ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

Table o f Contents Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations Overview In 2025, Textron’s revenues increased 8%, compared with 2024, reflecting the impact of higher volume on the MV-75 program at the Bell segment and higher aircraft and aftermarket parts and services revenues at the Textron Aviation segment. Segment profit increased 14%, compared with 2024, largely reflecting higher volume and mix at Textron Aviation. Our backlog increased 5% in 2025 to $18.8 billion, which included a $710 million increase at the Textron Systems segment and a $326 million increase at the Bell segment. Financial highlights for 2025 also include: • Generated $1.3 billion of net cash from operating activities from our manufacturing businesses. • Invested $521 million in research and development projects and $383 million in capital expenditures. • Returned $822 million to our shareholders through the repurchase of 10.7 million shares of our common stock. 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 2025 compared with 2024 is provided below, while a discussion of 2024 compared with 2023 can be found in Item 7. 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 28, 2024. 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. Business Environment Changes to the United States trade policy have resulted in new or higher tariffs on goods imported from numerous countries, and some countries have imposed retaliatory tariffs on imports from the United States. We are principally a North American manufacturer and 69% of our 2025 revenues were generated in the U.S. Our aircraft products, subassemblies, parts and components manufactured in Canada and Mexico are largely qualified under the rules of the United States-Mexico-Canada Agreement (USMCA) for preferential treatment on tariffs imposed by the U.S. on imports from Canada and Mexico. In addition, our operations outside of North America primarily source materials and components from outside of North America and manufacture products for non-U.S. customers. Many of our businesses also source materials and components from outside of North America. These businesses have been and will continue to be impacted by these imposed U.S. tariffs. In order to mitigate these impacts our businesses have been managing, and will continue to manage, pricing and supply chain optimization strategies. In addition, our aircraft businesses are working through the tariff reconciliation and refund process with the U.S. Government to recover tariff costs that were previously paid related to materials and components that were subsequently determined to be USMCA compliant. To date, we have not experienced a material adverse impact from these tariffs. We will continue to evaluate the ongoing impact of these tariffs and any further developments or changes in global tariff policies on our business and financial position. Consolidated Results of Operations % Change (Dollars in millions) 2025 2024 2023 2025 2024 Revenues $ 14,799 $ 13,702 $ 13,683 8% —% Cost of sales 12,104 11,200 10,835 8% 3% Gross margin as a % of Manufacturing revenues 17.8% 18.0% 20.5% Research and development costs $ 521 $ 491 $ 570 6% (14)% Selling and administrative expense 1,173 1,156 1,225 1% (6)% Interest expense, net 126 97 77 30% 26% Special charges 4 78 126 (95)% (38)% Non-service components of pension and postretirement income, net 266 263 237 1% 11% Revenues Revenues increased $1.1 billion in 2025, compared with 2024, largely due to the following factors: • Higher Bell revenues of $703 million, due to higher military aircraft and support programs revenues of $570 million, primarily related to the MV-75 program and military sustainment programs, and higher commercial revenues of $133 million. • Higher Textron Aviation revenues of $671 million, reflecting higher aircraft revenues of $548 million and higher aftermarket parts and services revenues of $123 million. 21 Table o f Contents • Lower Industrial revenues of $302 million, with $294 million at Textron Specialized Vehicles, largely reflecting the impact from the disposition of the Powersports business in April 2025, as discussed in Note 15 to the Consolidated Financial Statements, and lower volume and mix, primarily in golf products. Manufacturing group revenues increased $1.1 billion in 2025, compared with 2024, largely reflecting an increase of $1.4 billion in product revenues. The increase in product revenues in 2025 was partially offset by a decrease of $285 million in service revenues, largely related to the classification of revenues for the MV-75 program, which was service-related prior to the transition of the program to the Engineering and Manufacturing Development phase in the third quarter of 2024 when it became product-related. Cost of Sales Cost of sales includes cost of products and services sold for the Manufacturing group. In 2025, cost of sales increased $904 million, 8%, compared with 2024, largely due to higher net volume and mix and a $281 million impact from inflation, partially offset by the impact from the disposition of the Powersports business. Research and Development Costs Research and development costs increased $30 million, 6%, in 2025, compared with 2024. The higher research and development costs included an increase of $56 million at Bell, largely reflecting lower costs in 2024 due to the wind down of the Future Attack Reconnaissance Aircraft program, partially offset by a decrease of $21 million at the Textron eAviation segment, due to a reduction in costs on certain development projects. Selling and Administrative Expense Selling and administrative expense increased $17 million, 1%, in 2025, compared with 2024. The increase included a $21 million impact from inflation, higher share-based compensation expense and lower recoveries at the Finance segment, mostly offset by the impact from the disposition of the Powersports business and a $16 million gain resulting from the early termination of a vendor contract at the Textron Systems segment. 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 2025, interest expense, net increased $29 million, 30%, compared with 2024, primarily due to higher average debt outstanding and lower interest income. For 2025, 2024 and 2023, gross interest expense totaled $164 million, $146 million and $133 million, respectively. Special Charges Special charges of $4 million, $78 million and $126 million in 2025, 2024 and 2023, respectively, largely include restructuring activities and asset impairment charges as described in Note 15 to the Consolidated Financial Statements on page 63 . Non-service Components of Pension and Postretirement Income, Net Non-service components of pension and postretirement income, net increased by $3 million, 1%, in 2025, compared with 2024. Income Taxes 2025 2024 2023 Effective tax rate 18.8% 12.5% 15.2% In 2025, the effective tax rate of 18.8% was lower than the U.S. federal statutory tax rate of 21%, largely due to the favorable impact of research and development credits. In 2024, the effective tax rate of 12.5% was lower than the U.S. federal statutory tax rate of 21%, largely due to the favorable impact of research and development credits and the effective settlement of certain tax positions in the fourth quarter of 2024, which is discussed in Note 16 to the Consolidated Financial Statements. For a full reconciliation of our effective tax rate to the U.S. federal statutory tax rate, see Note 16 to the Consolidated Financial Statements on page 64 . 22 Table o f Contents Segment Analysis We operate in, and report financial information for, the following six operating segments: Textron Aviation, Bell, Textron Systems, Industrial, Textron eAviation and Finance. Segment profit is an important measure used for evaluating performance and for decision-making purposes. Segment profit for the manufacturing segments excludes the non-service components of pension and postretirement income, net; LIFO inventory provision; intangible asset amortization; interest expense, net for Manufacturing group; certain corporate expenses; gains/losses on major business dispositions; special charges and the inventory valuation charge to write down production-related powersports inventory. The operating costs used to derive segment profit for our manufacturing segments includes cost of sales, research and development costs and selling and administrative expense. The cost of sales discussed in this Segment Analysis section excludes the LIFO inventory provision, intangible asset amortization and the inventory valuation charge discussed above that are reported within Cost of products sold or Cost of services sold on the Consolidated Statement of Operations. The measurement for the Finance segment includes interest income and expense along with intercompany interest income and expense. In our discussion of comparative results for the Manufacturing group, material changes in revenues and segment profit for our commercial businesses typically are expressed in terms of product line revenues, including volume and mix and pricing; foreign exchange; acquisitions and dispositions; inflation; manufacturing efficiency; and changes in research and development costs and selling and administrative expense. For revenues, volume and mix represents changes in revenues from increases or decreases in the number of units delivered or services provided and the composition of products and/or services sold. For segment profit, volume and mix represents a change due to the number of units delivered or services provided and the composition of products and/or services sold at different profit margins. Pricing represents changes in unit pricing. Foreign exchange is the change resulting from translating foreign-denominated amounts into U.S. dollars at exchange rates that are different from the prior period. Revenues generated by acquired businesses are reflected in Acquisitions for a twelve-month period, while reductions in revenues and segment profit from the sale of businesses are reflected as Dispositions. Inflation represents higher material, wages, benefits, pension service cost or other costs. Manufacturing efficiency includes changes in material, labor and overhead variances to standards, typically due to scrap rates, labor efficiency or inefficiencies, facility usage and other manufacturing productivity inputs. Approximately 27% of our 2025 revenues were derived from contracts with the U.S. Government, including those under the U.S. Government-sponsored foreign military sales program. For our segments that contract with the U.S. Government, material changes in revenues related to these contracts are expressed in terms of volume. Changes in segment profit for these contracts are typically expressed in terms of volume and mix and contract performance, which includes 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 among other factors. See the Critical Accounting Estimates - Revenue Recognition section in Item 7 for a discussion of the factors that impact our estimated costs. Textron Aviation % Change (Dollars in millions) 2025 2024 2023 2025 2024 Revenues: Aircraft $ 3,922 $ 3,374 $ 3,577 16% (6)% Aftermarket parts and services 2,033 1,910 1,796 6% 6% Total revenues 5,955 5,284 5,373 13% (2)% Cost of sales 4,637 4,102 4,116 13% —% Research and development costs 214 208 199 3% 5% Selling and administrative expense 410 408 409 —% —% Segment profit $ 694 $ 566 $ 649 23% (13)% Profit margin 11.7% 10.7% 12.1% Backlog $ 7,724 $ 7,845 $ 7,169 (2)% 9% Textron Aviation’s revenues increased $671 million, 13%, in 2025, compared with 2024, reflecting higher aircraft revenues of $548 million and higher aftermarket parts and services revenues of $123 million. The increase in aircraft revenues was due to higher volume and mix and higher pricing. The increase in volume and mix is largely due to higher jet and commercial turboprop volume. The higher volume and mix also reflects the recovery from the strike that began in the third quarter of 2024 and continued into the fourth quarter of 2024. We delivered 171 Citation jets and 146 commercial turboprops in 2025, compared with 151 Citation jets and 127 commercial turboprops in 2024. The increase in aftermarket parts and services revenues was due to higher pricing and volume. 23 Table o f Contents Textron Aviation’s cost of sales increased $535 million, 13%, in 2025, compared with 2024, largely reflecting higher volume and mix and inflation of $167 million. Textron Aviation’s segment profit increased $128 million, 23%, in 2025, compared with 2024, largely due to higher volume and mix and a favorable impact from manufacturing efficiencies, related to idle facilities costs recognized in 2024 resulting from the strike, partially offset by higher warranty costs. Bell % Change (Dollars in millions) 2025 2024 2023 2025 2024 Revenues: Military aircraft and support programs $ 2,618 $ 2,048 $ 1,701 28% 20% Commercial helicopters, parts and services 1,664 1,531 1,446 9% 6% Total revenues 4,282 3,579 3,147 20% 14% Cost of sales 3,537 2,899 2,392 22% 21% Research and development costs 153 97 192 58% (49)% Selling and administrative expense 229 213 243 8% (12)% Segment profit $ 363 $ 370 $ 320 (2)% 16% Profit margin 8.5% 10.3% 10.2% Backlog $ 7,795 $ 7,469 $ 4,780 4% 56% Bell’s military aircraft and support programs revenues increased $570 million, 28%, in 2025, compared with 2024, primarily due to higher volume on the MV-75 program and military sustainment programs. Commercial helicopters, parts and services revenues increased $133 million, 9%, primarily due to the mix of aircraft sold and higher pricing. We delivered 169 commercial helicopters in 2025, compared with 172 commercial helicopters in 2024. Bell's cost of sales increased $638 million, 22%, in 2025, compared with 2024, primarily due to higher volume and mix described above. Bell's research and development costs increased $56 million, 58%, in 2025, compared with 2024, largely reflecting lower costs in 2024 due to the wind down of the Future Attack Reconnaissance Aircraft program. Bell’s segment profit decreased $7 million, 2%, in 2025, compared with 2024, reflecting higher research and development costs described above, partially offset by higher volume and mix. Bell's profit margin decreased 180 basis points, largely reflecting higher volume on lower margin MV-75 development activities and higher research and development costs. As the MV-75 program continues to accelerate, we expect that we will be awarded the long-lead Low-Rate Initial Production (LRIP) phase of the contract in late 2026 or early 2027. Upon award of the LRIP option, which is largely fixed price, we expect to record an unfavorable cumulative catch-up program adjustment, reflecting higher costs than originally anticipated from when the program was bid, in the range of $60 million to $110 million. The overall MV-75 program will continue to generate a positive profit margin after the adjustment. Bell's backlog increased $326 million, 4%, in 2025, compared with 2024, due to orders in excess of revenues recognized and deliveries. New orders included a $1.3 billion award for the prototype testing and evaluation phase of the MV-75 program. 24 Table o f Contents Textron Systems % Change (Dollars in millions) 2025 2024 2023 2025 2024 Revenues $ 1,247 $ 1,241 $ 1,235 —% —% Cost of sales 939 929 925 1% —% Research and development costs 45 51 53 (12)% (4)% Selling and administrative expense 88 107 110 (18)% (3)% Segment profit $ 175 $ 154 $ 147 14% 5% Profit margin 14.0% 12.4% 11.9% Backlog $ 3,304 $ 2,594 $ 1,950 27% 33% Textron Systems revenues increased $6 million in 2025, compared with 2024. The increase in revenues reflected higher pricing, partially offset by lower volume and mix. The decrease in volume and mix largely reflects the impact of the cancellation of the Shadow program and termination of certain U.S. Government development programs, partially offset by higher volume on the Ship-to-Shore Connector program. Textron Systems’ research and development costs decreased $6 million, 12%, in 2025, compared with 2024, primarily due to a reduction in costs on certain U.S. Government development programs. Textron Systems’ selling and administrative expense decreased $19 million, 18%, in 2025, compared with 2024. The decrease in expense included a $16 million gain resulting from the early termination of a vendor contract in the third quarter of 2025. Textron Systems segment profit increased $21 million, 14%, in 2025, compared with 2024, largely due to lower selling and administrative expense as discussed above. Textron Systems’ backlog increased $710 million, 27%, in 2025, compared with 2024, reflecting orders in excess of revenues recognized and deliveries. New orders included $480 million for additional units on the Ship-to-Shore Connector program and $475 million for a five-year contract for ATAC’s U.S. Navy Fighter Jet Services. Industrial % Change (Dollars in millions) 2025 2024 2023 2025 2024 Revenues: Kautex $ 1,883 $ 1,891 $ 1,954 —% (3)% Textron Specialized Vehicles 1,330 1,624 1,887 (18)% (14)% Total revenues 3,213 3,515 3,841 (9)% (8)% Cost of sales 2,733 2,993 3,221 (9)% (7)% Research and development costs 67 72 80 (7)% (10)% Selling and administrative expense 268 299 312 (10)% (4)% Segment profit $ 145 $ 151 $ 228 (4)% (34)% Profit margin 4.5% 4.3% 5.9% Industrial segment revenues decreased $302 million, 9%, in 2025, compared with 2024. Textron Specialized Vehicles' revenues decreased $294 million, 18%, largely reflecting a $195 million impact from the disposition of the Powersports business in April 2025, as discussed in Note 15 to the Consolidated Financial Statements, and lower volume and mix, primarily in golf products. Kautex revenues decreased $8 million, reflecting lower volume, partially offset by a favorable impact from foreign exchange rate fluctuations and higher pricing. Industrial's cost of sales decreased $260 million, 9%, in 2025 compared with 2024, principally reflecting the impact from the disposition and lower volume and mix, partially offset by higher inflation of $44 million. Industrial's selling and administrative expense decreased $31 million, 10%, in 2025, compared with 2024, largely reflecting the impact from the disposition. Industrial's segment profit decreased $6 million, 4%, in 2025, compared with 2024, primarily reflecting lower volume and mix described above, partially offset by the impact from the disposition and a favorable impact from manufacturing efficiencies, which included cost reductions resulting from restructuring activities. 25 Table o f Contents Textron eAviation % Change (Dollars in millions) 2025 2024 2023 2025 2024 Revenues $ 27  $ 33  $ 32  (18)% 3% Cost of sales 27  29  35  (7)% (17)% Research and development costs 42  63  46  (33)% 37% Selling and administrative expense 21  17  14  24% 21% Segment loss $ (63) $ (76) $ (63) (17)% 21% Textron eAviation segment revenues decreased $6 million, 18%, in 2025, compared with 2024, largely due to lower volume and mix. Research and development costs decreased $21 million, 33%, due to a reduction in costs on certain development projects. Segment loss decreased $13 million in 2025, compared with 2024, primarily reflecting the lower research and development costs, partially offset by lower volume and mix. Finance (In millions) 2025 2024 2023 Revenues $ 75  $ 50  $ 55 Selling and administrative expense 8  (4) (6) Interest expense, net 18  19  15 Segment profit $ 49  $ 35  $ 46 Finance segment revenues increased $25 million and segment profit increased $14 million in 2025, compared with 2024. The increase in revenues and segment profit included $17 million of gains on the disposition of non-captive assets in 2025. Selling and administrative expense increased $12 million in 2025, compared with 2024, largely reflecting lower recoveries of $9 million. Liquidity and Capital Resources Our financings are conducted through two separate borrowing groups.  