E-Z-GO 2000 Annual Report Download - page 55

The following reconciles the federal statutory income tax rate to the effective income tax rate
reflected in the consolidated statements of income:
2000 1999 1998
Federal statutory income tax rate 35.0% 35.0% 35.0%
Increase (decrease) in taxes resulting from:
State income taxes 3.8 2.3 2.7
Goodwill 19.0 2.2 4.3
Foreign tax rate differential (2.2) 0.6 –
Foreign sales corporation benefit (1.9) (0.9) (0.8)
Other, net (3.3) (2.2) (2.7)
Effective income tax rate 50.4% 37.0% 38.5%
Textron’s net deferred tax asset consisted of gross deferred tax assets and gross deferred tax lia-
bilities of $1,704 million and $1,531 million, respectively, at the end of 2000 and $1,623 million and
$1,467 million, respectively, at the end of 1999. The tax effects of temporary differences that give
rise to significant portions of Textron’s net deferred tax assets and liabilities were as follows:
(In millions) December 30, 2000 January 1, 2000
Deferred tax assets:
Self insured liabilities, (including environmental) $ 146 $184
Deferred compensation 140 144
Obligation for postretirement benefits 118 171
Investment securities 45 –
Allowance for credit losses 44 38
Amortization of goodwill 37 –
Other, principally timing of other expense deductions 278 187
Total deferred tax assets $ 808 $ 724
Deferred tax liabilities:
Textron Finance transactions, principally leasing $(366) $(353)
Fixed assets, principally depreciation (190) (164)
Inventory (53) (51)
Currency translation adjustment (26) –
Total deferred tax liabilities (635) (568)
Net deferred tax assets $173 $156
Deferred income taxes have not been provided for the undistributed earnings of foreign sub-
sidiaries, which approximated $649 million at the end of 2000. Management intends to reinvest
those earnings for an indefinite period, except for distributions having an immaterial tax effect. If
foreign subsidiaries’ earnings were distributed, 2000 taxes, net of foreign tax credits, would be
increased by approximately $88 million.
The Company records restructuring liabilities at the time management approves and commits to a
restructuring plan that identifies all significant actions to be taken and the expected completion date of
the plan. The restructuring liability includes those restructuring costs that (1) can be reasonably esti-
mated, (2) are not associated with and do not benefit activities that will be continued, and (3) are not
associated with or are not incurred to generate revenues after the commitment date. Restructuring
costs are incurred as a direct result of the plan and (1) are incremental to other costs incurred by Textron
in the conduct of its activities prior to the commitment date, or (2) represent contractual obligations
that existed prior to the commitment date and will either continue after the exit plan is completed with
no economic benefit to the enterprise or reflect a penalty to cancel a contractual obligation. Additionally,
restructuring liabilities incurred in conjunction with a business acquisition are recorded as part of the
allocation of the initial purchase price of the acquisition (1) as of the acquisition date, management
begins to assess and formulate a restructuring plan for the acquired business and (2) the restructuring
plan is approved and committed to within one year of the acquisition date.
2000 Special Charges
To improve returns at base businesses and to complete the integration of recently acquired busi-
nesses, during the fourth quarter of 2000, the Company approved and committed to a restructuring
program based upon targeted cost reductions in the Automotive, Fastening Systems and Industrial
Products segments. The 2000 program includes the consolidation of facilities, outsourcing of non-
core production activity, the rationalization of certain product lines, and the divestiture of non-core
businesses. Restructuring costs recorded in earnings during the fourth quarter of 2000 included
$16 million of accrued severance-related benefits, outplacement services and certain other exit
Special Charges, Net17
53 TEXTRON 2000 ANNUAL REPORT