)] [added: 15.](#Item15ExhibitsandFinancialStatementSched)] | [Exhibits and Financial Statement [removed: Schedules](#Item15_ExhibitsandFinancialState_053946)] [added: Schedules](#Item15ExhibitsandFinancialStatementSched)] | [removed: 78] [added: ​] | [added: 80 |]

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Textron Inc.

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⌧ Yes ◻ No

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| | Emerging growth company ☐ |

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☐ Yes ⌧ No

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For the Fiscal Year Ended January 4, 2020

| ​ | ​ | | Page |

| [PART I](#PARTI_405086) | ​ | ​ | |

10-K 1 a19-30052_110k.htm 10-K

Textron Inc.

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Indicate by check mark if disclosure of delinquent filers pursuant to Item 405 of Regulation S-K is not contained herein, and will not be contained, to the best of registrant’s knowledge, in definitive proxy or information statements incorporated by reference in Part III of this Form 10-K or any amendment to this Form 10-K.

\[ ü \]

| | | | |

\[ \]

| [PART I](#PARTI_102219 "Click to goto ") | | Page |

| | | |

| [Item 1.](#Item1_Business_102220) | [Business](#Item1_Business_102220) | 3 |

| [Item 2.](#Item2_Properties_102333) | [Properties](#Item2_Properties_102333) | 15 |

| [Item 3.](#Item3_LegalProceedings_102335) | [Legal Proceedings](#Item3_LegalProceedings_102335) | 15 |

| [PART II](#PARTII_102343 "Click to goto ") | | |

| [PART IV](#PARTIV_053947 "Click to goto ") | | |

| [Signatures](#Signatures_060414 "Click to goto ") | | 82 |

On [removed: December 29, 2018,] [added: January 4, 2020,] we operated a total of [removed: 55] [added: 54] plants located throughout the U.S. and [removed: 50] [added: 49] plants outside the U.S. We own 55 plants and lease the remainder for a total manufacturing space of approximately [removed: 23.8] [added: 23.7] million square feet.

[removed: PART II][added: PART II]

The principal market on which our common stock is traded is the New York Stock Exchange under the symbol “TXT.” At [removed: December 29, 2018,] [added: January 4, 2020,] there were approximately [removed: 8,300] [added: 7,900] record holders of Textron common stock.

[removed: Issuer] [added: Issuer] Repurchases of Equity [removed: Securities][added: Securities]

The following provides information about our fourth quarter [removed: 2018] [added: 2019] repurchases of equity securities that are registered pursuant to Section 12 of the Securities Exchange Act of 1934, as amended:

[removed: _* These] [added: _*_ _These] shares were purchased pursuant to a plan authorizing the repurchase of up to 40 million shares of Textron common stock that was announced on April 16, [removed: 2018.][added: 2018, which had no expiration date._]

[removed: Stock] [added: Stock] Performance [removed: Graph][added: 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, [removed: 2013] [added: 2014] 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.

[removed: ][added: ]

| [removed: | | 2013 | |] [added: ​] | 2014 | | [removed: |] 2015 | | [removed: |] 2016 | | [removed: |] 2017 | | [removed: |] 2018 | | [added: 2019 | |]

| ​ | ​ | ​ | ​ | ​ | ​ |

| ​ | ​ | ​ | ​ | ​ | Maximum |

| ​ | Total | Average Price | | Total Number of | Number of Shares |

| ​ | Number of | Paid per Share | | Shares Purchased as | that may yet be |

| ​ | Shares | (excluding | | part of Publicly | Purchased under |

| Period _(shares in thousands)_ | Purchased * | commissions) | | Announced Plan * | the Plan |

| September 29, 2019 – November 2, 2019 | 275 | $ | 46.75 | 275 | 7,615 |

| November 3, 2019 – November 30, 2019 | — | | — | — | 7,615 |

| December 1, 2019 – January 4, 2020 | 434 | | 44.13 | 434 | 7,181 |

| Total | 709 | $ | 45.14 | 709 | |

On February 25, 2020, our Board of Directors authorized the repurchase of up to 25 million shares of our common stock.