The Manufacturing group consists of Textron consolidated with its majority-owned subsidiaries that operate in the Textron Aviation, Bell, Textron Systems, Industrial and Textron eAviation segments. The Finance group, which also is the Finance segment, consists of Textron Financial Corporation and its consolidated subsidiaries. We designed this framework to enhance our borrowing power by separating the Finance group. Our Manufacturing group operations include the development, production and delivery of tangible products and services, while our Finance group provides financial services. Due to the fundamental differences between each borrowing group’s activities, investors, rating agencies and analysts use different measures to evaluate each group’s performance. To support those evaluations, we present balance sheet and cash flow information for each borrowing group within the Consolidated Financial Statements. Assessment of Liquidity and Significant Future Cash Requirements Key information that is utilized in assessing our liquidity is summarized below: (Dollars in millions) January 3, 2026 December 28, 2024 Manufacturing group Cash and equivalents $ 1,940 $ 1,386 Debt 3,539 3,247 Shareholders’ equity 7,875 7,204 Capital (debt plus shareholders’ equity) 11,414 10,451 Net debt (net of cash and equivalents) to capital 17% 21% Debt to capital 31% 31% Finance group Cash and equivalents $ 85 $ 55 Debt 339 341 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. 26 Table o f Contents We expect to have sufficient cash to meet our needs based on our existing cash balances, the cash we expect to generate from our manufacturing operations and the availability of our existing credit facility. 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 $150 million in 2026, $496 million in 2027, $500 million in 2028 and $3.4 billion thereafter, and for the Finance group of $19 million in 2026, $68 million in 2027, $41 million in 2028 and $466 million thereafter. For the Manufacturing group, we also have purchase obligations that require material future cash outlays totaling $3.5 billion in 2026, $626 million in 2027 and $171 million thereafter. Purchase obligations include undiscounted amounts committed under 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 33% of our purchase obligations represent purchase orders issued for goods and services to be delivered under firm contracts with the U.S. Government for which we have full recourse under customary contract termination clauses. Credit Facilities and Other Sources of Capital On October 16, 2025, Textron entered into a senior unsecured revolving credit facility for an aggregate principal amount of $1.0 billion, of which $100 million is available for the issuance of letters of credit. We may elect to increase the aggregate amount of commitments under the facility to up to $1.3 billion by designating an additional lender or by an existing lender agreeing to increase its commitment. The facility expires in October 2030 and provides for two one-year extensions at our option with the consent of lenders representing a majority of the commitments under the facility. The new facility replaces the prior 5-year facility which was scheduled to expire in October 2027. At January 3, 2026 and December 28, 2024, there were no amounts borrowed against either facility. At January 3, 2026, there were no letters of credit issued and outstanding under the new facility, and at December 28, 2024, there was a $9 million letter of credit issued and outstanding under the prior facility. 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. On October 31, 2025, we issued $500 million of SEC-registered fixed-rate notes due in March 2036 with an annual interest rate of 4.95%, and on February 13, 2025, we issued $500 million of SEC-registered fixed-rate notes due in May 2035 with an annual interest rate of 5.50%. On December 31, 2025, we repaid our $350 million 4.00% notes due in March 2026, and on March 3, 2025, we repaid our $350 million 3.875% Notes due in March 2025. 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) 2025 2024 2023 Operating activities $ 1,327  $ 1,008  $ 1,270 Investing activities (264) (288) (345) Financing activities (530) (1,438) (776) Cash flows from operating activities were $1.3 billion in 2025, compared with $1.0 billion in 2024. The $319 million increase in cash flows was primarily due to higher earnings, lower net income tax payments, changes in working capital and a $25 million dividend received from the Finance group. The dividend is included within cash flows from operating activities for the Manufacturing group as it represents a return on investment. Net income tax payments were $92 million and $181 million in 2025 and 2024, respectively. Pension contributions were $41 million and $44 million in 2025 and 2024, respectively. In 2025 and 2024, cash flows used in investing activities included capital expenditures of $383 million and $364 million, respectively, partially offset by net proceeds from corporate-owned life insurance policies of $80 million and $85 million, respectively. Cash flows used in investing activities in 2025 also included $16 million of net proceeds from the disposition of the Powersports business as discussed in Note 15 to the Consolidated Financial Statements. Cash flows used in financing activities in 2025 included $822 million of cash paid to repurchase an aggregate of 10.7 million shares of our common stock and $707 million of payments on long-term debt, partially offset by $991 million of net proceeds from the issuance of long-term debt. In 2024, cash flows used in financing activities included $1.1 billion of cash paid to repurchase an aggregate of 12.9 million shares of our common stock and $361 million of payments on long-term debt. On February 11, 2026, pursuant to a delegation by our Board of Directors, Textron's Audit Committee approved a program for the repurchase of up to 25 million shares of our common stock. 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 repurchase program has no expiration date and replaced the prior 2023 share repurchase program, which was utilized in 2025 for repurchases. 27 Table o f Contents Dividend payments to shareholders totaled $18 million and $12 million in 2025 and 2024, respectively. Due to the timing of our fiscal year-end, we made five dividend payments in 2025, compared with three dividend payments in 2024. 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) 2025 2024 2023 Operating activities $ 28  $ 8  $ 14 Investing activities 40  3  11 Financing activities (38) (16) (37) Cash flows from operating activities for the Finance Group were $28 million in 2025, compared with $8 million in 2024. The $20 million increase in cash flows was primarily due to higher earnings. The Finance group’s cash flows from investing activities primarily included finance receivable originations of $241 million and $130 million, respectively, and collections on finance receivables totaling $208 million and $133 million in 2025 and 2024, respectively. In 2025, investing cash flows also included $72 million of proceeds from the disposition of non-captive assets. Cash flows used in financing activities included payments on long-term and nonrecourse debt of $13 million and $16 million in 2025 and 2024, respectively. Dividends paid to the Manufacturing group totaled $25 million in 2025. Consolidated Cash Flows The consolidated cash flows from continuing operations, after elimination of activity between the borrowing groups, are summarized below: (In millions) 2025 2024 2023 Operating activities $ 1,313  $ 1,015  $ 1,267 Investing activities (207) (284) (317) Financing activities (543) (1,454) (813) Consolidated cash flows from operating activities were $1.3 billion in 2025, compared with $1.0 billion in 2024. The $298 million increase in cash flows was largely due to higher earnings, lower net income tax payments and changes in working capital. Net income tax payments were $104 million and $191 million in 2025 and 2024, respectively. Pension contributions were $41 million and $44 million in 2025 and 2024, respectively. In 2025 and 2024, cash flows used in investing activities included capital expenditures of $383 million and $364 million, respectively, partially offset by net proceeds from corporate-owned life insurance policies of $80 million and $85 million, respectively. Cash flows used in investing activities in 2025 also included $72 million of proceeds from the disposition of non-captive assets. Cash flows used in financing activities in 2025 included $822 million of share repurchases and $720 million of payments on long-term debt, partially offset by $991 million of net proceeds from the issuance of long-term debt. In 2024, cash flows used in financing activities included $1.1 billion of share repurchases and $377 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. In the Consolidated Statements of Cash Flows, cash received from customers is reflected as operating activities when received from third parties. However, in the cash flow information provided for the separate borrowing groups, cash flows related to captive financing activities are reflected based on the operations of each group. For example, when product is sold by our Manufacturing group to a customer and is financed by the Finance group, the origination of the finance receivable is recorded within investing activities as a cash outflow in the Finance group’s statement of cash flows. Meanwhile, in the Manufacturing group’s statement of cash flows, the cash received from the Finance group on the customer’s behalf is recorded within operating cash flows as a cash inflow. Although cash is transferred between the two borrowing groups, there is no cash transaction reported in the consolidated cash flows at the time of the original financing. These captive financing activities, along with all significant intercompany transactions, are reclassified or eliminated from the Consolidated Statements of Cash Flows. 28 Table o f Contents Reclassification adjustments included in the Consolidated Statements of Cash Flows on page 37 are summarized below: (In millions) 2025 2024 2023 Reclassification adjustments from investing activities: Finance receivable originations for Manufacturing group inventory sales $ (183) $ (109) $ (160) Cash received from customers 166  108  143 Total reclassification adjustments from investing activities (17) (1) (17) Reclassification adjustments from financing activities: Dividends received by Manufacturing group from Finance group (25) —  — Total reclassification adjustments to cash flows from operating activities $ (42) $ (1) $ (17) Under a Support Agreement between Textron and TFC, Textron is required to maintain a controlling interest in TFC. The agreement, as amended in December 2015, also requires Textron to ensure that TFC maintains fixed charge coverage of no less than 125% and consolidated shareholders' equity of no less than $125 million. There were no cash contributions required to be paid to TFC in 2025 and 2024 to maintain compliance with the support agreement. 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. 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 on page 39 , 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. We generally use the cost-to-cost method to measure progress for these contracts because it best depicts the transfer of control to the customer that occurs as we incur costs on our contracts.  Under this measure, the extent of progress towards completion is measured based on the ratio of costs incurred to date to the estimated costs at completion of the performance obligation, and revenue is recorded proportionally as costs are incurred. 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. In estimating total costs at completion, we are required to make numerous assumptions related to the complexity of design and related development work to be performed; engineering requirements; product performance; subcontractor performance; availability and cost of materials; labor productivity, availability and cost; overhead and capital costs; manufacturing efficiencies; the length of time to complete the contract (to estimate increases in wages and prices for materials); and costs of satisfying offset obligations, among other variables. Our cost estimation process is based on the professional knowledge and experience of engineers and program managers along with finance professionals. We review and update our cost projections quarterly or more frequently when circumstances significantly change. When our estimate of the total costs to be incurred on a performance obligation exceeds the estimated transaction price, a provision for the entire loss is recorded in the period in which the loss is determined. At the outset of each contract, we estimate an initial profit booking rate considering the risks surrounding our ability to achieve the technical requirements (e.g., a newly developed product versus a mature product), schedule (e.g., the number and type of milestone events), and costs by contract requirements in the initial estimated costs at completion. Profit booking rates may increase during the performance of the contract if we successfully retire risks surrounding the technical, schedule and cost aspects of the contract. Conversely, the profit booking rate may decrease if we are not successful in retiring the risks; and, as a result, our estimated costs at completion increase. All estimates are subject to change during the performance of the contract and, therefore, may affect the profit booking rate. 29 Table o f Contents Changes in our estimate of the total expected cost or in the transaction price for a contract typically impact our profit booking rate. We utilize the cumulative catch-up method of accounting to recognize the impact of these changes on our profit booking rate for a contract. Under this method, the inception-to-date impact of a profit adjustment on a contract is recognized in the period the adjustment is identified. The impact of our cumulative catch-up adjustments on segment profit recognized in prior periods is presented below: (In millions) 2025 2024 2023 Gross favorable $ 130  $ 122  $ 106 Gross unfavorable (64) (91) (62) Net adjustments $ 66  $ 31  $ 44 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. 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. 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. 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. The long-term revenue growth rate we use to determine the terminal value of the business is based on our assessment of its minimum expected terminal growth rate, as well as its past historical growth and broader economic considerations such as gross domestic product, inflation and the maturity of the markets we serve. The discount rates utilized in this analysis are based on each reporting unit’s weighted average cost of capital, which takes into account the relative weights of each component of capital structure (equity and debt) and represents the expected cost of new capital, adjusted as appropriate to consider the risk inherent in future cash flows of the respective reporting unit. We believe this approach yields a discount rate that is consistent with an implied rate of return that an independent investor or market participant would require for an investment in a company having similar risks and business characteristics to the reporting unit being assessed. 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. 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. Key assumptions used in determining these obligations and related expenses or benefits include the expected long-term rates of return on plan assets and discount rates. We also make assumptions regarding employee demographic factors such as retirement patterns, mortality, turnover and rate of compensation increases. We evaluate and update these assumptions annually. To determine the weighted-average expected long-term rate of return on plan assets, we consider the current and expected asset allocation, as well as historical and expected returns on each plan asset class.  A lower expected rate of return on plan assets will decrease pension income. For both 2025 and 2024, the assumed expected long-term rate of return on plan assets used in calculating pension income was 7.16%. For 2025, the assumed rate of return for our domestic plans, which represent approximately 89% of our total pension assets, was 7.25%. Net periodic benefit income is sensitive to changes in the expected long-term rate of return on plan assets. The discount rate enables us to state expected future benefit payments as a present value on the measurement date, reflecting the current rate at which the pension liabilities could be effectively settled. 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. In 2025, the weighted-average discount rate used in calculating pension income was 5.73%, compared with 5.19% in 2024.  For our domestic plans, the assumed discount rate was 5.80% in 2025, compared with 5.25% in 2024. A change of 50 basis-points higher or lower, with all other assumptions held constant, in this weighted-average discount rate in 2025 would have changed our pension income for our domestic plans by approximately $10 million. 30 Table o f Contents Item 7A. Quantitative and Qualitative Disclosures About Market Risk Foreign Currency Exchange Risk Our financial results are affected by changes in foreign currency exchange rates in the various countries in which our products are manufactured and/or sold.  For our manufacturing operations, we manage our foreign currency transaction exposures by entering into foreign currency exchange contracts. 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 $477 million and $464 million at January 3, 2026 and December 28, 2024, respectively. Interest Rate Risk Our financial results are affected by changes in interest rates. As part of managing this risk, we seek to achieve a prudent balance between floating- and fixed-rate exposures. We continually monitor our mix of these exposures and adjust the mix, as necessary. For our Finance group, we generally limit our risk to changes in interest rates with a strategy of matching floating-rate assets with floating-rate liabilities. This strategy includes the use of interest rate swap agreements. We had interest rate swap agreements with a total notional amount of $264 million at January 3, 2026 and $289 million at December 28, 2024, which effectively converted certain floating-rate debt to a fixed-rate equivalent. Quantitative Risk Measures In the normal course of business, we enter into financial instruments for purposes other than trading. The financial instruments that are subject to market risk include finance receivables (excluding leases), debt (excluding finance lease obligations) and foreign currency exchange contracts. To quantify the market risk inherent in these financial instruments, we utilize a sensitivity analysis that includes a hypothetical change in fair value assuming a 10% decrease in interest rates and a 10% strengthening in foreign exchange rates against the U.S. dollar. The fair value of these financial instruments is estimated using discounted cash flow analysis and indicative market pricing as reported by leading financial news and data providers. At the end of each year, the table below provides the carrying and fair values of these financial instruments along with the sensitivity of fair value to the hypothetical changes discussed above. This sensitivity analysis is most likely not indicative of actual results in the future. January 3, 2026 December 28, 2024 ( 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 Foreign currency exchange contracts $ (4) $ (4) $ 34  $ (14) $ (14) $ 31 Interest rate risk Debt (3,459) (3,406) (66) (3,164) (2,989) (49) Finance group Interest rate risk Finance receivables 493  528  12  439  454  9 Debt (339) (312) —  (341) (311) —

