TEXTRON INC. For an overview of our business segments, including a discussion of our major products and services, refer to Item 1. Business on pages 3 through 9. The following discussion should be read in conjunction with our Consolidated Financial Statements and related Notes included in Item 8. Financial Statements and Supplementary Data. An analysis of our consolidated operating results is set forth below, and a more detailed analysis of our segments' operating results is provided in the Segment Analysis section on pages 21 through 27.
At the beginning of 2018, we adopted Accounting Standards Update No. 2014-09,
Revenue from Contracts with Customers (ASC 606) using a modified retrospective
transition method applied to contracts that were not substantially complete at
the end of 2017. We recorded a
2019 Financial Highlights
? Our manufacturing businesses generated
activities of continuing operations.
? Invested
in capital expenditures.
? Returned
dividend payments.
Backlog increased 8% to
?
and the H-1 helicopter programs at the Bell segment.
Consolidated Results of Operations
% Change
(Dollars in millions) 2019 2018 2017 2019 2018
Revenues $ 13,630 $ 13,972 $ 14,198 (2) % (2) %
Cost of sales 11,406 11,594 11,827 (2) % (2) %
Gross margin as a percentage of
Manufacturing revenues 15.9 % 16.6 % 16.3 %
Selling and administrative
expense 1,152 1,275 1,334 (10) % (4) %
Interest expense 171 166 174 3 % (5) %
Revenues
Revenues decreased
? impact from the 2018 disposition of the Tools and Test Equipment product line
and lower volume and mix of
primarily in the Specialized Vehicles product line.
Lower
? of
the Unmanned Systems product line.
? Citation jet volume of
into service in the fourth quarter of 2019, and higher aftermarket volume of
Higher Bell revenues of
? revenues of
offset by lower military volume.
Revenues decreased
Lower
? volume of
a decrease due to the discontinuance of our sensor-fuzed weapon product in
2017.
? million, largely reflecting the mix of aircraft sold in the year, and lower
military revenues of
?
of
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? favorable impact of
Arctic Cat acquisition of
Equipment product line.
Cost of Sales and Selling and Administrative Expense
Cost of sales decreased
Selling and administrative expense decreased
In 2018, cost of sales decreased
Interest Expense
Interest expense on the Consolidated Statements of Operations includes interest
for both the Finance and Manufacturing borrowing groups with interest related to
intercompany borrowings eliminated. Interest expense for the Finance segment is
included within segment profit and includes intercompany interest. Consolidated
interest expense increased
Special Charges
Special charges of
Gain on Business Disposition
On
Income Taxes
2019 2018 2017
Effective tax rate 13.5 % 11.7 % 59.8 %
In 2019, the effective tax rate of 13.5% was lower than the
In 2018, our effective tax rate of 11.7% was lower than the
Our effective tax rate of 59.8% for 2017 was higher than the
For a full reconciliation of our effective tax rate to the
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Segment Analysis
We operate in, and report financial information for, the following five business
segments:
Segment profit is an important measure used for evaluating performance and for decision-making purposes. Segment profit for the manufacturing segments excludes interest expense, certain corporate expenses, gains/losses on major business dispositions and special charges. The measurement for the Finance segment includes interest income and expense along with intercompany interest income and expense. Operating expenses for the Manufacturing segments include cost of sales, selling and administrative expense and other non-service components of net periodic benefit cost/(credit), and exclude certain corporate expenses and special charges.
In our discussion of comparative results for the Manufacturing group, changes in
revenues and segment profit for our commercial businesses typically are
expressed in terms of volume and mix, pricing, foreign exchange, acquisitions
and dispositions, inflation and performance. For revenues, volume and mix
represents changes in revenues from increases or decreases in the number of
units delivered or services provided and the composition of products and/or
services sold. For segment profit, volume and mix represents a change due to
the number of units delivered or services provided and the composition of
products and/or services sold at different profit margins. Pricing represents
changes in unit pricing. Foreign exchange is the change resulting from
translating foreign-denominated amounts into
Approximately 24% of our 2019 revenues were derived from contracts with the
Changes in segment profit for these contracts are typically expressed in terms of volume and mix and performance; these include cumulative catch-up adjustments associated with a) revisions to the transaction price that may reflect contract modifications or changes in assumptions related to award fees and other variable consideration or b) changes in the total estimated costs at completion due to improved or deteriorated operating performance.
