Item 1. Financial Statements

TEXTRON INC.

Consolidated Statements of Operations (Unaudited)

			Three Months Ended						Nine Months Ended
(In millions, except per share amounts)			September 28, 2024			September 30, 2023			September 28, 2024			September 30, 2023
Revenues
Manufacturing product revenues			$	2,955		$	2,791		$	8,229		$	8,258
Manufacturing service revenues			460			539			1,821			1,490
Finance revenues			12			13			39			43
Total revenues			3,427			3,343			10,089			9,791
Costs, expenses and other
Cost of products sold			2,587			2,355			7,038			6,996
Cost of services sold			348			424			1,450			1,160
Selling and administrative expense			282			303			891			897
Interest expense, net			26			19			71			58
Special charges			(2)			—			25			—
Non-service components of pension and postretirement income, net			(66)			(59)			(198)			(177)
Total costs, expenses and other			3,175			3,042			9,277			8,934
Income from continuing operations before income taxes			252			301			812			857
Income tax expense			29			32			128			134
Income from continuing operations			223			269			684			723
Loss from discontinued operations			—			—			(1)			—
Net income			$	223		$	269		$	683		$	723
Basic Earnings per share
Continuing operations			$	1.19		$	1.36		$	3.60		$	3.59
Diluted Earnings per share
Continuing operations			$	1.18		$	1.35		$	3.56		$	3.56

See Notes to the Consolidated Financial Statements.

TEXTRON INC.

Consolidated Statements of Comprehensive Income (Unaudited)

			Three Months Ended						Nine Months Ended
(In millions)			September 28, 2024			September 30, 2023			September 28, 2024			September 30, 2023
Net income			$	223		$	269		$	683		$	723
Other comprehensive income (loss), net of tax
Pension and postretirement benefits adjustments, net of reclassifications			—			—			2			—
Foreign currency translation adjustments			59			(51)			12			(19)
Deferred gains (losses) on hedge contracts, net of reclassifications			2			(3)			(2)			3
Other comprehensive income (loss)			61			(54)			12			(16)
Comprehensive income			$	284		$	215		$	695		$	707

See Notes to the Consolidated Financial Statements.

TEXTRON INC.

Consolidated Balance Sheets (Unaudited)

(Dollars in millions)			September 28, 2024			December 30, 2023
Assets
Manufacturing group
Cash and equivalents			$	1,289		$	2,121
Accounts receivable, net			888			868
Inventories			4,410			3,914
Other current assets			750			857
Total current assets			7,337			7,760
Property, plant and equipment, less accumulated depreciation and amortization of $5,451 and $5,247, respectively			2,484			2,477
Goodwill			2,307			2,295
Other assets			3,656			3,663
Total Manufacturing group assets			15,784			16,195
Finance group
Cash and equivalents			58			60
Finance receivables, net			595			585
Other assets			15			16
Total Finance group assets			668			661
Total assets			$	16,452		$	16,856
Liabilities and shareholders’ equity
Liabilities
Manufacturing group
Current portion of long-term debt			$	357		$	357
Accounts payable			1,097			1,023
Other current liabilities			2,905			2,998
Total current liabilities			4,359			4,378
Other liabilities			1,855			1,904
Long-term debt			2,884			3,169
Total Manufacturing group liabilities			9,098			9,451
Finance group
Other liabilities			62			70
Debt			341			348
Total Finance group liabilities			403			418
Total liabilities			9,501			9,869
Shareholders’ equity
Common stock			25			24
Capital surplus			2,086			1,910
Treasury stock			(1,061)			(165)
Retained earnings			6,533			5,862
Accumulated other comprehensive loss			(632)			(644)
Total shareholders’ equity			6,951			6,987
Total liabilities and shareholders’ equity			$	16,452		$	16,856
Common shares outstanding (in thousands)			185,505			192,898

See Notes to the Consolidated Financial Statements.

TEXTRON INC.