This new plan has no expiration date and replaced the existing plan adopted in 2018 that had 6.7 million remaining shares available for repurchase.

| ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ |

| --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- |

| Textron Inc. | $ | 100.00 | $ | 99.81 | $ | 115.60 | $ | 134.93 | $ | 108.99 | $ | 106.99 |

| S&P 500 | | 100.00 | | 101.40 | | 113.53 | | 138.32 | | 131.12 | | 174.15 |

| S&P 500 A&D | | 100.00 | | 105.33 | | 125.25 | | 177.07 | | 160.65 | | 220.35 |

| S&P 500 Industrials | | 100.00 | | 102.95 | | 113.37 | | 138.95 | | 133.52 | | 178.27 |

| Period _(shares in thousands)_ | Total Number of Shares Purchased * | Average Price Paid per Share (excluding commissions) | | Total Number of Shares Purchased as part of Publicly Announced Plan * | Maximum Number of Shares that may yet be Purchased under the Plan |

| September 30, 2018 – November 3, 2018 | 2,905 | $ | 54.65 | 2,905 | 21,812 |

| November 4, 2018 – December 1, 2018 | 1,910 | | 55.76 | 1,910 | 19,902 |

| December 2, 2018 – December 29, 2018 | 2,710 | | 49.64 | 2,710 | 17,192 |

| Total | 7,525 | $ | 53.13 | 7,525 | |

This plan has no expiration date._

| --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- |

| Textron Inc. | $ | 100.00 | | $ | 115.83 | | $ | 115.77 | | $ | 134.09 | | $ | 156.51 | | $ | 126.42 | |

| S&P 500 | | 100.00 | | | 114.15 | | | 115.73 | | | 129.57 | | | 157.85 | | | 149.64 | |

| S&P 500 A&D | | 100.00 | | | 112.09 | | | 118.18 | | | 140.52 | | | 198.66 | | | 180.24 | |

| S&P 500 Industrials | | 100.00 | | | 112.81 | | | 116.08 | | | 127.82 | | | 156.67 | | | 150.54 | |

| (_Dollars in millions, except per share amounts_) | [added: 2019] | [added: | |] 2018 | | [added: |] 2017 | | [added: |] 2016 | | [added: |] 2015 | | [removed: 2014] |

| Revenues (a) | [added: ​] | | | [added: ​] | | | [added: ​] | | | [added: ​] | [added: | | ​ | | |]

| Textron Aviation | $ | [added: 5,187 | | $ |] 4,971 | [added: |] $ | 4,686 | [added: |] $ | 4,921 | [added: |] $ | 4,822 | [removed: $] | [removed: 4,568 |]

| Bell | | [added: 3,254 | | |] 3,180 | | [added: |] 3,317 | | [added: |] 3,239 | | [removed: 3,454] | [added: 3,454] | [removed: 4,245] |

| Textron Systems | | [added: 1,325 | | |] 1,464 | | [added: |] 1,840 | | [added: |] 1,756 | | [removed: 1,520] | [added: 1,520] | [removed: 1,624] |

| Industrial | | [added: 3,798 | | |] 4,291 | | [added: |] 4,286 | | [added: |] 3,794 | | [removed: 3,544] | [added: 3,544] | [removed: 3,338] |

| Finance | | 66 | | [added: | 66 | | |] 69 | | [added: |] 78 | | [removed: 83] | [added: 83] | [removed: 103] |

| Total revenues | $ | [added: 13,630 | | $ |] 13,972 | [added: |] $ | 14,198 | [added: |] $ | 13,788 | [added: |] $ | 13,423 | [removed: $] | [removed: 13,878 |]

| Segment profit | | | | | | | | | | | [added: | | | | |]

| Textron Aviation [removed: (b)] | $ | [added: 449 | | $ |] 445 | [added: |] $ | 303 | [added: |] $ | 389 | [added: |] $ | 400 | [removed: $] | [removed: 234 |]

| Bell | | [added: 435 | | |] 425 | | [added: |] 415 | | [added: |] 386 | | [removed: 400] | [added: 400] | [removed: 529] |

