TEXTRON 2026 PROXY STATEMENT / 35 COMPENSATION DISCUSSION AND ANALYSIS Long-Term Incentive Compensation Payouts and Performance Analysis 2023-2025 Performance Share Units Payouts for the 2023-2025 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 2023-2025 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 2023-2025 PSU cycle for each of these financial metrics were based upon the 2023 AOP approved in December 2022. At that time, we anticipated a continued strong general aviation market and the commencement of revenues on the MV-75 program in early 2023. The 2023 AOP assumed a continued reduction in global supply chain issues and labor challenges, and investments in new programs and product development activities. Actual performance reflects the positive impact of the Company’s continued investments in new products and programs, while successfully managing ongoing global supply chain issues and labor challenges, including the work stoppage at Textron Aviation. The Company’s actual performance achieved against the threshold, target and maximum levels set for the metrics included in the 2023-2025 PSU cycle, and the resulting percentage of PSUs earned by the NEOs, are detailed below: 2023–2025 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) 8.4% 12.4% 15.4% 11.6%(4) 50% 42.5% Cumulative Manufacturing Cash Flow(2) $1,206 $2,683 $4,160 $2,716(4) 30% 30.7% Relative Total Shareholder Return(3) 25% 50% 75% 50.1% 20% 20.1% Total Earned 93.3% (1) “Three-year 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) “Three-year Cumulative Manufacturing Cash Flow” means “Manufacturing cash flow before pension contributions” (as reported in our quarterly earnings releases) generated over the three-year performance period. This measure adjusts net cash from operating activities under U.S Generally Accepted Accounting Principles (“GAAP”) for the following: deducts capital expenditures and includes proceeds from insurance recoveries and the sale of property, plant and equipment, excludes dividends received from TFC and capital contributions provided under the Support Agreement and debt agreements and adds back pension contributions. (3) “Three-year Relative Total Shareholder Return” is the percentile rank of our Total Shareholder Return (“TSR”) compared with the companies in the S&P 500 over the same period. “TSR” is a measure of stock price appreciation, including reinvested dividends, over the three-year performance period. (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, dividends received from TFC, special charges, and the impact of foreign exchange fluctuations and changes associated with pension plans.
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