Consolidated Statements of Cash Flows (Unaudited)

For the Nine Months Ended September 28, 2024 and September 30, 2023, respectively

			Consolidated
(In millions)			2024			2023
Cash flows from operating activities
Income from continuing operations			$	684		$	723
Adjustments to reconcile income from continuing operations to net cash provided by operating activities:
Non-cash items:
Depreciation and amortization			279			292
Deferred income taxes			(18)			(113)
Other, net			88			74
Changes in assets and liabilities:
Accounts receivable, net			(21)			(45)
Inventories			(471)			(659)
Other assets			170			267
Accounts payable			77			202
Other liabilities			(77)			120
Income taxes, net			5			37
Pension, net			(169)			(152)
Captive finance receivables, net			4			(32)
Other operating activities, net			18			4
Net cash provided by operating activities of continuing operations			569			718
Net cash used in operating activities of discontinued operations			(1)			(1)
Net cash provided by operating activities			568			717
Cash flows from investing activities
Capital expenditures			(211)			(224)
Net cash used in business acquisitions			(13)			(1)
Net proceeds from corporate-owned life insurance policies			27			39
Proceeds from sale of property, plant and equipment			3			4
Finance receivables repaid			23			26
Finance receivables originated			(18)			—
Other investing activities, net			—			2
Net cash used in investing activities			(189)			(154)
Cash flows from financing activities
Principal payments on long-term debt and nonrecourse debt			(375)			(41)
Purchases of Textron common stock			(890)			(885)
Dividends paid			(8)			(12)
Proceeds from options exercised			84			66
Other financing activities, net			(25)			(5)
Net cash used in financing activities			(1,214)			(877)
Effect of exchange rate changes on cash and equivalents			1			(5)
Net decrease in cash and equivalents			(834)			(319)
Cash and equivalents at beginning of period			2,181			2,035
Cash and equivalents at end of period			$	1,347		$	1,716

See Notes to the Consolidated Financial Statements.

TEXTRON INC.

Consolidated Statements of Cash Flows (Unaudited) (Continued)

For the Nine Months Ended September 28, 2024 and September 30, 2023, respectively

			Manufacturing Group						Finance Group
(In millions)			2024			2023			2024			2023
Cash flows from operating activities
Income from continuing operations			$	660		$	690		$	24		$	33
Adjustments to reconcile income from continuing operations to net cash provided by operating activities:
Non-cash items:
Depreciation and amortization			279			292			—			—
Deferred income taxes			(17)			(110)			(1)			(3)
Other, net			100			93			(12)			(19)
Changes in assets and liabilities:
Accounts receivable, net			(21)			(45)			—			—
Inventories			(471)			(659)			—			—
Other assets			170			260			—			7
Accounts payable			77			202			—			—
Other liabilities			(70)			129			(7)			(9)
Income taxes, net			5			33			—			4
Pension, net			(169)			(152)			—			—
Other operating activities, net			18			4			—			—
Net cash provided by operating activities of continuing operations			561			737			4			13
Net cash used in operating activities of discontinued operations			(1)			(1)			—			—
Net cash provided by operating activities			560			736			4			13
Cash flows from investing activities
Capital expenditures			(211)			(224)			—			—
Net cash used in business acquisitions			(13)			(1)			—			—
Net proceeds from corporate-owned life insurance policies			27			39			—			—
Proceeds from sale of property, plant and equipment			3			4			—			—
Finance receivables repaid			—			—			99			116
Finance receivables originated			—			—			(90)			(122)
Other investing activities, net			—			—			—			2
Net cash provided by (used in) investing activities			(194)			(182)			9			(4)
Cash flows from financing activities
Principal payments on long-term debt and nonrecourse debt			(360)			(5)			(15)			(36)
Purchases of Textron common stock			(890)			(885)			—			—
Dividends paid			(8)			(12)			—			—
Proceeds from options exercised			84			66			—			—
Other financing activities, net			(25)			(5)			—			—
Net cash used in financing activities			(1,199)			(841)			(15)			(36)
Effect of exchange rate changes on cash and equivalents			1			(5)			—			—
Net decrease in cash and equivalents			(832)			(292)			(2)			(27)
Cash and equivalents at beginning of period			2,121			1,963			60			72
Cash and equivalents at end of period			$	1,289		$	1,671		$	58		$	45

See Notes to the Consolidated Financial Statements.

TEXTRON INC.