• The value represents an asset or (liability). 31 Table o f Contents Item 8. Financial Statements and Supplementary Data Our Consolidated Financial Statements and the related report of our independent registered public accounting firm thereon are included in this Annual Report on Form 10-K on the pages indicated below: Page Consolidated Statements of Operations for each of the years in the three-year period ended January 3, 2026 33 Consolidated Statements of Comprehensive Income for each of the years in the three-year period ended January 3, 2026 34 Consolidated Balance Sheets as of January 3, 2026 and December 28, 2024 35 Consolidated Statements of Shareholders’ Equity for each of the years in the three-year period ended January 3, 2026 36 Consolidated Statements of Cash Flows for each of the years in the three-year period ended January 3, 2026 37 Notes to the Consolidated Financial Statements Note 1. Summary of Significant Accounting Policies 39 Note 2 . Goodwill and Intangible Assets 45 Note 3 . Accounts Receivable and Finance Receivables 45 Note 4 . Inventories 47 Note 5 . Property, Plant and Equipment, Net 47 Note 6 . Accounts Payable and Liabilities 47 Note 7 . Leases 48 Note 8 . Debt and Credit Facilities 49 Note 9 . Derivative Instruments and Fair Value Measurements 50 Note 1 0 . Shareholders’ Equity 51 Note 1 1 . Segment Financial Information 53 Note 1 2 . Revenues 55 Note 1 3 . Share-Based Compensation 57 Note 1 4 . Retirement Plans 59 Note 1 5 . Special Charges 63 Note 1 6 . Income Taxes 64 Note 1 7 . Commitments and Contingencies 67 Note 1 8 . Supplemental Cash Flow Information 67 Report of Independent Registered Public Accounting Firm 68 Supplementary Information: Schedule II – Valuation and Qualifying Accounts 70 All other schedules are omitted either because they are not applicable or not required or because the required information is included in the financial statements or notes thereto. 32 Table o f Contents Consolidated Statements of Operations For each of the years in the three-year period ended January 3, 2026 (In millions, except per share data) 2025 2024 2023 Revenues Manufacturing product revenues $ 12,732   $ 11,375   $ 11,573 Manufacturing service revenues 1,992   2,277   2,055 Finance revenues 75   50   55 Total revenues 14,799   13,702   13,683 Costs, expenses and other Cost of products sold 10,608   9,403   9,206 Cost of services sold 1,496   1,797   1,629 Research and development costs 521   491   570 Selling and administrative expense 1,173   1,156   1,225 Interest expense, net 126   97   77 Special charges 4   78   126 Non-service components of pension and postretirement income, net ( 266 ) ( 263 ) ( 237 ) Total costs, expenses and other 13,662   12,759   12,596 Income from continuing operations before income taxes 1,137   943   1,087 Income tax expense 214   118   165 Income from continuing operations 923   825   922 Loss from discontinued operations ( 2 ) ( 1 ) ( 1 ) Net income $ 921   $ 824   $ 921 Basic earnings per share Continuing operations $ 5.16   $ 4.38   $ 4.62 Discontinued operations ( 0.01 ) —   ( 0.01 ) Basic earnings per share $ 5.15   $ 4.38   $ 4.61 Diluted earnings per share Continuing operations $ 5.12   $ 4.34   $ 4.57 Discontinued operations ( 0.01 ) ( 0.01 ) ( 0.01 ) Diluted earnings per share $ 5.11   $ 4.33   $ 4.56 See Notes to the Consolidated Financial Statements. 33 Table o f Contents Consolidated Statements of Comprehensive Income For each of the years in the three-year period ended January 3, 2026 (In millions) 2025 2024 2023 Net income $ 921   $ 824   $ 921 Other comprehensive income (loss), net of tax Pension and postretirement benefits adjustments, net of reclassifications 298   419   ( 82 ) Foreign currency translation adjustments, net of reclassifications 132   ( 71 ) 45 Deferred gains (losses) on hedge contracts, net of reclassifications 3   ( 8 ) 5 Total other comprehensive income (loss), net of tax 433   340   ( 32 ) Comprehensive income $ 1,354   $ 1,164   $ 889 See Notes to the Consolidated Financial Statements. 34 Table o f Contents Consolidated Balance Sheets (In millions, except share data) January 3, 2026 December 28, 2024 Assets Manufacturing group Cash and equivalents $ 1,940   $ 1,386 Accounts receivable, net 823   949 Inventories 4,278   4,071 Other current assets 872   687 Total current assets 7,913   7,093 Property, plant and equipment, net 2,590   2,529 Goodwill 2,321   2,288 Other assets 4,628   4,248 Total Manufacturing group assets 17,452   16,158 Finance group Cash and equivalents 85   55 Finance receivables, net 574   603 Other assets 18   22 Total Finance group assets 677   680 Total assets $ 18,129   $ 16,838 Liabilities and shareholders’ equity Liabilities Manufacturing group Current portion of long-term debt $ 5   $ 357 Accounts payable 1,185   943 Other current liabilities 3,163   3,094 Total current liabilities 4,353   4,394 Other liabilities 1,980   1,945 Long-term debt 3,534   2,890 Total Manufacturing group liabilities 9,867   9,229 Finance group Other liabilities 48   64 Debt 339   341 Total Finance group liabilities 387   405 Total liabilities 10,254   9,634 Shareholders’ equity Common stock ( 175.0 million and  184.0 million shares issued, respectively, and 174.3 million and 183.0 million shares outstanding, respectively) 22   23 Capital surplus 1,995   1,960 Treasury stock ( 55 ) ( 82 ) Retained earnings 5,784   5,607 Accumulated other comprehensive income (loss) 129   ( 304 ) Total shareholders’ equity 7,875   7,204 Total liabilities and shareholders’ equity $ 18,129   $ 16,838 See Notes to the Consolidated Financial Statements. 35 Table o f Contents Consolidated Statements of Shareholders’ Equity (In millions, except per share data) Common Stock Capital Surplus Treasury Stock Retained Earnings Accumulated Other Comprehensive Income (Loss) Total Shareholders’ Equity Balance at December 31, 2022 $ 26   $ 1,880   $ ( 84 ) $ 5,903   $ ( 612 ) $ 7,113 Net income —  —  —  921   —  921 Other comprehensive loss —  —  —  —  ( 32 ) ( 32 ) Dividends declared ($ 0.08  per share) —  —  —  ( 16 ) —  ( 16 ) Share-based compensation activity —  179   —  —  —  179 Purchases of common stock, including excise tax* —  —  ( 1,178 ) —  —  ( 1,178 ) Retirement of treasury stock ( 2 ) ( 149 ) 1,097   ( 946 ) —  — Balance at December 30, 2023 24   1,910   ( 165 ) 5,862   ( 644 ) 6,987 Net income —  —  —  824   —  824 Other comprehensive income —  —  —  —  340   340 Dividends declared ($ 0.08 per share) —  —  —  ( 16 ) —  ( 16 ) Share-based compensation activity 1   199   —  —  —  200 Purchases of common stock, including excise tax* —  —  ( 1,131 ) —  —  ( 1,131 ) Retirement of treasury stock ( 2 ) ( 149 ) 1,214   ( 1,063 ) —  — Balance at December 28, 2024 23   1,960   ( 82 ) 5,607   ( 304 ) 7,204 Net income —  —  —  921   —  921 Other comprehensive income —  —  —  —  433   433 Dividends declared ($ 0.08 per share) —  —  —  ( 14 ) —  ( 14 ) Share-based compensation activity —  159   —  —  —  159 Purchases of common stock, including excise tax* —  —  ( 828 ) —  —  ( 828 ) Retirement of treasury stock ( 1 ) ( 124 ) 855   ( 730 ) —  — Balance at January 3, 2026 $ 22   $ 1,995   $ ( 55 ) $ 5,784   $ 129   $ 7,875
• Includes amounts accrued for excise tax imposed on common share repurchases that totaled $ 6 million in 2025, $ 9 million in 2024 and $ 10 million in 2023. See Notes to the Consolidated Financial Statements. 36 Table o f Contents Consolidated Statements of Cash Flows For each of the years in the three-year period ended January 3, 2026 Consolidated (In millions) 2025 2024 2023 Cash flows from operating activities Income from continuing operations $ 923   $ 825   $ 922 Adjustments to reconcile income from continuing operations to net cash provided by operating activities of continuing operations: Non-cash items: Depreciation and amortization 401   382   395 Deferred income taxes 155   ( 48 ) ( 192 ) Asset impairments and powersports inventory charge 1   41   88 Gain on business disposition ( 4 ) —   — Other, net 134   102   90 Changes in assets and liabilities: Accounts receivable, net 107   ( 96 ) ( 9 ) Inventories ( 264 ) ( 194 ) ( 359 ) Other assets ( 76 ) 205   267 Accounts payable 197   ( 69 ) 2 Other liabilities 32   95   276 Income taxes, net ( 45 ) ( 26 ) 4 Pension, net ( 232 ) ( 225 ) ( 202 ) Captive finance receivables, net ( 17 ) ( 1 ) ( 17 ) Other operating activities, net 1   24   2 Net cash provided by operating activities of continuing operations 1,313   1,015   1,267 Net cash used in operating activities of discontinued operations ( 1 ) ( 1 ) ( 1 ) Net cash provided by operating activities 1,312   1,014   1,266 Cash flows from investing activities Capital expenditures ( 383 ) ( 364 ) ( 402 ) Net proceeds from corporate-owned life insurance policies 80   85   40 Net proceeds from business disposition 16   —   — Proceeds from sale of property, plant and equipment 9   4   18 Net cash used in business acquisitions ( 1 ) ( 13 ) ( 1 ) Finance receivables repaid 42   25   26 Finance receivables originated ( 58 ) ( 21 ) — Proceeds from the disposition of non-captive assets 72   —   — Other investing activities, net 16   —   2 Net cash used in investing activities ( 207 ) ( 284 ) ( 317 ) Cash flows from financing activities Net proceeds from long-term debt 991   —   348 Principal payments on long-term debt and nonrecourse debt ( 720 ) ( 377 ) ( 44 ) Purchases of Textron common stock ( 822 ) ( 1,122 ) ( 1,168 ) Proceeds from exercise of stock options 40   88   73 Dividends paid ( 18 ) ( 12 ) ( 16 ) Other financing activities, net ( 14 ) ( 31 ) ( 6 ) Net cash used in financing activities ( 543 ) ( 1,454 ) ( 813 ) Effect of exchange rate changes on cash and equivalents 22   ( 16 ) 10 Net increase (decrease) in cash and equivalents 584   ( 740 ) 146 Cash and equivalents at beginning of year 1,441   2,181   2,035 Cash and equivalents at end of year $ 2,025   $ 1,441   $ 2,181 See Notes to the Consolidated Financial Statements. 37 Table o f Contents Consolidated Statements of Cash Flows continued For each of the years in the three-year period ended January 3, 2026 Manufacturing Group Finance Group (In millions) 2025 2024 2023 2025 2024 2023 Cash flows from operating activities Income from continuing operations $ 878   $ 796   $ 884   $ 45   $ 29   $ 38 Adjustments to reconcile income from continuing operations to net cash provided by operating activities of continuing operations: Non-cash items: Depreciation and amortization 401   382   395   —   —   — Deferred income taxes 180   ( 46 ) ( 188 ) ( 25 ) ( 2 ) ( 4 ) Asset impairments and powersports inventory charge 1   41   88   —   —   — Gain on business disposition ( 4 ) —   —   —   —   — Other, net 136   115   110   ( 2 ) ( 13 ) ( 20 ) Changes in assets and liabilities: Accounts receivable, net 107   ( 96 ) ( 9 ) —   —   — Inventories ( 264 ) ( 194 ) ( 359 ) —   —   — Other assets ( 74 ) 205   261   ( 2 ) —   6 Accounts payable 197   ( 69 ) 2   —   —   — Other liabilities 38   100   281   ( 6 ) ( 5 ) ( 5 ) Income taxes, net ( 63 ) ( 25 ) 5   18   ( 1 ) ( 1 ) Pension, net ( 232 ) ( 225 ) ( 202 ) —   —   — Dividends received from Finance group 25   —   —   —   —   — Other operating activities, net 1   24   2   —   —   — Net cash provided by operating activities of continuing operations 1,327   1,008   1,270   28   8   14 Net cash used in operating activities of discontinued operations ( 1 ) ( 1 ) ( 1 ) —   —   — Net cash provided by operating activities 1,326   1,007   1,269   28   8   14 Cash flows from investing activities Capital expenditures ( 383 ) ( 364 ) ( 402 ) —   —   — Net proceeds from corporate-owned life insurance policies 80   85   40   —   —   — Net proceeds from business disposition 16   —   —   —   —   — Proceeds from sale of property, plant and equipment 9   4   18   —   —   — Net cash used in business acquisitions ( 1 ) ( 13 ) ( 1 ) —   —   — Finance receivables repaid —   —   —   208   133   169 Finance receivables originated —   —   —   ( 241 ) ( 130 ) ( 160 ) Proceeds from the disposition of non-captive assets —   —   —   72   —   — Other investing activities, net 15   —   —   1   —   2 Net cash provided by (used in) investing activities ( 264 ) ( 288 ) ( 345 ) 40   3   11 Cash flows from financing activities Net proceeds from long-term debt 991   —   348   —   —   — Principal payments on long-term debt and nonrecourse debt ( 707 ) ( 361 ) ( 7 ) ( 13 ) ( 16 ) ( 37 ) Purchases of Textron common stock ( 822 ) ( 1,122 ) ( 1,168 ) —   —   — Proceeds from exercise of stock options 40   88   73   —   —   — Dividends paid ( 18 ) ( 12 ) ( 16 ) ( 25 ) —   — Other financing activities, net ( 14 ) ( 31 ) ( 6 ) —   —   — Net cash used in financing activities ( 530 ) ( 1,438 ) ( 776 ) ( 38 ) ( 16 ) ( 37 ) Effect of exchange rate changes on cash and equivalents 22   ( 16 ) 10   —   —   — Net increase (decrease) in cash and equivalents 554   ( 735 ) 158   30   ( 5 ) ( 12 ) Cash and equivalents at beginning of year 1,386   2,121   1,963   55   60   72 Cash and equivalents at end of year $ 1,940   $ 1,386   $ 2,121   $ 85   $ 55   $ 60 See Notes to the Consolidated Financial Statements. 38 Table o f Contents Notes to the Consolidated Financial Statements Note 1. Summary of Significant Accounting Policies Principles of Consolidation and Financial Statement Presentation Our Consolidated Financial Statements include the accounts of Textron Inc. and its majority-owned subsidiaries. Our financings are conducted through two separate borrowing groups. The Manufacturing group consists of Textron Inc. consolidated with its majority-owned subsidiaries that operate in the Textron Aviation, Bell, Textron Systems, Industrial and Textron eAviation segments. The Finance group, which also is the Finance segment, consists of Textron Financial Corporation (TFC) and its consolidated subsidiaries. We designed this framework to enhance our borrowing power by separating the Finance group. Our Manufacturing group operations include the development, production and delivery of tangible goods and services, while our Finance group provides financial services. Due to the fundamental differences between each borrowing group’s activities, investors, rating agencies and analysts use different measures to evaluate each group’s performance. To support those evaluations, we present balance sheet and cash flow information for each borrowing group within the Consolidated Financial Statements. Our Finance group provides financing primarily to purchasers of new and pre-owned Textron Aviation aircraft and Bell helicopters manufactured by our Manufacturing group, otherwise known as captive financing. In the Consolidated Statements of Cash Flows, cash received from customers is reflected as operating activities when received from third parties. However, in the cash flow information provided for the separate borrowing groups, cash flows related to captive financing activities are reflected based on the operations of each group. For example, when product is sold by our Manufacturing group to a customer and is financed by the Finance group, the origination of the finance receivable is recorded within investing activities as a cash outflow in the Finance group’s statement of cash flows. Meanwhile, in the Manufacturing group’s statement of cash flows, the cash received from the Finance group on the customer’s behalf is recorded within operating cash flows as a cash inflow. Although cash is transferred between the two borrowing groups, there is no cash transaction reported in the consolidated cash flows at the time of the original financing. These captive financing activities, along with all significant intercompany transactions, are reclassified or eliminated in consolidation. Collaborative Arrangements Our Bell segment has a strategic alliance agreement with a third-party company to provide engineering, development and test services related to the V-22 aircraft, as well as to produce the V-22 aircraft, under a number of separate contracts with the U.S. Government (V-22 Contracts). The alliance created by this agreement is not a legal entity and has no employees, no assets and no true operations. This agreement creates contractual rights and does not represent an entity in which we have an equity interest. We account for this alliance as a collaborative arrangement with Bell and the third-party company reporting costs incurred and revenues generated from transactions with the U.S. Government in each company’s respective income statement. Neither Bell nor the third-party company is considered to be the principal participant for the transactions recorded under this agreement. Profits on cost-plus contracts are allocated between Bell and the third-party company on a 50 %-50% basis. Negotiated profits on fixed-price contracts are also allocated 50 %-50%; however, Bell and the third-party company are each responsible for their own cost overruns and are entitled to retain any cost underruns. Based on the contractual arrangement established under the alliance, Bell accounts for its rights and obligations under the specific requirements of the V-22 Contracts allocated to Bell under the work breakdown structure. We account for all of our rights and obligations, including warranty, product and any contingent liabilities, under the specific requirements of the V-22 Contracts allocated to us under the agreement. Revenues and cost of sales reflect our performance under the V-22 Contracts with revenues recognized using the cost-to-cost method. We include all assets used in performance of the V-22 Contracts that we own and all liabilities arising from our obligations under the V-22 Contracts in our Consolidated Balance Sheets. Use of Estimates We prepare our financial statements in conformity with generally accepted accounting principles, which require us to make estimates and assumptions that affect the amounts reported in the financial statements. Actual results could differ from those estimates. Our estimates and assumptions are reviewed periodically, and the effects of changes, if any, are reflected in the Consolidated Statements of Operations in the period that they are determined. Revenue Recognition Revenue is recognized when control of the product or service promised under the contract is transferred to the customer either at a point in time (e.g., upon delivery) or over time (e.g., as we perform under the contract). We account for a contract when it has approval and commitment from both parties, the rights and payment terms of the parties are identified, the contract has commercial substance and collectability of consideration is probable. Contracts are reviewed to determine whether there is one or multiple performance obligations. A performance obligation is a promise to transfer a distinct product or service to a customer and represents the unit of accounting for revenue recognition. For contracts with multiple performance obligations, the expected consideration, or the transaction price, is allocated to each performance obligation identified in the contract based on the relative standalone selling price of each performance obligation. Revenue is then recognized for the transaction price allocated to the 39 Table o f Contents performance obligation when control of the promised product or service underlying the performance obligation is transferred. Contract consideration is not adjusted for the effects of a significant financing component when, at contract inception, the period between when control transfers and when the customer will pay for that good or service is one year or less. Revenue is classified as product or service revenue based on the predominant attributes of each performance obligation. Commercial Contracts The majority of our contracts with commercial customers have a single performance obligation as there is only one product or service promised or the promise to transfer the product or service is not distinct or separately identifiable from other promises in the contract. Revenue is primarily recognized at a point in time, which is generally when the customer obtains control of the asset upon delivery and customer acceptance. Contract modifications that provide for additional distinct products or services at the standalone selling price are treated as separate contracts. For commercial fixed-wing aircraft, we contract with our customers to sell fully outfitted aircraft, which may include configuration options. The aircraft typically represents a single performance obligation and revenue is recognized upon customer acceptance and delivery. For commercial helicopters, our customers generally contract with us for fully functional basic configuration aircraft and control is transferred upon customer acceptance and delivery. At times, customers may separately contract with us for the installation of accessories and customization to the basic aircraft. If these contracts are entered into at or near the same time of the basic aircraft contract, we assess whether the contracts meet the criteria to be combined. For contracts that are combined, the basic aircraft and the accessories and customization are typically considered to be distinct, and therefore, are separate performance obligations. For these contracts, revenue is recognized on the basic aircraft upon customer acceptance and transfer of title and risk of loss, and on the accessories and customization, upon delivery and customer acceptance. We utilize observable prices to determine the standalone selling prices when allocating the transaction price to these performance obligations. The transaction price for our commercial contracts reflects our estimate of returns, rebates and discounts, which are based on historical, current and forecasted information. Amounts billed to customers for shipping and handling are included in the transaction price and generally are not treated as separate performance obligations as these costs fulfill a promise to transfer the product to the customer. Taxes collected from customers and remitted to government authorities are recorded on a net basis. We primarily provide standard warranty programs for products in our commercial businesses for periods that typically range from one year to five years . These assurance-type programs typically cannot be purchased separately and do not meet the criteria to be considered a performance obligation. U.S. Government Contracts Our contracts with the U.S. Government generally include the design, development, manufacture or modification of aerospace and defense products and related support services. These contracts, which also include those under the U.S. Government-sponsored foreign military sales program, accounted for approximately 27 % of total revenues in 2025.  