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What changed in Textron's 10-K — 2022 vs 2023

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Paragraph-level year-over-year comparison of Textron's 2022 and 2023 10-K annual filings, covering the Business, Risk Factors, Legal Proceedings, Cybersecurity, MD&A and Market Risk sections. Every new, removed and edited paragraph is highlighted side-by-side so you can see exactly what management changed in the 2023 report.

+218 added−211 removedSource: 10-K (2023-02-16) vs 10-K (2022-02-17)

Top changes in Textron's 2023 10-K

218 paragraphs added · 211 removed · 171 edited across 8 sections

Item 1. Business

Business — how the company describes what it does

46 edited+9 added−10 removed39 unchanged
Biggest changeName Age Current Position with Textron Inc. Scott C. Donnelly 60 Chairman, President and Chief Executive Officer Frank T. Connor 62 Executive Vice President and Chief Financial Officer Julie G. Duffy 56 Executive Vice President, Human Resources E. Robert Lupone 62 Executive Vice President, General Counsel, Secretary and Chief Compliance Officer Mr.
Biggest changeInformation about our Executive Officers The following table sets forth certain information concerning our executive officers as of February 16, 2023. Name Age Current Position with Textron Inc. Scott C. Donnelly 61 Chairman, President and Chief Executive Officer Frank T. Connor 63 Executive Vice President and Chief Financial Officer Julie G.
Government may not be liable for assets we own and utilize to provide services under the “fee-for-service” contracts; and (d) we may be liable for excess costs incurred by the U.S. Government in procuring undelivered items from another source. See Aerospace and Defense Industry section in Item 1A. Risk Factors for additional information related to regulation of U.S.
Government may not be liable for assets we own and utilize to provide services under the “fee-for-service” contracts; and (d) we may be liable for excess costs incurred by the U.S. Government in procuring undelivered items from another source. See Aerospace and Defense Industry section in Item 1A. Risk Factors for additional information related to regulation of U.S. Government business.
Army's premier tactical unmanned aircraft system; the Aerosonde Small Unmanned Aircraft Systems, a multi-mission capable unmanned aircraft system for commercial and military operations; the U.S. Navy's next generation Landing Craft Air Cushion, developed as part of the Ship-to-Shore Connector program; and piston aircraft engines under the Lycoming brand.
Army's premier tactical unmanned aircraft system; the Aerosonde Small Unmanned Aircraft System, a multi-mission capable unmanned aircraft system for commercial and military operations; the U.S. Navy's next generation Landing Craft Air Cushion, developed as part of the Ship-to-Shore Connector program; and piston aircraft engines under the Lycoming brand.
Their diversified customer base for the Specialized Vehicles product line includes golf courses and resorts, government agencies and municipalities, consumers, outdoor enthusiasts, and commercial and industrial users such as factories, warehouses, airlines, planned communities, hunting preserves, educational and corporate campuses, sporting venues, municipalities and landscaping professionals.
The diversified customer base for the Specialized Vehicles product line includes golf courses and resorts, government agencies and municipalities, consumers, outdoor enthusiasts, and commercial and industrial users such as factories, warehouses, airlines, planned communities, hunting preserves, educational and corporate campuses, sporting venues and landscaping professionals.
Bell produces a variety of commercial aircraft types, including light single- and twin-engine helicopters and medium twin-engine helicopters, along with other related products. The commercial helicopters currently offered by Bell include the 429, 407GXi, 412EPX, 412EPI, 412EP, 505 Jet Ranger X and Huey II.
Bell produces a variety of commercial aircraft types, including light single- and twin-engine helicopters and medium twin-engine helicopters, along with other related products. The commercial helicopters currently offered by Bell include the 429, 407GXi, 412EPX, 412EPI, 505 Jet Ranger X and Huey II.
Navy, Marine and Air Force personnel provided by Airborne Tactical Advantage Company (ATAC). 4 Table of Contents Industrial Segment Our Industrial segment designs and manufactures a variety of products within the Fuel Systems and Functional Components and Specialized Vehicles product lines.
Navy, Marine and Air Force personnel provided by Airborne Tactical Advantage Company. 4 Table of Contents Industrial Segment Our Industrial segment designs and manufactures a variety of products within the Fuel Systems and Functional Components and Specialized Vehicles product lines.
We believe by employing highly talented, diverse employees, who feel valued, respected and are able to contribute fully, we will improve performance, innovation, collaboration and talent retention, all of which contributes to stronger business results and reinforce our reputation as leaders in our industries and communities.
We believe by employing highly talented, diverse employees, who feel valued, respected and are able to contribute fully, we will improve performance, innovation, collaboration and talent retention, all of which contributes to stronger business results and reinforces our reputation as leaders in our industries and communities.
Financial Statements and Supplementary Data, and Business and Operational Risks and Risks Related to Regulatory and Legal Matters sections in Item 1A. Risk Factors.
Financial Statements and Supplementary Data, and Business and Operational Risks and Risks Related to Regulatory, Legal and Other Matters sections in Item 1A. Risk Factors.
Approximately 7,000, or 27%, of our U.S. employees, most of whom work for our Bell and Textron Aviation segments, are represented by unions under collective bargaining agreements, and certain of our non-U.S. employees are represented by organized works councils. From time to time our collective bargaining agreements expire.
Approximately 7,300, or 27%, of our U.S. employees, most of whom work for our Bell and Textron Aviation segments, are represented by unions under collective bargaining agreements, and certain of our non-U.S. employees are represented by organized works councils. From time to time our collective bargaining agreements expire.
Kautex has also developed and begun to market the Pentatonic battery system, a customizable, lightweight battery housing with thermal management capabilities, comprised of either thermoplastic composite or composite metal hybrid, for use in electric vehicles, from hybrid to full battery-powered. Kautex’s business model is focused on developing and maintaining long-term customer relationships with leading global OEMs.
Kautex has also developed and begun to market the Pentatonic battery system, a customizable, lightweight battery housing with thermal management capabilities, comprised of either thermoplastic composite or composite metal hybrid, for use in electric vehicles, from hybrid to full battery-powered. Kautex’s business model is focused on developing and maintaining long-term customer relationships with leading global original equipment manufacturers (OEMs).
For discussion of certain risks relating to human capital management, see Risks Related to Human Capital section in Item 1A. Risk Factors. Patents and Trademarks We own, or are licensed under, numerous patents throughout the world relating to products, services and methods of manufacturing. Patents developed while under contract with the U.S.
For discussion of certain risks relating to human capital management, see Risks Related to Human Capital section in Item 1A. Risk Factors. 7 Table of Contents Patents and Trademarks We own, or are licensed under, numerous patents throughout the world relating to products, services and methods of manufacturing. Patents developed while under contract with the U.S.
See Strategic Risks section in Item 1A. Risk Factors for additional information with respect to risks related to obtaining certification of new aircraft products. Our operations are subject to numerous laws and regulations designed to protect the environment. For additional information regarding environmental matters, see Note 18 to the Consolidated Financial Statements in Item 8.
Risk Factors for additional information with respect to risks related to obtaining certification of new aircraft products. Our operations are subject to numerous laws and regulations designed to protect the environment. For additional information regarding environmental matters, see Note 18 to the Consolidated Financial Statements in Item 8.
We use an annual goal setting process to drive injury rate improvements, and the injury rate reduction goal is a performance metric that is tracked and reported to senior leadership and the Audit Committee of the Board of Directors. The safety of our employees has been a priority throughout our response to the COVID-19 pandemic.
We use an annual goal setting process to drive injury rate improvements, and the injury rate reduction goal is a performance metric that is tracked and reported to senior leadership and the Audit Committee of the Board of Directors. The health and safety of our employees has been a priority throughout the duration of the COVID-19 pandemic.
Government’s convenience or for our failure to perform, to change applicable procurement and accounting policies, or, under certain circumstances, to withhold payment or suspend or debar us as a contractor eligible to receive future contract awards; • Changes in foreign military funding priorities or budget constraints and determinations, or changes in government regulations or policies on the export and import of military and commercial products; • Volatility in the global economy or changes in worldwide political conditions that adversely impact demand for our products; • Volatility in interest rates or foreign exchange rates; • Risks related to our international business, including establishing and maintaining facilities in locations around the world and relying on joint venture partners, subcontractors, suppliers, representatives, consultants and other business partners in connection with international business, including in emerging market countries; • Our Finance segment’s ability to maintain portfolio credit quality or to realize full value of receivables; • Performance issues with key suppliers or subcontractors; • Legislative or regulatory actions, both domestic and foreign, impacting our operations or demand for our products; • Our ability to control costs and successfully implement various cost-reduction activities; • The efficacy of research and development investments to develop new products or unanticipated expenses in connection with the launching of significant new products or programs; • The timing of our new product launches or certifications of our new aircraft products; • Our ability to keep pace with our competitors in the introduction of new products and upgrades with features and technologies desired by our customers; • Pension plan assumptions and future contributions; • Demand softness or volatility in the markets in which we do business; • Cybersecurity threats, including the potential misappropriation of assets or sensitive information, corruption of data or operational disruption; • Difficulty or unanticipated expenses in connection with integrating acquired businesses; • The risk that acquisitions do not perform as planned, including, for example, the risk that acquired businesses will not achieve revenues and profit projections; • The impact of changes in tax legislation; • Risks and uncertainties related to the impact of the COVID-19 pandemic on our business and operations; and • The ability of our businesses to hire and retain the highly skilled personnel necessary for our businesses to succeed.
Government’s convenience or for our failure to perform, to change applicable procurement and accounting policies, or, under certain circumstances, to withhold payment or suspend or debar us as a contractor eligible to receive future contract awards; • Changes in foreign military funding priorities or budget constraints and determinations, or changes in government regulations or policies on the export and import of military and commercial products; • Volatility in the global economy or changes in worldwide political conditions that adversely impact demand for our products; • Volatility in interest rates or foreign exchange rates and inflationary pressures; • Risks related to our international business, including establishing and maintaining facilities in locations around the world and relying on joint venture partners, subcontractors, suppliers, representatives, consultants and other business partners in connection with international business, including in emerging market countries; • Our Finance segment’s ability to maintain portfolio credit quality or to realize full value of receivables; • Performance issues with key suppliers or subcontractors; • Legislative or regulatory actions, both domestic and foreign, impacting our operations or demand for our products; • Our ability to control costs and successfully implement various cost-reduction activities; • The efficacy of research and development investments to develop new products or unanticipated expenses in connection with the launching of significant new products or programs; • The timing of our new product launches or certifications of our new aircraft products; • Our ability to keep pace with our competitors in the introduction of new products and upgrades with features and technologies desired by our customers; • Pension plan assumptions and future contributions; • Demand softness or volatility in the markets in which we do business; • Cybersecurity threats, including the potential misappropriation of assets or sensitive information, corruption of data or operational disruption; • Difficulty or unanticipated expenses in connection with integrating acquired businesses; • The risk that acquisitions do not perform as planned, including, for example, the risk that acquired businesses will not achieve revenues and profit projections; • The impact of changes in tax legislation; • Risks and uncertainties related to the ongoing impact of the COVID-19 pandemic and the war between Russia and Ukraine on our business and operations; • The ability of our businesses to hire and retain the highly skilled personnel necessary for our businesses to succeed; and • Risks related to a competitor's protest of the award of the FLRAA contract to Bell. 9 Table of Contents
A substantial number of the originations in our finance receivable portfolio are cross-border transactions for aircraft sold outside of the U.S. In 2021 and 2020, our Finance group paid our Manufacturing group $100 million and $195 million, respectively, related to the sale of Textron-manufactured products to third parties that were financed by the Finance group.
A substantial number of the originations in our finance receivable portfolio are cross-border transactions for aircraft sold outside of the U.S. In 2022 and 2021, our Finance group paid our Manufacturing group $92 million and $100 million, respectively, related to the sale of Textron-manufactured products to third parties that were financed by the Finance group.
Kautex operates over 30 plants in 14 countries in close proximity to our customers, along with 10 engineering/research and development locations around the world. Our Specialized Vehicles product line includes products sold by the Textron Specialized Vehicles businesses under our E-Z-GO, Arctic Cat, TUG Technologies, Douglas Equipment, Premier, Safeaero, Ransomes, Jacobsen and Cushman brands.
Kautex operates over 30 plants in 13 countries in close proximity to its customers, along with 9 engineering/research and development locations around the world. Our Specialized Vehicles product line includes products sold by the Textron Specialized Vehicles businesses under our E-Z-GO, Arctic Cat, TUG Technologies, Douglas Equipment, Premier, Safeaero, Ransomes, Jacobsen and Cushman brands.
Government-sponsored foreign military sales program, generated approximately 26% of our consolidated revenues in 2021, primarily in our Bell and Textron Systems segments. We must comply with and are affected by laws and regulations relating to the formation, administration and performance of U.S. Government contracts.
Government-sponsored foreign military sales program, generated approximately 22% of our consolidated revenues in 2022, primarily in our Bell and Textron Systems segments. We must comply with and are affected by laws and regulations relating to the formation, administration and performance of U.S. Government contracts.
Government’s ability to fund its activities and/or pay its obligations; • Changing priorities or reductions in the U.S. Government defense budget, including those related to military operations in foreign countries; • Our ability to perform as anticipated and to control costs under contracts with the U.S. Government; 8 Table of Contents • The U.S.
Government’s ability to fund its activities and/or pay its obligations; • Changing priorities or reductions in the U.S. Government defense budget, including those related to military operations in foreign countries; • Our ability to perform as anticipated and to control costs under contracts with the U.S. Government; • The U.S.
We conduct our business through five operating segments: Textron Aviation, Bell, Textron Systems and Industrial, which represent our manufacturing businesses, and Finance, which represents our captive finance business. Our segments include operations that are unincorporated divisions of Textron Inc. and others that are separately incorporated subsidiaries. Total revenues by segment and customer type for 2021 are presented below.
We conduct our business through six operating segments: Textron Aviation, Bell, Textron Systems, Industrial and Textron eAviation, which represent our manufacturing businesses, and Finance, which represents our captive finance business. Our segments include operations that are unincorporated divisions of Textron Inc. and others that are separately incorporated subsidiaries. Total revenues by segment and customer type for 2022 are presented below.
Connor joined the Corporate Finance Department of Goldman, Sachs & Co. in 1986 and became a Vice President in 1990 and a Managing Director in 1996. Ms. Duffy was named Executive Vice President, Human Resources in July 2017. Ms.
Connor joined the Corporate Finance Department of Goldman, Sachs & Co. in 1986 and became a Vice President in 1990 and a Managing Director in 1996. Ms. Duffy was named Executive Vice President, Human Resources in July 2017 and Executive Vice President and Chief Human Resources Officer in April 2022. Ms.
For both its military programs and its commercial products, Bell provides post-sale support and service for an installed base of approximately 13,000 helicopters through a network of six Company-operated service centers, four global parts distribution centers and nearly 100 independent service centers located in approximately 35 countries.
For both its military programs and its commercial products, Bell provides post-sale support and service for an installed base of approximately 13,000 helicopters through a network of eight Company-operated service centers, four global parts distribution centers and approximately 85 independent service centers located in approximately 35 countries.
Our enterprise-wide pandemic response teams, formed early in the pandemic, guided our operations in the processes and procedures to comply with applicable government-imposed health and safety-related operating restrictions, to enhance the safety of our facilities to protect the health of our employees and to monitor trends in infection rates at locations where we have facilities.
Our enterprise-wide pandemic response teams, formed early in the pandemic, guided our operations in the processes and procedures to comply with applicable government-imposed health and safety-related operating restrictions, to enhance the safety of our facilities to protect the health of our employees and to monitor trends.
Bell is continuing development of the V-280 Valor, a next generation vertical lift aircraft that is in competition for the Future Long Range Assault Aircraft (FLRAA) program, which is part of the U.S. Army’s FVL initiative.
Product Development Programs Bell is developing the V-280 Valor, a next generation vertical lift aircraft for the Future Long Range Assault Aircraft (FLRAA) program, which is part of the U.S. Army’s Future Vertical Lift (FVL) initiative.
Bell supplies advanced military helicopters and provides parts and support services to the U.S. Government and to military customers outside the United States. Bell’s primary U.S. Government programs are for the production and support of the V-22 tiltrotor aircraft and the H-1 helicopters. Bell is one of the leading suppliers of helicopters to the U.S.
