Consolidated Statements of Comprehensive Income (Unaudited) - USD ($) $ in Millions |
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Oct. 02, 2021 |
Oct. 03, 2020 |
Oct. 02, 2021 |
Oct. 03, 2020 |
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Statement of Comprehensive Income [Abstract] | ||||
Net income | $ 185 | $ 115 | $ 539 | $ 73 |
Other comprehensive income, net of tax | ||||
Pension and postretirement benefits adjustments, net of reclassifications | 30 | 37 | 90 | 110 |
Foreign currency translation adjustments, net of reclassifications | (19) | 35 | (22) | 25 |
Deferred gains (losses) on hedge contracts, net of reclassifications | (5) | 2 | 1 | (5) |
Other comprehensive income | 6 | 74 | 69 | 130 |
Comprehensive income | $ 191 | $ 189 | $ 608 | $ 203 |
Consolidated Balance Sheets (Unaudited) (Parenthetical) - USD ($) $ in Millions |
Oct. 02, 2021 |
Jan. 02, 2021 |
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Statement of Financial Position [Abstract] | ||
Accumulated depreciation and amortization | $ 4,855 | $ 4,696 |
Basis of Presentation |
9 Months Ended |
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Oct. 02, 2021 | |
Organization, Consolidation and Presentation of Financial Statements [Abstract] | |
Basis of Presentation | Basis of Presentation Our Consolidated Financial Statements include the accounts of Textron Inc. (Textron) and its majority-owned subsidiaries. We have prepared these unaudited consolidated financial statements in accordance with accounting principles generally accepted in the U.S. for interim financial information. Accordingly, these interim financial statements do not include all of the information and footnotes required by accounting principles generally accepted in the U.S. for complete financial statements. The consolidated interim financial statements included in this quarterly report should be read in conjunction with the consolidated financial statements included in our Annual Report on Form 10-K for the year ended January 2, 2021. In the opinion of management, the interim financial statements reflect all adjustments (consisting only of normal recurring adjustments) that are necessary for the fair presentation of our consolidated financial position, results of operations and cash flows for the interim periods presented. The results of operations for the interim periods are not necessarily indicative of the results to be expected for the full year. Our financings are conducted through two separate borrowing groups. The Manufacturing group consists of Textron consolidated with its majority-owned subsidiaries that operate in the Textron Aviation, Bell, Textron Systems and Industrial segments. The Finance group, which also is the Finance segment, consists of Textron Financial Corporation and its consolidated subsidiaries. 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. All significant intercompany transactions are eliminated from the Consolidated Financial Statements, including retail financing activities for inventory sold by our Manufacturing group and financed by our Finance group. 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. 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 the third quarter of 2021 and 2020, our cumulative catch-up adjustments increased segment profit by $25 million and $22 million, respectively, and increased net income by $19 million and $17 million, respectively ($0.08 and $0.07 per diluted share, respectively). Gross favorable profit adjustments totaled $43 million and $31 million in the third quarter of 2021 and 2020, respectively, and the gross unfavorable profit adjustments totaled $18 million and $9 million, respectively. We recognized revenues of $27 million and $22 million in the third quarter of 2021 and 2020, respectively, from performance obligations satisfied in prior periods that related to changes in profit booking rates. In the first nine months of 2021 and 2020, our cumulative catch-up adjustments increased segment profit by $54 million and $41 million, respectively, and increased net income by $41 million and $31 million, respectively ($0.18 and $0.14 per diluted share, respectively). Gross favorable profit adjustments totaled $119 million and $104 million in the first nine months of 2021 and 2020, respectively, and the gross unfavorable profit adjustments totaled $65 million and $63 million, respectively. We recognized revenues of $65 million and $48 million in the first nine months of 2021 and 2020, respectively, from performance obligations satisfied in prior periods that related to changes in profit booking rates.
