Item 8. Financial Statements and Supplementary Data

Our Consolidated Financial Statements and the related report of our independent registered public accounting firm thereon are included in this Annual Report on Form 10-K on the pages indicated below:

									Page
Consolidated Statements of Operations for each of the years in the three-year period ended January 3, 2026									33
Consolidated Statements of Comprehensive Income for each of the years in the three-year period ended January 3, 2026									34
Consolidated Balance Sheets as of January 3, 2026 and December 28, 2024									35
Consolidated Statements of Shareholders’ Equity for each of the years in the three-year period ended January 3, 2026									36
Consolidated Statements of Cash Flows for each of the years in the three-year period ended January 3, 2026									37
Notes to the Consolidated Financial Statements
			Note 1.			Summary of Significant Accounting Policies			39
			Note 2.			Goodwill and Intangible Assets			45
			Note 3.			Accounts Receivable and Finance Receivables			45
			Note 4.			Inventories			47
			Note 5.			Property, Plant and Equipment, Net			47
			Note 6.			Accounts Payable and Liabilities			47
			Note 7.			Leases			48
			Note 8.			Debt and Credit Facilities			49
			Note 9.			Derivative Instruments and Fair Value Measurements			50
			Note 10.			Shareholders’ Equity			51
			Note 11.			Segment Financial Information			53
			Note 12.			Revenues			55
			Note 13.			Share-Based Compensation			57
			Note 14.			Retirement Plans			59
			Note 15.			Special Charges			63
			Note 16.			Income Taxes			64
			Note 17.			Commitments and Contingencies			67
			Note 18.			Supplemental Cash Flow Information			67
Report of Independent Registered Public Accounting Firm									68
Supplementary Information:
			Schedule II – Valuation and Qualifying Accounts						70

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.

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Consolidated Statements of Operations

For each of the years in the three-year period ended January 3, 2026

(In millions, except per share data)			2025			2024			2023
Revenues
Manufacturing product revenues			$	12,732		$	11,375		$	11,573
Manufacturing service revenues			1,992			2,277			2,055
Finance revenues			75			50			55
Total revenues			14,799			13,702			13,683
Costs, expenses and other
Cost of products sold			10,608			9,403			9,206
Cost of services sold			1,496			1,797			1,629
Research and development costs			521			491			570
Selling and administrative expense			1,173			1,156			1,225
Interest expense, net			126			97			77
Special charges			4			78			126
Non-service components of pension and postretirement income, net			(266)			(263)			(237)
Total costs, expenses and other			13,662			12,759			12,596
Income from continuing operations before income taxes			1,137			943			1,087
Income tax expense			214			118			165
Income from continuing operations			923			825			922
Loss from discontinued operations			(2)			(1)			(1)
Net income			$	921		$	824		$	921
Basic earnings per share
Continuing operations			$	5.16		$	4.38		$	4.62
Discontinued operations			(0.01)			—			(0.01)
Basic earnings per share			$	5.15		$	4.38		$	4.61
Diluted earnings per share
Continuing operations			$	5.12		$	4.34		$	4.57
Discontinued operations			(0.01)			(0.01)			(0.01)
Diluted earnings per share			$	5.11		$	4.33		$	4.56

See Notes to the Consolidated Financial Statements.

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Consolidated Statements of Comprehensive Income

For each of the years in the three-year period ended January 3, 2026

(In millions)			2025			2024			2023
Net income			$	921		$	824		$	921
Other comprehensive income (loss), net of tax
Pension and postretirement benefits adjustments, net of reclassifications			298			419			(82)
Foreign currency translation adjustments, net of reclassifications			132			(71)			45
Deferred gains (losses) on hedge contracts, net of reclassifications			3			(8)			5
Total other comprehensive income (loss), net of tax			433			340			(32)
Comprehensive income			$	1,354		$	1,164		$	889

See Notes to the Consolidated Financial Statements.

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Consolidated Balance Sheets

(In millions, except share data)			January 3, 2026			December 28, 2024
Assets
Manufacturing group
Cash and equivalents			$	1,940		$	1,386
Accounts receivable, net			823			949
Inventories			4,278			4,071
Other current assets			872			687
Total current assets			7,913			7,093
Property, plant and equipment, net			2,590			2,529
Goodwill			2,321			2,288
Other assets			4,628			4,248
Total Manufacturing group assets			17,452			16,158
Finance group
Cash and equivalents			85			55
Finance receivables, net			574			603
Other assets			18			22
Total Finance group assets			677			680
Total assets			$	18,129		$	16,838
Liabilities and shareholders’ equity
Liabilities
Manufacturing group
Current portion of long-term debt			$	5		$	357
Accounts payable			1,185			943
Other current liabilities			3,163			3,094
Total current liabilities			4,353			4,394
Other liabilities			1,980			1,945
Long-term debt			3,534			2,890
Total Manufacturing group liabilities			9,867			9,229
Finance group
Other liabilities			48			64
Debt			339			341
Total Finance group liabilities			387			405
Total liabilities			10,254			9,634
Shareholders’ equity
Common stock (175.0 million and 184.0 million shares issued, respectively, and 174.3 million and 183.0 million shares outstanding, respectively)			22			23
Capital surplus			1,995			1,960
Treasury stock			(55)			(82)
Retained earnings			5,784			5,607
Accumulated other comprehensive income (loss)			129			(304)
Total shareholders’ equity			7,875			7,204
Total liabilities and shareholders’ equity			$	18,129		$	16,838

See Notes to the Consolidated Financial Statements.

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Consolidated Statements of Shareholders’ Equity

(In millions, except per share data)			Common Stock			Capital Surplus			Treasury Stock			Retained Earnings			Accumulated Other Comprehensive Income (Loss)			Total Shareholders’ Equity
Balance at December 31, 2022			$	26		$	1,880		$	(84)		$	5,903		$	(612)		$	7,113
Net income			—			—			—			921			—			921
Other comprehensive loss			—			—			—			—			(32)			(32)
Dividends declared ($0.08 per share)			—			—			—			(16)			—			(16)
Share-based compensation activity			—			179			—			—			—			179
Purchases of common stock, including excise tax*			—			—			(1,178)			—			—			(1,178)
Retirement of treasury stock			(2)			(149)			1,097			(946)			—			—
Balance at December 30, 2023			24			1,910			(165)			5,862			(644)			6,987
Net income			—			—			—			824			—			824
Other comprehensive income			—			—			—			—			340			340
Dividends declared ($0.08 per share)			—			—			—			(16)			—			(16)
Share-based compensation activity			1			199			—			—			—			200
Purchases of common stock, including excise tax*			—			—			(1,131)			—			—			(1,131)
Retirement of treasury stock			(2)			(149)			1,214			(1,063)			—			—
Balance at December 28, 2024			23			1,960			(82)			5,607			(304)			7,204
Net income			—			—			—			921			—			921
Other comprehensive income			—			—			—			—			433			433
Dividends declared ($0.08 per share)			—			—			—			(14)			—			(14)
Share-based compensation activity			—			159			—			—			—			159
Purchases of common stock, including excise tax*			—			—			(828)			—			—			(828)
Retirement of treasury stock			(1)			(124)			855			(730)			—			—
Balance at January 3, 2026			$	22		$	1,995		$	(55)		$	5,784		$	129		$	7,875

*Includes amounts accrued for excise tax imposed on common share repurchases that totaled $6 million in 2025, $9 million in 2024 and $10 million in 2023.

See Notes to the Consolidated Financial Statements.

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Consolidated Statements of Cash Flows

For each of the years in the three-year period ended January 3, 2026

			Consolidated
(In millions)			2025			2024			2023
Cash flows from operating activities
Income from continuing operations			$	923		$	825		$	922
Adjustments to reconcile income from continuing operations to net cash provided by operating activities of continuing operations:
Non-cash items:
Depreciation and amortization			401			382			395
Deferred income taxes			155			(48)			(192)
Asset impairments and powersports inventory charge			1			41			88
Gain on business disposition			(4)			—			—
Other, net			134			102			90
Changes in assets and liabilities:
Accounts receivable, net			107			(96)			(9)
Inventories			(264)			(194)			(359)
Other assets			(76)			205			267
Accounts payable			197			(69)			2
Other liabilities			32			95			276
Income taxes, net			(45)			(26)			4
Pension, net			(232)			(225)			(202)
Captive finance receivables, net			(17)			(1)			(17)
Other operating activities, net			1			24			2
Net cash provided by operating activities of continuing operations			1,313			1,015			1,267
Net cash used in operating activities of discontinued operations			(1)			(1)			(1)
Net cash provided by operating activities			1,312			1,014			1,266
Cash flows from investing activities
Capital expenditures			(383)			(364)			(402)
Net proceeds from corporate-owned life insurance policies			80			85			40
Net proceeds from business disposition			16			—			—
Proceeds from sale of property, plant and equipment			9			4			18
Net cash used in business acquisitions			(1)			(13)			(1)
Finance receivables repaid			42			25			26
Finance receivables originated			(58)			(21)			—
Proceeds from the disposition of non-captive assets			72			—			—
Other investing activities, net			16			—			2
Net cash used in investing activities			(207)			(284)			(317)
Cash flows from financing activities
Net proceeds from long-term debt			991			—			348
Principal payments on long-term debt and nonrecourse debt			(720)			(377)			(44)
Purchases of Textron common stock			(822)			(1,122)			(1,168)
Proceeds from exercise of stock options			40			88			73
Dividends paid			(18)			(12)			(16)
Other financing activities, net			(14)			(31)			(6)
Net cash used in financing activities			(543)			(1,454)			(813)
Effect of exchange rate changes on cash and equivalents			22			(16)			10
Net increase (decrease) in cash and equivalents			584			(740)			146
Cash and equivalents at beginning of year			1,441			2,181			2,035
Cash and equivalents at end of year			$	2,025		$	1,441		$	2,181

See Notes to the Consolidated Financial Statements.

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Consolidated Statements of Cash Flows continued

For each of the years in the three-year period ended January 3, 2026

			Manufacturing Group									Finance Group
(In millions)			2025			2024			2023			2025			2024			2023
Cash flows from operating activities
Income from continuing operations			$	878		$	796		$	884		$	45		$	29		$	38
Adjustments to reconcile income from continuing operations to net cash provided by operating activities of continuing operations:
Non-cash items:
Depreciation and amortization			401			382			395			—			—			—
Deferred income taxes			180			(46)			(188)			(25)			(2)			(4)
Asset impairments and powersports inventory charge			1			41			88			—			—			—
Gain on business disposition			(4)			—			—			—			—			—
Other, net			136			115			110			(2)			(13)			(20)
Changes in assets and liabilities:
Accounts receivable, net			107			(96)			(9)			—			—			—
Inventories			(264)			(194)			(359)			—			—			—
Other assets			(74)			205			261			(2)			—			6
Accounts payable			197			(69)			2			—			—			—
Other liabilities			38			100			281			(6)			(5)			(5)
Income taxes, net			(63)			(25)			5			18			(1)			(1)
Pension, net			(232)			(225)			(202)			—			—			—
Dividends received from Finance group			25			—			—			—			—			—
Other operating activities, net			1			24			2			—			—			—
Net cash provided by operating activities of continuing operations			1,327			1,008			1,270			28			8			14
Net cash used in operating activities of discontinued operations			(1)			(1)			(1)			—			—			—
Net cash provided by operating activities			1,326			1,007			1,269			28			8			14
Cash flows from investing activities
Capital expenditures			(383)			(364)			(402)			—			—			—
Net proceeds from corporate-owned life insurance policies			80			85			40			—			—			—
Net proceeds from business disposition			16			—			—			—			—			—
Proceeds from sale of property, plant and equipment			9			4			18			—			—			—
Net cash used in business acquisitions			(1)			(13)			(1)			—			—			—
Finance receivables repaid			—			—			—			208			133			169
Finance receivables originated			—			—			—			(241)			(130)			(160)
Proceeds from the disposition of non-captive assets			—			—			—			72			—			—
Other investing activities, net			15			—			—			1			—			2
Net cash provided by (used in) investing activities			(264)			(288)			(345)			40			3			11
Cash flows from financing activities
Net proceeds from long-term debt			991			—			348			—			—			—
Principal payments on long-term debt and nonrecourse debt			(707)			(361)			(7)			(13)			(16)			(37)
Purchases of Textron common stock			(822)			(1,122)			(1,168)			—			—			—
Proceeds from exercise of stock options			40			88			73			—			—			—
Dividends paid			(18)			(12)			(16)			(25)			—			—
Other financing activities, net			(14)			(31)			(6)			—			—			—
Net cash used in financing activities			(530)			(1,438)			(776)			(38)			(16)			(37)
Effect of exchange rate changes on cash and equivalents			22			(16)			10			—			—			—
Net increase (decrease) in cash and equivalents			554			(735)			158			30			(5)			(12)
Cash and equivalents at beginning of year			1,386			2,121			1,963			55			60			72
Cash and equivalents at end of year			$	1,940		$	1,386		$	2,121		$	85		$	55		$	60

See Notes to the Consolidated Financial Statements.

