Textron Inc. (TXT) Earnings Call Transcript & Summary

Welcome to the Textron Inc. 2021 Annual Shareholders Meeting. I will now turn the call over to Mr. Scott Donnelly, Chairman and Chief Executive Officer of Textron.

Good morning, everyone. On behalf of the Board of Directors and our management team, I'd like to welcome you to Textron's 2021 Annual Shareholders Meeting, which is being held virtually this year due to restrictions on public gatherings associated by the COVID-19 pandemic. I would like to begin this morning's meeting by first covering some housekeeping items concerning the shareholder virtual meeting web page. The meeting agenda is posted at the center of your screen. Shareholders may cast their votes at any time until voting has been completed on all matters on the agenda, at which time the polls will be closed. Please use the box label Voting located in the bottom right-hand corner of the web page to cast your votes, if you have not already done so. Shareholders may ask questions by clicking on the box labeled Q&A located in the bottom right-hand corner of the web page. Audio can be adjusted by clicking on the settings box located in the lower left-hand corner of the web page. Additional materials, including our annual report and proxy statement, the rules of conduct for the meeting and the registered shareholders list are available in the materials box located in the bottom right-hand corner of the web page. This meeting is being recorded, and the webcast will be posted on the Investor page of our website at www.textron.com, within 3 business days after the meeting and will remain available for 6 months thereafter. I would now like to introduce the independent directors who, in addition to me, comprise the full Board of Directors. Each of the independent Directors is present today by telephone. Kathleen M. Bader, retired President and CEO of NatureWorks LLC; Kerry Clark, retired Chairman and Chief Executive Officer of Cardinal Health, Inc; James T. Conway, retired general in the United States Marine Corps and 39th -- 34th commandant of the corps; Paul E. Gagné, retired Chairman of Wajax Corporation; Ralph D. Heath, retired Executive Vice President, Aeronautics, of Lockheed Martin Corporation; Deborah Lee James, retired 23rd Secretary of the United States Air Force; Lionel L. Nowell, III, retired Senior Vice President and Treasurer of PepsiCo; James L. Ziemer, retired President and Chief Executive Officer of Harley Davidson, Inc; Maria T. Zuber, Vice President for Research; and E. A. Griswold, Professor of Geophysics at the Massachusetts Institute of Technology. Also present today via telephone are Frank Connor, Executive Vice President and Chief Financial Officer; Julie Duffy, Executive Vice President of Human Resources; Bob Lupone, Executive Vice President, General Counsel and Secretary; and David Glinka, our Representative from Ernst & Young LLP, Textron's independent registered public accounting firm. The inspector of election appointed for this meeting is [Douglas Czarnecki ], a representative of Broadridge Financial Solutions, Inc. Mr. [ Czarnecki ] is also present via the telephone. As stated in the 2021 proxy statement and notice of annual shareholders meeting previously made available to our shareholders, the record date for voting at this meeting was the close of business on March 1, 2021. Secretary has delivered an affidavit of distribution, establishing that notice of this meeting was given. Our first order of business is to determine whether the shares represented at this meeting either voted during the meeting or by proxy are sufficient to constitute a quorum. The inspector of election has informed us that a quorum is present with 94% of outstanding shares entitled to vote represented at this meeting by proxy. This meeting is now duly convened for the purpose of transacting business properly before it. I hereby declare the polls are now open and will close following the completion of voting on the 4 matters noted on the agenda. If you have already voted online or returned a signed proxy card, your vote has been counted according to your instructions, and you do not need to vote today, unless you wish to change your vote. If you have not yet voted or wish to change your vote, please cast your vote using the box labeled Voting, located in the bottom right-hand corner of the meeting web page. The next order of business is a description of the matters to be voted on at today's meeting. First proposal before the shareholders today is the election of Directors to serve until the next annual meeting of the shareholders in 2022, and until their successors are duly elected and qualified. 9 independent members of the Board of Directors and I have been nominated for election as directors as set forth in the proxy statement. The Board recommends a vote for each of the directors on the ballot. The next proposal ,#2, is an advisory nonbinding vote to approve the compensation of Textron's named executive officers as disclosed in the proxy statement. The Board recommends approval of the proposal. The next proposal, #3, is the ratification of the appointment of Ernst & Young LLP as the company's independent registered public accounting firm for 2021. The Board recommends approval of the proposal. The last proposal, #4, relates to stockholder action by written consent and was submitted by [John Chevedden ] on behalf of Kenneth Steiner. Mr. Chevedden is on the line to present this proposal on behalf of Mr. Steiner. Mr. Chevedden, you may now present your proposal.

Well, this is John Chevedden. Can you hear me okay?

Yes, sir.

