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What changed in Textron's 10-K — 2023 vs 2024

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Paragraph-level year-over-year comparison of Textron's 2023 and 2024 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 2024 report.

+192 added−219 removedSource: 10-K (2024-02-12) vs 10-K (2023-02-16)

Top changes in Textron's 2024 10-K

192 paragraphs added · 219 removed · 159 edited across 8 sections

Item 1. Business

Business — how the company describes what it does

44 edited+6 added−15 removed35 unchanged
Biggest changeGovernment’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
Biggest changeGovernment’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 revenue and profit projections; • The impact of changes in tax legislation; 8 Table of Contents • The risk of disruptions to our business and the business of our suppliers, customers and other business partners due to unexpected events, such as pandemics, natural disasters, acts of war, strikes, terrorism, social unrest or other societal or political conditions; and • The ability of our businesses to hire and retain the highly skilled personnel necessary for our businesses to succeed.
The following description of our business and operating segments should be read in conjunction with Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations. Textron Aviation Segment Textron Aviation is a leader in general aviation. Textron Aviation manufactures, sells and services Beechcraft and Cessna aircraft, and services the Hawker brand of business jets.
The following description of our business and operating segments should be read in conjunction with Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations. Textron Aviation Segment Textron Aviation is a leader in general aviation. Textron Aviation manufactures, sells and services Cessna and Beechcraft aircraft, and services the Hawker brand of business jets.
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.
We believe by employing highly talented 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.
Textron Systems Segment The businesses in our Textron Systems segment develop and integrate a variety of products and services for U.S. and international military, government and commercial customers to support defense, homeland security, aerospace, infrastructure protection and other customer missions.
Textron Systems Segment The businesses in our Textron Systems segment develop, manufacture and integrate a variety of products and services for U.S. and international military, government and commercial customers to support defense, homeland security, aerospace, infrastructure protection and other customer missions.
These processes enable us to fill talent needs by matching employees who are ready to assume significant leadership roles with opportunities that best fit their career path, which may be in other businesses within the enterprise. Diversity and Inclusion Textron is committed to having a diverse workforce and inclusive workplaces throughout our global operations.
These processes enable us to fill talent needs by matching employees who are ready to assume significant leadership roles with opportunities that best fit their career path, which may be in other businesses within the enterprise. Textron is committed to having a diverse workforce and inclusive workplaces throughout our global operations.
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.
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. In addition, more than 300 authorized independent service centers are located throughout the world. Textron Aviation-owned service centers provide customers with 24-hour service and maintenance.
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.
Approximately 7,400, 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.
In that role she was responsible for managing the corporate litigation staff with primary oversight of litigation throughout Textron. She has also played an active role in developing, implementing and standardizing human resources policies across the Company and served as the senior legal advisor on employment and benefits issues. Mr.
In that role she was responsible for managing the corporate 7 Table of Contents litigation staff with primary oversight of litigation throughout Textron. She has also played an active role in developing, implementing and standardizing human resources policies across the Company and served as the senior legal advisor on employment and benefits issues. Mr.
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.
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.
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.
Kautex, which is headquartered in Bonn, Germany, 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 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-sponsored foreign military sales program, generated approximately 21% of our consolidated revenues in 2023, 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.
Product and service offerings of this segment include unmanned aircraft systems, electronic systems and solutions, advanced marine craft, piston aircraft engines, live military air-to-air and air-to-ship training, weapons and related components, and armored and specialty vehicles. Notable products developed and produced by the Textron Systems segment include the Shadow, the U.S.
Product and service offerings of this segment include electronic systems and solutions, advanced marine craft, piston aircraft engines, live military air-to-air and air-to-ship training, weapons and related components, unmanned aircraft systems and both manned and unmanned armored and specialty vehicles. Notable products developed and produced by the Textron Systems segment include the Ship-to-Shore Connector, the U.S.
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.
Duffy 58 Executive Vice President and Chief Human Resources Officer E. Robert Lupone 64 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.
Government for convenience or if we default in whole or in part by failing to perform under the terms of the applicable contract. If the U.S.
Government generally may be terminated by the U.S. Government for convenience or if we default in whole or in part by failing to perform under the terms of the applicable contract. If the U.S.
These businesses design, manufacture and sell golf cars, off-road utility vehicles, recreational side-by-side and all-terrain vehicles, snowmobiles, light transportation vehicles, aviation ground support equipment and professional turf-maintenance equipment, as well as specialized turf-care vehicles. A significant portion of the products sold by these businesses are powered with lithium batteries, greatly reducing the products’ impact on the environment.
These businesses design, manufacture and sell golf cars; off-road utility vehicles; powersports products; light transportation vehicles; aviation ground support equipment; professional turf-maintenance equipment; and specialized turf-care vehicles. A significant portion of the products sold by these businesses are powered with lithium batteries, greatly reducing the products’ impact on the environment.
Government contracts; and safeguard and restrict the use and dissemination of classified and covered defense information and the export of certain products and technical data. New laws, regulations or procurement requirements, or changes to current ones, can significantly increase our costs, reducing our profitability. Our contracts with the U.S. Government generally may be terminated by the U.S.
Government contracts; and safeguard and restrict the use and dissemination of 5 Table of Contents classified and covered defense information and the export of certain products and technical data. New laws, regulations or procurement requirements, or changes to current ones, can significantly increase our costs, reducing our profitability. Our contracts with the U.S.
Information 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.
Information about our Executive Officers The following table sets forth certain information concerning our executive officers as of February 12, 2024. Name Age Current Position with Textron Inc. Scott C. Donnelly 62 Chairman, President and Chief Executive Officer Frank T. Connor 64 Executive Vice President and Chief Financial Officer Julie G.
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.
In addition, Textron Aviation’s military trainer and defense aircraft include the Beechcraft T-6 trainer, which has been used to train pilots from more than 40 countries, and the AT-6 light attack military aircraft, which has achieved military type certification from the U.S. Air Force.
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.
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 2023 and 2022 is summarized below: (In millions) December 30, 2023 December 31, 2022 Textron Aviation $ 7,169 $ 6,387 Bell 4,780 4,781 Textron Systems 1,950 2,098 Total backlog $ 13,899 $ 13,266 U.S.
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.
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 numerous separately incorporated subsidiaries. Total revenues for 2023 were $13.7 billion and are presented below by segment and customer type.
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.
Navy's next generation of Landing Craft Air Cushion vehicles; a family of test and simulation products; Shadow, the U.S. 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; and piston aircraft engines under the Lycoming brand.
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.
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.
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.
Bell is also developing a new rotorcraft, the Bell 360 Invictus, for the U.S. Army's Future Attack Reconnaissance Aircraft (FARA) Competitive Prototype Program, which is part of the U.S. government's FVL initiative. In March 2020, the U.S. Army selected the 360 Invictus to move to the second phase of the Competitive Prototype Program.
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).
Kautex has also developed and begun to offer lightweight, composite Pentatonic battery systems, which include enclosures, underbody protection and thermal management systems, 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).
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.
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. Textron Aviation markets its products worldwide through its own sales force, as well as through a network of authorized independent sales representatives.
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.
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. 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.
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.
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.
In addition, Kautex produces plastic tanks for selective catalytic reduction systems used to reduce emissions from diesel engines, and other fuel system components.
