Long-Term Incentive Compensation Payouts and Performance Analysis 2020-2022 Performance Share Units Payouts for the 2020-2022 PSU cycle were based upon performance for the three-year period against metrics established by the Committee at the time the PSUs were granted. Performance metrics for the 2020-2022 PSU cycle consisted of average return on invested capital (ROIC), cumulative manufacturing cash flow, and relative total shareholder return compared to the S&P 500, all measured over the three-year performance period. As described above, the ROIC and cumulative cash flow performance metrics were chosen by the Committee to align with key value drivers of our business and, together, are designed to incentivize our executives to make disciplined capital allocation decisions and to manage working capital, inventory and investments to generate returns and create value for our shareholders over the long term. The three-year targets established by the Committee in 2020 for each of these financial metrics were challenging in light of uncertain global economic and market conditions. The targets became even more challenging as the COVID-19 pandemic began shortly after these targets were established and had a significant impact on our businesses and financial results during much of the three-year performance period. Despite this, the Committee did not adjust these targets. The Company’s actual performance achieved against the threshold, target and maximum levels set for the metrics included in the 2020-2022 PSU cycle, and the resulting percentage of PSUs earned by the executive officers, are detailed below: 2020–2022 Performance Share Unit Calculation ($ in millions) Financial Metric Threshold Performance Target Performance Maximum Performance Actual Performance Component Weighting Earned Percentage Average Return on Invested Capital(1) 7.2% 11.2% 14.2% 10.4%(4) 50% 42.5% Cumulative Manufacturing Cash Flow(2) $997 $2,000 $3,004 $3,025(4) 30% 60% Relative Total Shareholder Return(3) 25% 50% 75% 79% 20% 40% Total Earned 142.5% (1) “Average Return on Invested Capital” is measured by dividing “ROIC income” by “average invested capital”. “ROIC income” includes income from continuing operations and adds back after-tax amounts for interest expense for the Manufacturing group. “Invested capital” represents total shareholders’ equity and Manufacturing group debt, less Manufacturing group cash and equivalents and any outstanding amounts loaned to the Finance group. Invested capital is averaged over the three-year period using the balance at the beginning of the performance period and at the end of each year in the performance period. (2) “Cumulative Manufacturing Cash Flow” is the amount of “Manufacturing cash flow before pension contributions” (as reported in our quarterly earnings releases and as described above) generated over the three-year performance period. (3) “Relative Total Shareholder Return” is the percentile rank of our Total Shareholder Return (“TSR”) compared with the companies in the S&P 500 (as of the grant date) over the three-year performance period. “TSR” is a measure of stock price appreciation, including reinvested dividends. (4) As approved by the Committee when the metrics were established, performance for both Average Return on Invested Capital and Cumulative Manufacturing Cash Flow may be adjusted to reflect items not contemplated when performance targets were set. Accordingly, performance has been adjusted for, as applicable, the impact of acquisitions and dispositions, special charges and an inventory charge related to the 2020 COVID-19 restructuring plan, the impact of foreign exchange fluctuations and changes associated with pension plans. The calculated payout above for the 2020-2022 PSU award is 142.5%. While the ROIC metric was earned at 42.5% because performance was below target, both the Cumulative Manufacturing Cash Flow and relative TSR metrics were earned at the maximum of 200% of their weighting as performance on both metrics exceeded maximum performance. Two factors impact the value of PSU cash payouts: (i) the number of units earned is based on Textron’s performance against operating metrics and (ii) the value of each unit earned is based on Textron’s stock price at the end of the performance cycle. The table below shows the PSU awards granted in 2020 and the cash payout received by each executive in terms of both units and value. TEXTRON 2023 PROXY STATEMENT 33
RkJQdWJsaXNoZXIy MjQ2MDYz