Consolidated Statements of Comprehensive Income - USD ($) $ in Millions |
12 Months Ended | ||
|---|---|---|---|
Jan. 04, 2020 |
Dec. 29, 2018 |
Dec. 30, 2017 |
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| Consolidated Statements of Comprehensive Income | |||
| Net income | $ 815 | $ 1,222 | $ 307 |
| Other comprehensive income (loss), net of taxes: | |||
| Pension and postretirement benefits adjustments, net of reclassifications | (84) | (74) | 109 |
| Foreign currency translation adjustments, net of reclassifications | (4) | (43) | 107 |
| Deferred gains (losses) on hedge contracts, net of reclassifications | 3 | (13) | 14 |
| Other comprehensive income (loss) | (85) | (130) | 230 |
| Comprehensive income | $ 730 | $ 1,092 | $ 537 |
Consolidated Balance Sheets (Parenthetical) - shares shares in Thousands |
Jan. 04, 2020 |
Dec. 29, 2018 |
|---|---|---|
| Consolidated Balance Sheets | ||
| Common stock, shares issued | 228,400 | 238,200 |
| Common stock, shares outstanding | 227,956 | 235,621 |
Consolidated Statements of Shareholders' Equity (Parenthetical) - $ / shares |
12 Months Ended | ||
|---|---|---|---|
Jan. 04, 2020 |
Dec. 29, 2018 |
Dec. 30, 2017 |
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| Consolidated Statements of Shareholders' Equity | |||
| Dividends per share of common stock | $ 0.08 | $ 0.08 | $ 0.08 |
Summary of Significant Accounting Policies |
12 Months Ended |
|---|---|
Jan. 04, 2020 | |
| Summary of Significant Accounting Policies | |
| Summary of Significant Accounting Policies | 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 and Industrial 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. At the beginning of 2019, we adopted Accounting Standards Update (ASU) No. 2016-02, Leases (ASC Topic 842), which requires lessees to recognize all leases with a term greater than 12 months on the balance sheet as right-of-use assets and lease liabilities. Upon adoption, the most significant impact was the recognition of $307 million in right-of-use assets and for operating leases, while our accounting for finance leases remained unchanged. We applied the provisions of this standard to our existing leases at the adoption date using a retrospective transition method and did not adjust comparative periods. The cumulative transition adjustment to retained earnings was not significant and the adoption had no impact on our earnings or cash flows. We elected the expedients permitted under the transition guidance, which allowed us to carryforward the historical lease classification and to apply hindsight when evaluating options within a contract, resulting in the extension of the lease term for certain of our existing leases. We adopted ASU No. 2014-09, Revenue from Contracts with Customers (ASC Topic 606) and its related amendments, collectively referred to as ASC 606 at the beginning of 2018. We adopted ASC 606 using the modified retrospective transition method applied to contracts that were not substantially complete at the end of 2017. We recorded a $90 million adjustment to increase retained earnings to reflect the cumulative impact of adopting this standard at the beginning of 2018, primarily related to certain long-term contracts our Bell segment has with the U.S. Government that converted to the cost-to-cost method for revenue recognition. The comparative information for 2017 included in our financial statements and notes was not restated and is reported under the accounting standards in effect at that time based on the policies described in this note. Collaborative Arrangements Our Bell segment has a strategic alliance agreement with The Boeing Company (Boeing) 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 Boeing reporting costs incurred and revenues generated from transactions with the U.S. Government in each company’s respective income statement. Neither Bell nor Boeing is considered to be the principal participant for the transactions recorded under this agreement. Profits on cost-plus contracts are allocated between Bell and Boeing on a 50%-50% basis. Negotiated profits on fixed-price contracts are also allocated 50%-50%; however, Bell and Boeing 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 upon the adoption of ASC 606. 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 for 2019 and 2018 With the adoption of ASC 606 at the beginning of 2018, revenue is recognized when control of the goods or services 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 good 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 performance obligation when control of the promised goods or services 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. Commercial Contracts The majority of our contracts with commercial customers have a single performance obligation as there is only one good or service promised or the promise to transfer the goods or services 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 goods or services at the standalone selling price are treated as separate contracts. For commercial aircraft, we contract with our customers to sell fully outfitted fixed-wing 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 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 as well as related services. These contracts, which also include those under the U.S. Government-sponsored foreign military sales program, accounted for approximately 24% of total revenues in 2019. 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 goods 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. 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 70% of our 2019 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, which we present as contract assets in the Consolidated Balance Sheets. 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. Revenue Recognition for 2017 Prior to the adoption of ASC 606, we generally recognized revenue for the sale of products, which were not under long-term contracts, upon delivery. Commercial aircraft were considered to be delivered upon completion of manufacturing, customer acceptance, and the transfer of the risk and rewards of ownership. When a sale arrangement involved multiple deliverables, such as sales of products that include customization and other services, we evaluated the arrangement to determine whether there were separate items that were required to be delivered under the arrangement that qualify as separate units of accounting. These arrangements typically involved the customization services we offer to customers who purchase Bell helicopters, with the services generally provided within the first six months after customer acceptance of the aircraft and risk of loss assumption. The aircraft and the customization services were considered to be separate units of accounting and we allocated contract price between the two on a relative selling price basis using the best evidence of selling price for each of the deliverables, typically by reference to the price charged when the same or similar items were sold separately by us. Revenue was then recognized when the recognition criteria for each unit of accounting was met. Revenues under long-term contracts were accounted for under the percentage-of-completion method of accounting. Under this method, we estimated profit as the difference between the total estimated revenues and cost of a contract. We then recognized that estimated profit over the contract term based on either the units-of-delivery method or the cost-to-cost method (which typically was used for development effort as costs were incurred), as appropriate under the circumstances. Revenues under fixed-price contracts generally were recorded using the units-of-delivery method. Revenues under cost-reimbursement contracts were recorded using the cost-to-cost method. Finance Revenues Finance revenues primarily include interest on finance receivables, finance lease earnings and portfolio gains/losses. Portfolio gains/losses include impairment charges related to repossessed assets and properties and gains/losses on the sale or early termination of finance assets. 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 2019, 2018 and 2017, our cumulative catch-up adjustments increased segment profit by $91 million, $196 million and $5 million, respectively, and net income by $69 million, $149 million and $3 million, respectively ($0.30, $0.59 and $0.01 per diluted share, respectively). In 2019 and 2018, we recognized revenue from performance obligations satisfied in prior periods of $97 million and $190 million, which related to changes in profit booking rates that impacted revenue. For 2019, 2018 and 2017, gross favorable adjustments totaled $173 million, $249 million and $92 million, respectively. The 2018 favorable adjustments included $145 million, largely related to overhead rate improvements and risk retirements associated with contracts in the Bell segment. In 2019, 2018 and 2017, gross unfavorable adjustments totaled $82 million, $53 million and $87 million, respectively. 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 Sheet. 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. Accounts Receivable, Net Accounts receivable, net includes amounts billed to customers where the right to payment is unconditional. We maintain an allowance for doubtful accounts to provide for the estimated amount of accounts receivable that will not be collected, which is based on an assessment of customer creditworthiness, historical payment experience, the age of outstanding receivable and collateral value, if any. 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 net realizable value. We value our inventories generally using the first-in, first-out (FIFO) method or the last-in, first-out (LIFO) method for certain qualifying inventories where LIFO provides a better matching of costs and revenues. We determine costs for our commercial helicopters on an average cost basis by model considering the expended and estimated costs for the current production release. 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 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, 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. Approximately 85% of our gross 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 losses. We maintain an allowance for losses on finance receivables at a level considered adequate to cover inherent losses in the portfolio based on management’s evaluation. For larger balance accounts specifically identified as impaired, a reserve is established based on comparing the expected future cash flows, discounted at the finance receivable’s effective interest rate, or the fair value of the underlying collateral if the finance receivable is collateral dependent, to its carrying amount. 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. We also establish an allowance for losses to cover probable but specifically unknown losses existing in the portfolio. This allowance is established as a percentage of non-recourse finance receivables, which have not been identified as requiring specific reserves. The percentage is based on a combination of factors, including historical loss experience, current delinquency and default trends, collateral values and both general economic and specific industry trends. Finance receivables are charged off at the earlier of the date the collateral is repossessed or when no payment has been received for six months, unless management 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. These plans include significant pension and postretirement 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 in the year in which they occur. Actuarial gains and losses that are not immediately recognized as net periodic pension cost are recognized as a component of other comprehensive income (loss) (OCI) and are amortized into net periodic pension cost in future periods. 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 OCI, 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. We use foreign currency financing transactions to effectively hedge long-term investments in foreign operations with the same corresponding currency. Foreign currency gains and losses on the hedge of the long-term investments are recorded in the cumulative translation adjustment account. 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, 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 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. There is no legal requirement to remove these items, and there currently is no plan to remodel the related facilities or otherwise cause the impacted items to require disposal. Since these asset retirement obligations are not estimable, 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. Company-funded research and development costs were $647 million, $643 million and $634 million in 2019, 2018 and 2017, respectively, and are included in cost of sales. Income Taxes The provision for income tax expense is calculated on reported Income from continuing operations 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. Accounting Pronouncements Not Yet Adopted In 2016, the FASB issued ASU No. 2016-13, Financial Instruments – Credit Losses. For most financial assets, such as trade and other receivables, loans and other instruments, this standard changes the current incurred loss model to a forward-looking expected credit loss model, which generally will result in the earlier recognition of allowances for losses. The new standard is effective for our company at the beginning of 2020. Entities are required to apply the provisions of the standard through a cumulative-effect adjustment to retained earnings as of the effective date. We completed our evaluation of the standard and determined that the impact on our consolidated financial statements is not significant. |
Business Disposition and Acquisition |
12 Months Ended |
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Jan. 04, 2020 | |
| Business Disposition and Acquisition | |
| Business Disposition and Acquisition | Note 2. Business Disposition and Acquisition On July 2, 2018, we completed the sale of the businesses that manufacture and sell the products in our Tools and Test Equipment product line within our Industrial segment to Emerson Electric Co. for net cash proceeds of $807 million. We recorded an after-tax gain of $419 million related to this disposition. On March 6, 2017, we completed the acquisition of Arctic Cat Inc. (Arctic Cat), a publicly-held company (NASDAQ: ACAT), pursuant to a cash tender offer for $18.50 per share, followed by a short-form merger. The cash paid for this business, including repayment of debt and net of cash acquired, totaled $316 million. Arctic Cat was incorporated into our Textron Specialized Vehicles business in the Industrial segment and its operating results have been included in the Consolidated Statements of Operations since the closing date. |
Goodwill and Intangible Assets |
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| Goodwill and Intangible Assets | Note 3. Goodwill and Intangible Assets Goodwill The changes in the carrying amount of goodwill by segment are as follows:
*See Note 7 for additional information. Intangible Assets Our intangible assets are summarized below:
Trade names and trademarks in the table above include $208 million of indefinite-lived intangible assets at both January 4, 2020 and December 29, 2018. Amortization expense totaled $59 million, $66 million and $69 million in 2019, 2018 and 2017, respectively. Amortization expense is estimated to be approximately $55 million, $53 million, $54 million, $37 million and $32 million in 2020, 2021, 2022, 2023 and 2024, respectively. |
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Accounts Receivable and Finance Receivables |
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| Accounts Receivable and Finance Receivables | Note 4. Accounts Receivable and Finance Receivables Accounts Receivable Accounts receivable is composed of the following:
Finance Receivables Finance receivables are presented in the following table:
Finance receivables primarily includes loans provided to purchasers of new and pre-owned Textron Aviation aircraft and Bell helicopters. These loans typically have initial terms ranging from to twelve years, amortization terms ranging from to fifteen years and an average balance of $1 million at January 4, 2020. 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 both January 4, 2020 and December 29, 2018, 59% of our finance receivables were distributed internationally and 41% throughout the U.S. At January 4, 2020 and December 29, 2018 finance receivables of $148 million and $201 million, respectively, have been pledged as collateral for TFC’s debt of $87 million and $119 million, respectively. 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:
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. A summary of impaired finance receivables, excluding leveraged leases, and the average recorded investment is provided below:
A summary of the allowance for losses on finance receivables based on how the underlying finance receivables are evaluated for impairment, is provided below. The finance receivables reported in this table specifically exclude $104 million and $101 million of leveraged leases at January 4, 2020 and December 29, 2018, respectively, in accordance with U.S. generally accepted accounting principles.