Our cleaning systems are comprised of nozzles, reservoirs, inlets and pumps to support onboard cleaning for windscreens, headlamps and ADAS cameras and sensors. In addition, Kautex produces plastic tanks for selective catalytic reduction systems used to 4 Table of Contents reduce emissions from diesel engines, and other fuel system components.
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.
Textron Aviation's business jets include the Cessna Citation M2 Gen2, Citation CJ3 Gen2, Citation CJ4 Gen2, Citation XLS Gen2, Citation Latitude and the Citation Longitude. 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.
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.
Tiltrotor aircraft are designed to provide the benefits of both helicopters and fixed-wing aircraft. 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 major U.S. Government programs are for the production and support of V-22 tiltrotor aircraft, primarily for the U.S.
Notable service offerings of the segment include fee-for-service programs using unmanned aircraft systems and live military air-to-air and air-to-ship training and support services for U.S.
Notable service offerings of the segment include fee-for-service programs, using unmanned aircraft systems, and live military air-to-air and air-to-ship training and support services for U.S. Navy, Marine and Air Force personnel provided by Airborne Tactical Advantage Company. Industrial Segment Our Industrial segment designs and manufactures a variety of products within the Kautex and Specialized Vehicles product lines.
Our Fuel Systems and Functional Components product line is produced by our Kautex business unit which is headquartered in Bonn, Germany. Kautex is a leader in designing and manufacturing plastic fuel systems for automobiles and light trucks, including blow-molded solutions for conventional plastic fuel tanks and pressurized plastic fuel tanks for hybrid vehicle applications.
Kautex is a leader in designing and manufacturing plastic fuel systems for automobiles and light trucks, including blow-molded solutions for conventional plastic fuel tanks and pressurized plastic fuel tanks for hybrid vehicle applications. Kautex also develops and manufactures clear-vision systems for automotive safety and advanced driver assistance systems (ADAS).
We need highly skilled personnel in multiple areas including, among others, engineering, manufacturing, information technology, cybersecurity, flight operations, business development and strategy and management.
We need highly skilled personnel in multiple areas including, among others, engineering, manufacturing, information technology, cybersecurity, flight operations, business development and strategy and management. In order to attract and retain highly skilled employees, we offer comprehensive compensation and benefit programs, career opportunities and an engaging, inclusive environment where all employees are treated with dignity and respect.
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.
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 from the UK Civil Aviation Authority. Finance Segment Our Finance segment, or the Finance group, is a commercial finance business that consists of Textron Financial Corporation (TFC) and its consolidated subsidiaries.
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.
The Denali will be powered by an engine expected to be up to 20% more efficient than similarly sized engines. 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.
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.
To maintain and enhance the safety of our employees, we promote a workplace safety culture of continuous improvement, shared responsibility, and individual accountability 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. 6 Table of Contents 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.
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.
The Finance segment provides financing primarily to purchasers of new and pre-owned Textron Aviation aircraft and Bell helicopters. A substantial number of the originations in our finance receivable portfolio are cross-border transactions for aircraft sold outside of the U.S.
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.
Textron eAviation Segment Our Textron eAviation segment includes Pipistrel, a manufacturer of light aircraft, along with other research and development initiatives related to sustainable aviation solutions. Pipistrel offers a family of light aircraft and gliders with both electric and combustion engines.
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.
Bell operates a global network of eight Company-operated service centers, two of which are co-located with Textron Aviation, and four global parts distribution centers. In addition, approximately 85 independent service centers are located in about 35 countries.
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.
In 2023 and 2022, our Finance group made payments of $160 million and $92 million, respectively, to finance the Manufacturing group's sale of Textron-manufactured products to third parties. Backlog Backlog represents amounts allocated to contracts that we expect to recognize as revenue in future periods when we perform under the contracts.
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.
Health and Safety The health and safety of our employees, contractors and communities is a priority, and we strive to provide our employees with healthy working conditions and safe facilities.
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.
Textron Aviation also provides its customers with around-the-clock parts support and offers a mobile support program with over 80 mobile service units. Textron Aviation is developing the Citation Ascend, a high-performance midsize business jet, which is expected to enter into service in 2025.
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.
Department of Defense; the development of the V-280 Valor, a next generation tiltrotor aircraft for the U.S. Army’s Future Long Range Assault Aircraft (FLRAA) program; and production and support of H-1 helicopters for the U.S. Marine Corps. Under the U.S. Government-sponsored foreign military sales program, Bell offers the V-22 tiltrotor aircraft and H-1 helicopter products for sale to other countries.
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.
The FLRAA development contract was awarded to Bell in December 2022 as part of the U.S. Army’s Future Vertical Lift (FVL) initiative. Bell is developing a tiltrotor aircraft, based on the V-280 Valor, to meet U.S. Army weapon system requirements. The V-280 Valor first flew in December 2017 and has conducted over 200 hours of flight testing.
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Textron Aviation markets its products worldwide through its own sales force, as well as through a network of authorized independent sales representatives. The family of jets currently offered by Textron Aviation includes the Citation M2 Gen2, Citation CJ3+, Citation CJ4 Gen2, Citation XLS Gen2, Citation Latitude and the Citation Longitude.
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With a product lineup ranging from introductory training aircraft through super mid-size business jets, Textron Aviation’s diverse customer base includes fractional aircraft businesses, charter and fleet operators, corporate aviation, individual buyers, training schools, airlines, and special mission, military and government operators.
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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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The Beechcraft Denali, a high-performance single engine turboprop aircraft also under development, achieved its first flight in November 2021 and is in the certification process with the Federal Aviation Administration (FAA).
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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.
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Bell continues to progress on its development of the 360 Invictus Prototype under this phase of the cost-share program. On February 8, 2024, as part of plans to rebalance its aviation modernization investments, the U.S. Army announced plans to discontinue development of the FARA at the conclusion of FY24 prototyping activities.
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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.
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The commercial helicopters currently offered by Bell include the 429, 407GXi, 412EPX and 505 Jet Ranger X. Bell’s first super medium commercial helicopter, the 525 Relentless, is currently in the certification process with the FAA. 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.
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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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Human Capital Resources At December 30, 2023, we employed approximately 35,000 employees worldwide, with approximately 80% located in the U.S. and the remainder located outside of the U.S.
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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).
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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.
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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.
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Kautex also develops and manufactures clear-vision systems for automotive safety and advanced driver assistance systems (ADAS). Our cleaning systems are comprised of nozzles, reservoirs, inlets and pumps to support onboard cleaning for windscreens, headlamps and ADAS cameras and sensors.
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Finance Segment Our Finance segment, or the Finance group, is a commercial finance business that consists of Textron Financial Corporation (TFC) and its consolidated subsidiaries. The Finance segment provides financing primarily to purchasers of new and pre-owned Textron Aviation aircraft and Bell helicopters.
Removed
Our Finance segment’s largest business risk is the collectability of its finance receivable portfolio. See Finance Segment section in Item 7.
Removed
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.
Removed
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.
Removed
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
For over a decade, Textron has allocated five percent of annual incentive compensation for management-level employees toward achievement of diversity goals. Beginning in 2020, we focused these goals specifically on hiring diversity.
Removed
To improve our outreach to diverse candidates, we have increased our recruiting efforts at historically black colleges and universities, enhanced our partnerships with diverse professional organizations and participated in diverse STEM conferences. In addition, we provide inclusion and unconscious bias training to our employees and recruiters to improve diversity in recruiting.