The customer typically contracts with us to provide a significant service of integrating a complex set of tasks and components into a single project or capability, which often results in the delivery of multiple units. Accordingly, the entire contract is accounted for as one performance obligation. In certain circumstances, a contract may include both production and support services, such as logistics and parts plans, which are considered to be distinct in the context of the contract and represent separate performance obligations. When a contract is separated into more than one performance obligation, we generally utilize the expected cost plus a margin approach to determine the standalone selling prices when allocating the transaction price. Our contracts are frequently modified for changes in contract specifications and requirements. Most of our contract modifications with the U.S. Government are for products and services that are not distinct from the existing contract due to the significant integration service provided in the context of the contract and are accounted for as part of that existing contract. The effect of these contract modifications on our estimates is recognized using the cumulative catch-up method of accounting. Contracts with the U.S. Government generally contain clauses that provide lien rights to work-in-process along with clauses that allow the customer to unilaterally terminate the contract for convenience, pay us for costs incurred plus a reasonable profit and take control of any work-in-process. Due to the continuous transfer of control to the U.S. Government, we recognize revenue over the time that we perform under the contract. Selecting the method to measure progress towards completion requires judgment and is based on the nature of the products or service to be provided. We generally use the cost-to-cost method to measure progress for our contracts because it best depicts the transfer of control to the customer that occurs as we incur costs on our contracts.  Under this measure, the extent of progress towards completion is measured based on the ratio of costs incurred to date to the estimated costs at completion of the performance obligation, and revenue is recorded proportionally as costs are incurred. 40 Table o f Contents The transaction price for our contracts represents our best estimate of the consideration we will receive and includes assumptions regarding variable consideration as applicable. Certain of our long-term contracts contain incentive fees or other provisions that can either increase or decrease the transaction price. These variable amounts generally are awarded upon achievement of certain performance metrics, program milestones or cost targets and can be based upon customer discretion. We include estimated amounts in the transaction price to the extent it is probable that a significant reversal of cumulative revenue recognized will not occur when the uncertainty associated with the variable consideration is resolved. Our estimates of variable consideration and determination of whether to include estimated amounts in the transaction price are based largely on an assessment of our anticipated performance, historical performance, and all other information that is reasonably available to us. Total contract cost is estimated utilizing current contract specifications and expected engineering requirements. Contract costs typically are incurred over a period of several years, and the estimation of these costs requires substantial judgment. Our cost estimation process is based on the professional knowledge and experience of engineers and program managers along with finance professionals. We review and update our projections of costs quarterly or more frequently when circumstances significantly change. Approximately 53 % of our 2025 revenues with the U.S. Government were under fixed-price and fixed-price incentive contracts. Under the typical payment terms of these contracts, the customer pays us either performance-based or progress payments. Performance-based payments represent interim payments of up to 90 % of the contract price based on quantifiable measures of performance or on the achievement of specified events or milestones. Progress payments are interim payments of up to 80 % of costs incurred as the work progresses. Because the customer retains a small portion of the contract price until completion of the contract, these contracts generally result in revenue recognized in excess of billings. Amounts billed and due from our customers are classified in Accounts receivable, net. The portion of the payments retained by the customer until final contract settlement is not considered a significant financing component because the intent is to protect the customer. For cost-type contracts, we are generally paid for our actual costs incurred within a short period of time. Finance Revenues Finance revenues primarily include interest on finance receivables, finance lease earnings and portfolio gains/losses. We recognize interest using the interest method, which provides a constant rate of return over the terms of the receivables. Accrual of interest income is suspended if credit quality indicators suggest full collection of principal and interest is doubtful. In addition, we automatically suspend the accrual of interest income for accounts that are contractually delinquent by more than three months unless collection is not doubtful. Cash payments on nonaccrual accounts, including finance charges, generally are applied to reduce the net investment balance. Once we conclude that the collection of all principal and interest is no longer doubtful, we resume the accrual of interest and recognize previously suspended interest income at the time either a) the loan becomes contractually current through payment according to the original terms of the loan, or b) if the loan has been modified, following a period of performance under the terms of the modification. Contract Estimates For contracts where revenue is recognized over time, we recognize changes in estimated contract revenues, costs and profits using the cumulative catch-up method of accounting. This method recognizes the cumulative effect of changes on current and prior periods with the impact of the change from inception-to-date recorded in the current period. Anticipated losses on contracts are recognized in full in the period in which the losses become probable and estimable. In 2025, 2024 and 2023, our cumulative catch-up adjustments increased segment profit by $ 66 million, $ 31  million and $ 44 million, respectively, and net income by $ 50 million, $ 24 million and $ 34 million, respectively ($ 0.28 , $ 0.12 and $ 0.17 per diluted share, respectively). Revenues increased by $ 66 million, $ 32 million and $ 42 million in 2025, 2024 and 2023, respectively, related to changes in profit booking rates for performance obligations satisfied in prior periods. Contract Assets and Liabilities Contract assets arise from contracts when revenue is recognized over time and the amount of revenue recognized exceeds the amount billed to the customer. These amounts are included in contract assets until the right to payment is no longer conditional on events other than the passage of time and are included in Other current assets in the Consolidated Balance Sheets. Contract liabilities, which are primarily included in Other current liabilities, include deposits, largely from our commercial aviation customers, and billings in excess of revenue recognized. The incremental costs of obtaining a contract with a customer that is expected to be recovered is expensed as incurred when the period to be benefitted is one year or less. 41 Table o f Contents Accounts Receivable, Net Accounts receivable, net includes amounts billed to customers where the right to payment is unconditional. We maintain an allowance for credit losses for our commercial accounts receivable to provide for the estimated amount that will not be collected, even when the risk of loss is remote. The allowance is measured on a collective pool basis when similar risk characteristics exist and is established as a percentage of accounts receivable. We have identified pools with similar risk characteristics, based on customer and industry type and geographic location. The percentage is based on all available and relevant information including age of outstanding receivables and collateral value, if any, historical payment experience and loss history, current economic conditions, and, when reasonable and supportable factors exist, management’s expectation of future economic conditions. For amounts due from the U.S. Government, we have not established an allowance for credit losses as we have zero loss expectation based on a long history of no credit losses and the explicit guarantee of a sovereign entity. Cash and Equivalents Cash and equivalents consist of cash and short-term, highly liquid investments with original maturities of three months or less. Inventories Inventories are stated at the lower of cost or estimated realizable value. The majority of our inventories are valued using the last-in, first-out (LIFO) method, while the remaining inventories are generally valued using the first-in, first-out (FIFO) method. Property, Plant and Equipment Property, plant and equipment are recorded at cost and are depreciated primarily using the straight-line method. We capitalize expenditures for improvements that increase asset values and extend useful lives.  Property, plant and equipment are reviewed for impairment whenever events or changes in circumstances indicate that the carrying amount of the asset may not be recoverable. If the carrying value of the asset exceeds the sum of the undiscounted expected future cash flows, the asset is written down to fair value. Goodwill and Intangible Assets Goodwill represents the excess of the consideration paid for the acquisition of a business over the fair values assigned to intangible and other net assets of the acquired business. Goodwill and intangible assets deemed to have indefinite lives are not amortized but are subject to an annual impairment test. We evaluate the recoverability of these assets in the fourth quarter of each year or more frequently if events or changes in circumstances, such as declines in sales, earnings or cash flows, or material adverse changes in the business climate, indicate a potential impairment. For our goodwill impairment test, we calculate the fair value of each reporting unit using discounted cash flows.  A reporting unit represents the operating segment unless discrete financial information is prepared and reviewed by segment management for businesses one level below that operating segment, in which case such component is the reporting unit. In certain instances, we have aggregated components of an operating segment into a single reporting unit based on similar economic characteristics. The discounted cash flows incorporate assumptions for revenue growth rates, operating margins and discount rates that represent our best estimates of current and forecasted market conditions, cost structure, anticipated net cost reductions, and the implied rate of return that we believe a market participant would require for an investment in a business having similar risks and characteristics to the reporting unit being assessed. The fair value of our indefinite-lived intangible assets is primarily determined using the relief of royalty method based on forecasted revenues and royalty rates. If the estimated fair value of the reporting unit or indefinite-lived intangible asset exceeds the carrying value, there is no impairment. Otherwise, an impairment loss is recognized for the amount by which the carrying value exceeds the estimated fair value. Acquired intangible assets with finite lives are subject to amortization. These assets are reviewed for impairment whenever events or changes in circumstances indicate that the carrying amount of the asset may not be recoverable. Amortization of these intangible assets is recognized over their estimated useful lives using a method that reflects the pattern in which the economic benefits of the intangible assets are consumed or otherwise realized. The majority of our intangible assets are amortized based on the cash flow streams used to value the assets, with the remaining assets amortized using the straight-line method. Finance Receivables Finance receivables primarily include loans provided to purchasers of new and pre-owned Textron Aviation aircraft and Bell helicopters. Finance receivables are generally recorded at the amount of outstanding principal less allowance for credit losses. We establish an allowance for credit losses to cover probable but specifically unknown losses existing in the portfolio. This allowance is established as a percentage of finance receivables categorized by pools with similar risk characteristics, such as collateral or customer type and geographic location. The percentage is based on a combination of factors, including historical loss experience, current delinquency and default trends, collateral values, current economic conditions, and, when reasonable and supportable factors exist, management’s expectation of future economic conditions. 42 Table o f Contents For those finance receivables that do not have similar risk characteristics, including larger balance accounts specifically identified as impaired, a reserve is established against the carrying amount either based on comparing the expected future cash flows that are discounted at the finance receivable's effective interest rate, or based on the fair value of the underlying collateral if the finance receivable is collateral dependent. The expected future cash flows consider collateral value; financial performance and liquidity of our borrower; existence and financial strength of guarantors; estimated recovery costs, including legal expenses; and costs associated with the repossession and eventual disposal of collateral. When there is a range of potential outcomes, we perform multiple discounted cash flow analyses and weight the potential outcomes based on their relative likelihood of occurrence. The evaluation of our portfolio is inherently subjective, as it requires estimates, including the amount and timing of future cash flows expected to be received on impaired finance receivables and the estimated fair value of the underlying collateral, which may differ from actual results. While our analysis is specific to each individual account, critical factors included in this analysis include industry valuation guides, age and physical condition of the collateral, payment history, and existence and financial strength of guarantors. Finance receivables are charged off at the earlier of the date the collateral is repossessed or when management no longer deems the receivable collectible.  Repossessed assets are recorded at their fair value, less estimated cost to sell. Pension and Postretirement Benefit Obligations We maintain various pension and postretirement plans for our employees globally. Our pension plans include significant benefit obligations, which are calculated based on actuarial valuations. Key assumptions used in determining these obligations and related expenses include expected long-term rates of return on plan assets, discount rates and healthcare cost projections. We evaluate and update these assumptions annually in consultation with third-party actuaries and investment advisors. We also make assumptions regarding employee demographic factors such as retirement patterns, mortality, turnover and rate of compensation increases. For our year-end measurement, our defined benefit plan assets and obligations are measured as of the month-end date closest to our fiscal year-end. We recognize the overfunded or underfunded status of our pension and postretirement plans in the Consolidated Balance Sheets and recognize changes in the funded status of our defined benefit plans in comprehensive income (loss) in the year in which they occur. To the extent actuarial gains and losses exceed 10% of the higher of the market-related value of assets or the benefit obligation in a year, the excess is recognized as a component of accumulated other comprehensive income (loss) and is amortized into net periodic pension cost over the remaining service period of the active participants. For plans in which all or almost all of the plan’s participants are inactive, the amortization period is the remaining life expectancy of the inactive participants. This determination is made on a plan-by-plan basis. Derivatives and Hedging Activities We are exposed to market risk primarily from changes in currency exchange rates and interest rates. We do not hold or issue derivative financial instruments for trading or speculative purposes.  To manage the volatility relating to our exposures, we net these exposures on a consolidated basis to take advantage of natural offsets.  For the residual portion, we enter into various derivative transactions pursuant to our policies in areas such as counterparty exposure and hedging practices.  Credit risk related to derivative financial instruments is considered minimal and is managed by requiring high credit standards for counterparties and through periodic settlements of positions. All derivative instruments are reported at fair value in the Consolidated Balance Sheets.  