TXT 10-K & 10-Q changes, risk factors and insider trading

During 2024,2025, we derived approximately 25%27% of our revenues from sales to a variety of U.S. Government entities. Our revenues from the U.S. Government largely result from contracts awarded to us under various U.S. Government defense-related programs. The MV-75 program at Bell represents a significant and growing portion of our U.S. Government revenues and backlog. Bell has significantly increased and will continue to increase its investments in the resources, facilities and personnel applied to the MV-75 program. Considerable uncertainty exists regarding how future budget and program decisions will develop. We cannot predict the impact on existing, follow-on or future programs from changes in the threat environment, defense spending levels, government priorities, political leadership, procurement practices, inflation and other macroeconomic trends, military strategy, or broader societal changes. Significant changes in national and international priorities for defense spending could affect the funding, or the timing of funding, of our programs, which could negatively impact our results of operations and financial condition. In particular, a material reduction or delay in funding of the MV-75 program could have a material adverse effect on our cash flows, results of operations and financial condition.

The funding of U.S. Government defense programs is subject to congressional appropriation decisions and the U.S. Government budget process which includes enacting relevant legislation, such as appropriations bills and accords on the debt ceiling. Although multiple-year contracts may be planned in connection with major procurements, Congress generally appropriates funds on a fiscal year basis even though a program may continue for several years. Consequently, programs often are only partially funded initially, and additional funds are committed only as Congress makes further appropriations. Further uncertainty with respect to ongoing programs could also result in the event that the U.S. Government finances its operations through temporary funding measures such as “continuing resolutions” rather than full-year appropriations or ifwhen a government shutdown were to occuroccurs and were to continuecontinues for an extended period of time. If we incur costs in advance or in excess of funds committed on a contract, we are at risk for non-reimbursement of those costs until additional funds are appropriated. The reduction, termination or delay in the timing of funding for U.S. Government programs for which we currently provide or propose to provide products or services from time to time has resulted and, in the future, may result in a loss of anticipated revenues. A loss of such revenues could materially and adversely impact our results of operations and financial condition. In addition, because our U.S. Government contracts generally require us to continue to perform even if the U.S. Government is unable to make timely payments, we may need to finance our continued performance for the impacted contracts from our other resources on an interim basis. An extended delay in the timely payment by the U.S. Government could have a material adverse effect on our liquidity.

The U.S. Government typically can terminate or modify any of its contracts with us either for its convenience or if we default by failing to perform under the terms of the applicable contract. In the event of termination for the U.S. Government’s convenience, contractors are generally protected by provisions covering reimbursement for costs incurred on the contracts and profit on those costscosts. butHowever, contractors are not automatically entitled to reimbursement for capital investments made for production facilities and other resources necessary to accommodate a large program such as the MV-75 or for the anticipated profit that would have been earned had the contract been completed. A termination arising out of our default for failure to perform could expose us to liability, including but not limited to, all costs incurred under the contract plus potential liability for re-procurement costs in excess of the total original contract amount, less the value of work performed and accepted by the customer under the contract. Such an event could also have an adverse effect on our ability to compete for future contracts and orders. If any of our contracts are terminated by the U.S. Government whether for convenience or default, our backlog would be reduced by the expected value of the remaining work under such contracts. We also enter into “fee for service” contracts with the U.S. Government where we retain ownership of, and consequently the risk of loss on, aircraft and equipment supplied to perform under these contracts. Termination of these contracts could materially and adversely impact our results of operations. On contracts for which we are teamed with others and are not the prime contractor, the U.S. Government could terminate a prime contract under which we are a subcontractor, irrespective of the quality of our products and services as a subcontractor. In addition, in the event that the U.S. Government is unable to make timely payments, failure to continue contract performance places the contractor at risk of termination for default. Any such event could have a material adverse effect on our cash flows, results of operations and financial condition.

We must comply with and are affected by laws and regulations relating to the formation, administration and performance of U.S. Government contracts. These laws and regulations, among other things, require certification and disclosure of all cost and pricing data in connection with contract negotiation, define allowable and unallowable costs and otherwise govern our right to reimbursement under certain cost-based U.S. Government contracts, and safeguard and restrict the use and dissemination of classified information, covered defense information, and the exportation of certain products and technical data. New laws, regulations or procurement requirements or changes to current ones (including, for example, regulations related to cybersecurity and the recently issued Executive Order relating to underperformance of U.S. defense contracts, investment in defense production capacity and possible limitations on dividends and share buybacks) can significantly increase our costs, thereby reducing our profitability.profitability or otherwise adversely impacting our results of operations, financial condition, or shareholder returns. Our failure to comply with procurement regulations and requirements could allow the U.S. Government to suspend or debar us from receiving new contracts for a period of time, reduce the value of existing contracts, issue modifications to a contract, withhold cash on contract payments, and control and potentially prohibit the export of our products, services and associated materials, any of which could negatively impact our results of operations, financial condition or liquidity. A number of our U.S. Government contracts contain provisions that require us to make disclosure to the Inspector General of the agency that is our customer if we have credible evidence that we have violated U.S. criminal laws involving fraud, conflict of interest, or bribery; the U.S. civil False Claims Act; or received a significant overpayment under a U.S. Government contract. Failure to properly and timely make disclosures under these provisions may result in a termination for default or cause, suspension and/or debarment, and potential fines.

