E-Z-GO 2010 Annual Report Download - page 77

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65
Assets and Liabilities Not Recorded at Fair Value
The carrying value and estimated fair values of our financial instruments that are not reflected in the financial statements at fair value
are as follows:
January 1, 2011
January 2, 2010
(In millions)
Carrying
Value
Estimated
Fair Value
Carrying
Value
Estimated
Fair Value
Manufacturing group
Debt, excluding leases
$ (2,172)
$ (2,698)
$ (3,474)
$ (3,762)
Finance group
Finance receivables held for investment, excluding leases
3,345
3,131
5,159
4,703
Investment in other marketable securities
—
—
68
56
Debt
(3,660)
(3,528)
(5,667)
(5,439)
Fair value for the Manufacturing group debt is determined using market observable data for similar transactions. At January 1, 2011
and January 2, 2010, approximately 33% and 54%, respectively, of the fair value of term debt for the Finance group was determined
based on observable market transactions. The remaining Finance group debt was determined based on discounted cash flow analyses
using observable market inputs from debt with similar duration, subordination and credit default expectations. We utilize the same
valuation methodologies to determine the fair value estimates for finance receivables held for investment as used for finance
receivables held for sale.
Note 10. Shareholders’ Equity
Capital Stock
We have authorization for 15 million shares of preferred stock with a par value of $0.01 and 500 million shares of common stock
with a par value of $0.125. Outstanding common stock activity for the three years ended January 1, 2011 is presented below:
(In thousands) 2010 2009 2008
Beginning balance
272,272
242,041
250,061
Purchases
—
—
(11,649)
Exercise of stock options
336
10
1,147
Conversion of preferred stock to common stock
31
556
60
Issued to Textron Savings Plan
2,682
5,460
2,060
Common stock offering
—
23,805
—
Other issuances
418
400
362
Ending balance
275,739
272,272
242,041
Reserved Shares of Common Stock
At the end of 2010, 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 140 million shares. See the “4.50%
Convertible Senior Notes” section in Note 8 for information on our convertible debt.
Income per Common Share
We calculate basic and diluted earnings per share (EPS) 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 as they provide nonforfeitable rights to dividends. Diluted earnings per share considers the dilutive effect of all potential
future common stock, including convertible preferred shares, stock options, restricted stock units and the shares that could be issued
upon the conversion of our 4.50% Convertible Senior Notes, as discussed below, and upon the exercise of the related warrants. The
convertible note call options purchased in connection with the issuance of the 4.50% Convertible Senior Notes are excluded from the
calculation of diluted EPS as their impact is always anti-dilutive. Upon conversion of our 4.50% Convertible Senior Notes, as
described in Note 8, the principal amount would be settled in cash, and the excess of the conversion value, as defined, over the
principal amount may be settled in cash and/or shares of our common stock. Therefore, only the shares of our common stock
potentially issuable with respect to the excess of the notes’ conversion value over the principal amount, if any, are considered as
dilutive potential common shares for purposes of calculating diluted EPS.