Government and to military customers outside the United States. Bell’s primary U.S. Government programs are for the production and support of V-22 tiltrotor aircraft, primarily for the U.S. Department of Defense, and H-1 helicopters for the U.S. Marine Corps. Bell is one of the leading suppliers of helicopters to the U.S.
While our intellectual property rights in the aggregate are important to the operation of our business, we do not believe that any existing patent, license, trademark or other intellectual property right is of such importance that its loss or termination would have a material adverse effect on our business taken as a whole. 7 Table of Contents Information about our Executive Officers The following table sets forth certain information concerning our executive officers as of February 17, 2022.
While our intellectual property rights in the aggregate are important to the operation of our business, we do not believe that any existing patent, license, trademark or other intellectual property right is of such importance that its loss or termination would have a material adverse effect on our business taken as a whole.
Sales are made through a network of independent distributors and dealers worldwide and the Bass Pro Shops and Cabela’s retail outlets, which sell our products under the Tracker Off-Road brand, as well as factory direct resources.
Sales are made through a network of independent distributors and dealers worldwide and the Bass Pro Shops and Cabela's retail outlets, which sell our products under the Tracker Off Road brand, as well as factory direct resources. In addition, we also manufacture products for OEMs for resale to customers under the OEM’s branding.
GE’s Aviation business unit is a leading maker of commercial and military jet engines and components, as well as integrated digital, electric power and mechanical systems for aircraft. Prior to July 2005, Mr.
Donnelly was the President and CEO of General Electric Company’s Aviation business unit, a position he had held since July 2005. GE’s Aviation business unit is a leading maker of commercial and military jet engines and components, as well as integrated digital, electric power and mechanical systems for aircraft. Prior to July 2005, Mr.
Available Information We make available free of charge on our Internet Web site (www.textron.com) our Annual Report on Form 10-K, Quarterly Reports on Form 10-Q, Current Reports on Form 8-K and amendments to those reports filed or furnished pursuant to Section 13(a) or 15(d) of the Securities Exchange Act of 1934 as soon as reasonably practicable after we electronically file such material with, or furnish it to, the Securities and Exchange Commission.
Available Information We make available free of charge on our Internet Web site (www.textron.com) our Annual Report on Form 10-K, Quarterly Reports on Form 10-Q, Current Reports on Form 8-K and amendments to those reports filed or furnished pursuant to Section 13(a) or 15(d) of the Securities Exchange Act of 1934 as soon as reasonably practicable after we electronically file such material with, or furnish it to, the Securities and Exchange Commission. 8 Table of Contents Forward-Looking Information Certain statements in this Annual Report on Form 10-K and other oral and written statements made by us from time to time are “forward-looking statements” within the meaning of the Private Securities Litigation Reform Act of 1995.
In order to attract and retain highly skilled employees, we are committed to ensuring a safe and healthy work environment, offering comprehensive compensation and benefit programs, creating great career opportunities and building an engaging, inclusive environment where all employees are treated with dignity and respect. 6 Table of Contents Health and Safety To maintain and enhance the safety of our employees, we promote a culture of continuous improvement and individual accountability to provide safe workplaces.
In order to attract and retain highly skilled employees, we are committed to ensuring a safe and healthy work environment, offering comprehensive compensation and benefit programs, creating great career opportunities and building an engaging, inclusive environment where all employees are treated with dignity and respect.
The Denali, a high-performance single engine turboprop aircraft currently under development, achieved its first flight in November 2021. 3 Table of Contents Bell Segment Bell is one of the leading suppliers of military and commercial helicopters, tiltrotor aircraft, and related spare parts and services in the world.
The Denali achieved its first flight in November 2021 and is currently in the flight testing process. 3 Table of Contents Bell Segment Bell is one of the leading suppliers of military and commercial helicopters, tiltrotor aircraft, and related spare parts and services in the world. Bell supplies advanced military helicopters and provides parts and support services to the U.S.
Marine Corps is the primary customer for H-1 helicopters, we also sell these helicopters under the U.S. Government-sponsored foreign military sales program. Through its commercial business, Bell is a leading supplier of commercially certified helicopters and support to corporate, private, law enforcement, utility and emergency medical helicopter operators, and the U.S. and foreign governments.
Government-sponsored foreign military sales program, Bell offers its V-22 tiltrotor aircraft and H-1 helicopter products for sale to other countries. Through its commercial business, Bell is a leading supplier of commercially certified helicopters and support to corporate, private, law enforcement, utility, public safety and emergency medical helicopter operators, and U.S. and foreign governments.
Talent and Career Development Our talent development programs are designed to prepare our employees at all levels to take on new career and growth opportunities at Textron. Leadership, professional and functional training courses are tailored for employees at each stage of their careers and include a mix of enterprise-wide and business unit-specific programs.
Leadership, professional and functional training courses are tailored for employees at each stage of their careers and include a mix of enterprise-wide and business unit-specific programs.
The V-280 achieved its first flight in December 2017, conducted over 200 hours of flight testing, and has demonstrated all key performance objectives established by the U.S. Army, including flying at 300 knots airspeed. In March 2020, the U.S.
The V-280 achieved its first flight in December 2017, conducted over 200 hours of flight testing, and has demonstrated all key performance objectives established by the U.S. Army, including flying in excess of 300 knots airspeed. After an extended competitive process, in December 2022, Bell was awarded the development contract for the next stage of the FLRAA program.
Donnelly joined Textron in June 2008 as Executive Vice President and Chief Operating Officer and was promoted to President and Chief Operating Officer in January 2009. He was appointed to the Board of Directors in October 2009 and became Chief Executive Officer of Textron in December 2009. In July 2010, Mr.
He was appointed to the Board of Directors in October 2009 and became Chief Executive Officer of Textron in December 2009. In July 2010, Mr. Donnelly was appointed Chairman of the Board of Directors effective September 1, 2010. Previously, Mr.
Our Finance segment’s largest business risk is the collectability of its finance receivable portfolio. See Finance Segment section in Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations for information about the Finance segment’s credit performance.
Our Finance segment’s largest business risk is the collectability of its finance receivable portfolio. See Finance Segment section in Item 7.
Textron Aviation also offers piston engine aircraft including the Beechcraft Baron and Bonanza, and the Cessna Skyhawk, Skylane, and the Turbo Stationair HD. In support of its family of aircraft, Textron Aviation operates a global network of 21 service centers, two of which are co-located with Bell, along with more than 300 authorized independent service centers located throughout the world.
In support of its family of aircraft, Textron Aviation operates a global network of more than 20 service centers, two of which are co-located with Bell, along with more than 300 authorized independent service centers located throughout the world. Textron Aviation-owned service centers provide customers with 24-hour service and maintenance.
These regulations address production and quality systems, airworthiness and installation approvals, repair procedures and continuing operational safety. For an aircraft to be manufactured and sold, the model must receive a type certificate from the appropriate aviation authority, and each aircraft must receive a certificate of airworthiness. Aircraft outfitting and completions also require approval by the appropriate aviation authority.
For an aircraft to be manufactured and sold, the model must receive a type certificate from the appropriate aviation authority, and each aircraft must receive a certificate of airworthiness. Aircraft outfitting and completions also require approval by the appropriate aviation authority. See Strategic Risks section in Item 1A.
Textron Aviation’s turboprop aircraft include the Beechcraft King Air 260, King Air 360ER and King Air 360, and the Cessna Caravan and Grand Caravan EX. In addition, Textron Aviation’s military trainer and defense aircraft include the T-6 trainer, which has been used to train pilots from more than 20 countries, and the AT-6 light attack military aircraft.
In addition, Textron Aviation’s military trainer and defense aircraft include the T-6 trainer, which has been used to train pilots from more than 20 countries, and the AT-6 light attack military aircraft, which achieved military type certification from the U.S. Air Force in July 2022, enabling international sales of the aircraft.
However, laws and regulations may be changed or adopted that impose additional compliance requirements which could necessitate capital expenditures or otherwise increase our costs of doing business, reducing our profitability and negatively impacting our operating results.
However, laws and regulations may be changed or adopted that impose additional compliance requirements which could necessitate capital expenditures or otherwise increase our costs of doing business, reducing our profitability and negatively impacting our operating results. 6 Table of Contents Human Capital Resources At December 31, 2022, we employed approximately 34,000 employees worldwide, with approximately 80% located in the U.S. and the remainder located outside of the U.S.
Product Development Programs In October 2019, Bell announced a new rotorcraft, the Bell 360 Invictus, which it is developing as its entrant for the U.S. Army's Future Attack Reconnaissance Aircraft (FARA) Competitive Prototype Program, part of the U.S. government's Future Vertical Lift (FVL) initiative. The FARA program was initiated by the U.S.
Bell is developing a new rotorcraft, the Bell 360 Invictus, for the U.S. Army's Future Attack Reconnaissance Aircraft (FARA) Competitive Prototype Program, which is also part of the U.S. government's FVL initiative. The FARA program was initiated by the U.S. Army to develop a successor to the retired Bell OH-58D Kiowa Warrior helicopter. In March 2020, the U.S.
Department of Defense, and also offers this aircraft to other countries under the U.S. Government-sponsored foreign military sales program. The H-1 helicopter program includes a utility model, the UH-1Y, and an advanced attack model, the AH-1Z, which have 84% parts commonality between them. While the U.S.
Government and, in association with The Boeing Company, the only supplier of military tiltrotor aircraft. Tiltrotor aircraft are designed to provide the benefits of both helicopters and fixed-wing aircraft. The H-1 helicopter program includes a utility model, the UH-1Y, and an advanced attack model, the AH-1Z, which have 84% parts commonality between them. Under the U.S.
Government business herein. Commercial aircraft products manufactured by our Textron Aviation and Bell segments are required to comply with FAA regulations in the U.S. and the regulations of other similar aviation regulatory governing authorities internationally, including, the European Aviation Safety Agency. Maintenance facilities and aftermarket services must also comply with FAA and international regulations.
Our commercial aircraft manufacturing businesses are regulated by the FAA in the U.S. and by similar aviation regulatory governing authorities internationally, including, the European Aviation Safety Agency. Maintenance facilities and aftermarket services must also comply with FAA and international regulations. These regulations address production and quality systems, airworthiness and installation approvals, repair procedures and continuing operational safety.
Our backlog at the end of 2021 and 2020 is summarized below: (In millions) January 1, 2022 January 2, 2021 Bell $ 3,871 $ 5,342 Textron Aviation 4,120 1,603 Textron Systems 2,144 2,556 Total backlog $ 10,135 $ 9,501 5 Table of Contents U.S.
Backlog excludes unexercised contract options and potential orders under ordering-type contracts, such as Indefinite Delivery, Indefinite Quantity contracts. Our backlog at the end of 2022 and 2021 is summarized below: (In millions) December 31, 2022 January 1, 2022 Textron Aviation $ 6,387 $ 4,120 Bell 4,781 3,871 Textron Systems 2,098 2,144 Total backlog $ 13,266 $ 10,135 U.S.
Bell’s first super medium commercial helicopter, the 525 Relentless, is currently in the certification process with the Federal Aviation Administration (FAA).
Army selected the 360 Invictus to move to the second phase of the Competitive Prototype Program. Bell continues to progress on its development of the 360 Invictus Prototype under this phase. Bell’s first super medium commercial helicopter, the 525 Relentless, is currently in the certification process with the Federal Aviation Administration (FAA).
Textron Aviation-owned service centers provide customers with 24-hour service and maintenance. Textron Aviation also provides its customers with around-the-clock parts support and offers a mobile support program with approximately 70 mobile service units.
Textron Aviation also provides its customers with around-the-clock parts support and offers a mobile support program with over 70 mobile service units. In addition, Able Aerospace Services, Inc., a subsidiary of Textron Aviation, provides component and maintenance, repair and overhaul services in support of commercial and military fixed- and rotor-wing aircraft.
Backlog Backlog represents amounts allocated to contracts that we expect to recognize as revenue in future periods when we perform under the contracts. Backlog excludes unexercised contract options and potential orders under ordering-type contracts, such as Indefinite Delivery, Indefinite Quantity contracts.
Management’s Discussion and Analysis of Financial Condition and Results of Operations for information about the Finance segment’s credit performance. 5 Table of Contents Backlog Backlog represents amounts allocated to contracts that we expect to recognize as revenue in future periods when we perform under the contracts.
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In addition, Able Aerospace Services, Inc., a subsidiary of Textron Aviation, provides component and maintenance, repair and overhaul services in support of commercial and military fixed- and rotor-wing aircraft. Product Development Programs Textron Aviation is developing the Cessna SkyCourier, a twin-engine, high-wing, large-utility turboprop aircraft, which achieved its first flight in May 2020.
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Textron Aviation’s turboprop aircraft include the Beechcraft King Air 260, King Air 360ER and King Air 360, and the Cessna Caravan, Grand Caravan EX and SkyCourier, which was certified in March 2022.
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The aircraft is continuing to progress through the certification process having accomplished over 2,100 hours of flight test activity.
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Textron Aviation also offers piston engine aircraft including the Beechcraft Baron G58 and Bonanza G36, and the Cessna Skyhawk, Skylane, Turbo Skylane, and Turbo Stationair HD.
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Government and, in association with The Boeing Company (Boeing), the only supplier of military tiltrotor aircraft. Tiltrotor aircraft are designed to provide the benefits of both helicopters and fixed-wing aircraft. Through its strategic alliance with Boeing, Bell produces and supports the V-22 tiltrotor aircraft primarily for the U.S.
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Product Development Programs Textron Aviation is developing the Denali, a high-performance single engine turboprop aircraft that will be powered by an engine expected to be up to 20% more efficient than similarly sized engines.
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Army to develop a successor to the retired Bell OH-58D Kiowa Warrior helicopter. In March 2020, the U.S. Army selected the 360 Invictus to move to the second phase of the Competitive Prototype Program. During 2021, Bell continued to progress on its development of the 360 Invictus Prototype.
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A competitor has filed a protest with the Government Accountability Office (GAO) regarding the award of the FLRAA contract to Bell, and a stop-work order has been issued pending resolution of the protest. We expect the GAO to issue its decision on the protest by April 7, 2023.
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Army awarded Bell a Competitive Demonstration and Risk Reduction contract for the next stage of the FLRAA program; the scope and period of performance for this contract was extended in March 2021. The U.S. Army is expected to award the contract for the FLRAA program in 2022.
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Textron eAviation Segment Textron eAviation was formed in the second quarter of 2022 following our acquisition of Pipistrel, a manufacturer of electrically powered aircraft, on April 15, 2022. Pipistrel offers a family of light aircraft and gliders with both electric and combustion engines.
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Human Capital Resources At January 1, 2022, we employed approximately 33,000 employees worldwide, with approximately 75% located in the U.S. and the remainder located outside of the U.S.
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Pipistrel’s Velis Electro is the world’s first, and currently only, electric aircraft to receive full type certification from the European Union Aviation Safety Agency and, in 2022, it earned UK Civil Aviation Authority type certification. The Textron eAviation segment includes Pipistrel along with other research and development initiatives related to sustainable aviation solutions.
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These teams continue to operate as needed, updating enterprise guidance as the pandemic has continued and the medical science and government guidance and orders have evolved. Our businesses continue to enforce COVID-19 health and safety protocols and have implemented protocols to address actual and suspected cases of COVID-19 and resulting contact tracing and quarantine requirements.
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Health and Safety To maintain and enhance the safety of our employees, we promote a culture of continuous improvement and individual accountability to provide safe workplaces.
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Throughout the pandemic, we have been communicating regularly with our employees and monitoring their views on issues related to COVID-19 and the workplace as well as general levels of engagement through regular pulse surveys. In addition, management has regularly updated our Board of Directors on our COVID-19 status and response, including with respect to employee safety.
Added
During 2022, these teams continued to operate as needed, updating response actions as government guidance and orders evolved, and we have continued to communicate with our employees as appropriate. Talent and Career Development Our talent development programs are designed to prepare our employees at all levels to take on new career and growth opportunities at Textron.
Removed
Donnelly was appointed Chairman of the Board of Directors effective September 1, 2010. Previously, Mr. Donnelly was the President and CEO of General Electric Company’s Aviation business unit, a position he had held since July 2005.
Added
Duffy 57 Executive Vice President and Chief Human Resources Officer E. Robert Lupone 63 Executive Vice President, General Counsel, Secretary and Chief Compliance Officer Mr. Donnelly joined Textron in June 2008 as Executive Vice President and Chief Operating Officer and was promoted to President and Chief Operating Officer in January 2009.
Removed
Forward-Looking Information Certain statements in this Annual Report on Form 10-K and other oral and written statements made by us from time to time are “forward-looking statements” within the meaning of the Private Securities Litigation Reform Act of 1995.

