E-Z-GO 2009 Annual Report Download - page 29

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20
Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations
Since the inception of the restructuring program, we have incurred the following costs through January 2, 2010:
Curtailment Contract
Severance Charges, Asset Terminations Total
(In millions) Costs Net Impairments and Other Restructuring
Cessna $ 85 $ 26 $ 54 $ 7 $ 172
Finance 26 1 11 2 40
Corporate 40 — — 1 41
Industrial 22 (4) 9 3 30
Bell 9 — — — 9
Textron Systems 6 2 — 1 9
$ 188 $ 25 $ 74 $ 14 $ 301
We estimate that we will incur approximately $30 million in additional pre-tax restructuring costs in 2010, most of which will result in future cash
outlays. The additional costs are expected to primarily include relocation costs at Cessna as it consolidates certain operations, severance in the
Cessna segment and $3 million in severance for the Finance segment. We expect that the program will be substantially completed in 2010;
however, we expect to incur additional costs to exit the non-captive portion of our commercial finance business over the next two to three years,
which are estimated to be within a range of $7 million to $17 million, primarily attributable to severance and retention benefits.
Interest Expense
Interest expense includes interest for both the Finance and Manufacturing borrowing groups. Interest expense decreased $139 million to
$309 million in 2009, compared with 2008, primarily due to reduced debt in the Finance segment as it liquidates its non-captive business.
Interest expense, net for the Manufacturing group increased $18 million to $143 million in 2009, compared with 2008, primarily due to
$38 million in interest on the Convertible Notes issued in the second quarter of 2009, partially offset by lower rates in 2009 due to our borrowings
from our bank lines of credit. Interest expense for the Finance segment is included within segment profit.
In 2008, interest expense decreased $59 million to $448 million, compared with 2007, primarily due to the Finance segment, reflecting lower
interest rates, partially offset by higher average debt outstanding. Lower interest rates were primarily attributable to the decrease in market rate
indices, partially offset by an increase in borrowing spreads. Interest expense, net for the Manufacturing group increased $38 million to
$125 million in 2008, compared with 2007, primarily due to higher borrowing costs associated with our commercial paper borrowings in 2008.
Income Taxes
The following table reconciles the federal statutory income tax rate to our effective income tax rate:
2009 2008 2007
Federal statutory income tax rate (35.0)% 35.0% 35.0%
Increase (decrease) in taxes resulting from:
State income taxes 0.4 2.3 1.0
Goodwill impairment 18.5 8.4 —
Non-U.S. tax rate differential (13.5) (5.7) (0.5)
Valuation allowance on contingent receipts (7.3) (0.5) —
Research credit (4.7) (1.9) (0.8)
Unrecognized tax benefits and related interest (4.1) 3.4 1.2
Change in status of subsidiary (3.6) 5.0 —
Manufacturing deduction (3.1) (2.8) (1.6)
Equity hedge loss (income) 0.5 6.2 (1.5)
Other, net 0.9 (0.8) (3.0)
Effective income tax rate (51.0)% 48.6% 29.8%