AI interpretation based on checked source excerpts. Issuer assertions and evidence limitations remain explicit.
Policy quality-scores-2: six equally weighted categories. The overall score requires full coverage. Missing inputs are not zero. Qualitative grades are sourced interpretations, not probabilities. 4/6 · 18/10/2026
Moat50
Equal-weight average of four evidence-backed rubric grades (0–4), scaled to 100.
structural advantage · 2/4 · Significant integration in existing government work and awarded Bell programs support a bounded incumbent advantage. Competitive procurement and incomplete evidence for the remaining businesses prevent a stronger enterprise-wide assessment.
durability · 2/4 · MV-75’s award, subsequent milestone and continuing military program activity demonstrate continuity across years. Government termination rights and uncertain production economics constrain durability.
customer dependency · 2/4 · Integrated contract modifications and continuing production and support suggest customer reliance within existing programs. This is indirect evidence of dependency; neither switching costs nor customer inability to substitute are quantified.
erosion resilience · 2/4 · Military revenue growth and Industrial pricing recovery show some resilience, while Bell profit deterioration, lower legacy program volumes and realized Industrial impairments show meaningful weaknesses. The anticipated MV-75 charge adds a prospective risk rather than a realized loss.
Pricing power44
Equal-weight average of four evidence-backed rubric grades (0–4), scaled to 100.
realized pricing · 2/4 · Bell’s second-quarter commercial revenue increase was primarily attributed to higher pricing. Industrial reported higher pricing net of inflation, including $21 million of tariff recoveries. These observed outcomes demonstrate some pricing ability, but their scope and duration are limited.
retention · 2/4 · Continuing military production and support and integrated contract modifications provide indirect evidence of recurring customer demand and switching friction. Lower V-22 and sustainment volumes and commercial helicopter deliveries temper that evidence; no retention rate is inferred.
margin resilience · 2/4 · Industrial improved profit through efficiencies and pricing net of inflation, but manufacturing gross margin fell 100 basis points and Bell’s first-half profit declined despite revenue growth. Resilience is mixed rather than uniformly strong.
contractual freedom · 1/4 · Fixed-price contracts leave Textron responsible for excess costs, competitive defense procurement creates pricing pressure, and government contracts permit unilateral termination. Commercial pricing gains show some discretion outside these constraints, but broad freedom to reset terms is not demonstrated.
Predictability100
Five consecutive annual periods. Equal weights: nondeclining revenue frequency; revenue-growth volatility (5–40pp); positive FCF frequency; FCF-margin volatility (3–20pp). Stability indicator, not a growth forecast.
- Nondeclining revenue years (%)
- 100.00
- Revenue growth volatility (pp)
- 2.95
- Positive FCF years (%)
- 100.00
- FCF margin volatility (pp)
- 1.87
Financial strength—
Missing required inputs: debtFcfGrade, netDebtEbitGrade, interestCoverageGrade, currentRatioGrade. Equal-weight grades: debt/FCF (1–8x), net debt/earnings before interest and tax (0–5x), interest service (1–12x), current ratio (0.75–2x). Earnings use reported operating income, or reported pretax profit plus reported interest expense when operating income is unavailable. Interest service uses earnings/interest expense; if unavailable, it uses reported operating cash flow/cash interest paid, without relabeling cash paid as accrued expense. Nonpositive cash flow/earnings score 0 for their service component; reported zero interest with a positive numerator scores 100. Net cash scores 100 for net leverage. Missing disclosures remain unavailable. General nonfinancial-company rubric, not a credit rating; exceptional and nonoperating gains are not normalized out. IFRS finance-cost and cash-flow classifications retain their reported scope.
Capital allocation—
Missing required inputs: operatingReturn. Three-year equal-weight indicators: pretax return on average invested capital (0–25%; equity + debt − cash, each year and its prior year), share-count growth (0–5%, lower better), share-based cost/revenue (2–20%, lower better), consolidated FCF/net income (0–1x). Return uses reported operating income or, if unavailable, EBIT calculated from reported pretax profit plus reported interest expense; exceptional/nonoperating gains are not normalized out. Share-based cost uses the reported cash-flow add-back or, if absent, separately reported recognized compensation expense; the latter never becomes an FCF adjustment. Nonpositive net income scores 0 for cash conversion; absent income/FCF stays unavailable. Nonpositive invested capital has no defined return and remains unavailable. Does not establish acquisition quality or buyback timing.