Textron Aviation % Change (Dollars in millions) 2019 2018 2017 2019 2018 Revenues: Aircraft$ 3,592 $ 3,435 $ 3,112 5 % 10 % Aftermarket parts and services 1,595 1,536 1,574 4 % (2) % Total revenues 5,187 4,971 4,686 4 % 6 % Operating expenses 4,738 4,526 4,383 5 % 3 % Segment profit 449 445 303 1 % 47 % Profit margin 8.7 % 9.0 % 6.5 % Backlog$ 1,714 $ 1,791 $ 1,180 (4) % 52 %
Textron Aviation Revenues and Operating Expenses
Factors contributing to the 2019 year-over-year revenue change are provided
below:
2019 versus
(In millions) 2018
Volume and mix $ 199
Pricing 17
Total change $ 216
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Factors contributing to the 2018 year-over-year revenue change are provided
below:
2018 versus
(In millions) 2017
Volume and mix $ 185
Pricing 100
Total change $ 285 Textron Aviation Segment Profit
Factors contributing to 2019 year-over-year segment profit change are provided
below:
2019 versus
(In millions) 2018
Performance $ 49
Inflation, net of pricing (28)
Volume and mix (17)
Total change $ 4
Factors contributing to 2018 year-over-year segment profit change are provided
below:
2018 versus
(In millions) 2017
Volume and mix $ 65
Pricing, net of inflation 57
Performance 20
Total change $ 142 Segment profit at
Textron Aviation Backlog
Backlog at
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Bell
% Change
(Dollars in millions) 2019 2018 2017 2019 2018
Revenues:
Military aircraft and support programs $ 1,988 $ 2,030 $ 2,076 (2) % (2) %
Commercial helicopters, parts and services 1,266 1,150 1,241 10 % (7) %
Total revenues 3,254 3,180 3,317 2 % (4) %
Operating expenses 2,819 2,755 2,902 2 % (5) %
Segment profit 435 425 415 2 % 2 %
Profit margin 13.4 % 13.4 % 12.5 %
Backlog $ 6,902 $ 5,837 $ 4,598 18 % 27 %
Bell's major
Bell Revenues and Operating Expenses
Factors contributing to the 2019 year-over-year revenue change are provided below:
2019 versus
(In millions) 2018
Volume and mix $ 61
Other 13
Total change $ 74
Bell's revenues increased
Bell's operating expenses increased
Factors contributing to the 2018 year-over-year revenue change are provided
below:
2018 versus
(In millions) 2017
Volume and mix $ (155)
Other 18
Total change $ (137) Bell's revenues decreased
Bell's operating expenses decreased
Bell Segment Profit
Factors contributing to 2019 year-over-year segment profit change are provided below:
2019 versus
(In millions) 2018
Performance and other $ 6
Volume and mix 4
Total change $ 10
Bell's segment profit increased
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Factors contributing to 2018 year-over-year segment profit change are provided below:
2018 versus
(In millions) 2017
Performance and other $ 60
Volume and mix (50)
Total change $ 10
Bell's segment profit increased
Bell Backlog
Bell's backlog increased
Bell's backlog increased
Textron Systems % Change (Dollars in millions) 2019 2018 2017 2019 2018 Revenues$ 1,325 $ 1,464 $ 1,840 (9) % (20) % Operating expenses 1,184 1,308 1,701 (9) % (23) % Segment profit 141 156 139 (10) % 12 % Profit margin 10.6 % 10.7 % 7.6 % Backlog$ 1,211 $ 1,469 $ 1,406 (18) % 4 %
Textron Systems Revenues and Operating Expenses
Factors contributing to the 2019 year-over-year revenue change are provided
below:
2019 versus
(In millions) 2018
Volume $ (144)
Other 5
Total change $ (139) Revenues at
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Factors contributing to the 2018 year-over-year revenue change are provided
below:
2018 versus
(In millions) 2017
Volume $ (380)
Other 4
Total change $ (376) Revenues at
Textron Systems Segment Profit
Factors contributing to 2019 year-over-year segment profit change are provided
below:
2019 versus
(In millions) 2018
Performance and other $ (9)
Volume and mix (6)
Total change $ (15)