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Inventories |
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| Inventories | Note 5. Inventories Inventories are composed of the following:
Inventories valued by the LIFO method totaled $2.5 billion and $2.2 billion at January 4, 2020 and December 29, 2018, respectively, and the carrying values of these inventories would have been higher by approximately $475 million and $457 million, respectively, had our LIFO inventories been valued at current costs. |
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Property, Plant and Equipment, Net |
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| Property, Plant and Equipment, Net | Note 6. Property, Plant and Equipment, Net Our Manufacturing group’s property, plant and equipment, net is composed of the following:
The Manufacturing group’s depreciation expense, which included amortization expense on finance leases, totaled $346 million, $358 million and $362 million in 2019, 2018 and 2017, respectively. |
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Other Assets |
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| Other Assets | Note 7. Other Assets On April 1, 2019, TRU Simulation + Training Inc., a business within our Textron Systems segment, contributed assets associated with its training business into FlightSafety Textron Aviation Training LLC, a company formed by FlightSafety International Inc. and TRU to provide training solutions for Textron Aviation’s commercial business and general aviation aircraft. We have a 30% interest in this newly formed company and our investment is accounted for under the equity method of accounting. We contributed assets with a carrying value of $69 million to the company, which primarily included property, plant and equipment. In addition, $71 million of the Textron Systems segment’s goodwill was allocated to this transaction. Based on the fair value of our share of the business, we recorded a pre-tax net gain of $18 million in 2019 to cost of sales in our Consolidated Statements of Operations. |
Other Current Liabilities |
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| Other Current Liabilities | Note 8. Other Current Liabilities The other current liabilities of our Manufacturing group are summarized below:
Changes in our warranty liability are as follows:
* Adjustments include changes to prior year estimates, new issues on prior year sales, business dispositions and currency translation adjustments. |
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Leases |
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| Leases | Note 9. 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 30 years, which include options to extend the lease term for periods up to 25 years when it is reasonably certain the option will be exercised. In 2019, our operating lease cost totaled $64 million. Our finance lease cost and our variable and short-term lease costs were not significant. Cash paid for operating lease liabilities during 2019 totaled $62 million, which is classified in cash flows from operating activities. Balance sheet and other information related to our leases is as follows:
At December 29, 2018, assets under finance leases totaled $168 million and had accumulated amortization of $47 million. Maturities of our lease liabilities at January 4, 2020 are as follows:
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Debt and Credit Facilities |
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| Debt and Credit Facilities | Note 10. Debt and Credit Facilities Our debt is summarized in the table below:
The following table shows required payments during the next five years on debt outstanding at January 4, 2020:
On October 18, 2019, Textron entered into a senior unsecured revolving credit facility for an aggregate principal amount of $1.0 billion, of which up to $100 million is available for the issuance of letters of credit. Textron 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 2024, subject to up to two one-year extensions at Textron's option with the consent of lenders representing a majority of the commitments under the facility. This new facility replaced the prior 5-year facility, which was scheduled to expire in September 2021. At January 4, 2020 and , there were no amounts borrowed against either facility. At January 4, 2020, there were $10 million of outstanding letters of credit issued under the new facility and at December 29, 2018, there were $10 million of outstanding letters of credit issued under the prior facility. Fixed-to-Floating Rate Junior Subordinated Notes The Finance group’s $299 million of Fixed-to-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 on the notes was fixed at 6% through February 15, 2017 and is now variable at the three-month London Interbank Offered Rate + 1.735%. Support Agreement Under a Support Agreement, as amended in December 2015, Textron Inc. is required to ensure that TFC maintains fixed charge coverage of no less than 125% and consolidated shareholder’s equity of no less than $125 million. There were no cash contributions required to be paid to TFC in 2019, 2018 and 2017 to maintain compliance with the support agreement. |
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| Derivative Instruments and Fair Value Measurements | Note 11. 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 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 4, 2020 and December 29, 2018, we had foreign currency exchange contracts with notional amounts upon which the contracts were based of $342 million and $379 million, respectively. At January 4, 2020, the fair value amounts of our foreign currency exchange contracts were a $2 million asset and a $2 million liability. At December 29, 2018, the fair value amounts of our foreign currency exchange contracts were a $2 million asset and a $10 million liability. We hedge our net investment position in certain major currencies and generate foreign currency interest payments that offset other transactional exposures in these currencies. To accomplish this, we borrow directly in the foreign currency and designate a portion of the debt as a hedge of the net investment. We record changes in the fair value of these contracts in other comprehensive income to the extent they are effective as cash flow hedges. Currency effects on the effective portion of these hedges, which are reflected in the foreign currency translation adjustments within Accumulated other comprehensive loss, were not significant in the periods presented. 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:
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. |
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Shareholders' Equity |
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| Shareholders' Equity | Note 12. 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:
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 2019, 2018 and 2017, stock options to purchase 4.3 million, 1.3 million and 1.6 million shares, respectively, of common stock are excluded from the calculation of diluted weighted-average shares outstanding as their effect would have been anti-dilutive. Accumulated Other Comprehensive Loss The components of Accumulated other comprehensive loss are presented below:
In 2018, the FASB issued ASU No. 2018-02, Income Statement - Reporting Comprehensive Income (Topic 220): Reclassification of Certain Tax Effects from Accumulated Other Comprehensive Income, which allows entities to reclassify stranded tax effects resulting from the Tax Cuts and Jobs Act from accumulated other comprehensive loss to retained earnings. The stranded tax effects are comprised of the tax amounts included in accumulated other comprehensive loss at the previous U.S. federal corporate tax rate of 35%, for which the related deferred tax asset or liability was remeasured at the new U.S. federal corporate tax rate of 21% in the fourth quarter of 2017. The adoption of this standard resulted in an increase to accumulated other comprehensive loss of $257 million, with an offsetting increase to retained earnings. Other Comprehensive Income (Loss) The before and after-tax components of other comprehensive income (loss) are presented below:
* These components of other comprehensive income (loss) are included in the computation of net periodic pension cost. See Note 16 for additional information. |
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Segment and Geographic Data |
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| Segment and Geographic Data | Note 13. Segment and Geographic Data We operate in, and financial information for, the following five business segments: Textron Aviation, Bell, Textron Systems, Industrial and Finance. The accounting policies of the segments are the same as those described in Note 1. Textron Aviation products include Citation jets, King Air and Caravan turboprop aircraft, piston engine aircraft, military trainer and defense aircraft, and aftermarket part sales and services sold to a diverse base of corporate and individual buyers. Bell products include military and commercial helicopters, tiltrotor aircraft and related spare parts and services. Bell supplies military helicopters and, in association with The Boeing Company, military tiltrotor aircraft, and aftermarket services to the U.S. and non-U.S. governments. Bell also supplies commercial helicopters and aftermarket services to corporate, offshore petroleum exploration and development, utility, charter, police, fire, rescue and emergency medical helicopter operators, and foreign governments. Textron Systems products include unmanned aircraft and surface systems, marine craft, armored vehicles and specialty vehicles, advanced flight training devices and other defense and aviation mission support products and services primarily for U.S. and non-U.S. governments. Industrial products and markets include the following:
On July 2, 2018, we sold our Tools and Test Equipment businesses that were previously included in the Industrial segment as discussed in Note 2. The Finance segment provides financing primarily to purchasers of new and pre-owned Textron Aviation aircraft and Bell helicopters. Segment profit is an important measure used for evaluating performance and for decision-making purposes. Segment profit for the manufacturing segments excludes interest expense, certain corporate expenses, gains/losses on major business dispositions and special charges. The measurement for the Finance segment includes interest income and expense along with intercompany interest income and expense. Our revenues by segment, along with a reconciliation of segment profit to income from continuing operations before income taxes, are as follows:
Other information by segment is provided below:
Geographic Data Presented below is selected financial information of our continuing operations by geographic area:
* Revenues are attributed to countries based on the location of the customer. ** Property, plant and equipment, net is based on the location of the asset. |
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Revenues |
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| Revenues | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Revenues | Note 14. Revenues Disaggregation of Revenues Our revenues disaggregated by major product type are presented below:
Our 2019 and 2018 revenues for our segments by customer type and geographic location are presented below:
In 2017, our revenues included sales to the U.S. Government of approximately $3.1 billion, primarily in the Bell and Textron Systems segments. 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 4, 2020, we had $9.8 billion in remaining performance obligations of which we expect to recognize revenues of approximately 75% through 2021, an additional 20% through 2023, 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 4, 2020 and December 29, 2018, contract assets totaled $567 million and $461 million, respectively, and contract liabilities totaled $830 million and $974 million, respectively. The changes in these balances in 2019 resulted from timing differences between revenue recognized, billings and payments from customers, largely related to the V-22 program in the Bell segment. During 2019 and 2018, we recognized revenues of $590 million and $817 million, respectively, that were included in the contract liability balance at the beginning of each year. Reconciliation of ASC 606 to Prior Accounting Standards The amount by which each financial statement line item is affected in 2018 as a result of applying the accounting standard as discussed in Note 1 is presented below:
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Share-Based Compensation |
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| Share-Based Compensation | Note 15. Share-Based Compensation Under our 2015 Long-Term Incentive Plan (Plan), which replaced our 2007 Long-Term Incentive Plan in April 2015, 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 17 million shares is authorized for issuance for all purposes under the Plan plus any shares that become available upon cancellation, forfeiture or expiration of awards granted under the 2007 Long-Term Incentive Plan. No more than 17 million shares may be awarded pursuant to incentive stock options, and no more than 4.25 million shares may be issued pursuant to awards of restricted stock, restricted stock units, performance stock or other awards that are payable in shares. For 2019, 2018 and 2017, the awards granted under this Plan primarily included stock options, restricted stock units and performance share units. Through our Deferred Income Plan for Textron Executives, we provide certain executives the opportunity to voluntarily defer up to 80% of their base salary, along with incentive compensation. Elective deferrals may be put into either a stock unit account or an interest-bearing account. Participants cannot move amounts between the two accounts while actively employed by us and cannot receive distributions until termination of employment. The intrinsic value of amounts paid under this deferred income plan was not significant in 2019, 2018 and 2017. 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:
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. 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 4, 2020, 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. Stock Options Stock option compensation expense was $22 million, $23 million and $20 million in 2019, 2018 and 2017, 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 implied volatilities from traded options on our common stock, historical volatilities and other factors. The expected term is based on historical option exercise data, which is adjusted to reflect any anticipated changes in expected behavior. The weighted-average fair value of options granted and the assumptions used in our option-pricing model for such grants are as follows:
The stock option activity during 2019 is provided below:
At January 4, 2020, our outstanding options had an aggregate intrinsic value of $45 million and a weighted-average remaining contractual life of 5.7 years. Our exercisable options had an aggregate intrinsic value of $45 million and a weighted-average remaining contractual life of 4.5 years at January 4, 2020. The total intrinsic value of options exercised during 2019, 2018 and 2017 was $22 million, $62 million and $29 million, respectively. Restricted Stock Units We issue restricted stock units settled in both cash and stock (vesting one-third each in the third, fourth and fifth year following the year of the grant), which include the right to receive dividend equivalents. The fair value of these units is 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 2019 activity for restricted stock units is provided below:
The fair value of the restricted stock unit awards that vested and/or amounts paid under these awards is as follows:
Performance Share Units The fair value of share-based compensation awards accounted for as liabilities includes performance share units, which are paid in cash in the first quarter of the year following vesting. Payouts under performance share units vary based on certain performance criteria generally set for each year of a three-year performance period. The performance share units vest at the end of three years. The fair value of these units is based on the trading price of our common stock and is remeasured at each reporting period date. The 2019 activity for our performance share units is as follows:
The fair value of the performance share units that vested and/or amounts paid under these awards is as follows:
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Retirement Plans |
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| Retirement Plans | Note 16. Retirement Plans Our defined benefit and contribution plans cover substantially all of our employees. A significant number of our U.S.-based employees participate in the Textron Retirement Plan, which is designed to be a “floor-offset” arrangement with both a defined benefit component and a defined contribution component. The defined benefit component of the arrangement includes the Textron Master Retirement Plan (TMRP) and the Bell Helicopter Textron Master Retirement Plan (BHTMRP), and the defined contribution component is the Retirement Account Plan (RAP). The defined benefit component provides a minimum guaranteed benefit (or “floor” benefit). Under the RAP, participants are eligible to receive contributions from Textron of 2% of their eligible compensation but may not make contributions to the plan. Upon retirement, participants receive the greater of the floor benefit or the value of the RAP. Both the TMRP and the BHTMRP are subject to the provisions of the Employee Retirement Income Security Act of 1974 (ERISA). Effective on January 1, 2010, the Textron Retirement Plan was closed to new participants, and employees hired after that date receive an additional 4% annual cash contribution to their Textron Savings Plan account based on their eligible compensation. We also have other funded and unfunded defined benefit pension plans that cover certain of our U.S. and Non-U.S. employees. In addition, several defined contribution plans are sponsored by our various businesses, of which the largest plan is the Textron Savings Plan, which is a qualified 401(k) plan subject to ERISA. Our defined contribution plans cost $130 million, $125 million and $123 million in 2019, 2018 and 2017, respectively, which included $13 million in contributions to the RAP for each year. We also provide postretirement benefits other than pensions for certain retired employees in the U.S. that include healthcare, dental care, Medicare Part B reimbursement and life insurance. Periodic Benefit Cost (Credit) The components of net periodic benefit cost (credit) and other amounts recognized in OCI are as follows:
In 2018, we adopted ASU No. 2017-07, Improving the Presentation of Net Periodic Pension Cost and Net Periodic Postretirement Benefit Cost. This standard requires companies to present only the service cost component of net periodic benefit cost in operating income in the same line as other compensation costs arising from services rendered by the pertinent employees during the period. The other non-service components of net periodic benefit cost must be presented separately from service cost and excluded from operating income. In addition, only the service cost component is eligible for capitalization into inventory. The change in the amount capitalized into inventory was applied prospectively. Using a practical expedient, the other non-service components of net periodic benefit cost (credit) previously disclosed of $(29) million for 2017 was reclassified from Cost of sales and Selling and administrative expense to Non-service components of pension and postretirement income, net in the Consolidated Statements of Operations. 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:
Actuarial losses (gains) reflected in the table above for both 2019 and 2018 were largely the result of changes in the discount rate utilized. Amounts recognized in our balance sheets are as follows:
The accumulated benefit obligation for all defined benefit pension plans was $8.5 billion and $7.5 billion at January 4, 2020 and December 29, 2018, respectively, which included $404 million and $369 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:
Pension plans with projected benefit obligation exceeding the fair value of plan assets are as follows:
Assumptions The weighted-average assumptions we use for our pension and postretirement plans are as follows:
Our assumed healthcare cost trend rate for both the medical and prescription drug cost was 7.00% in both 2019 and 2018. We expect this rate to gradually decline to 5% by 2024 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:
The fair value of our pension plan assets by major category and valuation method is as follows:
Cash and equivalents, equity securities and debt securities include comingled 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. Since these comingled funds are not quoted on any active market, they are priced based on the relative value of the underlying equity and debt investments and their individual prices at any given time; these funds are not subject to leveling within the fair value hierarchy. 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):
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 2020, we expect to contribute approximately $50 million to our pension plans and the RAP. 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 2019. 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:
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| Special Charges | Note 17. Special Charges Special charges recorded by segment and type of cost are as follows:
In December 2019, we recorded $72 million in special charges, primarily in connection with a restructuring plan that was designed to reduce costs and improve overall operating efficiency through headcount reductions, facility consolidations and other actions in the Industrial and Textron Aviation segments. In the Industrial segment, in connection with the strategic review of our Kautex business, cost reduction and other measures were initiated to maximize its operating margin, and we took further cost cutting actions in our Textron Specialized Vehicles business. In the Textron Aviation segment, we conducted a review of our ongoing workforce requirements, resulting in targeted headcount reductions and other actions to realign our cost structure. Headcount reductions totaled approximately 1,000 positions and included business support and administrative functions within both segments. The headcount reductions at Textron Aviation were primarily related to engineering positions, reflecting completion of the Longitude certification activities and reduced requirements for ongoing development programs. This plan was substantially completed at the end of 2019. In the fourth quarter of 2018, we recorded $73 million in special charges in connection with a plan to restructure the Textron Specialized Vehicles businesses within our Industrial segment. Under this plan, we recorded asset impairment charges of $47 million, primarily intangible assets related to product rationalization, contract termination and other costs of $18 million and severance costs of $8 million. Headcount reductions totaled approximately 400 positions, representing 10% of Textron Specialized Vehicles’ workforce. This plan was substantially completed at the end of 2018. In 2017, special charges totaled $130 million, largely reflecting $90 million related to an enterprise-wide restructuring plan initiated in 2016 and $28 million for a restructuring plan initiated in the first quarter of 2017 in connection with the acquisition of Arctic Cat discussed in Note 2. Both of these plans were completed in 2017. Acquisition integration and transaction costs include $5 million in 2019 related to the strategic review of the Kautex business and $12 million in 2017 related to the Arctic Cat acquisition. Restructuring Reserve Our restructuring reserve activity is summarized below:
The majority of the remaining cash outlays of $65 million is expected to be paid in the first half of 2020. Severance costs generally are paid on a lump-sum basis and include outplacement costs, which are paid in accordance with normal payment terms. |
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| Income Taxes | Note 18. 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:
Income tax expense for continuing operations is summarized as follows:
The following table reconciles the federal statutory income tax rate to our effective income tax rate for continuing operations:
In 2019, the effective tax rate was favorably impacted by $61 million in benefits recognized for additional tax credits related to prior years as a result of the completion of a research and development tax credit analysis. In 2018, the effective tax rate was favorably impacted by a $25 million upon the reassessment of reserves for uncertain tax positions related to research and development tax credits. The Tax Cuts and Jobs Act (the Tax Act) was enacted on December 22, 2017. Among other things, the Tax Act reduced the U.S. federal corporate tax rate from 35% to 21% and required companies to pay a one-time transition tax on earnings of certain foreign subsidiaries that were previously tax deferred. We reasonably estimated the effects of the Tax Act and recorded provisional amounts in the fourth quarter of 2017 totaling $266 million. Our provisional estimate included a $154 million charge to remeasure our U.S. federal deferred tax assets and liabilities based on the rates at which they are expected to reverse in the future, which is generally 21%. In addition, the provisional estimate included $112 million in expense for the one-time transition tax. This tax was based on approximately $1.6 billion of our post-1986 earnings and profits that were previously deferred from U.S. income taxes, and on the amount of those earnings held in cash and other specified net assets. In 2018, we finalized the 2017 impacts of the Tax Act, specifically the remeasurement of our U.S. Federal deferred tax assets and liabilities and the post-1986 earnings and profits transition tax, which resulted in a $14 million benefit. 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 tax benefits. At the end of 2019, 2018 and 2017, 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 2019, additional tax positions primarily reflect the completion of a research and development tax credit analysis for tax credits related to prior years. In 2018, certain tax positions related to research and development tax credits were reduced by $25 million based on new information, including interactions with the tax authorities and recent audit settlements. In the normal course of business, we are subject to examination by tax authorities throughout the world. We are generally no longer subject to U.S. federal tax examinations for years before 2014, state and local income tax examinations for years before 2012, and non-U.S. income tax examinations for years before 2011. In 2019, we filed U.S. federal amended returns for 2012 and 2013 for additional research and development tax credits that are subject to examination. Deferred Taxes The significant components of our net deferred tax assets/(liabilities) are provided below:
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:
Non-U.S. and U.S. state income taxes have not been provided for on basis differences in certain investments, primarily as a result of unremitted earnings in foreign subsidiaries totaling $1.7 billion at January 4, 2020 and $1.6 billion at December 29, 2018, which 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 income taxes payable to various non-U.S. jurisdictions and U.S. states. Determination of the deferred tax liability associated with indefinitely reinvested earnings is not practicable due to multiple factors, including the complexity of non-U.S. tax laws and tax treaty interpretations, exchange rate fluctuations, and the uncertainty of available credits or exemptions under U.S. federal and state tax laws. |
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Commitments and Contingencies |
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Jan. 04, 2020 | |
| Commitments and Contingencies | |
| Commitments and Contingencies | Note 19. Commitments and Contingencies We are subject to legal proceedings and other claims arising out of the conduct of our business, including proceedings and claims relating to commercial and financial transactions; government contracts; alleged lack of compliance with applicable laws and regulations; production partners; product liability; patent and trademark infringement; employment disputes; and environmental, safety and health matters. 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 $247 million and $333 million at January 4, 2020 and December 29, 2018, 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 $40 million to $150 million. At January 4, 2020, environmental reserves of approximately $76 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 $14 million as current liabilities. Expenditures to evaluate and remediate contaminated sites were $13 million, $13 million and $18 million in 2019, 2018 and 2017, respectively. |
Supplemental Cash Flow Information |
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| Supplemental Cash Flow Information | Note 20. Supplemental Cash Flow Information Our cash payments and receipts are as follows:
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Quarterly Data |
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| Quarterly Data | Quarterly Data
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Schedule II - Valuation and Qualifying Accounts |
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| Schedule II - Valuation and Qualifying Accounts | Schedule II — Valuation and Qualifying Accounts
* Deductions primarily include amounts written off on uncollectable accounts (less recoveries), inventory disposals, changes to prior year estimates, business dispositions and currency translation adjustments. |
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Summary of Significant Accounting Policies (Policies) |
12 Months Ended |
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Jan. 04, 2020 | |
| Summary of Significant Accounting Policies | |
| Principles of Consolidation and Financial Statement Presentation | 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 and Industrial 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. At the beginning of 2019, we adopted Accounting Standards Update (ASU) No. 2016-02, Leases (ASC Topic 842), which requires lessees to recognize all leases with a term greater than 12 months on the balance sheet as right-of-use assets and lease liabilities. Upon adoption, the most significant impact was the recognition of $307 million in right-of-use assets and for operating leases, while our accounting for finance leases remained unchanged. We applied the provisions of this standard to our existing leases at the adoption date using a retrospective transition method and did not adjust comparative periods. The cumulative transition adjustment to retained earnings was not significant and the adoption had no impact on our earnings or cash flows. We elected the expedients permitted under the transition guidance, which allowed us to carryforward the historical lease classification and to apply hindsight when evaluating options within a contract, resulting in the extension of the lease term for certain of our existing leases. We adopted ASU No. 2014-09, Revenue from Contracts with Customers (ASC Topic 606) and its related amendments, collectively referred to as ASC 606 at the beginning of 2018. We adopted ASC 606 using the modified retrospective transition method applied to contracts that were not substantially complete at the end of 2017. We recorded a $90 million adjustment to increase retained earnings to reflect the cumulative impact of adopting this standard at the beginning of 2018, primarily related to certain long-term contracts our Bell segment has with the U.S. Government that converted to the cost-to-cost method for revenue recognition. The comparative information for 2017 included in our financial statements and notes was not restated and is reported under the accounting standards in effect at that time based on the policies described in this note. |
| Collaborative Arrangements | Collaborative Arrangements Our Bell segment has a strategic alliance agreement with The Boeing Company (Boeing) 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 Boeing reporting costs incurred and revenues generated from transactions with the U.S. Government in each company’s respective income statement. Neither Bell nor Boeing is considered to be the principal participant for the transactions recorded under this agreement. Profits on cost-plus contracts are allocated between Bell and Boeing on a 50%-50% basis. Negotiated profits on fixed-price contracts are also allocated 50%-50%; however, Bell and Boeing 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 upon the adoption of ASC 606. 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 | 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 Recognition for 2019 and 2018 With the adoption of ASC 606 at the beginning of 2018, revenue is recognized when control of the goods or services 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 good 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 performance obligation when control of the promised goods or services 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. Commercial Contracts The majority of our contracts with commercial customers have a single performance obligation as there is only one good or service promised or the promise to transfer the goods or services 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 goods or services at the standalone selling price are treated as separate contracts. For commercial aircraft, we contract with our customers to sell fully outfitted fixed-wing 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 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 as well as related services. These contracts, which also include those under the U.S. Government-sponsored foreign military sales program, accounted for approximately 24% of total revenues in 2019. 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 goods 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. 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 70% of our 2019 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, which we present as contract assets in the Consolidated Balance Sheets. 