Designation to support hedge accounting is performed on a specific exposure basis.  For financial instruments qualifying as cash flow hedges, we record changes in the fair value of derivatives (to the extent they are effective as hedges) in other comprehensive income (loss), net of deferred taxes. Changes in fair value of derivatives not qualifying as hedges are recorded in earnings. Foreign currency denominated assets and liabilities are translated into U.S. dollars.  Adjustments from currency rate changes are recorded in the cumulative translation adjustment account in shareholders’ equity until the related foreign entity is sold or substantially liquidated. Leases We identify leases by evaluating our contracts to determine if the contract conveys the right to use an identified asset for a stated period of time in exchange for consideration. Specifically, we consider whether we can control the underlying asset and have the right to obtain substantially all of the economic benefits or outputs from the asset.  For our contracts that contain both lease components (e.g., fixed payments including rent, real estate taxes and insurance costs) and non-lease components (e.g., common-area maintenance costs or other goods/services), we allocate the consideration in the contract to each component based on its standalone price. Leases with terms greater than 12 months are classified as either operating or finance leases at the commencement date.  For these leases, we capitalize the lesser of a) the present value of the minimum lease payments over the lease term, or b) the fair value of the asset, as a right-of-use asset with an offsetting lease liability. The discount rate used to calculate the present value of the minimum lease payments is typically our incremental borrowing rate, as the rate implicit in the lease is generally not known or determinable. The lease term includes any noncancelable period for which we have the right to 43 Table o f Contents use the asset and may include options to extend or terminate the lease when it is reasonably certain that we will exercise the option.  Operating leases are recognized as a single lease cost on a straight-line basis over the lease term, while finance lease cost is recognized separately as amortization and interest expense. Product Liabilities We accrue for product liability claims and related defense costs when a loss is probable and reasonably estimable.  Our estimates are generally based on the specifics of each claim or incident and our best estimate of the probable loss using historical experience. Environmental Liabilities and Asset Retirement Obligations Liabilities for environmental matters are recorded on a site-by-site basis when it is probable that an obligation has been incurred and the cost can be reasonably estimated. We estimate our accrued environmental liabilities using currently available facts, existing technology, and presently enacted laws and regulations, all of which are subject to a number of factors and uncertainties. Our environmental liabilities are not discounted and do not take into consideration possible future insurance proceeds or significant amounts from claims against other third parties. We have incurred asset retirement obligations primarily related to costs to remove and dispose of underground storage tanks and asbestos materials used in insulation, adhesive fillers and floor tiles. Currently, there is no legal requirement to remove these items and there is no plan to remodel the related facilities or otherwise cause the impacted items to require disposal. Since these asset retirement obligations are not probable, there is no related liability recorded in the Consolidated Balance Sheets. Warranty Liabilities For our assurance-type warranty programs, we estimate the costs that may be incurred and record a liability in the amount of such costs at the time product revenues are recognized.  Factors that affect this liability include the number of products sold, historical costs per claim, length of warranty period, contractual recoveries from vendors and historical and anticipated rates of warranty claims, including production and warranty patterns for new models.  We assess the adequacy of our recorded warranty liability periodically and adjust the amounts as necessary. Additionally, we may establish a warranty liability related to the issuance of aircraft service bulletins for aircraft no longer covered under the limited warranty programs. Research and Development Costs Our customer-funded research and development costs are charged directly to the related contracts, which primarily consist of U.S. Government contracts. In accordance with government regulations, we recover a portion of company-funded research and development costs through overhead rate charges on our U.S. Government contracts.  Research and development costs that are not reimbursable under a contract with the U.S. Government or another customer are charged to expense as incurred. Income Taxes The provision for income tax expense is calculated on reported income before income taxes based on current tax law and includes, in the current period, the cumulative effect of any changes in tax rates from those used previously in determining deferred tax assets and liabilities. Tax laws may require items to be included in the determination of taxable income at different times from when the items are reflected in the financial statements. Deferred tax balances reflect the effects of temporary differences between the financial reporting carrying amounts of assets and liabilities and their tax bases, as well as from net operating losses and tax credit carryforwards, and are stated at enacted tax rates in effect for the year taxes are expected to be paid or recovered. Deferred tax assets represent tax benefits for tax deductions or credits available in future years and require certain estimates and assumptions to determine whether it is more likely than not that all or a portion of the benefit will not be realized. The recoverability of these future tax deductions and credits is determined by assessing the adequacy of future expected taxable income from all sources, including the future reversal of existing taxable temporary differences, taxable income in carryback years, estimated future taxable income and available tax planning strategies. Should a change in facts or circumstances lead to a change in judgment about the ultimate recoverability of a deferred tax asset, we record or adjust the related valuation allowance in the period that the change in facts and circumstances occurs, along with a corresponding increase or decrease in income tax expense. We record tax benefits for uncertain tax positions based upon management’s evaluation of the information available at the reporting date.  To be recognized in the financial statements, the tax position must meet the more-likely-than-not threshold that the position will be sustained upon examination by the tax authority based on technical merits assuming the tax authority has full knowledge of all relevant information. For positions meeting this recognition threshold, the benefit is measured as the largest amount of benefit that meets the more-likely-than-not threshold to be sustained. We periodically evaluate these tax positions based on the latest available information.  For tax positions that do not meet the threshold requirement, we recognize net tax-related interest and penalties for continuing operations in income tax expense. 44 Table o f Contents Note 2. Goodwill and Intangible Assets Goodwill The changes in the carrying amount of goodwill by segment are as follows: (In millions) Textron Aviation Bell Textron Systems Industrial Textron eAviation Total Balance at December 30, 2023 $ 633   $ 37   $ 1,010   $ 470   $ 145   $ 2,295 Acquisitions —   —   —   —   10   10 Foreign currency translation ( 1 ) —   —   ( 7 ) ( 9 ) ( 17 ) Balance at December 28, 2024 632   37   1,010   463   146   2,288 Foreign currency translation 1   —   —   13   19   33 Balance at January 3, 2026 $ 633   $ 37   $ 1,010   $ 476   $ 165   $ 2,321 Intangible Assets Our intangible assets are summarized below: January 3, 2026 December 28, 2024 (Dollars in millions) Weighted-Average Amortization Period (in years) Gross Carrying Amount Accumulated Amortization Net Gross Carrying Amount Accumulated Amortization Net Trade names and trademarks 18 $ 201   $ ( 12 ) $ 189   $ 199   $ ( 11 ) $ 188 Patents and technology 15 515   ( 387 ) 128   509   ( 360 ) 149 Customer relationships and contractual agreements 15 358   ( 337 ) 21   356   ( 331 ) 25 Total $ 1,074   $ ( 736 ) $ 338   $ 1,064   $ ( 702 ) $ 362 Trade names and trademarks in the table above include $ 169 million of indefinite-lived intangible assets at both January 3, 2026 and December 28, 2024. Amortization expense totaled $ 32 million, $ 34 million and $ 39 million, in 2025, 2024 and 2023, respectively. Amortization expense is estimated to be approximately $ 29 million, $ 28 million, $ 27 million, $ 26 million and $ 9 million in 2026, 2027, 2028, 2029 and 2030, respectively. Note 3. Accounts Receivable and Finance Receivables Accounts Receivable Accounts receivable is composed of the following: (In millions) January 3, 2026 December 28, 2024 Commercial $ 690   $ 738 U.S. Government contracts 149   230 839   968 Allowance for credit losses ( 16 ) ( 19 ) Total $ 823   $ 949 Finance Receivables Finance receivables are presented in the following table: (In millions) January 3, 2026 December 28, 2024 Finance receivables $ 593   $ 622 Allowance for credit losses ( 19 ) ( 19 ) Total finance receivables, net $ 574   $ 603 Finance receivables primarily includes loans provided to purchasers of new and pre-owned Textron Aviation aircraft and Bell helicopters. These loans generally have initial terms ranging from five years to twelve years and amortization terms ranging from five years to fifteen years ; the average loan balance was $ 2.1 million at January 3, 2026. Loans generally require the customer to pay a significant down payment, along with periodic scheduled principal payments that reduce the outstanding balance through the term of the loan. Our finance receivables are diversified across geographic region and borrower industry. At January 3, 45 Table o f Contents 2026,  73 % of our finance receivables were distributed internationally and 27 % throughout the U.S., compared with 58 % and 42 %, respectively, at December 28, 2024. Finance Receivable Portfolio Quality We internally assess the quality of our finance receivables based on a number of key credit quality indicators and statistics such as delinquency, loan balance to estimated collateral value and the financial strength of individual borrowers and guarantors.  Because many of these indicators are difficult to apply across an entire class of receivables, we evaluate individual loans on a quarterly basis and classify these loans into three categories based on the key credit quality indicators for the individual loan. These three categories are performing, watchlist and nonaccrual. We classify finance receivables as nonaccrual if credit quality indicators suggest full collection of principal and interest is doubtful. In addition, we automatically classify accounts as nonaccrual once they are contractually delinquent by more than  three months  unless collection of principal and interest is not doubtful. Accounts are classified as watchlist when credit quality indicators have deteriorated as compared with typical underwriting criteria, and we believe collection of full principal and interest is probable but not certain. All other finance receivables that do not meet the watchlist or nonaccrual categories are classified as performing. We measure delinquency based on the contractual payment terms of our finance receivables.  In determining the delinquency aging category of an account, any/all principal and interest received is applied to the most past-due principal and/or interest amounts due. If a significant portion of the contractually due payment is delinquent, the entire finance receivable balance is reported in accordance with the most past-due delinquency aging category. Finance receivables categorized based on the credit quality indicators and by delinquency aging category are summarized as follows: (Dollars in millions) January 3, 2026 December 28, 2024 Performing $ 578   $ 612 Watchlist 13   — Nonaccrual 2   10 Nonaccrual as a percentage of finance receivables 0.34 % 1.61 % Current and less than 31 days past due $ 584   $ 609 31-60 days past due 9   13 61-90 days past due —   — Over 90 days past due —   — 60+ days contractual delinquency as a percentage of finance receivables — % — % At January 3, 2026, 63 % of our performing finance receivables were originated since the beginning of 2023 and 18 % were originated from 2020 to 2022 with the remainder prior to 2020. For finance receivables categorized as watchlist, 100 % were originated from 2023 to 2024, and for nonaccrual, 100 % were originated prior to 2020. On a quarterly basis, we evaluate individual larger balance accounts for impairment.  A finance receivable is considered impaired when it is probable that we will be unable to collect all amounts due according to the contractual terms of the loan agreement based on our review of the credit quality indicators described above. Impaired finance receivables include both nonaccrual accounts and accounts for which full collection of principal and interest remains probable, but the account’s original terms have been, or are expected to be, significantly modified.  If the modification specifies an interest rate equal to or greater than a market rate for a finance receivable with comparable risk, the account is not considered impaired in years subsequent to the modification. Our impaired finance receivables were insignificant at January 3, 2026 and December 28, 2024. 46 Table o f Contents Note 4. Inventories Inventories are composed of the following: (In millions) January 3, 2026 December 28, 2024 Finished goods $ 1,104   $ 1,138 Work in process 2,065   1,769 Raw materials and components 1,109   1,164 Total $ 4,278   $ 4,071 At January 3, 2026, 71 % of inventories were valued using the LIFO method, compared with 69 % at December 28, 2024. Inventories valued at LIFO cost would have been higher by approximately $ 1.1 billion and $ 877 million, at January 3, 2026 and December 28, 2024, respectively, if they had been valued using the FIFO method. Note 5. Property, Plant and Equipment, Net Our Manufacturing group’s property, plant and equipment, net is composed of the following: (Dollars in millions) Useful Lives (in years) January 3, 2026 December 28, 2024 Land, buildings and improvements 2 - 40 $ 2,514   $ 2,364 Machinery and equipment 2 - 20 5,860   5,636 8,374   8,000 Accumulated depreciation and amortization ( 5,784 ) ( 5,471 ) Total $ 2,590   $ 2,529 The Manufacturing group's depreciation expense totaled $ 365 million, $ 344 million and $ 353 million in 2025, 2024 and 2023, respectively. Property, plant and equipment, net includes non-cash activity of $ 51 million in 2025, reflecting property, plant and equipment acquired but not yet paid for. This non-cash activity has been excluded from the relevant line items on the Consolidated Statements of Cash Flows. Non-cash property, plant and equipment activity for 2024 and 2023 was not significant. Note 6. Accounts Payable and Liabilities Accounts Payable Supplier Financing Arrangement We have a financing arrangement with one of our suppliers for a maximum amount of $ 200 million that extends payment terms for up to 190 days from the receipt of goods and provides for the supplier to be paid by a financial institution earlier than maturity. This financing arrangement expires in April 2027. At January 3, 2026 and December 28, 2024, the amount due under the supplier financing arrangement was $ 108 million and $ 50 million, respectively. During 2025, the amounts added under this arrangement totaled $ 279 million and the amounts settled totaled $ 221 million. Other Current Liabilities The other current liabilities of our Manufacturing group are summarized below: (In millions) January 3, 2026 December 28, 2024 Contract liabilities $ 1,897   $ 1,734 Salaries, wages and employer taxes 442   456 Current portion of warranty and product repair and maintenance program liabilities 138   177 Other 686   727 Total $ 3,163   $ 3,094 47 Table o f Contents Warranty Liability Changes in our current and non-current warranty liability are as follows: (In millions) 2025 2024 2023 Balance at beginning of year $ 173   $ 172   $ 149 Provision 82   79   76 Changes to estimates 35   ( 2 ) 13 Settlements ( 89 ) ( 72 ) ( 69 ) Other* ( 18 ) ( 4 ) 3 Balance at end of year $ 183   $ 173   $ 172
• Other includes business dispositions and currency translation adjustments. Note 7. Leases We primarily lease certain manufacturing plants, offices, warehouses, training and service centers at various locations worldwide that are classified as either operating or finance leases. Our leases have remaining lease terms up to 25 years, which include options to extend the lease term for periods up to 20 years when it is reasonably certain the option will be exercised. Operating lease cost totaled $ 73 million, $ 74 million and $ 69 million in 2025, 2024 and 2023, respectively. Cash paid for operating lease liabilities approximated the lease expense and is classified in cash flows from operating activities. Noncash transactions related to operating leases totaled $ 82 million, $ 49 million and $ 54 million in 2025, 2024 and 2023, respectively, reflecting the recognition of operating lease assets and liabilities for new or modified leases and changes from the reassessment of lease options. In 2024, non-cash transactions included the recognition of a $ 72  million asset and liability related to a new finance lease that matures in 2028. Finance lease, variable and short-term lease costs were not significant. Balance sheet and other information related to our leases is as follows: (Dollars in millions) January 3, 2026 December 28, 2024 Operating leases: Other assets $ 390   $ 360 Other current liabilities 58   55 Other liabilities 346   316 Weighted-average remaining lease term (in years) 9.5 10.0 Weighted-average discount rate 4.97 % 4.84 % Finance leases: Property, plant and equipment, less accumulated amortization of $ 14 million and $ 9 million, respectively $ 95   $ 95 Long-term debt, including current portion 100   97 Weighted-average remaining lease term (in years) 5.9 5.9 Weighted-average discount rate 6.63 % 6.72 % At January 3, 2026, maturities of our operating lease liabilities on an undiscounted basis totaled $ 74 million for 2026, $ 65 million for 2027, $ 60 million for 2028, $ 55 million for 2029, $ 48 million for 2030 and $ 213 million thereafter. 48 Table o f Contents Note 8.  Debt and Credit Facilities Our debt is summarized in the table below: (In millions) January 3, 2026 December 28, 2024 Manufacturing group 3.875 % due 2025 $ —   $ 350 4.00 % due 2026* —   350 3.65 % due 2027 350   350 3.375 % due 2028 300   300 3.90 % due 2029 300   300 3.00 % due 2030 650   650 2.45 % due 2031 500   500 6.10 % due 2033 350   350 5.50 % due 2035 500   — 4.95 % due 2036 500   — Other (weighted-average rate of  6.08 % and 5.87 %, respectively) 89   97 Total Manufacturing group debt $ 3,539   $ 3,247 Less: Current portion of long-term debt ( 5 ) ( 357 ) Total Long-term debt $ 3,534   $ 2,890 Finance group Variable-rate note due 2028 (weighted-average rate of 5.04 % and 5.70 %, respectively) $ 25   $ 25 Fixed-rate note due 2027 ( 4.40 %) 50   50 Floating Rate Junior Subordinated Notes due 2067 ( 5.85 % and 6.52 %, respectively) 264   264 Other —   2 Total Finance group debt $ 339   $ 341