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Notes to the Consolidated Financial Statements

Note 1. Summary of Significant Accounting Policies

Principles of Consolidation and Financial Statement Presentation

Our Consolidated Financial Statements include the accounts of Textron Inc. and its majority-owned subsidiaries. Our financings are conducted through two separate borrowing groups. The Manufacturing group consists of Textron Inc. consolidated with its majority-owned subsidiaries that operate in the Textron Aviation, Bell, Textron Systems, Industrial and Textron eAviation segments. The Finance group, which also is the Finance segment, consists of Textron Financial Corporation (TFC) and its consolidated subsidiaries. We designed this framework to enhance our borrowing power by separating the Finance group. Our Manufacturing group operations include the development, production and delivery of tangible goods and services, while our Finance group provides financial services. Due to the fundamental differences between each borrowing group’s activities, investors, rating agencies and analysts use different measures to evaluate each group’s performance. To support those evaluations, we present balance sheet and cash flow information for each borrowing group within the Consolidated Financial Statements.

Our Finance group provides financing primarily to purchasers of new and pre-owned Textron Aviation aircraft and Bell helicopters manufactured by our Manufacturing group, otherwise known as captive financing. In the Consolidated Statements of Cash Flows, cash received from customers is reflected as operating activities when received from third parties. However, in the cash flow information provided for the separate borrowing groups, cash flows related to captive financing activities are reflected based on the operations of each group. For example, when product is sold by our Manufacturing group to a customer and is financed by the Finance group, the origination of the finance receivable is recorded within investing activities as a cash outflow in the Finance group’s statement of cash flows. Meanwhile, in the Manufacturing group’s statement of cash flows, the cash received from the Finance group on the customer’s behalf is recorded within operating cash flows as a cash inflow. Although cash is transferred between the two borrowing groups, there is no cash transaction reported in the consolidated cash flows at the time of the original financing. These captive financing activities, along with all significant intercompany transactions, are reclassified or eliminated in consolidation.

Collaborative Arrangements

Our Bell segment has a strategic alliance agreement with a third-party company to provide engineering, development and test services related to the V-22 aircraft, as well as to produce the V-22 aircraft, under a number of separate contracts with the U.S. Government (V-22 Contracts). The alliance created by this agreement is not a legal entity and has no employees, no assets and no true operations. This agreement creates contractual rights and does not represent an entity in which we have an equity interest. We account for this alliance as a collaborative arrangement with Bell and the third-party company reporting costs incurred and revenues generated from transactions with the U.S. Government in each company’s respective income statement. Neither Bell nor the third-party company is considered to be the principal participant for the transactions recorded under this agreement. Profits on cost-plus contracts are allocated between Bell and the third-party company on a 50%-50% basis. Negotiated profits on fixed-price contracts are also allocated 50%-50%; however, Bell and the third-party company are each responsible for their own cost overruns and are entitled to retain any cost underruns. Based on the contractual arrangement established under the alliance, Bell accounts for its rights and obligations under the specific requirements of the V-22 Contracts allocated to Bell under the work breakdown structure. We account for all of our rights and obligations, including warranty, product and any contingent liabilities, under the specific requirements of the V-22 Contracts allocated to us under the agreement. Revenues and cost of sales reflect our performance under the V-22 Contracts with revenues recognized using the cost-to-cost method. We include all assets used in performance of the V-22 Contracts that we own and all liabilities arising from our obligations under the V-22 Contracts in our Consolidated Balance Sheets.

Use of Estimates

We prepare our financial statements in conformity with generally accepted accounting principles, which require us to make estimates and assumptions that affect the amounts reported in the financial statements. Actual results could differ from those estimates. Our estimates and assumptions are reviewed periodically, and the effects of changes, if any, are reflected in the Consolidated Statements of Operations in the period that they are determined.

Revenue Recognition

Revenue is recognized when control of the product or service promised under the contract is transferred to the customer either at a point in time (e.g., upon delivery) or over time (e.g., as we perform under the contract). We account for a contract when it has approval and commitment from both parties, the rights and payment terms of the parties are identified, the contract has commercial substance and collectability of consideration is probable. Contracts are reviewed to determine whether there is one or multiple performance obligations. A performance obligation is a promise to transfer a distinct product or service to a customer and represents the unit of accounting for revenue recognition. For contracts with multiple performance obligations, the expected consideration, or the transaction price, is allocated to each performance obligation identified in the contract based on the relative standalone selling price of each performance obligation. Revenue is then recognized for the transaction price allocated to the

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performance obligation when control of the promised product or service underlying the performance obligation is transferred. Contract consideration is not adjusted for the effects of a significant financing component when, at contract inception, the period between when control transfers and when the customer will pay for that good or service is one year or less.

Revenue is classified as product or service revenue based on the predominant attributes of each performance obligation.

Commercial Contracts

The majority of our contracts with commercial customers have a single performance obligation as there is only one product or service promised or the promise to transfer the product or service is not distinct or separately identifiable from other promises in the contract. Revenue is primarily recognized at a point in time, which is generally when the customer obtains control of the asset upon delivery and customer acceptance. Contract modifications that provide for additional distinct products or services at the standalone selling price are treated as separate contracts.

For commercial fixed-wing aircraft, we contract with our customers to sell fully outfitted aircraft, which may include configuration options. The aircraft typically represents a single performance obligation and revenue is recognized upon customer acceptance and delivery. For commercial helicopters, our customers generally contract with us for fully functional basic configuration aircraft and control is transferred upon customer acceptance and delivery. At times, customers may separately contract with us for the installation of accessories and customization to the basic aircraft. If these contracts are entered into at or near the same time of the basic aircraft contract, we assess whether the contracts meet the criteria to be combined. For contracts that are combined, the basic aircraft and the accessories and customization are typically considered to be distinct, and therefore, are separate performance obligations. For these contracts, revenue is recognized on the basic aircraft upon customer acceptance and transfer of title and risk of loss, and on the accessories and customization, upon delivery and customer acceptance. We utilize observable prices to determine the standalone selling prices when allocating the transaction price to these performance obligations.

The transaction price for our commercial contracts reflects our estimate of returns, rebates and discounts, which are based on historical, current and forecasted information. Amounts billed to customers for shipping and handling are included in the transaction price and generally are not treated as separate performance obligations as these costs fulfill a promise to transfer the product to the customer. Taxes collected from customers and remitted to government authorities are recorded on a net basis.

We primarily provide standard warranty programs for products in our commercial businesses for periods that typically range from one year to five years. These assurance-type programs typically cannot be purchased separately and do not meet the criteria to be considered a performance obligation.

U.S. Government Contracts

Our contracts with the U.S. Government generally include the design, development, manufacture or modification of aerospace and defense products and related support services. These contracts, which also include those under the U.S. Government-sponsored foreign military sales program, accounted for approximately 27% of total revenues in 2025. The customer typically contracts with us to provide a significant service of integrating a complex set of tasks and components into a single project or capability, which often results in the delivery of multiple units. Accordingly, the entire contract is accounted for as one performance obligation. In certain circumstances, a contract may include both production and support services, such as logistics and parts plans, which are considered to be distinct in the context of the contract and represent separate performance obligations. When a contract is separated into more than one performance obligation, we generally utilize the expected cost plus a margin approach to determine the standalone selling prices when allocating the transaction price.

Our contracts are frequently modified for changes in contract specifications and requirements. Most of our contract modifications with the U.S. Government are for products and services that are not distinct from the existing contract due to the significant integration service provided in the context of the contract and are accounted for as part of that existing contract. The effect of these contract modifications on our estimates is recognized using the cumulative catch-up method of accounting.

Contracts with the U.S. Government generally contain clauses that provide lien rights to work-in-process along with clauses that allow the customer to unilaterally terminate the contract for convenience, pay us for costs incurred plus a reasonable profit and take control of any work-in-process. Due to the continuous transfer of control to the U.S. Government, we recognize revenue over the time that we perform under the contract. Selecting the method to measure progress towards completion requires judgment and is based on the nature of the products or service to be provided. We generally use the cost-to-cost method to measure progress for our contracts because it best depicts the transfer of control to the customer that occurs as we incur costs on our contracts. Under this measure, the extent of progress towards completion is measured based on the ratio of costs incurred to date to the estimated costs at completion of the performance obligation, and revenue is recorded proportionally as costs are incurred.

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The transaction price for our contracts represents our best estimate of the consideration we will receive and includes assumptions regarding variable consideration as applicable. Certain of our long-term contracts contain incentive fees or other provisions that can either increase or decrease the transaction price. These variable amounts generally are awarded upon achievement of certain performance metrics, program milestones or cost targets and can be based upon customer discretion. We include estimated amounts in the transaction price to the extent it is probable that a significant reversal of cumulative revenue recognized will not occur when the uncertainty associated with the variable consideration is resolved. Our estimates of variable consideration and determination of whether to include estimated amounts in the transaction price are based largely on an assessment of our anticipated performance, historical performance, and all other information that is reasonably available to us.

Total contract cost is estimated utilizing current contract specifications and expected engineering requirements. Contract costs typically are incurred over a period of several years, and the estimation of these costs requires substantial judgment. Our cost estimation process is based on the professional knowledge and experience of engineers and program managers along with finance professionals. We review and update our projections of costs quarterly or more frequently when circumstances significantly change.

Approximately 53% of our 2025 revenues with the U.S. Government were under fixed-price and fixed-price incentive contracts. Under the typical payment terms of these contracts, the customer pays us either performance-based or progress payments. Performance-based payments represent interim payments of up to 90% of the contract price based on quantifiable measures of performance or on the achievement of specified events or milestones. Progress payments are interim payments of up to 80% of costs incurred as the work progresses. Because the customer retains a small portion of the contract price until completion of the contract, these contracts generally result in revenue recognized in excess of billings. Amounts billed and due from our customers are classified in Accounts receivable, net. The portion of the payments retained by the customer until final contract settlement is not considered a significant financing component because the intent is to protect the customer. For cost-type contracts, we are generally paid for our actual costs incurred within a short period of time.

Finance Revenues

Finance revenues primarily include interest on finance receivables, finance lease earnings and portfolio gains/losses. We recognize interest using the interest method, which provides a constant rate of return over the terms of the receivables. Accrual of interest income is suspended if credit quality indicators suggest full collection of principal and interest is doubtful. In addition, we automatically suspend the accrual of interest income for accounts that are contractually delinquent by more than three months unless collection is not doubtful. Cash payments on nonaccrual accounts, including finance charges, generally are applied to reduce the net investment balance. Once we conclude that the collection of all principal and interest is no longer doubtful, we resume the accrual of interest and recognize previously suspended interest income at the time either a) the loan becomes contractually current through payment according to the original terms of the loan, or b) if the loan has been modified, following a period of performance under the terms of the modification.

Contract Estimates

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 2025, 2024 and 2023, our cumulative catch-up adjustments increased segment profit by $66 million, $31 million and $44 million, respectively, and net income by $50 million, $24 million and $34 million, respectively ($0.28, $0.12 and $0.17 per diluted share, respectively). Revenues increased by $66 million, $32 million and $42 million in 2025, 2024 and 2023, respectively, related to changes in profit booking rates for performance obligations satisfied in prior periods.