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Business Disposition |
9 Months Ended |
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Oct. 02, 2021 | |
Discontinued Operations and Disposal Groups [Abstract] | |
Business Disposition | Business DispositionOn January 25, 2021, we completed the sale of TRU Simulation + Training Canada Inc. within our Textron Systems segment for net cash proceeds of $38 million and recorded an after-tax gain of $17 million. |
Accounts Receivable and Finance Receivables |
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Receivables [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Accounts Receivable and Finance Receivables | 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 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. Since the first quarter of 2020, the Finance segment has worked with certain customers impacted by the pandemic to provide payment relief through loan modifications. The types of temporary payment relief we offered to these customers included delays in the timing of required principal payments, deferrals of interest payments and/or interest-only payments. The majority of these modified loans have returned to paying principal and interest. For loan modifications that cover payment-relief periods in excess of six months, even if the loan was previously current, the loan is deemed a troubled debt restructuring and considered impaired. These impaired loans are classified as either nonaccrual or watchlist based on a review of the credit quality indicators as discussed above. During the first nine months of 2021, we modified finance receivable contracts for 21 customers with an outstanding balance at October 2, 2021 totaling $76 million, which were all categorized as troubled debt restructurings. Of these modifications, $71 million were previously modified in 2020. Due to the nature of these restructurings, the financial effects were not significant. We had no customer defaults during the last twelve months related to finance receivables previously modified as a troubled debt restructuring. We believe our allowance for credit losses adequately covers our exposure on these loans as our estimated collateral values largely exceed the outstanding loan amounts. Finance receivables categorized based on the credit quality indicators and by the delinquency aging category are summarized as follows:
At October 2, 2021, 30% of our performing finance receivables were originated since the beginning of 2020 and 32% were originated from 2017 to 2019. For finance receivables categorized as nonaccrual, 63% were originated from 2017 to 2019. 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 finance receivables and the allowance for credit losses, based on the results of our impairment evaluation, is provided below. The finance receivables included in this table specifically exclude leveraged leases in accordance with U.S. generally accepted accounting principles.
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Inventories |
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Inventory Disclosure [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||
Inventories | Inventories Inventories are composed of the following:
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Warranty Liability |
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Payables and Accruals [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Warranty Liability | Warranty Liability Changes in our warranty liability are as follows:
* Adjustments include changes to prior year estimates, new issues on prior year sales and currency translation adjustments.
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Leases |
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Leases [Abstract] | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Leases | Leases We primarily lease certain manufacturing plants, offices, warehouses, training and service centers at various locations worldwide. Our operating leases have remaining lease terms up to 28 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. Operating lease cost totaled $17 million and $15 million in the third quarter of 2021 and 2020, respectively, and $49 million and $45 million in the first nine months of 2021 and 2020, respectively. Cash paid for operating leases totaled $49 million and $45 million in the first nine months of 2021 and 2020, respectively, and is classified in cash flows from operating activities. Noncash transactions totaled $81 million and $33 million in the first nine months of 2021 and 2020, respectively, reflecting the recognition of operating lease assets and liabilities for new or extended leases. Variable and short-term lease costs were not significant. Balance sheet and other information related to our operating leases is as follows:
At October 2, 2021, maturities of our operating lease liabilities on an undiscounted basis totaled $20 million for the remainder of 2021, $69 million for 2022, $59 million for 2023, $51 million for 2024, $45 million for 2025 and $247 million thereafter.