• On December 31, 2025, we repaid our $ 350 million 4.00 % notes due in March 2026. The following table shows required principal payments during the next five years on debt outstanding at January 3, 2026: (In millions) 2026 2027 2028 2029 2030 Manufacturing group $ 5   $ 355   $ 375   $ 301   $ 651 Finance group —   50   25   —   — Total $ 5   $ 405   $ 400   $ 301   $ 651 On October 16, 2025, Textron entered into a senior unsecured revolving credit facility for an aggregate principal amount of $ 1.0 billion, of which $ 100 million is available for the issuance of letters of credit. We may elect to increase the aggregate amount of commitments under the facility to up to $ 1.3 billion by designating an additional lender or by an existing lender agreeing to increase its commitment. The facility expires in October 2030 and provides for two   one-year  extensions at our option with the consent of lenders representing a majority of the commitments under the facility. The new facility replaces the prior 5-year facility which was scheduled to expire in October 2027. At January 3, 2026 and December 28, 2024, there were no amounts borrowed against either facility. At January 3, 2026, there were no letters of credit issued and outstanding under the new facility, and at December 28, 2024, there was a $ 9 million letter of credit issued and outstanding under the prior facility. Floating Rate Junior Subordinated Notes The Finance group’s $ 264 million of Floating Rate Junior Subordinated Notes are unsecured and rank junior to all of its existing and future senior debt. The notes mature on  February 15, 2067 ; however, we have the right to redeem the notes at par at any time and we are obligated to redeem the notes beginning on  February 15, 2042 . Interest is variable at the  three-month CME Term Secured Overnight Financing Rate  +  1.99661 %. Support Agreement Under a Support Agreement between Textron and TFC, Textron is required to maintain a controlling interest in TFC. The agreement, as amended in December 2015, also requires Textron to ensure that TFC maintains fixed charge coverage of no less than 125 % and consolidated shareholders' equity of no less than $ 125 million. There were no cash contributions required to be paid to TFC in 2025, 2024 and 2023 to maintain compliance with the support agreement. 49 Table o f Contents Note 9. Derivative Instruments and Fair Value Measurements We measure fair value at the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date.  We prioritize the assumptions that market participants would use in pricing the asset or liability into a three-tier fair value hierarchy.  This fair value hierarchy gives the highest priority (Level 1) to quoted prices in active markets for identical assets or liabilities and the lowest priority (Level 3) to unobservable inputs in which little or no market data exist, requiring companies to develop their own assumptions.  Observable inputs that do not meet the criteria of Level 1, which include quoted prices for similar assets or liabilities in active markets or quoted prices for identical assets and liabilities in markets that are not active, are categorized as Level 2.  Level 3 inputs are those that reflect our estimates about the assumptions market participants would use in pricing the asset or liability based on the best information available in the circumstances. Valuation techniques for assets and liabilities measured using Level 3 inputs may include methodologies such as the market approach, the income approach or the cost approach and may use unobservable inputs such as projections, estimates and management’s interpretation of current market data.  These unobservable inputs are utilized only to the extent that observable inputs are not available or cost effective to obtain. Assets and Liabilities Recorded at Fair Value on a Recurring Basis We manufacture and sell our products in a number of countries throughout the world, and, therefore, we are exposed to movements in foreign currency exchange rates. We primarily utilize foreign currency exchange contracts with maturities of no more than  three years  to manage this volatility. These contracts qualify as cash flow hedges and are intended to offset the effect of exchange rate fluctuations on forecasted sales, inventory purchases and overhead expenses. Net gains and losses recognized in earnings and Accumulated other comprehensive income (loss) on cash flow hedges, including gains and losses related to hedge ineffectiveness, were not significant in the periods presented. Our foreign currency exchange contracts are measured at fair value using the market method valuation technique.  The inputs to this technique utilize current foreign currency exchange forward market rates published by third-party leading financial news and data providers.  These are observable data that represent the rates that the financial institution uses for contracts entered into at that date; however, they are not based on actual transactions, so they are classified as Level 2. At January 3, 2026 and December 28, 2024, we had foreign currency exchange contracts with notional amounts upon which the contracts were based of $ 477 million and $ 464 million, respectively. At January 3, 2026, the fair value amounts of our foreign currency exchange contracts were a $ 6 million asset and a $ 10 million liability. At December 28, 2024, the fair value amount of our foreign currency exchange contracts was a $ 5 million asset and a $ 19 million liability. Our Finance group enters into interest rate swap agreements to mitigate certain exposures to fluctuations in interest rates. By using these contracts, we are able to convert floating-rate cash flows to fixed-rate cash flows. These agreements are designated as cash flow hedges. The fair value of these interest rate swap agreements is determined using values published by third-party leading financial news and data providers. These values are observable data that represent the value that financial institutions use for contracts entered into at that date, but are not based on actual transactions, so they are classified as Level 2. The fair value of our outstanding interest rate swap agreements was a $ 1 million and an $ 8 million asset at January 3, 2026 and December 28, 2024, respectively. At January 3, 2026 and December 28, 2024, our Finance group had interest rate swap agreements related to our Floating Rate Junior Subordinated Notes for an aggregate notional amount of $ 264 million that effectively converts the variable-rate interest for these Notes to a weighted-average fixed rate of 5.16 % and 5.20 %, respectively. At January 3, 2026, these agreements have maturities ranging from August 2026 to August 2030. At December 28, 2024, we also had an interest rate swap agreement with a notional amount of $ 25 million that matured in June 2025 and effectively converted variable-rate interest on a term loan to a fixed rate of 4.13 %. 50 Table o f Contents Assets and Liabilities Not Recorded at Fair Value The carrying value and estimated fair value of our financial instruments that are not reflected in the financial statements at fair value are as follows: January 3, 2026 December 28, 2024 (In millions) Carrying Value Estimated Fair Value Carrying Value Estimated Fair Value Manufacturing group Debt, excluding leases $ ( 3,459 ) $ ( 3,406 ) $ ( 3,164 ) $ ( 2,989 ) Finance group Finance receivables, excluding leases 493   528   439   454 Debt ( 339 ) ( 312 ) ( 341 ) ( 311 ) Fair value for the Manufacturing group debt is determined using market observable data for similar transactions (Level 2).  The fair value for the Finance group debt was determined primarily based on discounted cash flow analyses using observable market inputs from debt with similar duration, subordination and credit default expectations (Level 2). Fair value estimates for finance receivables were determined based on internally developed discounted cash flow models primarily utilizing significant unobservable inputs (Level 3), which include estimates of the rate of return, financing cost, capital structure and/or discount rate expectations of current market participants combined with estimated loan cash flows based on credit losses, payment rates and expectations of borrowers’ ability to make payments on a timely basis. Note 10. Shareholders’ Equity Capital Stock We have authorization for  15 million shares of preferred stock with a par value of $ 0.01  and  500 million shares of common stock with a par value of $ 0.125 .   Outstanding common stock activity is presented below: (In thousands) 2025 2024 2023 Balance at beginning of year 182,964   192,898   206,161 Share repurchases ( 10,650 ) ( 12,890 ) ( 16,169 ) Share-based compensation activity 1,996   2,956   2,906 Balance at end of year 174,310   182,964   192,898 Earnings Per Share We calculate basic and diluted earnings per share (EPS) based on net income, which approximates income available to common shareholders for each period.  Basic EPS is calculated using the two-class method, which includes the weighted-average number of common shares outstanding during the period and restricted stock units to be paid in stock that are deemed participating securities as they provide nonforfeitable rights to dividends. Diluted EPS considers the dilutive effect of all potential future common stock, including stock options. The weighted-average shares outstanding for basic and diluted EPS are as follows: (In thousands) 2025 2024 2023 Basic weighted-average shares outstanding 178,895   188,318   199,719 Dilutive effect of stock options 1,363   1,989   2,055 Diluted weighted-average shares outstanding 180,258   190,307   201,774 In 2025, 2024 and 2023, stock options to purchase  2.0 million,  0.9 million and  1.5 million shares, respectively, of common stock were excluded from the calculation of diluted weighted-average shares outstanding as their effect would have been anti-dilutive. 51 Table o f Contents Accumulated Other Comprehensive Income (Loss) The components of Accumulated other comprehensive income (loss) are presented below: (In millions) Pension and Postretirement Benefits Adjustments Foreign Currency Translation Adjustments Deferred Gains (Losses) on Hedge Contracts Accumulated Other Comprehensive Income (Loss) Balance at December 30, 2023 $ ( 598 ) $ ( 49 ) $ 3   $ ( 644 ) Other comprehensive income before reclassifications 418   ( 74 ) ( 9 ) 335 Reclassified from Accumulated other comprehensive income (loss) 1   3   1   5 Balance at December 28, 2024 $ ( 179 ) $ ( 120 ) $ ( 5 ) $ ( 304 ) Other comprehensive income before reclassifications 299   134   ( 2 ) 431 Reclassified from Accumulated other comprehensive income (loss) ( 1 ) ( 2 ) 5   2 Balance at January 3, 2026 $ 119   $ 12   $ ( 2 ) $ 129 Other Comprehensive Income (Loss) The before and after-tax components of other comprehensive income (loss) are presented below: 2025 2024 2023 (In millions) Pre-Tax Amount Tax (Expense) Benefit After- Tax Amount Pre-Tax Amount Tax (Expense) Benefit After- Tax Amount Pre-Tax Amount Tax (Expense) Benefit After- Tax Amount Pension and postretirement benefits adjustments: Unrealized gains (losses) $ 430   $ ( 108 ) $ 322   $ 568   $ ( 136 ) $ 432   $ ( 102 ) $ 25   $ ( 77 ) Amortization of net actuarial gain* ( 9 ) 2   ( 7 ) ( 5 ) 1   ( 4 ) ( 7 ) 2   ( 5 ) Amortization of prior service cost* 9   ( 3 ) 6   8   ( 3 ) 5   8   ( 3 ) 5 Recognition of prior service cost ( 29 ) 6   ( 23 ) ( 19 ) 5   ( 14 ) ( 7 ) 2   ( 5 ) Pension and postretirement benefits adjustments, net 401   ( 103 ) 298   552   ( 133 ) 419   ( 108 ) 26   ( 82 ) Foreign currency translation adjustments: Foreign currency translation adjustments 134   —   134   ( 74 ) —   ( 74 ) 45   —   45 Business disposition ( 2 ) —   ( 2 ) —   —   —   —   —   — Other —   —   —   3   —   3   —   —   — Foreign currency translation adjustments, net 132   —   132   ( 71 ) —   ( 71 ) 45   —   45 Deferred gains (losses) on hedge contracts: Current deferrals ( 2 ) —   ( 2 ) ( 11 ) 2   ( 9 ) ( 2 ) 1   ( 1 ) Reclassification adjustments 6   ( 1 ) 5   2   ( 1 ) 1   8   ( 2 ) 6 Deferred gains (losses) on hedge contracts, net 4   ( 1 ) 3   ( 9 ) 1   ( 8 ) 6   ( 1 ) 5 Total $ 537   $ ( 104 ) $ 433   $ 472   $ ( 132 ) $ 340   $ ( 57 ) $ 25   $ ( 32 )
• These components of other comprehensive income (loss) are included in the computation of net periodic pension cost (income). See Note 14 for additional information. 52 Table o f Contents Note 11. Segment Financial Information For the periods presented, we operate in, and report financial information for, the following six operating segments: Textron Aviation, Bell, Textron Systems, Industrial, Textron eAviation and Finance. The accounting policies of these segments are the same as those described in Note 1. Effective January 4, 2026, the beginning of our 2026 fiscal year, the business activities of the Textron eAviation segment were realigned within Textron's other operating segments resulting in the elimination of the Textron eAviation segment as a separate reporting segment. Additional information regarding this segment change is provided below. Textron Aviation products and services include Cessna Citation jets, Beechcraft and Cessna turboprop aircraft, military trainer and defense aircraft, piston engine aircraft, advanced flight training devices, aftermarket parts and maintenance, inspection and repair services. Textron Aviation has a diverse customer base including fractional aircraft businesses, charter and fleet operators, corporate aviation, individual buyers, training schools, airlines, and special mission, military and government operators. Bell products and services include development of the MV-75 tiltrotor aircraft, the V-22 tiltrotor aircraft, advanced military helicopters, and aftermarket parts and support services to the U.S. and non-U.S. governments. Bell also supplies commercial helicopters and aftermarket parts and services to corporate, private, law enforcement, utility, public safety and emergency medical helicopter operators, and U.S. and foreign governments. Textron Systems products and services include electronic systems and solutions, advanced marine craft, piston aircraft engines, live military air-to-air and air-to-ship training, weapons and related components, unmanned aircraft systems, and both manned and unmanned armored and specialty vehicles for U.S. and international military, government and commercial customers. Industrial products and markets include the following: • Kautex products include blow-molded plastic fuel systems, including conventional plastic fuel tanks and pressurized fuel tanks for hybrid vehicle applications, clear-vision systems, plastic tanks for selective catalytic reduction systems and battery systems for use in electric vehicles, from hybrid to full battery-powered, that are sold to automobile OEMs; and • Textron Specialized Vehicles products include golf cars, utility vehicles, light transportation vehicles, aviation ground support equipment, professional turf-maintenance equipment and specialized turf-care vehicles that are marketed primarily to golf courses and resorts, government agencies and municipalities, consumers, outdoor enthusiasts, and commercial and industrial users. The Textron eAviation segment has been focused on research and development initiatives related to sustainable aviation solutions and also manufactures a family of light aircraft and gliders with both electric and combustion engines. Under the segment realignment mentioned above, effective at the beginning of our 2026 fiscal year, a significant part of Textron eAviation, including Pipistrel, will become part of the Textron Aviation segment to enable the business to more effectively leverage the development, manufacturing and sales expertise at Textron Aviation. In addition, Textron eAviation’s manned and unmanned products for military applications and related research and development activities will be included in the results of the Textron Systems segment, which is best suited to provide more direct access to the targeted customer base for these products. Lastly, certain Textron eAviation research and development activities encompassing digital flight control and air vehicle management systems, which we expect will benefit several of our segments, will be reported within corporate expenses. The Finance segment provides financing primarily to purchasers of new and pre-owned Textron Aviation aircraft and Bell helicopters. Segment profit is an important financial measure. Through 2025, Textron’s Chief Operating Decision Maker (CODM) was its Chairman and Chief Executive Officer, Scott Donnelly. Effective January 4, 2026, the beginning of our 2026 fiscal year, Lisa Atherton became Textron's President and Chief Executive Officer, and CODM, succeeding Mr. Donnelly. Our CODM utilizes segment profit to evaluate the performance of the segments to establish management's compensation and for decision-making purposes, including the allocation of capital resources between segments. Segment profit for the manufacturing segments excludes the non-service components of pension and postretirement income, net; LIFO inventory provision; intangible asset amortization; interest expense, net for Manufacturing group; certain corporate expenses; gains/losses on major business dispositions; special charges; and the inventory valuation charge to write down production-related powersports inventory discussed in Note 15. The measurement for the Finance segment includes interest income and expense along with intercompany interest income and expense. 53 Table o f Contents Our revenues and expenses by segment are provided below: (In millions) Textron Aviation Bell Textron Systems Industrial Textron eAviation Finance Total 2025 Revenues $ 5,955   $ 4,282   $ 1,247   $ 3,213   $ 27   $ 75   $ 14,799 Costs and expenses: Cost of sales 4,637   3,537   939   2,733   27   —   11,873 Research and development costs 214   153   45   67   42   —   521 Selling and administrative expense 410   229   88   268   21   8   1,024 Interest expense, net —   —   —   —   —   18   18 Segment profit (loss) $ 694   $ 363   $ 175   $ 145   $ ( 63 ) $ 49   $ 1,363 2024 Revenues $ 5,284   $ 3,579   $ 1,241   $ 3,515   $ 33   $ 50   $ 13,702 Costs and expenses: Cost of sales 4,102   2,899   929   2,993   29   —   10,952 Research and development costs 208   97   51   72   63   —   491 Selling and administrative expense 408   213   107   299   17   ( 4 ) 1,040 Interest expense, net —   —   —   —   —   19   19 Segment profit (loss) $ 566   $ 370   $ 154   $ 151   $ ( 76 ) $ 35   $ 1,200 2023 Revenues $ 5,373   $ 3,147   $ 1,235   $ 3,841   $ 32   $ 55   $ 13,683 Costs and expenses: Cost of sales 4,116   2,392   925   3,221   35   —   10,689 Research and development costs 199   192   53   80   46   —   570 Selling and administrative expense 409   243   110   312   14   ( 6 ) 1,082 Interest expense, net —   —   —   —   —   15   15 Segment profit (loss) $ 649   $ 320   $ 147   $ 228   $ ( 63 ) $ 46   $ 1,327 A reconciliation of segment profit to income from continuing operations before income taxes is presented below: (In millions) 2025 2024 2023 Segment profit $ 1,363   $ 1,200   $ 1,327 Unallocated amounts: Corporate expenses and other, net ( 149 ) ( 116 ) ( 143 ) Interest expense, net for Manufacturing group ( 108 ) ( 78 ) ( 62 ) LIFO inventory provision ( 199 ) ( 176 ) ( 107 ) Intangible asset amortization ( 32 ) ( 34 ) ( 39 ) Special charges* ( 4 ) ( 78 ) ( 126 ) Inventory charge* —   ( 38 ) — Non-service components of pension and postretirement income, net 266   263   237 Income from continuing operations before income taxes $ 1,137   $ 943   $ 1,087
