E-Z-GO 2002 Annual Report Download - page 62

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Major actuarial assumptions used in accounting for defined benefit pension plans are presented below.
December 28, December 29, December 30, January 1,
2002 2001 2000 2000
Discount rate 6.75% 7.25% 7.50% 7.50%
Expected rate of return on plan
assets 8.90 9.25 9.25 9.25
Annual rate of compensation
increase 4.20 4.50 4.80 4.80
Postretirement benefit plan discount rates are the same as those used by Textron’s defined benefit pen-
sion plans.
The 2002 health care cost trend rate, which is the weighted average annual assumed rate of increase in
the per capita cost of covered benefits, was 10% for all retirees. This rate is assumed to decrease to 5%
by 2006 and then remain at that level. A one-percentage-point change in assumed health care cost
trend rate would have the following effects:
(In millions) 1% Increase 1% Decrease
Effect on total of service and interest cost components $ 4 $ (4)
Effect on postretirement benefit obligation $ 55 $ (47)
Textron files a consolidated federal income tax return for all U.S. subsidiaries and separate returns for
foreign subsidiaries.
Income from operations before income taxes and distributions on preferred securities of subsidiary
trusts is as follows:
(In millions) 2002 2001 2000
United States $ 393 $ 451 $ 366
Foreign 97 (32) 245
Total $ 490 $ 419 $ 611
Income tax expense is summarized as follows:
(In millions) 2002 2001 2000
Federal:
Current $ (13) $ 136 $ 246
Deferred 73 48 (37)
State 15 26 35
Foreign 25 17 64
Income tax expense $ 100 $ 227 $ 308
The following reconciles the federal statutory income tax rate to the effective income tax rate reflected in
the consolidated statements of income:
2002 2001 2000
Federal statutory income tax rate 35.0% 35.0% 35.0%
Increase (decrease) in taxes resulting from:
State income taxes 2.1 2.7 3.8
Goodwill — 22.3 19.0
Permanent items from Automotive Trim disposition 1.4 2.7 —
Settlement of tax court case (2.5) — —
Sale of Snorkel (9.5) — —
ESOP dividends (3.7) — —
Foreign tax rate differential (0.3) (0.9) (2.2)
Export sales benefit (1.8) (2.9) (1.9)
Other, net (0.3) (4.7) (3.3)
Effective income tax rate 20.4% 54.2% 50.4%
The tax effects of temporary differences that give rise to significant portions of Textron’s net deferred tax
assets and liabilities were as follows:
Note 14
Income Taxes
60