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Derivative Instruments and Fair Value Measurements |
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Derivative Instruments and Fair Value Measurements | 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 October 2, 2021 and January 2, 2021, we had foreign currency exchange contracts with notional amounts upon which the contracts were based of $341 million and $318 million, respectively. At October 2, 2021, the fair value amounts of our foreign currency exchange contracts were a $5 million asset and a $2 million liability. At January 2, 2021, the fair value amounts of our foreign currency exchange contracts were a $5 million asset and a $2 million liability. Our Finance group enters into interest rate swap agreements to mitigate certain exposures to fluctuations in interest rates. By using these contracts, we are able to convert floating-rate cash flows to fixed-rate cash flows. These agreements are designated as cash flow hedges. At October 2, 2021, we had a swap agreement for a notional amount of $289 million with a maturity of August 2023 and a fair value of a $3 million liability. At January 2, 2021, we had a swap agreement for a notional amount of $294 million with a maturity of February 2022 and a fair value of a $4 million liability. The fair value of these swap agreements is determined using values published by third-party leading financial news and data providers. These values are observable data that represent the value that financial institutions use for contracts entered into at that date, but are not based on actual transactions, so they are classified as Level 2. 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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Equity [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Shareholders' Equity | Shareholders’ Equity A reconciliation of Shareholders’ equity is presented below:
Dividends per share of common stock were $0.02 for both the third quarter of 2021 and 2020 and $0.06 for both the first nine months of 2021 and 2020. 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:
For the first nine months of 2021, stock options to purchase 1.4 million shares of common stock were excluded from the calculation of diluted weighted-average shares outstanding as their effect would have been anti-dilutive. Stock options to purchase 7.5 million and 7.9 million shares of common stock were excluded from the calculation of diluted weighted-average shares outstanding for the third quarter and first nine months of 2020, respectively, as their effect would have been anti-dilutive. Accumulated Other Comprehensive Loss and Other Comprehensive Income The components of Accumulated other comprehensive loss are presented below:
The before and after-tax components of Other comprehensive income are presented below:
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Segment Information |
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Segment Reporting [Abstract] | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Segment Information | Segment Information We operate in, and report financial information for, the following five business segments: Textron Aviation, Bell, Textron Systems, Industrial and Finance. 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 included in the table below:
* See Note 12 for additional information.
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Revenues |
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Revenue from Contract with Customer [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Revenues | Revenues Disaggregation of Revenues Our revenues disaggregated by major product type are presented below:
Our revenues for our segments by customer type and geographic location are presented below:
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 revenues 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 October 2, 2021, we had $9.8 billion in remaining performance obligations of which we expect to recognize revenues of approximately 70% through 2022, an additional 25% through 2024, 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 October 2, 2021 and January 2, 2021, contract assets totaled $624 million and $561 million, respectively, and contract liabilities totaled $1.1 billion and $842 million, respectively, reflecting timing differences between revenues recognized, billings and payments from customers. We recognized revenues of $51 million and $499 million in the third quarter and first nine months of 2021, respectively, and $44 million and $396 million in the third quarter and first nine months of 2020, respectively, that were included in the contract liability balance at the beginning of each year.
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Retirement Plans |
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Retirement Benefits [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Retirement Plans | Retirement Plans We provide defined benefit pension plans and other postretirement benefits to eligible employees. The components of net periodic benefit cost (credit) for these plans are as follows:
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Special Charges |
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Special Charges [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Special Charges | Special Charges Special charges recorded in the third quarter and first nine months of 2021 and 2020 by segment and type of cost are presented in the table below.