• See Note 15 for additional information. 54 Table o f Contents Other information by segment is provided below: Assets Capital Expenditures Depreciation and Amortization (In millions) January 3, 2026 December 28, 2024 2025 2024 2023 2025 2024 2023 Textron Aviation $ 4,907   $ 4,624   $ 140   $ 136   $ 138   $ 167   $ 164   $ 160 Bell 3,132   2,992   132   122   119   103   86   89 Textron Systems 2,107   2,036   41   40   48   48   48   41 Industrial 2,305   2,378   68   62   91   68   70   89 Textron eAviation 313   286   1   4   4   8   7   7 Finance 677   680   —   —   —   —   —   — Corporate 4,688   3,842   1   —   2   7   7   9 Total $ 18,129   $ 16,838   $ 383   $ 364   $ 402   $ 401   $ 382   $ 395 At January 3, 2026 and December 28, 2024, 85 % and 86 %, respectively, of our property, plant and equipment, net was located in the United States. Note 12. Revenues Disaggregation of Revenues Our revenues disaggregated by major product type are presented below: (In millions) 2025 2024 2023 Aircraft $ 3,922   $ 3,374   $ 3,577 Aftermarket parts and services 2,033   1,910   1,796 Textron Aviation $ 5,955   $ 5,284   $ 5,373 Military aircraft and support programs 2,618   2,048   1,701 Commercial helicopters, parts and services 1,664   1,531   1,446 Bell $ 4,282   $ 3,579   $ 3,147 Textron Systems $ 1,247   $ 1,241   $ 1,235 Fuel systems and functional components 1,883   1,891   1,954 Specialized vehicles 1,330   1,624   1,887 Industrial $ 3,213   $ 3,515   $ 3,841 Textron eAviation $ 27   $ 33   $ 32 Finance $ 75   $ 50   $ 55 Total revenues $ 14,799   $ 13,702   $ 13,683 55 Table o f Contents Our revenues for our segments by customer type and geographic location are presented below: (In millions) Textron Aviation Bell Textron Systems Industrial Textron eAviation Finance Total 2025 Customer type: Commercial $ 5,579   $ 1,634   $ 306   $ 3,185   $ 27   $ 75   $ 10,806 U.S. Government 376   2,648   941   28   —   —   3,993 Total revenues $ 5,955   $ 4,282   $ 1,247   $ 3,213   $ 27   $ 75   $ 14,799 Geographic location: United States $ 4,281   $ 3,156   $ 1,129   $ 1,668   $ 14   $ 35   $ 10,283 Europe 467   122   43   649   7   1   1,289 South and Latin America 628   281   7   336   2   26   1,280 Other international 579   723   68   560   4   13   1,947 Total revenues $ 5,955   $ 4,282   $ 1,247   $ 3,213   $ 27   $ 75   $ 14,799 2024 Customer type: Commercial $ 4,985   $ 1,490   $ 292   $ 3,482   $ 33   $ 50   $ 10,332 U.S. Government 299   2,089   949   33   —   —   3,370 Total revenues $ 5,284   $ 3,579   $ 1,241   $ 3,515   $ 33   $ 50   $ 13,702 Geographic location: United States $ 4,019   $ 2,644   $ 1,112   $ 1,865   $ 19   $ 17   $ 9,676 Europe 371   85   45   693   11   5   1,210 South and Latin America 336   201   12   306   —   19   874 Other international 558   649   72   651   3   9   1,942 Total revenues $ 5,284   $ 3,579   $ 1,241   $ 3,515   $ 33   $ 50   $ 13,702 2023 Customer type: Commercial $ 5,155   $ 1,407   $ 282   $ 3,819   $ 32   $ 55   $ 10,750 U.S. Government 218   1,740   953   22   —   —   2,933 Total revenues $ 5,373   $ 3,147   $ 1,235   $ 3,841   $ 32   $ 55   $ 13,683 Geographic location: United States $ 3,873   $ 2,228   $ 1,103   $ 2,067   $ 17   $ 17   $ 9,305 Europe 432   149   54   766   11   2   1,414 South and Latin America 284   224   12   300   1   21   842 Other international 784   546   66   708   3   15   2,122 Total revenues $ 5,373   $ 3,147   $ 1,235   $ 3,841   $ 32   $ 55   $ 13,683 Remaining Performance Obligations Our remaining performance obligations, which is the equivalent of our backlog, represent the expected transaction price allocated to our contracts that we expect to recognize as revenue in future periods when we perform under the contracts.  These remaining obligations exclude unexercised contract options and potential orders under ordering-type contracts such as Indefinite Delivery, Indefinite Quantity contracts. At January 3, 2026, we had $ 18.8 billion in remaining performance obligations of which we expect to recognize revenues of approximately  80 % through 2027, an additional  15 % through 2029, and the balance thereafter. Contract Assets and Liabilities Assets and liabilities related to our contracts with customers are reported on a contract-by-contract basis at the end of each reporting period. At January 3, 2026 and December 28, 2024, contract assets totaled $ 451 million and $ 345 million, respectively, and contract liabilities totaled $ 2.1 billion and $ 1.9 billion, respectively, reflecting timing differences between revenues recognized, billings and payments from customers. During 2025, 2024 and 2023, we recognized revenues of $ 1.2 billion, $ 1.1 billion and $ 953 million, respectively, that were included in the contract liability balance at the beginning of each year. 56 Table o f Contents Note 13. Share-Based Compensation Under our 2024 Long-Term Incentive Plan (the 2024 Plan), which replaced our 2015 Long-Term Incentive Plan (the 2015 Plan) in April 2024, we have authorization to provide awards to selected employees and non-employee directors in the form of stock options, restricted stock, restricted stock units, stock appreciation rights, performance stock, performance share units and other awards. A maximum of  10 million shares is authorized for issuance for all purposes under the 2024 Plan plus any shares that become available upon cancellation, forfeiture or expiration of awards granted under the 2015 Plan. Under the 2024 Plan, the maximum number of shares that may be issued pursuant to awards payable in shares, such as restricted stock, restricted stock units, performance stock, performance share units, or other awards is  3.127 million, plus any shares that become available upon cancellation, forfeiture or expiration of such awards which were granted under the 2015 Plan. For 2025, 2024 and 2023, the awards granted under these plans primarily included stock options, restricted stock units and performance share units. Share-based compensation costs are reflected primarily in selling and administrative expense.   Compensation expense included in net income for our share-based compensation plans is as follows: (In millions) 2025 2024 2023 Compensation expense $ 81   $ 66   $ 94 Income tax benefit ( 20 ) ( 16 ) ( 23 ) Total compensation expense included in net income $ 61   $ 50   $ 71 Compensation cost for awards subject only to service conditions that vest ratably is recognized on a straight-line basis over the requisite service period for each separately vesting portion of the award utilizing an estimated forfeiture rate. Our awards include continued vesting provisions for retirement eligible employees. Upon reaching retirement eligibility, the service requirement for these individuals is considered to have been satisfied and compensation expense for future awards is recognized on the date of the grant. As of January 3, 2026, we had not recognized $ 27 million of total compensation costs associated with unvested awards subject only to service conditions. We expect to recognize compensation expense for these awards over a weighted-average period of approximately two years . We typically grant stock appreciation rights to selected non-U.S. employees. At January 3, 2026, outstanding stock appreciation rights totaled 386,329 with a weighted-average exercise price of $ 68.05 and a weighted-average remaining contractual life of 6.2 years; these units had an intrinsic value of $ 7 million, compared to $ 6 million at December 28, 2024. Stock Options Stock option compensation expense was $ 24 million, $ 25 million and $ 23 million in 2025, 2024 and 2023, respectively. Options to purchase our shares have a maximum term of  ten years  and generally vest ratably over a  three-year period. Stock option compensation cost is calculated under the fair value approach using the Black-Scholes option-pricing model to determine the fair value of options granted on the date of grant. The expected volatility used in this model is based on historical volatilities and implied volatilities from traded options on our common stock. The expected term is based on historical option exercise data, which is adjusted to reflect any anticipated changes in expected behavior. We grant options annually on the first day of March. The assumptions used in our option-pricing model for these grants and the weighted-average fair value for these options are as follows: 2025 2024 2023 Fair value of options at grant date $ 22.01 $ 27.69 $ 23.83 Dividend yield 0.1 % 0.1 % 0.1 % Expected volatility 25.1 % 27.2 % 29.4 % Risk-free interest rate 4.1 % 4.3 % 4.2 % Expected term (in years) 4.8 4.8 4.8 57 Table o f Contents The stock option activity during 2025 is provided below: (Options in thousands) Number of Options Weighted- Average Exercise Price Outstanding at beginning of year 6,649   $ 61.70 Granted 1,022   74.73 Exercised ( 809 ) ( 52.23 ) Forfeited or expired ( 70 ) ( 79.25 ) Outstanding at end of year 6,792   $ 64.61 Exercisable at end of year 4,791   $ 58.58 At January 3, 2026, our outstanding options had an aggregate intrinsic value of $ 154 million and a weighted-average remaining contractual life of  5.4 years.  Our exercisable options had an aggregate intrinsic value of $ 137 million and a weighted-average remaining contractual life of  4.2 years at January 3, 2026.  The total intrinsic value of options exercised during 2025, 2024 and 2023 was $ 24 million, $ 78 million and $ 50 million, respectively. Restricted Stock Units We issue restricted stock units that include the right to receive dividend equivalents upon vesting and are settled in either cash or stock. Grants of restricted stock units vest in full on the third anniversary of the grant date. Compensation cost is determined using the fair value of these units based on the trading price of our common stock. For units payable in stock, we use the trading price on the grant date, while units payable in cash are remeasured using the price at each reporting period date. The 2025 activity for restricted stock units is provided below: Units Payable in Stock Units Payable in Cash (Shares/Units in thousands) Number of Shares Weighted- Average Grant Date Fair Value Number of Units Weighted- Average Grant Date Fair Value Outstanding at beginning of year, nonvested 331   $ 75.50   631   $ 77.75 Granted 129   73.07   259   74.72 Vested ( 101 ) ( 70.65 ) ( 195 ) ( 71.14 ) Forfeited —   —   ( 22 ) ( 78.39 ) Outstanding at end of year, nonvested 359   $ 75.99   673   $ 78.48 The fair value of the restricted stock unit awards that vested and/or amounts paid under these awards is as follows: (In millions) 2025 2024 2023 Fair value of awards vested $ 22   $ 42   $ 45 Cash paid 15   33   34 Performance Share Units The fair value of share-based compensation awards accounted for as liabilities includes performance share units, which are generally paid in cash in the first quarter of the year following vesting. Performance share units are subject to performance goals set at the beginning of the three-year performance period and vest at the end of the performance period. These units are remeasured to fair value at the end of each reporting period based on the trading price of our common stock and the number of units, as adjusted based on assumptions with respect to performance on the relevant metrics. The 2025 activity for our performance share units is as follows: (Units in thousands) Number of Units Weighted- Average Grant Date Fair Value Outstanding at beginning of year, nonvested 394   $ 80.81 Granted 202   74.73 Vested ( 200 ) ( 73.19 ) Outstanding at end of year, nonvested 396   $ 81.57 58 Table o f Contents The fair value of the performance share units that vested and/or amounts paid under these awards is as follows: (In millions) 2025 2024 2023 Fair value of awards vested $ 18   $ 13   $ 19 Cash paid 16   35   27 Note 14. Retirement Plans We provide defined-contribution benefits to eligible employees, as well as some remaining defined-benefit pension and other post-retirement benefits covering certain of our U.S. and Non-U.S. employees. Substantially all of our employees are covered by defined contribution plans. The largest of these plans, the Textron Savings Plan, is a qualified 401(k) plan subject to the Employee Retirement Income Security Act of 1974 (ERISA). Our defined contribution plans cost $ 178 million, $ 164 million and $ 154 million in 2025, 2024 and 2023, respectively. We also provide post-retirement benefits other than pensions for certain retired employees in the U.S. that include healthcare, dental care, Medicare Part B reimbursement and life insurance. A portion of our U.S. employees participate in the legacy defined benefit pension plans which were closed to new participants beginning on January 1, 2010. These legacy plans include the Textron Master Retirement Plan (TMRP), the Bell Helicopter Textron Master Retirement Plan, and the CWC Castings Division of Textron Inc. Hourly-Rated Employees' Pension Plan, which are each subject to the provisions of ERISA and provide a minimum guaranteed benefit to participants. The primary factors affecting the benefits earned by participants in our pension plans are employees’ years of service and compensation levels. Employees hired subsequent to the closure of these plans receive an additional annual cash contribution to their Textron Savings Plan account based on their eligible compensation of up to 4 %. Periodic Benefit Cost (Income) The components of net periodic benefit cost (income) and other amounts recognized in other comprehensive income (loss) (OCI) are as follows: Pension Benefits Postretirement Benefits Other than Pensions (In millions) 2025 2024 2023 2025 2024 2023 Net periodic benefit income Service cost $ 63   $ 69   $ 67   $ 1   $ 1   $ 2 Interest cost 376   362   364   6   7   8 Expected return on plan assets ( 648 ) ( 635 ) ( 610 ) —   —   — Amortization of prior service cost (credit) 10   9   11   ( 1 ) ( 1 ) ( 3 ) Amortization of net actuarial loss (gain) ( 1 ) 3   1   ( 8 ) ( 8 ) ( 8 ) Net periodic benefit income* $ ( 200 ) $ ( 192 ) $ ( 167 ) $ ( 2 ) $ ( 1 ) $ ( 1 ) Other changes in plan assets and benefit obligations recognized in OCI Current year actuarial loss (gain) $ ( 427 ) $ ( 561 ) $ 109   $ ( 3 ) $ ( 7 ) $ ( 7 ) Current year prior service cost 29   19   7   —   —   — Amortization of net actuarial gain (loss) 1   ( 3 ) ( 1 ) 8   8   8 Amortization of prior service credit (cost) ( 10 ) ( 9 ) ( 11 ) 1   1   3 Total recognized in OCI, before taxes $ ( 407 ) $ ( 554 ) $ 104   $ 6   $ 2   $ 4 Total recognized in net periodic benefit income and OCI $ ( 607 ) $ ( 746 ) $ ( 63 ) $ 4   $ 1   $ 3
• Excludes the cost associated with the defined-contribution component that is included in certain of our U.S.-based defined benefit pension plans of $ 10 million in both 2025 and 2024, and $ 11 million in 2023. 59 Table o f Contents Obligations and Funded Status All of our plans are measured as of our fiscal year-end. The changes in the projected benefit obligation and in the fair value of plan assets, along with our funded status, are as follows: Pension Benefits Postretirement Benefits Other than Pensions (In millions) January 3, 2026 December 28, 2024 January 3, 2026 December 28, 2024 Change in projected benefit obligation Projected benefit obligation at beginning of year $ 6,788   $ 7,205   $ 121   $ 136 Service cost 63   69   1   1 Interest cost 376   362   6   7 Plan participants’ contributions —   —   2   3 Actuarial losses (gains) 75   ( 392 ) 2   ( 7 ) Benefits paid ( 458 ) ( 454 ) ( 21 ) ( 19 ) Plan amendment 29   19   —   — Foreign exchange rate changes and other 45   ( 21 ) —   — Projected benefit obligation at end of year $ 6,918   $ 6,788   $ 111   $ 121 Change in fair value of plan assets Fair value of plan assets at beginning of year $ 8,772   $ 8,413 Actual return on plan assets 1,145   806 Employer contributions 31   34 Benefits paid ( 458 ) ( 454 ) Foreign exchange rate changes and other 69   ( 27 ) Fair value of plan assets at end of year $ 9,559   $ 8,772 Funded status at end of year $ 2,641   $ 1,984   $ ( 111 ) $ ( 121 ) Actuarial losses (gains) for 2025 and 2024 were largely the result of changes in the discount rate utilized. Amounts recognized in our balance sheets are as follows: Pension Benefits Postretirement Benefits Other than Pensions (In millions) January 3, 2026 December 28, 2024 January 3, 2026 December 28, 2024 Non-current assets $ 2,973   $ 2,311   $ —   $ — Current liabilities ( 29 ) ( 29 ) ( 14 ) ( 15 ) Non-current liabilities ( 303 ) ( 298 ) ( 97 ) ( 106 ) Recognized in Accumulated other comprehensive income (loss), pre-tax: Net loss (gain) ( 261 ) 167   ( 63 ) ( 69 ) Prior service cost (credit) 71   52   —   ( 1 ) The accumulated benefit obligation for all defined benefit pension plans was $ 6.6 billion and $ 6.5 billion at January 3, 2026 and December 28, 2024, respectively, which included $ 320 million and $ 316 million, respectively, in accumulated benefit obligations for unfunded plans where funding is not permitted or in foreign environments where funding is not feasible. Pension plans with accumulated benefit obligation exceeding the fair value of plan assets are as follows: (In millions) January 3, 2026 December 28, 2024 Accumulated benefit obligation $ 320   $ 316 Fair value of plan assets —   — Pension plans with projected benefit obligation exceeding the fair value of plan assets are as follows: (In millions) January 3, 2026 December 28, 2024 Projected benefit obligation $ 332   $ 327 Fair value of plan assets —   — 60 Table o f Contents Assumptions The weighted-average assumptions we use for our pension and postretirement plans are as follows: Pension Benefits Postretirement Benefits Other than Pensions 2025 2024 2023 2025 2024 2023 Net periodic benefit cost Discount rate 5.73 % 5.19 % 5.51 % 5.75 % 5.40 % 5.70 % Expected long-term rate of return on assets 7.16 % 7.16 % 7.14 % Rate of compensation increase 3.97 % 3.97 % 3.97 % Benefit obligations at year-end Discount rate 5.60 % 5.73 % 5.19 % 5.40 % 5.75 % 5.40 % Rate of compensation increase 3.96 % 3.97 % 3.97 % Interest crediting rate for cash balance plans 5.25 % 5.25 % 5.25 % Our assumed healthcare cost trend rate for both the medical and prescription drug cost was  6.50 % in both 2025 and 2024. We expect this rate to gradually decline to  4.75 % by  2032  where we assume it will remain. Pension Assets The expected long-term rate of return on plan assets is determined based on a variety of considerations, including the established asset allocation targets and expectations for those asset classes, historical returns of the plans’ assets and other market considerations. We invest our pension assets with the objective of achieving a total rate of return over the long term that will be sufficient to fund future pension obligations and to minimize future pension contributions. We are willing to tolerate a commensurate level of risk to achieve this objective based on the funded status of the plans and the long-term nature of our pension liability. Risk is controlled by maintaining a portfolio of assets that is diversified across a variety of asset classes, investment styles and investment managers. Where possible, investment managers are prohibited from owning our securities in the portfolios that they manage on our behalf. For U.S. plan assets, which represent the majority of our plan assets, asset allocation target ranges are established consistent with our investment objectives, and the assets are rebalanced periodically.  For Non-U.S. plan assets, allocations are based on expected cash flow needs and assessments of the local practices and markets.   