Item 1A. Risk Factors

Risk Factors — what could go wrong, per management

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Biggest changeGovernment customer may choose competitive offerings over our offerings. The competition from other government contractors, combined with the increasingly competitive nature of the government contract bidding and award process, results in an intensely competitive market environment in which there can be no assurance that our businesses will be selected for government programs with significant long-term revenues.
Biggest changeGovernment customer sometimes chooses competitor's offerings over our offerings and there can be no assurance that our businesses will be selected for government programs with significant long-term revenues. Even if we are successful in obtaining an award, we have in the past and may in the future encounter bid protests from unsuccessful bidders on new program awards.
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.
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 or terrorism 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.
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.
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 7,400, or 27%, of our U.S. employees are unionized, and many of our non-U.S. employees are represented by organized councils.
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.
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, among other factors.
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.
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 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.
Government is unable to make timely payments, failure to continue contract performance places the contractor at risk of termination for default. Any such event could have a material adverse effect on our cash flows, results of operations and financial condition. 10 Table of Contents As a U.S.
Government is unable to make timely payments, failure to continue contract performance places the contractor at risk of termination for default. Any such event could have a material adverse effect on our cash flows, results of operations and financial condition. As a U.S.
We also enter into “fee for service” contracts with the U.S. Government where we retain ownership of, and consequently the risk of loss on, aircraft and equipment supplied to perform under these contracts. Termination of these contracts could materially and adversely impact our results of operations.
We also enter into “fee for service” contracts with the U.S. Government where we retain ownership of, and consequently the risk of loss on, aircraft and equipment 9 Table of Contents supplied to perform under these contracts. Termination of these contracts could materially and adversely impact our results of operations.
Government programs for which we currently provide or propose to provide products or services from time to time has resulted and, in the future, may result in a loss of anticipated revenues. A loss of such revenues could materially and adversely impact our results of operations and financial condition.
Government programs for which we currently provide or propose to provide products or services from time to time has resulted and, in the future, may result in a loss of anticipated revenues. A loss of such revenues could materially and adversely impact our results of operations and financial condition. In addition, because our U.S.
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.
Such events may adversely affect our financial results, damage our reputation and relationships with our customers, and result in regulatory actions and/or litigation. 12 Table of Contents We are subject to the risks of doing business in foreign countries that could adversely impact our business. During 2023, we derived approximately 32% of our revenues from international business, including U.S. exports.
Government, are increasingly requiring cybersecurity protections and mandating cybersecurity standards in our products, and we may incur additional costs to comply with such demands. Failure to perform by our subcontractors or suppliers could adversely affect our performance. We rely on other companies to provide raw materials, major components and subsystems for our products.
Government, are increasingly requiring cybersecurity protections and mandating cybersecurity standards in our products, and we may incur additional costs to comply with such demands. Challenges faced by our subcontractors or suppliers could materially and adversely affect our performance. We rely on other companies to provide raw materials, major components and subsystems for our products.
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.
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 14 Table of Contents our products.
Consumer Product Safety Commission (CPSC) to exclude from the market products that are found to be unsafe or hazardous. Under certain circumstances, the CPSC could require us to repair, replace or refund the purchase price of one or more of our products, or potentially even discontinue entire product lines.
Consumer Product Safety Commission (CPSC) to exclude from the market products that are found to be unsafe or hazardous. Under certain circumstances, the CPSC has in the past and could require in the future us to repair, replace or refund the purchase price of one or more of our products, or potentially even discontinue entire product lines.
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.
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.
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.
We expect that most of our businesses will 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.
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.
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 11 Table of Contents 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.
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.
Government relies upon competitive contract award types, including indefinite-delivery, indefinite-quantity, other transaction agreements and multi-award contracts, which often create increased pricing pressure and increase our cost by requiring that we submit multiple bids or share in costs.
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.
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. Additionally, our intellectual property could be at risk due to cybersecurity threats.
Natural disasters or other events outside of our control may disrupt our operations, adversely affect our results of operations and financial condition, and may not be fully covered by insurance.
Natural disasters or other events outside of our control have disrupted and may in the future disrupt our operations, adversely affect our results of operations and financial condition, and may not be fully covered by insurance.
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.
Under fixed-price incentive contracts, we share with the U.S. Government cost underrun savings, which are derived from total cost being less than target costs; we also share in cost overruns, which occur when total costs exceed target costs up to a negotiated cost ceiling; however, we are solely responsible for costs above the ceiling.
We have made and may continue to make acquisitions that increase the risks of our business. We enter into acquisitions in an effort to expand our business and enhance shareholder value. Acquisitions involve risks and uncertainties that, in some cases, have resulted, and, in the future, could result in our not achieving expected benefits.
We have made and may continue to make acquisitions that increase the risks of our business. We enter into acquisitions with the intention of expanding our business and enhancing shareholder value. Acquisitions involve risks and uncertainties that, in some cases, have resulted, and, in the future, could result in our not achieving expected benefits.
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.
Suppliers may be unable to quickly recover from natural disasters, acts of war, 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, resulting in their inability to perform as anticipated.
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.
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.
Unanticipated changes in our tax rates or exposure to additional income tax liabilities could affect our profitability. We are subject to income taxes in the U.S. and various non-U.S. jurisdictions, and our domestic and international tax liabilities are subject to the location of income among these different jurisdictions.
We are subject to income taxes in the U.S. and various non-U.S. jurisdictions, and our domestic and international tax liabilities are subject to the location of income among these different jurisdictions.
We may not be successful in hiring or retaining such employees which could adversely impact our business and results of operations. The increasing costs of certain employee and retiree benefits could adversely affect our results. Our results of operations and cash flows may be adversely impacted by increasing costs and funding requirements related to our employee benefit plans.
We may not be successful in hiring or retaining such employees which could adversely impact our business and results of operations. 15 Table of Contents The increasing costs of certain employee and retiree benefits could adversely affect our results.
Consequently, programs often are only partially funded initially, and additional funds are committed only as Congress makes further appropriations. Further uncertainty with respect to ongoing programs could also result in the event that the U.S. Government finances its operations through temporary funding measures such as “continuing resolutions” rather than full-year appropriations.
Consequently, programs often are only partially funded initially, and additional funds are committed only as Congress makes further appropriations. Further uncertainty with respect to ongoing programs could also result in the event that the U.S.
Significant changes in national and international policies or priorities for defense spending, as well as the potential impact of sequestration, could affect the funding, or the timing of funding, of our programs, which could negatively impact our results of operations and financial condition. In addition, because our U.S.
Significant changes in national and international priorities for defense spending could affect the funding, or the timing of funding, of our programs, which could negatively impact our results of operations and financial condition. The funding of U.S. Government defense programs is subject to congressional appropriation decisions and the U.S.