Item 1A. Risk Factors

Risk Factors — what could go wrong, per management

45 edited+17 added−5 removed91 unchanged
Biggest changeIn addition, new regulations by U.S. or foreign governments and government agencies addressed to the aviation or travel industry could impose additional regulatory, aircraft security, travel restrictions or other requirements or restrictions related to the pandemic that could adversely impact demand for aircraft and rotorcraft or significantly reduce hours flown, resulting in a reduction in revenues and/or increased costs. 9 Table of Contents The extent to which the pandemic could continue to impact our business, results of operations, financial condition and liquidity is highly uncertain and also will depend on future developments, most of which are outside our control.
Biggest changeThe extent to which the pandemic could continue to impact our business, results of operations, financial condition and liquidity is highly uncertain and also will depend on future developments, most of which are outside our control.
Due to the nature of our work under government contracts, we sometimes experience unforeseen technological or schedule difficulties and cost overruns. Under each type of contract, if we are unable to control costs or if our initial cost estimates 11 Table of Contents are incorrect, our cash flows, results of operations and financial condition could be adversely affected.
Due to the nature of our work under government contracts, we sometimes experience unforeseen technological or schedule difficulties and cost overruns. Under each type of contract, if we are unable to control costs or if our initial cost estimates are incorrect, our 11 Table of Contents cash flows, results of operations and financial condition could be adversely affected.
Government increasingly relies upon competitive contract award types, including indefinite-delivery, indefinite-quantity, other transaction agreements and multi-award contracts, which have the potential to create increased pricing pressure, as well as to increase our cost by requiring that we submit multiple bids or share in costs.
Government relies upon competitive contract award types, including indefinite-delivery, indefinite-quantity, other transaction agreements and multi-award contracts, which have the potential to create increased pricing pressure, as well as to increase our cost by requiring that we submit multiple bids or share in costs.
Compliance with laws and regulations of increasing scope and complexity is even more challenging in our current business environment in which reducing our operating costs is often necessary to remain competitive.
Compliance with laws and regulations of increasing scope and complexity is even more challenging in our business environment in which reducing our operating costs is often necessary to remain competitive.
Also, changes in pension legislation and regulations could increase the cost associated with our defined benefit pension plans. Our business could be adversely affected by strikes or work stoppages and other labor issues. Approximately 7,000, or 27%, of our U.S. employees are unionized, and many of our non-U.S. employees are represented by organized councils.
Also, changes in pension legislation and regulations could increase the cost associated with our defined benefit pension plans. Our business could be adversely affected by strikes or work stoppages and other labor issues. Approximately 7,300, or 27%, of our U.S. employees are unionized, and many of our non-U.S. employees are represented by organized councils.
Natural disasters, including hurricanes, fires, tornados, floods and other forms of severe weather, the intensity and frequency of which are being exacerbated by climate change, other impacts of climate change, such as rising sea waters, as well as other events outside of our control including public health crises or pandemics, power outages and industrial accidents, have in the past and could in the future disrupt our operations and adversely affect our business.
Natural disasters, including hurricanes, fires, tornados, floods and other forms of severe weather, the intensity and frequency of which are being exacerbated by climate change, along with other impacts of climate change, such as rising sea waters, as well as other events outside of our control including public health crises, pandemics, power outages and industrial accidents, have in the past and could in the future disrupt our operations and adversely affect our business.
Government cost underrun savings, which are derived from total cost being less than target costs; we also share in cost overruns, which occur when total costs exceed target costs up to a negotiated cost ceiling, but are solely responsible for costs above the ceiling.
Government cost underrun savings, which are derived from total cost being less than target costs; we also share in cost overruns, which occur when total costs exceed target costs up to a negotiated cost ceiling; however, we are solely responsible for costs above the ceiling.
Litigation is inherently unpredictable, and we could incur judgments, receive adverse arbitration awards or enter into settlements for current or future claims that could adversely affect our results of operations in any particular period. 15 Table of Contents Intellectual property infringement claims of others and the inability to protect our intellectual property rights could harm our business and our customers.
Litigation is inherently unpredictable, and we could incur judgments, receive adverse arbitration awards or enter into settlements for current or future claims that could adversely affect our results of operations in any particular period. Intellectual property infringement claims of others and the inability to protect our intellectual property rights could harm our business and our customers.
Any of these events could result in physical damage to and/or complete or partial closure of one or more of our facilities, temporary or long-term disruption of our operations or the operations of our suppliers by causing business interruptions or by impacting the availability and cost of materials needed for manufacturing or otherwise impacting our ability to deliver products and services to our customers.
Any of these events could result in physical damage to and/or complete or partial closure of one or more of our facilities and temporary or long-term disruption of our 14 Table of Contents operations or the operations of our suppliers by causing business interruptions or by impacting the availability and cost of materials needed for manufacturing or otherwise impacting our ability to deliver products and services to our customers.
Likewise, new products and technologies could generate unanticipated safety or other concerns resulting in expanded product liability risks, potential product recalls and other regulatory issues that could have an adverse impact on us.
In addition, new products and technologies could generate unanticipated safety or other concerns resulting in expanded product liability risks, potential product recalls and other regulatory issues that could have an adverse impact on us.
If we are unable to continue to compete successfully against our current or future competitors or do not win government programs with significant long-term revenues, we may experience declines in future revenues, which could have a material adverse effect on our financial position, results of operations and or cash flows.
If we are unable to continue to compete successfully against our current or future competitors, do not win government programs with significant long-term revenues or do not prevail in bid protests, we may experience declines in future revenues and profitability, which could have a material adverse effect on our financial position, results of operations or cash flows.
Such events may adversely affect our financial results, damage our reputation and relationships with our customers, and result in regulatory actions and/or litigation. We are subject to the risks of doing business in foreign countries that could adversely impact our business. During 2021, we derived approximately 31% of our revenues from international business, including U.S. exports.
Such events may adversely affect our financial results, damage our reputation and relationships with our customers, and result in regulatory actions and/or litigation. We are subject to the risks of doing business in foreign countries that could adversely impact our business. During 2022, we derived approximately 32% of our revenues from international business, including U.S. exports.
We are subject to legal proceedings and other claims arising out of the conduct of our business, including proceedings and claims relating to commercial and financial transactions; government contracts; alleged lack of compliance with applicable laws and regulations; production partners; product liability; patent and trademark infringement; employment disputes; and environmental, safety and health matters.
We are subject to legal proceedings and other claims arising out of the conduct of our business, including proceedings and claims relating to commercial and financial transactions; government contracts; alleged lack of compliance with applicable laws and regulations; disputes with suppliers, production partners or other third parties; product liability; patent and trademark infringement; employment disputes; and environmental, safety and health matters.
During 2021, we derived approximately 26% of our revenues from sales to a variety of U.S. Government entities. Our revenues from the U.S. Government largely result from contracts awarded to us under various U.S. Government defense-related programs. The funding of these programs is subject to congressional appropriation decisions and the U.S.
During 2022, we derived approximately 22% of our revenues from sales to a variety of U.S. Government entities. Our revenues from the U.S. Government largely result from contracts awarded to us under various U.S. Government defense-related programs. The funding of these programs is subject to congressional appropriation decisions and the U.S.
Any repurchases or recalls of our products or an imposition of fines or penalties could be costly to us and could damage the reputation or the value of our brands.
Any repurchases or recalls of our products or an imposition of 15 Table of Contents fines or penalties could be costly to us and could damage the reputation or the value of our brands.
Under fixed-price contracts, generally we receive a fixed price irrespective of the actual costs we incur, and, consequently, any costs in excess of the fixed price are absorbed by us. Changes in underlying assumptions, circumstances or estimates used in developing the pricing for such contracts can adversely affect our results of operations.
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. Changes in underlying assumptions, circumstances or estimates used in developing the pricing for such contracts can adversely affect our results of operations.
Because many of our businesses experience cyclical demand, they face challenges in maintaining their workforce at levels appropriate to market demand which in the past has necessitated workforce reductions at some of our businesses as demand decreased.
Because many of our businesses experience cyclical market demand, they face challenges in maintaining their workforce at levels aligned with market demand which in the past has necessitated workforce reductions at some of our businesses as demand decreased.
Any of these events could adversely affect our results of operations. Item 1B. Unresolved Staff Comments None. 16 Table of Contents
Any of these events could adversely affect our results of operations. Item 1B. Unresolved Staff Comments None.
These delays could be caused by unanticipated technological hurdles, production changes to meet customer demands, unanticipated difficulties in obtaining required regulatory certifications of new aircraft or other products, coordination with joint venture partners or failure on the part of our suppliers to deliver components as agreed.
These delays or cost overruns could be caused by unanticipated technological hurdles, production changes to meet customer demands, unanticipated difficulties in obtaining required regulatory certifications of new aircraft or other products, or failure on the part of our suppliers to deliver components as agreed.
Such risks include difficulties in integrating newly acquired businesses and operations in an efficient and cost-effective manner; challenges in achieving expected strategic objectives, cost savings and other benefits; the risk that the acquired businesses’ markets do not evolve as anticipated and that the acquired businesses’ products and technologies do not prove to be those needed to be successful in those markets; the risk that our due diligence reviews of the acquired business do not identify or adequately assess all of the material issues which impact valuation of the business or result in costs or liabilities in excess of what we anticipated; the risk that we pay a purchase price that exceeds what the future results of operations would have merited; the risk that the acquired business may have significant internal control deficiencies or exposure to regulatory sanctions; and the potential loss of key customers, suppliers and employees of the acquired businesses. 12 Table of Contents Business and Operational Risks Our business could be negatively impacted by cybersecurity threats and other disruptions.
Such risks include difficulties in integrating newly acquired businesses and operations in an efficient and cost-effective manner; challenges in achieving expected strategic objectives, cost savings and other benefits; the risk that the acquired businesses’ markets do not evolve as anticipated and that the acquired businesses’ products and technologies do not prove to be those needed to be successful in those markets; the risk that our due diligence reviews of the acquired business do not identify or adequately assess all of the material issues which impact valuation of the business or result in costs or liabilities in excess of what we anticipated; the risk that we pay a purchase price that exceeds what the future results of operations would have merited; the risk that the acquired business may have significant internal control deficiencies or exposure to regulatory sanctions; and the potential loss of key customers, suppliers and employees of the acquired businesses. 12 Table of Contents Business and Operational Risks The global economic impacts of Russia’s war with Ukraine could adversely affect our business, financial condition or operating results.
In addition, we own the rights to many patents, trademarks, brand names, trade names and trade secrets that are important to our business. The inability to enforce these intellectual property rights could have an adverse effect on our results of operations. Additionally, our intellectual property could be at risk due to cybersecurity threats.
In addition, we own the rights to many patents, trademarks, brand names, trade names and trade secrets that are important to our business. Our inability to enforce these intellectual property rights could have an adverse effect on our results of operations.
Risks related to international operations include import, export, economic sanctions and other trade restrictions; changing U.S. and foreign procurement policies and practices; changes in international trade policies, including higher tariffs on imported goods and materials and renegotiation of free trade agreements; potential retaliatory tariffs imposed by foreign countries against U.S. goods; impacts related to the voluntary exit of the United Kingdom from the European Union (Brexit); restrictions on 13 Table of Contents technology transfer; difficulties in protecting intellectual property; increasing complexity of employment and environmental, health and safety regulations; foreign investment laws; exchange controls; repatriation of earnings or cash settlement challenges; compliance with increasingly rigorous data privacy and protection laws; competition from foreign and multinational firms with home country advantages; economic and government instability, acts of terrorism and related safety concerns.
Risks related to international operations include import, export, economic sanctions and other trade restrictions; changing U.S. and foreign procurement policies and practices; changes in international trade policies, including higher tariffs on imported goods and materials and renegotiation of free trade agreements; potential retaliatory tariffs imposed by foreign countries against U.S. goods; impacts on our non-U.S. suppliers and customers due to acts of war occurring internationally; restrictions on technology transfer; difficulties in protecting intellectual property; increasing complexity of employment and environmental, health and safety regulations; foreign investment laws; exchange controls; repatriation of earnings or cash settlement challenges; compliance with increasingly rigorous data privacy and protection laws; competition from foreign and multinational firms with home country advantages; economic and government instability; acts of industrial espionage, acts of war and terrorism and related safety concerns.
Both U.S. and foreign laws and regulations applicable to us have been increasing in scope and complexity. For example, both U.S. and foreign governments and government agencies regulate the aviation industry, and they have previously and may in the future impose new regulations for additional aircraft security or other requirements or restrictions.
For example, both U.S. and foreign governments and government agencies regulate the aviation industry, and they have previously and may in the future impose new regulations for additional aircraft security or other requirements or restrictions.
Risks Related to the COVID-19 Pandemic Our business is being adversely impacted, and is expected to continue to be adversely impacted, by the coronavirus (COVID-19) pandemic. Our businesses have experienced and continue to experience various degrees of disruption due to the unprecedented conditions surrounding the COVID-19 pandemic.
Our business was adversely impacted, and may again be adversely impacted, by the coronavirus (COVID-19) pandemic. Our businesses have experienced and continue to experience various degrees of disruption due to the unprecedented conditions surrounding the COVID-19 pandemic.
Due to the evolving nature of security threats, the possibility of future material incidents cannot be completely mitigated, and we may not always be successful in timely detecting, reporting or responding to cyber incidents.
We believe our threat detection and mitigation processes and procedures are robust. Due to the evolving nature of security threats, the possibility of future material incidents cannot be completely mitigated, and we may not always be successful in timely detecting, reporting or responding to cyber incidents.
Further, our insider trading compliance program addresses restrictions against trading while in possession of material, nonpublic information in connection with a cybersecurity incident. While we have experienced cybersecurity attacks, we have not suffered any material losses relating to such attacks, and we believe our threat detection and mitigation processes and procedures are robust.
Further, our insider trading compliance program addresses restrictions against trading while in possession of material, nonpublic information in connection with a cybersecurity incident. While we have experienced cybersecurity attacks, such attacks have not resulted in a material information security breach and we have not suffered any material losses relating to such attacks.
For example, certain of our businesses have been, and may continue to be, adversely impacted by suppliers which were unable to perform as anticipated due to impacts of the pandemic.
For example, certain of our businesses have been, and 13 Table of Contents may continue to be, adversely impacted by suppliers which have been unable to perform as anticipated due to impacts of the pandemic and/or the war between Russia and Ukraine.
Our suppliers may be less likely than us to be able to quickly recover from natural disasters and other events beyond their control and may be subject to additional risks such as financial problems that limit their ability to conduct their operations.
Our suppliers may be unable to quickly recover from natural disasters and other events beyond their control and may be subject to additional risks such as material or labor shortages, inflationary conditions or other financial problems that limit their ability to conduct their operations.
Even if we are successful in obtaining an award, we may encounter bid protests from unsuccessful bidders on new program awards. Bid protests could result in significant expenses associated with justifying the selection or due to potential program delays, and could result in contract modifications that alter schedule or scope or even cause the loss of the contract award.
Bid protests could result in significant expenses associated with justifying the selection or due to potential program delays and could result in contract modifications that alter schedule or scope or even cause the loss of the contract award.
The effects of COVID-19 have included and could continue to include disruption of the operation or temporary closure of certain of our facilities or the facilities of our customers, suppliers or business partners, as well as other disruptions in our supply chains or our customers’ supply chains, particularly in the supply chains serving our recreational vehicle products and in our automotive OEM supply chains, disruptions in which have caused and may continue to cause reduced demand for our automotive products.
The effects of COVID-19 have included and could continue to include disruption of the operation of certain of our facilities or the facilities of our customers, suppliers or business partners, as well as other disruptions in our supply chains or our customers’ supply chains.
The use of certain contract award types by the U.S. Government increases pricing pressure and cost. The U.S.
The use of certain contract award types by the U.S. Government and the competitive bidding process increases pricing pressure and cost and may result in delayed revenues and profit. The U.S.
For example, we sometimes initially must obtain licenses and authorizations from various U.S. Government agencies before we are permitted to sell certain of our aerospace and defense products outside the U.S., and we are not always successful in obtaining these licenses or authorizations in a timely manner.
Government agencies before we are permitted to sell certain of our aerospace and defense products outside the U.S., and we are not always successful in obtaining these licenses or authorizations in a timely manner. Both U.S. and foreign laws and regulations applicable to us have been increasing in scope and complexity.
As a global business, we are subject to laws and regulations in the U.S. and other countries in which we operate. International sales and global operations require importing and exporting goods, software and technology, some of which have military applications subjecting them to more stringent import-export controls across international borders on a regular basis.
International sales and global operations require importing and exporting goods, software and technology, some of which have military applications subjecting them to more stringent import-export controls across international borders on a regular basis. For example, we sometimes initially must obtain licenses and authorizations from various U.S.
We have experienced and may continue to experience lower revenues and/or increased costs as a result of these business and production disruptions.
In addition, disruptions in our automotive OEM supply chains have caused and may continue to cause reduced demand for our automotive products. We have experienced and may continue to experience lower revenues and/or increased costs as a result of these business and production disruptions.
See also risks related to our Finance Segment under Financial Risks section below. Aerospace and Defense Industry Risks Demand for our aircraft products is cyclical and lower demand adversely affects our financial results. Demand for business jets, turbo props and commercial helicopters has been cyclical and difficult to forecast.
Aerospace and Defense Industry Risks Demand for our aircraft products is cyclical and lower demand adversely affects our financial results. Demand for business jets, turbo props and commercial helicopters has been cyclical and difficult to forecast. The demand for our aircraft products has been adversely impacted by unexpected events and may be impacted by such events in the future.
In particular, the carrying value of deferred tax assets is dependent on our ability to generate future taxable income, as well as changes to applicable statutory tax rates.
In particular, the carrying value of deferred tax assets is dependent on our ability to generate future taxable income, as well as changes to applicable statutory tax rates. In addition, the amount of income taxes we pay is subject to audits in various jurisdictions, and a material assessment by a tax authority could affect our profitability.
We also could be adversely affected if our research and development efforts are less successful than expected or if we do not adequately protect the intellectual property developed through these efforts.
We also could be adversely affected if our research and development efforts are less successful than expected or if these efforts require significantly more funding to achieve our goals than anticipated.
Such laws and regulations may include more restrictive or expansive standards, such as stricter limits on greenhouse gas emissions by our facilities or our products that produce carbon emissions, more prescriptive reporting of environmental, social and governance metrics and/or other compliance requirements.
Such laws and regulations are likely to include more prescriptive reporting on environmental metrics, climate change related risks and associated financial impacts, as well as increased oversight of and reporting on our supply chain and other compliance requirements. Stricter limits on greenhouse gas emissions generated by our facilities or by our products that produce carbon emissions could also be imposed.
Similarly, there is uncertainty as to when or whether our existing commercial backlog for aircraft products will convert to revenues as the conversion depends on production capacity, customer needs and credit availability. Changes in economic conditions has in the past caused, and in the future may cause, customers to request that firm orders be rescheduled, deferred or cancelled.
Therefore, future demand for these products could be significantly and unexpectedly less than anticipated and/or less than previous period deliveries. Similarly, there is uncertainty as to when or whether our existing commercial backlog for aircraft products will convert to revenues as the conversion depends on production capacity, customer needs and credit availability.
Laws and regulations addressing climate change, and our efforts to meet the expectations of our stakeholders, could lead to the necessity of additional investment in product development, changes to our manufacturing processes, sourcing from new suppliers, changes to our facilities and/or equipment and greater internal resources, all of which could increase our costs and negatively impact our business, results of operations, financial condition and competitive position.
We expect that compliance with such laws and regulations will require additional internal resources and may necessitate larger investment in product development and manufacturing equipment and/or facilities, as well as sourcing from new suppliers and/or higher costs from existing suppliers, all of which would increase our direct and indirect costs and negatively impact our business, results of operations, financial condition and competitive position.
We need highly skilled personnel in multiple areas including, among others, engineering, manufacturing, information technology, cybersecurity, flight operations, business development and strategy and management.
Our success is highly dependent upon our ability to hire and retain a workforce with the skills necessary for our businesses to develop and manufacture the products desired by our customers. We need highly skilled personnel in multiple areas including, among others, engineering, manufacturing, information technology, cybersecurity, flight operations, business development and strategy and management.
Moreover, our investors, customers, employees and other stakeholders increasingly expect us to reduce the greenhouse gas emissions generated by our operations and our products and publicly report our plans and progress on these efforts.
Moreover, our investors, customers, employees and other stakeholders increasingly expect us to reduce greenhouse gas emissions generated by our operations by implementing more efficient manufacturing technologies and increasing the amount of renewable energy used within our facilities.
Portfolio quality can be adversely affected by several factors, including finance receivable underwriting procedures, collateral value, geographic or industry concentrations, and the effect of general economic conditions such as the recent deterioration of the economy due to the impact from the COVID-19 pandemic.
Portfolio quality can be adversely affected by several factors, including finance receivable underwriting procedures, collateral value, geographic or industry concentrations, and the effect of general economic conditions. In addition, a substantial number of the originations in our finance receivable portfolio are cross-border transactions for aircraft sold outside of the U.S.
In addition, the amount of income taxes we pay is subject to audits in various jurisdictions, and a material assessment by a tax authority could affect our profitability. 14 Table of Contents Risks Related to Regulatory and Legal Matters We are subject to increasing compliance risks that could adversely affect our operating results.
Risks Related to Regulatory, Legal and Other Matters We are subject to increasing compliance risks that could adversely affect our operating results. As a global business, we are subject to laws and regulations in the U.S. and other countries in which we operate.
Risks Related to Human Capital Our success is highly dependent on our ability to hire and retain a qualified workforce. Our success is highly dependent upon our ability to hire and retain a workforce with the skills necessary for our businesses to develop and manufacture the products desired by our customers.
Additionally, our intellectual property could be at risk due to cybersecurity threats. 16 Table of Contents Risks Related to Human Capital Our success is highly dependent on our ability to hire and retain a qualified workforce.
Removed
Unexpected events, such as the COVID-19 pandemic, have adversely impacted demand for our aircraft products and may continue to do so. Therefore, future demand for these products could be significantly and unexpectedly less than anticipated and/or less than previous period deliveries.
Added
Changes in economic conditions have in the past caused, and in the future may cause, customers to request that firm orders be rescheduled, deferred or cancelled.
Removed
As a result of the pandemic, our Finance segment modified a significant number of the loans in its portfolio in order to provide temporary payment relief to its customers and has provided extended payment relief to certain customers.
Added
Even if we are successful in obtaining an award, we may encounter bid protests from unsuccessful bidders on new program awards, such as the protest filed by our competitor on the FLRAA program.
Removed
While a majority of these modified loans have returned to paying status, our ultimate recovery on these assets could be delayed or impacted. In addition, a substantial number of the originations in our finance receivable portfolio are cross-border transactions for aircraft sold outside of the U.S.
Added
In particular, the success of Textron eAviation depends in large part, on our ability to develop and certify new electric and hybrid electric aircraft products in order to achieve our long-term strategy of offering a family of sustainable aircraft for urban air mobility, general aviation, cargo and special mission roles.
Removed
Because the impact of any future climate change-related legislative, regulatory, or product standard requirements on our global businesses and products is dependent on the timing and design of mandates or standards, we are unable to predict their potential impact at this time.
Added
The war between Russia and Ukraine and the resulting economic sanctions imposed by the international community have impacted the global economy and given rise to potential global security issues that may adversely affect international business and economic conditions.
Removed
We are subject to legal proceedings and other claims.
Added
Certain of our direct or indirect suppliers have been negatively impacted by these events, resulting in increased costs to us for certain materials and components as well as shortages and delays of critical components for certain of our products.
Added
These cost increases, along with increased energy and shipping costs, have and may continue to negatively impact our profitability, and component shortages and delays have and may continue to result in production delays for certain of our products.
Added
In addition, these events have caused additional disruption in the supply chains of our automotive OEM customers, already experiencing disruption due to the impacts of the COVID-19 pandemic, which has caused, and may continue to cause, reduced demand for our automotive products.
Added
The continuation of the war could lead to other supply chain disruptions, increased inflationary pressures, and volatility in global markets and industries that could negatively impact our operations. Furthermore, the potential for retaliatory acts of cyberwarfare from Russia against U.S. companies in response to increasing sanctions on Russia could result in increased cyber-attacks against us.
Added
The impact of any one or more of these or other factors could adversely affect our business, financial condition or operating results. Our business could be negatively impacted by cybersecurity threats and other disruptions.
Added
Our failure to adequately comply with such laws and regulations could jeopardize our ability to receive contract awards from the U.S. government and other customers.
Added
While we are engaged in efforts to transition to a lower carbon economy by reducing the emissions generated by our operations and increasing our use of renewable energy, these efforts take time and resources and may increase our energy acquisition and other costs and require capital investment.
Added
In addition, our stakeholders expect us to reduce greenhouse gas emissions from the use of our products, including by developing and incorporating sustainable technologies into our products.
Added
Our businesses are expected to require significant research and development investment to succeed in developing the new technologies and products that will enable us to significantly reduce such emissions from the use of our products and successfully compete in a lower carbon economy.
Added
We may not realize the anticipated benefits of our investments and actions for a variety of reasons, including technological challenges, evolving government and customer requirements and our ability to anticipate them and develop the desired technologies and products on a timely basis.
Added
Our competitors may develop these technologies and products before we do and they may be deemed by our customers to be superior to technologies and products we may develop, and they may otherwise gain industry acceptance in advance of, or instead of, our products.
Added
In addition, as we and our competitors develop increasingly sustainable technologies, demand for our existing offerings may decrease or become nonexistent. We are subject to legal proceedings and other claims.
Added
Such challenges in aligning the size of our businesses’ workforces with current or future business needs have resulted and may, in the future result in increased costs, production delays or other adverse impacts on our business and results of operations.