Notes to the Consolidated Financial Statements (Unaudited)

Note 1. Basis of Presentation

Our Consolidated Financial Statements include the accounts of Textron Inc. (Textron) and its majority-owned subsidiaries. We have prepared these unaudited consolidated financial statements in accordance with accounting principles generally accepted in the U.S. for interim financial information. Accordingly, these interim financial statements do not include all of the information and footnotes required by accounting principles generally accepted in the U.S. for complete financial statements. The consolidated interim financial statements included in this quarterly report should be read in conjunction with the consolidated financial statements included in our Annual Report on Form 10-K for the year ended December 30, 2023. In the opinion of management, the interim financial statements reflect all adjustments (consisting only of normal recurring adjustments) that are necessary for the fair presentation of our consolidated financial position, results of operations and cash flows for the interim periods presented. The results of operations for the interim periods are not necessarily indicative of the results to be expected for the full year.

Our financings are conducted through two separate borrowing groups. The Manufacturing group consists of Textron consolidated with its majority-owned subsidiaries that operate in the Textron Aviation, Bell, Textron Systems, Industrial and Textron eAviation segments. The Finance group, which also is the Finance segment, consists of Textron Financial Corporation and its consolidated subsidiaries. We designed this framework to enhance our borrowing power by separating the Finance group. Our Manufacturing group operations include the development, production and delivery of tangible 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. All significant intercompany transactions are eliminated from the Consolidated Financial Statements, including retail financing activities for inventory sold by our Manufacturing group and financed by our Finance group.

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.

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 the third quarter of 2024 and 2023, our cumulative catch-up adjustments increased segment profit by $10 million and $18 million, respectively, and net income by $7 million and $14 million, respectively ($0.04 and $0.07 per diluted share, respectively). In the first nine months of 2024 and 2023, our cumulative catch-up adjustments increased segment profit by $41 million and $36 million, respectively, and net income by $31 million and $28 million, respectively ($0.16 and $0.14 per diluted share, respectively).

Note 2. Accounts Receivable and Finance Receivables

Accounts Receivable

Accounts receivable is composed of the following:

(In millions)			September 28, 2024			December 30, 2023
Commercial			$	823		$	831
U.S. Government contracts			84			63
			907			894
Allowance for credit losses			(19)			(26)
Total accounts receivable, net			$	888		$	868

Finance Receivables

Finance receivables are presented in the following table:

(In millions)			September 28, 2024			December 30, 2023
Finance receivables			$	614		$	609
Allowance for credit losses			(19)			(24)
Total finance receivables, net			$	595		$	585

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 the delinquency aging category are summarized as follows:

(Dollars in millions)			September 28, 2024			December 30, 2023
Performing			$	603		$	571
Watchlist			—			23
Nonaccrual			11			15
Nonaccrual as a percentage of finance receivables			1.79%			2.46%
Current and less than 31 days past due			$	606		$	589
31-60 days past due			8			16
61-90 days past due			—			—
Over 90 days past due			—			4
60+ days contractual delinquency as a percentage of finance receivables			—%			0.66%

At September 28, 2024, 40% of our performing finance receivables were originated since the beginning of 2022 and 29% were originated from 2019 to 2021 with the remainder prior to 2019. For finance receivables categorized as nonaccrual, 100% were originated prior to 2021.

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

A summary of finance receivables and the allowance for credit losses, based on the results of our impairment evaluation, is provided below. The finance receivables included in this table specifically exclude leveraged leases in accordance with U.S. generally accepted accounting principles.

(In millions)			September 28, 2024			December 30, 2023
Finance receivables evaluated collectively			$	522		$	508
Finance receivables evaluated individually			11			15
Allowance for credit losses based on collective evaluation			19			21
Allowance for credit losses based on individual evaluation			—			3
Impaired finance receivables with specific allowance for credit losses			$	—		$	11
Impaired finance receivables with no specific allowance for credit losses			11			4
Unpaid principal balance of impaired finance receivables			17			25
Allowance for credit losses on impaired finance receivables			—			3
Average recorded investment of impaired finance receivables			13			27

Note 3. Inventories

Inventories are composed of the following:

(In millions)			September 28, 2024			December 30, 2023
Finished goods			$	1,270		$	1,072
Work in process			1,961			1,736
Raw materials and components			1,179			1,106
Total inventories			$	4,410		$	3,914

Note 4. Accounts Payable and Warranty Liability

Accounts Payable

Supplier Financing Arrangement

We have a financing arrangement with one of our suppliers that extends payment terms for up to 190 days from the receipt of goods and provides for the supplier to be paid by a financial institution earlier than maturity. In June 2024, the maximum amount available under the financing arrangement was increased by $25 million to $200 million. This financing arrangement expires in April 2027. At September 28, 2024 and December 30, 2023, the amount due under the supplier financing arrangement was $104 million and $125 million, respectively.