Contract Assets and Liabilities

Contract assets arise from contracts when revenue is recognized over time and the amount of revenue recognized exceeds the amount billed to the customer. These amounts are included in contract assets until the right to payment is no longer conditional on events other than the passage of time and are included in Other current assets in the Consolidated Balance Sheets. Contract liabilities, which are primarily included in Other current liabilities, include deposits, largely from our commercial aviation customers, and billings in excess of revenue recognized.

The incremental costs of obtaining a contract with a customer that is expected to be recovered is expensed as incurred when the period to be benefitted is one year or less.

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Accounts Receivable, Net

Accounts receivable, net includes amounts billed to customers where the right to payment is unconditional. We maintain an allowance for credit losses for our commercial accounts receivable to provide for the estimated amount that will not be collected, even when the risk of loss is remote. The allowance is measured on a collective pool basis when similar risk characteristics exist and is established as a percentage of accounts receivable. We have identified pools with similar risk characteristics, based on customer and industry type and geographic location. The percentage is based on all available and relevant information including age of outstanding receivables and collateral value, if any, historical payment experience and loss history, current economic conditions, and, when reasonable and supportable factors exist, management’s expectation of future economic conditions. For amounts due from the U.S. Government, we have not established an allowance for credit losses as we have zero loss expectation based on a long history of no credit losses and the explicit guarantee of a sovereign entity.

Cash and Equivalents

Cash and equivalents consist of cash and short-term, highly liquid investments with original maturities of three months or less.

Inventories

Inventories are stated at the lower of cost or estimated realizable value. The majority of our inventories are valued using the last-in, first-out (LIFO) method, while the remaining inventories are generally valued using the first-in, first-out (FIFO) method.

Property, Plant and Equipment

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. The majority of our intangible assets are amortized based on the cash flow streams used to value the assets, with the remaining assets amortized using the straight-line method.

Finance Receivables

Finance receivables primarily include loans provided to purchasers of new and pre-owned Textron Aviation aircraft and Bell helicopters. Finance receivables are generally recorded at the amount of outstanding principal less allowance for credit losses.

We establish an allowance for credit losses to cover probable but specifically unknown losses existing in the portfolio. This allowance is established as a percentage of finance receivables categorized by pools with similar risk characteristics, such as collateral or customer type and geographic location. The percentage is based on a combination of factors, including historical loss experience, current delinquency and default trends, collateral values, current economic conditions, and, when reasonable and supportable factors exist, management’s expectation of future economic conditions.

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For those finance receivables that do not have similar risk characteristics, including larger balance accounts specifically identified as impaired, a reserve is established against the carrying amount either based on comparing the expected future cash flows that are discounted at the finance receivable's effective interest rate, or based on the fair value of the underlying collateral if the finance receivable is collateral dependent. The expected future cash flows consider collateral value; financial performance and liquidity of our borrower; existence and financial strength of guarantors; estimated recovery costs, including legal expenses; and costs associated with the repossession and eventual disposal of collateral. When there is a range of potential outcomes, we perform multiple discounted cash flow analyses and weight the potential outcomes based on their relative likelihood of occurrence. The evaluation of our portfolio is inherently subjective, as it requires estimates, including the amount and timing of future cash flows expected to be received on impaired finance receivables and the estimated fair value of the underlying collateral, which may differ from actual results. While our analysis is specific to each individual account, critical factors included in this analysis include industry valuation guides, age and physical condition of the collateral, payment history, and existence and financial strength of guarantors.

Finance receivables are charged off at the earlier of the date the collateral is repossessed or when management no longer deems the receivable collectible. Repossessed assets are recorded at their fair value, less estimated cost to sell.

Pension and Postretirement Benefit Obligations

We maintain various pension and postretirement plans for our employees globally. Our pension plans include significant benefit obligations, which are calculated based on actuarial valuations. Key assumptions used in determining these obligations and related expenses include expected long-term rates of return on plan assets, discount rates and healthcare cost projections. We evaluate and update these assumptions annually in consultation with third-party actuaries and investment advisors. We also make assumptions regarding employee demographic factors such as retirement patterns, mortality, turnover and rate of compensation increases.

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.

Leases

We identify leases by evaluating our contracts to determine if the contract conveys the right to use an identified asset for a stated period of time in exchange for consideration. Specifically, we consider whether we can control the underlying asset and have the right to obtain substantially all of the economic benefits or outputs from the asset. For our contracts that contain both lease components (e.g., fixed payments including rent, real estate taxes and insurance costs) and non-lease components (e.g., common-area maintenance costs or other goods/services), we allocate the consideration in the contract to each component based on its standalone price. Leases with terms greater than 12 months are classified as either operating or finance leases at the commencement date. For these leases, we capitalize the lesser of a) the present value of the minimum lease payments over the lease term, or b) the fair value of the asset, as a right-of-use asset with an offsetting lease liability. The discount rate used to calculate the present value of the minimum lease payments is typically our incremental borrowing rate, as the rate implicit in the lease is generally not known or determinable. The lease term includes any noncancelable period for which we have the right to

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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 is recognized separately as amortization and interest expense.

Product Liabilities

We accrue for product liability claims and related defense costs when a loss is probable and reasonably estimable. Our estimates are generally based on the specifics of each claim or incident and our best estimate of the probable loss using historical experience.

Environmental Liabilities and Asset Retirement Obligations

Liabilities for environmental matters are recorded on a site-by-site basis when it is probable that an obligation has been incurred and the cost can be reasonably estimated. We estimate our accrued environmental liabilities using currently available facts, existing technology, and presently enacted laws and regulations, all of which are subject to a number of factors and uncertainties. Our environmental liabilities are not discounted and do not take into consideration possible future insurance proceeds or significant amounts from claims against other third parties.

We have incurred asset retirement obligations primarily related to costs to remove and dispose of underground storage tanks and asbestos materials used in insulation, adhesive fillers and floor tiles. Currently, there is no legal requirement to remove these items and there is no plan to remodel the related facilities or otherwise cause the impacted items to require disposal. Since these asset retirement obligations are not probable, there is no related liability recorded in the Consolidated Balance Sheets.

Warranty Liabilities

For our assurance-type warranty programs, we estimate the costs that may be incurred and record a liability in the amount of such costs at the time product revenues are recognized. Factors that affect this liability include the number of products sold, historical costs per claim, length of warranty period, contractual recoveries from vendors and historical and anticipated rates of warranty claims, including production and warranty patterns for new models. We assess the adequacy of our recorded warranty liability periodically and adjust the amounts as necessary. Additionally, we may establish a warranty liability related to the issuance of aircraft service bulletins for aircraft no longer covered under the limited warranty programs.

Research and Development Costs

Our customer-funded research and development costs are charged directly to the related contracts, which primarily consist of U.S. Government contracts. In accordance with government regulations, we recover a portion of company-funded research and development costs through overhead rate charges on our U.S. Government contracts. Research and development costs that are not reimbursable under a contract with the U.S. Government or another customer are charged to expense as incurred.

Income Taxes

The provision for income tax expense is calculated on reported income before income taxes based on current tax law and includes, in the current period, the cumulative effect of any changes in tax rates from those used previously in determining deferred tax assets and liabilities. Tax laws may require items to be included in the determination of taxable income at different times from when the items are reflected in the financial statements. Deferred tax balances reflect the effects of temporary differences between the financial reporting carrying amounts of assets and liabilities and their tax bases, as well as from net operating losses and tax credit carryforwards, and are stated at enacted tax rates in effect for the year taxes are expected to be paid or recovered.

Deferred tax assets represent tax benefits for tax deductions or credits available in future years and require certain estimates and assumptions to determine whether it is more likely than not that all or a portion of the benefit will not be realized. The recoverability of these future tax deductions and credits is determined by assessing the adequacy of future expected taxable income from all sources, including the future reversal of existing taxable temporary differences, taxable income in carryback years, estimated future taxable income and available tax planning strategies. Should a change in facts or circumstances lead to a change in judgment about the ultimate recoverability of a deferred tax asset, we record or adjust the related valuation allowance in the period that the change in facts and circumstances occurs, along with a corresponding increase or decrease in income tax expense.

We record tax benefits for uncertain tax positions based upon management’s evaluation of the information available at the reporting date. To be recognized in the financial statements, the tax position must meet the more-likely-than-not threshold that the position will be sustained upon examination by the tax authority based on technical merits assuming the tax authority has full knowledge of all relevant information. For positions meeting this recognition threshold, the benefit is measured as the largest amount of benefit that meets the more-likely-than-not threshold to be sustained. We periodically evaluate these tax positions based on the latest available information. For tax positions that do not meet the threshold requirement, we recognize net tax-related interest and penalties for continuing operations in income tax expense.

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Note 2. Goodwill and Intangible Assets

Goodwill

The changes in the carrying amount of goodwill by segment are as follows:

(In millions)			Textron Aviation			Bell			Textron Systems			Industrial			Textron eAviation			Total
Balance at December 30, 2023			$	633		$	37		$	1,010		$	470		$	145		$	2,295
Acquisitions			—			—			—			—			10			10
Foreign currency translation			(1)			—			—			(7)			(9)			(17)
Balance at December 28, 2024			632			37			1,010			463			146			2,288
Foreign currency translation			1			—			—			13			19			33
Balance at January 3, 2026			$	633		$	37		$	1,010		$	476		$	165		$	2,321

Intangible Assets

Our intangible assets are summarized below:

						January 3, 2026									December 28, 2024
(Dollars in millions)			Weighted-Average Amortization Period (in years)			Gross Carrying Amount			Accumulated Amortization			Net			Gross Carrying Amount			Accumulated Amortization			Net
Trade names and trademarks			18			$	201		$	(12)		$	189		$	199		$	(11)		$	188
Patents and technology			15			515			(387)			128			509			(360)			149
Customer relationships and contractual agreements			15			358			(337)			21			356			(331)			25
Total						$	1,074		$	(736)		$	338		$	1,064		$	(702)		$	362

Trade names and trademarks in the table above include $169 million of indefinite-lived intangible assets at both January 3, 2026 and December 28, 2024. Amortization expense totaled $32 million, $34 million and $39 million, in 2025, 2024 and 2023, respectively. Amortization expense is estimated to be approximately $29 million, $28 million, $27 million, $26 million and $9 million in 2026, 2027, 2028, 2029 and 2030, respectively.

Note 3. Accounts Receivable and Finance Receivables

Accounts Receivable

Accounts receivable is composed of the following:

(In millions)			January 3, 2026			December 28, 2024
Commercial			$	690		$	738
U.S. Government contracts			149			230
			839			968
Allowance for credit losses			(16)			(19)
Total			$	823		$	949

Finance Receivables

Finance receivables are presented in the following table:

(In millions)			January 3, 2026			December 28, 2024
Finance receivables			$	593		$	622
Allowance for credit losses			(19)			(19)
Total finance receivables, net			$	574		$	603

Finance receivables primarily includes loans provided to purchasers of new and pre-owned Textron Aviation aircraft and Bell helicopters. These loans generally have initial terms ranging from five years to twelve years and amortization terms ranging from five years to fifteen years; the average loan balance was $2.1 million at January 3, 2026. 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 January 3,

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2026, 73% of our finance receivables were distributed internationally and 27% throughout the U.S., compared with 58% and 42%, respectively, at December 28, 2024.

Finance Receivable Portfolio Quality

We internally assess the quality of our finance receivables based on a number of key credit quality indicators and statistics such as delinquency, loan balance to estimated collateral value and the financial strength of individual borrowers and guarantors. Because many of these indicators are difficult to apply across an entire class of receivables, we evaluate individual loans on a quarterly basis and classify these loans into three categories based on the key credit quality indicators for the individual loan. These three categories are performing, watchlist and nonaccrual.

We classify finance receivables as nonaccrual if credit quality indicators suggest full collection of principal and interest is doubtful. In addition, we automatically classify accounts as nonaccrual once they are contractually delinquent by more than three months unless collection of principal and interest is not doubtful. Accounts are classified as watchlist when credit quality indicators have deteriorated as compared with typical underwriting criteria, and we believe collection of full principal and interest is probable but not certain. All other finance receivables that do not meet the watchlist or nonaccrual categories are classified as performing.

We measure delinquency based on the contractual payment terms of our finance receivables. In determining the delinquency aging category of an account, any/all principal and interest received is applied to the most past-due principal and/or interest amounts due. If a significant portion of the contractually due payment is delinquent, the entire finance receivable balance is reported in accordance with the most past-due delinquency aging category.