Item 2. Properties

Properties — owned and leased real estate

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Biggest changeItem 2. Properties On January 1, 2022, we operated a total of 52 plants located throughout the U.S. and 45 plants outside the U.S. We own 58 plants and lease the remainder for a total manufacturing space of approximately 23.3 million square feet.
Biggest changeItem 2. Properties On December 31, 2022, we operated a total of 54 plants located throughout the U.S. and 44 plants outside the U.S. We own 58 plants and lease the remainder for a total manufacturing space of approximately 23.6 million square feet.
In general, our facilities are in good condition, are considered to be adequate for the uses to which they are being put and are substantially in regular use.
In general, our facilities are in good condition, are considered to be adequate for the uses to which they are being put and are substantially in regular use. 17 Table of Contents

Item 3. Legal Proceedings

Legal Proceedings — active lawsuits and investigations

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Biggest changeOn September 17, 2021, the Second Circuit Court of Appeals narrowed the case, unanimously upholding dismissal of most of the Second Amended Complaint, but reversing dismissal of one aspect of the Second Amended Complaint and remanding that remaining portion back to the District Court for further proceedings. We intend to continue to vigorously defend this lawsuit.
Biggest changeOn September 17, 2021, the Second Circuit Court of Appeals narrowed the case, unanimously upholding dismissal of most of the Second Amended Complaint, but reversing dismissal of one aspect of the Second Amended Complaint and remanding that remaining portion back to the District Court for further proceedings.
Government could result in our suspension or debarment from U.S. Government contracting for a period of time. On the basis of information presently available, we do not believe that existing proceedings and claims will have a material effect on our financial position or results of operations. Item 4. Mine Safety Disclosures Not applicable. 17 Table of Contents PART II
Government could result in our suspension or debarment from U.S. Government contracting for a period of time. On the basis of information presently available, we do not believe that existing proceedings and claims will have a material effect on our financial position or results of operations. Item 4. Mine Safety Disclosures Not applicable. PART II
We also are subject to actual and threatened legal proceedings and other claims arising out of the conduct of our business, including proceedings and claims relating to commercial and financial transactions; government contracts; alleged lack of compliance with applicable laws and regulations; production partners; product liability; patent and trademark infringement; employment disputes; and environmental, health and safety matters.
We also are subject to actual and threatened legal proceedings and other claims arising out of the conduct of our business, including proceedings and claims relating to commercial and financial transactions; government contracts; alleged lack of compliance with applicable laws and regulations; disputes with suppliers, production partners or other third parties; product liability; patent and trademark infringement; employment disputes; and environmental, health and safety matters.
Added
On June 23, 2022, as a result of a mediation process overseen by an independent mediator, the Parties entered into a settlement agreement to settle plaintiff’s claims for an amount not material to Textron. On November 21, 2022, the Court entered an order giving final approval of the settlement and final judgment in the case.
Added
Neither Textron nor any of the other defendants admitted any wrongdoing with respect to the allegations in the case.

Item 4. Mine Safety Disclosures

Mine Safety Disclosures — required of mining issuers

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Biggest changeItem 4. Mine Safety Disclosures 17 PART II Item 5. Market for Registrant’s Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities 18 Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations 19 Item 7A. Quantitative and Qualitative Disclosures About Market Risk 30 Item 8. Financial Statements and Supplementary Data 31
Biggest changeItem 4. Mine Safety Disclosures 18 PART II Item 5. Market for Registrant’s Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities 18 Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations 20 Item 7A. Quantitative and Qualitative Disclosures About Market Risk 31 Item 8. Financial Statements and Supplementary Data 32

Item 5. Market for Registrant's Common Equity

Market for Common Equity — stock, dividends, buybacks

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Biggest changeIssuer Repurchases of Equity Securities The following provides information about our fourth quarter 2021 repurchases of equity securities that are registered pursuant to Section 12 of the Securities Exchange Act of 1934, as amended: Period (shares in thousands) Total Number of Shares Purchased * Average Price Paid per Share (excluding commissions) Total Number of Shares Purchased as part of Publicly Announced Plan * Maximum Number of Shares that may yet be Purchased under the Plan October 3, 2021 – November 6, 2021 1,025 $ 72.19 1,025 11,270 November 7, 2021 – December 4, 2021 1,915 74.78 1,915 9,355 December 5, 2021 – January 1, 2022 1,598 73.76 1,598 7,757 Total 4,538 $ 73.84 4,538 * These shares were purchased pursuant to a plan authorizing the repurchase of up to 25 million shares of Textron common stock that was announced on February 25,2020, which had no expiration date.
Biggest changeIssuer Repurchases of Equity Securities The following provides information about our fourth quarter 2022 repurchases of equity securities that are registered pursuant to Section 12 of the Securities Exchange Act of 1934, as amended: Period (shares in thousands) Total Number of Shares Purchased * Average Price Paid per Share (excluding commissions) Total Number of Shares Purchased as part of Publicly Announced Plan * Maximum Number of Shares that may yet be Purchased under the Plan October 2, 2022 – November 5, 2022 750 $ 64.62 750 14,500 November 6, 2022 – December 3, 2022 1,635 69.67 1,635 12,865 December 4, 2022 – December 31, 2022 940 70.12 940 11,925 Total 3,325 $ 68.66 3,325 * These shares were purchased pursuant to a plan authorizing the repurchase of up to 25 million shares of Textron common stock that was announced on January 25,2022 and has no expiration date. 18 Table of Contents Stock Performance Graph The following graph compares the total return on a cumulative basis at the end of each year of $100 invested in our common stock on December 31, 2017 with the Standard & Poor’s (S&P) 500 Stock Index, the S&P 500 Aerospace & Defense (A&D) Index and the S&P 500 Industrials Index, all of which include Textron.
Item 5. Market for Registrant’s Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities The principal market on which our common stock is traded is the New York Stock Exchange under the symbol "TXT." At January 1, 2022, there were approximately 5,800 record holders of Textron common stock.
Item 5. Market for Registrant’s Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities The principal market on which our common stock is traded is the New York Stock Exchange under the symbol "TXT." At December 31, 2022, there were approximately 5,500 record holders of Textron common stock.
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On January 25, 2022, we announced the authorization of the repurchase of up to 25 million shares of our common stock. This new plan has no expiration date and replaced the existing plan adopted in 2020 that had 7.8 million remaining shares available for repurchase.
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The values calculated assume dividend reinvestment. 2017 2018 2019 2020 2021 2022 Textron Inc. $ 100.00 $ 80.77 $ 79.29 $ 85.86 $ 137.31 $ 126.08 S&P 500 100.00 94.80 125.91 148.85 191.58 156.88 S&P 500 A&D 100.00 90.72 124.44 100.56 113.86 133.64 S&P 500 Industrials 100.00 96.09 128.30 157.60 201.56 162.45 19 Table of Contents
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Stock Performance Graph The following graph compares the total return on a cumulative basis at the end of each year of $100 invested in our common stock on December 31, 2016 with the Standard & Poor’s (S&P) 500 Stock Index, the S&P 500 Aerospace & Defense (A&D) Index and the S&P 500 Industrials Index, all of which include Textron.
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The values calculated assume dividend reinvestment. 2016 2017 2018 2019 2020 2021 Textron Inc. $ 100.00 $ 116.72 $ 94.28 $ 92.55 $ 100.22 $ 160.28 S&P 500 100.00 121.83 115.49 153.40 181.35 233.41 S&P 500 A&D 100.00 141.38 128.27 175.93 142.18 160.98 S&P 500 Industrials 100.00 122.56 117.77 157.25 193.16 247.04 18 Table of Contents