| Textron Systems | | [added: 141 | | |] 156 | | [added: |] 139 | | [added: |] 186 | | [removed: 129] | [added: 129] | [removed: 150] |

| Industrial | | [added: 217 | | |] 218 | | [added: |] 290 | | [added: |] 329 | | [removed: 302] | [added: 302] | [removed: 280] |

| Finance | | [added: 28 | | |] 23 | | [added: |] 22 | | [added: |] 19 | | [removed: 24] | [added: 24] | [removed: 21] |

| Total segment profit | | [added: 1,270 | | |] 1,267 | | [added: |] 1,169 | | [added: |] 1,309 | | [removed: 1,255] | [added: 1,255] | [removed: 1,214] |

| Corporate expenses and other, net | | [added: (110) | | |] (119) | | [added: |] (132) | | [added: |] (172) | | [removed: (154)] | [added: (154)] | [removed: (161)] |

| Interest expense, net for Manufacturing group | | [added: (146) | | |] (135) | | [added: |] (145) | | [added: |] (138) | | [removed: (130)] | [added: (130)] | [removed: (148)] |

| Special charges [removed: (c)] [added: (b)] | | [added: (72) | | |] (73) | | [added: |] (130) | | [added: |] (123) | | [removed: —] | [added: —] | [removed: (52)] |

| Gain on business disposition [removed: (d)] [added: (c)] | | [removed: 444] [added: —] | | [removed: —] | [added: 444] | [added: | |] — | | [added: |] — | | [added: |] — | [added: |]

| Income tax expense [removed: (e)] [added: (d)] | | [added: (127) | | |] (162) | | [added: |] (456) | | [added: |] (33) | | [removed: (273)] | [added: (273)] | [removed: (248)] |

| Income from continuing operations | $ | [added: 815 | | $ |] 1,222 | [added: |] $ | 306 | [added: |] $ | 843 | [added: |] $ | 698 | [removed: $] | [removed: 605 |]

| Earnings per share | | | | | | | | | | | [added: | | | | |]

| Basic earnings per share — continuing operations | $ | [added: 3.52 | | $ |] 4.88 | [added: |] $ | 1.15 | [added: |] $ | 3.11 | [added: |] $ | 2.52 | [removed: $] | [removed: 2.17 |]

| Diluted earnings per share — continuing operations | $ | [added: 3.50 | | $ |] 4.83 | [added: |] $ | 1.14 | [added: |] $ | 3.09 | [added: |] $ | 2.50 | [removed: $] | [removed: 2.15 |]

| Basic average shares outstanding (_in thousands)_ | | [added: 231,315 | | |] 250,196 | | [added: |] 266,380 | | [added: |] 270,774 | | [removed: 276,682] | [added: 276,682] | [removed: 279,409] |

| Diluted average shares outstanding (_in thousands)_ | | [added: 232,709 | | |] 253,237 | | [added: |] 268,750 | | [added: |] 272,365 | | [removed: 278,727] | [added: 278,727] | [removed: 281,790] |

| Common stock information | | | | | | | | | | | [added: | | | | |]

| Dividends declared per share | $ | 0.08 | [added: |] $ | 0.08 | [added: |] $ | 0.08 | [added: |] $ | 0.08 | [added: |] $ | 0.08 | [added: |]

| Book value at year-end | $ | [added: 24.21 | | $ |] 22.04 | [added: |] $ | 21.60 | [added: |] $ | 20.62 | [added: |] $ | 18.10 | [removed: $] | [removed: 15.45 |]

| Price at year-end | $ | [added: 44.74 | | $ |] 45.65 | [added: |] $ | 56.59 | [added: |] $ | 48.56 | [added: |] $ | 42.01 | [removed: $] | [removed: 42.17 |]

| Financial position | | | | | | | | | | | [added: | | | | |]

| Total assets | $ | [added: 15,018 | | $ |] 14,264 | [added: |] $ | 15,340 | [added: |] $ | 15,358 | [added: |] $ | 14,708 | [removed: $] | [removed: 14,605 |]

