E-Z-GO 2009 Annual Report Download - page 78

Textron Inc.
Note 11. Shareholders’ Equity
Capital Stock
We have authorization for 15 million shares of preferred stock with no par value and 500 million shares of $0.125 par value common stock. In
December 2009, we elected to redeem all outstanding shares of our $2.08 Cumulative Convertible Preferred Stock, Series A and our $1.40
Convertible Preferred Dividend Stock, Series B. As part of the redemption, approximately 45,600 and 21,300 shares of Series A and Series B
preferred stock, respectively, were converted at the stated conversion rate (8.8 for Series A and 7.2 for Series B) into approximately 554,000
shares of common stock, and the remaining unconverted shares were paid in cash at the stated redemption rate. At the end of 2008 and 2007, we
had approximately 67,000 and 72,000 shares, respectively, of Series A issued and outstanding and approximately 34,000 and 36,000 shares,
respectively, of Series B issued and outstanding.
Outstanding common stock activity for the three years ended January 2, 2010 is presented below:
(In thousands) 2009 2008 2007
Beginning balance 242,041 250,061 251,192
Purchases — (11,649) (5,902)
Exercise of stock options 10 1,147 3,404
Conversion of preferred stock to common stock 556 60 89
Issued to Textron Savings Plan 5,460 2,060 994
Common stock offering 23,805 — —
Other issuances 400 362 284
Ending balance 272,272 242,041 250,061
Reserved Shares of Common Stock
At the end of 2009, common stock reserved for the conversion of convertible debt, the exercise of outstanding stock options and warrants, and the
issuance of shares upon vesting of outstanding restricted stock units totaled 143 million shares. See the “4.50% Convertible Senior Notes”
section in Note 8 for information on our convertible debt.
Income per Common Share
In the first quarter of 2009, we adopted the new accounting standard for determining whether instruments granted in share-based payment
transactions are participating securities. This new standard requires us to include any unvested share-based payment awards that contain
nonforfeitable rights to dividends or dividend equivalents (whether paid or unpaid) as participating securities in our basic earnings per share
calculation. We have granted certain restricted stock units that are deemed participating securities under this new standard, and, as a result, prior
period basic and diluted weighted-average shares outstanding have been recast to conform to the new calculation. The adoption of this standard
reduced our basic and diluted earnings per share by $0.01 in 2008, and there was no impact in 2007.
We calculate basic and diluted earnings per share based on net income, which approximates income available to common shareholders for each
period. Basic earnings per share is calculated using the two-class method, which includes the weighted-average number of common shares
outstanding during the period and restricted stock units to be paid in stock that are deemed participating securities. Diluted earnings per share
considers the dilutive effect of all potential future common stock, including convertible preferred shares, Convertible Notes, stock options and
warrants and restricted stock units in the weighted-average number of common shares outstanding. The weighted-average shares outstanding for
basic and diluted earnings per share are as follows:
(In thousands) 2009 2008 2007
Basic weighted-average shares outstanding 262,923 246,208 249,792
Dilutive effect of convertible preferred shares, stock options and restricted stock units — 4,130 5,034
Diluted weighted-average shares outstanding 262,923 250,338 254,826
In 2009, the potential dilutive effect of 8 million weighted-average shares of restricted stock units, stock options and warrants, convertible
preferred stock and Convertible Notes was excluded from the computation of diluted weighted-average shares outstanding as the shares would
have an antidilutive effect on the loss from continuing operations. In addition, stock options to purchase 7 million shares of common stock
outstanding are excluded from our calculation of diluted weighted-average shares outstanding in 2009 as the exercise prices were greater than the
average market price of our common stock for those periods. These securities could potentially dilute earnings per share in the future.
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