Factors contributing to 2018 year-over-year segment profit change are provided
below:
2018 versus
(In millions) 2017
Performance and other $ 62
Volume and mix (45)
Total change $ 17
Textron Systems Backlog
In 2019, backlog decreased
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Industrial
% Change
(Dollars in millions) 2019 2018 2017 2019 2018
Revenues:
Fuel Systems and Functional Components $ 2,237 $ 2,352 $ 2,330 (5) % 1 %
Specialized Vehicles 1,561 1,691 1,486 (8) % 14 %
Tools and Test Equipment - 248 470 - (47) %
Total revenues 3,798 4,291 4,286 (11) % -
Operating expenses 3,581 4,073 3,996 (12) % 2 %
Segment profit 217 218 290 - (25) %
Profit margin 5.7 % 5.1 % 6.8 %
Industrial Revenues and Operating Expenses
Factors contributing to the 2019 year-over-year revenue change are provided
below:
2019 versus
(In millions) 2018
Disposition $ (248)
Volume and mix (233)
Foreign exchange (66)
Pricing 54
Total change $ (493) Industrial segment revenues decreased
Operating expenses for the Industrial segment decreased
Factors contributing to the 2018 year-over-year revenue change are provided
below:
2018 versus
(In millions) 2017
Disposition $ (246)
Volume 149
Foreign exchange 57
Acquisition 49
Other (4)
Total change $ 5
Industrial segment revenues increased
Operating expenses for the Industrial segment increased
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Industrial Segment Profit
Factors contributing to 2019 year-over-year segment profit change are provided
below:
2019 versus
(In millions) 2018
Performance $ 94
Pricing, net of inflation 18
Volume and mix (82)
Disposition (22)
Foreign exchange (9)
Total change $ (1) Segment profit for the Industrial segment was largely unchanged in 2019,
compared with 2018, as favorable performance of
Factors contributing to 2018 year-over-year segment profit change are provided
below:
2018 versus
(In millions) 2017
Disposition $ (22)
Pricing and inflation (21)
Performance and other (16)
Volume and mix (13)
Total change $ (72) Segment profit for the Industrial segment decreased
Finance (In millions) 2019 2018 2017 Revenues$ 66 $ 66 $ 69 Segment profit 28 23 22
Finance segment revenues were unchanged and segment profit increased
January 4, December 29,
(Dollars in millions) 2020 2018
Finance receivables $ 707 $ 789
Nonaccrual finance receivables 39 40
Ratio of nonaccrual finance receivables to finance receivables 5.52 % 5.07 % 60+ days contractual delinquency
$ 17 $ 14 60+ days contractual delinquency as a percentage of finance receivables 2.40 % 1.77 % 27 Table of Contents
Liquidity and Capital Resources
Our financings are conducted through two separate borrowing groups. The
Manufacturing group consists of Textron consolidated with its majority-owned
subsidiaries that operate in the
Key information that is utilized in assessing our liquidity is summarized below:
January 4, December 29,
(Dollars in millions) 2020 2018
Manufacturing group
Cash and equivalents $ 1,181 $ 987
Debt 3,124 3,066
Shareholders' equity 5,518 5,192
Capital (debt plus shareholders' equity) 8,642 8,258
Net debt (net of cash and equivalents) to capital 26 % 29 %
Debt to capital 36 % 37 %
Finance group
Cash and equivalents $ 176 $ 120
Debt 686 718
We believe that our calculations of debt to capital and net debt to capital are useful measures as they provide a summary indication of the level of debt financing (i.e., leverage) that is in place to support our capital structure, as well as to provide an indication of the capacity to add further leverage. We believe that we will have sufficient cash to meet our future needs, based on our existing cash balances, the cash we expect to generate from our manufacturing operations and other available funding alternatives, as appropriate.