Finance receivables categorized based on the credit quality indicators and by delinquency aging category are summarized as follows:

(Dollars in millions)			January 3, 2026			December 28, 2024
Performing			$	578		$	612
Watchlist			13			—
Nonaccrual			2			10
Nonaccrual as a percentage of finance receivables			0.34%			1.61%
Current and less than 31 days past due			$	584		$	609
31-60 days past due			9			13
61-90 days past due			—			—
Over 90 days past due			—			—
60+ days contractual delinquency as a percentage of finance receivables			—%			—%

At January 3, 2026, 63% of our performing finance receivables were originated since the beginning of 2023 and 18% were originated from 2020 to 2022 with the remainder prior to 2020. For finance receivables categorized as watchlist, 100% were originated from 2023 to 2024, and for nonaccrual, 100% were originated prior to 2020.

On a quarterly basis, we evaluate individual larger balance accounts for impairment. A finance receivable is considered impaired when it is probable that we will be unable to collect all amounts due according to the contractual terms of the loan agreement based on our review of the credit quality indicators described above. Impaired finance receivables include both nonaccrual accounts and accounts for which full collection of principal and interest remains probable, but the account’s original terms have been, or are expected to be, significantly modified. If the modification specifies an interest rate equal to or greater than a market rate for a finance receivable with comparable risk, the account is not considered impaired in years subsequent to the modification. Our impaired finance receivables were insignificant at January 3, 2026 and December 28, 2024.

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Note 4. Inventories

Inventories are composed of the following:

(In millions)			January 3, 2026			December 28, 2024
Finished goods			$	1,104		$	1,138
Work in process			2,065			1,769
Raw materials and components			1,109			1,164
Total			$	4,278		$	4,071

At January 3, 2026, 71% of inventories were valued using the LIFO method, compared with 69% at December 28, 2024. Inventories valued at LIFO cost would have been higher by approximately $1.1 billion and $877 million, at January 3, 2026 and December 28, 2024, respectively, if they had been valued using the FIFO method.

Note 5. Property, Plant and Equipment, Net

Our Manufacturing group’s property, plant and equipment, net is composed of the following:

(Dollars in millions)			Useful Lives (in years)									January 3, 2026			December 28, 2024
Land, buildings and improvements			2			-			40			$	2,514		$	2,364
Machinery and equipment			2			-			20			5,860			5,636
												8,374			8,000
Accumulated depreciation and amortization												(5,784)			(5,471)
Total												$	2,590		$	2,529

The Manufacturing group's depreciation expense totaled $365 million, $344 million and $353 million in 2025, 2024 and 2023, respectively. Property, plant and equipment, net includes non-cash activity of $51 million in 2025, reflecting property, plant and equipment acquired but not yet paid for. This non-cash activity has been excluded from the relevant line items on the Consolidated Statements of Cash Flows. Non-cash property, plant and equipment activity for 2024 and 2023 was not significant.

Note 6. Accounts Payable and Liabilities

Accounts Payable

Supplier Financing Arrangement

We have a financing arrangement with one of our suppliers for a maximum amount of $200 million that extends payment terms for up to 190 days from the receipt of goods and provides for the supplier to be paid by a financial institution earlier than maturity. This financing arrangement expires in April 2027. At January 3, 2026 and December 28, 2024, the amount due under the supplier financing arrangement was $108 million and $50 million, respectively. During 2025, the amounts added under this arrangement totaled $279 million and the amounts settled totaled $221 million.

Other Current Liabilities

The other current liabilities of our Manufacturing group are summarized below:

(In millions)			January 3, 2026			December 28, 2024
Contract liabilities			$	1,897		$	1,734
Salaries, wages and employer taxes			442			456
Current portion of warranty and product repair and maintenance program liabilities			138			177
Other			686			727
Total			$	3,163		$	3,094

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Warranty Liability

Changes in our current and non-current warranty liability are as follows:

(In millions)			2025			2024			2023
Balance at beginning of year			$	173		$	172		$	149
Provision			82			79			76
Changes to estimates			35			(2)			13
Settlements			(89)			(72)			(69)
Other*			(18)			(4)			3
Balance at end of year			$	183		$	173		$	172

** Other includes business dispositions and currency translation adjustments.*

Note 7. Leases

We primarily lease certain manufacturing plants, offices, warehouses, training and service centers at various locations worldwide that are classified as either operating or finance leases. Our leases have remaining lease terms up to 25 years, which include options to extend the lease term for periods up to 20 years when it is reasonably certain the option will be exercised.

Operating lease cost totaled $73 million, $74 million and $69 million in 2025, 2024 and 2023, respectively. Cash paid for operating lease liabilities approximated the lease expense and is classified in cash flows from operating activities. Noncash transactions related to operating leases totaled $82 million, $49 million and $54 million in 2025, 2024 and 2023, respectively, reflecting the recognition of operating lease assets and liabilities for new or modified leases and changes from the reassessment of lease options. In 2024, non-cash transactions included the recognition of a $72 million asset and liability related to a new finance lease that matures in 2028. Finance lease, variable and short-term lease costs were not significant.

Balance sheet and other information related to our leases is as follows:

(Dollars in millions)			January 3, 2026			December 28, 2024
Operating leases:
Other assets			$	390		$	360
Other current liabilities			58			55
Other liabilities			346			316
Weighted-average remaining lease term (in years)			9.5			10.0
Weighted-average discount rate			4.97%			4.84%
Finance leases:
Property, plant and equipment, less accumulated amortization of $14 million and $9 million, respectively			$	95		$	95
Long-term debt, including current portion			100			97
Weighted-average remaining lease term (in years)			5.9			5.9
Weighted-average discount rate			6.63%			6.72%

At January 3, 2026, maturities of our operating lease liabilities on an undiscounted basis totaled $74 million for 2026, $65 million for 2027, $60 million for 2028, $55 million for 2029, $48 million for 2030 and $213 million thereafter.

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Note 8. Debt and Credit Facilities

Our debt is summarized in the table below:

(In millions)			January 3, 2026			December 28, 2024
Manufacturing group
3.875% due 2025			$	—		$	350
4.00% due 2026*			—			350
3.65% due 2027			350			350
3.375% due 2028			300			300
3.90% due 2029			300			300
3.00% due 2030			650			650
2.45% due 2031			500			500
6.10% due 2033			350			350
5.50% due 2035			500			—
4.95% due 2036			500			—
Other (weighted-average rate of 6.08% and 5.87%, respectively)			89			97
Total Manufacturing group debt			$	3,539		$	3,247
Less: Current portion of long-term debt			(5)			(357)
Total Long-term debt			$	3,534		$	2,890
Finance group
Variable-rate note due 2028 (weighted-average rate of 5.04% and 5.70%, respectively)			$	25		$	25
Fixed-rate note due 2027 (4.40%)			50			50
Floating Rate Junior Subordinated Notes due 2067 (5.85% and 6.52%, respectively)			264			264
Other			—			2
Total Finance group debt			$	339		$	341

** On December 31, 2025, we repaid our $350 million 4.00% notes due in March 2026.*

The following table shows required principal payments during the next five years on debt outstanding at January 3, 2026:

(In millions)			2026			2027			2028			2029			2030
Manufacturing group			$	5		$	355		$	375		$	301		$	651
Finance group			—			50			25			—			—
Total			$	5		$	405		$	400		$	301		$	651

On October 16, 2025, Textron entered into a senior unsecured revolving credit facility for an aggregate principal amount of $1.0 billion, of which $100 million is available for the issuance of letters of credit. We may elect to increase the aggregate amount of commitments under the facility to up to $1.3 billion by designating an additional lender or by an existing lender agreeing to increase its commitment. The facility expires in October 2030 and provides for two one-year extensions at our option with the consent of lenders representing a majority of the commitments under the facility. The new facility replaces the prior 5-year facility which was scheduled to expire in October 2027. At January 3, 2026 and December 28, 2024, there were no amounts borrowed against either facility. At January 3, 2026, there were no letters of credit issued and outstanding under the new facility, and at December 28, 2024, there was a $9 million letter of credit issued and outstanding under the prior facility.

Floating Rate Junior Subordinated Notes

The Finance group’s $264 million of Floating Rate Junior Subordinated Notes are unsecured and rank junior to all of its existing and future senior debt. The notes mature on February 15, 2067; however, we have the right to redeem the notes at par at any time and we are obligated to redeem the notes beginning on February 15, 2042. Interest is variable at the three-month CME Term Secured Overnight Financing Rate + 1.99661%.

Support Agreement

Under a Support Agreement between Textron and TFC, Textron is required to maintain a controlling interest in TFC. The agreement, as amended in December 2015, also requires Textron to ensure that TFC maintains fixed charge coverage of no less than 125% and consolidated shareholders' equity of no less than $125 million. There were no cash contributions required to be paid to TFC in 2025, 2024 and 2023 to maintain compliance with the support agreement.

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Note 9. Derivative Instruments and Fair Value Measurements

We measure fair value at the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date. We prioritize the assumptions that market participants would use in pricing the asset or liability into a three-tier fair value hierarchy. This fair value hierarchy gives the highest priority (Level 1) to quoted prices in active markets for identical assets or liabilities and the lowest priority (Level 3) to unobservable inputs in which little or no market data exist, requiring companies to develop their own assumptions. Observable inputs that do not meet the criteria of Level 1, which include quoted prices for similar assets or liabilities in active markets or quoted prices for identical assets and liabilities in markets that are not active, are categorized as Level 2. Level 3 inputs are those that reflect our estimates about the assumptions market participants would use in pricing the asset or liability based on the best information available in the circumstances. Valuation techniques for assets and liabilities measured using Level 3 inputs may include methodologies such as the market approach, the income approach or the cost approach and may use unobservable inputs such as projections, estimates and management’s interpretation of current market data. These unobservable inputs are utilized only to the extent that observable inputs are not available or cost effective to obtain.

Assets and Liabilities Recorded at Fair Value on a Recurring Basis

We manufacture and sell our products in a number of countries throughout the world, and, therefore, we are exposed to movements in foreign currency exchange rates. We primarily utilize foreign currency exchange contracts with maturities of no more than three years to manage this volatility. These contracts qualify as cash flow hedges and are intended to offset the effect of exchange rate fluctuations on forecasted sales, inventory purchases and overhead expenses. Net gains and losses recognized in earnings and Accumulated other comprehensive income (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 3, 2026 and December 28, 2024, we had foreign currency exchange contracts with notional amounts upon which the contracts were based of $477 million and $464 million, respectively. At January 3, 2026, the fair value amounts of our foreign currency exchange contracts were a $6 million asset and a $10 million liability. At December 28, 2024, the fair value amount of our foreign currency exchange contracts was a $5 million asset and a $19 million liability.

Our Finance group enters into interest rate swap agreements to mitigate certain exposures to fluctuations in interest rates. By using these contracts, we are able to convert floating-rate cash flows to fixed-rate cash flows. These agreements are designated as cash flow hedges. The fair value of these interest rate swap agreements is determined using values published by third-party leading financial news and data providers. These values are observable data that represent the value that financial institutions use for contracts entered into at that date, but are not based on actual transactions, so they are classified as Level 2. The fair value of our outstanding interest rate swap agreements was a $1 million and an $8 million asset at January 3, 2026 and December 28, 2024, respectively.

At January 3, 2026 and December 28, 2024, our Finance group had interest rate swap agreements related to our Floating Rate Junior Subordinated Notes for an aggregate notional amount of $264 million that effectively converts the variable-rate interest for these Notes to a weighted-average fixed rate of 5.16% and 5.20%, respectively. At January 3, 2026, these agreements have maturities ranging from August 2026 to August 2030. At December 28, 2024, we also had an interest rate swap agreement with a notional amount of $25 million that matured in June 2025 and effectively converted variable-rate interest on a term loan to a fixed rate of 4.13%.