To continue to grow our revenues and segment profit, we must successfully develop new products and technologies or modify our existing products and technologies for our current and future markets. Our future performance depends, in part, on our ability to identify emerging technological trends and customer requirements and to develop and maintain competitive products and services. Artificial intelligence technologies have developed rapidly and our business may be adversely affected if we cannot successfully integrate the technology into our internal business processes and product and service offerings in a timely, cost-effective, compliant and responsible manner. Delays or cost overruns in the development and acceptance of new products or certification of new aircraft and other products occur from time to time and could adversely affect our results of operations. These delays or cost overruns could be caused by unanticipated technological hurdles, production changes to meet customer demands, unanticipated difficulties in obtaining required regulatory certifications of new aircraft or other products, or failure on the part of our suppliers to deliver components as agreed. We also could be adversely affected if our research and development efforts are less successful than expected or if these efforts require significantly more funding to achieve our goals than anticipated. In particular, the success of the business activities and research and development initiatives begun at Textron eAviation depends in large part, on our ability to develop and certify new electric and hybrid electric aircraft products in order to achieve our long-term strategy of offering a family of sustainable aircraft for urban air mobility, general aviation, cargo and special mission roles. In addition, new products and technologies could generate unanticipated safety or other concerns resulting in expanded product liability risks, potential product recalls and other regulatory issues that could have an adverse impact on us. Furthermore, because of the lengthy research and development cycle involved in bringing certain of our products to market, we cannot predict the economic conditions that will exist when any new product is complete, and the market for our product offerings does not always develop or continue to expand as we anticipate.

Risks arising from uncertainty in globalGlobal macroeconomic conditions maycould harmnegatively impact our business.

We are sensitive to globalGlobal macroeconomic conditions.conditions have negatively impacted our business in the past and could in the future negatively impact our business. Negative macroeconomic factors may have an adverse effect on our business, results of operations and financial condition, as well as on our distributors, customers, subcontractors and suppliers, and on activity in many of the industries and markets we serve. We cannot predict changes in worldwide or regional economic or political conditions and government policies as such factors are highly volatile and beyond our control. If current macroeconomic pressures, including from inflation and labor and supply chain challenges, continue or if global macroeconomic conditions deteriorate and remain at depressed levels for extended periods, our business, results of operations and financial condition could be materially adversely affected. In addition, changes in laws or policies governing the terms of foreign trade, and in particularincluding increased trade restrictions, tariffs or taxes on imports from countries where we manufacture or sell our products or from where we import products or raw materials (either directly or through our suppliers) could adversely impact our competitive position, business operations andor financial results. In particular, recent changes to global tariff policies have created significant uncertainty with respect to trade policies, treaties and tariffs. 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 2026, the USMCA is subject to a mandatory six-year joint review, during which the United States, Canada, and Mexico will assess whether the agreement continues to serve their respective economic and strategic interests. There can be no assurance that this review will conclude with the continuation of the trilateral agreement in its current form or at all. The termination of the agreement or renegotiation of the agreement with terms less favorable to us could result in the loss or reduction of preferential tariff treatment which could increase our costs and create compliance and supply-chain disruption risks. These developments could adversely impact us, our distributors, customers, subcontractors or suppliers, which could have a material adverse effect on our financial position, results of operations or cash flows. See Management's Discussion and Analysis of Financial Condition and Results of Operations for further discussion of the impact of these tariffs.

Our information technology (IT) and related systems are critical to the efficient operation of our business and essential to our ability to perform day to dayday-to-day processes. We routinely face persistent security threats, including threats to our IT infrastructure and unlawful attempts to gain access to our confidential, classified or otherwise proprietary information via phishing/malware campaigns and other cyberattack methods, as well as threats to the physical security of our facilities and employees. The threats we face varyare fromcontinuous, those common to most industries, to attacks by more advancedevolving and persistent,vary in degree of severity and sophistication. These threats include advanced, persistent threats from highly organized adversaries, including cybercrime syndicates, nation state actors,actors and hacktivists, which target us for the national security information in our possession, for our role in developing advanced technology systems or with the goal of committing fraudulent activity. Some of these threats are related to the geopolitical environment and have, therefore, grown in number and changed in focus due to recent and evolving conflicts. Our customers, suppliers and subcontractors are likewise targeted, and attack methods continue to evolve. Some cyberattacks depend on human error or manipulation, including phishing attacks or schemes that use social engineering or artificial intelligence to gain access to systems or carry out disbursement of funds or other frauds. Developments in artificial intelligence and machine learning provide threat actors with the capability to use more sophisticated means to attack our systems and may exacerbate cybersecurity risk.