Item 7. Management's Discussion & Analysis

Management's Discussion & Analysis (MD&A) — revenue / margin commentary

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Biggest changeChanges in segment profit for these contracts are typically expressed in terms of volume and mix and performance; these include cumulative catch-up adjustments associated with a) revisions to the transaction price that may reflect contract modifications or changes in assumptions related to award fees and other variable consideration or b) changes in the total estimated costs at completion due to improved or deteriorated operating performance. 20 Table of Contents Textron Aviation % Change (Dollars in millions) 2021 2020 2019 2021 2020 Revenues: Aircraft $ 3,116 $ 2,714 $ 3,592 15% (24)% Aftermarket parts and services 1,450 1,260 1,595 15% (21)% Total revenues 4,566 3,974 5,187 15% (23)% Operating expenses 4,188 3,958 4,738 6% (16)% Segment profit 378 16 449 2,263% (96)% Profit margin 8.3% 0.4% 8.7% Backlog $ 4,120 $ 1,603 $ 1,714 157% (6)% Textron Aviation Revenues and Operating Expenses Factors contributing to the 2021 year-over-year revenue change are provided below: (In millions) 2021 versus 2020 Volume and mix $ 519 Pricing 73 Total change $ 592 Textron Aviation’s revenues increased $592 million, 15%, in 2021, compared with 2020, largely due to higher Citation jet volume of $330 million and higher aftermarket volume of $204 million, reflecting higher aircraft utilization.
Biggest changeTextron Aviation % Change (Dollars in millions) 2022 2021 2020 2022 2021 Revenues: Aircraft $ 3,387 $ 3,116 $ 2,714 9% 15% Aftermarket parts and services 1,686 1,450 1,260 16% 15% Total revenues 5,073 4,566 3,974 11% 15% Operating expenses 4,489 4,188 3,958 7% 6% Segment profit $ 584 $ 378 $ 16 54% 2,263% Profit margin 11.5% 8.3% 0.4% Backlog $ 6,387 $ 4,120 $ 1,603 55% 157% Textron Aviation Revenues and Operating Expenses Factors contributing to the 2022 year-over-year revenue change are provided below: (In millions) 2022 versus 2021 Volume and mix $ 302 Pricing 205 Total change $ 507 Textron Aviation’s revenues increased $507 million, 11%, in 2022, compared with 2021, reflecting higher volume and mix of $302 million and higher pricing of $205 million.
Cash flows used by financing activities in 2021 included $921 million of cash paid to repurchase an aggregate of 13.5 million shares of our common stock under a 2020 share repurchase plan, and $524 million of payments on long-term debt.
In 2021, cash flows used by financing activities included $921 million of cash paid to repurchase an aggregate of 13.5 million shares of our common stock under a 2020 share repurchase plan, and $524 million of payments on long-term debt.
Revenue Recognition A substantial portion of our revenues is related to long-term contracts with the U.S. Government, including those under the U.S. Government-sponsored foreign military sales program, for the design, development, manufacture or modification of aerospace and defense products as well as related parts and services.
Revenue Recognition A substantial portion of our revenues is related to long-term contracts with the U.S. Government, including those under the U.S. Government-sponsored foreign military sales program, for the design, development, manufacture or modification of aerospace and defense products as well as related services.
Purchase obligations include undiscounted amounts committed under legally enforceable contracts or purchase orders for goods and services with defined terms as to price, quantity and delivery dates, as well as property, plant and equipment. Approximately 29% of our purchase obligations represent purchase orders issued for goods and services to be delivered under firm contracts with the U.S.
Purchase obligations include undiscounted amounts committed under legally enforceable contracts or purchase orders for goods and services with defined terms as to price, quantity and delivery dates, as well as property, plant and equipment. Approximately 18% of our purchase obligations represent purchase orders issued for goods and services to be delivered under firm contracts with the U.S.
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 2021 and 2020 to maintain compliance with the support agreement.
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 2022 and 2021 to maintain compliance with the support agreement.
This rate should be in line with rates for high-quality fixed income investments available for the period to maturity of the pension benefits, which fluctuate as long-term interest rates change. A lower discount rate increases the present value of the benefit obligations and increases pension expense.
This rate should be in line with rates for high-quality fixed income investments available for the period to maturity of the pension benefits, which fluctuate as long-term interest rates change. A lower discount rate increases the present value of the benefit obligations and decreases pension income.
For an overview of our business segments, including a discussion of our major products and services, refer to Item 1. Business. A discussion of our financial condition and operating results for 2021 compared with 2020 is provided below, while a discussion of 2020 compared with 2019 can be found in Item 7.
For an overview of our business segments, including a discussion of our major products and services, refer to Item 1. Business. A discussion of our financial condition and operating results for 2022 compared with 2021 is provided below, while a discussion of 2021 compared with 2020 can be found in Item 7.
Performance reflects an increase or decrease in research and development, depreciation, selling and administrative costs, warranty, product liability, quality/scrap, labor efficiency, overhead, non-service pension cost/(income), product line profitability, start-up, ramp up and cost-reduction initiatives or other manufacturing inputs. Approximately 26% of our 2021 revenues were derived from contracts with the U.S. Government, including those under the U.S.
Performance reflects an increase or decrease in research and development, depreciation, selling and administrative costs, warranty, product liability, quality/scrap, labor efficiency, overhead, non-service pension cost/(income), product line profitability, start-up, ramp up and cost-reduction initiatives or other manufacturing inputs. Approximately 22% of our 2022 revenues were derived from contracts with the U.S. Government, including those under the U.S.
All estimates are subject to change during the performance of the contract and, therefore, may affect the profit booking rate. 28 Table of Contents Changes in our estimate of the total expected cost or in the transaction price for a contract typically impact our profit booking rate.
All estimates are subject to change during the performance of the contract and, therefore, may affect the profit booking rate. Changes in our estimate of the total expected cost or in the transaction price for a contract typically impact our profit booking rate.
Government for which we have full recourse under customary contract termination clauses. Beginning in 2022, the Tax Cuts and Jobs Act of 2017 eliminates the option to deduct research and development expenditures immediately in the year incurred and requires taxpayers to amortize such expenditures over five years.
Government for which we have full recourse under customary contract termination clauses. Effective at the beginning of 2022, the Tax Cuts and Jobs Act of 2017 eliminated the option to deduct research and development expenditures immediately in the year incurred and requires taxpayers to amortize such expenditures over five years.
Management’s Discussion and Analysis of Financial Condition and Results of Operations of our Annual Report on Form 10-K for the year ended January 2, 2021. The following discussion should be read in conjunction with our Consolidated Financial Statements and related Notes included in Item 8. Financial Statements and Supplementary Data.
Management’s Discussion and Analysis of Financial Condition and Results of Operations of our Annual Report on Form 10-K for the year ended January 1, 2022. The following discussion should be read in conjunction with our Consolidated Financial Statements and related Notes included in Item 8. Financial Statements and Supplementary Data.
Financial Statements and Supplementary Data. The measurement for the Finance segment includes interest income and expense along with intercompany interest income and expense. Operating expenses for the Manufacturing segments include cost of sales, selling and administrative expense and other non-service components of net periodic benefit cost/(income), and exclude certain corporate expenses and special charges.
The measurement for the Finance segment includes interest income and expense along with intercompany interest income and expense. Operating expenses for the Manufacturing segments include cost of sales, selling and administrative expense and other non-service components of net periodic benefit cost/(income), and exclude certain corporate expenses and special charges.
The impact of our cumulative catch-up adjustments on segment profit recognized in prior periods is presented below: (In millions) 2021 2020 2019 Gross favorable $ 154 $ 148 $ 173 Gross unfavorable (73) (76) (82) Net adjustments $ 81 $ 72 $ 91 Due to the significance of judgment in the estimation process described above, it is likely that materially different revenues and/or cost of sales amounts could be recorded if we used different assumptions or if the underlying circumstances were to change.
The impact of our cumulative catch-up adjustments on segment profit recognized in prior periods is presented below: (In millions) 2022 2021 2020 Gross favorable $ 101 $ 154 $ 148 Gross unfavorable (117) (73) (76) Net adjustments $ (16) $ 81 $ 72 Due to the significance of judgment in the estimation process described above, it is likely that materially different revenues and/or cost of sales amounts could be recorded if we used different assumptions or if the underlying circumstances were to change.
To determine the weighted-average expected long-term rate of return on plan assets, we consider the current and expected asset allocation, as well as historical and expected returns on each plan asset class. A lower expected rate of return on plan assets will increase pension expense.
To determine the weighted-average expected long-term rate of return on plan assets, we consider the current and expected asset allocation, as well as historical and expected returns on each plan asset class. A lower expected rate of return on plan assets will decrease pension income.
Income Taxes 2021 2020 2019 Effective tax rate 14.4% (9.6%) 13.5% In 2021, the effective tax rate of 14.4% was lower than the U.S. federal statutory tax rate of 21%, largely due to the favorable impact of research and development credits, which included a $12 million benefit recognized for additional credits related to prior years.
In 2021, the effective tax rate of 14.4% was lower than the U.S. federal statutory tax rate of 21%, largely due to the favorable impact of research and development credits, which included a $12 million benefit recognized for additional credits related to prior years.
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 products 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.
Our Manufacturing group operations include the development, production and delivery of tangible products 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.
Retirement Benefits We sponsor funded and unfunded domestic and international pension plans for certain of our employees. Beginning on January 1, 2010, we initiated actions to commence the closure of the pension plans to new entrants. We provide employees hired subsequent to these closures with defined contribution benefits. Our pension benefit obligations are calculated based on actuarial valuations.
Beginning on January 1, 2010, we initiated actions to commence the closure of the pension plans to new entrants. We provide employees hired subsequent to these closures with defined contribution benefits. Our pension benefit obligations are calculated based on actuarial valuations.
Consolidated Cash Flows The consolidated cash flows from continuing operations, after elimination of activity between the borrowing groups, are summarized below: (In millions) 2021 2020 2019 Operating activities $ 1,599 $ 769 $ 1,016 Investing activities (281) (248) (266) Financing activities (1,446) 360 (502) Consolidated cash flows from operating activities were $1.6 billion in 2021, compared with $769 million in 2020.
Consolidated Cash Flows The consolidated cash flows from continuing operations, after elimination of activity between the borrowing groups, are summarized below: (In millions) 2022 2021 2020 Operating activities $ 1,490 $ 1,599 $ 769 Investing activities (447) (281) (248) Financing activities (1,091) (1,446) 360 Consolidated cash flows from operating activities were $1,490 million in 2022, compared with $1,599 million in 2021.
Finance Group Cash Flows The cash flows from continuing operations for the Finance group as presented in our Consolidated Statements of Cash Flows are summarized below: (In millions) 2021 2020 2019 Operating activities $ (1) $ 13 $ 34 Investing activities 185 (48) 135 Financing activities (97) (33) (113) The Finance group’s cash flows from investing activities primarily included collections on finance receivables totaling $250 million and $128 million in 2021 and 2020, respectively, and finance receivable originations of $100 million and $195 million, respectively.
Finance Group Cash Flows The cash flows from continuing operations for the Finance group as presented in our Consolidated Statements of Cash Flows are summarized below: (In millions) 2022 2021 2020 Operating activities $ (7) $ (1) $ 13 Investing activities 100 185 (48) Financing activities (216) (97) (33) The Finance group’s cash flows from investing activities primarily included collections on finance receivables totaling $147 million and $250 million in 2022 and 2021, respectively, partially offset by finance receivable originations of $92 million and $100 million, respectively.
Credit Facilities and Other Sources of Capital Textron has a senior unsecured revolving credit facility for an aggregate principal amount of $1.0 billion, of which up to $100 million is available for the issuance of letters of credit.
Credit Facilities and Other Sources of Capital On October 21, 2022, 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.
For 2021 and 2020, the assumed expected long-term rate of return on plan assets used in calculating pension expense was 7.10% and 7.55%, respectively. For 2021, the assumed rate of return for our domestic plans, which represent approximately 90% of our total pension assets, was 7.25%.
For both 2022 and 2021, the assumed expected long-term rate of return on plan assets used in calculating pension income was 7.10%. For 2022, the assumed rate of return for our domestic plans, which represent approximately 91% of our total pension assets, was 7.25%.
A decrease of 50 basis-points in this weighted-average discount rate in 2021 would have increased pension cost for our domestic plans by approximately $20 million. 29 Table of Contents
A decrease of 50 basis-points in this weighted-average discount rate in 2022 would have decreased pension income for our domestic plans by approximately $20 million. 30 Table of Contents
Textron Aviation Segment Profit Factors contributing to 2021 year-over-year segment profit change are provided below: (In millions) 2021 versus 2020 Volume and mix $ 231 Performance 74 Pricing, net of inflation 57 Total change $ 362 Textron Aviation’s segment profit increased $362 million in 2021, compared with 2020, due to the impact from higher volume and mix described above, a favorable impact from performance of $74 million and favorable pricing, net of inflation of $57 million.
Textron Aviation Segment Profit Factors contributing to 2022 year-over-year segment profit change are provided below: (In millions) 2022 versus 2021 Volume and mix $ 101 Pricing, net of inflation 91 Performance 14 Total change $ 206 Textron Aviation’s segment profit increased $206 million, 54%, in 2022, compared with 2021, primarily due to the impact from higher volume and mix described above and favorable pricing, net of inflation of $91 million.
For the Manufacturing Group, we also have purchase obligations that require material future cash outlays totaling $2.5 billion in 2022, $392 million in 2023 and $86 million thereafter.
For the Manufacturing Group, we also have purchase obligations that require material future cash outlays totaling $2.9 billion in 2023, $383 million in 2024 and $149 million thereafter.
There were no amounts borrowed against the facility and there were $9 million of outstanding letters of credit issued under the facility at both January 1, 2022 and January 2, 2021. We also maintain an effective shelf registration statement filed with the Securities and Exchange Commission that allows us to issue an unlimited amount of public debt and other securities.
At December 31, 2022, there were $9 million of outstanding letters of credit issued under the new facility, and at January 1, 2022, there were $9 million of outstanding letters of credit issued under the prior facility. 26 Table of Contents We also maintain an effective shelf registration statement filed with the Securities and Exchange Commission that allows us to issue an unlimited amount of public debt and other securities.
In 2021, the weighted-average discount rate used in calculating pension expense was 2.62%, compared with 3.36% in 2020. For our domestic plans, the assumed discount rate was 2.70% in 2021, compared with 3.45% in 2020.
In 2022, the weighted-average discount rate used in calculating pension income was 2.99%, compared with 2.62% in 2021. For our domestic plans, the assumed discount rate was 3.05% in 2022, compared with 2.70% in 2021.
Net tax payments were $72 million and $34 million in 2021 and 2020, respectively. Pension contributions were $52 million and $47 million in 2021 and 2020, respectively. In 2021 and 2020, investing cash flows primarily included capital expenditures of $375 million and $317 million, respectively.