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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:

			January 3, 2026						December 28, 2024
(In millions)			Carrying Value			Estimated Fair Value			Carrying Value			Estimated Fair Value
Manufacturing group
Debt, excluding leases			$	(3,459)		$	(3,406)		$	(3,164)		$	(2,989)
Finance group
Finance receivables, excluding leases			493			528			439			454
Debt			(339)			(312)			(341)			(311)

Fair value for the Manufacturing group debt is determined using market observable data for similar transactions (Level 2). The fair value for the Finance group debt was determined primarily based on discounted cash flow analyses using observable market inputs from debt with similar duration, subordination and credit default expectations (Level 2). Fair value estimates for finance receivables were determined based on internally developed discounted cash flow models primarily utilizing significant unobservable inputs (Level 3), which include estimates of the rate of return, financing cost, capital structure and/or discount rate expectations of current market participants combined with estimated loan cash flows based on credit losses, payment rates and expectations of borrowers’ ability to make payments on a timely basis.

Note 10. Shareholders’ Equity

Capital Stock

We have authorization for 15 million shares of preferred stock with a par value of $0.01 and 500 million shares of common stock with a par value of $0.125. Outstanding common stock activity is presented below:

(In thousands)			2025			2024			2023
Balance at beginning of year			182,964			192,898			206,161
Share repurchases			(10,650)			(12,890)			(16,169)
Share-based compensation activity			1,996			2,956			2,906
Balance at end of year			174,310			182,964			192,898

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)			2025			2024			2023
Basic weighted-average shares outstanding			178,895			188,318			199,719
Dilutive effect of stock options			1,363			1,989			2,055
Diluted weighted-average shares outstanding			180,258			190,307			201,774

In 2025, 2024 and 2023, stock options to purchase 2.0 million, 0.9 million and 1.5 million shares, respectively, of common stock were excluded from the calculation of diluted weighted-average shares outstanding as their effect would have been anti-dilutive.

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Accumulated Other Comprehensive Income (Loss)

The components of Accumulated other comprehensive income (loss) are presented below:

(In millions)			Pension and Postretirement Benefits Adjustments			Foreign Currency Translation Adjustments			Deferred Gains (Losses) on Hedge Contracts			Accumulated Other Comprehensive Income (Loss)
Balance at December 30, 2023			$	(598)		$	(49)		$	3		$	(644)
Other comprehensive income before reclassifications			418			(74)			(9)			335
Reclassified from Accumulated other comprehensive income (loss)			1			3			1			5
Balance at December 28, 2024			$	(179)		$	(120)		$	(5)		$	(304)
Other comprehensive income before reclassifications			299			134			(2)			431
Reclassified from Accumulated other comprehensive income (loss)			(1)			(2)			5			2
Balance at January 3, 2026			$	119		$	12		$	(2)		$	129

Other Comprehensive Income (Loss)

The before and after-tax components of other comprehensive income (loss) are presented below:

			2025									2024									2023
(In millions)			Pre-Tax Amount			Tax (Expense) Benefit			After- Tax Amount			Pre-Tax Amount			Tax (Expense) Benefit			After- Tax Amount			Pre-Tax Amount			Tax (Expense) Benefit			After- Tax Amount
Pension and postretirement benefits adjustments:
Unrealized gains (losses)			$	430		$	(108)		$	322		$	568		$	(136)		$	432		$	(102)		$	25		$	(77)
Amortization of net actuarial gain*			(9)			2			(7)			(5)			1			(4)			(7)			2			(5)
Amortization of prior service cost*			9			(3)			6			8			(3)			5			8			(3)			5
Recognition of prior service cost			(29)			6			(23)			(19)			5			(14)			(7)			2			(5)
Pension and postretirement benefits adjustments, net			401			(103)			298			552			(133)			419			(108)			26			(82)
Foreign currency translation adjustments:
Foreign currency translation adjustments			134			—			134			(74)			—			(74)			45			—			45
Business disposition			(2)			—			(2)			—			—			—			—			—			—
Other			—			—			—			3			—			3			—			—			—
Foreign currency translation adjustments, net			132			—			132			(71)			—			(71)			45			—			45
Deferred gains (losses) on hedge contracts:
Current deferrals			(2)			—			(2)			(11)			2			(9)			(2)			1			(1)
Reclassification adjustments			6			(1)			5			2			(1)			1			8			(2)			6
Deferred gains (losses) on hedge contracts, net			4			(1)			3			(9)			1			(8)			6			(1)			5
Total			$	537		$	(104)		$	433		$	472		$	(132)		$	340		$	(57)		$	25		$	(32)

** These components of other comprehensive income (loss) are included in the computation of net periodic pension cost (income). See Note 14 for additional information.*

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Note 11. Segment Financial Information

For the periods presented, we operate in, and report financial information for, the following six operating segments: Textron Aviation, Bell, Textron Systems, Industrial, Textron eAviation and Finance. The accounting policies of these segments are the same as those described in Note 1. Effective January 4, 2026, the beginning of our 2026 fiscal year, the business activities of the Textron eAviation segment were realigned within Textron's other operating segments resulting in the elimination of the Textron eAviation segment as a separate reporting segment. Additional information regarding this segment change is provided below.

Textron Aviation products and services include Cessna Citation jets, Beechcraft and Cessna turboprop aircraft, military trainer and defense aircraft, piston engine aircraft, advanced flight training devices, aftermarket parts and maintenance, inspection and repair services. Textron Aviation has a diverse customer base including fractional aircraft businesses, charter and fleet operators, corporate aviation, individual buyers, training schools, airlines, and special mission, military and government operators.

Bell products and services include development of the MV-75 tiltrotor aircraft, the V-22 tiltrotor aircraft, advanced military helicopters, and aftermarket parts and support services to the U.S. and non-U.S. governments. Bell also supplies commercial helicopters and aftermarket parts and services to corporate, private, law enforcement, utility, public safety and emergency medical helicopter operators, and U.S. and foreign governments.

Textron Systems products and services include electronic systems and solutions, advanced marine craft, piston aircraft engines, live military air-to-air and air-to-ship training, weapons and related components, unmanned aircraft systems, and both manned and unmanned armored and specialty vehicles for U.S. and international military, government and commercial customers.

Industrial products and markets include the following:

• Kautex products include blow-molded plastic fuel systems, including conventional plastic fuel tanks and pressurized fuel tanks for hybrid vehicle applications, clear-vision systems, plastic tanks for selective catalytic reduction systems and battery systems for use in electric vehicles, from hybrid to full battery-powered, that are sold to automobile OEMs; and

• Textron Specialized Vehicles products include golf cars, utility vehicles, light transportation vehicles, aviation ground support equipment, professional turf-maintenance equipment and specialized turf-care vehicles that are marketed primarily to golf courses and resorts, government agencies and municipalities, consumers, outdoor enthusiasts, and commercial and industrial users.

The Textron eAviation segment has been focused on research and development initiatives related to sustainable aviation solutions and also manufactures a family of light aircraft and gliders with both electric and combustion engines. Under the segment realignment mentioned above, effective at the beginning of our 2026 fiscal year, a significant part of Textron eAviation, including Pipistrel, will become part of the Textron Aviation segment to enable the business to more effectively leverage the development, manufacturing and sales expertise at Textron Aviation. In addition, Textron eAviation’s manned and unmanned products for military applications and related research and development activities will be included in the results of the Textron Systems segment, which is best suited to provide more direct access to the targeted customer base for these products. Lastly, certain Textron eAviation research and development activities encompassing digital flight control and air vehicle management systems, which we expect will benefit several of our segments, will be reported within corporate expenses.

The Finance segment provides financing primarily to purchasers of new and pre-owned Textron Aviation aircraft and Bell helicopters.

Segment profit is an important financial measure. Through 2025, Textron’s Chief Operating Decision Maker (CODM) was its Chairman and Chief Executive Officer, Scott Donnelly. Effective January 4, 2026, the beginning of our 2026 fiscal year, Lisa Atherton became Textron's President and Chief Executive Officer, and CODM, succeeding Mr. Donnelly. Our CODM utilizes segment profit to evaluate the performance of the segments to establish management's compensation and for decision-making purposes, including the allocation of capital resources between segments. Segment profit for the manufacturing segments excludes the non-service components of pension and postretirement income, net; LIFO inventory provision; intangible asset amortization; interest expense, net for Manufacturing group; certain corporate expenses; gains/losses on major business dispositions; special charges; and the inventory valuation charge to write down production-related powersports inventory discussed in Note 15. The measurement for the Finance segment includes interest income and expense along with intercompany interest income and expense.

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Our revenues and expenses by segment are provided below:

(In millions)			Textron Aviation			Bell			Textron Systems			Industrial			Textron eAviation			Finance			Total
2025
Revenues			$	5,955		$	4,282		$	1,247		$	3,213		$	27		$	75		$	14,799
Costs and expenses:
Cost of sales			4,637			3,537			939			2,733			27			—			11,873
Research and development costs			214			153			45			67			42			—			521
Selling and administrative expense			410			229			88			268			21			8			1,024
Interest expense, net			—			—			—			—			—			18			18
Segment profit (loss)			$	694		$	363		$	175		$	145		$	(63)		$	49		$	1,363
2024
Revenues			$	5,284		$	3,579		$	1,241		$	3,515		$	33		$	50		$	13,702
Costs and expenses:
Cost of sales			4,102			2,899			929			2,993			29			—			10,952
Research and development costs			208			97			51			72			63			—			491
Selling and administrative expense			408			213			107			299			17			(4)			1,040
Interest expense, net			—			—			—			—			—			19			19
Segment profit (loss)			$	566		$	370		$	154		$	151		$	(76)		$	35		$	1,200
2023
Revenues			$	5,373		$	3,147		$	1,235		$	3,841		$	32		$	55		$	13,683
Costs and expenses:
Cost of sales			4,116			2,392			925			3,221			35			—			10,689
Research and development costs			199			192			53			80			46			—			570
Selling and administrative expense			409			243			110			312			14			(6)			1,082
Interest expense, net			—			—			—			—			—			15			15
Segment profit (loss)			$	649		$	320		$	147		$	228		$	(63)		$	46		$	1,327

A reconciliation of segment profit to income from continuing operations before income taxes is presented below:

(In millions)			2025			2024			2023
Segment profit			$	1,363		$	1,200		$	1,327
Unallocated amounts:
Corporate expenses and other, net			(149)			(116)			(143)
Interest expense, net for Manufacturing group			(108)			(78)			(62)
LIFO inventory provision			(199)			(176)			(107)
Intangible asset amortization			(32)			(34)			(39)
Special charges*			(4)			(78)			(126)
Inventory charge*			—			(38)			—
Non-service components of pension and postretirement income, net			266			263			237
Income from continuing operations before income taxes			$	1,137		$	943		$	1,087

** See Note 15 for additional information.*

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Other information by segment is provided below:

			Assets						Capital Expenditures									Depreciation and Amortization
(In millions)			January 3, 2026			December 28, 2024			2025			2024			2023			2025			2024			2023
Textron Aviation			$	4,907		$	4,624		$	140		$	136		$	138		$	167		$	164		$	160
Bell			3,132			2,992			132			122			119			103			86			89
Textron Systems			2,107			2,036			41			40			48			48			48			41
Industrial			2,305			2,378			68			62			91			68			70			89
Textron eAviation			313			286			1			4			4			8			7			7
Finance			677			680			—			—			—			—			—			—
Corporate			4,688			3,842			1			—			2			7			7			9
Total			$	18,129		$	16,838		$	383		$	364		$	402		$	401		$	382		$	395

At January 3, 2026 and December 28, 2024, 85% and 86%, respectively, of our property, plant and equipment, net was located in the United States.