I guess, just as a point of order, 3 minutes before the meeting started, Q&A was closed. So I think that you ought to publish -- when you publish the voting results on EDGAR in 4 days, it should include a e-mail address to contact Broadridge to complain about the Q&A being closed just at the start of the annual meeting. So I'll go on with proposal 4, show the right deck by written consent. Those requested our Board of Directors take the necessary status to permit written consent by the shareholders entitled to cast a minimum number of votes that would be necessary to authorize in action at a meeting at which all shareholders entitled to vote thereon were present and voting. This proposal topic won 95% support at Dover Corporation and 88% support at AT&T. This proposal topic also won more than 44% support at our 2019 shareholder meeting. This 44% support may have represented a majority vote from the shares that have access to objective proxy voting advice. And the 44% vote was in spite of unsupported management statements that certain difficult things could occur with written consent, but there was no example of such mythical things ever occurring at any company at any time. And since our 44% vote in 2019, written consent has become more important due to the near extinction of in-person shareholder meetings. This diminishes our current ability of 25% of Textron shares to call a special meeting because a special shareholder meeting can now be a tightly controlled online meeting. With the near universal use of tightly controlled online annual shareholder meetings, which can be only 10 minutes of boiler plate, show they're severely restricted and engaging with management and making their views known because all challenging questions and comments can be screened out. For instance, Goodyear management hit the mute button right in the middle of a formal shareholder proposal presentation at its 2020 shareholder meeting. [Audio Gap] Plus, AT&T management would not even allow shareholders to speak at its online shareholder meeting. Online means also give management a blank check to make false statements. For instance, management of Scores of 2020 online annual meetings falsely stated, there were no more shareholder questions. Shareholders were powerless to point out that their questions were not answered. Now more than ever, shareholders need to have the option to take action outside of a shareholder meeting with written consent since tightly controlled online shareholder meetings are surely engagement wasteland. Please vote yes, shareholder right to act by written consent, Proposal 4.

Thank you, Mr. Chevedden. Based on a careful review of the proposals, the Board believes the proposal is contrary to the best interest of Textron and its shareholders and recommends that shareholders vote against this proposal. Please refer to the company's 2021 proxy statement for the Board's full view on this proposal. And incidentally, Mr. Chevedden, it appears the questions are coming in and that the Q&A line is open. So if someone does have a question, please click on that button, and we will see your question.

It's already delayed open.

Are there any questions related to this proposals? If so, please type your question into the box labeled Q&A located in the bottom right-hand of the corner of our web page. [Audio Gap] Question from Derek. Questioning, you've had from the corporate response and would appreciate our sentiments on stakeholder capitalism. I think this is probably a fairly complex topic for a quick answer, but I certainly recognize that there have been some movements where companies have made statements around stakeholder capitalism and beyond just the shareholder. And I guess our view of those, in general, has been that recognizing the importance of our employees, of our customers, of our communities, all of these things are stakeholders that are perhaps, maybe not the investor stakeholder, but something that we've always taken into consideration. I don't think you can run a successful company if you're not only understanding and recognizing the value of your shareholders, but also of your employees and customers. So I think that our behavior and our perspective here is that some of the statements that you've seen out there are sort of redundant with the view that we already and have always taken. There is a question around derivatives of V-22 plan. It's probably a little early to going into a whole lot of detail there. The Navy and Marine Corps have been pretty open about their desire to see future upgrades on V-22. There is already a program in place to update the V-22s to bring them to a common configuration to address issues that have been a challenge for the fleet in the areas of nacelles. But I would say that there are -- there is active work going on within our customer community, which obviously, we are fully supporting to look at future upgrades and modifications, enhancements, improvements of the V-22. Obviously, an asset that will be in service for many, many, many years, and then one which the customer clearly continue to invest and enhance overtime. What is the total [indiscernible] 2020, '21. I think if you could refer to the proxy, all that information is fully disclosed in the -- in our proxy statement. All right. Okay. The discussion of matters for shareholder consideration is now closed. I will pause for a moment to give any shareholder attending the meeting today, who have not yet cast his or her vote, to do so. [Voting]

Since it appears that all those desiring to vote have now done so, I hereby declare the polls closed. As I stated earlier, the vast majority of Textron's shareholders are represented today by proxy. Based on those proxies, the preliminary report of the inspector of election shows that each of the 10 persons nominated for election as a Director has been elected. Textron's executive compensation has been approved on an advisory basis. The appointment of Ernst & Young LLP as the company's independent registered public accounting firm for 2021 has been ratified, and the shareholder proposal permits stock shareholder action by written consent has been rejected. The inspector will prepare a report, documenting the final vote totals, and the voting results will be reported in a filing made with the SEC in the next 4 business days. Since we've completed the business of the meeting, the meeting is now adjourned. On behalf of the Board of Directors and our management team and employees, thank you for your continued support to Textron.

Thank you. The Textron Inc. 2021 Annual Shareholders Meeting has now come to an end. Thank you for attending. You may now disconnect.