During 2024, we derived approximately 29% of our revenues from international business, including U.S. exports. Conducting business internationally exposes us to additional risks than if we conducted our business solely within the U.S. We maintain manufacturing facilities, service centers, supply centers and other facilities worldwide, including in various emerging market countries. Risks related to international operations include import, export, economic sanctions and other trade restrictions; changing U.S. and foreign procurement policies and practices; changes in international trade policies, including higher tariffs on imported goods and materials and renegotiation of free trade agreements; potential retaliatory tariffs imposed by foreign countries against U.S. goods; impacts on our non-U.S. suppliers and customers due to acts of war or terrorism occurring internationally; restrictions on technology transfer; difficulties in protecting intellectual property; increasing complexity of employment and environmental, health and safety regulations; foreign investment laws; exchange controls; repatriation of earnings or cash settlement challenges; compliance with increasingly rigorous data privacy and protection laws; competition from foreign and multinational firms with home country advantages; economic and government instability; acts of industrial espionage, acts of war and terrorism and related safety concerns. The impact of any one or more of these or other factors could adversely affect our business, financial condition or operating results.

As a distributor of consumer products in the U.S., certain of our products are subject to the Consumer Product Safety Act, which empowers the U.S. Consumer Product Safety Commission (CPSC) to exclude from the market products that are found to be unsafe or hazardous. Under certain circumstances, the CPSC has in the past and could require in the future require us to repair, replace or refund the purchase price of one or more of our products, or potentially even discontinue entire product lines. We also may voluntarily take such action and, from time to time, have done so, but within strictures recommended by the CPSC. The CPSC also can impose fines or penalties on a manufacturer for non-compliance with its requirements. Furthermore, failure to timely notify the CPSC of a potential safety hazard can result in significant fines being assessed against us. Any repurchases or recalls of our products or an imposition of fines or penalties could be costly to us and could damage the reputation or the value of our brands. Additionally, laws regulating certain consumer products exist in some states, as well as in other countries in which we sell our products, and more restrictive laws and regulations could be adopted in the future.

Increased worldwide public awareness and concern regarding global climate change has resulted and is likely to continue to result in more legislative and regulatory efforts, in the U.S., the European Union and in other jurisdictions in which we operate, in an effort to address the negative impacts of climate change. Recently enacted laws and regulations include, and future such laws and regulations may include, more prescriptive required reporting on environmental metrics, climate change related risks and associated financial and other impacts, as well as increased oversight of and reporting on our supply chain and other compliance requirements. We expect that compliance with such laws and regulations will require additional internal and external resources. Stricter limits on greenhouse gas emissions generated by our facilities or by our products that produce carbon emissions, carbon pricing mechanisms and/or energy taxes could also be imposed. Compliance with stricter limits may necessitate larger investment in product development and manufacturing equipment and/or facilities, as well as sourcing from new suppliers and/or higher costs from existing suppliers. These increased regulatory requirements are expected to increase our direct and indirect costs and could negatively impact our business, results of operations, financial condition and competitive position. Our failure to adequately comply with such laws and regulations could jeopardize our ability to receive contract awards from the U.S. government and other customers.

Approximately 7,400,7,700, or 28%,29%, of our U.S. employees are represented by labor unions under various collective bargaining agreements with varying durations and expiration dates, and many of our non-U.S. employees are represented by organized councils. From time to time, ourOur collective bargaining agreements expire in accordance with their terms and are subject to renegotiation at that time. We may not be able to negotiate successor collective bargaining agreements upon expiration without experiencing labor disputes, including strikes or work stoppages, or we may be unable to renegotiate such contracts on favorable terms. For example, on September 21, 2024, Textron Aviation’s largest union rejected a proposed new contract and engaged in a strike that had an adverse effect on Textron Aviation's ability to meet its production and delivery schedules, and negatively impacted revenues and segment profit in 2024. If we again experience any extended interruption of operations at any of our facilities as a result of labor disputes, strikes or other work stoppages, our business, financial condition or results of operations could be adversely affected. In addition, the workforces of many of our suppliers and customers are represented by labor unions. Work stoppages or strikes at the plants of our key suppliers could disrupt our manufacturing processes; similar actions at the plants of our customers could result in delayed or canceled orders for our products. Any of these events could adversely affect our results of operations.

•Returned $1.1$822 billionmillion to our shareholders through the repurchase of 12.910.7 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 20242025 compared with 20232024 is provided below, while a discussion of 20232024 compared with 20222023 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 30,28, 2023.2024. 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.

Revenues increased $19$1.1 millionbillion in 2024,2025, compared with 2023,2024, largely due to the following factors:

•Higher Bell revenues of $432$703 million, largelydue reflectingto higher military aircraft and support programs revenues of $347$570 million, primarily duerelated to the MV-75 program and military sustainment programs, and higher volumecommercial onrevenues theof FLRAA$133 program, partially offset by lower volume on the V-22 program.million.

•Lower Industrial revenues of $326$302 million, duewith to lower revenues of $263$294 million at Textron Specialized Vehicles, principallylargely reflecting the impact from the disposition of the Powersports business in theApril powersports2025, andas personaldiscussed transportationin vehiclesNote product lines due15 to reducedthe demandConsolidated inFinancial their end markets,Statements, and lower revenuesvolume ofand $63mix, millionprimarily atin Kautex.golf products.

Cost of sales includes cost of products and services sold for the Manufacturing group. In 2024,2025, cost of sales increased $365$904 million, 3%,8%, compared with 2023. The increase in cost was2024, largely due to higher net volume and mix and a $299$281 million impact from inflationinflation, andpartially higheroffset LIFO inventory provision and a $38 million inventory valuation charge to write down inventory to its net realizable value at Textron Specialized Vehicles as discussed in Note 15 toby the Consolidatedimpact Financialfrom Statementsthe ondisposition pageof 62.the Powersports business.