Note 12. Revenues

Disaggregation of Revenues

Our revenues disaggregated by major product type are presented below:

(In millions)			2025			2024			2023
Aircraft			$	3,922		$	3,374		$	3,577
Aftermarket parts and services			2,033			1,910			1,796
Textron Aviation			$	5,955		$	5,284		$	5,373
Military aircraft and support programs			2,618			2,048			1,701
Commercial helicopters, parts and services			1,664			1,531			1,446
Bell			$	4,282		$	3,579		$	3,147
Textron Systems			$	1,247		$	1,241		$	1,235
Fuel systems and functional components			1,883			1,891			1,954
Specialized vehicles			1,330			1,624			1,887
Industrial			$	3,213		$	3,515		$	3,841
Textron eAviation			$	27		$	33		$	32
Finance			$	75		$	50		$	55
Total revenues			$	14,799		$	13,702		$	13,683

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Our revenues for our segments by customer type and geographic location are presented below:

(In millions)			Textron Aviation			Bell			Textron Systems			Industrial			Textron eAviation			Finance			Total
2025
Customer type:
Commercial			$	5,579		$	1,634		$	306		$	3,185		$	27		$	75		$	10,806
U.S. Government			376			2,648			941			28			—			—			3,993
Total revenues			$	5,955		$	4,282		$	1,247		$	3,213		$	27		$	75		$	14,799
Geographic location:
United States			$	4,281		$	3,156		$	1,129		$	1,668		$	14		$	35		$	10,283
Europe			467			122			43			649			7			1			1,289
South and Latin America			628			281			7			336			2			26			1,280
Other international			579			723			68			560			4			13			1,947
Total revenues			$	5,955		$	4,282		$	1,247		$	3,213		$	27		$	75		$	14,799
2024
Customer type:
Commercial			$	4,985		$	1,490		$	292		$	3,482		$	33		$	50		$	10,332
U.S. Government			299			2,089			949			33			—			—			3,370
Total revenues			$	5,284		$	3,579		$	1,241		$	3,515		$	33		$	50		$	13,702
Geographic location:
United States			$	4,019		$	2,644		$	1,112		$	1,865		$	19		$	17		$	9,676
Europe			371			85			45			693			11			5			1,210
South and Latin America			336			201			12			306			—			19			874
Other international			558			649			72			651			3			9			1,942
Total revenues			$	5,284		$	3,579		$	1,241		$	3,515		$	33		$	50		$	13,702
2023
Customer type:
Commercial			$	5,155		$	1,407		$	282		$	3,819		$	32		$	55		$	10,750
U.S. Government			218			1,740			953			22			—			—			2,933
Total revenues			$	5,373		$	3,147		$	1,235		$	3,841		$	32		$	55		$	13,683
Geographic location:
United States			$	3,873		$	2,228		$	1,103		$	2,067		$	17		$	17		$	9,305
Europe			432			149			54			766			11			2			1,414
South and Latin America			284			224			12			300			1			21			842
Other international			784			546			66			708			3			15			2,122
Total revenues			$	5,373		$	3,147		$	1,235		$	3,841		$	32		$	55		$	13,683

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 3, 2026, we had $18.8 billion in remaining performance obligations of which we expect to recognize revenues of approximately 80% through 2027, an additional 15% through 2029, 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 3, 2026 and December 28, 2024, contract assets totaled $451 million and $345 million, respectively, and contract liabilities totaled $2.1 billion and $1.9 billion, respectively, reflecting timing differences between revenues recognized, billings and payments from customers. During 2025, 2024 and 2023, we recognized revenues of $1.2 billion, $1.1 billion and $953 million, respectively, that were included in the contract liability balance at the beginning of each year.

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Note 13. Share-Based Compensation

Under our 2024 Long-Term Incentive Plan (the 2024 Plan), which replaced our 2015 Long-Term Incentive Plan (the 2015 Plan) in April 2024, we have authorization to provide awards to selected employees and non-employee directors in the form of stock options, restricted stock, restricted stock units, stock appreciation rights, performance stock, performance share units and other awards. A maximum of 10 million shares is authorized for issuance for all purposes under the 2024 Plan plus any shares that become available upon cancellation, forfeiture or expiration of awards granted under the 2015 Plan. Under the 2024 Plan, the maximum number of shares that may be issued pursuant to awards payable in shares, such as restricted stock, restricted stock units, performance stock, performance share units, or other awards is 3.127 million, plus any shares that become available upon cancellation, forfeiture or expiration of such awards which were granted under the 2015 Plan. For 2025, 2024 and 2023, the awards granted under these plans primarily included stock options, restricted stock units and performance share units.

Share-based compensation costs are reflected primarily in selling and administrative expense. Compensation expense included in net income for our share-based compensation plans is as follows:

(In millions)			2025			2024			2023
Compensation expense			$	81		$	66		$	94
Income tax benefit			(20)			(16)			(23)
Total compensation expense included in net income			$	61		$	50		$	71

Compensation cost for awards subject only to service conditions that vest ratably is recognized on a straight-line basis over the requisite service period for each separately vesting portion of the award utilizing an estimated forfeiture rate. Our awards include continued vesting provisions for retirement eligible employees. Upon reaching retirement eligibility, the service requirement for these individuals is considered to have been satisfied and compensation expense for future awards is recognized on the date of the grant.

As of January 3, 2026, we had not recognized $27 million of total compensation costs associated with unvested awards subject only to service conditions. We expect to recognize compensation expense for these awards over a weighted-average period of approximately two years. We typically grant stock appreciation rights to selected non-U.S. employees. At January 3, 2026, outstanding stock appreciation rights totaled 386,329 with a weighted-average exercise price of $68.05 and a weighted-average remaining contractual life of 6.2 years; these units had an intrinsic value of $7 million, compared to $6 million at December 28, 2024.

Stock Options

Stock option compensation expense was $24 million, $25 million and $23 million in 2025, 2024 and 2023, 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:

			2025			2024			2023
Fair value of options at grant date			$	22.01		$	27.69		$	23.83
Dividend yield			0.1%			0.1%			0.1%
Expected volatility			25.1%			27.2%			29.4%
Risk-free interest rate			4.1%			4.3%			4.2%
Expected term (in years)			4.8			4.8			4.8

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The stock option activity during 2025 is provided below:

(Options in thousands)			Number of Options			Weighted- Average Exercise Price
Outstanding at beginning of year			6,649			$	61.70
Granted			1,022			74.73
Exercised			(809)			(52.23)
Forfeited or expired			(70)			(79.25)
Outstanding at end of year			6,792			$	64.61
Exercisable at end of year			4,791			$	58.58

At January 3, 2026, our outstanding options had an aggregate intrinsic value of $154 million and a weighted-average remaining contractual life of 5.4 years. Our exercisable options had an aggregate intrinsic value of $137 million and a weighted-average remaining contractual life of 4.2 years at January 3, 2026. The total intrinsic value of options exercised during 2025, 2024 and 2023 was $24 million, $78 million and $50 million, respectively.

Restricted Stock Units

We issue restricted stock units that include the right to receive dividend equivalents upon vesting and are settled in either cash or stock. Grants of restricted stock units vest in full on the third anniversary of the grant date. Compensation cost is determined using the fair value of these units based on the trading price of our common stock. For units payable in stock, we use the trading price on the grant date, while units payable in cash are remeasured using the price at each reporting period date.

The 2025 activity for restricted stock units is provided below:

			Units Payable in Stock									Units Payable in Cash
(Shares/Units in thousands)			Number of Shares			Weighted- Average Grant Date Fair Value						Number of Units			Weighted- Average Grant Date Fair Value
Outstanding at beginning of year, nonvested			331			$	75.50					631			$	77.75
Granted			129			73.07						259			74.72
Vested			(101)			(70.65)						(195)			(71.14)
Forfeited			—			—						(22)			(78.39)
Outstanding at end of year, nonvested			359			$	75.99					673			$	78.48

The fair value of the restricted stock unit awards that vested and/or amounts paid under these awards is as follows:

(In millions)			2025			2024			2023
Fair value of awards vested			$	22		$	42		$	45
Cash paid			15			33			34

Performance Share Units

The fair value of share-based compensation awards accounted for as liabilities includes performance share units, which are generally paid in cash in the first quarter of the year following vesting. Performance share units are subject to performance goals set at the beginning of the three-year performance period and vest at the end of the performance period. These units are remeasured to fair value at the end of each reporting period based on the trading price of our common stock and the number of units, as adjusted based on assumptions with respect to performance on the relevant metrics.

The 2025 activity for our performance share units is as follows:

(Units in thousands)			Number of Units			Weighted- Average Grant Date Fair Value
Outstanding at beginning of year, nonvested			394			$	80.81
Granted			202			74.73
Vested			(200)			(73.19)
Outstanding at end of year, nonvested			396			$	81.57

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The fair value of the performance share units that vested and/or amounts paid under these awards is as follows:

(In millions)			2025			2024			2023
Fair value of awards vested			$	18		$	13		$	19
Cash paid			16			35			27

Note 14. Retirement Plans

We provide defined-contribution benefits to eligible employees, as well as some remaining defined-benefit pension and other post-retirement benefits covering certain of our U.S. and Non-U.S. employees. Substantially all of our employees are covered by defined contribution plans. The largest of these plans, the Textron Savings Plan, is a qualified 401(k) plan subject to the Employee Retirement Income Security Act of 1974 (ERISA). Our defined contribution plans cost $178 million, $164 million and $154 million in 2025, 2024 and 2023, respectively. We also provide post-retirement benefits other than pensions for certain retired employees in the U.S. that include healthcare, dental care, Medicare Part B reimbursement and life insurance.

A portion of our U.S. employees participate in the legacy defined benefit pension plans which were closed to new participants beginning on January 1, 2010. These legacy plans include the Textron Master Retirement Plan (TMRP), the Bell Helicopter Textron Master Retirement Plan, and the CWC Castings Division of Textron Inc. Hourly-Rated Employees' Pension Plan, which are each subject to the provisions of ERISA and provide a minimum guaranteed benefit to participants. The primary factors affecting the benefits earned by participants in our pension plans are employees’ years of service and compensation levels. Employees hired subsequent to the closure of these plans receive an additional annual cash contribution to their Textron Savings Plan account based on their eligible compensation of up to 4%.

Periodic Benefit Cost (Income)

The components of net periodic benefit cost (income) and other amounts recognized in other comprehensive income (loss) (OCI) are as follows:

			Pension Benefits									Postretirement Benefits Other than Pensions
(In millions)			2025			2024			2023			2025			2024			2023
Net periodic benefit income
Service cost			$	63		$	69		$	67		$	1		$	1		$	2
Interest cost			376			362			364			6			7			8
Expected return on plan assets			(648)			(635)			(610)			—			—			—
Amortization of prior service cost (credit)			10			9			11			(1)			(1)			(3)
Amortization of net actuarial loss (gain)			(1)			3			1			(8)			(8)			(8)
Net periodic benefit income*			$	(200)		$	(192)		$	(167)		$	(2)		$	(1)		$	(1)
Other changes in plan assets and benefit obligations recognized in OCI
Current year actuarial loss (gain)			$	(427)		$	(561)		$	109		$	(3)		$	(7)		$	(7)
Current year prior service cost			29			19			7			—			—			—
Amortization of net actuarial gain (loss)			1			(3)			(1)			8			8			8
Amortization of prior service credit (cost)			(10)			(9)			(11)			1			1			3
Total recognized in OCI, before taxes			$	(407)		$	(554)		$	104		$	6		$	2		$	4
Total recognized in net periodic benefit income and OCI			$	(607)		$	(746)		$	(63)		$	4		$	1		$	3

** Excludes the cost associated with the defined-contribution component that is included in certain of our U.S.-based defined benefit pension plans of $10 million in both 2025 and 2024, and $11 million in 2023.*

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Obligations and Funded Status

All of our plans are measured as of our fiscal year-end. The changes in the projected benefit obligation and in the fair value of plan assets, along with our funded status, are as follows:

			Pension Benefits						Postretirement Benefits Other than Pensions
(In millions)			January 3, 2026			December 28, 2024			January 3, 2026			December 28, 2024
Change in projected benefit obligation
Projected benefit obligation at beginning of year			$	6,788		$	7,205		$	121		$	136
Service cost			63			69			1			1
Interest cost			376			362			6			7
Plan participants’ contributions			—			—			2			3
Actuarial losses (gains)			75			(392)			2			(7)
Benefits paid			(458)			(454)			(21)			(19)
Plan amendment			29			19			—			—
Foreign exchange rate changes and other			45			(21)			—			—
Projected benefit obligation at end of year			$	6,918		$	6,788		$	111		$	121
Change in fair value of plan assets
Fair value of plan assets at beginning of year			$	8,772		$	8,413
Actual return on plan assets			1,145			806
Employer contributions			31			34
Benefits paid			(458)			(454)
Foreign exchange rate changes and other			69			(27)
Fair value of plan assets at end of year			$	9,559		$	8,772
Funded status at end of year			$	2,641		$	1,984		$	(111)		$	(121)

Actuarial losses (gains) for 2025 and 2024 were largely the result of changes in the discount rate utilized.