Net income tax payments were $332 million and $72 million in 2022 and 2021, respectively. Pension contributions were $49 million and $52 million in 2022 and 2021, respectively. In 2022 and 2021, investing cash flows primarily included capital expenditures of $354 million and $375 million, respectively.
Net tax payments were $93 million and $42 million in 2021 and 2020, respectively. Pension contributions were $52 million and $47 million in 2021 and 2020, respectively. In 2021 and 2020, investing cash flows included capital expenditures of $375 million and $317 million, respectively.
Net income tax payments were $356 million and $93 million in 2022 and 2021, respectively. Pension contributions were $49 million and $52 million in 2022 and 2021, respectively. In 2022 and 2021, investing cash flows included capital expenditures of $354 million and $375 million, respectively.
Special Charges Special charges of $25 million and $147 million in 2021 and 2020, respectively, primarily include restructuring activities and 2020 intangible asset impairment charges as described in Note 16 to the Consolidated Financial Statements in Item 8. Financial Statements and Supplementary Data.
Special Charges Special charges of $25 million in 2021, primarily include restructuring activities as described in Note 16 to the Consolidated Financial Statements in Item 8. Financial Statements and Supplementary Data. There were no special charges recorded in 2022.
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.
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.
In addition to our manufacturing operating cash requirements, future material cash outlays include our contractual combined debt and interest payments for the Manufacturing group of $117 million in 2022, $119 million in 2023, $461 million in 2024 and $3.2 billion thereafter, and for the Finance Group of $274 million in 2022, $20 million in 2023, $16 million in 2024 and $390 million thereafter.
In addition to our manufacturing operating cash requirements, future material cash outlays include our contractual combined debt and interest payments for the Manufacturing group of $119 million in 2023, $461 million in 2024, $446 million in 2025 and $2.7 billion thereafter, and for the Finance Group of $35 million in 2023, $32 million in 2024, $49 million in 2025 and $611 million thereafter.
Textron Aviation Backlog Textron Aviation’s backlog increased $2.5 billion in 2021 as a result of orders in excess of deliveries. 21 Table of Contents Bell % Change (Dollars in millions) 2021 2020 2019 2021 2020 Revenues: Military aircraft and support programs $ 2,073 $ 2,213 $ 1,988 (6)% 11% Commercial helicopters, parts and services 1,291 1,096 1,266 18% (13)% Total revenues 3,364 3,309 3,254 2% 2% Operating expenses 2,956 2,847 2,819 4% 1% Segment profit 408 462 435 (12)% 6% Profit margin 12.1% 14.0% 13.4% Backlog $ 3,871 $ 5,342 $ 6,902 (28)% (23)% Bell’s major U.S.
Textron Aviation Backlog Textron Aviation’s backlog increased $2.3 billion in 2022 as a result of orders in excess of deliveries. 22 Table of Contents Bell % Change (Dollars in millions) 2022 2021 2020 2022 2021 Revenues: Military aircraft and support programs $ 1,740 $ 2,073 $ 2,213 (16)% (6)% Commercial helicopters, parts and services 1,351 1,291 1,096 5% 18% Total revenues 3,091 3,364 3,309 (8)% 2% Operating expenses 2,774 2,956 2,847 (6)% 4% Segment profit $ 317 $ 408 $ 462 (22)% (12)% Profit margin 10.3% 12.1% 14.0% Backlog $ 4,781 $ 3,871 $ 5,342 24% (28)% A significant portion of Bell’s military aircraft and support program revenues is from the U.S.
Operating expenses for the Industrial segment increased $101 million, 3%, in 2021 compared with 2020, primarily reflecting inflation of $105 million, largely in material costs, and an unfavorable impact of $54 million from foreign exchange rate fluctuations, partially offset by the impact of lower volume and mix described above.
Operating expenses for the Industrial segment increased $310 million, 10%, in 2022 compared with 2021, primarily reflecting inflation of $226 million, largely in material costs, and higher volume and mix described above, partially offset by a favorable impact of $85 million from foreign exchange rate fluctuations.
Segment profit is an important measure used for evaluating performance and for decision-making purposes. Segment profit for the manufacturing segments excludes interest expense, certain corporate expenses, gains/losses on major business dispositions, special charges and an inventory charge related to the 2020 COVID-19 restructuring plan, as discussed in Note 16 to the Consolidated Financial Statements in Item 8.
Segment profit for the manufacturing segments includes non-service components of net periodic benefit cost/(income) and excludes interest expense, net; certain corporate expenses; gains/losses on major business dispositions; special charges; and an inventory charge related to the 2020 COVID-19 restructuring plan, as discussed in Note 16 to the Consolidated Financial Statements in Item 8. Financial Statements and Supplementary Data.
These captive financing activities, along with all significant intercompany transactions, are reclassified or eliminated from the Consolidated Statements of Cash Flows. 27 Table of Contents Reclassification adjustments included in the Consolidated Statements of Cash Flows are summarized below: (In millions) 2021 2020 2019 Reclassification adjustments from investing activities: Cash received from customers $ 231 $ 106 $ 229 Finance receivable originations for Manufacturing group inventory sales (100) (195) (184) Other — 12 27 Total reclassification adjustments from investing activities 131 (77) 72 Reclassification adjustments from financing activities: Dividends received by Manufacturing group from Finance group — — (50) Total reclassification adjustments to cash flow from operating activities $ 131 $ (77) $ 22 Under a Support Agreement between Textron and TFC, Textron is required to maintain a controlling interest in TFC.
Reclassification adjustments included in the Consolidated Statements of Cash Flows are summarized below: (In millions) 2022 2021 2020 Reclassification adjustments from investing activities to operating activities: Cash received from customers $ 127 $ 231 $ 106 Finance receivable originations for Manufacturing group inventory sales (92) (100) (195) Other 1 — 12 Total reclassification adjustments from investing activities to operating activities $ 36 $ 131 $ (77) Under a Support Agreement between Textron and TFC, Textron is required to maintain a controlling interest in TFC.
Assessment of Liquidity and Significant Future Cash Requirements Key information that is utilized in assessing our liquidity is summarized below: (Dollars in millions) January 1, 2022 January 2, 2021 Manufacturing group Cash and equivalents $ 1,922 $ 2,146 Debt 3,185 3,707 Shareholders’ equity 6,815 5,845 Capital (debt plus shareholders’ equity) 10,000 9,552 Net debt (net of cash and equivalents) to capital 16% 21% Debt to capital 32% 39% Finance group Cash and equivalents $ 195 $ 108 Debt 582 662 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 our capacity to add further leverage. 25 Table of Contents We expect to have sufficient cash to meet our needs based on our existing cash balances, the cash we expect to generate from our manufacturing operations and the availability of our existing credit facility.
Assessment of Liquidity and Significant Future Cash Requirements Key information that is utilized in assessing our liquidity is summarized below: (Dollars in millions) December 31, 2022 January 1, 2022 Manufacturing group Cash and equivalents $ 1,963 $ 1,922 Debt 3,182 3,185 Shareholders’ equity 7,113 6,815 Capital (debt plus shareholders’ equity) 10,295 10,000 Net debt (net of cash and equivalents) to capital 15% 16% Debt to capital 31% 32% Finance group Cash and equivalents $ 72 $ 195 Debt 375 582 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 our capacity to add further leverage.
Key financial highlights for 2021 include: • Generated $1.5 billion of net cash from operating activities from our manufacturing businesses. • Improved our ratio of debt, net of cash and equivalents, to capital to 16%, from 21% in 2020. • Invested $619 million in research and development projects and $375 million in capital expenditures. • Returned $921 million to our shareholders through repurchasing 13.5 million shares of our common stock.
Financial highlights for 2022 also include: • Generated $1.5 billion of net cash from operating activities from our manufacturing businesses. • Invested $601 million in research and development projects and $354 million in capital expenditures. • Returned $867 million to our shareholders through the repurchase of 13.1 million shares of our common stock.
For a full reconciliation of our effective tax rate to the U.S. federal statutory tax rate, see Note 17 to the Consolidated Financial Statements in Item 8. Financial Statements and Supplementary Data. Segment Analysis We operate in, and report financial information for, the following five business segments: Textron Aviation, Bell, Textron Systems, Industrial and Finance.
For a full reconciliation of our effective tax rate to the U.S. federal statutory tax rate, see Note 17 to the Consolidated Financial Statements in Item 8. Financial Statements and Supplementary Data.
Government contracts in excess of new contracts received. 22 Table of Contents Textron Systems % Change (Dollars in millions) 2021 2020 2019 2021 2020 Revenues $ 1,273 $ 1,313 $ 1,325 (3)% (1)% Operating expenses 1,084 1,161 1,184 (7)% (2)% Segment profit 189 152 141 24% 8% Profit margin 14.8% 11.6% 10.6% Backlog $ 2,144 $ 2,556 $ 1,211 (16)% 111% Textron Systems Revenues and Operating Expenses Factors contributing to the 2021 year-over-year revenue change are provided below: (In millions) 2021 versus 2020 Volume $ (16) Other (24) Total change $ (40) Revenues at Textron Systems decreased $40 million, 3%, in 2021, compared with 2020.
Government for spares and logistic support for the V-22 tiltrotor aircraft in the first quarter of 2022. 23 Table of Contents Textron Systems % Change (Dollars in millions) 2022 2021 2020 2022 2021 Revenues $ 1,172 $ 1,273 $ 1,313 (8)% (3)% Operating expenses 1,020 1,084 1,161 (6)% (7)% Segment profit $ 152 $ 189 $ 152 (20)% 24% Profit margin 13.0% 14.8% 11.6% Backlog $ 2,098 $ 2,144 $ 2,556 (2)% (16)% Textron Systems Revenues and Operating Expenses Factors contributing to the 2022 year-over-year revenue change are provided below: (In millions) 2022 versus 2021 Volume and mix $ (121) Pricing 20 Total change $ (101) Revenues at Textron Systems decreased $101 million, 8%, in 2022, compared with 2021.
Bell Revenues and Operating Expenses Factors contributing to the 2021 year-over-year revenue change are provided below: (In millions) 2021 versus 2020 Pricing $ 28 Volume and mix 27 Total change $ 55 Bell’s revenues increased $55 million, 2%, in 2021, compared with 2020, reflecting higher commercial revenues of $195 million, primarily due to higher volume, partially offset by lower military revenues of $140 million, reflecting lower spares and support volume and the winddown of the H-1 production program.
Bell Revenues and Operating Expenses Factors contributing to the 2022 year-over-year revenue change are provided below: (In millions) 2022 versus 2021 Volume and mix $ (332) Pricing 59 Total change $ (273) Bell’s revenues decreased $273 million, 8%, in 2022, compared with 2021, largely due to lower military revenues of $333 million, primarily in the H-1 program due to lower aircraft and spares production volume reflecting lower demand.
Due to the number of years it may take to complete these contracts and the scope and nature of the work required to be performed on the contracts, the estimation of total transaction price and costs at completion is complicated and subject to many variables and, accordingly, is subject to change.
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. 28 Table of Contents Due to the number of years it may take to complete these contracts and the scope and nature of the work required to be performed on the contracts, the estimation of total transaction price and costs at completion is complicated and subject to many variables and, accordingly, is subject to change.
The facility expires in October 2024, subject to up to two one-year extensions at our option with the consent of lenders representing a majority of the commitments under the facility.
The facility expires in October 2027 and provides for two one-year extensions at our option with the consent of lenders representing a majority of the commitments under the facility. This new facility replaces the existing 5-year facility, which was scheduled to expire in October 2024.
Consolidated Results of Operations % Change (Dollars in millions) 2021 2020 2019 2021 2020 Revenues $ 12,382 $ 11,651 $ 13,630 6% (15)% Cost of sales 10,297 10,094 11,406 2% (12)% Gross margin as a percentage of Manufacturing revenues 16.5% 13.0% 15.9% Selling and administrative expense 1,221 1,045 1,152 17% (9)% Interest expense 142 166 171 (14)% (3)% Revenues Revenues increased $731 million, 6%, in 2021, compared with 2020, primarily at the Textron Aviation and Industrial segments.
Consolidated Results of Operations % Change (Dollars in millions) 2022 2021 2020 2022 2021 Revenues $ 12,869 $ 12,382 $ 11,651 4% 6% Cost of sales 10,800 10,297 10,094 5% 2% Gross margin as a percentage of Manufacturing revenues 15.7% 16.5% 13.0% Selling and administrative expense 1,186 1,221 1,045 (3)% 17% Interest expense, net 107 142 166 (25)% (14)% Non-service components of pension and postretirement income, net 240 159 83 51% 92% Revenues Revenues increased $487 million, 4%, in 2022, compared with 2021.
Under the assumption that this legislation is not modified or repealed, the impact will continue over the five-year amortization period, but will decrease each year.
Without the option to deduct these expenses in the year incurred, our tax payments increased by $284 million in 2022. Under the assumption that this legislation is not modified or repealed, the impact will continue over the five-year amortization period, but will decrease each year.
Captive Financing and Other Intercompany Transactions The Finance group provides financing primarily to purchasers of new and pre-owned Textron Aviation aircraft and Bell helicopters manufactured by our Manufacturing group, otherwise known as captive financing. In the Consolidated Statements of Cash Flows, cash received from customers is reflected as operating activities when received from third parties.
In 2021, cash flows used by financing activities included $921 million of share repurchases and $621 million of payments on long-term debt. Captive Financing and Other Intercompany Transactions The Finance group provides financing primarily to purchasers of new and pre-owned Textron Aviation aircraft and Bell helicopters manufactured by our Manufacturing group, otherwise known as captive financing.
Textron Systems Backlog Backlog at Textron Systems’ decreased $412 million in 2021, primarily due to revenues recognized in excess of new contracts received. 23 Table of Contents Industrial % Change (Dollars in millions) 2021 2020 2019 2021 2020 Revenues: Fuel Systems and Functional Components $ 1,735 $ 1,751 $ 2,237 (1)% (22)% Specialized Vehicles 1,395 1,249 1,561 12% (20)% Total revenues 3,130 3,000 3,798 4% (21)% Operating expenses 2,990 2,889 3,581 3% (19)% Segment profit 140 111 217 26% (49)% Profit margin 4.5% 3.7% 5.7% Industrial Revenues and Operating Expenses Factors contributing to the 2021 year-over-year revenue change are provided below: (In millions) 2021 versus 2020 Pricing $ 142 Foreign exchange 50 Volume and mix (62) Total change $ 130 Industrial segment revenues increased $130 million, 4%, in 2021, compared with 2020, due to a favorable impact of $142 million from pricing, principally in the Specialized Vehicles product line, and $50 million from foreign exchange rate fluctuations, largely related to the Euro and the Chinese Yuan in the Fuel Systems and Functional Components product line.
Industrial % Change (Dollars in millions) 2022 2021 2020 2022 2021 Revenues: Fuel Systems and Functional Components $ 1,771 $ 1,735 $ 1,751 2% (1)% Specialized Vehicles 1,694 1,395 1,249 21% 12% Total revenues 3,465 3,130 3,000 11% 4% Operating expenses 3,300 2,990 2,889 10% 3% Segment profit $ 165 $ 140 $ 111 18% 26% Profit margin 4.8% 4.5% 3.7% 24 Table of Contents Industrial Revenues and Operating Expenses Factors contributing to the 2022 year-over-year revenue change are provided below: (In millions) 2022 versus 2021 Pricing $ 227 Volume and mix 203 Foreign exchange (95) Total change $ 335 Industrial segment revenues increased $335 million, 11%, in 2022, compared with 2021, due to a favorable impact of $227 million from pricing, principally in the Specialized Vehicles product line, and higher volume and mix of $203 million in both product lines, partially offset by an unfavorable impact of $95 million from foreign exchange rate fluctuations.
Financial Statements and Supplementary Data. Liquidity and Capital Resources Our financings are conducted through two separate borrowing groups. The Manufacturing group consists of Textron consolidated with its majority-owned subsidiaries that operate in the Textron Aviation, Bell, Textron Systems and Industrial segments. The Finance group, which also is the Finance segment, consists of Textron Financial Corporation and its consolidated subsidiaries.
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.
This new plan allows us to continue our practice of repurchasing shares to offset the impact of dilution from stock-based compensation and benefit plans and for opportunistic capital management purposes. The 2022 plan has no expiration date and replaced the prior 2020 share repurchase authorization, which was utilized in 2021 and 2020 for repurchases.
On January 25, 2022, we announced the authorization of the repurchase of up to 25 million shares of our common stock. This plan allows us to continue our practice of repurchasing shares to offset the impact of dilution from stock-based compensation and benefit plans and for opportunistic capital management purposes.