Research and development costs decreasedincreased $79$30 million, 14%,6%, in 2024,2025, compared with 2023,2024. The higher research and development costs included an increase of $56 million at Bell, largely reflecting lower costs in 2024 due to the winddownwind down of the Future Attack Reconnaissance Aircraft Program at the Bell segment,program, partially offset by a $17decrease of $21 million increase at the Textron eAviation segment, largely due to developmenta effortsreduction in costs on hybridcertain anddevelopment electric propulsion aircraft.projects.

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 2024,2025, interest expense, net increased $20$29 million, 26%,30%, compared with 2023,2024, primarily due to anhigher increase in the weighted-average interest rate of ouraverage debt outstanding and $7 million in lower interest income. For 2024,2025, 20232024 and 2022,2023, gross interest expense totaled $146$164 million, $133$146 million and $129$133 million, respectively.

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 62.63.

Non-service components of pension and postretirement income, net increased by $26$3 million, 11%,1%, in 2024,2025, compared with 2023. The increase is based on our annual valuation at the end of 2023 and is primarily driven by the impact of actual pension asset returns that exceeded our expected return on plan assets.2024.

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 on page 63. In 2023, the effective tax rate of 15.2% was lower than the U.S. federal statutory tax rate of 21%, largely due to the favorable impact of research and development credits and tax deductions for foreign-derived intangible income.Statements.

Approximately 25%27% of our 20242025 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.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’s revenues decreasedincreased $89$671 million, 2%,13%, in 2024,2025, compared with 2023,2024, reflecting lowerhigher 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 of $270 million, which was principally a result of the strike discussed below, partially offset byand higher pricingpricing. ofThe $181increase million.in Aircraftvolume revenuesand decreasedmix $203is million, 6%,largely due to lower volume and mix, largely from Citationhigher jet and commercial turboprop deliveries,volume. partially offset byThe higher pricing.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 2024,2024. comparedThe with 168 Citation jets and 153 commercial turbopropsincrease in 2023. Aftermarketaftermarket parts and services revenues increased $114 million, 6%,was due to higher pricing and volume.

Textron Aviation’s segmentcost profitof decreasedsales $83increased $535 million, 13%, in 2024,2025, compared with 2023,2024, primarilylargely duereflecting to lowerhigher volume and mix and the manufacturing inefficiencies discussed above, partially offset by higher pricing, netinflation of inflation.$167 million.

Bell’s military aircraft and support programs revenues increased $347$570 million, 20%,28%, in 2024,2025, compared with 2023,2024, primarily due to higher volume on the FLRAAMV-75 program,program partiallyand offsetmilitary bysustainment lower volume on the V-22 program.programs. Commercial helicopters, parts and services revenues increased $85$133 million, 6%.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, compared with 171 commercial helicopters in 2023.2024.

Bell's cost of sales increased $507$638 million, 21%,22%, in 2024,2025, compared with 2023,2024, primarily due to the higher volume and mix discusseddescribed above.

Bell's research and development costs decreasedincreased $95$56 million, 49%,58%, in 2024,2025, compared with 2023,2024, largely reflecting lower costs in 2024 due to the winddownwind down of the Future Attack Reconnaissance Aircraft Program.program.

Bell’s segment profit increaseddecreased $50$7 million, 16%,2%, in 2024,2025, compared with 2023,2024, primarilyreflecting due to lowerhigher research and development costs, ascosts described above, partially offset by an unfavorable impact from mix ashigher volume increasedand mix. Bell's profit margin decreased 180 basis points, largely reflecting higher volume on lower margin FLRAAMV-75 development activities while volume decreased onand higher marginresearch V-22and programdevelopment revenues.costs.

BacklogBell's backlog increased $2.7$326 billion,million, 56%,4%, atin Bell2025, compared with 2024, due to orders in excess of revenues recognized and deliveries,deliveries. largelyNew relatedorders toincluded a $1.3 billion award for the FLRAAprototype programtesting discussedand above.evaluation phase of the MV-75 program.

Textron Systems revenues and segment profit increased $6 million and $7 million, respectively, in 2024,2025, compared with 2023.2024. The impactincrease onin revenues reflected higher pricing, partially offset by lower volume relatedand tomix. The decrease in volume and mix largely reflects the impact of the cancellation of the Shadow program inand the first quartertermination of 2024certain wasU.S. largelyGovernment development programs, partially offset by higher volume on the Ship-to-Shore Connector program.

Textron Systems’ backlogresearch increasedand $644development costs decreased $6 million, 33%,12%, in 2024,2025, compared with 2023,2024, reflectingprimarily ordersdue to a reduction in excesscosts ofon revenuescertain recognizedU.S. andGovernment deliveries,development which included new contract awards for the Ship-to-Shore Connector program.programs.

Industrial segment revenues decreased $326$302 million, 8%,9%, in 2024,2025, compared with 2023, largely due to lower volume and mix.2024. Textron Specialized Vehicles' revenues decreased $263$294 million, 14%,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, principallypartially inoffset theby powersportsa favorable impact from foreign exchange rate fluctuations and personalhigher transportation vehicles products due to reduced demand in their end markets. Kautex revenues decreased $63 million, 3%, largely due to lower volume.pricing.