| Manufacturing group debt | $ | [added: 3,124 | | $ |] 3,066 | [added: |] $ | 3,088 | [added: |] $ | 2,777 | [added: |] $ | 2,697 | [removed: $] | [removed: 2,811 |]

| Finance group debt | $ | [added: 686 | | $ |] 718 | [added: |] $ | 824 | [added: |] $ | 903 | [added: |] $ | 913 | [removed: $] | [removed: 1,063 |]

| Shareholders’ equity | $ | [added: 5,518 | | $ |] 5,192 | [added: |] $ | 5,647 | [added: |] $ | 5,574 | [added: |] $ | 4,964 | [removed: $] | [removed: 4,272 |]

| Manufacturing group debt-to-capital (net of cash) | | [removed: 29%] [added: 26] | [added: %] | [removed: 26%] | [added: 29] | [removed: 23%] [added: %] | | [removed: 26%] [added: 26] | [added: %] | [removed: 33%] | [added: 23 | % | | 26 | % |]

| Manufacturing group debt-to-capital | | [removed: 37%] [added: 36] | [added: %] | [removed: 35%] | [added: 37] | [removed: 33%] [added: %] | | [removed: 35%] [added: 35] | [added: %] | [removed: 40%] | [added: 33 | % | | 35 | % |]

| Investment data | | | | | | | | [added: ​] | | | [added: | | | | |]

| Capital expenditures | $ | [added: 339 | | $ |] 369 | [added: |] $ | 423 | [added: |] $ | 446 | [added: |] $ | 420 | [removed: $] | [removed: 429 |]

| Manufacturing group depreciation | $ | [added: 346 | | $ |] 358 | [added: |] $ | 362 | [added: |] $ | 368 | [added: |] $ | 383 | [removed: $] | [removed: 379 |]

| ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ |

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| --- | --- |

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| (d) | _Income tax expense for 2017 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._ |

| --- | --- |

| --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- |

See Note 1 to the Consolidated Financial Statements for additional information._

_(b)_ _In 2015 and 2014, segment profit included amortization of $12 million and $63 million, respectively, related to fair value step-up adjustments of Beechcraft acquired inventories sold during the period._

In 2017 and 2016, special charges included $90 million and $123 million, respectively, related to our 2016 restructuring plan.

We also recorded special charges of $40 million in 2017 related to the Arctic Cat acquisition, which included restructuring, integration and transaction costs.

For 2014, special charges included acquisition and restructuring costs related to the acquisition of Beechcraft._

_(e)_ _Income tax expense for 2017 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 income tax benefit.

In 2016, we recognized an income tax benefit of $319 million, inclusive of interest, of which $206 million is attributable to continuing operations and $113 million is attributable to discontinued operations.

This benefit was a result of the final settlement with the Internal Revenue Service Office of Appeals for our 1998 to 2008 tax years._

| [added: ​] | [added: |] Page |

| [Consolidated Statements of Operations for each of the years in the three-year period ended [removed: December 29, 2018](#ConsolidatedStatementsofOperatio_031158 "Click to goto ")] [added: January 4, 2020](#ConsolidatedStatementsofOperations_49538)] | [added: ​ |] 37 |

| [Consolidated Statements of Comprehensive Income for each of the years in the three-year period ended [removed: December 29, 2018](#ConsolidatedStatementsofComprehe_031216 "Click to goto ")] [added: January 4, 2020](#ConsolidatedStatementsofComprehensiveInc)] | [added: ​ |] 38 |

| [Consolidated Balance Sheets as of [removed: December 29, 2018] [added: January 4, 2020] and December [removed: 30, 2017](#ConsolidatedBalanceSheets_031218 "Click to goto ")] [added: 29, 2018](#ConsolidatedBalanceSheets_32464)] | [added: ​ |] 39 |

| [Consolidated Statements of Shareholders’ Equity for each of the years in the three-year period ended [removed: December 29, 2018](#ConsolidatedStatementsofSharehol_031221 "Click to goto ")] [added: January 4, 2020](#ConsolidatedStatementsofShareholdersEqui)] | [added: ​ |] 40 |