- 3-year average dilution (%)
- -5.62
- 3-year average SBC / revenue (%)
- 0.57
- cashConversionGrade
- 91.64
Management63
Equal-weight average of four evidence-backed rubric grades (0–4), scaled to 100.
capital discipline · 2/4 · Actual three-year manufacturing cash flow modestly exceeded the incentive target, while average ROIC missed target. First-half 2026 operating cash flow of $187 million fell below $228 million of capital expenditure while $377 million funded buybacks, reducing cash. Lower debt and remaining liquidity temper this concern; buyback value creation is not established.
incentive alignment · 3/4 · Actual long-term awards included 50% performance share units, and the completed 2023–2025 cycle paid 93.3% of target using ROIC, manufacturing cash flow and relative shareholder return. Disclosed ownership requirements and compensation safeguards reinforce alignment, although individual ownership compliance and exceptional incentive effectiveness are not established.
execution · 2/4 · Program progression, military revenue growth, Industrial efficiencies and three-year cash generation demonstrate delivery. Bell profit deterioration, below-target three-year ROIC and Industrial impairments show mixed outcomes. Execution is assessed from operating evidence, and the expected MV-75 adjustment remains prospective.
governance · 3/4 · Entirely independent principal committees, annual majority-vote director elections and actual 2025 attendance support strong governance practices. These disclosures establish operating processes rather than exceptional oversight effectiveness or future shareholder voting outcomes.
Evidence
The MV-75 contract was awarded to Bell in December 2022.
Business: MV-75 contract award · Filed 11/02/2026
In 2024, the U.S. Army announced approval of Milestone B, establishing the MV-75 as a program of record and transitioning the program to the Engineering and Manufacturing Development phase.
Business: MV-75 program milestone · Filed 11/02/2026
Army’s Future Long Range Assault Aircraft program, now designated as the MV-75 program and the production and support of the V-22 tiltrotor aircraft and H-1 helicopters.
Business: Bell military production and support programs · Filed 11/02/2026
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.
Revenue recognition: significant integration in government contract modifications · Filed 11/02/2026
Bell’s military aircraft and support programs revenues increased $208 million, 16%, in the first half of 2026, compared with the first half of 2025, reflecting higher volume on the MV-75 program and H-1 production, partially offset by lower volume on V-22 production and on military sustainment programs.
Bell segment analysis: first-half military revenue and program volumes · Filed 28/07/2026
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.
Revenue recognition: government termination and work-in-process rights · Filed 11/02/2026
The market for U.S. Government defense business is highly competitive, and the competitive bidding process increases pricing pressure and cost which may affect our ability to win new contracts for major government programs.
Risk factors: defense competition and procurement pricing pressure · Filed 11/02/2026
Under fixed-price contracts, generally we receive a fixed price irrespective of the actual costs we incur, and, consequently, we absorb any costs in excess of the fixed price.
Risk factors: fixed-price contract cost responsibility · Filed 11/02/2026
Upon award of the LRIP option, which is largely fixed price, we expect to record an unfavorable cumulative catch-up program adjustment, reflecting higher costs than originally anticipated from when the program was bid, in the range of $60 million to $110 million.
MV-75 production option: expected unfavorable program adjustment · Filed 28/07/2026
Bell Three Months Ended Six Months Ended (Dollars in millions) July 4, 2026 June 28, 2025 % Change July 4, 2026 June 28, 2025 % Change Revenues: Military aircraft and support programs $ 695 $ 648 7% $ 1,490 $ 1,282 16% Commercial helicopters, parts and services 379 368 3% 654 717 (9)% Total revenues 1,074 1,016 6% 2,144 1,999 7% Cost of sales 917 841 9% 1,821 1,644 11% Research and development costs 27 38 (29)% 64 77 (17)% Selling and administrative expense 55 57 (4)% 112 108 4% Segment profit $ 75 $ 80 (6)% $ 147 $ 170 (14)% Profit margin 7.0% 7.9% 6.9% 8.5% Bell’s military aircraft and support programs revenues increased $47 million, 7%, in the second quarter of 2026, compared with the second quarter of 2025, largely due to higher volume on H-1 production and the MV-75 program.