The obligation for our defined benefit pension plans is driven by, among other things, our assumptions of the expected long-term rate of return on plan assets and the discount rate used for future payment obligations.
Our results of operations and cash flows may be adversely impacted by increasing costs and funding requirements related to our employee benefit plans. The obligation for our defined benefit pension plans is driven by, among other things, our assumptions of the expected long-term rate of return on plan assets and the discount rate used for future payment obligations.
Even when a bid protest does not result in the loss of a contract award, the resolution could postpone commencement of contract activity, resulting in additional cost and delay in the recognition of revenue and profit. Our profitability and cash flow varies depending on the mix of our government contracts and our ability to control costs .
Even when a bid protest does not result in the loss of a contract award, the resolution could postpone commencement of contract activity, resulting in additional cost and delay in the recognition of revenue and profit.
Additionally, fixed-price contracts generally require progress payments rather than performance-based payments which can delay our ability to recover a significant amount of costs incurred on a contract and thus affect the timing of our cash flows. Under fixed-price incentive contracts, we share with the U.S.
Changes in underlying assumptions, circumstances or estimates used in developing the pricing for such contracts can adversely affect our results of operations. Additionally, fixed-price contracts generally require progress payments rather than performance-based payments which can delay our ability to recover a significant amount of costs incurred on a contract and thus affect the timing of our cash flows.
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.
During 2023, we derived approximately 21% 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. Considerable uncertainty exists regarding how future budget and program decisions will develop.
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.
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.
Our defense businesses operate in highly competitive markets in which they participate in rigorous, increasingly competitive bidding processes against other defense companies for U.S. government business. The competitive bidding process is costly and, in some instances, may require significant research and development and/or engineering efforts to participate. Despite our best efforts, the U.S.
Government defense business is highly competitive, and the competitive bidding process increases pricing pressure and cost which may affect our ability to win new contracts for major government programs. Our defense businesses operate in highly competitive markets in which they participate in rigorous, increasingly competitive bidding processes against other defense companies for U.S. government business. The U.S.
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.
Under each type of contract, if we are unable to control costs or if our initial cost estimates are incorrect, our cash flows, results of operations and financial condition could be adversely affected. Cost overruns also may adversely affect our ability to sustain existing programs and obtain future contract awards. 10 Table of Contents The market for U.S.
In addition, multi-award contracts increase our cost as they require that we make sustained efforts to compete for task orders and delivery orders under the contract. Further, the competitive bidding process is costly and demands employee and managerial time to prepare bids and proposals for contracts that may not be awarded to us or may be split among competitors.
In addition, multi-award contracts increase our cost as they require that we make sustained efforts to compete for task orders and delivery orders under the contract.
Our access to the debt capital markets and the cost of borrowings are affected by a number of factors including market conditions and the strength of our credit ratings. If we cannot obtain adequate sources of credit on favorable terms, or at all, our business, operating results, and financial condition could be adversely affected.
Our access to the debt capital markets and the cost of borrowings are affected by a number of factors including market conditions and the strength of our credit ratings.
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.
As a result, we have experienced, and may continue to experience, cost increases for certain materials and components which, along with increased energy and shipping costs and other inflationary pressures, have negatively impacted, and may continue to negatively impact, our profitability.
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.
We need highly skilled personnel in multiple areas including, among others, engineering, manufacturing, information technology, cybersecurity, flight operations, business development and strategy and management.
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.
Our profitability and cash flow varies depending on the mix of our government contracts and our ability to control costs . 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.
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.
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.
Removed
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.
Added
We cannot predict the impact on existing, follow-on or future programs from changes in the threat environment, defense spending levels, government priorities, political leadership, procurement practices, inflation and other macroeconomic trends, military strategy, or broader societal changes.
Removed
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.
Added
Government finances its operations through temporary funding measures such as “continuing resolutions” rather than full-year appropriations or if a government shutdown were to occur and were to continue for an extended period of time.
Removed
Cost overruns also may adversely affect our ability to sustain existing programs and obtain future contract awards. The market for U.S. Government defense business is highly competitive which may affect our ability to win new contracts for major government programs and result in reduced future revenues.
Added
Due to the nature of our work under government contracts, we sometimes experience unforeseen technological or schedule difficulties and cost overruns due to inflation, labor shortages, supply chain challenges and/or other factors.
Removed
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.
Added
Further, the competitive bidding process is costly, in some instances requires significant research and development and/or engineering efforts to participate and demands employee and managerial time to prepare bids and proposals for contracts that may not be awarded to us or may be split among competitors. Despite our best efforts, the U.S.
Removed
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
Business and Operational Risks Risks arising from uncertainty in global macroeconomic conditions may harm our business. We are sensitive to global macroeconomic conditions.
Removed
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
Negative macroeconomic factors may have an adverse effect on our business, results of operations and financial condition, as well as on our distributors, customers and suppliers, and on activity in many of the industries and markets we serve.
Removed
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
We cannot predict changes in worldwide or regional economic or political conditions and government policies as such factors are highly volatile and beyond our control.
Removed
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
If current macroeconomic pressures, including from inflation and labor and supply chain challenges, continue or if global macroeconomic conditions deteriorate and remain at depressed levels for extended periods, our business, results of operations and financial condition could be materially adversely affected. Our business could be negatively impacted by cybersecurity threats and other disruptions.
Removed
We maintain Information Systems Incident Management Standards applicable to all our businesses intended to ensure information security events and weaknesses associated with information systems are communicated and acted on in a timely manner.
Added
Our businesses are experiencing and may continue to experience manufacturing inefficiencies and production delays as a result of shortages and delays of critical components for our products and other issues related to our direct or indirect suppliers.
Removed
Our enterprise risk management program includes cyber risk/network protection mitigation plans, and our disclosure controls and procedures address cybersecurity and include processes intended to ensure that security breaches are analyzed for potential disclosure. Additionally, we conduct periodic training for our employees regarding the protection of sensitive information which includes training intended to prevent the success of cyberattacks.
Added
If we cannot obtain adequate sources of credit on favorable terms, or at all, our business, operating results, and financial condition could be adversely affected. 13 Table of Contents Unanticipated changes in our tax rates or exposure to additional income tax liabilities could affect our profitability.
Removed
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.
Removed
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.
Removed
Economic and other impacts from the pandemic initially resulted in, and could again result in, reduced demand for our aviation and commercial helicopter products and services, the delay or cancellation of existing orders by our customers and lower flight hours, and consequently, lower demand for parts and maintenance.
Removed
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.
Removed
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.
Removed
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.
Removed
Such developments may include the geographic spread and duration of the virus, the emergence of variants of the virus that cause severe illness and/or are resistant to the developed vaccines, the development of and access to effective treatments, the acceptance of, and access to, effective vaccines, and the effects of actions that have been or may be taken by various governmental authorities and other third parties in response to the outbreak.