Warranty Liability

Changes in our warranty liability are as follows:

			Nine Months Ended
(In millions)			September 28, 2024			September 30, 2023
Beginning of period			$	172		$	149
Provision			57			51
Settlements			(55)			(53)
Adjustments*			(4)			17
End of period			$	170		$	164

** Adjustments include changes to prior year estimates, new issues on prior year sales and currency translation adjustments.*

Note 5. Leases

We primarily lease certain manufacturing plants, offices, warehouses, training and service centers at various locations worldwide that are classified as either operating or finance leases. Our leases have remaining lease terms up to 24 years, which include options to extend the lease term for periods up to 20 years when it is reasonably certain the option will be exercised.

Operating lease expense totaled $19 million and $18 million in the third quarter of 2024 and 2023, respectively, and $55 million and $52 million in the first nine months of 2024 and 2023, respectively. Cash paid for operating leases approximated the lease expense and is classified in cash flows from operating activities. Noncash transactions related to operating leases totaled $36 million and $32 million in the first nine months of 2024 and 2023, respectively, reflecting new or extended leases. In the first nine months of 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)			September 28, 2024			December 30, 2023
Operating leases:
Other assets			$	365		$	371
Other current liabilities			58			55
Other liabilities			318			326
Weighted-average remaining lease term (in years)			9.8			10.3
Weighted-average discount rate			4.78%			4.70%
Finance leases:
Property, plant and equipment, less accumulated amortization of $8 million and $8 million, respectively			$	89		$	20
Long-term debt, including current portion			90			23
Weighted-average remaining lease term (in years)			5.1			14.9
Weighted-average discount rate			6.45%			4.55%

At September 28, 2024, maturities of our operating lease liabilities on an undiscounted basis totaled $20 million for the remainder of 2024, $69 million for 2025, $55 million for 2026, $46 million for 2027, $44 million for 2028 and $246 million thereafter.

Note 6. Derivative Instruments and Fair Value Measurements

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

Assets and Liabilities Recorded at Fair Value on a Recurring Basis

We manufacture and sell our products in a number of countries throughout the world, and, therefore, we are exposed to movements in foreign currency exchange rates. We primarily utilize foreign currency exchange contracts with maturities of no more than three years to manage this volatility. These contracts qualify as cash flow hedges and are intended to offset the effect of exchange rate fluctuations on forecasted sales, inventory purchases and overhead expenses. Net gains and losses recognized in earnings and Accumulated other comprehensive loss on cash flow hedges, including gains and losses related to hedge ineffectiveness, were not significant in the periods presented.

Our foreign currency exchange contracts are measured at fair value using the market method valuation technique. The inputs to this technique utilize current foreign currency exchange forward market rates published by third-party leading financial news and data providers. These are observable data that represent the rates that the financial institution uses for contracts entered into at that date; however, they are not based on actual transactions, so they are classified as Level 2. At September 28, 2024 and December 30, 2023, we had foreign currency exchange contracts with notional amounts upon which the contracts were based of $604 million and $478 million, respectively. At September 28, 2024, the fair value amounts of our foreign currency exchange contracts were a $6 million asset and a $4 million liability. At December 30, 2023, the fair value amount of our foreign currency exchange contracts were a $4 million asset and a $3 million liability.

Our Finance group enters into interest rate swap agreements to mitigate certain exposures to fluctuations in interest rates. By using these contracts, we are able to convert floating-rate cash flows to fixed-rate cash flows. These agreements are designated as cash flow hedges. The fair value of our 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 asset at September 28, 2024 and a $4 million asset at December 30, 2023.

At September 28, 2024, we 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 5.20%. These agreements have maturities ranging from August 2025 to August 2029. In the third quarter of 2024, we also entered into a new swap agreement related to these Notes with a notional amount of $30 million and a weighted-average fixed rate of 5.10%; this agreement has a forward start date of August 15, 2025 and matures on August 15, 2030. At December 30, 2023, interest rate swap agreements related to these Notes had an aggregate notional amount of $185 million with a weighted-average fixed rate of 5.17%. At September 28, 2024 and December 30, 2023, we had an interest rate swap agreement with a notional amount of $25 million that matures in June 2025 and effectively converts variable-rate interest on a term loan to a fixed rate of 4.13%.