Bell segment analysis: revenues, profit and margins · Filed 28/07/2026
Commercial helicopters, parts and services revenues increased $11 million, 3%, in the second quarter of 2026, compared with the second quarter of 2025, primarily due to higher pricing.
Bell segment analysis: realized commercial pricing contribution · Filed 28/07/2026
Industrial's segment profit increased $15 million, 18%, in the first half of 2026, compared with the first half of 2025, primarily due to manufacturing efficiencies, which included the benefit of cost reductions resulting from prior year restructuring activities, and higher pricing, net of inflation, partially offset by lower net volume and mix.
Industrial segment analysis: efficiencies and pricing net of inflation · Filed 28/07/2026
Pricing, net of inflation includes $21 million of tariff recoveries as described above.
Industrial segment analysis: tariff recoveries · Filed 28/07/2026
We delivered 56 commercial helicopters in the first half of 2026, compared with 61 commercial helicopters in the first half of 2025.
Bell segment analysis: first-half commercial helicopter deliveries · Filed 28/07/2026
Gross margin as a percentage of Manufacturing revenues decreased 100 basis points in the first half of 2026, primarily due to lower margin at the Bell segment.
Cost of sales: first-half manufacturing gross margin deterioration · Filed 28/07/2026
Consolidated Statements of Cash Flows (Unaudited) For the Six Months Ended July 4, 2026 and June 28, 2025, respectively Consolidated (In millions) 2026 2025 Cash flows from operating activities Net income $ 468 $ 452 Adjustments to reconcile net income to net cash provided by operating activities: Non-cash items: Depreciation and amortization 190 192 Deferred income taxes 82 (22) Gain on business disposition — (4) Other, net 69 73 Changes in assets and liabilities: Accounts receivable, net (96) 54 Inventories (446) (284) Other assets (29) (70) Accounts payable 93 163 Other liabilities (88) (200) Income taxes, net 20 46 Pension, net (121) (117) Captive finance receivables, net 46 (26) Other operating activities, net (1) 7 Net cash provided by operating activities of continuing operations 187 264 Net cash used in operating activities of discontinued operations — (1) Net cash provided by operating activities 187 263 Cash flows from investing activities Capital expenditures (228) (134) Net proceeds from corporate-owned life insurance policies 3 57 Net proceeds from business disposition — 16 Proceeds from sale of property, plant and equipment 6 9 Finance receivables repaid 13 17 Finance receivables originated (15) (21) Proceeds from the disposition of non-captive assets 24 59 Other investing activities, net 4 14 Net cash provided by (used in) investing activities (193) 17 Cash flows from financing activities Net proceeds from long-term debt — 495 Principal payments on long-term debt and nonrecourse debt (75) (364) Purchases of Textron common stock (377) (429) Proceeds from stock options exercised 61 10 Dividends paid (7) (7) Other financing activities, net (11) (15) Net cash used in financing activities (409) (310) Effect of exchange rate changes on cash and equivalents (4) 23 Net decrease in cash and equivalents (419) (7) Cash and equivalents at beginning of period 2,025 1,441 Cash and equivalents at end of period $ 1,606 $ 1,434 See Notes to the Consolidated Financial Statements.
Consolidated cash flows: cash generation, investment and financing · Filed 28/07/2026
Key information that is utilized in assessing our liquidity is summarized below: (Dollars in millions) July 4, 2026 January 3, 2026 Manufacturing group Cash and equivalents $ 1,436 $ 1,940 Debt 3,466 3,539 Shareholders’ equity 8,054 7,875 Capital (debt plus shareholders’ equity) 11,520 11,414 Net debt (net of cash and equivalents) to capital 20% 17% Debt to capital 30% 31% Finance group Cash and equivalents $ 170 $ 85 Debt 339 339 We believe that our calculations of debt to capital and net debt to capital are useful measures as they provide a summary indication of the level of debt financing (i.e., leverage) that is in place to support our capital structure, as well as to provide an indication of the capacity to add further leverage.
