Long-Term Incentive Compensation Payouts and Performance Analysis 2021-2023 Performance Share Units Payouts for the 2021-2023 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 2021-2023 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 Manufacturing 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 for the 2021-2023 PSU cycle for each of these financial metrics were based upon the AOP approved in December 2020 during uncertain global economic and market conditions. At that time, we anticipated a gradual end to COVID-19 shutdowns and moderate economic recovery over the next three-year period with the pandemic continuing to have a significant impact on our businesses and financial results over the three-year performance period. Actual performance reflects the Company’s successful management of ongoing global supply chain and labor challenges to deliver products and services to our customers. The Company’s actual performance achieved against the threshold, target and maximum levels set for the metrics included in the 2021-2023 PSU cycle, and the resulting percentage of PSUs earned by the NEOs, are detailed below: 2021–2023 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) 4.5% 8.5% 11.5% 12.5%(4) 50% 100% Cumulative Manufacturing Cash Flow(2) $539 $1,342 $2,145 $3,326(4) 30% 60% Relative Total Shareholder Return(3) 25% 50% 75% 82.1% 20% 40% Total Earned 200% (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 the impact of foreign exchange fluctuations and changes associated with pension plans. The calculated payout above for the 2021-2023 PSU award is 200% of target. The average ROIC, the Cumulative Manufacturing Cash Flow and relative TSR metrics were earned at the maximum of 200% of their weighting as performance on all three metrics exceeded maximum performance. Textron’s stock price increased by 52.5% over the three-year performance period. Two factors impact the value of PSU 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 2021 and the payout earned by each NEO. TEXTRON 2024 PROXY STATEMENT 33
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