2020 COVID-19 Restructuring Plan In the second quarter of 2020, we initiated a restructuring plan to reduce operating expenses through headcount reductions, facility consolidations and other actions in response to the economic challenges and uncertainty resulting from the COVID-19 pandemic. This plan was expanded in the third quarter of 2020 to include additional headcount reductions and facility consolidations. Since inception of the plan, we have incurred total charges of $128 million, which included severance costs of $76 million for the termination of approximately 2,800 employees, asset impairment charges of $33 million and contract terminations and other costs of $19 million. Of these amounts, $54 million was incurred at Industrial, $37 million at Textron Systems, $33 million at Textron Aviation, and $4 million at Corporate. We expect to incur additional contract termination costs and other charges in the range of $5 million to $10 million, primarily in the Industrial segment, and expect the plan to be substantially completed in the fourth quarter of 2021. In the second quarter of 2020 and in connection with the restructuring plan, we ceased manufacturing at TRU Simulation + Training Canada Inc.’s facility in Montreal, Canada, resulting in a production suspension of our commercial air transport simulators. As a result of this action and market conditions, we incurred an inventory charge of $55 million, which was recorded in Cost of Sales, to write-down the related inventory to its net realizable value. Other Asset Impairments In the first quarter of 2020, we recognized $39 million of intangible asset impairment charges at the Textron Aviation and Industrial segments. Due to the impact of the COVID-19 pandemic, we experienced decreased demand for our products and services as our customers delayed or ceased orders due to the environment of economic uncertainty. In light of these conditions, Textron Aviation had temporarily shut down most aircraft production, including the King Air turboprop and Beechcraft piston product lines, and had instituted employee furloughs. Based on these events, we performed an interim impairment test of the indefinite-lived Beechcraft and King Air trade name intangible assets and recorded an impairment charge of $32 million. Restructuring Reserve Our restructuring reserve activity is summarized below:
The majority of the remaining cash outlays of $32 million is expected to be paid by the first quarter of 2022. 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 |
9 Months Ended |
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Oct. 02, 2021 | |
Income Tax Disclosure [Abstract] | |
Income Taxes | Income Taxes Our effective tax rate for the third quarter and first nine months of 2021 was 15.1% and 13.7%, respectively. In the third quarter and first nine months of 2021, the effective tax rate was lower than the U.S. federal statutory rate of 21%, largely due to the favorable impact of research and development credits. In the first nine months of 2021, the effective tax rate also included a $12 million benefit recognized for additional research and development credits related to prior years. Our effective tax rate for the third quarter and first nine months of 2020 was 0.9% and (9.0)%, respectively, compared with the statutory rate of 21%, largely due to the favorable impact of research and development credits. In the first nine months of 2020, we incurred special charges and an inventory charge in a non-U.S. jurisdiction where tax benefits cannot be realized, which were partially offset by a $14 million benefit recognized upon the release of a valuation allowance in a non-U.S. jurisdiction. These items had a more significant impact on the effective tax rate due to the lower income from continuing operations before income taxes for the period.
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Commitments and Contingencies |
9 Months Ended |
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Oct. 02, 2021 | |
Commitments and Contingencies Disclosure [Abstract] | |
Commitments and Contingencies | Commitments and ContingenciesWe 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. |
Basis of Presentation (Policies) |
9 Months Ended |
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Oct. 02, 2021 | |
Organization, Consolidation and Presentation of Financial Statements [Abstract] | |
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.
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Accounts Receivable and Finance Receivables (Tables) |
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Receivables [Abstract] | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Accounts Receivable | Accounts receivable is composed of the following:
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Finance Receivables | Finance receivables are presented in the following table:
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Finance Receivables Categorized Based On Credit Quality Indicators | Finance receivables categorized based on the credit quality indicators and by the delinquency aging category are summarized as follows:
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Finance Receivables By Delinquency Aging Category | Finance receivables categorized based on the credit quality indicators and by the delinquency aging category are summarized as follows:
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Finance Receivables and Allowance For Credit Losses Based on Impairment Evaluation | A summary of finance receivables and the allowance for credit losses, based on the results of our impairment evaluation, is provided below. The finance receivables included in this table specifically exclude leveraged leases in accordance with U.S. generally accepted accounting principles.
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Inventories (Tables) |
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Inventory Disclosure [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||
Inventories | Inventories are composed of the following:
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Warranty Liability (Tables) |
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Payables and Accruals [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Changes in warranty liability | Changes in our warranty liability are as follows:
* Adjustments include changes to prior year estimates, new issues on prior year sales and currency translation adjustments.