On
We also maintain an effective shelf registration statement filed with the
In
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Manufacturing Group Cash Flows
Cash flows from continuing operations for the Manufacturing group as presented in our Consolidated Statements of Cash Flows are summarized below:
(In millions) 2019 2018 2017 Operating activities$ 960 $ 1,127 $ 930 Investing activities (329) 539 (728) Financing activities (439) (1,738) (266)
In 2019, cash flows from operating activities were
Cash flows provided by operating activities in 2018 were
Net tax payments/(receipts) were
In 2019, investing cash flows included capital expenditures of
Cash flows used in financing activities in 2019 primarily included
On
Dividend payments to shareholders totaled
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Finance Group Cash Flows
The cash flows from continuing operations for the Finance group as presented in our Consolidated Statements of Cash Flows are summarized below:
(In millions) 2019 2018 2017 Operating activities$ 34 $ 14 $ (24) Investing activities 135 99 140 Financing activities (113) (176) (94)
The Finance group's cash flows from operating activities included net tax
payments of
Cash flows used in financing activities included payments on long-term and
nonrecourse debt of
Consolidated Cash Flows
The consolidated cash flows from continuing operations, after elimination of activity between the borrowing groups, are summarized below:
(In millions) 2019 2018 2017 Operating activities$ 1,016 $ 1,109 $ 963 Investing activities (266) 620 (645) Financing activities (502) (1,864) (360)
Consolidated cash flows from operating activities were
In 2018, consolidated cash flows provided by operating activities were
Net tax payments were
In 2019, investing cash flows included capital expenditures of
In 2019, 2018 and 2017, cash used in financing activities included share
repurchases of
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Captive Financing and Other Intercompany Transactions
The Finance group provides financing primarily to purchasers of new and
pre-owned
Reclassification adjustments included in the Consolidated Statements of Cash Flows are summarized below:
(In millions) 2019 2018 2017 Reclassification adjustments from investing activities: Cash received from customers$ 229 $ 199 $ 241 Finance receivable originations for Manufacturing group inventory sales (184) (177) (174) Other 27 (4) (10) Total reclassification adjustments from investing activities 72 18 57 Reclassification adjustments from financing activities: Dividends received by Manufacturing group from Finance group (50) (50) - Total reclassification adjustments to cash flow from operating activities$ 22 $ (32) $ 57
Under a Support Agreement between Textron and TFC, Textron is required to
maintain a controlling interest in TFC. The agreement, as amended in
Contractual Obligations
Manufacturing Group
The following table summarizes the known contractual obligations, as defined by
reporting regulations, of our Manufacturing group as of
Payments Due by Period
More Than 5
(In millions) Total Year 1 Years 2-3 Years 4-5 Years
Debt $ 3,139 $ 561 $ 514 $ 368 $ 1,696
Purchase obligations not reflected in
balance sheet 3,376 2,570 729 76 1
Interest on borrowings 631 127 182 154 168
Pension benefits for unfunded plans 405 27 53 47 278
Postretirement benefits other than
pensions 246 26 46 40 134
Other long-term liabilities 293 62 93 44 94
Operating leases 356 57 88 57 154
Total Manufacturing group $ 8,446 $ 3,430 $ 1,705 $ 786 $ 2,525 Pension and Postretirement Benefits
We maintain defined benefit pension plans and postretirement benefit plans other
than pensions as described in Note 16 to the Consolidated Financial Statements.
Included in the above table are discounted estimated benefit payments we expect
to make related to unfunded pension and other postretirement benefit plans.
Actual benefit payments are dependent on a number of factors, including
mortality assumptions, expected retirement age, rate of compensation increases
and medical trend rates, which are subject to change in future years. Our policy
for funding pension plans is to make contributions annually, consistent with
applicable laws and regulations; however, future contributions to our pension
plans are not included in the above table. In 2020, we expect to make
approximately
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Other Long-Term Liabilities
Other long-term liabilities consist of undiscounted amounts in the Consolidated Balance Sheets that primarily include obligations under deferred compensation arrangements and estimated environmental remediation costs. Payments under deferred compensation arrangements have been estimated based on management's assumptions of expected retirement age, mortality, stock price and rates of return on participant deferrals. The timing of cash flows associated with environmental remediation costs is largely based on historical experience. Certain other long-term liabilities, such as deferred taxes, unrecognized tax benefits, and reserves for product liability, warranty, product maintenance and litigation, have been excluded from the table due to the uncertainty of the timing of payments combined with the absence of historical trends to be used as a predictor for such payments.
Purchase Obligations
Purchase obligations include undiscounted amounts committed under legally
enforceable contracts or purchase orders for goods and services with defined
terms as to price, quantity and delivery dates. Approximately 39% of the
purchase obligations we disclose represent purchase orders issued for goods and
services to be delivered under firm contracts with the
The following table summarizes the known contractual obligations, as defined by
reporting regulations, of our Finance group as of
Payments Due by Period
More Than 5
(In millions) Total Year 1 Years 2-3 Years 4-5 Years
Term debt $ 387 $ 167 $ 181 $ 32 $ 7
Subordinated debt 299 - - - 299
Interest on borrowings 269 22 33 24 190
Total Finance group $ 955 $ 189 $ 214 $ 56 $ 496 Critical Accounting Estimates
To prepare our Consolidated Financial Statements to be in conformity with generally accepted accounting principles, we must make complex and subjective judgments in the selection and application of accounting policies. The accounting policies that we believe are most critical to the portrayal of our financial condition and results of operations are listed below. We believe these policies require our most difficult, subjective and complex judgments in estimating the effect of inherent uncertainties. This section should be read in conjunction with Note 1 to the Consolidated Financial Statements, which includes other significant accounting policies.