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:

			September 28, 2024						December 30, 2023
			Carrying			Estimated			Carrying			Estimated
(In millions)			Value			Fair Value			Value			Fair Value
Manufacturing group
Debt, excluding leases			$	(3,166)		$	(3,063)		$	(3,520)		$	(3,342)
Finance group
Finance receivables, excluding leases			433			453			417			423
Debt			(341)			(311)			(348)			(293)

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 7. Shareholders’ Equity

A reconciliation of Shareholders’ equity is presented below:

(In millions)			Common Stock			Capital Surplus			Treasury Stock			Retained Earnings			Accumulated Other Comprehensive Loss			Total Shareholders' Equity
Three months ended September 28, 2024
Beginning of period			$	25		$	2,050		$	(844)		$	6,314		$	(693)		$	6,852
Net income			—			—			—			223			—			223
Other comprehensive income			—			—			—			—			61			61
Share-based compensation activity			—			36			—			—			—			36
Dividends declared			—			—			—			(4)			—			(4)
Purchases of common stock, including excise tax*			—			—			(217)			—			—			(217)
End of period			$	25		$	2,086		$	(1,061)		$	6,533		$	(632)		$	6,951
Three months ended September 30, 2023
Beginning of period			$	26		$	1,973		$	(740)		$	6,349		$	(574)		$	7,034
Net income			—			—			—			269			—			269
Other comprehensive loss			—			—			—			—			(54)			(54)
Share-based compensation activity			—			58			—			—			—			58
Dividends declared			—			—			—			(4)			—			(4)
Purchases of common stock, including excise tax*			—			—			(236)			—			—			(236)
End of period			$	26		$	2,031		$	(976)		$	6,614		$	(628)		$	7,067
Nine months ended September 28, 2024
Beginning of period			$	24		$	1,910		$	(165)		$	5,862		$	(644)		$	6,987
Net income			—			—			—			683			—			683
Other comprehensive income			—			—			—			—			12			12
Share-based compensation activity			1			176			—			—			—			177
Dividends declared			—			—			—			(12)			—			(12)
Purchases of common stock, including excise tax*			—			—			(896)			—			—			(896)
End of period			$	25		$	2,086		$	(1,061)		$	6,533		$	(632)		$	6,951
Nine months ended September 30, 2023
Beginning of period			$	26		$	1,880		$	(84)		$	5,903		$	(612)		$	7,113
Net income			—			—			—			723			—			723
Other comprehensive loss			—			—			—			—			(16)			(16)
Share-based compensation activity			—			151			—			—			—			151
Dividends declared			—			—			—			(12)			—			(12)
Purchases of common stock, including excise tax*			—			—			(892)			—			—			(892)
End of period			$	26		$	2,031		$	(976)		$	6,614		$	(628)		$	7,067

*Includes amounts accrued for excise tax imposed on common share repurchases of $2 million and $6 million for the third quarter and first nine months of 2024, respectively, and $1 million and $7 million for the third quarter and first nine months of 2023, respectively.

Dividends per share of common stock were $0.02 for both the third quarter of 2024 and 2023 and $0.06 for both the first nine months of 2024 and 2023.

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:

			Three Months Ended						Nine Months Ended
(In thousands)			September 28, 2024			September 30, 2023			September 28, 2024			September 30, 2023
Basic weighted-average shares outstanding			186,958			197,947			189,834			201,161
Dilutive effect of stock options			1,986			2,045			2,052			2,009
Diluted weighted-average shares outstanding			188,944			199,992			191,886			203,170

Stock options to purchase shares of common stock that were excluded from the calculation of diluted weighted-average shares outstanding as their effect would have been anti-dilutive totaled 1.0 million shares for both the third quarter of 2024 and 2023, and 1.0 million and 1.7 million shares for the first nine months of 2024 and 2023, respectively.