Amounts recognized in our balance sheets are as follows:

			Pension Benefits						Postretirement Benefits Other than Pensions
(In millions)			January 3, 2026			December 28, 2024			January 3, 2026			December 28, 2024
Non-current assets			$	2,973		$	2,311		$	—		$	—
Current liabilities			(29)			(29)			(14)			(15)
Non-current liabilities			(303)			(298)			(97)			(106)
Recognized in Accumulated other comprehensive income (loss), pre-tax:
Net loss (gain)			(261)			167			(63)			(69)
Prior service cost (credit)			71			52			—			(1)

The accumulated benefit obligation for all defined benefit pension plans was $6.6 billion and $6.5 billion at January 3, 2026 and December 28, 2024, respectively, which included $320 million and $316 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)			January 3, 2026			December 28, 2024
Accumulated benefit obligation			$	320		$	316
Fair value of plan assets			—			—

Pension plans with projected benefit obligation exceeding the fair value of plan assets are as follows:

(In millions)			January 3, 2026			December 28, 2024
Projected benefit obligation			$	332		$	327
Fair value of plan assets			—			—

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Assumptions

The weighted-average assumptions we use for our pension and postretirement plans are as follows:

			Pension Benefits									Postretirement Benefits Other than Pensions
			2025			2024			2023			2025			2024			2023
Net periodic benefit cost
Discount rate			5.73%			5.19%			5.51%			5.75%			5.40%			5.70%
Expected long-term rate of return on assets			7.16%			7.16%			7.14%
Rate of compensation increase			3.97%			3.97%			3.97%
Benefit obligations at year-end
Discount rate			5.60%			5.73%			5.19%			5.40%			5.75%			5.40%
Rate of compensation increase			3.96%			3.97%			3.97%
Interest crediting rate for cash balance plans			5.25%			5.25%			5.25%

Our assumed healthcare cost trend rate for both the medical and prescription drug cost was 6.50% in both 2025 and 2024. We expect this rate to gradually decline to 4.75% by 2032 where we assume it will remain.

Pension Assets

The expected long-term rate of return on plan assets is determined based on a variety of considerations, including the established asset allocation targets and expectations for those asset classes, historical returns of the plans’ assets and other market considerations. We invest our pension assets with the objective of achieving a total rate of return over the long term that will be sufficient to fund future pension obligations and to minimize future pension contributions. We are willing to tolerate a commensurate level of risk to achieve this objective based on the funded status of the plans and the long-term nature of our pension liability. Risk is controlled by maintaining a portfolio of assets that is diversified across a variety of asset classes, investment styles and investment managers. Where possible, investment managers are prohibited from owning our securities in the portfolios that they manage on our behalf.

For U.S. plan assets, which represent the majority of our plan assets, asset allocation target ranges are established consistent with our investment objectives, and the assets are rebalanced periodically. For Non-U.S. plan assets, allocations are based on expected cash flow needs and assessments of the local practices and markets. Our target allocation ranges are as follows:

U.S. Plan Assets
Domestic equity securities			17		%	to			33%
International equity securities			6		%	to			17%
Global equities			5		%	to			17%
Debt securities			27		%	to			38%
Real estate			7		%	to			13%
Private investment partnerships			7		%	to			13%
Non-U.S. Plan Assets
Equity securities			55		%	to			75%
Debt securities			25		%	to			45%
Real estate			—		%	to			13%

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The fair value of our pension plan assets by major category and valuation method is as follows:

			January 3, 2026												December 28, 2024
(In millions)			Level 1			Level 2			Level 3			Not Subject to Leveling			Level 1			Level 2			Level 3			Not Subject to Leveling
Cash and equivalents			$	254		$	6		$	—		$	—		$	159		$	1		$	—		$	—
Equity securities:
Domestic			2,969			—			—			342			3,151			—			—			307
International			1,317			—			—			349			1,028			—			—			290
Mutual funds			184			—			—			—			194			—			—			—
Debt securities:
National, state and local governments			1,327			112			—			21			899			60			—			13
Corporate debt			83			607			—			154			46			618			—			148
Private investment partnerships			—			—			—			992			—			—			—			974
Real estate			—			—			449			393			—			—			479			405
Total			$	6,134		$	725		$	449		$	2,251		$	5,477		$	679		$	479		$	2,137

Cash and equivalents, equity securities and debt securities include commingled funds, which represent investments in funds offered to institutional investors that are similar to mutual funds in that they provide diversification by holding various equity and debt securities. Generally, the fair value of the majority of the commingled funds is determined and published by the fund's investment managers and is the basis for current transactions, therefore, they are categorized as Level 1 in the table above. 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)			2025			2024
Balance at beginning of year			$	479		$	508
Unrealized gains (losses), net			9			(25)
Realized gains (losses), net			(19)			16
Purchases, sales and settlements, net			(20)			(20)
Balance at end of year			$	449		$	479

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 2026, we expect to contribute approximately $50 million to our pension plans. Benefit payments provided below reflect expected future employee service, as appropriate, and are expected to be paid, net of estimated participant contributions. These payments are based on the same assumptions used to measure our benefit obligation at the end of 2025. 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)			2026			2027			2028			2029			2030			2031-2035
Pension benefits			$	466		$	475		$	484		$	492		$	497		$	2,536
Postretirement benefits other than pensions			14			14			13			12			12			44

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Note 15. Special Charges

Special charges by segment and type of cost (income) are as follows:

(In millions)			Severance Costs			Contract Termination and Other Costs			Asset Impairments			Other			Total
2025
Industrial			$	—		$	—		$	—		$	(4)		$	(4)
Textron Systems			5			3			—			—			8
Total special charges			$	5		$	3		$	—		$	(4)		$	4
2024
Industrial			$	37		$	32		$	3		$	—		$	72
Bell			1			—			—			—			1
Textron Systems			5			—			—			—			5
Total special charges			$	43		$	32		$	3		$	—		$	78
2023
Industrial			$	21		$	—		$	87		$	—		$	108
Bell			13			—			—			—			13
Textron Systems			5			—			—			—			5
Total special charges			$	39		$	—		$	87		$	—		$	126

2025 Restructuring and Other Actions

In connection with the termination of certain U.S. Government development programs, we initiated restructuring actions in the second quarter of 2025 to reduce operating expenses through headcount reductions and other actions at the Textron Systems segment. As a result, we recorded special charges of $8 million, which included severance costs of $5 million and contract termination costs of $3 million. Headcount reductions totaled approximately 85 positions, representing less than 1% of our global workforce. The restructuring actions were substantially completed in the third quarter of 2025.

In the second quarter of 2025, we completed the strategic review of the Powersports product line discussed below, and on April 23, 2025, we closed on the sale of the Powersports business, including the Arctic Cat brand and its operations. Net cash proceeds from the sale were $16 million and we recorded a pre-tax gain of $4 million, which is included in special charges.

2023 Restructuring Plan

In the fourth quarter of 2023, we initiated a restructuring plan to reduce operating expenses through headcount reductions at the Industrial, Bell and Textron Systems segments. In the Industrial segment, the plan included headcount reductions at Textron Specialized Vehicles, resulting from lower demand for certain of our powersports products, and at Kautex, due to reduced demand for fuel systems from European automotive manufacturers. In the Bell and Textron Systems segments, the plan included targeted headcount reductions to improve the segments’ cost structures and realign their workforces as these segments transition from legacy production contracts to more development, engineering focused contracts. In April 2024, the plan was expanded for the Bell and Textron Systems segments to include headcount reductions resulting from the cancellations of the Future Attack Reconnaissance Aircraft and Shadow programs in 2024.

In December 2024, we approved additional actions under the 2023 plan at Textron Specialized Vehicles related to an indefinite pause in production of its powersports products. During 2024, the consumer end market demand for powersports products continued to remain soft. As a result, and in conjunction with its annual operating plan process, Textron Specialized Vehicles began to pause production of powersports products as Textron's management reviewed strategic alternatives for the business.

In 2024, we recorded special charges totaling $78 million as a result of the above restructuring actions. Since inception of the 2023 plan, we have incurred $204 million in special charges including severance costs of $82 million, which included $58 million at the Industrial segment, $14 million at the Bell segment and $10 million at the Textron Systems segment; and contract termination and other costs of $32 million and asset impairment charges of $90 million at the Industrial segment. Headcount reductions since inception of the plan totaled approximately 1,800 positions, representing 5% of our global workforce. The plan was substantially completed in the first half of 2025.

In the fourth quarter of 2024 and in connection with the actions taken under the restructuring plan at Textron Specialized Vehicles, we recorded an inventory valuation charge of $38 million, which is recorded in Cost of products sold, to write down production-related powersports inventory to its net realizable value.

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In 2023, as a result of the lower demand described above, we recognized asset impairment charges of $75 million at Textron Specialized Vehicles related to both fixed and intangible assets and $12 million of fixed asset impairment charges at Kautex.

Restructuring Reserve

Our restructuring reserve activity is summarized below:

(In millions)			Severance Costs			Contract Termination and Other Costs			Total
Balance at December 30, 2023			$	42		$	5		$	47
Provision for 2023 restructuring plan			49			32			81
Cash paid			(46)			(3)			(49)
Reversals			(6)			—			(6)
Foreign currency translation			(2)			—			(2)
Balance at December 28, 2024			$	37		$	34		$	71
Provision			5			3			8
Cash paid			(23)			(18)			(41)
Business disposition			(7)			(15)			(22)
Foreign currency translation			3			—			3
Balance at January 3, 2026			$	15		$	4		$	19

Note 16. Income Taxes

We conduct business globally and, as a result, file numerous consolidated and separate income tax returns within and outside the U.S. For all of our U.S. subsidiaries, we file a consolidated federal income tax return. Income from continuing operations before income taxes is as follows:

(In millions)			2025			2024			2023
U.S.			$	903		$	739		$	905
Non-U.S.			234			204			182
Income from continuing operations before income taxes			$	1,137		$	943		$	1,087

Income tax expense is summarized as follows:

(In millions)			2025			2024			2023
Current:
Federal			$	(7)		$	84		$	267
State			8			21			18
Non-U.S.			58			61			72
Total current			59			166			357
Deferred:
Federal			165			(34)			(181)
State			(6)			(24)			1
Non-U.S.			(4)			10			(12)
Total deferred			155			(48)			(192)
Total income tax expense (benefit):
Federal			158			50			86
State			2			(3)			19
Non-U.S.			54			71			60
Total income tax expense			$	214		$	118		$	165

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In 2025, we adopted Accounting Standards Update 2023-09 – Income Taxes (Topic 740): Improvements to Income Tax Disclosures, which requires disclosure of disaggregated information about a reporting entity’s effective tax rate reconciliation as well as information on income taxes paid. This standard has been adopted on a prospective basis and the new presentation of the U.S. Federal statutory income tax rate to our effective tax rate for 2025 is provided below.

			2025
(Dollars in millions)			Amount			Percentage
U.S. Federal statutory income tax rate			$	239		21.0		%
State and local income taxes, net of Federal income tax effects*			2			0.2		%
Foreign tax effects			6			0.5		%
Effect of cross-border tax laws			(2)			(0.2)		%
Tax credits - research and development			(36)			(3.2)		%
Non-taxable or nondeductible items:
Share-based compensation			29			2.6		%
Other			6			0.5		%
Changes in unrecognized tax benefits:
Audit settlement			(17)			(1.5)		%
Other			3			0.3		%
Other adjustments			(16)			(1.4)		%
Effective income tax rate			$	214		18.8		%

** State income taxes for Kansas and Texas comprise the majority (greater than 50%) of this category. In 2025, an $18 million benefit was recognized related to the enactment of a single sales factor apportionment in Kansas.*

For 2025, income tax payments, net of refunds by jurisdiction totaled $19 million for the U.S. Federal jurisdiction, $13 million for the states and $72 million for non-U.S. jurisdictions, which included $23 million, $18 million, $8 million, $6 million and $(5) million in Canada, Mexico, China, Czech Republic and Spain, respectively.

A reconciliation of the U.S. Federal statutory income tax rate to our effective income tax rate for prior years is provided below.