Revenue Recognition
A substantial portion of our revenues is related to long-term contracts with the
At the beginning of 2018, we adopted ASC 606 as discussed in Note 1 to the
Consolidated Financial Statements. With the adoption of this standard , due to
the continuous transfer of control to the
Prior to the ASC 606 adoption, we accounted for our long-term contracts under the percentage of completion method of accounting. Under this method, we estimated profit as the difference between total estimated revenues and cost of a contract. We then recognized that estimated profit over the contract term based on either the units-of-delivery method or the cost-to-cost method (which typically was used for development effort as costs were incurred), as appropriate under the circumstances. Revenues under fixed price contracts generally were recorded using the units-of-delivery method, while revenues under cost-reimbursement contracts were recorded using the cost-to-cost method.
Approximately 70% of our 2019 revenues with the
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The transaction price for our contracts represents our best estimate of the consideration we expect to receive and includes assumptions regarding variable consideration as applicable. Certain of our long-term contracts contain incentive fees or other provisions that can either increase or decrease the transaction price. These variable amounts generally are awarded upon achievement of certain performance metrics, program milestones or cost targets and can be based upon customer discretion. We include estimated amounts in the transaction price to the extent it is probable that a significant reversal of cumulative revenue recognized will not occur when the uncertainty associated with the variable consideration is resolved. Our estimates of variable consideration and determination of whether to include estimated amounts in the transaction price are based largely on an assessment of our anticipated performance, historical performance and all other information that is reasonably available to us.
Due to the number of years it may take to complete many of our contracts and the scope and nature of the work required to be performed on those contracts, the estimation of total transaction price and costs at completion is complicated and subject to many variables and, accordingly, is subject to change. In estimating total costs at completion, we are required to make numerous assumptions related to the complexity of design and related development work to be performed; engineering requirements; product performance; subcontractor performance; availability and cost of materials; labor productivity, availability and cost; overhead and capital costs; manufacturing efficiencies; the length of time to complete the contract (to estimate increases in wages and prices for materials); and costs of satisfying offset obligations, among other variables. Our cost estimation process is based on the professional knowledge and experience of engineers and program managers along with finance professionals. We review and update our cost projections quarterly or more frequently when circumstances significantly change. When estimates of total costs to be incurred on a contract exceed estimates of total sales to be earned, a provision for the entire loss on the contract is recorded in the period in which the loss is determined.
At the outset of each contract, we estimate an initial profit booking rate considering the risks surrounding our ability to achieve the technical requirements (e.g., a newly-developed product versus a mature product), schedule (e.g., the number and type of milestone events), and costs by contract requirements in the initial estimated costs at completion. Profit booking rates may increase during the performance of the contract if we successfully retire risks surrounding the technical, schedule, and cost aspects of the contract. Conversely, the profit booking rate may decrease if we are not successful in retiring the risks; and, as a result, our estimated costs at completion increase. All estimates are subject to change during the performance of the contract and, therefore, may affect the profit booking rate.
Changes in our estimate of the total expected cost or in the transaction price for a contract typically impact our profit booking rate. We utilize the cumulative catch-up method of accounting to recognize the impact of these changes on our profit booking rate for a contract. Under this method, the inception-to-date impact of a profit adjustment on a contract is recognized in the period the adjustment is identified. The impact of our cumulative catch-up adjustments on revenues and segment profit recognized in prior periods is presented below:
(In millions) 2019 2018 2017 Gross favorable$ 173 $ 249 $ 92 Gross unfavorable (82) (53) (87) Net adjustments$ 91 $ 196 $ 5
With the adoption of ASC 606 in 2018, a significant portion of our contracts
with the
Due to the significance of judgment in the estimation process described above, it is likely that materially different revenues and/or cost of sales amounts could be recorded if we used different assumptions or if the underlying circumstances were to change. Our earnings could be reduced by a material amount resulting in a charge to earnings if (a) total estimated contract costs are significantly higher than expected due to changes in customer specifications prior to contract amendment, (b) total estimated contract costs are significantly higher than previously estimated due to cost overruns or inflation, (c) there is a change in engineering efforts required during the development stage of the contract or (d) we are unable to meet contract milestones.