Accumulated Other Comprehensive Loss and Other Comprehensive Income (Loss)

The components of Accumulated other comprehensive loss are presented below:

(In millions)			Pension and Postretirement Benefits Adjustments			Foreign Currency Translation Adjustments			Deferred Gains (Losses) on Hedge Contracts			Accumulated Other Comprehensive Loss
Balance at December 30, 2023			$	(598)		$	(49)		$	3		$	(644)
Other comprehensive income before reclassifications			—			12			(3)			9
Reclassified from Accumulated other comprehensive loss			2			—			1			3
Balance at September 28, 2024			$	(596)		$	(37)		$	1		$	(632)
Balance at December 31, 2022			$	(516)		$	(94)		$	(2)		$	(612)
Other comprehensive loss before reclassifications			—			(19)			(1)			(20)
Reclassified from Accumulated other comprehensive loss			—			—			4			4
Balance at September 30, 2023			$	(516)		$	(113)		$	1		$	(628)

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

			September 28, 2024									September 30, 2023
(In millions)			Pre-Tax Amount			Tax (Expense) Benefit			After-tax Amount			Pre-Tax Amount			Tax (Expense) Benefit			After-tax Amount
Three Months Ended
Pension and postretirement benefits adjustments:
Amortization of net actuarial gain*			$	(1)		$	1		$	—		$	(2)		$	1		$	(1)
Amortization of prior service cost*			1			(1)			—			2			(1)			1
Pension and postretirement benefits adjustments, net			—			—			—			—			—			—
Foreign currency translation adjustments			59			—			59			(51)			—			(51)
Deferred gains (losses) on hedge contracts:
Current deferrals			3			(2)			1			(6)			2			(4)
Reclassification adjustments			4			(3)			1			2			(1)			1
Deferred gains (losses) on hedge contracts, net			7			(5)			2			(4)			1			(3)
Total			$	66		$	(5)		$	61		$	(55)		$	1		$	(54)
Nine Months Ended
Pension and postretirement benefits adjustments:
Amortization of net actuarial gain*			$	(3)		$	1		$	(2)		$	(5)		$	2		$	(3)
Amortization of prior service cost*			5			(1)			4			6			(3)			3
Pension and postretirement benefits adjustments, net			2			—			2			1			(1)			—
Foreign currency translation adjustments			12			—			12			(19)			—			(19)
Deferred gains (losses) on hedge contracts:
Current deferrals			(3)			—			(3)			(3)			2			(1)
Reclassification adjustments			2			(1)			1			6			(2)			4
Deferred gains (losses) on hedge contracts, net			(1)			(1)			(2)			3			—			3
Total			$	13		$	(1)		$	12		$	(15)		$	(1)		$	(16)

*These components of other comprehensive income (loss) are included in the computation of net periodic pension cost (income). See Note 15 of our 2023 Annual Report on Form 10-K for additional information.

Note 8. Segment Information

We operate in, and report financial information for, the following six operating segments: Textron Aviation, Bell, Textron Systems, Industrial, Textron eAviation and Finance. Segment profit is an important measure used for evaluating performance and for decision-making purposes. Segment profit for the manufacturing segments excludes the non-service components of pension and postretirement income, net; LIFO inventory provision; intangible asset amortization; interest expense, net for Manufacturing group; certain corporate expenses; gains/losses on major business dispositions; and special charges. The measurement for the Finance segment includes interest income and expense along with intercompany interest income and expense.

Our revenues by segment, along with a reconciliation of segment profit to income from continuing operations before income taxes, are included in the table below:

			Three Months Ended						Nine Months Ended
(In millions)			September 28, 2024			September 30, 2023			September 28, 2024			September 30, 2023
Revenues
Textron Aviation			$	1,339		$	1,338		$	4,002		$	3,849
Bell			929			754			2,450			2,076
Textron Systems			301			309			930			921
Industrial			840			922			2,646			2,880
Textron eAviation			6			7			22			22
Finance			12			13			39			43
Total revenues			$	3,427		$	3,343		$	10,089		$	9,791
Segment Profit
Textron Aviation			$	128		$	160		$	466		$	456
Bell			98			77			260			202
Textron Systems			39			41			112			112
Industrial			32			51			103			171
Textron eAviation			(18)			(19)			(54)			(40)
Finance			5			22			30			42
Segment profit			284			332			917			943
Corporate expenses and other, net			(20)			(38)			(99)			(98)
Interest expense, net for Manufacturing group			(22)			(16)			(57)			(49)
LIFO inventory provision			(49)			(26)			(96)			(86)
Intangible asset amortization			(9)			(10)			(26)			(30)
Special charges			2			—			(25)			—
Non-service components of pension and postretirement income, net			66			59			198			177
Income from continuing operations before income taxes			$	252		$	301		$	812		$	857