Item 2. Properties

Properties — owned and leased real estate

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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.
Biggest changeItem 2. Properties On December 30, 2023, we operated a total of 56 plants located throughout the U.S. and 44 plants outside the U.S. We own 59 plants and lease the remainder for a total manufacturing space of approximately 23.7 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. 17 Table of Contents
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.

Item 3. Legal Proceedings

Legal Proceedings — active lawsuits and investigations

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Biggest changeWe 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.
Biggest changeLegal Proceedings We are subject to actual and threatened legal proceedings and other claims arising out of the conduct of our business, including proceedings and claims relating to commercial and financial transactions; government contracts; alleged lack of compliance with applicable laws and regulations; disputes with suppliers, production partners or other third parties; product liability; patent and trademark infringement; employment disputes; and environmental, health and safety matters.
Removed
Item 3. Legal Proceedings As previously reported in Textron’s Annual Report on Form 10-K for the fiscal year ended January 4, 2020, on August 22, 2019, a purported shareholder class action lawsuit was filed in the United States District Court in the Southern District of New York against Textron, its Chairman and Chief Executive Officer and its Chief Financial Officer.
Removed
The suit, filed by Building Trades Pension Fund of Western Pennsylvania, alleges that the defendants violated the federal securities laws by making materially false and misleading statements and concealing material adverse facts related to the Arctic Cat acquisition and integration. The complaint seeks unspecified compensatory damages.
Removed
On November 12, 2019, the Court appointed IWA Forest Industry Pension Fund (IWA) as the sole lead plaintiff in the case. On December 24, 2019, IWA filed an Amended Complaint in the now entitled In re Textron Inc. Securities Litigation.
Removed
On February 14, 2020, IWA filed a Second Amended Complaint, and on March 6, 2020, Textron filed a motion to dismiss the Second Amended Complaint. On July 20, 2020, the Court granted Textron’s motion to dismiss and closed the case. On August 18, 2020, plaintiffs filed a notice of appeal contesting the dismissal, which Textron opposed.
Removed
On 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.
Removed
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.
Removed
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 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
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 6 . [Reserved] 19 Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations 20 Item 7A. Quantitative and Qualitative Disclosures About Market Risk 32 Item 8.

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 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.
Biggest changeIssuer Repurchases of Equity Securities The following provides information about our fourth quarter 2023 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 1, 2023 – November 4, 2023 495 $ 76.41 495 31,650 November 5, 2023 – December 2, 2023 1,075 76.93 1,075 30,575 December 3, 2023 – December 30, 2023 2,099 77.76 2,099 28,476 Total 3,669 $ 77.33 3,669 * These shares were purchased pursuant to a plan authorizing the repurchases of up to 35 million shares of Textron common stock that was approved on July 24, 2023 by our Board of Directors.
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.
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 30, 2023, there were approximately 5,200 record holders of Textron common stock.
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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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This share repurchase program 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, 2018 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. 2018 2019 2020 2021 2022 2023 Textron Inc. $ 100.00 $ 98.17 $ 106.29 $ 170.00 $ 156.09 $ 177.49 S&P 500 100.00 132.82 157.02 202.09 165.49 209.00 S&P 500 A&D 100.00 137.16 110.84 125.50 147.30 157.27 S&P 500 Industrials 100.00 133.52 164.01 209.76 169.06 220.52

