E-Z-GO 2005 Annual Report Download - page 79

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59
Accumulated Other Comprehensive Loss
Deferred
Unrealized Gains
Currency Gains Pension (Losses)
Translation (Losses) Liability on Hedge
(In millions)
Adjustment on Securities Adjustment Contracts Total
Balance at December 28, 2002 $ (112) $ 3 $ (97) $ (19) $ (225)
Other comprehensive income (loss), net of tax 159 — (35) 37 161
Balance at January 3, 2004 $ 47 $ 3 $ (132) $ 18 $ (64)
Other comprehensive income (loss), net of tax 97 — (131) 4 (30)
Reclassification adjustment, net of tax — (3) — — (3)
Balance at January 1, 2005 $ 144 $ — $ (263) $ 22 $ (97)
Other comprehensive income (loss), net of tax (17) — 34 2 19
Balance at December 31, 2005 $ 127 $ — $ (229) $ 24 $ (78)
Included in Other Comprehensive Income (Loss) is an income tax (expense) benefit of $(12) million, $(22) million and $3 million in 2005, 2004
and 2003, respectively.
Note 13. Share-Based Compensation
Summary of Share-Based Compensation Plans
Textron’s 1999 Long-Term Incentive Plan (the “Plan”) authorizes awards to key employees of Textron in the form of options to purchase Textron
shares and restricted stock. Options to purchase Textron shares have a maximum term of ten years and, beginning with 2004 grants, vest ratably
over a three-year period. Grants awarded prior to 2004 vested ratably over two years. Restricted stock grants vest one-third each in the third,
fourth and fifth year following the grant. The maximum number of shares authorized under the Plan includes 17.5 million options to purchase
Textron shares and two million shares of restricted stock. Textron also provides share-based compensation awards payable in cash, including
retention awards to certain executives and performance share units. Payouts under performance share units vary based on certain performance
criteria measured over a three-year period. The performance share units vest at the end of three years.
The Deferred Income Plan for Textron Key Executives (the “DIP”) provides participants the opportunity to voluntarily defer up to 25% of their base
salary and up to 100% of annual and long-term incentive compensation and other compensation. Elective deferrals may be put into either a stock
unit account or an interest bearing account. Textron generally contributes a 10% premium on amounts deferred into the stock unit account. Exec-
utives who are eligible to participate in the DIP who have not achieved and/or maintained the required minimum stock ownership level are
required to defer annual incentive compensation in excess of 100% of the executive’s annual target into a deferred stock unit account and are not
entitled to the 10% premium contribution on the amount deferred. Participants cannot move amounts between the two accounts while actively
employed by Textron and cannot receive distributions until termination of employment.
Change in Accounting for Share-Based Compensation
In December 2004, the FASB issued SFAS No. 123 (Revised 2004), “Share-Based Payment” (“SFAS No. 123-R”), which replaces SFAS No. 123,
“Accounting for Stock-Based Compensation” and supercedes Accounting Principles Board Opinion No. 25, “Accounting for Stock Issued to
Employees” (“APB No. 25”). SFAS No. 123-R requires companies to measure compensation costs for share-based payments to employees,
including stock options, at fair value and expense such compensation over the service period beginning with the first interim or annual period
after June 15, 2005. In April 2005, the Securities and Exchange Commission delayed the transition date for companies to the first fiscal year
beginning after June 15, 2005, effectively delaying Textron’s required adoption of SFAS No. 123-R until the first quarter of 2006.
Prior to 2005, Textron accounted for share-based payments, including stock options issued under its Plan, using the intrinsic value method of
APB No. 25.
Textron elected to adopt SFAS No. 123-R in the first quarter of 2005 using the modified prospective method. Under this transition method, com-
pensation expense recognized in 2005 includes: a) compensation cost for all stock options and restricted stock granted prior to but not yet vested
as of January 1, 2005, based on the grant-date fair value estimated and recognized in accordance with the provisions of SFAS No. 123 and b)
compensation cost for all stock options and restricted stock granted subsequent to January 1, 2005, and all share-based compensation awards
accounted for as liabilities, based upon the measurement and recognition provisions of SFAS No. 123-R. For awards granted or modified in 2005
Notes to the Consolidated Financial Statements