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Leases (Tables) |
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Leases [Abstract] | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Schedule of Balance Sheet and Other Information | Balance sheet and other information related to our operating leases is as follows:
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Derivative Instruments and Fair Value Measurements (Tables) |
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Derivative Instruments and Hedging Activities Disclosure [Abstract] | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Carrying Value and Estimated and Fair Value of Financial Instruments | 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:
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Shareholders' Equity (Tables) |
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Equity [Abstract] | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Schedule of Shareholder's Equity | A reconciliation of Shareholders’ equity is presented below:
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Schedule of Weighted-Average Shares Outstanding for Basic and Diluted EPS | The weighted-average shares outstanding for basic and diluted EPS are as follows:
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Schedule of Components of Accumulated Other Comprehensive Loss | The components of Accumulated other comprehensive loss are presented below:
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Schedule of Before and After-Tax Components of Other Comprehensive Income (Loss) | The before and after-tax components of Other comprehensive income are presented below:
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Segment Information (Tables) |
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Segment Reporting [Abstract] | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Revenues by Segment and Reconciliation of Segment Profit Income (Loss) Before Income Taxes | Our revenues by segment, along with a reconciliation of segment profit to income from continuing operations before income taxes, are included in the table below:
* See Note 12 for additional information.
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Revenues (Tables) |
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Revenue from Contract with Customer [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Disaggregation of Revenue | Our revenues disaggregated by major product type are presented below:
Our revenues for our segments by customer type and geographic location are presented below:
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Retirement Plans (Tables) |
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Retirement Benefits [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Schedule of Components of Net Periodic Benefit Cost (Credit) | The components of net periodic benefit cost (credit) for these plans are as follows:
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Special Charges (Tables) |
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Special Charges [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Schedule of Special Charges | Special charges recorded in the third quarter and first nine months of 2021 and 2020 by segment and type of cost are presented in the table below.
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Schedule of Restructuring Reserve Activity | Our restructuring reserve activity is summarized below:
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Basis of Presentation (Details) $ / shares in Units, $ in Millions |
3 Months Ended | 9 Months Ended | ||
---|---|---|---|---|
Oct. 02, 2021
USD ($)
$ / shares
|
Oct. 03, 2020
USD ($)
$ / shares
|
Oct. 02, 2021
USD ($)
borrowingGroup
$ / shares
|
Oct. 03, 2020
USD ($)
$ / shares
|
|
Basis of Presentation | ||||
Number of borrowing groups | borrowingGroup | 2 | |||