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 21 Table of Contents variable consideration or b) changes in the total estimated costs at completion due to improved or deteriorated operating performance.
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. 21 Table of Contents Textron Aviation % Change (Dollars in millions) 2023 2022 2021 2023 2022 Revenues: Aircraft $ 3,577 $ 3,387 $ 3,116 6% 9% Aftermarket parts and services 1,796 1,686 1,450 7% 16% Total revenues 5,373 5,073 4,566 6% 11% Operating expenses 4,724 4,513 4,217 5% 7% Segment profit $ 649 $ 560 $ 349 16% 60% Profit margin 12.1% 11.0% 7.6% Backlog $ 7,169 $ 6,387 $ 4,120 12% 55% Textron Aviation Revenues and Operating Expenses Factors contributing to the 2023 year-over-year revenue change are provided below: (In millions) 2023 versus 2022 Pricing $ 335 Volume and mix (35) Total change $ 300 Textron Aviation’s revenues increased $300 million, 6%, in 2023, compared with 2022, reflecting higher pricing of $335 million, partially offset by lower volume and mix of $35 million.
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.
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 generally decreases pension income.
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.
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 14% of our purchase obligations represent purchase orders issued for goods and services to be delivered under firm contracts with the U.S.
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.
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 2023 compared with 2022 is provided below, while a discussion of 2022 compared with 2021 can be found in Item 7.
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.
Income Taxes 2023 2022 2021 Effective tax rate 15.2% 15.2% 14.4% In 2023 and 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.
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.
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 $37 million and $216 million in 2023 and 2022, respectively.
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.
The impact of our cumulative catch-up adjustments on segment profit recognized in prior periods is presented below: (In millions) 2023 2022 2021 Gross favorable $ 106 $ 101 $ 154 Gross unfavorable (62) (117) (73) Net adjustments $ 44 $ (16) $ 81 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.
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.
Management’s Discussion and Analysis of Financial Condition and Results of Operations of our Annual Report on Form 10-K for the year ended December 31, 2022 was insignificant. 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.
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.
Reclassification adjustments included in the Consolidated Statements of Cash Flows on page 38 are summarized below: (In millions) 2023 2022 2021 Reclassification adjustments from investing activities to operating activities: Finance receivable originations for Manufacturing group inventory sales $ (160) $ (92) $ (100) Cash received from customers 143 127 231 Other — 1 — Total reclassification adjustments from investing activities to operating activities $ (17) $ 36 $ 131 Under a Support Agreement between Textron and TFC, Textron is required to maintain a controlling interest in TFC.
Government-sponsored foreign military sales program. For our segments that contract with the U.S. Government, changes in revenues related to these contracts are expressed in terms of volume.
For our segments that contract with the U.S. Government, changes in revenues related to these contracts are expressed in terms of volume.
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%.
For 2023 and 2022, the assumed expected long-term rate of return on plan assets used in calculating pension income was 7.14% and 7.10%, respectively. For 2023, the assumed rate of return for our domestic plans, which represent approximately 90% of our total pension assets, was 7.25%.
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.
For the Manufacturing Group, we also have purchase obligations that require material future cash outlays totaling $2.9 billion in 2024, $445 million in 2025 and $107 million thereafter.
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.
Financial Statements and Supplementary Data, which includes other significant accounting policies. 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.
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.
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.
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.
Performance reflects an increase or decrease in research and development, depreciation, selling and administrative costs, warranty, product liability, quality/scrap, labor efficiency, overhead, product line profitability, start-up, ramp up and cost-reduction initiatives or other manufacturing inputs. Approximately 21% of our 2023 revenues were derived from contracts with the U.S. Government, including those under the U.S. Government-sponsored foreign military sales program.
These cash flows incorporate assumptions for revenue growth rates and operating margins that are based on our strategic plans and long-range planning forecasts, which include our best estimates of current and forecasted market conditions, cost structure and anticipated net cost reductions.
We calculate the fair value of each reporting unit using discounted cash flows. These cash flows incorporate assumptions for revenue growth rates and operating margins that are based on our strategic plans and long-range planning forecasts, which include our best estimates of current and forecasted market conditions, cost structure and anticipated net cost reductions.
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.
Assessment of Liquidity and Significant Future Cash Requirements Key information that is utilized in assessing our liquidity is summarized below: (Dollars in millions) December 30, 2023 December 31, 2022 Manufacturing group Cash and equivalents $ 2,121 $ 1,963 Debt 3,526 3,182 Shareholders’ equity 6,987 7,113 Capital (debt plus shareholders’ equity) 10,513 10,295 Net debt (net of cash and equivalents) to capital 17% 15% Debt to capital 34% 31% Finance group Cash and equivalents $ 60 $ 72 Debt 348 375 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.
(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.
(Dollars in millions) December 30, 2023 December 31, 2022 Finance receivables $ 609 $ 587 Allowance for credit losses 24 24 Ratio of allowance for credit losses to finance receivables 3.94% 4.09% Nonaccrual finance receivables 15 46 Ratio of nonaccrual finance receivables to finance receivables 2.46% 7.84% 60+ days contractual delinquency 4 1 60+ days contractual delinquency as a percentage of finance receivables 0.66% 0.17% 26 Table of Contents Liquidity and Capital Resources Our financings are conducted through two separate borrowing groups.
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.
In 2023, the weighted-average discount rate used in calculating pension income was 5.51%, compared with 2.99% in 2022. For our domestic plans, the assumed discount rate was 5.55% in 2023, compared with 3.05% in 2022.
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.
Financial highlights for 2023 also include: • Generated $1.3 billion of net cash from operating activities from our manufacturing businesses. • Invested $570 million in research and development projects and $402 million in capital expenditures. • Returned $1.2 billion to our shareholders through the repurchase of 16.2 million shares of our common stock.
Our earnings could be reduced by a material amount resulting in a charge to earnings if (a) total estimated contract costs are significantly higher than expected due to changes in customer specifications prior to contract amendment, (b) total estimated contract costs are significantly higher than previously estimated due to cost overruns or inflation, (c) there is a change in engineering efforts required during the development stage of the contract or (d) we are unable to meet contract milestones.
Our earnings could be reduced by a material amount resulting in a charge to earnings if (a) total estimated contract costs are significantly higher than expected due to changes in customer specifications prior to contract amendment, (b) total estimated contract costs are significantly higher than previously estimated due to cost overruns or inflation, (c) there is a change in engineering efforts required during the development stage of the contract or (d) we are unable to meet contract milestones. 30 Table of Contents Goodwill We evaluate the recoverability of goodwill annually in the fourth quarter or more frequently if events or changes in circumstances indicate a potential impairment of a reporting unit.
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.
Consolidated Results of Operations % Change (Dollars in millions) 2023 2022 2021 2023 2022 Revenues $ 13,683 $ 12,869 $ 12,382 6% 4% Cost of sales 11,405 10,800 10,297 6% 5% Gross margin as a percentage of Manufacturing revenues 16.3% 15.7% 16.5% Selling and administrative expense 1,225 1,186 1,221 3% (3)% Interest expense, net 77 107 142 (28)% (25)% Special charges 126 — 25 — — Non-service components of pension and postretirement income, net 237 240 159 (1)% 51% Revenues Revenues increased $814 million, 6%, in 2023, compared with 2022.
We believe these policies require our most difficult, subjective and complex judgments in estimating the effect of inherent uncertainties. This section should be read in conjunction with Note 1 to the Consolidated Financial Statements in Item 8. Financial Statements and Supplementary Data, which includes other significant accounting policies.
The accounting policies that we believe are most critical to the portrayal of our financial condition and results of operations are listed below. We believe these policies require our most difficult, subjective and complex judgments in estimating the effect of inherent uncertainties. This section should be read in conjunction with Note 1 to the Consolidated Financial Statements in Item 8.
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.
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 $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.
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 $483 million in 2024, $467 million in 2025, $452 million in 2026 and $2.8 billion thereafter, and for the Finance Group of $32 million in 2024, $49 million in 2025, $22 million in 2026 and $613 million thereafter.
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.
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.
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.