| [Consolidated Statements of Cash Flows for each of the years in the three-year period ended [removed: December 29, 2018](#ConsolidatedStatementsofCashFlow_031223 "Click to goto ")] [added: January 4, 2020](#CashFlows_876189)] | [added: ​ |] 41 |

| Notes to the Consolidated Financial Statements | [added: ​] | [added: ​ |]

| [Note 1. Summary of Significant Accounting [removed: Policies](#Note1_SummaryofSignificantAccoun_015430 "Click to goto ")] [added: Policies](#Note1SummaryofSignificantAccountingPolic)] | [added: ​ |] 43 |

| [Note 3. Goodwill and Intangible [removed: Assets](#Note3_GoodwillandIntangibleAsset_015634 "Click to goto ")] [added: Assets](#Note3GoodwillandIntangibleAssets_826147)] | [removed: 51] [added: ​] | [added: 50 |]

| [Note 4. Accounts Receivable and Finance [removed: Receivables](#Note4_AccountsReceivableandFinan_015637 "Click to goto ")] [added: Receivables](#Note4AccountsReceivableandFinanceReceiva)] | [added: ​ |] 51 |

| [Note 6. Property, Plant and Equipment, [removed: Net](#Note6_PropertyPlantandEquipmentN_015647 "Click to goto ")] [added: Net](#Note6PropertyPlantandEquipmentNet_374586)] | [removed: 54] [added: ​] | [added: 53 |]

[removed: | [Note 8. Debt] [added: Note 10. Debt] and Credit [removed: Facilities](#Note8_DebtandCreditFacilities_015652 "Click to goto ") | 55 |][added: Facilities]

| [Note [removed: 9.] [added: 11.] Derivative Instruments and Fair Value [removed: Measurements](#Note9_DerivativeInstrumentsandFa_063026 "Click to goto ")] [added: Measurements](#Note9DerivativeInstrumentsandFairValueMe)] | [added: ​ |] 56 |

[removed: | [Report] [added: Report] of Independent Registered Public Accounting [removed: Firm](#ReportofIndependentRegisteredPub_063400 "Click to goto ") | 73 |][added: Firm]

| Supplementary Information: | [added: ​] | [added: ​ |]

| [Quarterly Data for [removed: 2018] [added: 2019] and [removed: 2017 (Unaudited)](#QuarterlyData_063412 "Click to goto ")] [added: 2018 (Unaudited)](#QuarterlyData_499399)] | [removed: 74] [added: ​] | [added: 76 |]

| [Schedule II – Valuation and Qualifying [removed: Accounts](#ScheduleIIValuationandQualifying_063417 "Click to goto ")] [added: Accounts](#ScheduleIIValuationandQualifyingAccounts)] | [removed: 75] [added: ​] | [added: 77 |]

[removed: Consolidated] [added: Consolidated] Statements of [removed: Operations][added: Operations]

For each of the years in the three-year period ended [removed: December 29, 2018][added: January 4, 2020]

| _(In millions, except per share data)_ | [removed: |] [added: 2019] | | 2018 | | 2017 | | [removed: 2016 |]

| Revenues | [removed: | |] [added: ​] | [added: ​] | [added: ​] | [added: ​] | [added: ​] | [added: ​] |

| Manufacturing revenues | [added: $] | [added: 13,564] | $ | 13,906 | $ | 14,129 | [removed: $ | 13,710 |]

| Finance revenues | | [added: 66] | | 66 | | 69 | [removed: | 78 |]

| Total revenues | | [added: 13,630] | | 13,972 | | 14,198 | [removed: | 13,788 |]

| Costs, expenses and other | [removed: | |] [added: ​] | [added: ​] | [added: ​] | [added: ​] | [added: ​] | [added: ​] |

| Cost of sales | | [added: 11,406] | | 11,594 | | 11,827 | [removed: | 11,337 |]

| Selling and administrative expense | | [added: 1,152] | | 1,275 | | 1,334 | [removed: | 1,317 |]