Cumulative catch-up method | ||||
Basis of Presentation | ||||
Cumulative catch up adjustments | $ 25 | $ 22 | $ 54 | $ 41 |
Change in accounting estimate financial effect, increase in net income | $ 19 | $ 17 | $ 41 | $ 31 |
Change in accounting estimate financial effect increase in earnings per diluted share (in dollars per share) | $ / shares | $ 0.08 | $ 0.07 | $ 0.18 | $ 0.14 |
Gross favorable adjustments | $ 43 | $ 31 | $ 119 | $ 104 |
Gross unfavorable adjustments | 18 | 9 | 65 | 63 |
Recognized revenue form performance obligations satisfied in prior periods | $ 27 | $ 22 | $ 65 | $ 48 |
Business Disposition (Details) - USD ($) $ in Millions |
3 Months Ended | 9 Months Ended | |||
---|---|---|---|---|---|
Jan. 25, 2021 |
Oct. 02, 2021 |
Oct. 03, 2020 |
Oct. 02, 2021 |
Oct. 03, 2020 |
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Income Statement, Balance Sheet and Additional Disclosures by Disposal Groups, Including Discontinued Operations [Line Items] | |||||
Net proceeds from business disposition | $ 38 | $ 0 | |||
After-tax gain | $ 0 | $ 0 | $ 17 | $ 0 | |
Disposition of businesses | TRU Non-US | |||||
Income Statement, Balance Sheet and Additional Disclosures by Disposal Groups, Including Discontinued Operations [Line Items] | |||||
Net proceeds from business disposition | $ 38 | ||||
After-tax gain | $ 17 |
Accounts Receivable and Finance Receivables - Accounts Receivable (Details) - Manufacturing group - USD ($) $ in Millions |
Oct. 02, 2021 |
Jan. 02, 2021 |
---|---|---|
Accounts Receivable | ||
Accounts receivable, gross | $ 802 | $ 823 |
Allowance for credit losses | (29) | (36) |
Total accounts receivable, net | 773 | 787 |
Commercial | ||
Accounts Receivable | ||
Accounts receivable, gross | 671 | 668 |
U.S. Government | ||
Accounts Receivable | ||
Accounts receivable, gross | $ 131 | $ 155 |
Accounts Receivable and Finance Receivables - Finance Receivables (Details) - USD ($) $ in Millions |
Oct. 02, 2021 |
Jan. 02, 2021 |
---|---|---|
Finance Receivables | ||
Finance receivables | $ 621 | $ 779 |
Allowance for credit losses | (25) | (35) |
Total finance receivables, net | $ 596 | $ 744 |
Accounts Receivable and Finance Receivables - Finance Receivables and Allowance for Losses Based on the Results of Impairment Evaluation (Details) - USD ($) $ in Millions |
9 Months Ended | 12 Months Ended |
---|---|---|
Oct. 02, 2021 |
Jan. 02, 2021 |
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Finance receivables | ||
Finance receivables evaluated collectively | $ 416 | $ 521 |
Finance receivables evaluated individually | 110 | 163 |
Allowance for credit losses based on collective evaluation | 21 | 28 |
Allowance for credit losses based on individual evaluation | 4 | 7 |
Impaired finance receivables with specific allowance for credit losses | 34 | 46 |
Impaired finance receivables with no specific allowance for credit losses | 76 | 117 |
Unpaid principal balance of impaired finance receivables | 124 | 175 |
Allowance for credit losses on impaired finance receivables | 4 | 7 |
Average recorded investment of impaired finance receivables | $ 123 | $ 126 |
Inventories (Details) - USD ($) $ in Millions |
Oct. 02, 2021 |
Jan. 02, 2021 |
---|---|---|
Inventories | ||
Finished goods | $ 1,085 | $ 1,228 |
Work in process | 1,741 | 1,455 |
Raw materials and components | 844 | 830 |
Total inventories | $ 3,670 | $ 3,513 |
Warranty Liability (Details) - USD ($) $ in Millions |
9 Months Ended | |
---|---|---|
Oct. 02, 2021 |
Oct. 03, 2020 |
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Changes in warranty liability | ||
Beginning of period | $ 119 | $ 141 |
Provision | 49 | 35 |
Settlements | (52) | (46) |
Adjustments | 5 | (13) |
End of period | $ 121 | $ 117 |
Leases - Narrative (Details) - USD ($) $ in Millions |
3 Months Ended | 9 Months Ended | ||
---|---|---|---|---|
Oct. 02, 2021 |