Industrial Segment Profit Factors contributing to 2023 year-over-year segment profit change are provided below: (In millions) 2023 versus 2022 Pricing, net of inflation $ 58 Volume and mix 54 Foreign exchange 1 Performance (40) Total change $ 73 Segment profit for the Industrial segment increased $73 million, 47%, in 2023, compared with 2022, largely due to a favorable impact from pricing, net of inflation of $58 million, principally in the Specialized Vehicles product line, and higher volume and mix of $54 million as described above, partially offset by an unfavorable impact of $40 million from performance.
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.
Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations Overview In 2023, Textron’s revenues increased 6%, compared with 2022, reflecting the impact of higher pricing, principally at the Textron Aviation, Industrial and Bell segments, and higher volume and mix at the Industrial segment.
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.
Non-service Components of Pension and Postretirement Income, Net Non-service components of pension and postretirement income, net decreased by $3 million, 1%, in 2023, compared with 2022.
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.
Textron Systems Segment Profit Factors contributing to 2023 year-over-year segment profit change are provided below: (In millions) 2023 versus 2022 Performance $ 10 Pricing, net of inflation 10 Volume and mix (5) Total change $ 15 Textron Systems’ segment profit increased $15 million, 11%, in 2023, compared with 2022, due to a favorable impact from performance of $10 million and higher pricing, net of inflation of $10 million, partially offset by an unfavorable impact from the mix of products and services sold.
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.
Government for which we have full recourse under customary contract termination clauses. 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 $100 million is available for the issuance of letters of credit.
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.
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 conduct our business through six operating segments: Textron Aviation, Bell, Textron Systems, Industrial, Textron eAviation and Finance.
Cash flows used by financing activities in 2022 included $867 million of cash paid to repurchase an aggregate of 13.1 million shares of our common stock under the 2022 share repurchase plan described below.
In 2022, cash flows used by financing activities included $867 million of cash paid to repurchase an aggregate of 13.1 million shares of our common stock under a 2022 share repurchase plan. On July 24, 2023, Textron's Board of Directors approved a new program for the repurchase of up to 35 million shares of our common stock.
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.
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.
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.
Textron Aviation Backlog Textron Aviation’s backlog increased $782 million in 2023, reflecting orders in excess of deliveries. 22 Table of Contents Bell % Change (Dollars in millions) 2023 2022 2021 2023 2022 Revenues: Military aircraft and support programs $ 1,701 $ 1,740 $ 2,073 (2)% (16)% Commercial helicopters, parts and services 1,446 1,351 1,291 7% 5% Total revenues 3,147 3,091 3,364 2% (8)% Operating expenses 2,827 2,809 2,965 1% (5)% Segment profit $ 320 $ 282 $ 399 13% (29)% Profit margin 10.2% 9.1% 11.9% Backlog $ 4,780 $ 4,781 $ 3,871 0% 24% A significant portion of Bell’s military aircraft and support program revenues has been from the U.S.
Investing cash flows in 2022 also included $202 million of net cash paid for business acquisitions, largely related to the Pipistrel acquisition discussed in Note 2 to the Consolidated Financial Statements included in Item 8. Financial Statements and Supplementary Data.
Investing cash flows in 2022 included capital expenditures of $354 million and $202 million of net cash paid for business acquisitions, largely related to the Pipistrel acquisition.
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.
Industrial % Change (Dollars in millions) 2023 2022 2021 2023 2022 Revenues: Kautex $ 1,954 $ 1,771 $ 1,735 10% 2% Specialized Vehicles 1,887 1,694 1,395 11% 21% Total revenues 3,841 3,465 3,130 11% 11% Operating expenses 3,613 3,310 3,010 9% 10% Segment profit $ 228 $ 155 $ 120 47% 29% Profit margin 5.9% 4.5% 3.8% 24 Table of Contents Industrial Revenues and Operating Expenses Factors contributing to the 2023 year-over-year revenue change are provided below: (In millions) 2023 versus 2022 Volume and mix $ 280 Pricing 99 Foreign exchange (3) Total change $ 376 Industrial segment revenues increased $376 million, 11%, in 2023, compared with 2022, largely due to higher volume and mix of $280 million across both product lines and a favorable impact of $99 million from pricing, principally in the Specialized Vehicles product line.
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.
Consolidated Cash Flows The consolidated cash flows from continuing operations, after elimination of activity between the borrowing groups, are summarized below: (In millions) 2023 2022 2021 Operating activities $ 1,267 $ 1,490 $ 1,599 Investing activities (317) (447) (281) Financing activities (813) (1,091) (1,446) Consolidated cash flows from operating activities were $1,267 million in 2023, compared with $1,490 million in 2022 as higher earnings were more than offset by changes in working capital and a net cash outflow from captive finance receivables of $52 million.
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.
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.
The increase in volume and mix was largely due to higher Citation jet and aftermarket volume, partially offset by lower pre-owned volume. The higher aftermarket volume reflected increased aircraft utilization. We delivered 178 Citation jets and 146 commercial turboprops in 2022, compared with 167 Citation jets and 125 commercial turboprops in 2021.
Volume and mix included lower Citation jet and pre-owned volume, partially offset by higher defense, aftermarket, commercial turboprop and other aircraft volume. We delivered 168 Citation jets and 153 commercial turboprops in 2023, compared with 178 Citation jets and 146 commercial turboprops in 2022.
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.
Government for the V-22 tiltrotor aircraft and the H-1 helicopter platforms. Under current contracts, production of the V-22 tiltrotor aircraft is expected to end with final deliveries in the next two years after which this program will transition to the support stage.
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.
Textron Systems’ operating expenses increased $48 million, 5%, in 2023, compared with 2022, largely related to higher volume and mix described above.
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.
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 for the Manufacturing borrowing group. In 2023, interest expense, net decreased $30 million, 28%, compared with 2022, primarily due to an increase in interest income of $34 million.
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.
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.
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
A change of 50 basis-points higher or lower, with all other assumptions held constant, in this weighted-average discount rate in 2023 would have changed our pension income for our domestic plans by approximately $10 million. 31 Table of Contents
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.
For 2023, 2022 and 2021, gross interest expense totaled $133 million, $129 million and $142 million, respectively. Special Charges Special charges include restructuring activities and asset impairment charges as described in Note 16 to the Consolidated Financial Statements in Item 8. Financial Statements and Supplementary Data.
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.
This share repurchase program 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 new program has no expiration date and replaced the prior 2022 share repurchase program, which was utilized in 2022 for repurchases.
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.
Textron Aviation Segment Profit Factors contributing to 2023 year-over-year segment profit change are provided below: (In millions) 2023 versus 2022 Pricing, net of inflation $ 159 Volume and mix 9 Performance (79) Total change $ 89 Textron Aviation’s segment profit increased $89 million, 16%, in 2023, compared with 2022, due to favorable pricing, net of inflation of $159 million and a favorable impact from the mix of products and services sold, partially offset by an unfavorable impact from performance of $79 million, largely related to supply chain and labor inefficiencies.
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.
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) 2023 2022 2021 Operating activities $ 14 $ (7) $ (1) Investing activities 11 100 185 Financing activities (37) (216) (97) In 2023, cash flows from operating activities were $14 million, compared with cash outflows of $7 million in 2022.
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.
Cost of Sales and Selling and Administrative Expense Cost of sales includes cost of products and services sold for the Manufacturing group. In 2023, cost of sales increased $605 million, 6%, compared with 2022, largely due to the impact of higher net volume and mix described above, and $257 million of inflation.
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.
Bell Revenues and Operating Expenses Factors contributing to the 2023 year-over-year revenue change are provided below: (In millions) 2023 versus 2022 Pricing $ 68 Volume and mix (12) Total change $ 56 Bell’s revenues increased $56 million, 2%, in 2023, compared with 2022, reflecting higher pricing of $68 million, partially offset by lower volume and mix of $12 million.
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.
Cash flows used by financing activities in 2023 included $1,168 million of share repurchases, partially offset by $348 million of net proceeds from the issuance of long-term debt. In 2022, cash flows used by financing activities included $867 million of share repurchases and $234 million of payments on long-term debt.
Critical Accounting Estimates To prepare our Consolidated Financial Statements to be in conformity with generally accepted accounting principles, we must make complex and subjective judgments in the selection and application of accounting policies. The accounting policies that we believe are most critical to the portrayal of our financial condition and results of operations are listed below.