| Interest expense | | [added: 171] | | 166 | | 174 | [removed: | 174 |]

| Special charges | [added: ​] | [added: 72] | [added: ​] | 73 | [added: ​] | 130 | [removed: | 123 |]

| Gain on business disposition | [added: ​] | [added: —] | [added: ​] | (444) | [removed: | — |] [added: ​] | — |

| Non-service components of pension and [removed: post-retirement] [added: postretirement] income, net | [added: ​] | [added: (113)] | [added: ​] | (76) | [added: ​] | (29) | [removed: | (39) |]

| Total costs, expenses and other | | [added: 12,688] | | 12,588 | | 13,436 | [removed: | 12,912 |]

| Income from continuing operations before income taxes | | [added: 942] | | 1,384 | | 762 | [removed: | 876 |]

| Income tax expense | | [added: 127] | | 162 | | 456 | [removed: | 33 |]

| Income from continuing operations | | [added: 815] | | 1,222 | | 306 | [removed: | 843 |]

| Income from discontinued operations, net of income [removed: taxes*] [added: taxes] | | [added: —] | | — | | 1 | [removed: | 119 |]

| Net income | [added: $] | [added: 815] | $ | 1,222 | $ | 307 | [removed: $ | 962 |]

[removed: | Basic earnings per share | | | | | | | | |][added: Earnings Per Share]

| [removed: Basic] [added: Basic] earnings per [removed: share | |] [added: share - continuing operations] | $ | 4.88 | $ | [removed: 1.15] [added: (0.08)] | $ | [removed: 3.55] [added: 4.80] |

| [removed: Diluted] [added: Diluted] earnings per [removed: share | |] [added: share - continuing operations] | | [added: 4.83] | | [added: (0.08)] | | [added: 4.75] |

| ​ | ​ | ​ |

| ​ | ​ | ​ |

| ​ | ​ | ​ |

| ​ | ​ | ​ |

| ​ | ​ | ​ |

| ​ | ​ | ​ |

| ​ | ​ | ​ |

| [Note 2. Business Disposition and Acquisition](#Note2BusinessDispositionandAcquisitions_) | ​ | 50 |

| [Note 5. Inventories](#Note5Inventories_716048) | ​ | 52 |

| [Note 7. Other Assets](#OtherAssets_179897) | ​ | 53 |

| [Note 9. Leases](#Note8Leases_482082) | ​ | 54 |

| [Note 12. Shareholders’ Equity](#Note10ShareholdersEquity_30317) | ​ | 57 |

| [Note 13. Segment and Geographic Data](#Note11SegmentandGeographicData_675888) | ​ | 58 |

| [Note 14. Revenues](#Note12Revenues_976022) | ​ | 60 |

| [Note 15. Share-Based Compensation](#Note13ShareBasedCompensation_951200) | ​ | 62 |

| [Note 16. Retirement Plans](#Note14RetirementPlans_381823) | ​ | 64 |

| [Note 17. Special Charges](#Note15SpecialCharges_293964) | ​ | 68 |

| [Note 18. Income Taxes](#Note16IncomeTaxes_512314) | ​ | 69 |

| [Note 19. Commitments and Contingencies](#Note18CommitmentsandContingencies) | ​ | 72 |

| [Note 20. Supplemental Cash Flow Information](#Note18SupplementalCashFlowInformation_35) | ​ | 72 |

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| ​ | ​ | ​ | ​ | ​ | ​ | ​ |

| --- | --- | --- | --- | --- | --- | --- |

| Basic | $ | 3.52 | $ | 4.88 | $ | 1.15 |

| Diluted | $ | 3.50 | $ | 4.83 | $ | 1.14 |

​

For each of the years in the three-year period ended January 4, 2020

​

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*​*

*​*

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| *​* | January 4, | | December 29, | |

| ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ |

| *​* | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | Accumulated | | ​ | ​ |

| *​* | Common | | Capital | | Treasury | | Retained | | Comprehensive | | Shareholders’ | |

| | |

| [Note 2. Business Disposition and Acquisitions](#Note2_BusinessDispositionandAcqu_015726 "Click to goto ") | 50 |