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. Revenue Recognition for 2017 Prior to the adoption of ASC 606, we generally recognized revenue for the sale of products, which were not under long-term contracts, upon delivery. Commercial aircraft were considered to be delivered upon completion of manufacturing, customer acceptance, and the transfer of the risk and rewards of ownership. When a sale arrangement involved multiple deliverables, such as sales of products that include customization and other services, we evaluated the arrangement to determine whether there were separate items that were required to be delivered under the arrangement that qualify as separate units of accounting. These arrangements typically involved the customization services we offer to customers who purchase Bell helicopters, with the services generally provided within the first six months after customer acceptance of the aircraft and risk of loss assumption. The aircraft and the customization services were considered to be separate units of accounting and we allocated contract price between the two on a relative selling price basis using the best evidence of selling price for each of the deliverables, typically by reference to the price charged when the same or similar items were sold separately by us. Revenue was then recognized when the recognition criteria for each unit of accounting was met. Revenues under long-term contracts were accounted for under the percentage-of-completion method of accounting. Under this method, we estimated profit as the difference between the total estimated revenues and cost of a contract. We then recognized that estimated profit over the contract term based on either the units-of-delivery method or the cost-to-cost method (which typically was used for development effort as costs were incurred), as appropriate under the circumstances. Revenues under fixed-price contracts generally were recorded using the units-of-delivery method. Revenues under cost-reimbursement contracts were recorded using the cost-to-cost method. Finance Revenues Finance revenues primarily include interest on finance receivables, finance lease earnings and portfolio gains/losses. Portfolio gains/losses include impairment charges related to repossessed assets and properties and gains/losses on the sale or early termination of finance assets. 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 | 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 2019, 2018 and 2017, our cumulative catch-up adjustments increased segment profit by $91 million, $196 million and $5 million, respectively, and net income by $69 million, $149 million and $3 million, respectively ($0.30, $0.59 and $0.01 per diluted share, respectively). In 2019 and 2018, we recognized revenue from performance obligations satisfied in prior periods of $97 million and $190 million, which related to changes in profit booking rates that impacted revenue. For 2019, 2018 and 2017, gross favorable adjustments totaled $173 million, $249 million and $92 million, respectively. The 2018 favorable adjustments included $145 million, largely related to overhead rate improvements and risk retirements associated with contracts in the Bell segment. In 2019, 2018 and 2017, gross unfavorable adjustments totaled $82 million, $53 million and $87 million, respectively. |
| Contract Assets and Liabilities | 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 Sheet. 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. |
| Accounts Receivable, Net | Accounts Receivable, Net Accounts receivable, net includes amounts billed to customers where the right to payment is unconditional. We maintain an allowance for doubtful accounts to provide for the estimated amount of accounts receivable that will not be collected, which is based on an assessment of customer creditworthiness, historical payment experience, the age of outstanding receivable and collateral value, if any. |
| Cash and Equivalents | 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 Inventories are stated at the lower of cost or estimated net realizable value. We value our inventories generally using the first-in, first-out (FIFO) method or the last-in, first-out (LIFO) method for certain qualifying inventories where LIFO provides a better matching of costs and revenues. We determine costs for our commercial helicopters on an average cost basis by model considering the expended and estimated costs for the current production release. |
| Property, Plant and Equipment | 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 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 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, 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. Approximately 85% of our gross 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 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 losses. We maintain an allowance for losses on finance receivables at a level considered adequate to cover inherent losses in the portfolio based on management’s evaluation. For larger balance accounts specifically identified as impaired, a reserve is established based on comparing the expected future cash flows, discounted at the finance receivable’s effective interest rate, or the fair value of the underlying collateral if the finance receivable is collateral dependent, to its carrying amount. 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. We also establish an allowance for losses to cover probable but specifically unknown losses existing in the portfolio. This allowance is established as a percentage of non-recourse finance receivables, which have not been identified as requiring specific reserves. The percentage is based on a combination of factors, including historical loss experience, current delinquency and default trends, collateral values and both general economic and specific industry trends. Finance receivables are charged off at the earlier of the date the collateral is repossessed or when no payment has been received for six months, unless management deems the receivable collectible. Repossessed assets are recorded at their fair value, less estimated cost to sell. |
| Pension and Postretirement Benefit Obligations | Pension and Postretirement Benefit Obligations We maintain various pension and postretirement plans for our employees globally. These plans include significant pension and postretirement 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 in the year in which they occur. Actuarial gains and losses that are not immediately recognized as net periodic pension cost are recognized as a component of other comprehensive income (loss) (OCI) and are amortized into net periodic pension cost in future periods. |
| Derivatives and Hedging Activities | 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 OCI, 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. We use foreign currency financing transactions to effectively hedge long-term investments in foreign operations with the same corresponding currency. Foreign currency gains and losses on the hedge of the long-term investments are recorded in the cumulative translation adjustment account. |
| Leases | 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, 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 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 | 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 | 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. There is no legal requirement to remove these items, and there currently is no plan to remodel the related facilities or otherwise cause the impacted items to require disposal. Since these asset retirement obligations are not estimable, there is no related liability recorded in the Consolidated Balance Sheets. |
| Warranty Liabilities | 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 | 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. Company-funded research and development costs were $647 million, $643 million and $634 million in 2019, 2018 and 2017, respectively, and are included in cost of sales. |
| Income Taxes | Income Taxes The provision for income tax expense is calculated on reported Income from continuing operations 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. |
| Accounting Pronouncements Not Yet Adopted | Accounting Pronouncements Not Yet Adopted In 2016, the FASB issued ASU No. 2016-13, Financial Instruments – Credit Losses. For most financial assets, such as trade and other receivables, loans and other instruments, this standard changes the current incurred loss model to a forward-looking expected credit loss model, which generally will result in the earlier recognition of allowances for losses. The new standard is effective for our company at the beginning of 2020. Entities are required to apply the provisions of the standard through a cumulative-effect adjustment to retained earnings as of the effective date. We completed our evaluation of the standard and determined that the impact on our consolidated financial statements is not significant. |
Goodwill and Intangible Assets (Tables) |
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Accounts Receivable and Finance Receivables (Tables) |
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Property, Plant and Equipment, Net (Tables) |
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Other Current Liabilities (Tables) |
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Leases (Tables) |
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Debt and Credit Facilities (Tables) |
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Derivative Instruments and Fair Value Measurements (Tables) |
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Shareholders' Equity (Tables) |
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| Capital Stock |
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| Schedule of weighted-average shares outstanding for basic and diluted EPS |
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| Schedule of components of Accumulated Other Comprehensive Loss |
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| Schedule of before and after-tax components of other comprehensive income (loss) |
* These components of other comprehensive income (loss) are included in the computation of net periodic pension cost. See Note 16 for additional information. |
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Segment and Geographic Data (Tables) |
12 Months Ended | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
Jan. 04, 2020 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Segment and Geographic Data | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Revenues by segment and reconciliation of segment profit to income before income taxes |
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| Other information by segment |
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| Financial information of continuing operations by geographic area |
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Revenues (Tables) |
12 Months Ended | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
Jan. 04, 2020 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Revenues | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Schedule of revenue by major product type, customer type and geographic location |
Our 2019 and 2018 revenues for our segments by customer type and geographic location are presented below:
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| Schedule of impacts of adopting ASC 606 |
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Share-Based Compensation (Tables) |
12 Months Ended | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
Jan. 04, 2020 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Share-Based Compensation | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Compensation expense included in net income |
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| Weighted-average fair value of stock options and assumptions used in option-pricing model |
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| Stock option activity |