Oct. 03, 2020 |
Oct. 02, 2021 |
Oct. 03, 2020 |
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Leases [Abstract] | ||||
Remaining lease terms | 28 years | 28 years | ||
Operating lease - option to extend the lease, term | 25 years | 25 years | ||
Operating lease - option to extend | true | |||
Operating lease cost | $ 17 | $ 15 | $ 49 | $ 45 |
Cash paid for operating lease liabilities | 49 | 45 | ||
Noncash lease transactions | $ 81 | $ 33 |
Leases - Balance Sheet and Other Information (Details) - USD ($) $ in Millions |
Oct. 02, 2021 |
Jan. 02, 2021 |
---|---|---|
Operating leases: | ||
Other assets | $ 388 | $ 349 |
Other current liabilities | 58 | 47 |
Other liabilities | $ 336 | $ 306 |
Weighted-average remaining lease term (in years) | ||
Weighted-average remaining lease term (in years) | 10 years 6 months | 11 years 7 months 6 days |
Weighted-average discount rate | ||
Weighted-average discount rate | 3.34% | 4.17% |
Operating Lease, Right-of-Use Asset, Statement of Financial Position [Extensible Enumeration] | Other assets | |
Operating Lease, Liability, Current, Statement of Financial Position [Extensible Enumeration] | Other current liabilities | |
Operating Lease, Liability, Noncurrent, Statement of Financial Position [Extensible Enumeration] | Other liabilities |
Leases - Maturity of Lease Liabilities (Details) $ in Millions |
Oct. 02, 2021
USD ($)
|
---|---|
Operating Leases | |
Remainder of 2021 | $ 20 |
2022 | 69 |
2023 | 59 |
2024 | 51 |
2025 | 45 |
Thereafter | $ 247 |
Derivative Instruments and Fair Value Measurements - Assets and Liabilities Recorded at Fair Value on a Recurring Basis (Details) - USD ($) |
9 Months Ended | |
---|---|---|
Oct. 02, 2021 |
Jan. 02, 2021 |
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Manufacturing group | ||
Fair value of derivative instruments | ||
Forward exchange contracts maximum maturity period | 3 years | |
Manufacturing group | Foreign currency exchange contracts | Cash Flow Hedging | ||
Fair value of derivative instruments | ||
Notional amounts | $ 341,000,000 | $ 318,000,000 |
Manufacturing group | Foreign currency exchange contracts | Cash Flow Hedging | Level 2 | ||
Fair value of derivative instruments | ||
Fair value of foreign currency exchange contracts, asset | 5,000,000 | 5,000,000 |
Fair value of foreign currency exchange contracts, liability | 2,000,000 | 2,000,000 |
Finance group | Interest Rate Swap | Cash Flow Hedging | ||
Fair value of derivative instruments | ||
Notional amounts | 289,000,000 | 294,000,000 |
Fair value of foreign currency exchange contracts, liability | $ 3,000,000 | $ 4,000,000 |
Derivative Instruments and Fair Value Measurements - Assets and Liabilities not Recorded at Fair Value (Details) - USD ($) $ in Millions |
Oct. 02, 2021 |
Jan. 02, 2021 |
---|---|---|
Manufacturing group | Carrying Value | ||
Financial instruments not reflected at fair value | ||
Debt, excluding leases | $ (3,183) | $ (3,690) |
Manufacturing group | Estimated Fair value | ||
Financial instruments not reflected at fair value | ||
Debt, excluding leases | (3,413) | (3,986) |
Finance group | Carrying Value | ||
Financial instruments not reflected at fair value | ||
Finance receivables, excluding leases | 404 | 549 |
Debt, carrying value | (585) | (662) |
Finance group | Estimated Fair value | ||
Financial instruments not reflected at fair value | ||
Finance receivables, excluding leases | 438 | 599 |
Debt, estimated fair value | $ (552) | $ (587) |
Shareholders' Equity - Earnings Per Share (Details) - shares shares in Thousands |
3 Months Ended | 9 Months Ended | ||
---|---|---|---|---|
Oct. 02, 2021 |
Oct. 03, 2020 |
Oct. 02, 2021 |
Oct. 03, 2020 |
|
Weighted-average shares outstanding for basic and diluted EPS | ||||
Basic weighted-average shares outstanding (in shares) | 223,663 | 228,918 | 225,545 | 228,492 |
Dilutive effect of stock options (in shares) | 2,827 | 361 | 2,250 | 345 |