| [Note 5. Inventories](#Note5_Inventories_015644 "Click to goto ") | 53 |

| [Note 7. Other Current Liabilities](#Note7_OtherCurrentLiabilities_015649 "Click to goto ") | 54 |

| [Note 10. Shareholders’ Equity](#Note10_ShareholdersEquity_063032 "Click to goto ") | 57 |

| [Note 11. Segment and Geographic Data](#Note11_SegmentandGeographicData_063034 "Click to goto ") | 58 |

| [Note 12. Revenues](#Note12_Revenues_063037 "Click to goto ") | 60 |

| [Note 13. Share-Based Compensation](#Note13_ShareBasedCompensation_063315 "Click to goto ") | 62 |

| [Note 14. Retirement Plans](#Note14_RetirementPlans_063319 "Click to goto ") | 64 |

| [Note 15. Special Charges](#Note15_SpecialCharges_032510 "Click to goto ") | 68 |

| [Note 16. Income Taxes](#Note16_IncomeTaxes_032641 "Click to goto ") | 69 |

| [Note 17. Commitments and Contingencies](#Note17_CommitmentsandContingenci_063542 "Click to goto ") | 72 |

| [Note 18. Supplemental Cash Flow Information](#Note18_SupplementalCashFlowInfor_063546 "Click to goto ") | 72 |

| --- | --- | --- | --- | --- | --- | --- | --- | --- |

| Continuing operations | | | $ | 4.88 | $ | 1.15 | $ | 3.11 |

| Discontinued operations | | | | — | | — | | 0.44 |

| Continuing operations | | | $ | 4.83 | $ | 1.14 | $ | 3.09 |

| Diluted earnings per share | | | $ | 4.83 | $ | 1.14 | $ | 3.53 |

| --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- |

| Balance at January 2, 2016 | $ | 36 | $ | 1,587 | $ | (559) | $ | 5,298 | $ | (1,398) | $ | 4,964 |

| Retirement of treasury stock | | (3) | | (105) | | 800 | | (692) | | — | | — |

We also adopted ASU No. 2016-15, _Statement of Cash Flows_ - _Classification of Certain Cash Receipts and Cash Payment_ at the beginning of 2018_._ This standard provides guidance on the classification of certain cash flows and requires companies to classify cash proceeds received from the settlement of corporate-owned life insurance as cash inflows from investing activities.

The standard is required to be adopted on a retrospective basis.

Prior to adoption of this standard, we classified these proceeds as operating activities in the Consolidated Statements of Cash Flows.

Upon adoption, we reclassified $17 million and $87 million of net cash proceeds for 2017 and 2016, respectively, from operating activities to investing activities.

Taxes collected from customers and remitted to government authorities are recorded on a net basis.

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 also considered any performance, cancellation, termination or refund-type provisions.

Long-term contract profits were based on estimates of total contract cost and revenues utilizing current contract specifications, expected engineering requirements, the achievement of contract milestones and product deliveries.

Certain contracts

are awarded with fixed-price incentive fees that also were considered when estimating revenues and profit rates.

We update our projections of costs at least semiannually or when circumstances significantly change.

When adjustments are required, any changes from prior estimates were recognized using the cumulative catch-up method with the impact of the change from inception-to-date recorded in the current period.

Anticipated losses on contracts were recognized in full in the period in which the losses became probable and estimable.

The 2017 unfavorable adjustments included $44 million related to the Tactical Armoured Patrol Vehicle program related to inefficiencies resulting from various production issues during the ramp up and subsequent production.

At December 29, 2018, contract assets are included in Other current assets in the Consolidated Balance Sheet.

periodically and adjust the amounts as necessary.

_Lease Accounting_

Under current accounting guidance, we are not required to recognize assets and liabilities arising from operating leases on the balance sheet.

[removed: _Disclosure] [added: Disclosure] Controls and [removed: Procedures_][added: Procedures]

We performed an evaluation of the effectiveness of our disclosure controls and procedures as of [removed: December 29, 2018.][added: January 4, 2020.]