Industrial's cost of sales decreased $228$260 million, 7%,9%, in 20242025 compared with 2023,2024, primarilyprincipally reflecting the impact offrom the disposition and lower volume and mix.mix, partially offset by higher inflation of $44 million.

SegmentIndustrial's segment profit for the Industrial segment decreased $77$6 million, 34%,4%, in 2024,2025, compared with 2023,2024, largelyprimarily due to a $105 million impact fromreflecting lower volume and mix,mix described above, partially offset by $22the millionimpact infrom the disposition and a favorable impact from manufacturing efficienciesefficiencies, andwhich $21 million in lower selling and administrative expense and research and development costs, largely due toincluded cost reductionreductions resulting from restructuring activities.

Textron eAviation segment revenues increaseddecreased $1$6 million, 3%,18%, in 2024,2025, compared with 2023.2024, largely due to lower volume and mix. Research and development costs increaseddecreased $17$21 million, 37%, largely33%, due to thea rampreduction upin ofcosts on certain development efforts on hybrid and electric propulsion aircraft.projects. Segment loss increaseddecreased $13 million in 2024,2025, compared with 2023,2024, primarily reflecting the higherlower research and development costs.costs, partially offset by lower volume and mix.

Finance segment revenues decreasedincreased $5$25 million and segment profit decreasedincreased $11$14 million in 2024,2025, compared with 2023.2024. 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 includedincreased recoveries of $10 million and $18$12 million in 20242025, andcompared 2023,with respectively.2024, Thelargely decrease in segment profit was primarily due to $8 million inreflecting lower recoveries of credit$9 losses.million.

On October 16, 2025, Textron hasentered 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 20272030 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 and December 30, 2023,2024, there were no amounts borrowed against theeither facilityfacility. andAt January 3, 2026, there were $9 million of outstandingno 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 1,2036 2024,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 4.30%4.00% notes due in March 2026, and on March 3, 2025, we repaid our $350 million 3.875% Notes due in March 2024.2025.

Cash flows from operating activities were $1.3 billion in 2025, compared with $1.0 billion in 2024, compared with $1.3 billion in 2023.2024. The $262$319 million decreaseincrease in cash flows was largelyprimarily due to higher earnings, lower net income tax payments, changes in working capital and lowera earnings, partially offset by $157$25 million individend lowerreceived netfrom taxthe payments.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 $181$92 million and $338$181 million in 20242025 and 2023,2024, respectively. Pension contributions were $44$41 million and $45$44 million in 20242025 and 2023,2024, respectively.

In 20242025 and 2023, investing2024, cash flows used in investing activities included capital expenditures of $364$383 million and $402$364 million, respectively, partially offset by net proceeds from corporate-owned life insurance policies of $85$80 million and $40$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.

InOn JulyFebruary 2023,11, Textron's2026, pursuant to a delegation by our Board of DirectorsDirectors, Textron's Audit Committee approved a program for the repurchase of up to 3525 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 there were 15.6 million shares remaining underreplaced the programprior at2023 Decembershare 28,repurchase 2024.program, which was utilized in 2025 for repurchases.

Dividend payments to shareholders totaled $12$18 million and $16$12 million in 20242025 and 2023,2024, respectively. Due to the timing of our fiscal year-end, we made five dividend payments in 2025, compared with three dividend payments in 2024, compared with four dividend payments in 2023.2024.

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 $133$208 million and $169$133 million in 20242025 and 2023,2024, respectively,respectively. partiallyIn offset2025, byinvesting financecash receivableflows originationsalso included $72 million of $130proceeds millionfrom andthe $160disposition million,of respectively.non-captive assets. Cash flows used in financing activities included payments on long-term and nonrecourse debt of $16$13 million and $37$16 million in 20242025 and 2023,2024, respectively. Dividends paid to the Manufacturing group totaled $25 million in 2025.

Our business, financial condition and results of operations are subject to various risks. Investors should review and consider the risk factors previously disclosed in the 2025 Annual Report on Form 10-K for the year ended January 3, 2026, and in the Quarterly Report on Form 10-Q for the quarter ended April 4, 2026, along with the additional risk factorfactors included below. We may disclose changes to these risk factors or additional risk factors in our future filings with the SEC as the business environment and conditions change. Additional risks and uncertainties not presently known to us or that we currently believe are not material also may adversely impact our business, financial condition, results of operations and cash flows.

The ongoing conflict in the Middle East has resulted in significant volatility in the global energy and commodity markets, increased energy and shipping costs, disruptions to international shipping lanes (including the Strait of Hormuz) and heightened risks of supply-chain interruptions, cyber-attacks and terrorism. In addition, some of our commercial aircraft delivery schedules and order activity in the Middle East and surrounding regions are at risk of being disrupted as a result of hostility-related events. Certain of our direct or indirect suppliers also have been negatively impacted by these events, resulting in increased costs to us for certain materials and components. The continuation or escalation of hostilities in the Middle East region could adversely affect global economic conditions, lead to other delivery schedule, order activity and/or supply chain disruptions, result in continued elevated transportation and energy costs and other inflationary pressures or otherwise negatively impact our operations. Sustained elevated energy costs, including the cost of jet fuel, could adversely impact demand and/or utilization of our aircraft and rotorcraft products. Furthermore, the potential for retaliatory acts of cyberwarfare against U.S. defense companies in response to the hostilities could result in increased cyber-attacks against us. The impact of any one or more of these or other factors could adversely affect our business, financial condition or operating results.