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| Restricted Stock Units | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Share-Based Compensation | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Unit period activity, Nonvested, Weighted average grant date fair value |
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| Fair value of awards vested and cash paid during respective periods |
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| Performance Share Units | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Share-Based Compensation | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Unit period activity, Nonvested, Weighted average grant date fair value |
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| Fair value of awards vested and cash paid during respective periods |
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Retirement Plans (Tables) |
12 Months Ended | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
Jan. 04, 2020 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Retirement Plans | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Components of net periodic benefit cost (credit) |
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| Changes in the projected benefit obligation and in the fair value of plan assets |
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| Amounts recognized in our balance sheets |
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| Pension plans with accumulated benefit obligations exceeding the fair value of plan assets |
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| Pension plans with projected benefit obligations exceeding the fair value of plan assets |
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| Weighted-average assumptions used for pension and postretirement plans |
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| Target allocation ranges |
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| Fair value of total pension plan assets |
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| Reconciliation for fair value measurements that use significant unobservable inputs |
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| Estimated future benefit payments which reflect expected future service to be paid by the plans |
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Special Charges (Tables) |
12 Months Ended | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
Jan. 04, 2020 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Special Charges | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Schedule of special charges |
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| Schedule of restructuring reserve activity |
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Income Taxes (Tables) |
12 Months Ended | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
Jan. 04, 2020 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Income Taxes | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Income before income taxes |
|
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| Income tax expense for continuing operations |
|
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| Federal statutory income tax rate to effective income tax rate for continuing operations |
|
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| Reconciliation of unrecognized tax benefits |
|
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| Deferred tax assets and liabilities |
|
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| Breakdown of net deferred tax assets |
|
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Supplemental Cash Flow Information (Tables) |
12 Months Ended | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||
|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
Jan. 04, 2020 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Supplemental Cash Flow Information | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Cash payments and receipts |
|
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Summary of Significant Accounting Policies - Principle of Consolidation and Financial Statement Presentation (Details) $ in Millions |
12 Months Ended | ||
|---|---|---|---|
|
Jan. 04, 2020
USD ($)
item
|
Dec. 29, 2018
USD ($)
|
Dec. 31, 2017
USD ($)
|
|
| Principle of Consolidation and Financial Statement Presentation | |||
| Number of borrowing groups | item | 2 | ||
| New Accounting Standards | |||
| Operating right-of-use assets | $ 277.0 | ||
| Operating lease liabilities | $ 281.0 | ||
| Lease, Practical Expedient, Use of Hindsight [true false] | true | ||
| Retained earnings | $ 5,682.0 | $ 5,407.0 | |
| ASC 606 | Effect of adoption of ASC 606 | |||
| New Accounting Standards | |||
| Retained earnings | $ 90.0 | ||
| ASU 2016-02 | |||
| New Accounting Standards | |||
| Operating right-of-use assets | 307.0 | ||
| Operating lease liabilities | $ 307.0 |
Summary of Significant Accounting Policies - Collaborative Arrangements (Details) |
12 Months Ended |
|---|---|
Jan. 04, 2020 | |
| Collaborative Arrangements | |
| Collaborative arrangement profit sharing percentage allocation on cost-plus contracts | 50.00% |
| Collaborative arrangement negotiated profit sharing percentage allocation on fixed-price contracts | 50.00% |
Summary of Significant Accounting Policies - Revenue Recognition (Details) |
12 Months Ended |
|---|---|
Jan. 04, 2020 | |
| U. S. Government | |
| Revenue Recognition | |
| Revenues from contracts with U.S. Government (as a percent) | 24.00% |
| U. S. Government | Fixed-price and fixed-price incentive contracts | |
| Revenue Recognition | |
| Percentage of revenue under fixed-price and fixed-price incentive contracts | 70.00% |
| U. S. Government | Maximum | |
| Revenue Recognition | |
| Percentage of contract price received for performance based payments on US Government Contracts | 90.00% |
| Percentage of costs incurred representing progress payments on US Government Contracts | 80.00% |
| Commercial Contract | Minimum | |
| Revenue Recognition | |
| Period of warranty programs | 1 year |
| Commercial Contract | Maximum | |
| Revenue Recognition | |
| Period of warranty programs | 5 years |
Summary of Significant Accounting Policies - Finance Revenues (Details) |
12 Months Ended |
|---|---|
Jan. 04, 2020 | |
| Minimum | Nonaccrual | |
| Revenue Recognition | |
| Number of months of contractual delinquency to classify accounts as nonaccrual unless such collection is not doubtful | 3 months |
Summary of Significant Accounting Policies - Contracts Estimates (Details) - Cumulative catch-up method - USD ($) $ / shares in Units, $ in Millions |
12 Months Ended | ||
|---|---|---|---|
Jan. 04, 2020 |
Dec. 29, 2018 |
Dec. 30, 2017 |
|
| Use of Estimates | |||
| Cumulative catch-up adjustments | $ 91 | $ 196 | $ 5 |
| Change in accounting estimate financial effect increase in net income | $ 69 | $ 149 | $ 3 |
| Change in Accounting Estimate Financial Effect Increase in Earnings Per Share Diluted | $ 0.30 | $ 0.59 | $ 0.01 |
| Gross favorable adjustments | $ 173 | $ 249 | $ 92 |
| Gross unfavorable adjustments | 82 | 53 | $ 87 |
| Gross favorable adjustment related to Bell segment | 145 | ||
| Revenue recognized from performance obligations satisfied in prior periods | $ 97 | $ 190 | |
Summary of Significant Accounting Policies - Goodwill and Intangible Assets (Details) |
12 Months Ended |
|---|---|
Jan. 04, 2020 | |
| Goodwill and Intangible Assets | |
| Gross intangible assets amortized based on the cash flow streams | 85.00% |
Summary of Significant Accounting Policies - Environmental Liabilities and Asset Retirement Obligations (Details) $ in Millions |
Jan. 04, 2020
USD ($)
|
|---|---|
| Environmental Liabilities and Asset Retirement Obligations | |
| Asset retirement obligations | $ 0 |
Summary of Significant Accounting Policies - Research and Development Costs (Details) - USD ($) $ in Millions |
12 Months Ended | ||
|---|---|---|---|
Jan. 04, 2020 |
Dec. 29, 2018 |
Dec. 30, 2017 |
|
| Research and Development Costs | |||
| Research and development costs | $ 647 | $ 643 | $ 634 |
Business Disposition and Acquisition - Disposition (Details) - USD ($) $ in Millions |
3 Months Ended | 12 Months Ended | |
|---|---|---|---|
Jul. 02, 2018 |
Jan. 04, 2020 |
Dec. 29, 2018 |
|
| Business Disposition | |||
| Net proceeds from business disposition | $ 807 | ||
| Disposition of businesses | Tools and Test Equipment | |||
| Business Disposition | |||
| Net proceeds from business disposition | $ 807 | ||
| After tax gain | $ 419 | $ 419 |
Business Disposition and Acquisition - Business Acquisitions (Details) - Artic Cat Inc $ / shares in Units, $ in Millions |
Mar. 06, 2017
USD ($)
$ / shares
|
|---|---|
| Business Acquisitions | |
| Price per share (in dollars per share) | $ / shares | $ 18.50 |
| Aggregate cash payment | $ | $ 316 |
Goodwill and Intangible Assets - Goodwill (Details) - Manufacturing group - USD ($) $ in Millions |
12 Months Ended | |
|---|---|---|
Jan. 04, 2020 |
Dec. 29, 2018 |
|
| Changes in the carrying amount of goodwill | ||
| Beginning Balance | $ 2,218 | $ 2,364 |
| Disposition | (71) | (153) |
| Acquisition | 4 | 13 |
| Foreign currency translation | (1) | (6) |
| Ending Balance | 2,150 | 2,218 |
| Textron Aviation | ||
| Changes in the carrying amount of goodwill | ||
| Beginning Balance | 614 | 614 |
| Ending Balance | 614 | 614 |
| Bell | ||
| Changes in the carrying amount of goodwill | ||
| Beginning Balance | 31 | 31 |
| Ending Balance | 31 | 31 |
| Textron Systems | ||
| Changes in the carrying amount of goodwill | ||
| Beginning Balance | 1,100 | 1,087 |
| Disposition | (71) | |
| Acquisition | 4 | 13 |
| Ending Balance | 1,033 | 1,100 |
| Industrial | ||
| Changes in the carrying amount of goodwill | ||
| Beginning Balance | 473 | 632 |
| Disposition | (153) | |
| Foreign currency translation | (1) | (6) |
| Ending Balance | $ 472 | $ 473 |
Goodwill and Intangible Assets - Amortization expense (Details) - USD ($) $ in Millions |
12 Months Ended | ||
|---|---|---|---|
Jan. 04, 2020 |
Dec. 29, 2018 |
Dec. 30, 2017 |
|
| Goodwill and Intangible Assets | |||
| Total amortization expense | $ 59 | $ 66 | $ 69 |
| Estimated amortization expense for 2020 | 55 | ||
| Estimated amortization expense for 2021 | 53 | ||
| Estimated amortization expense for 2022 | 54 | ||
| Estimated amortization expense for 2023 | 37 | ||
| Estimated amortization expense for 2024 | $ 32 | ||
Accounts Receivable and Finance Receivables - Accounts receivable (Details) - Manufacturing group - USD ($) $ in Millions |
Jan. 04, 2020 |
Dec. 29, 2018 |
|---|---|---|
| Accounts Receivable | ||
| Accounts Receivable, Gross | $ 950 | $ 1,051 |
| Allowance for doubtful accounts | (29) | (27) |
| Total accounts receivable, net | 921 | 1,024 |
| Commercial | ||
| Accounts Receivable | ||
| Accounts Receivable, Gross | 835 | 885 |
| U.S. Government contracts | ||
| Accounts Receivable | ||
| Accounts Receivable, Gross | $ 115 | $ 166 |
Accounts Receivable and Finance Receivables - Finance receivables (Details) - USD ($) $ in Millions |
12 Months Ended | |
|---|---|---|
Jan. 04, 2020 |
Dec. 29, 2018 |
|
| Finance Receivables | ||
| Finance receivables | $ 707 | $ 789 |
| Allowance for losses | (25) | (29) |
| Total finance receivables, net | 682 | $ 760 |
| Average balance of loans | $ 1 | |
| Minimum | ||
| Finance Receivables | ||
| Contractual terms | 5 years | |
| Amortization period | 8 years | |
| Maximum | ||
| Finance Receivables | ||
| Contractual terms | 12 years | |
| Amortization period | 15 years |
Accounts Receivable and Finance Receivables - Other information regarding finance receivables (Details) - USD ($) $ in Millions |
12 Months Ended | |
|---|---|---|
Jan. 04, 2020 |
Dec. 29, 2018 |
|
| Summary of financing vehicles | ||
| Percentage of internationally based finance receivables | 59.00% | 59.00% |