Based on our annual impairment review, the fair value calculated using the estimates discussed above exceeded the carrying value by an adequate amount for each reporting group. Accordingly, we do not believe that there is a reasonable possibility that any units might fail the impairment test in the foreseeable future.
Based on our annual impairment review, the fair value calculated using the estimates discussed above exceeded the carrying value by an adequate amount for each reporting group.
Bell Segment Profit Factors contributing to 2021 year-over-year segment profit change are provided below: (In millions) 2021 versus 2020 Performance $ (36) Volume and mix (31) Pricing, net of inflation 13 Total change $ (54) Bell’s segment profit decreased $54 million, 12%, in 2021, compared with 2020, largely reflecting an unfavorable impact of $36 million from performance, which included higher research and development costs discussed above and higher selling and administrative costs.
Bell Segment Profit Factors contributing to 2022 year-over-year segment profit change are provided below: (In millions) 2022 versus 2021 Volume and mix $ (135) Performance 45 Inflation, net of pricing (1) Total change $ (91) Bell’s segment profit decreased $91 million, 22%, in 2022, compared with 2021, largely reflecting lower volume and mix described above, partially offset by a favorable impact from performance of $45 million.
We delivered 156 commercial helicopters in 2021, compared with 140 commercial helicopters in 2020. Bell’s operating expenses increased $109 million, 4%, in 2021, compared with 2020, primarily due to higher net volume and mix described above and higher research and development costs, largely related to the future vertical lift programs.
Commercial revenues increased $60 million, largely due to higher pricing. We delivered 179 commercial helicopters in 2022, compared with 156 commercial helicopters in 2021. Bell’s operating expenses decreased $182 million, 6%, in 2022, compared with 2021, primarily due to lower net volume and mix described above.
Cash flows used in financing activities included payments on long-term and nonrecourse debt of $97 million and $45 million in 2021 and 2020, respectively.
Cash flows provided by investing activities in 2022 also included $45 million of other investing activities, largely related to proceeds from the sale of operating lease assets. Cash flows used in financing activities included payments on long-term and nonrecourse debt of $216 million and $97 million in 2022 and 2021, respectively.
Textron Systems Segment Profit Factors contributing to 2021 year-over-year segment profit change are provided below: (In millions) 2021 versus 2020 Performance and other $ 52 Volume and mix (15) Total change $ 37 Textron Systems’ segment profit increased $37 million, 24%, in 2021, compared with 2020, due to a favorable impact from performance and other, which included a $19 million impact from TRU Canada related to unfavorable performance and other in 2020.
Textron Systems Segment Profit Factors contributing to 2022 year-over-year segment profit change are provided below: (In millions) 2022 versus 2021 Volume and mix $ (25) Performance (20) Pricing, net of inflation 8 Total change $ (37) Textron Systems’ segment profit decreased $37 million, 20%, in 2022, compared with 2021, due to lower volume and mix of $25 million described above and an unfavorable impact from performance of $20 million, partially offset by favorable pricing, net of inflation of $8 million.
Gross margin as a percentage of Manufacturing revenues increased 350 basis points in 2021, compared with 2020, primarily due to higher margin at the Textron Aviation segment reflecting the impact of higher product sales.
Gross margin as a percentage of Manufacturing revenues decreased 80 basis points in 2022, compared with 2021, as higher margin at the Textron Aviation segment, reflecting higher volume and mix and pricing, was more than offset by lower margin at the other Manufacturing segments, primarily at the Bell segment due to lower volume and mix.
Industrial Segment Profit Factors contributing to 2021 year-over-year segment profit change are provided below: (In millions) 2021 versus 2020 Pricing, net of inflation $ 37 Performance 10 Volume and mix (14) Foreign exchange (4) Total change $ 29 Segment profit for the Industrial segment increased $29 million, 26%, in 2021, compared with 2020, primarily due to a favorable impact of $37 million, from pricing, net of inflation, largely in the Specialized Vehicles product line, and a favorable impact of $10 million from performance, partially offset by lower volume and mix as described above. 24 Table of Contents Finance (In millions) 2021 2020 2019 Revenues $ 49 $ 55 $ 66 Segment profit 19 10 28 Finance segment revenues decreased $6 million in 2021, compared with 2020, and segment profit increased $9 million in 2021, compared with 2020, primarily due to lower provision for loan losses.
Industrial Segment Profit Factors contributing to 2022 year-over-year segment profit change are provided below: (In millions) 2022 versus 2021 Volume and mix $ 44 Foreign exchange (10) Performance (10) Pricing, net of inflation 1 Total change $ 25 Segment profit for the Industrial segment increased $25 million, 18%, in 2022, compared with 2021, primarily due to higher volume and mix of $44 million as described above, partially offset by an unfavorable impact from foreign exchange rate fluctuations of $10 million and performance of $10 million.
We delivered 167 Citation jets and 125 commercial turboprops in 2021, compared with 132 Citation jets and 113 commercial turboprops in 2020. Textron Aviation’s operating expenses increased $230 million, 6%, in 2021, compared with 2020, largely due to higher volume and mix described above.
Textron Aviation’s operating expenses increased $301 million, 7%, in 2022, compared with 2021, largely due to higher volume and mix described above and inflation of $114 million.
In 2020, the effective tax rate of (9.6)% was lower than the U.S. federal statutory tax rate of 21%, primarily due to an audit settlement with respect to certain state income tax returns that resulted in a $52 million benefit and the favorable impact of research and development credits.
Income Taxes 2022 2021 2020 Effective tax rate 15.2% 14.4% (9.6%) In 2022, the effective tax rate of 15.2% was lower than the U.S. federal statutory tax rate of 21%, largely due to the favorable impact of research and development credits and tax deductions for foreign-derived intangible income.
In 2021, cost of sales increased $203 million, 2%, compared with 2020, largely due to higher net volume and mix described above and an unfavorable impact from inflation of $117 million, principally reflecting higher material costs in the Industrial segment.
Cost of Sales and Selling and Administrative Expense Cost of sales includes cost of products and services sold for the Manufacturing group. In 2022, cost of sales increased $503 million, 5%, compared with 2021, largely due to an unfavorable impact from inflation of $385 million, principally reflecting higher material costs in the Industrial and Textron Aviation segments.
Manufacturing Group Cash Flows Cash flows from continuing operations for the Manufacturing group as presented in our Consolidated Statements of Cash Flows are summarized below: (In millions) 2021 2020 2019 Operating activities $ 1,469 $ 833 $ 960 Investing activities (335) (277) (329) Financing activities (1,349) 393 (439) Cash flows from operating activities were $1.5 billion in 2021 compared with $833 million in 2020.
Manufacturing Group Cash Flows Cash flows from continuing operations for the Manufacturing group as presented in our Consolidated Statements of Cash Flows are summarized below: (In millions) 2022 2021 2020 Operating activities $ 1,461 $ 1,469 $ 833 Investing activities (511) (335) (277) Financing activities (875) (1,349) 393 Cash flows from operating activities in 2022 were essentially unchanged from 2021 as an increase in net income tax payments of $260 million, largely resulting from a change in tax legislation discussed above, was mostly offset by changes in working capital and higher earnings.
Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations Overview In 2021, Textron’s revenues increased 6% and segment profit increased 51%, compared with 2020, reflecting higher volume and pricing, along with performance improvements.
Management’s Discussion and Analysis of Financial Condition and Results of Operations Overview In 2022, Textron’s revenues increased 4% and segment profit increased 8%, compared with 2021, reflecting the impact of higher pricing and higher volume and mix at both the Textron Aviation and Industrial segments, partially offset by lower volume and mix at the Bell and Textron Systems segments.
Cash flows used by financing activities in 2021 primarily included $921 million of share repurchases and $621 million of payments on outstanding debt.
Investing cash flows in 2022 also included $202 million of net cash paid for business acquisitions, largely related to the Pipistrel acquisition. Cash flows used by financing activities in 2022 primarily included $867 million of share repurchases and $234 million of payments on long-term debt.
Government programs at this time are the V-22 tiltrotor aircraft and the H-1 helicopter platforms, which are both in the production and support stage and represent a significant portion of Bell’s revenues from the U.S. Government. Over the next several years, the H-1 helicopter program with the U.S. Government will be transitioning from the production stage to the support stage.
Government for the V-22 tiltrotor aircraft and the H-1 helicopter platforms, which are transitioning from production to the support stage over the next few years. Under the current contracts, production is expected to end by 2023 for the H-1 helicopter and 2025 for the V-22 tiltrotor.
Interest expense for the Finance segment is included within segment profit and includes intercompany interest. Consolidated interest expense decreased $24 million, 14%, in 2021, compared with 2020, primarily due to lower average debt outstanding.
In 2022, interest expense, net decreased $35 million, 25%, compared with 2021, primarily due to an increase in interest income of $22 million and lower average debt outstanding. For 2022, 2021 and 2020, gross interest expense totaled $129 million, $142 million and $166 million, respectively.
(Dollars in millions) January 1, 2022 January 2, 2021 Finance receivables $ 630 $ 779 Allowance for credit losses 25 35 Ratio of allowance for credit losses to finance receivables 3.97% 4.49% Nonaccrual finance receivables 94 93 Ratio of nonaccrual finance receivables to finance receivables 14.92% 11.94% 60+ days contractual delinquency 1 29 60+ days contractual delinquency as a percentage of finance receivables 0.16% 3.72% Since the first quarter of 2020, the Finance segment has worked with certain customers impacted by the pandemic to provide payment relief through loan modifications.
(Dollars in millions) December 31, 2022 January 1, 2022 Finance receivables $ 587 $ 630 Allowance for credit losses 24 25 Ratio of allowance for credit losses to finance receivables 4.09% 3.97% Nonaccrual finance receivables 46 94 Ratio of nonaccrual finance receivables to finance receivables 7.84% 14.92% 60+ days contractual delinquency 1 1 60+ days contractual delinquency as a percentage of finance receivables 0.17% 0.16% 25 Table of Contents Liquidity and Capital Resources Our financings are conducted through two separate borrowing groups.
Selling and administrative expense increased $176 million, 17%, in 2021, compared with 2020, primarily at the Textron Aviation and Industrial segments as more normalized operating activities resumed during 2021 compared to 2020, which included temporary cost reduction activities related to the pandemic, and higher share-based compensation expense due to stock appreciation. 19 Table of Contents Interest Expense Interest expense on the Consolidated Statements of Operations includes interest for both the Finance and Manufacturing borrowing groups with interest related to intercompany borrowings eliminated.
Selling and administrative expense decreased $35 million, 3%, in 2022, compared with 2021, primarily reflecting lower share-based compensation expense. 20 Table of Contents Interest Expense, Net Interest expense, net includes interest expense for both the Finance and Manufacturing borrowing groups, with interest on intercompany borrowings eliminated, and interest income earned on cash and equivalents.
The $636 million year-over-year increase in net cash inflow was primarily due to higher earnings and working capital improvements.
The $109 million year-over-year decrease in net cash inflow was primarily due to an increase in net income tax payments of $263 million, 27 Table of Contents largely resulting from a change in tax legislation discussed above, and a decrease in cash inflows from captive finance receivables of $96 million, partially offset changes in working capital and higher earnings.
The following table reflects information about the Finance segment’s credit performance related to finance receivables.
Finance (In millions) 2022 2021 2020 Revenues $ 52 $ 49 $ 55 Segment profit 31 19 10 Finance segment revenues increased $3 million and segment profit increased $12 million in 2022, compared with 2021. The following table reflects information about the Finance segment’s credit performance related to finance receivables.
Dividend payments to shareholders totaled $18 million in both 2021 and 2020.
The 2022 plan has no expiration date and replaced the prior 2020 share repurchase authorization, which was utilized in 2021 for repurchases. Dividend payments to shareholders totaled $17 million and $18 million in 2022 and 2021, respectively.
Lower volume of $16 million included a $79 million decrease from our fee-for-service contracts, primarily reflecting the impact from the U.S. Army’s withdrawal from Afghanistan, partially offset by higher volume at ATAC of $69 million, primarily from increased demand for its military tactical air services.
Lower volume of $121 million included an $88 million decrease from our Afghanistan fee-for-service and aircraft support contracts, primarily reflecting the impact from the U.S. Army’s withdrawal from Afghanistan. Textron Systems’ operating expenses decreased $64 million, 6%, in 2022, compared with 2021, primarily related to lower volume described above.
Removed
Higher earnings and working capital improvements during the year resulted in a year-over-year increase of $636 million in net cash flows from operating activities from our manufacturing businesses. While most of our commercial businesses have not yet returned to 2019 pre-pandemic levels, we experienced a rebound in customer demand in these businesses during 2021.
Added
Our backlog increased 31%, to $13.3 billion by the end of 2022, reflecting increased demand in many of our businesses, including a 55% increase in backlog at the Textron Aviation segment. During 2022, we continued to manage through the impacts of ongoing global supply chain shortages/delays and labor shortages, in order to meet customer demand.
Removed
Customer demand for our Textron Aviation aircraft products, in particular, increased throughout the year, enabling the business to return to a more normalized and efficient manufacturing cadence and resulted in a $2.5 billion, 157%, increase in backlog.
Added
In December 2022, Bell was awarded the development contract for the U.S. Army’s Future Long-Range Assault Aircraft (FLRAA) program as discussed in Item 1. Business.
Removed
During the year, we have been impacted by ongoing pandemic-related global supply chain shortages and delays, as well as inflation, primarily in the Industrial segment, and we continue to manage through these challenges.
Added
The revenue increase primarily included the following factors: • Higher Textron Aviation revenues of $507 million, reflecting higher volume and mix of $302 million and higher pricing of $205 million. • Higher Industrial revenues of $335 million due to a favorable impact from pricing of $227 million, principally in the Specialized Vehicles product line, and higher volume and mix of $203 million in both product lines, partially offset by an unfavorable impact from exchange rate fluctuations of $95 million. • Lower Bell revenues of $273 million due to lower military revenues of $333 million, primarily in the H-1 program due to lower aircraft and spares production volume reflecting lower demand, partially offset by higher commercial revenues of $60 million, largely due to higher pricing. • Lower Textron Systems revenues of $101 million, largely due to lower volume of $121 million, which included an $88 million decrease from our Afghanistan fee-for-service and aircraft support contracts.
Removed
Textron Aviation revenues were higher by $592 million, largely due to higher Citation jet volume of $330 million, and higher aftermarket volume of $204 million. Revenues at Industrial were higher by $130 million, largely due to a favorable impact of $142 million from pricing, principally in the Specialized Vehicles product line.
Added
Non-service Components of Pension and Postretirement Income, Net Non-service components of pension and postretirement income, net increased by $81 million, 51%, in 2022, compared with 2021.
Removed
Cost of Sales and Selling and Administrative Expense Cost of sales includes cost of products and services sold for the Manufacturing group.
Added
The increase is based on our annual valuation at the end of 2021 and is primarily driven by an increase in the discount rate utilized for our domestic qualified pension plans and the impact of actual pension asset returns that exceeded our expected return on plan assets.
Removed
These increases were partially offset by the impact of costs incurred in 2020, including idle facility costs of $142 million, primarily at the Textron Aviation segment, and a $55 million inventory charge related to the TRU Canada business discussed in Note 16 to the Consolidated Financial Statements in Item 8. Financial Statements and Supplementary Data.