						2024			2023
U.S. Federal statutory income tax rate						21.0%			21.0%
Increase (decrease) resulting from:
State income taxes, net of Federal tax benefit						(0.2)%			1.4%
Non-U.S. tax rate differential and foreign tax credits						2.1%			1.5%
Research and development tax credits						(5.4)%			(4.7)%
Uncertain tax positions release for 2012 to 2017 IRS audit						(2.9)%			—%
Foreign-derived intangible income deduction						(1.7)%			(3.2)%
Other, net						(0.4)%			(0.8)%
Effective income tax rate						12.5%			15.2%

Unrecognized Tax Benefits

Our unrecognized tax benefits represent tax positions for which reserves have been established, with unrecognized state tax benefits reflected net of applicable federal tax benefits. If our unrecognized tax benefits were recognized in future periods, they would favorably impact our effective tax rate. A reconciliation of these unrecognized tax benefits is as follows:

(In millions)			2025			2024			2023
Balance at beginning of year			$	215		$	222		$	231
Additions for tax positions related to current year			19			17			16
Additions for tax positions of prior years			—			4			3
Reductions for tax positions of prior years			(1)			—			(28)
Reductions for settlements			(17)			(28)			—
Balance at end of year			$	216		$	215		$	222

In November 2024, we received a Revenue Agent Report (RAR) from the Internal Revenue Service (IRS) for the tax years 2012 to 2017 that proposed adjustments related to research and development tax credits generated on amended returns filed in 2019 and 2021. We disagree with the proposed adjustments and are vigorously contesting them through the IRS’s Office of Appeals and, if necessary, will continue with legal proceedings. We believe it is more likely than not that we will prevail on our refund claim for

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these credits and that our allowance for uncertain tax positions related to this matter is adequate. In connection with the RAR for these years, other tax positions were effectively settled, resulting in a benefit upon the reversal of $27 million of uncertain tax positions in the fourth quarter of 2024. A tax benefit of $17 million was recorded in 2025 related to the effective settlement of other uncertain tax positions.

We are currently under examination by the IRS for the tax years 2018 to 2021. In the normal course of business, we are subject to examination by tax authorities throughout the world. We are generally no longer subject to state and local income tax examinations for years before 2019 and non-U.S. income tax examinations for years before 2012.

Deferred Taxes

The significant components of our net deferred tax assets/(liabilities) are provided below:

(In millions)			January 3, 2026			December 28, 2024
Capitalized research and development expenditures			$	459		$	631
U.S. operating loss and tax credit carryforwards (a)			232			212
Accrued liabilities (b)			201			224
Obligation for pension and postretirement benefits			130			109
Operating lease liabilities			102			93
Non-U.S. operating loss and tax credit carryforwards (c)			82			88
Deferred compensation			70			94
Prepaid pension benefits			(721)			(562)
Property, plant and equipment, principally depreciation			(186)			(198)
Amortization of goodwill and other intangibles			(157)			(184)
Operating lease right-of-use assets			(99)			(90)
Valuation allowance on deferred tax assets			(76)			(82)
Other, net			(25)			(74)
Deferred taxes, net			$	12		$	261

*(a)*At January 3, 2026, U.S. operating loss and tax credit carryforward benefits of $184 million expire through 2045 if not utilized and $48 million may be carried forward indefinitely.

*(b)*Accrued liabilities include warranty reserves, self-insured liabilities and interest.

*(c)*At January 3, 2026, non-U.S. operating loss and tax credit carryforward benefits of $73 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)			January 3, 2026			December 28, 2024
Manufacturing group:
Deferred tax assets, net of valuation allowance			$	145		$	394
Deferred tax liabilities			(123)			(96)
Finance group – Deferred tax liabilities			(10)			(37)
Net deferred tax asset			$	12		$	261

Non-U.S. 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. Should these earnings be distributed in the future in the form of dividends or otherwise, we would be subject to withholding and local taxes to the applicable non-U.S. jurisdictions.

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Note 17. Commitments and Contingencies

We are subject to actual and threatened legal proceedings and other claims arising out of the conduct of our business, including proceedings and claims relating to commercial and financial transactions; government contracts; alleged lack of compliance with applicable laws and regulations; disputes with suppliers, production partners or other third parties; product liability; patent and trademark infringement; employment disputes; and environmental, health and safety matters. Some of these legal proceedings and claims seek damages, fines or penalties in substantial amounts or remediation of environmental contamination. As a government contractor, we are subject to audits, reviews and investigations to determine whether our operations are being conducted in accordance with applicable regulatory requirements. Under federal government procurement regulations, certain claims brought by the U.S. Government could result in our suspension or debarment from U.S. Government contracting for a period of time. On the basis of information presently available, we do not believe that existing proceedings and claims will have a material effect on our financial position or results of operations.

In the ordinary course of business, we enter into standby letter of credit agreements and surety bonds with financial institutions to meet various performance and other obligations. These outstanding letter of credit arrangements and surety bonds aggregated to approximately $380 million and $336 million at January 3, 2026 and December 28, 2024, 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 $45 million to $155 million. At January 3, 2026, environmental reserves of $80 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. In 2025, 2024 and 2023, to evaluate and remediate contaminated sites, we incurred expense, net of recoveries received, of $17 million, $9 million and $8 million, respectively.

Note 18. Supplemental Cash Flow Information

Our cash payments and receipts are as follows:

(In millions)			2025			2024			2023
Interest paid:
Manufacturing group			$	135		$	124		$	110
Finance group			17			18			12
Net income taxes paid:
Manufacturing group			92			181			338
Finance group			12			10			14

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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 3, 2026 and December 28, 2024, the related Consolidated Statements of Operations, Comprehensive Income, Shareholders’ Equity and Cash Flows for each of the three years in the period ended January 3, 2026, and the related notes and the financial statement schedule listed in the Index at Item 8 (collectively referred to as the “consolidated financial statements”). In our opinion, the consolidated financial statements present fairly, in all material respects, the financial position of the Company at January 3, 2026 and December 28, 2024 and the results of its operations and its cash flows for each of the three years in the period ended January 3, 2026, 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 3, 2026, 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 11, 2026 expressed an unqualified opinion thereon.

Basis for Opinion

These financial statements are the responsibility of the Company’s management. Our responsibility is to express an opinion on the Company’s financial statements based on our audits. We are a public accounting firm registered with the PCAOB and are required to be independent with respect to the Company in accordance with the U.S. federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB.

We conducted our audits in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement, whether due to error or fraud. Our audits included performing procedures to assess the risks of material misstatement of the financial statements, whether due to error or fraud, and performing procedures that respond to those risks. Such procedures included examining, on a test basis, evidence regarding the amounts and disclosures in the financial statements. Our audits also included evaluating the accounting principles used and significant estimates made by management, as well as evaluating the overall presentation of the financial statements. We believe that our audits provide a reasonable basis for our opinion.

Critical Audit Matters

The critical audit matters communicated below are matters arising from the current period audit of the financial statements that were communicated or required to be communicated to the audit committee and that: (1) relate to accounts or disclosures that are material to the financial statements and (2) involved our especially challenging, subjective or complex judgments. The communication of critical audit matters does not alter in any way our opinion on the consolidated financial statements, taken as a whole, and we are not, by communicating the critical audit matters below, providing separate opinions on the critical audit matters or on the accounts or disclosures to which they relate.

						Revenue Recognition - Estimates at Completion for Select Long Term Contracts
Description of the Matter						As described in Note 1 to the consolidated financial statements, revenues under long-term contracts with the U.S. Government are generally recognized over time using the cost-to-cost method of accounting. Under this method, the extent of progress towards completion is measured based on the ratio of costs incurred to date to the estimated costs at completion, and revenue is recorded proportionally as costs are incurred. Contract costs, which are estimated utilizing current contract specifications and expected engineering requirements, typically are incurred over a period of several years, and the estimation of these costs at completion is complex and may require 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 performance obligations are recognized in full in the period in which losses become evident.

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						Auditing the Company’s estimated costs at completion for select long-term contracts was complex due to the judgment involved in evaluating management’s assumptions and key estimates over the duration of these long-term contracts. The estimated costs at completion for the select long-term contracts are affected by the Company’s assessment of the current status of the contract, relevance of historical experience, and risks surrounding the Company’s ability to achieve the technical requirements and specifications of the contract, schedule, and other cost elements of the contract, and depend on whether the Company is able to successfully retire risks surrounding such aspects of the contract.
How We Addressed the Matter in Our Audit						We obtained an understanding, evaluated the design and tested the operating effectiveness of the controls related to the Company’s revenue recognition process, including controls over management’s review of the estimated costs at completion for the select long-term contracts and related key assumptions and management’s review that the data underlying the estimated costs at completion was complete and accurate.
						To test the accuracy of the Company’s estimated costs at completion for the select long-term contracts, our audit procedures included, among others, evaluating the key assumptions used by management to determine such estimate. This included evaluating the historical accuracy of management’s estimates by comparing planned costs to actual costs incurred to date and performing sensitivity analyses over the significant assumptions to evaluate the change in revenue recognition resulting from changes in the assumptions. We also tested the completeness and accuracy of the underlying data back to source documents and contracts.
						Defined Benefit Pension Obligations
Description of the Matter						As described in Note 14 to the consolidated financial statements, at January 3, 2026, the aggregate qualified defined benefit pension obligation was $6.9 billion and the fair value of pension plan assets was $9.6 billion, resulting in a net pension asset of $2.6 billion. As explained in Note 1 to the consolidated financial statements, the Company updates the estimates used to measure the defined benefit pension assets and obligations annually in the fourth quarter or more frequently upon the occurrence of certain events.
						Auditing the defined benefit pension obligations was complex and required the involvement of specialists as a result of the judgmental nature of certain actuarial assumptions including the discount rate and expected return on plan assets used in the measurement process. These assumptions have a significant effect on the projected benefit obligation and net periodic benefit income.
How We Addressed the Matter in Our Audit						We obtained an understanding, evaluated the design and tested the operating effectiveness of the controls that address the risks of material misstatement relating to the measurement and valuation of the defined benefit pension obligation. For example, we tested controls over management’s review of the defined benefit pension obligation actuarial calculations, the significant actuarial assumptions, and the data inputs provided to the actuaries.
						To test the defined benefit pension obligation, our audit procedures included, among others, evaluating the methodology used, the significant actuarial assumptions discussed above, and the underlying data used by management and its actuaries. We compared the actuarial assumptions used by management to historical trends and evaluated the change in the defined benefit pension obligation from the prior year due to the change in service cost, interest cost, benefit payments, actuarial gains and losses, contributions, and plan amendments, as applicable. In addition, we involved an actuarial specialist to assist in evaluating management’s methodology for determining the discount rate that reflects the maturity and duration of the benefit payments and is used to measure the defined benefit pension obligation. As part of this assessment, we compared the projected cash flows to prior year and compared the current year benefits paid to the prior year projected cash flows. We also tested the completeness and accuracy of the underlying data, including the participant data provided to the Company’s actuaries. Lastly, to evaluate the expected return on plan assets, we assessed whether management’s assumption is consistent with a range of returns for a portfolio of comparative investments.

/s/ Ernst & Young LLP

We have served as the Company’s auditor since 1957.

Boston, Massachusetts

February 11, 2026

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Schedule II — Valuation and Qualifying Accounts

(In millions)			2025			2024			2023
Allowance for credit losses on accounts receivable
Balance at beginning of year			$	19		$	26		$	24
Provision (reversal) for credit losses			(1)			(4)			7
Deductions from reserves*			(2)			(3)			(5)
Balance at end of year			$	16		$	19		$	26
Allowance for credit losses on finance receivables
Balance at beginning of year			$	19		$	24		$	24
Reversal for credit losses			(1)			(14)			(18)
Charge-offs			—			(1)			—
Recoveries			1			10			18
Balance at end of year			$	19		$	19		$	24
Inventory FIFO reserves
Balance at beginning of year			$	432		$	390		$	350
Charged to costs and expenses			26			57			63
Business disposition			(36)			—			—
Deductions from reserves*			(28)			(15)			(23)
Balance at end of year			$	394		$	432		$	390

*** Deductions primarily include amounts written off on uncollectible accounts (less recoveries), inventory disposals, changes to prior year estimates and currency translation adjustments.