| Percentage of US based finance receivables | 41.00% | 41.00% |
| Pledged assets finance receivable pledged as collateral | $ 148 | $ 201 |
| Value of debt collateralized | $ 87 | $ 119 |
Accounts Receivable and Finance Receivables - Finance receivables by delinquency aging category (Details) - USD ($) $ in Millions |
Jan. 04, 2020 |
Dec. 29, 2018 |
|---|---|---|
| Finance receivables held for investment by delinquency aging | ||
| 60 + days contractual delinquency as a percentage of finance receivables | 2.40% | 1.77% |
| Less than 31 days past due | ||
| Finance receivables held for investment by delinquency aging | ||
| Total finance receivables | $ 637 | $ 719 |
| 31-60 days past due | ||
| Finance receivables held for investment by delinquency aging | ||
| Total finance receivables | 53 | 56 |
| 61- 90 days past due | ||
| Finance receivables held for investment by delinquency aging | ||
| Total finance receivables | 7 | 5 |
| Over 90 days past due | ||
| Finance receivables held for investment by delinquency aging | ||
| Total finance receivables | $ 10 | $ 9 |
Accounts Receivable and Finance Receivables - Summary of impaired finance receivables, excluding leveraged leases, and the average recorded investment (Details) - USD ($) $ in Millions |
12 Months Ended | |
|---|---|---|
Jan. 04, 2020 |
Dec. 29, 2018 |
|
| Summary of impaired finance receivables, excluding leveraged leases, and the average recorded investment | ||
| Impaired loans with related allowance for losses | $ 17 | $ 15 |
| Impaired finance receivables with no related allowance for losses | 22 | 43 |
| Recorded investment, Total | 39 | 58 |
| Unpaid principal balance | 50 | 67 |
| Allowance for losses on impaired loans | 3 | 5 |
| Average recorded investment | $ 40 | $ 61 |
Accounts Receivable and Finance Receivables - Allowance for losses on finance receivables on an individual and on a collective basis and rollforward of the allowance for losses on finance receivables (Details) - USD ($) $ in Millions |
Jan. 04, 2020 |
Dec. 29, 2018 |
|---|---|---|
| Finance receivables | ||
| Leveraged leases | $ 104 | $ 101 |
| Allowance for losses | ||
| Allowance for losses based on collective evaluation | 22 | 24 |
| Allowance for losses based on individual evaluation | 3 | 5 |
| Finance receivables evaluated collectively | 564 | 630 |
| Finance receivables evaluated individually | $ 39 | $ 58 |
Inventories (Details) - USD ($) $ in Millions |
Jan. 04, 2020 |
Dec. 29, 2018 |
|---|---|---|
| Inventories | ||
| Finished goods | $ 1,557 | $ 1,662 |
| Work in process | 1,616 | 1,356 |
| Raw materials and components | 896 | 800 |
| Total inventories | 4,069 | 3,818 |
| Inventories by LIFO method | 2,500 | 2,200 |
| LIFO carrying value at current cost | $ 475 | $ 457 |
Other Assets (Details) - USD ($) $ in Millions |
12 Months Ended | |
|---|---|---|
Apr. 01, 2019 |
Jan. 04, 2020 |
|
| Equity method investment | ||
| Contributed assets | $ 69 | |
| Allocated goodwill | $ 71 | |
| Amount of net pre-tax gain subject to post-closing adjustments | $ 18 | |
| FlightSafety Textron Aviation Training LLC | ||
| Equity method investment | ||
| Investment (in percentage) | 30.00% |
Other Current Liabilities - Accrued liabilities of Manufacturing group (Details) - Manufacturing group - USD ($) $ in Millions |
Jan. 04, 2020 |
Dec. 29, 2018 |
|---|---|---|
| Other current liabilities of Manufacturing group | ||
| Contract liabilities | $ 715 | $ 876 |
| Salaries, wages and employer taxes | 362 | 381 |
| Current portion of warranty and product maintenance liabilities | 147 | 177 |
| Other | 683 | 715 |
| Total | $ 1,907 | $ 2,149 |
Other Current Liabilities - Changes in warranty liability (Details) - Manufacturing group - USD ($) $ in Millions |
12 Months Ended | ||
|---|---|---|---|
Jan. 04, 2020 |
Dec. 29, 2018 |
Dec. 30, 2017 |
|
| Changes in warranty liability | |||
| Balance at beginning of period | $ 149 | $ 164 | $ 138 |
| Provision | 68 | 72 | 81 |
| Settlements | (70) | (78) | (69) |
| Acquisitions | 1 | 35 | |
| Adjustments | (6) | (10) | (21) |
| Balance at end of period | $ 141 | $ 149 | $ 164 |
Leases (Details) $ in Millions |
12 Months Ended |
|---|---|
|
Jan. 04, 2020
USD ($)
| |
| Leases | |
| Operating lease - Option to extend | true |
| Operating lease cost | $ 64 |
| Cash paid for operating lease liabilities | $ 62 |
| Maximum | |
| Leases | |
| Operating lease and finance lease - Remaining lease term | 30 years |
| Operating lease - Option to extend the lease, term | 25 years |
Leases - Maturity of lease liabilities (Details) $ in Millions |
Jan. 04, 2020
USD ($)
|
|---|---|
| Operating Leases | |
| 2020 | $ 57 |
| 2021 | 48 |
| 2022 | 40 |
| 2023 | 32 |
| 2024 | 25 |
| Thereafter | 154 |
| Total lease payments | 356 |
| Less: interest | (75) |
| Total lease liabilities | $ 281 |
| Operating lease, liability, statement of financial position | us-gaap:OtherLiabilitiesCurrent us-gaap:OtherLiabilities |
| Finance Leases | |
| 2020 | $ 4 |
| 2021 | 4 |
| 2022 | 4 |
| 2023 | 4 |
| 2024 | 5 |
| Thereafter | 46 |
| Total lease payments | 67 |
| Less: interest | (25) |
| Total lease liabilities | $ 42 |
Debt and Credit Facilities - Future required payments on debt (Details) $ in Millions |
Jan. 04, 2020
USD ($)
|
|---|---|
| Required payments during the next five years on debt outstanding | |
| 2020 | $ 728 |
| 2021 | 521 |
| 2022 | 174 |
| 2023 | 24 |
| 2024 | 376 |
| Manufacturing group | |
| Required payments during the next five years on debt outstanding | |
| 2020 | 561 |
| 2021 | 507 |
| 2022 | 7 |
| 2023 | 7 |
| 2024 | 361 |
| Finance group | |
| Required payments during the next five years on debt outstanding | |
| 2020 | 167 |
| 2021 | 14 |
| 2022 | 167 |
| 2023 | 17 |
| 2024 | $ 15 |
Derivative Instruments and Fair Value Measurements - Assets and liabilities recorded at fair value on a recurring basis (Details) - Manufacturing group - USD ($) $ in Millions |
12 Months Ended | |
|---|---|---|
Jan. 04, 2020 |
Dec. 29, 2018 |
|
| Fair value of derivative instruments | ||
| Forward exchange contracts maximum maturity period | 3 years | |
| Foreign currency exchange contracts | ||
| Fair value of derivative instruments | ||
| Notional amounts | $ 342 | $ 379 |
| Level 2 | Foreign currency exchange contracts | ||
| Fair value of derivative instruments | ||
| Derivative Asset, Fair Value | 2 | 2 |
| Derivative Liability, Fair Value | $ 2 | $ 10 |
Derivative Instruments and Fair Value Measurements - Assets and liabilities not recorded at fair value (Details) - USD ($) $ in Millions |
Jan. 04, 2020 |
Dec. 29, 2018 |
|---|---|---|
| Manufacturing group | ||
| Financial instruments not reflected at fair value | ||
| Debt | $ (3,124) | $ (3,066) |
| Manufacturing group | Carrying Value | ||
| Financial instruments not reflected at fair value | ||
| Debt, excluding leases | (3,097) | (2,996) |
| Manufacturing group | Estimated Fair Value | ||
| Financial instruments not reflected at fair value | ||
| Debt, excluding leases | (3,249) | (2,971) |
| Finance group | ||
| Financial instruments not reflected at fair value | ||
| Debt | (686) | (718) |
| Finance group | Carrying Value | ||
| Financial instruments not reflected at fair value | ||
| Finance receivables, excluding leases | 493 | 582 |
| Debt | (686) | (718) |
| Finance group | Estimated Fair Value | ||
| Financial instruments not reflected at fair value | ||
| Finance receivables, excluding leases | 527 | 584 |
| Debt | $ (634) | $ (640) |
Shareholders' Equity - Capital stock (Details) - $ / shares shares in Thousands |
12 Months Ended | ||
|---|---|---|---|
Jan. 04, 2020 |
Dec. 29, 2018 |
Dec. 30, 2017 |
|
| Shareholders' Equity | |||
| Preferred stock shares authorized | 15,000 | ||
| Preferred stock par value (in dollars per share) | $ 0.01 | ||
| Common stock (in shares) | 500,000 | ||
| Common stock par value (in dollars per share) | $ 0.125 | ||
| Capital Stock | |||
| Balance at beginning of year (in shares) | 235,621 | 261,471 | 270,287 |
| Share repurchases (in shares) | (10,011) | (29,094) | (11,917) |
| Share-based compensation activity | 2,346 | 3,244 | 3,101 |
| Balance at end of year (in shares) | 227,956 | 235,621 | 261,471 |
Shareholders' Equity - Earnings per share (Details) - shares shares in Thousands |
3 Months Ended | 12 Months Ended | |||||||||
|---|---|---|---|---|---|---|---|---|---|---|---|
Jan. 04, 2020 |
Sep. 28, 2019 |
Jun. 29, 2019 |
Mar. 30, 2019 |
Dec. 29, 2018 |
Sep. 29, 2018 |
Jun. 30, 2018 |
Mar. 31, 2018 |
Jan. 04, 2020 |
Dec. 29, 2018 |
Dec. 30, 2017 |
|
| Weighted-average shares outstanding for basic and diluted EPS | |||||||||||
| Basic weighted-average shares outstanding | 228,653 | 229,755 | 232,013 | 234,839 | 240,248 | 246,136 | 253,904 | 260,497 | 231,315 | 250,196 | 266,380 |
| Dilutive effect of stock options | 1,394 | 3,041 | 2,370 | ||||||||
| Diluted weighted-average shares outstanding | 229,790 | 231,097 | 233,545 | 236,437 | 242,569 | 249,378 | 257,177 | 263,672 | 232,709 | 253,237 | 268,750 |
| Anti-dilutive effect of weighted average shares | 4,300 | 1,300 | 1,600 | ||||||||
Segment and Geographic Data - Operating and reportable segments (Details) |
12 Months Ended |
|---|---|
|
Jan. 04, 2020
segment
| |
| Operating and reportable business segments | |
| Number of business operating segments | 5 |
| Number of reportable business segments | 5 |
Segment and Geographic Data - Selected financial information by geographic area (Details) - USD ($) $ in Millions |
3 Months Ended | 12 Months Ended | |||||||||
|---|---|---|---|---|---|---|---|---|---|---|---|
Jan. 04, 2020 |
Sep. 28, 2019 |
Jun. 29, 2019 |
Mar. 30, 2019 |
Dec. 29, 2018 |
Sep. 29, 2018 |
Jun. 30, 2018 |
Mar. 31, 2018 |
Jan. 04, 2020 |
Dec. 29, 2018 |
Dec. 30, 2017 |
|
| Revenues from External Customers and Long-Lived Assets | |||||||||||
| Revenues | $ 4,035 | $ 3,259 | $ 3,227 | $ 3,109 | $ 3,750 | $ 3,200 | $ 3,726 | $ 3,296 | $ 13,630 | $ 13,972 | $ 14,198 |
| Property, plant and equipment, net | 2,527 | 2,615 | 2,527 | 2,615 | |||||||
| United States | |||||||||||
| Revenues from External Customers and Long-Lived Assets | |||||||||||
| Revenues | 8,963 | 8,667 | 8,786 | ||||||||
| Property, plant and equipment, net | 2,054 | 2,115 | 2,054 | 2,115 | |||||||
| Europe | |||||||||||
| Revenues from External Customers and Long-Lived Assets | |||||||||||
| Revenues | 1,986 | 2,187 | 1,962 | ||||||||
| Property, plant and equipment, net | 244 | 267 | 244 | 267 | |||||||
| Asia and Australia | |||||||||||
| Revenues from External Customers and Long-Lived Assets | |||||||||||
| Revenues | 1,070 | 1,253 | 1,206 | ||||||||
| Property, plant and equipment, net | 97 | 88 | 97 | 88 | |||||||
| Other international | |||||||||||
| Revenues from External Customers and Long-Lived Assets | |||||||||||
| Revenues | 1,611 | 1,865 | $ 2,244 | ||||||||
| Property, plant and equipment, net | $ 132 | $ 145 | $ 132 | $ 145 | |||||||
Revenues - Contract Assets and Liabilities (Details) - USD ($) $ in Millions |
12 Months Ended | |
|---|---|---|
Jan. 04, 2020 |
Dec. 29, 2018 |
|
| Contract Assets and Liabilities | ||
| Contract assets | $ 567 | $ 461 |
| Contract liabilities | 830 | 974 |
| Revenue recognized included in contract liabilities | $ 590 | $ 817 |
Share-Based Compensation - Performance Share Units (Details) - Performance Share Units - USD ($) $ / shares in Units, shares in Thousands, $ in Millions |
12 Months Ended | ||
|---|---|---|---|
Jan. 04, 2020 |
Dec. 29, 2018 |
Dec. 30, 2017 |
|
| Share-Based Compensation | |||
| Performance share units measurement period | 3 years | ||
| Performance share units vesting period | 3 years | ||
| Number of Units | |||
| Outstanding at beginning of period, nonvested (in shares) | 404 | ||
| Granted | 262 | ||
| Vested | (196) | ||
| Forfeited | (59) | ||