Note 9. Revenues

Disaggregation of Revenues

Our revenues disaggregated by major product type are presented below:

			Three Months Ended						Nine Months Ended
(In millions)			September 28, 2024			September 30, 2023			September 28, 2024			September 30, 2023
Aircraft			$	869		$	891		$	2,576		$	2,529
Aftermarket parts and services			470			447			1,426			1,320
Textron Aviation			$	1,339		$	1,338		$	4,002		$	3,849
Military aircraft and support programs			553			472			1,532			1,252
Commercial helicopters, parts and services			376			282			918			824
Bell			$	929		$	754		$	2,450		$	2,076
Textron Systems			$	301		$	309		$	930		$	921
Fuel systems and functional components			452			465			1,432			1,476
Specialized vehicles			388			457			1,214			1,404
Industrial			$	840		$	922		$	2,646		$	2,880
Textron eAviation			$	6		$	7		$	22		$	22
Finance			$	12		$	13		$	39		$	43
Total revenues			$	3,427		$	3,343		$	10,089		$	9,791

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
Three months ended September 28, 2024
Customer type:
Commercial			$	1,259		$	356		$	67		$	834		$	6		$	12		$	2,534
U.S. Government			80			573			234			6			—			—			893
Total revenues			$	1,339		$	929		$	301		$	840		$	6		$	12		$	3,427
Geographic location:
United States			$	1,002		$	693		$	273		$	452		$	5		$	5		$	2,430
Europe			99			23			10			144			1			—			277
Other international			238			213			18			244			—			7			720
Total revenues			$	1,339		$	929		$	301		$	840		$	6		$	12		$	3,427
Three months ended September 30, 2023
Customer type:
Commercial			$	1,302		$	270		$	66		$	915		$	7		$	13		$	2,573
U.S. Government			36			484			243			7			—			—			770
Total revenues			$	1,338		$	754		$	309		$	922		$	7		$	13		$	3,343
Geographic location:
United States			$	906		$	573		$	275		$	488		$	4		$	4		$	2,250
Europe			133			41			10			174			2			—			360
Other international			299			140			24			260			1			9			733
Total revenues			$	1,338		$	754		$	309		$	922		$	7		$	13		$	3,343
Nine months ended September 28, 2024
Customer type:
Commercial			$	3,757		$	883		$	218		$	2,626		$	22		$	39		$	7,545
U.S. Government			245			1,567			712			20			—			—			2,544
Total revenues			$	4,002		$	2,450		$	930		$	2,646		$	22		$	39		$	10,089
Geographic location:
United States			$	3,099		$	1,891		$	830		$	1,409		$	14		$	13		$	7,256
Europe			252			60			35			525			6			5			883
Other international			651			499			65			712			2			21			1,950
Total revenues			$	4,002		$	2,450		$	930		$	2,646		$	22		$	39		$	10,089
Nine months ended September 30, 2023
Customer type:
Commercial			$	3,730		$	803		$	210		$	2,866		$	22		$	43		$	7,674
U.S. Government			119			1,273			711			14			—			—			2,117
Total revenues			$	3,849		$	2,076		$	921		$	2,880		$	22		$	43		$	9,791
Geographic location:
United States			$	2,675		$	1,567		$	824		$	1,548		$	12		$	12		$	6,638
Europe			358			95			41			579			8			1			1,082
Other international			816			414			56			753			2			30			2,071
Total revenues			$	3,849		$	2,076		$	921		$	2,880		$	22		$	43		$	9,791

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 revenues 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 September 28, 2024, we had $16.0 billion in remaining performance obligations of which we expect to recognize revenues of approximately 64% through 2025, an additional 34% through 2027, 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 September 28, 2024 and December 30, 2023, contract assets totaled $376 million and $513 million, respectively, and contract liabilities totaled $1.8 billion for both dates, reflecting timing differences between revenues recognized, billings and payments from customers. We recognized revenues of $252 million and $70 million in the third quarter of 2024 and 2023, respectively, and $912 million and $766 million in the first nine months of 2024 and 2023, respectively, that were included in the contract liability balance at the beginning of each year.