We have customer concentration with the U.S. Government; reduction in U.S. Government defense spending canor a material reduction or delay in funding of the MV-75 program could adversely affect our results of operations and financial condition.

During 2025, we derived approximately 27% of our revenues from sales to a variety of U.S. Government entities. Our revenues from the U.S. Government largely result from contracts awarded to us under various U.S. Government defense-related programs. The MV-75 program at Bell represents a significant and growing portion of our U.S. Government revenues and backlog. Bell has significantly increased and expects to continue to increase its investments in the resources, facilities and personnel applied to the MV-75 program. However, as described in Note 13.12. Commitments and Contingencies - MV-75 Program,Program - Funding, subsequent to the end of our second quarter, in mid-July 2026, Bell exhausted substantially all currently available fiscal 2026 MV-75 program funds. While the U.S. Government hasis notifiedpursuing Bellan that,ATR shouldrequest Bellfor exhaust$350 allmillion availablein U.S. governmentadditional fiscal year 2026 programfunding funds prior tofor the MV-75 program, approval of additionalthe request is not guaranteed. The U.S. Government has advised that is not obligated to reimburse Bell for any costs incurred beyond the current obligated funding orallotted iffor the contract and that any performance beyond the allotted funds is at Bell’s own risk. If additional funding is not approved, Bell will be required to stop work on the program. There can be no assurance that this additional funding will be approved orand thatobligated, spendingwe reductioncould measuresincur atsignificant Bellunreimbursed willcosts enableand itrecognize toa continuesignificant tounfavorable workcumulative on thecatch-up program usingadjustment availableas programwell fundsas untilexperience receipt of the additional funds. A stop work order could result in program delays, supplier claims, unrecoverable costs or otheran adverse consequencescash andflow could materially impact the Company’s financial results.impact. In addition, while the current Future Years Defense Program indicates a funding level for the MV-75 program of $2.3 billion for the Government’s fiscal 2027 year which begins October 1, 2026, considerable uncertainty exists regarding how future budget and program decisions will develop. We cannot predict the impact on existing, follow-on or future programs from changes in the threat environment, defense spending levels, government priorities, political leadership, procurement practices, inflation and other macroeconomic trends, military strategy, or broader societal changes. Significant changes in national and international priorities for defense spending could affect the funding, or the timing of funding, of our programs, which could negatively impact our results of operations and financial condition. In particular, a material reduction or delay in funding of the MV-75 program could have a material adverse effect on Bell’s and our cash flows, results of operations and financial condition.

BeginningSince inearly 2025, the United States has made various changes to its trade policy resulting in new or higher tariffs on goods imported from numerous countries. These tariffs were imposed under various legal authorities, including the International Emergency Economic Powers Act (IEEPA). We are principally a North American manufacturer and 69% of our 2025 revenues were generated in the U.S. Many of our aircraft materials and components qualify under the rules of the United States-Mexico-Canada Agreement 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 with operations in North America 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. To date, we have not experienced a material adverse impact from these tariffs.

On February 20, 2026, the U.S. Supreme Court ruled that tariffs imposed under the IEEPA were not authorized by the statute. While we currently believe the impact of this ruling on our financial results is not material, weWe will continue to evaluate itsthe potentialongoing effects,impact alongof withtariffs and any further developments or changes in global tariff policies on our business and financial position.

Revenues increased $389$111 million, 12%,3%, in the firstsecond quarter of 2026, compared with the firstsecond quarter of 2025. The revenue increase primarily included the following factors:

•Higher Bell revenues of $87$58 million,million due to higher military aircraft and support programs revenues of $161$47 million, largely from the MV-75 program, partially offset by lower volume on V-22 productionmillion and on military sustainment programs. The increase in military revenues was partially offset by lowerhigher commercial revenues of $74$11 million.

•LowerHigher Industrial revenues of $6$3 million, reflecting higher revenues of $53 million at Kautex, primarily due to a favorable impact from foreign exchange rate fluctuations, higher pricing and higher volume and mix, largely offset by lower revenues of $42$50 million at Textron Specialized Vehicles, largelymostly due to the impact from the disposition of the Powersports business in April 2025, partially offset by higher revenues of $36 million at Kautex, primarily due to a favorable impact from foreign exchange rate fluctuations and higher volume and mix.pricing.

Cost of sales includes cost of products and services sold for the Manufacturing group. Cost of sales increased $351$126 million, 13%,4%, in the firstsecond quarter of 2026, compared with the firstsecond quarter of 2025, largelyprimarily due to a $67 million impact from inflation and higher net volume and mix of $287$44 million and an $81 million impact from inflation and higher LIFO inventory provision, partially offset by the impact from the Powersports disposition.million. Gross margin as a percentage of Manufacturing revenues decreased 100 basis points in the firstsecond quarter of 2026, primarily due to lower margin at the Bell segment.