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Item 7A. Quantitative and Qualitative Disclosures About Market Risk

Market Risk — interest-rate, FX, commodity exposure

3 edited+0 added−0 removed7 unchanged
Biggest changeJanuary 1, 2022 January 2, 2021 ( In millions ) Carrying Value* Fair Value* Sensitivity of Fair Value to a 10% Change Carrying Value* Fair Value* Sensitivity of Fair Value to a 10% Change Manufacturing group Foreign currency exchange risk Debt $ (6) $ (6) $ (1) $ (10) $ (10) $ (1) Foreign currency exchange contracts 1 1 21 3 3 22 $ (5) $ (5) $ 20 $ (7) $ (7) $ 21 Interest rate risk Debt $ (3,181) $ (3,346) $ (24) $ (3,690) $ (3,986) $ (16) Finance group Interest rate risk Finance receivables $ 413 $ 444 $ 7 $ 549 $ 599 $ 9 Debt (582) (546) — (662) (587) — * The value represents an asset or (liability). 30 Table of Contents
Biggest changeDecember 31, 2022 January 1, 2022 ( In millions ) Carrying Value* Fair Value* Sensitivity of Fair Value to a 10% Change Carrying Value* Fair Value* Sensitivity of Fair Value to a 10% Change Manufacturing group Foreign currency exchange risk Debt $ (6) $ (6) $ (1) $ (6) $ (6) $ (1) Foreign currency exchange contracts (11) (11) 28 1 1 21 $ (17) $ (17) $ 27 $ (5) $ (5) $ 20 Interest rate risk Debt $ (3,175) $ (2,872) $ (51) $ (3,181) $ (3,346) $ (24) Finance group Interest rate risk Finance receivables $ 390 $ 369 $ 10 $ 413 $ 444 $ 7 Debt (375) (294) (1) (582) (546) — * The value represents an asset or (liability). 31 Table of Contents
These contracts generally are used to fix the local currency cost of purchased goods or services or selling prices denominated in currencies other than the functional currency. The notional amount of outstanding foreign currency exchange contracts was $272 million and $318 million at January 1, 2022 and January 2, 2021, respectively.
These contracts generally are used to fix the local currency cost of purchased goods or services or selling prices denominated in currencies other than the functional currency. The notional amount of outstanding foreign currency exchange contracts was $354 million and $272 million at December 31, 2022 and January 1, 2022, respectively.
This strategy includes the use of interest rate swap agreements. We had an interest rate swap agreement with a notional amount of $289 million at January 1, 2022 and $294 million at January 2, 2021, which effectively converted certain floating-rate debt to a fixed-rate equivalent.
This strategy includes the use of interest rate swap agreements. We had interest rate swap agreements with a total notional amount of $297 million at December 31, 2022 and $289 million at January 1, 2022, which effectively converted certain floating-rate debt to a fixed-rate equivalent.

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