Our target allocation ranges are as follows: U.S. Plan Assets Domestic equity securities 17 % to 33 % International equity securities 6 % to 17 % Global equities 5 % to 17 % Debt securities 27 % to 38 % Real estate 7 % to 13 % Private investment partnerships 7 % to 13 % Non-U.S. Plan Assets Equity securities 55 % to 75 % Debt securities 25 % to 45 % Real estate — % to 13 % 61 Table o f Contents The fair value of our pension plan assets by major category and valuation method is as follows: January 3, 2026 December 28, 2024 (In millions) Level 1 Level 2 Level 3 Not Subject to Leveling Level 1 Level 2 Level 3 Not Subject to Leveling Cash and equivalents $ 254   $ 6   $ —   $ —   $ 159   $ 1   $ —   $ — Equity securities: Domestic 2,969   —   —   342   3,151   —   —   307 International 1,317   —   —   349   1,028   —   —   290 Mutual funds 184   —   —   —  194   —   —   — Debt securities: National, state and local governments 1,327   112   —   21   899   60   —   13 Corporate debt 83   607   —   154   46   618   —   148 Private investment partnerships —   —   —   992   —   —   —   974 Real estate —   —   449   393   —   —   479   405 Total $ 6,134   $ 725   $ 449   $ 2,251   $ 5,477   $ 679   $ 479   $ 2,137 Cash and equivalents, equity securities and debt securities include commingled funds, which represent investments in funds offered to institutional investors that are similar to mutual funds in that they provide diversification by holding various equity and debt securities. Generally, the fair value of the majority of the commingled funds is determined and published by the fund's investment managers and is the basis for current transactions, therefore, they are categorized as Level 1 in the table above. Debt securities are valued based on same day actual trading prices, if available. If such prices are not available, we use a matrix pricing model with historical prices, trends and other factors. Private investment partnerships represents interests in funds which invest in equity, debt and other financial assets.  These funds are generally not publicly traded so the interests therein are valued using income and market methods that include cash flow projections and market multiples for various comparable investments. Real estate includes owned properties and limited partnership interests in real estate partnerships. Owned properties are valued using certified appraisals at least every  three years  that are updated at least annually by the real estate investment manager based on current market trends and other available information. These appraisals generally use the standard methods for valuing real estate, including forecasting income and identifying current transactions for comparable real estate to arrive at a fair value.  Limited partnership interests in real estate partnerships are valued similarly to private investment partnerships, with the general partner using standard real estate valuation methods to value the real estate properties and securities held within their portfolios.  Neither private investment nor real estate partnerships are subject to leveling within the fair value hierarchy. The table below presents a reconciliation of the fair value measurements for owned real estate properties, which use significant unobservable inputs (Level 3): (In millions) 2025 2024 Balance at beginning of year $ 479   $ 508 Unrealized gains (losses), net 9   ( 25 ) Realized gains (losses), net ( 19 ) 16 Purchases, sales and settlements, net ( 20 ) ( 20 ) Balance at end of year $ 449   $ 479 Estimated Future Cash Flow Impact Defined benefits under salaried plans are based on salary and years of service.  Hourly plans generally provide benefits based on stated amounts for each year of service.  Our funding policy is consistent with applicable laws and regulations.  In 2026, we expect to contribute approximately $ 50 million to our pension plans. Benefit payments provided below reflect expected future employee service, as appropriate, and are expected to be paid, net of estimated participant contributions. These payments are based on the same assumptions used to measure our benefit obligation at the end of 2025. While pension benefit payments primarily will be paid out of qualified pension trusts, we will pay postretirement benefits other than pensions out of our general corporate assets. Benefit payments that we expect to pay on an undiscounted basis are as follows: (In millions) 2026 2027 2028 2029 2030 2031-2035 Pension benefits $ 466   $ 475   $ 484   $ 492   $ 497   $ 2,536 Postretirement benefits other than pensions 14   14   13   12   12   44 62 Table o f Contents Note 15. Special Charges Special charges by segment and type of cost (income) are as follows: (In millions) Severance Costs Contract Termination and Other Costs Asset Impairments Other Total 2025 Industrial $ —   $ —   $ —   $ ( 4 ) $ ( 4 ) Textron Systems 5   3   —   —   8 Total special charges $ 5   $ 3   $ —   $ ( 4 ) $ 4 2024 Industrial $ 37   $ 32   $ 3   $ —   $ 72 Bell 1   —   —   —   1 Textron Systems 5   —   —   —   5 Total special charges $ 43   $ 32   $ 3   $ —   $ 78 2023 Industrial $ 21   $ —   $ 87   $ —   $ 108 Bell 13   —   —   —   13 Textron Systems 5   —   —   —   5 Total special charges $ 39   $ —   $ 87   $ —   $ 126 2025 Restructuring and Other Actions In connection with the termination of certain U.S. Government development programs, we initiated restructuring actions in the second quarter of 2025 to reduce operating expenses through headcount reductions and other actions at the Textron Systems segment. As a result, we recorded special charges of $ 8 million, which included severance costs of $ 5 million and contract termination costs of $ 3 million. Headcount reductions totaled approximately 85 positions, representing less than 1 % of our global workforce. The restructuring actions were substantially completed in the third quarter of 2025. In the second quarter of 2025, we completed the strategic review of the Powersports product line discussed below, and on April 23, 2025, we closed on the sale of the Powersports business, including the Arctic Cat brand and its operations. Net cash proceeds from the sale were $ 16 million and we recorded a pre-tax gain of $ 4 million, which is included in special charges. 2023 Restructuring Plan In the fourth quarter of 2023, we initiated a restructuring plan to reduce operating expenses through headcount reductions at the Industrial, Bell and Textron Systems segments. In the Industrial segment, the plan included headcount reductions at Textron Specialized Vehicles, resulting from lower demand for certain of our powersports products, and at Kautex, due to reduced demand for fuel systems from European automotive manufacturers. In the Bell and Textron Systems segments, the plan included targeted headcount reductions to improve the segments’ cost structures and realign their workforces as these segments transition from legacy production contracts to more development, engineering focused contracts. In April 2024, the plan was expanded for the Bell and Textron Systems segments to include headcount reductions resulting from the cancellations of the Future Attack Reconnaissance Aircraft and Shadow programs in 2024. In December 2024, we approved additional actions under the 2023 plan at Textron Specialized Vehicles related to an indefinite pause in production of its powersports products. During 2024, the consumer end market demand for powersports products continued to remain soft. As a result, and in conjunction with its annual operating plan process, Textron Specialized Vehicles began to pause production of powersports products as Textron's management reviewed strategic alternatives for the business. In 2024, we recorded special charges totaling $ 78 million as a result of the above restructuring actions. Since inception of the 2023 plan, we have incurred $ 204 million in special charges including severance costs of $ 82 million, which included $ 58 million at the Industrial segment, $ 14 million at the Bell segment and $ 10 million at the Textron Systems segment; and contract termination and other costs of $ 32 million and asset impairment charges of $ 90 million at the Industrial segment. Headcount reductions since inception of the plan totaled approximately 1,800 positions, representing 5 % of our global workforce. The plan was substantially completed in the first half of 2025. In the fourth quarter of 2024 and in connection with the actions taken under the restructuring plan at Textron Specialized Vehicles, we recorded an inventory valuation charge of $ 38 million, which is recorded in Cost of products sold, to write down production-related powersports inventory to its net realizable value. 63 Table o f Contents In 2023, as a result of the lower demand described above, we recognized asset impairment charges of $ 75 million at Textron Specialized Vehicles related to both fixed and intangible assets and $ 12 million of fixed asset impairment charges at Kautex. Restructuring Reserve Our restructuring reserve activity is summarized below: (In millions) Severance Costs Contract Termination and Other Costs Total Balance at December 30, 2023 $ 42   $ 5   $ 47 Provision for 2023 restructuring plan 49   32   81 Cash paid ( 46 ) ( 3 ) ( 49 ) Reversals ( 6 ) —   ( 6 ) Foreign currency translation ( 2 ) —   ( 2 ) Balance at December 28, 2024 $ 37   $ 34   $ 71 Provision 5   3   8 Cash paid ( 23 ) ( 18 ) ( 41 ) Business disposition ( 7 ) ( 15 ) ( 22 ) Foreign currency translation 3   —   3 Balance at January 3, 2026 $ 15   $ 4   $ 19 Note 16. Income Taxes We conduct business globally and, as a result, file numerous consolidated and separate income tax returns within and outside the U.S.  For all of our U.S. subsidiaries, we file a consolidated federal income tax return.   Income from continuing operations before income taxes is as follows: (In millions) 2025 2024 2023 U.S. $ 903   $ 739   $ 905 Non-U.S. 234   204   182 Income from continuing operations before income taxes $ 1,137   $ 943   $ 1,087 Income tax expense is summarized as follows: (In millions) 2025 2024 2023 Current: Federal $ ( 7 ) $ 84   $ 267 State 8   21   18 Non-U.S. 58   61   72 Total current 59   166   357 Deferred: Federal 165   ( 34 ) ( 181 ) State ( 6 ) ( 24 ) 1 Non-U.S. ( 4 ) 10   ( 12 ) Total deferred 155   ( 48 ) ( 192 ) Total income tax expense (benefit): Federal 158   50   86 State 2   ( 3 ) 19 Non-U.S. 54   71   60 Total income tax expense $ 214   $ 118   $ 165 64 Table o f Contents In 2025, we adopted Accounting Standards Update 2023-09 – Income Taxes (Topic 740): Improvements to Income Tax Disclosures , which requires disclosure of disaggregated information about a reporting entity’s effective tax rate reconciliation as well as information on income taxes paid. This standard has been adopted on a prospective basis and the new presentation of the U.S. Federal statutory income tax rate to our effective tax rate for 2025 is provided below. 2025 (Dollars in millions) Amount Percentage U.S. Federal statutory income tax rate $ 239   21.0   % State and local income taxes, net of Federal income tax effects* 2   0.2   % Foreign tax effects 6   0.5   % Effect of cross-border tax laws ( 2 ) ( 0.2 ) % Tax credits - research and development ( 36 ) ( 3.2 ) % Non-taxable or nondeductible items: Share-based compensation 29   2.6   % Other 6   0.5   % Changes in unrecognized tax benefits: Audit settlement ( 17 ) ( 1.5 ) % Other 3   0.3   % Other adjustments ( 16 ) ( 1.4 ) % Effective income tax rate $ 214   18.8   %
• State income taxes for Kansas and Texas comprise the majority (greater than 50%) of this category. In 2025, an $ 18 million benefit was recognized related to the enactment of a single sales factor apportionment in Kansas. For 2025, income tax payments, net of refunds by jurisdiction totaled $ 19 million for the U.S. Federal jurisdiction, $ 13 million for the states and $ 72 million for non-U.S. jurisdictions, which included $ 23 million, $ 18 million, $ 8 million, $ 6 million and $( 5 ) million in Canada, Mexico, China, Czech Republic and Spain, respectively. A reconciliation of the U.S. Federal statutory income tax rate to our effective income tax rate for prior years is provided below. 2024 2023 U.S. Federal statutory income tax rate 21.0 % 21.0 % Increase (decrease) resulting from: State income taxes, net of Federal tax benefit ( 0.2 )% 1.4 % Non-U.S. tax rate differential and foreign tax credits 2.1 % 1.5 % Research and development tax credits ( 5.4 )% ( 4.7 )% Uncertain tax positions release for 2012 to 2017 IRS audit ( 2.9 )% — % Foreign-derived intangible income deduction ( 1.7 )% ( 3.2 )% Other, net ( 0.4 )% ( 0.8 )% Effective income tax rate 12.5 % 15.2 % Unrecognized Tax Benefits Our unrecognized tax benefits represent tax positions for which reserves have been established, with unrecognized state tax benefits reflected net of applicable federal tax benefits. If our unrecognized tax benefits were recognized in future periods, they would favorably impact our effective tax rate. A reconciliation of these unrecognized tax benefits is as follows: (In millions) 2025 2024 2023 Balance at beginning of year $ 215   $ 222   $ 231 Additions for tax positions related to current year 19   17   16 Additions for tax positions of prior years —   4   3 Reductions for tax positions of prior years ( 1 ) —   ( 28 ) Reductions for settlements ( 17 ) ( 28 ) — Balance at end of year $ 216   $ 215   $ 222 In November 2024, we received a Revenue Agent Report (RAR) from the Internal Revenue Service (IRS) for the tax years 2012 to 2017 that proposed adjustments related to research and development tax credits generated on amended returns filed in 2019 and 2021. We disagree with the proposed adjustments and are vigorously contesting them through the IRS’s Office of Appeals and, if necessary, will continue with legal proceedings. We believe it is more likely than not that we will prevail on our refund claim for 65 Table o f Contents these credits and that our allowance for uncertain tax positions related to this matter is adequate. In connection with the RAR for these years, other tax positions were effectively settled, resulting in a benefit upon the reversal of $ 27 million of uncertain tax positions in the fourth quarter of 2024. A tax benefit of $ 17 million was recorded in 2025 related to the effective settlement of other uncertain tax positions. We are currently under examination by the IRS for the tax years 2018 to 2021. In the normal course of business, we are subject to examination by tax authorities throughout the world. We are generally no longer subject to state and local income tax examinations for years before 2019 and non-U.S. income tax examinations for years before 2012. Deferred Taxes The significant components of our net deferred tax assets/(liabilities) are provided below: (In millions) January 3, 2026 December 28, 2024 Capitalized research and development expenditures $ 459   $ 631 U.S. operating loss and tax credit carryforwards (a) 232   212 Accrued liabilities (b) 201   224 Obligation for pension and postretirement benefits 130   109 Operating lease liabilities 102   93 Non-U.S. operating loss and tax credit carryforwards (c) 82   88 Deferred compensation 70   94 Prepaid pension benefits ( 721 ) ( 562 ) Property, plant and equipment, principally depreciation ( 186 ) ( 198 ) Amortization of goodwill and other intangibles ( 157 ) ( 184 ) Operating lease right-of-use assets ( 99 ) ( 90 ) Valuation allowance on deferred tax assets ( 76 ) ( 82 ) Other, net ( 25 ) ( 74 ) Deferred taxes, net $ 12   $ 261 (a) At January 3, 2026, U.S. operating loss and tax credit carryforward benefits of $ 184 million expire through 2045 if not utilized and $ 48 million may be carried forward indefinitely. (b) Accrued liabilities include warranty reserves, self-insured liabilities and interest. (c) At January 3, 2026, non-U.S. operating loss and tax credit carryforward benefits of $ 73 million may be carried forward indefinitely. We believe earnings during the period when the temporary differences become deductible will be sufficient to realize the related future income tax benefits. For those jurisdictions where the expiration date of tax carryforwards or the projected operating results indicate that realization is not more than likely, a valuation allowance is provided. The following table presents the breakdown of our deferred taxes: (In millions) January 3, 2026 December 28, 2024 Manufacturing group: Deferred tax assets, net of valuation allowance $ 145   $ 394 Deferred tax liabilities ( 123 ) ( 96 ) Finance group – Deferred tax liabilities ( 10 ) ( 37 ) Net deferred tax asset $ 12   $ 261 Non-U.S. income taxes have not been provided for on basis differences in certain investments, primarily as a result of unremitted earnings in foreign subsidiaries that are indefinitely reinvested. Should these earnings be distributed in the future in the form of dividends or otherwise, we would be subject to withholding and local taxes to the applicable non-U.S. jurisdictions. 66 Table o f Contents Note 17. Commitments and Contingencies We are subject to actual and threatened legal proceedings and other claims arising out of the conduct of our business, including proceedings and claims relating to commercial and financial transactions; government contracts; alleged lack of compliance with applicable laws and regulations; disputes with suppliers, production partners or other third parties; product liability; patent and trademark infringement; employment disputes; and environmental, health and safety matters. Some of these legal proceedings and claims seek damages, fines or penalties in substantial amounts or remediation of environmental contamination. As a government contractor, we are subject to audits, reviews and investigations to determine whether our operations are being conducted in accordance with applicable regulatory requirements. Under federal government procurement regulations, certain claims brought by the U.S. Government could result in our suspension or debarment from U.S. Government contracting for a period of time. On the basis of information presently available, we do not believe that existing proceedings and claims will have a material effect on our financial position or results of operations. In the ordinary course of business, we enter into standby letter of credit agreements and surety bonds with financial institutions to meet various performance and other obligations.  These outstanding letter of credit arrangements and surety bonds aggregated to approximately $ 380 million and $ 336 million at January 3, 2026 and December 28, 2024, respectively. Environmental Remediation As with other industrial enterprises engaged in similar businesses, we are involved in a number of remedial actions under various federal and state laws and regulations relating to the environment that impose liability on companies to clean up, or contribute to the cost of cleaning up, sites on which hazardous wastes or materials were disposed or released.  Our accrued environmental liabilities relate to installation of remediation systems, disposal costs, U.S. Environmental Protection Agency oversight costs, legal fees, and operating and maintenance costs for both currently and formerly owned or operated facilities.  Circumstances that can affect the reliability and precision of the accruals include the identification of additional sites, environmental regulations, level of cleanup required, technologies available, number and financial condition of other contributors to remediation and the time period over which remediation may occur. We believe that any changes to the accruals that may result from these factors and uncertainties will not have a material effect on our financial position or results of operations. Based upon information currently available, we estimate that our potential environmental liabilities are within the range of $ 45 million to $ 155 million. At January 3, 2026, environmental reserves of $ 80 million have been established to address these specific estimated liabilities. We estimate that we will likely pay our accrued environmental remediation liabilities over the next  ten years  and have classified $ 15 million as current liabilities. In 2025, 2024 and 2023, to evaluate and remediate contaminated sites, we incurred expense, net of recoveries received, of $ 17 million, $ 9 million and $ 8 million, respectively. Note 18. Supplemental Cash Flow Information Our cash payments and receipts are as follows: (In millions) 2025 2024 2023 Interest paid: Manufacturing group $ 135   $ 124   $ 110 Finance group 17   18   12 Net income taxes paid: Manufacturing group 92   181   338 Finance group 12   10   14 67