Diluted weighted-average shares outstanding (in shares) | 226,490 | 229,279 | 227,795 | 228,837 |
Stock options | ||||
Weighted-average shares outstanding for basic and diluted EPS | ||||
Anti-dilutive effect of weighted average shares (in shares) | 7,500 | 1,400 | 7,900 |
Segment Information - Operating and Reportable Segments (Details) |
9 Months Ended |
---|---|
Oct. 02, 2021
businessSegment
| |
Operating and reportable business segments | |
Number of business operating segments | 5 |
Number of reportable business segments | 5 |
Revenues - Contract Assets and Liabilities (Details) - USD ($) $ in Millions |
3 Months Ended | 9 Months Ended | |||
---|---|---|---|---|---|
Oct. 02, 2021 |
Oct. 03, 2020 |
Oct. 02, 2021 |
Oct. 03, 2020 |
Jan. 02, 2021 |
|
Contract Assets and Liabilities | |||||
Contract assets | $ 624 | $ 624 | $ 561 | ||
Contract liabilities | 1,100 | 1,100 | $ 842 | ||
Revenue recognized included in contract liabilities | $ 51 | $ 44 | $ 499 | $ 396 |
Retirement Plans (Details) - USD ($) $ in Millions |
3 Months Ended | 9 Months Ended | ||
---|---|---|---|---|
Oct. 02, 2021 |
Oct. 03, 2020 |
Oct. 02, 2021 |
Oct. 03, 2020 |
|
Pension Benefits | ||||
Net periodic benefit cost (credit) | ||||
Service cost | $ 29 | $ 27 | $ 87 | $ 79 |
Interest cost | 62 | 73 | 188 | 220 |
Expected return on plan assets | (143) | (144) | (431) | (431) |
Amortization of net actuarial loss | 39 | 47 | 116 | 139 |
Amortization of prior service cost | 4 | 3 | 10 | 9 |
Net periodic benefit cost (credit) | (9) | 6 | (30) | 16 |
Pension Benefits | United States | ||||
Net periodic benefit cost (credit) | ||||
Defined contribution component | 2 | 2 | 8 | 8 |
Postretirement Benefits Other Than Pensions | ||||
Net periodic benefit cost (credit) | ||||
Service cost | 1 | 0 | 2 | 2 |
Interest cost | 1 | 2 | 4 | 6 |
Amortization of net actuarial loss | (1) | (1) | (2) | (1) |
Amortization of prior service cost | (2) | (1) | (4) | (4) |
Net periodic benefit cost (credit) | $ (1) | $ 0 | $ 0 | $ 3 |
Special Charges - First Quarter 2020 (Details) - USD ($) $ in Millions |
3 Months Ended | 9 Months Ended | |||
---|---|---|---|---|---|
Oct. 02, 2021 |
Oct. 03, 2020 |
Apr. 04, 2020 |
Oct. 02, 2021 |
Oct. 03, 2020 |
|
Special Charges | |||||
Asset and Other Asset Impairments | $ 0 | $ 0 | $ 0 | $ 39 | |
Beechcraft and King Air trade name intangible assets | |||||
Special Charges | |||||
Impairment charge | $ 32 | ||||
Textron Aviation and Industrial segments | |||||
Special Charges | |||||
Asset and Other Asset Impairments | $ 39 |
Special Charges - Restructuring Reserve (Details) $ in Millions |
9 Months Ended |
---|---|
Oct. 02, 2021
USD ($)
| |
Restructuring Reserve [Roll Forward] | |
Beginning balance | $ 52 |
Provision for 2020 COVID-19 restructuring plan | 15 |
Cash paid | (28) |
Reversals | (6) |
Foreign currency translation | (1) |
Ending balance | 32 |
Severance Costs | |
Restructuring Reserve [Roll Forward] | |
Beginning balance | 43 |
Provision for 2020 COVID-19 restructuring plan | 8 |
Cash paid | (21) |
Reversals | (5) |
Foreign currency translation | (1) |
Ending balance | 24 |
Contract Termination and Other | |
Restructuring Reserve [Roll Forward] | |
Beginning balance | 9 |
Provision for 2020 COVID-19 restructuring plan | 7 |
Cash paid | (7) |
Reversals | (1) |
Foreign currency translation | 0 |
Ending balance | $ 8 |
Income Taxes (Details) - USD ($) $ in Millions |
3 Months Ended | 9 Months Ended | ||
---|---|---|---|---|
Oct. 02, 2021 |
Oct. 03, 2020 |
Oct. 02, 2021 |
Oct. 03, 2020 |
|
Income Tax Disclosure [Abstract] | ||||
Effective income tax rate | 15.10% | 0.90% | 13.70% | (9.00%) |
U.S. federal statutory income tax rate | 21.00% | 21.00% | ||
Tax benefit recognized for additional research and development credits | $ 12 | |||
Tax benefit recognized upon release of valuation allowance | $ 14 |