Liquidity: manufacturing cash, debt and leverage · Filed 28/07/2026
The Company’s actual performance achieved against the threshold, target and maximum levels set for the metrics included in the 2023-2025 PSU cycle, and the resulting percentage of PSUs earned by the NEOs, are detailed below: 2023–2025 Performance Share Unit Calculation ($ in millions) Financial Metric Threshold Performance Target Performance Maximum Performance Actual Performance Component Weighting Earned Percentage Average Return on Invested Capital(1) 8.4% 12.4% 15.4% 11.6%(4) 50% 42.5% Cumulative Manufacturing Cash Flow(2) $1,206 $2,683 $4,160 $2,716(4) 30% 30.7% Relative Total Shareholder Return(3) 25% 50% 75% 50.1% 20% 20.1% Total Earned 93.3% (1) “Three-year Average Return on Invested Capital” is measured by dividing “ROIC income” by “average invested capital”.
Compensation discussion: actual 2023–2025 performance and PSU payout calculation · Filed 05/03/2026
26 / TEXTRON 2026 PROXY STATEMENT COMPENSATION DISCUSSION AND ANALYSIS 2025 Long-Term Incentive Compensation: • The Committee again awarded a mix of long-term incentive awards comprised of 50% performance share units, 25% stock options, and 25% restricted stock units.
Compensation discussion: awarded 2025 long-term incentive mix · Filed 05/03/2026
Executive Compensation Highlights The following summarizes key aspects of our executive compensation program for the NEOs: • Pay for performance philosophy aligns with a substantial portion of executives’ compensation tied to Company performance against pre-established metrics set by the Committee • Fifty percent (50%) of long-term incentive awards are subject to performance-based metrics to closely align with long-term Company performance • Pay is aligned with shareholder interests as a substantial portion of executives’ target compensation, including more than 75% of CEO’s target compensation, is in the form of equity-based long-term incentives • Annual incentive compensation and performance share unit payout percentages are capped • Double-triggers are required in change in control provisions for equity awards and severance arrangements • Committee annually conducts a pay-for-performance analysis based on operating metrics used in our annual incentive program • Committee annually reviews the composition of a talent peer group which is referenced for benchmarking our executives’ compensation and makes changes as appropriate • Committee annually reviews compensation data against the talent peer group in order to understand the competitiveness of our compensation program and pay levels • Committee annually reviews a compensation-related risk assessment with assistance from its independent compensation consultant • Committee and the Board review and evaluate plans for executive development and succession • Executives are subject to robust share ownership requirements • No single-trigger vesting of long-term incentive awards upon a change in control of the Company • No tax gross-ups for officers hired after 2008 • No employment contracts guaranteeing fixed-term employment or bonuses to executives • No excessive executive perquisites • No hedging or pledging Textron securities • No repricing or exchanging stock options without shareholder approval Compensation Philosophy Textron’s compensation philosophy establishes target total direct compensation with reference to a talent peer group median and ties a substantial portion of our executives’ compensation to performance against objective business metrics and stock price performance.
Compensation discussion: ownership requirements and compensation safeguards · Filed 05/03/2026
● Our three principal Board committees, the Audit, Nominating and Corporate Governance, and Organization and Compensation Committees, are each comprised of entirely independent directors.
Corporate governance: independent principal committees · Filed 05/03/2026
Board Accountability and Practices ● All directors must stand for election annually and be elected by a majority of votes cast in uncontested elections.
Corporate governance: annual elections and majority voting · Filed 05/03/2026
● During 2025, each director attended at least 75% of the total number of Board and applicable committee meetings, and all of the directors then standing for re-election attended the Annual Meeting of Shareholders.
Corporate governance: actual 2025 director attendance · Filed 05/03/2026
63 Table of Contents 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.
Special charges: realized Industrial asset impairments · Filed 11/02/2026