| Outstanding at end of period, nonvested (in shares) | 411 | 404 | |
| Weighted-Average Grant Date Fair Value | |||
| Outstanding at beginning of period, nonvested (in dollars per share) | $ 53.63 | ||
| Granted | 54.43 | ||
| Vested | (49.58) | ||
| Forfeited | (53.94) | ||
| Outstanding at end of period, nonvested (in dollars per share) | $ 56.03 | $ 53.63 | |
| Fair value | |||
| Fair value of awards vested | $ 9 | $ 12 | $ 15 |
| Cash paid | $ 10 | $ 11 | $ 15 |
Retirement Plans - Other information on retirement plans (Details) - USD ($) $ in Millions |
12 Months Ended | ||
|---|---|---|---|
Jan. 04, 2020 |
Dec. 29, 2018 |
Dec. 30, 2017 |
|
| Retirement Plans | |||
| Percentage of eligible compensation contributed by employer to Retirement Account Plan | 2.00% | ||
| Additional percentage of eligible compensation contributed annually by employer to defined contribution plan for employees hired after January 1, 2010 | 4.00% | ||
| Cost recognized for defined contribution plans | $ 130 | $ 125 | $ 123 |
| Portion of contribution related to Retirement Account Plan | $ 13 | $ 13 | $ 13 |
Retirement Plans - Adoption of ASU 2017-17 (Details) $ in Millions |
12 Months Ended |
|---|---|
|
Dec. 30, 2017
USD ($)
| |
| Accounting Standards Update 2017-07 | |
| Defined Benefit Plan, Net Periodic Benefit Cost (Credit) [Abstract] | |
| Cost of sales and Selling and administrative expense | $ 29 |
Retirement Plans - Amounts recognized in the balance sheets (Details) - USD ($) $ in Millions |
Jan. 04, 2020 |
Dec. 29, 2018 |
|---|---|---|
| Pension Benefits | ||
| Amounts recognized in our balance sheets | ||
| Non-current assets | $ 152 | $ 112 |
| Current liabilities | (27) | (27) |
| Non-current liabilities | (934) | (864) |
| Recognized in Accumulated other comprehensive loss, pre-tax: | ||
| Net loss (gain) | 2,271 | 2,157 |
| Prior service cost (credit) | 55 | 69 |
| Postretirement Benefits Other Than Pensions | ||
| Amounts recognized in our balance sheets | ||
| Current liabilities | (26) | (28) |
| Non-current liabilities | (220) | (222) |
| Recognized in Accumulated other comprehensive loss, pre-tax: | ||
| Net loss (gain) | (21) | (34) |
| Prior service cost (credit) | $ (20) | $ (27) |
Retirement Plans - Pension plans with accumulated benefit obligations exceeding the fair value of plan assets (Details) - USD ($) $ in Millions |
Jan. 04, 2020 |
Dec. 29, 2018 |
|---|---|---|
| Retirement Plans | ||
| Accumulated benefit obligation | $ 8,500 | $ 7,500 |
| Portion of accumulated benefit obligation for unfunded plans | 404 | 369 |
| Pension plans with accumulated benefit obligations exceeding the fair value of plan assets | ||
| Accumulated benefit obligation | 8,050 | 7,137 |
| Fair value of plan assets | 7,500 | 6,589 |
| Pension plans with projected benefit obligation exceeding the fair value of plan assets | ||
| Projected benefit obligation | 8,462 | 7,481 |
| Fair value of plan assets | $ 7,500 | $ 6,589 |
Retirement Plans - Weighted-average assumptions (Details) |
12 Months Ended | ||
|---|---|---|---|
Jan. 04, 2020 |
Dec. 29, 2018 |
Dec. 30, 2017 |
|
| Pension Benefits | |||
| Net periodic benefit cost | |||
| Discount rate (as a percent) | 4.24% | 3.67% | 4.13% |
| Expected long-term rate of return on assets (as a percent) | 7.55% | 7.58% | 7.57% |
| Rate of compensation increase (as a percent) | 3.50% | 3.50% | 3.50% |
| Benefit obligations at year-end | |||
| Discount rate (as a percent) | 3.36% | 4.24% | 3.66% |
| Rate of compensation increase (as a percent) | 3.50% | 3.50% | 3.50% |
| Interest crediting rate for cash balance plans (as a percent) | 5.25 | 5.25 | 5.25 |
| Postretirement Benefits Other Than Pensions | |||
| Net periodic benefit cost | |||
| Discount rate (as a percent) | 4.25% | 3.50% | 4.00% |
| Benefit obligations at year-end | |||
| Discount rate (as a percent) | 3.20% | 4.25% | 3.50% |
Retirement Plans - Assumed healthcare cost trend rates and effect of one-percentage-point change in cost trend rates (Details) |
12 Months Ended | |
|---|---|---|
Jan. 04, 2020 |
Dec. 29, 2018 |
|
| Assumed healthcare cost trend rates | ||
| Healthcare cost trend rate for both the medical and prescription drug cost ( as a percent) | 7.00% | 7.00% |
| Rate to which medical and prescription drug cost trend rates will gradually decline (as a percent) | 5.00% | |
| Year that the rates reach the rate where we assume they will remain | 2024 |
Retirement Plans - Reconciliation for fair value measurements that use significant unobservable inputs (Details) - Unobservable Inputs Level 3 - USD ($) $ in Millions |
12 Months Ended | |
|---|---|---|
Jan. 04, 2020 |
Dec. 29, 2018 |
|
| Reconciliation for fair value measurements that use significant unobservable inputs (Level 3) | ||
| Balance at beginning of year | $ 460 | |
| Balance at end of year | 473 | $ 460 |
| Real estate | ||
| Reconciliation for fair value measurements that use significant unobservable inputs (Level 3) | ||
| Balance at beginning of year | 460 | 460 |
| Unrealized gains, net | 7 | 13 |
| Realized gains, net | 5 | 12 |
| Purchases, sales and settlements, net | 1 | (25) |
| Balance at end of year | $ 473 | $ 460 |
Retirement Plans - Estimated future benefit payments (Details) $ in Millions |
Jan. 04, 2020
USD ($)
|
|---|---|
| Retirement Plans | |
| Expected contributions to our non-qualified plans and foreign plans | $ 50 |
| Pension Benefits | |
| Estimated future benefit payments | |
| 2020 | 426 |
| 2021 | 433 |
| 2022 | 441 |
| 2023 | 450 |
| 2024 | 460 |
| 2025 - 2029 | 2,426 |
| Postretirement Benefits Other Than Pensions | |
| Estimated future benefit payments | |
| 2020 | 26 |
| 2021 | 25 |
| 2022 | 24 |
| 2023 | 23 |
| 2024 | 22 |
| 2025 - 2029 | $ 88 |
Income Taxes - Income from continuing operations before income taxes (Details) - USD ($) $ in Millions |
12 Months Ended | ||
|---|---|---|---|
Jan. 04, 2020 |
Dec. 29, 2018 |
Dec. 30, 2017 |
|
| Income before income taxes | |||
| U.S. | $ 668 | $ 557 | $ 428 |
| Non-U.S. | 274 | 827 | 334 |
| Income from continuing operations before income taxes | $ 942 | $ 1,384 | $ 762 |
Income Taxes - Current and deferred income tax expense for continuing operations (Details) - USD ($) $ in Millions |
3 Months Ended | 12 Months Ended | |||||||||
|---|---|---|---|---|---|---|---|---|---|---|---|
Jan. 04, 2020 |
Sep. 28, 2019 |
Jun. 29, 2019 |
Mar. 30, 2019 |
Dec. 29, 2018 |
Sep. 29, 2018 |
Jun. 30, 2018 |
Mar. 31, 2018 |
Jan. 04, 2020 |
Dec. 29, 2018 |
Dec. 30, 2017 |
|
| Current expense (benefit): | |||||||||||
| Federal | $ (48) | $ 3 | $ 29 | ||||||||
| State | 16 | 9 | (9) | ||||||||
| Non-U.S. | 70 | 101 | 79 | ||||||||
| Current income tax expense, total | 38 | 113 | 99 | ||||||||
| Deferred expense (benefit): | |||||||||||
| Federal | 112 | 60 | 358 | ||||||||
| State | (20) | (5) | (14) | ||||||||
| Non-U.S. | (3) | (6) | 13 | ||||||||
| Deferred income tax expense, total | 89 | 49 | 357 | ||||||||
| Income tax expense continuing operations, total | $ 11 | $ 21 | $ 62 | $ 33 | $ 32 | $ 65 | $ 36 | $ 29 | $ 127 | $ 162 | $ 456 |
Income Taxes - U.S. Tax Reform (Details) - USD ($) $ in Millions |
3 Months Ended | 12 Months Ended | |||
|---|---|---|---|---|---|
Dec. 29, 2018 |
Dec. 30, 2017 |
Jan. 04, 2020 |
Dec. 29, 2018 |
Dec. 30, 2017 |
|
| U.S. Tax Reform | |||||
| Research credits related to prior years | $ 61 | $ 25 | |||
| U.S. federal statutory income tax rate (as a percent) | 21.00% | 35.00% | 21.00% | 21.00% | 35.00% |
| Income tax expense charge to reflect provisional estimate of the net impact of Tax Cuts and Jobs Act | $ 266 | ||||
| Remeasurement of U.S. deferred tax assets and liabilities | 154 | ||||
| One-time transition tax on post-1986 earnings | 112 | ||||
| Post-1986 earnings and profits previously deferred from U.S. income taxes used as basis for one-time transition tax | $ 1,600 | $ 1,600 | |||
| Post-1986 earnings and profits transition tax | $ 14 | ||||
Income Taxes - Unrecognized tax benefits rollforward and various tax information (Details) - USD ($) $ in Millions |
12 Months Ended | ||
|---|---|---|---|
Jan. 04, 2020 |
Dec. 29, 2018 |
Dec. 30, 2017 |
|
| Unrecognized tax benefits, excluding accrued interest, related to unrecognized tax benefits | |||
| Balance at beginning of year | $ 141 | $ 182 | $ 186 |
| Additions for tax positions related to current year | 9 | 5 | 12 |
| Additions for tax positions of prior years | 74 | 13 | 16 |
| Reductions for settlements and expiration of statute of limitations | (1) | (22) | (17) |
| Reductions for tax positions of prior years | (2) | (37) | (15) |
| Balance at end of year | 221 | $ 141 | $ 182 |
| Certain tax position related to research credits | $ 25 | ||
Income Taxes - Breakdown of net deferred tax assets (Details) - USD ($) $ in Millions |
Jan. 04, 2020 |
Dec. 29, 2018 |
|---|---|---|
| Breakdown of net deferred tax assets | ||
| Deferred taxes, net | $ 269 | $ 322 |
| Unremitted earnings in foreign subsidiaries | 1,700 | 1,600 |
| Manufacturing group | ||
| Breakdown of net deferred tax assets | ||
| Deferred tax assets, net of valuation allowance | 341 | 397 |
| Deferred tax liabilities | (4) | (5) |
| Finance group | ||
| Breakdown of net deferred tax assets | ||
| Deferred tax liabilities | $ (68) | $ (70) |
Commitments and Contingencies - Letter of Credit (Details) - USD ($) $ in Millions |
Jan. 04, 2020 |
Dec. 29, 2018 |
|---|---|---|
| Commitments and Contingencies | ||
| Aggregate amount of outstanding letter of credit arrangements and surety bonds | $ 247 | $ 333 |
Commitments and Contingencies - Environmental remediation (Details) - Environmental liabilities - USD ($) $ in Millions |
12 Months Ended | ||
|---|---|---|---|
Jan. 04, 2020 |
Dec. 29, 2018 |
Dec. 30, 2017 |
|
| Environmental Remediation | |||
| Environmental reserves | $ 76 | ||
| Estimated period over which accrued environmental remediation liabilities are likely to be paid | 10 years | ||
| Accrued environmental remediation liabilities classified as current liabilities | $ 14 | ||
| Expenditures to evaluate and remediate contaminated sites | 13 | $ 13 | $ 18 |
| Minimum | |||
| Environmental Remediation | |||
| Potential environmental liabilities | 40 | ||
| Maximum | |||
| Environmental Remediation | |||
| Potential environmental liabilities | $ 150 | ||
Supplemental Cash Flow Information (Details) - USD ($) $ in Millions |
12 Months Ended | ||
|---|---|---|---|
Jan. 04, 2020 |
Dec. 29, 2018 |
Dec. 30, 2017 |
|
| Manufacturing group | |||
| Supplemental Cash Flow Information | |||
| Cash paid for interest | $ 138 | $ 132 | $ 133 |
| Net taxes paid /(received) | 120 | 129 | (16) |
| Finance group | |||
| Supplemental Cash Flow Information | |||
| Cash paid for interest | 23 | 25 | 29 |
| Net taxes paid /(received) | $ 1 | $ 17 | $ 48 |
Schedule II - Valuation and Qualifying Accounts (Details) - USD ($) $ in Millions |
12 Months Ended | ||
|---|---|---|---|
Jan. 04, 2020 |
Dec. 29, 2018 |
Dec. 30, 2017 |
|
| Allowance for doubtful accounts | |||
| Valuation and Qualifying Accounts | |||
| Balance at beginning of year | $ 27 | $ 27 | $ 27 |
| Charged to costs and expenses | 7 | 5 | 3 |
| Deductions from reserves | (5) | (5) | (3) |
| Balance at end of year | 29 | 27 | 27 |
| Allowance for losses on finance receivables | |||
| Valuation and Qualifying Accounts | |||
| Balance at beginning of year | 29 | 31 | 41 |
| Reversal of the provision for losses | (6) | (3) | (11) |
| Charge-offs | (4) | (4) | (6) |
| Recoveries | 6 | 5 | 7 |
| Balance at end of year | 25 | 29 | 31 |
| Inventory FIFO reserves | |||
| Valuation and Qualifying Accounts | |||
| Balance at beginning of year | 280 | 262 | 231 |
| Charged to costs and expenses | 58 | 56 | 63 |
| Deductions from reserves | (29) | (38) | (32) |
| Balance at end of year | $ 309 | $ 280 | $ 262 |