Research and development costs decreased $12$21 million, 9%,15%, in the firstsecond quarter of 2026, compared with the firstsecond quarter of 2025, primarilylargely due to a decrease of $11 million at the Bell segment, reflecting a $7reduction in costs on several programs, and a decrease of $6 million decreaseat the Textron Systems segment, due to a reduction in costs on certain U.S. Government development projects reported within corporate expenses as discussed in the Segment Analysis section below.programs.

Selling and administrative expense increased $23$8 million, 8%,3%, and $31 million, 5%, in the second quarter and first half of 2026, respectively, compared with the corresponding periods of 2025. The increase in selling and administrative expense in the first quarterhalf of 2026,2026 compared with the first quarter of 2025,was primarily due to higher share-based and other compensation expense.

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 the second quarter and first quarterhalf of 2026, interest expense, net increased $5$2 million, 17%,6%, and $7 million, 12%, respectively, compared with the firstcorresponding quarterperiods of 2025, primarily due to higher average debt outstanding. Gross interest expense totaled $43$40 million and $38$39 million in the firstsecond quarter of 2026 and 2025, respectively, and $83 million and $77 million in the first half of 2026 and 2025, respectively.

Our effective tax rate was 18.4% and 18.0% for the firstsecond quarter of 2026 and 2025 was 17.6% and 14.1%, respectively. In the first quarterhalf of 2026, therespectively. The effective tax rate was lower than the U.S. federal statutory rate of 21%, primarily due to the favorable impact of research and development credits and tax deductions for foreign-derived deduction eligible income, which replaced foreign-derived intangible income beginning in 2026. In the first quarter of 2025, the effective tax rate was lower than the U.S. federal statutory rate of 21%, largely due to the favorable impact of research and development credits and tax deductions for foreign-derived intangible income.

Textron Aviation’s revenues increased $269$22 million, 22%,1%, in the firstsecond quarter of 2026, compared with the firstsecond quarter of 2025, reflecting higher aircraft revenues of $221$17 million and higher aftermarket parts and services revenues of $48$5 million. The increase in aircraft revenues was primarily due to higher pricing, partially offset by lower volume and mix,mix. The decrease in volume and mix largely reflectingreflected higherlower Citation jet and defense volume, partially offset by higher commercial turboprop volume. We delivered 3740 Citation jets and 3544 commercial turboprops in the firstsecond quarter of 2026, compared with 3149 Citation jets and 3034 commercial turboprops in the firstsecond quarter of 2025. The increase in aftermarket parts and services revenues was due to higher volume and pricing.

Textron Aviation’s cost of sales increased $220$26 million, 24%,2%, in the firstsecond quarter of 2026, compared with the second quarter of 2025, primarily reflecting inflation of $47 million, partially offset by lower aircraft volume. Cost of sales increased $246 million, 12%, in the first quarterhalf of 2026, compared with the first half of 2025, primarily reflecting higher aircraft volume and inflation of $45$92 million.

Textron Aviation's selling and administrative expense increased $21$2 million, 21%,2%, in the second quarter of 2026, and increased $23 million, 11%, in the first quarterhalf of 2026, compared with the firstcorresponding quarterperiods of 2025,2025. The increase in the first half of 2026 was primarily due to higher compensation expense.

Textron Aviation's segment profit increaseddecreased $32$5 million, 26%,3%, in the firstsecond quarter of 2026, compared with the firstsecond quarter of 2025, primarily due to higheran unfavorable impact from manufacturing inefficiencies and lower aircraft volume and mix, partially offset by higher selling and administrative expense andlower warranty costs.

Bell’s military aircraft and support programs revenues increased $161$47 million, 25%,7%, in the firstsecond quarter of 2026, compared with the firstsecond quarter of 2025, largely due to higher volume on the MV-75 program, partially offset by lower volume on V-22H-1 production and onthe militaryMV-75 sustainment programs.program. Commercial helicopters, parts and services revenues decreasedincreased $74$11 million, 21%,3%, in the firstsecond quarter of 2026, compared with the firstsecond quarter of 2025, primarily due to lowerhigher volumepricing. and mix as weWe delivered 2036 commercial helicopters in the firstsecond quarter of 2026, compared with 2932 commercial helicopters in the firstsecond quarter of 2025.

Bell’s cost of sales increased $101$76 million, 13%,9%, and $177 million, 11%, in the second quarter and first quarterhalf of 2026, respectively, compared with the firstcorresponding quarterperiods of 2025, largely due to higher net volume and mix described above.

Bell'sBell’s segment profit decreased $18$5 million, 20%,6%, in the firstsecond quarter of 2026, compared with the firstsecond quarter of 2025, and its profit margin decreased 25090 basis points, largelyprimarily reflectingdue to an unfavorable impact from contract performance and from the mix of military programs described aboveabove, partially offset by lower research and lowerdevelopment commercial volume and mix.costs.

As the MV-75 program continues to accelerate,progress, 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. TheWe expect the overall MV-75 program willto continue to generate a positive profit margin after the adjustment.

Textron Systems’ revenues increased $39$23 million, 13%,7%, in the firstsecond quarter of 2026, compared with the firstsecond quarter of 2025, largelyprimarily due to higher volume on thearmored Ship-to-Shoreland Connector programvehicles and military training and support services provided by Airborne Tactical Advantage Company (ATAC), partially offset by lower net volume on other programs..