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Goodwill We evaluate the recoverability of goodwill annually in the fourth quarter or more frequently if events or changes in circumstances, such as declines in sales, earnings or cash flows, or material adverse changes in the business climate, indicate that the carrying value of a reporting unit might be impaired. The reporting unit represents the operating segment unless discrete financial information is prepared and reviewed by segment management for businesses one level below that operating segment, in which case such component is the reporting unit. In certain instances, we have aggregated components of an operating segment into a single reporting unit based on similar economic characteristics.
We calculate the fair value of each reporting unit, primarily using discounted cash flows. These cash flows incorporate assumptions for short- and long-term revenue growth rates, operating margins and discount rates that represent our best estimates of current and forecasted market conditions, cost structure, anticipated net cost reductions, and the implied rate of return that we believe a market participant would require for an investment in a business having similar risks and business characteristics to the reporting unit being assessed. The revenue growth rates and operating margins used in our discounted cash flow analysis are based on our strategic plans and long-range planning forecasts. The long-term growth rate we use to determine the terminal value of the business is based on our assessment of its minimum expected terminal growth rate, as well as its past historical growth and broader economic considerations such as gross domestic product, inflation and the maturity of the markets we serve. We utilize a weighted-average cost of capital in our impairment analysis that makes assumptions about the capital structure that we believe a market participant would make and include a risk premium based on an assessment of risks related to the projected cash flows of each reporting unit. We believe this approach yields a discount rate that is consistent with an implied rate of return that an independent investor or market participant would require for an investment in a company having similar risks and business characteristics to the reporting unit being assessed.
If the reporting unit's estimated fair value exceeds its carrying value, there is no impairment, and no further analysis is performed. Otherwise, an impairment loss is recognized in an amount equal to that excess carrying value over the estimated fair value amount. Based on our annual impairment review, the fair value of all of our reporting units exceeded their carrying values, and we do not believe that there is a reasonable possibility that any units might fail the initial step of the impairment test in the foreseeable future.
Retirement Benefits
We maintain various pension and postretirement plans for our employees globally. These plans include significant pension and postretirement benefit obligations, which are calculated based on actuarial valuations. Key assumptions used in determining these obligations and related expenses include expected long-term rates of return on plan assets, discount rates and healthcare cost projections. We also make assumptions regarding employee demographic factors such as retirement patterns, mortality, turnover and rate of compensation increases. We evaluate and update these assumptions annually.
To determine the weighted-average expected long-term rate of return on plan
assets, we consider the current and expected asset allocation, as well as
historical and expected returns on each plan asset class. A lower expected rate
of return on plan assets will increase pension expense. For 2019, the assumed
expected long-term rate of return on plan assets used in calculating pension
expense was 7.55%, compared with 7.58% in 2018. For the last seven years, the
assumed rate of return for our domestic plans, which represent approximately 90%
of our total pension assets, was 7.75%. A decrease of 50 basis-points in this
long-term rate of return in 2019 would have increased pension cost for our
domestic plans by approximately
The discount rate enables us to state expected future benefit payments as a
present value on the measurement date, reflecting the current rate at which the
pension liabilities could be effectively settled. This rate should be in line
with rates for high-quality fixed income investments available for the period to
maturity of the pension benefits, which fluctuate as long-term interest rates
change. A lower discount rate increases the present value of the benefit
obligations and increases pension expense. In 2019, the weighted-average
discount rate used in calculating pension expense was 4.24%, compared with 3.67%
in 2018. For our domestic plans, the assumed discount rate was 4.35% in 2019,
compared with 3.75% in 2018. A decrease of 50 basis-points in this
weighted-average discount rate in 2019 would have increased pension cost for our
domestic plans by approximately
The trend in healthcare costs is difficult to estimate and has an important effect on postretirement liabilities. The 2019 medical and prescription drug cost trend rates represent the weighted-average annual projected rate of increase in the per capita cost of covered benefits. In 2019, we assumed a trend rate of 7% for both medical and prescription drug cost and assumed this rate would gradually decline to 5% by 2024 and then remain at that level.
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