Note 10. Retirement Plans

We provide defined benefit pension plans and other postretirement benefits to eligible employees. The components of net periodic benefit income for these plans are as follows:

			Three Months Ended						Nine Months Ended
(In millions)			September 28, 2024			September 30, 2023			September 28, 2024			September 30, 2023
Pension Benefits
Service cost			$	18		$	17		$	52		$	50
Interest cost			91			91			272			273
Expected return on plan assets			(159)			(152)			(477)			(457)
Amortization of net actuarial loss			1			—			3			1
Amortization of prior service cost			1			3			6			9
Net periodic benefit income*			$	(48)		$	(41)		$	(144)		$	(124)
Postretirement Benefits Other Than Pensions
Service cost			$	—		$	1		$	1		$	2
Interest cost			2			2			5			6
Amortization of net actuarial gain			(2)			(2)			(6)			(6)
Amortization of prior service credit			—			(1)			(1)			(3)
Net periodic benefit income			$	—		$	—		$	(1)		$	(1)

** Excludes the cost associated with the defined contribution component, included in certain of our U.S.-based defined benefit pension plans, that totaled $2 million for both the third quarter of 2024 and 2023 and $8 million for both the first nine months of 2024 and 2023.*

Note 11. Special Charges

On April 24, 2024, the Board of Directors approved the expansion of Textron’s 2023 restructuring plan to further reduce operating expenses through headcount reductions. In the first quarter of 2024, both the Shadow and Future Attack Reconnaissance Aircraft programs were cancelled at the Textron Systems and Bell segments, resulting in additional severance costs under the restructuring plan. Additionally, we increased our planned headcount reduction within the Industrial segment due to lower anticipated consumer demand for certain products at the Specialized Vehicles product line and reduced demand for fuel systems from European automotive manufacturers at Kautex.

In connection with this plan, special charges for the third quarter and first nine months of 2024 included a reversal of $2 million and charges of $25 million, respectively, primarily related to headcount reductions at the Industrial, Textron Systems and Bell segments. In the third quarter of 2024, we recorded a $6 million reversal of accrued severance and related benefit costs due to a change in estimate as a result of retaining and re-assigning certain employees at Bell and due to customer contract termination cost reimbursements at Textron Systems. In the first nine months of 2024, special charges included $23 million in severance costs and $2 million in asset impairment charges; we recorded $19 million of these charges at the Industrial segment, $5 million at the Textron Systems segment and $1 million at the Bell segment. We expect to incur additional special charges in the fourth quarter of 2024 in the range of approximately $15 million to $20 million, largely related to headcount reductions at the Industrial segment.

Since inception of the 2023 restructuring plan, we have incurred $151 million in special charges, including severance costs of $62 million, which included $38 million at the Industrial segment, $14 million at the Bell segment and $10 million at the Textron Systems segment; and asset impairment charges of $89 million at the Industrial segment.

Headcount reductions since inception of the plan are expected to total approximately 1,500 positions, representing 4% of our global workforce. We estimate that remaining future cash outlays under this plan will be in the range of $45 million to $50 million, most of which we expect to pay by the first quarter of 2025. We expect charges under this plan to be substantially completed by the end of 2024.

Our restructuring reserve activity is summarized below:

(In millions)			Severance Costs			Contract Terminations and Other			Total
Balance at December 30, 2023			$	42		$	5		$	47
Provision for 2023 Restructuring Plan			29			—			29
Cash paid			(36)			(1)			(37)
Reversals			(6)			—			(6)
Balance at September 28, 2024			$	29		$	4		$	33

Note 12. Income Taxes

Our effective tax rate for the third quarter of 2024 and 2023 was 11.5% and 10.6%, respectively. In the third quarter of 2024, the effective tax rate was lower than the U.S. federal statutory rate of 21%, largely due to the favorable impact of research and development credits and foreign tax credits. In the third quarter of 2023, the effective tax rate was lower than the U.S. federal statutory rate of 21%, largely due to the favorable impact of research and development credits and tax deductions for foreign-derived intangible income.

Our effective tax rate for the first nine months of 2024 and 2023 was 15.8% and 15.6%, respectively, and was lower than the U.S. federal statutory rate largely due to the favorable impact of research and development credits and tax deductions for foreign-derived intangible income.

Note 13. 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.