TEXTRON 2026 PROXY STATEMENT / 33 COMPENSATION DISCUSSION AND ANALYSIS 2025 INCENTIVE COMPENSATION TARGETS, PAYOUTS AND PERFORMANCE ANALYSIS Setting Targets for 2025 Performance Metrics The Committee relies on Textron’s Annual Operating Plan (“AOP”) in setting financial performance targets for short and long-term incentive compensation. The AOP, which is prepared toward the end of each fiscal year for the following three fiscal years, includes financial plans and targets and key assumptions for each segment. At its December meeting, the Board of Directors reviews and approves the AOP, subject to adjustment for certain year-end items. The Committee approves targets for the performance metrics included in Textron’s incentive compensation programs in January based upon the finalized AOP. 2025 Annual Incentive Compensation Performance Metrics The performance metrics for the 2025 annual incentive compensation program focused on profitability, measured by enterprise net operating profit (weighted at 60%), manufacturing cash flow (weighted at 35%), and environmental, social and governance performance (weighted at 5%). The net operating profit metric focused executives on improving execution in order to increase profit margin consistent with our expectations of our end markets. The 2025 net operating profit target was consistent with the 2024 target and 13.5% higher than 2024 actual performance. The manufacturing cash flow metric focused executives on improving operational efficiency and sustaining the strength of the balance sheet. The cash flow target established by the Committee for 2025 was approximately 12.0% lower than the previous year’s target and 3.9% below 2024 actual performance. The lower target was primarily driven by higher planned strategic investments during 2025 to support new products and development programs intended to drive long-term shareholder value, including investments in the MV-75 program at Bell. Performance on environmental, social and governance focused on the Company’s progress related to safety, sustainability, and an engaged, high-performing workforce. The Committee reviewed the Company’s progress related to these areas, and determined the performance achieved based upon its overall qualitative assessment. 2025-2027 PSU Cycle Performance Metrics Performance metrics for the 2025-2027 PSU cycle are unchanged from the prior year and consist of average Return on Invested Capital (ROIC) (weighted at 50%), Cumulative Manufacturing Cash Flow (weighted at 30%), and relative total shareholder return compared to the S&P 500 (weighted at 20%), all measured over the three-year performance period. 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 relative Total Shareholder Return metric maintains focus on stock performance as an important relative measure of Company performance.
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