There were no cash contributions required to be paid to TFC in 2023 and 2022 to maintain compliance with the support agreement. 29 Table of Contents Critical Accounting Estimates To prepare our Consolidated Financial Statements to be in conformity with generally accepted accounting principles, we must make complex and subjective judgments in the selection and application of accounting policies.
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.
Operating expenses for the Industrial segment increased $303 million, 9%, in 2023 compared with 2022, primarily reflecting the impact of higher volume and mix described above.
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 income tax payments were $338 million and $332 million in 2023 and 2022, respectively. Pension contributions were $45 million and $49 million in 2023 and 2022, respectively. In 2023, investing cash flows included capital expenditures of $402 million, partially offset by $40 million of net proceeds from corporate-owned life insurance policies.
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.
Cash flows used by financing activities in 2023 included $1,168 million of cash paid to repurchase an aggregate of 16.2 million shares of our common stock under the 2023 share repurchase plan described below, partially offset by $348 million of net proceeds from the issuance of long-term debt.
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.
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. At December 30, 2023 and December 31, 2022, there were no amounts borrowed against the facility and there were $9 million of outstanding letters of credit issued under the facility.
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.
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 November 2023, we issued $350 million in SEC-registered fixed-rate notes due in November 2033 with an annual interest rate of 6.10%.
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.
The proceeds will be used for general corporate purposes, including the redemption or repayment of certain of our debt, including the $350 million outstanding amount of our 4.30% notes due in March 2024. 27 Table of Contents 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) 2023 2022 2021 Operating activities $ 1,270 $ 1,461 $ 1,469 Investing activities (345) (511) (335) Financing activities (776) (875) (1,349) Cash flows from operating activities were $1,270 million in 2023, compared with $1,461 million from 2022, as higher earnings were more than offset by changes in working capital, reflecting an increase in inventories and lower accounts payable, partially offset by a decrease in other assets.
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.
Operating expenses for the Manufacturing segments include cost of sales and selling and administrative expense, while excluding certain corporate expenses, LIFO inventory provision, intangible asset amortization and special charges.
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 Segment Profit Factors contributing to 2023 year-over-year segment profit change are provided below: (In millions) 2023 versus 2022 Performance $ 74 Pricing, net of inflation 13 Volume and mix (49) Total change $ 38 Bell’s segment profit increased $38 million, 13%, in 2023, compared with 2022, largely reflecting a favorable impact from performance of $74 million, which included $84 million of lower research and development costs, partially offset by lower volume and mix described above. 23 Table of Contents Textron Systems % Change (Dollars in millions) 2023 2022 2021 2023 2022 Revenues $ 1,235 $ 1,172 $ 1,273 5% (8)% Operating expenses 1,088 1,040 1,095 5% (5)% Segment profit $ 147 $ 132 $ 178 11% (26)% Profit margin 11.9% 11.3% 14.0% Backlog $ 1,950 $ 2,098 $ 2,144 (7)% (2)% Textron Systems Revenues and Operating Expenses Factors contributing to the 2023 year-over-year revenue change are provided below: (In millions) 2023 versus 2022 Volume and mix $ 44 Pricing 19 Total change $ 63 Revenues at Textron Systems increased $63 million, 5%, in 2023, compared with 2022, primarily due to higher volume and mix, which was principally related to weapons products.
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.
The revenue increase primarily included the following factors: • Higher Industrial revenues of $376 million due to higher volume and mix of $280 million across both product lines and a favorable impact from pricing of $99 million. • Higher Textron Aviation revenues of $300 million, reflecting higher pricing of $335 million, partially offset by lower volume and mix of $35 million. • Higher Textron Systems revenues of $63 million, primarily due to higher volume of $44 million. • Higher Bell revenues of $56 million, reflecting higher pricing of $68 million, partially offset by lower volume and mix of $12 million.
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.
During 2023, we continued to manage through the impacts of ongoing global supply chain shortages/delays and labor shortages to deliver products to our customers.
Textron 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.
Textron eAviation % Change (Dollars in millions) 2023 2022 2021 2023 2022 Revenues $ 32 $ 16 $ — 100% — Operating expenses 95 40 — 138% — Segment loss $ (63) $ (24) $ — 163% — Textron eAviation Revenues and Operating Expenses Factors contributing to the 2023 year-over-year revenue change are provided below: (In millions) 2023 versus 2022 Volume and mix $ 9 Acquisition 4 Other 3 Total change $ 16 Textron eAviation segment revenues increased $16 million in 2023, compared with 2022, primarily reflecting higher volume and mix.
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.
The following table reflects information about the Finance segment’s credit performance related to finance receivables.
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.
Gross margin as a percentage of Manufacturing revenues increased 60 basis points in 2023, compared with 2022, largely due to higher margins at the Industrial, Bell and Textron Aviation segments. 20 Table of Contents Selling and administrative expense increased $39 million, 3%, in 2023, compared with 2022, primarily reflecting higher share-based compensation expense and $27 million of inflation, largely in labor costs, partially offset by a $17 million recovery of amounts that were previously written off related to one customer relationship at the Finance segment.
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.
Textron eAviation's operating expenses increased $55 million in 2023, compared with 2022, primarily related to higher research and development costs. 25 Table of Contents Textron eAviation Segment Loss Factors contributing to 2023 year-over-year segment loss change are provided below: (In millions) 2023 versus 2022 Performance and other $ (43) Volume and mix 4 Total change $ (39) Textron eAviation's segment loss increased $39 million in 2023, compared with 2022, largely due to an unfavorable impact from performance and other, primarily reflecting higher research and development costs.
Removed
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.
Added
Segment profit increased 17%, compared with 2022, largely due to higher pricing, net of inflation at the Textron Aviation and Industrial segments. Our backlog increased 5% in 2023 to $13.9 billion, which included a $782 million increase at the Textron Aviation segment.
Removed
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.
Added
Management’s Discussion and Analysis of Financial Condition and Results of Operations of our Annual Report on Form 10-K for the year ended December 31, 2022. Beginning in 2023, we changed how we measure our segment profit for the manufacturing segments, as discussed in the Segment Analysis section below.
Removed
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.
Added
As a result of this change, the prior periods have been recast to conform to this presentation. The impact of the change in the segment profit measure on the narrative discussion of fluctuations in segment profit provided in Item 7.
Removed
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.
Added
Segment profit is an important measure used for evaluating performance and for decision-making purposes. Beginning in 2023, we changed how we measure our segment profit for the manufacturing segments to exclude the non-service components of pension and postretirement income, net; LIFO inventory provision; and intangible asset amortization.
Removed
Segment Analysis 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. Segment profit is an important measure used for evaluating performance and for decision-making purposes.
Added
This measure also continues to exclude interest expense, net for Manufacturing group; certain corporate expenses; gains/losses on major business dispositions; and special charges. The prior periods have been recast to conform to this presentation. The measurement for the Finance segment includes interest income and expense along with intercompany interest income and expense.
Removed
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.
Added
Textron Aviation’s operating expenses increased $211 million, 5%, in 2023, compared with 2022, largely reflecting inflation of $176 million.
Removed
In December 2022, Bell was awarded the development contract for the next stage of the FLRAA program, as discussed in Item 1 Business.

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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 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
Biggest changeDecember 30, 2023 December 31, 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 1 1 30 (11) (11) 28 $ (5) $ (5) $ 29 $ (17) $ (17) $ 27 Interest rate risk Debt $ (3,520) $ (3,342) $ (54) $ (3,175) $ (2,872) $ (51) Finance group Interest rate risk Finance receivables $ 417 $ 423 $ 9 $ 390 $ 369 $ 10 Debt (348) (293) (1) (375) (294) (1) * The value represents an asset or (liability). 32 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 $354 million and $272 million at December 31, 2022 and January 1, 2022, 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 $478 million and $354 million at December 30, 2023 and December 31, 2022, respectively.
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.
This strategy includes the use of interest rate swap agreements. We had interest rate swap agreements with a total notional amount of $210 million at December 30, 2023 and $297 million at December 31, 2022, which effectively converted certain floating-rate debt to a fixed-rate equivalent.

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