Fellow Shareholders

It was a year of transition for our company as we put into place the building blocks that position us for growth in 2018 and beyond.

The achievements of milestones within our new product programs, most notably, the first flight of the Bell V-280 Valor and first delivery of the Bell 505 Jet Ranger X; introductions of new products like the Cessna SkyCourier turboprop; and our acquisition of Arctic Cat to expand our Textron Specialized Vehicles product portfolio and dealer network all represented progress in our long-term growth strategy. This resulted in 2017 revenues of $14.2 billion, a 3.0% increase over the previous year, and segment profit of $1.2 billion with a profit margin of 8.2%.

Growth Through New Products

With the knowledge that innovation and new product development are the lifeblood of our company, our businesses maintained their focus in these key areas.

Understanding our customers and the trends that will help shape their future needs have been hallmarks of our businesses. Textron Aviation continued to prepare its newest large-cabin jet, the Citation Longitude, for FAA certification and entry into service, which is expected in early 2018.

In addition to flight testing during the year, the first production Longitude debuted at major business aviation shows around the world and embarked on a 46-city demonstration tour across the U.S. The Longitude follows the success of the Citation Latitude, the company’s first Citation large-cabin jet that entered service in 2015 and achieved its milestone 100^th customer delivery during the fourth quarter of 2017.

In November, Textron Aviation introduced the Cessna SkyCourier, a new twin-engine, large-utility turboprop. Textron Aviation collaborated with FedEx Express to develop the performance specifications for the cargo version of the SkyCourier and signed on as its launch customer with an initial order for 50 aircraft and an option to order 50 more.

Textron Aviation also continued development of the single-engine Cessna Denali turboprop. These new aircraft, together with the King Air and Caravan product lines, will represent the most comprehensive turboprop product lineup in the market and provide our customers with solutions to their aircraft needs for years to come.

On the military side at Textron Aviation, our Scorpion jet and AT-6 Wolverine both performed extremely well during August’s U.S. Air Force (USAF) OA-X light attack demonstration program at Holloman Air Force Base in New Mexico. This exercise represented an important step in the USAF’s evaluation of its needs for a future light attack fleet.

At Bell Helicopter, capping a successful year of development and testing, the Bell V-280 Valor completed its first flight in December. With this achievement, the V-280 comes one step closer to realizing the next generation of vertical lift for the U.S. military through the Joint Multi-Role Technology Demonstrator initiative. Throughout the year, both our U.S. Army and foreign government customers experienced the V-280 mockup complete with virtual reality flights. On the commercial side, customers began taking deliveries of Bell’s newest aircraft, the Bell 505 Jet Ranger X, and flight testing resumed for the Bell 525 Relentless program.

With the acquisition of Arctic Cat in March, Textron Specialized Vehicles significantly expanded its product lineup of off-road vehicles, snowmobiles and its dealer network, while introducing new products like the Havoc X side-by-side and the Arctic Cat ZR200 youth snowmobile. TSV also introduced the new E-Z-GO ELiTE golf car powered by a lithium-ion battery. This new technology has been well-received among golf course owners and fleet managers around the world, lowering maintenance costs and emissions, while reducing the weight of the E-Z-GO ELiTE.

Drawing on decades of successful unmanned aircraft systems products, including the Shadow Tactical Unmanned Aircraft System (TUAS) with more than one million flight hours, Textron Systems introduced the new NIGHTWARDEN TUAS as its next-generation platform.

Within our Textron Tools & Test businesses, product development teams leveraged their expertise and relationships with customers to introduce new products throughout the businesses’ sales channels. Greenlee launched new automated equipment to drive speed and safety for electrical contractors, Sherman + Reilly developed a new remote-controlled underground cable puller and Klauke, with its flagship battery-powered hydraulic tool technology, teamed with several OEM partners to access new market segments.

Stronger Global Sales and Service Operations

With a strong lineup of products and a local presence around the world, we captured new business in highly competitive market segments.

Bell Helicopter continued its rapid growth in China. The first deliveries of 100 Bell 407GXP helicopters to Shaanxi Helicopter began as part of a deal announced in June. Also, Reignwood International Investment Group Company Ltd. of China placed two orders for a total of 110 Bell 505 Jet Ranger X helicopters and announced plans to establish a Bell 505 delivery and maintenance center in China. Our improving sales in China stem from our hard work and commitment to developing this emerging commercial rotorcraft market.

Bell Helicopter also executed on two Foreign Military Sales contracts: the first three of 12 H-1 helicopters were delivered to the U.S. Navy for Pakistan and the first of 17 V-22 tiltrotor aircraft was delivered to the U.S. Navy for Japan. Meanwhile, Textron Systems was awarded a Foreign Military Sales contract for its Aerosonde Small Unmanned Aircraft System (SUAS), marking the first international sale for this platform.

Kautex continued to expand its presence in China with its technological prowess, winning contracts with Shanghai Automotive Industry Corporation (SAIC) for seven new vehicle programs. Working closely with SAIC, Kautex created a single-tank solution for three fuel tank applications that reduced engineering, testing and development costs. In two of the new programs, Kautex will employ its proven pressurized hybrid fuel systems for SAIC’s plug-in hybrid models.

TRU Simulation + Training expanded its general aviation training solutions programs, receiving full program certification for its Citation Latitude and King Air 350 pilot training programs and expanding its ProFlight Training Center in Tampa.

Bell Helicopter also continued to make investments in its customer service capabilities, achieving certification from the European Aviation Safety Agency in January of its Bell Training Academy in Valencia, Spain, which includes a Bell 429 simulator for European customers who now have a more convenient training resource. For the 23rd consecutive year, Bell Helicopter was ranked first in the Professional Pilot survey of helicopter operators, a testament to continuously improving its level of customer service and support.

Textron Systems won new contracts to provide maintenance and support for our military customers, including a five-year contract to provide training and maintenance in support of USAF and Afghan Air Force C-208B Caravans. The business also won a separate contract to supply support and technical services for the Shadow TUAS and secured its first international sustainment and support contract with the Italian Army for the Shadow V2.

Driving Growth through Disciplined Execution

In 2017, we continued to move forward with new technologies, processes and programs that enabled us to innovate in order to better serve our customers and markets. These initiatives, combined with our ongoing investments in new products and the integration of strategic acquisitions, put us in a good position for future growth. Our success will come from leveraging these investments through consistent execution in all phases of our operations. With the continued support of our employees, customers and investors, we see exciting growth opportunities across the company.

Scott C. Donnelly

Chairman and Chief Executive Officer