Textron Systems’ cost of salesrevenues increased $37$62 million, 17%,10%, in the first quarterhalf of 2026, compared with the first quarterhalf of 2025, primarily due to higher net volume describedon above.military training and support services provided by ATAC and the Ship-to-Shore Connector program.

Textron Systems’ segmentcost profitof sales increased $4$23 million, 11%,9%, and $60 million, 13%, in the second quarter and first quarterhalf of 2026, respectively, compared with the firstcorresponding quarterperiods of 2025, largelyprimarily due to higher net volume described above.

Industrial segment revenues decreasedincreased $6$9 million, 1%, in the firstsecond quarter of 2026, compared with the firstsecond quarter of 2025. Kautex revenues increased $17 million, 4%, largely due to a favorable impact from pricing and from foreign exchange rate fluctuations of $8 million. Textron Specialized Vehicles' revenues decreased $42$8 million, 12%, largely2%, reflecting alower $55volume millionand mix and the impact from the disposition of the Powersports business in April 2025.2025, Kautexpartially revenuesoffset increased $36 million, 8%, primarily due to a favorable impact of $20 million from foreign exchange rate fluctuations andby higher volume and mix.pricing.

Industrial's cost of sales decreased $17$1 million and $18 million, 3%,1%, in the second quarter and first half of 2026, respectively, compared with the corresponding periods of 2025. The decrease in the first quarterhalf of 2026, compared with the first quarter of 2025,2026 primarily reflectingreflected the impact from the disposition, partially offset by higher volume and mix discussed above and an unfavorable impact from foreign exchange rate fluctuations.fluctuations and higher net volume and mix discussed above.

Industrial's segment profit increased $10$5 million, 33%,9%, in the firstsecond quarter of 2026, compared with the firstsecond quarter of 2025, primarily due to manufacturinghigher efficiencies,pricing, whichnet includedof inflation, partially offset by lower volume and mix. Pricing, net of inflation includes $21 million of tariffs recovered in the benefitsecond quarter of cost2026 reductionsthat resultingwere frompreviously priorimposed yearunder restructuringthe activities.IEEPA as described in the Business Environment section on page 21.

Textron has a senior unsecured revolving credit facility for an aggregate principal amount of $1.0 billion, of which $100 million is available for the issuance of letters of credit. 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. At AprilJuly 4, 2026 and January 3, 2026, there were no amounts borrowed against the facility and there were no letters of credit issued and outstanding under the facility.

Cash flows from continuing operations for the Manufacturing group as presented in our Consolidated Statements of Cash Flows are summarized below:

Cash flows used in investing activities included $133$228 million and $56$134 million of capital expenditures in the first quarterhalf of 2026 and 2025, respectively. In the first quarterhalf of 2025, cash flows used in investing activities also included $31$57 million of net proceeds from corporate-owned life insurance policies.policies and $16 million of net proceeds from the disposition of the Powersports business.

Cash flows used in financing activities in the first quarterhalf of 2026 included $168$377 million of cash paid to repurchase an aggregate of 1.84.1 million shares of our common stock and $74$75 million of payments on long-term debt, partially offset by $56$61 million of proceeds from the exercise of stock options granted to employees. In the first quarterhalf of 2025, cash flows used in financing activities included $352 million of payments on long-term debt and $215$429 million of cash paid to repurchase an aggregate of 2.95.8 million shares of our common stock,stock largelyand $353 million of payments on long-term debt, partially offset by $495 million of net proceeds from the issuance of long-term debt.

The Finance group’s cash flows from investing activities included finance receivable originations of $49$71 million and $33$111 million in the first quarterhalf of 2026 and 2025, respectively, and collections on finance receivables totaling $34$115 million and $29$81 million, respectively. In the first quarterhalf of 2026,2026 and 2025, investing cash flows also included $24 million and $59 million of proceeds from the disposition of non-captive assets.assets, respectively. In the first half of 2025, financing activities included payments on long-term and nonrecourse debt of $11 million.

The consolidated cash flows from continuing operations after elimination of activity between the borrowing groups, are summarized below:

Cash flows used in investing activities in the first quarterhalf of 2026 included $133$228 million of capital expenditures, partially offset by $24 million of proceeds from the disposition of non-captive assets. In the first quarterhalf of 2025, cash flows used infrom investing activities included $56$59 million of capitalproceeds expenditures,from partiallythe offsetdisposition byof $31non-captive assets, $57 million of net proceeds from corporate-owned life insurance policies.policies and $16 million of net proceeds from the disposition of the Powersports business, offset by $134 million of capital expenditures.

Cash flows used in financing activities in the first quarterhalf of 2026 included $168$377 million of cash paid to repurchase shares of our outstanding common stock and $74$75 million of payments on long-term debt and nonrecourse debt, partially offset by $56$61 million of proceeds from the exercise of stock options granted to employees. In the first quarterhalf of 2025, cash flows used in financing activities included $355 million of payments on long-term and non-recourse debt and $215$429 million of cash paid to repurchase shares of our outstanding common stock,stock largelyand $364 million of payments on long-term and nonrecourse debt, partially offset by $495 million of net proceeds from the issuance of long-term debt.

•Uncertainty related to the Company's ability to satisfy the necessary conditions to consummate the separation of its Industrial segment; and