E-Z-GO 2013 Annual Report Download - page 33

Textron Inc. Annual Report • 2013 20
classification. These finance receivables were recorded at fair value at the time of the transfer, resulting in a $186 million charge
recorded to Valuation allowance on transfer of Golf Mortgage portfolio to held for sale.
Other Losses, net
In 2011, other losses, net included $55 million in losses on the early extinguishment of a portion of our convertible notes which
was largely offset by a $52 million gain from the collection on notes receivable in connection with the disposition of the Fluid &
Power business in 2008.
Income Tax Expense
Our effective tax rate was 26.1% in 2013, 30.9% in 2012 and 28.1% in 2011, and generally differs from the U.S. federal statutory
tax rate of 35% due to certain earnings from our operations in lower-tax jurisdictions throughout the world, as well as research
credits. The jurisdictions with favorable tax rates that have the most significant effective tax rate impact in the periods presented
include primarily Canada, Germany, Belgium and China. We have not provided for U.S. taxes for those earnings because we plan
to reinvest all of those earnings indefinitely outside of the U.S. Our effective tax rate will fluctuate based on the mix of earnings
from our U.S. and non-U.S. operations. In addition, the American Taxpayer Relief Act of 2012 was enacted on January 2, 2013 to
retroactively reinstate and extend the Federal Research and Development Tax Credit from January 1, 2012 to December 31, 2013.
As a result our income tax provision for 2013 includes a tax benefit that reduced the annual effective tax rate by approximately
four percent. We estimate our full year annual effective tax rate in 2014 to be approximately 31.5%. For a full reconciliation of
our effective tax rate to the U.S. federal statutory tax rate of 35% see Note 12 to the Consolidated Financial Statements.
Segment Analysis
We operate in, and report financial information for, the following five business segments: Cessna, Bell, Textron Systems,
Industrial and Finance. Segment profit is an important measure used for evaluating performance and for decision-making
purposes. Segment profit for the manufacturing segments excludes interest expense and certain corporate expenses. The
measurement for the Finance segment includes interest income and expense along with intercompany interest expense.
In our discussion of comparative results for the Manufacturing group, changes in revenue and segment profit typically are
expressed for our commercial business in terms of volume, pricing, foreign exchange and acquisitions. Additionally, changes in
segment profit may be expressed in terms of mix, inflation and cost performance. Volume changes in revenue represent
increases/decreases in the number of units delivered or services provided. Pricing represents changes in unit pricing. Foreign
exchange is the change resulting from translating foreign-denominated amounts into U.S. dollars at exchange rates that are
different from the prior period. Acquisitions refer to the results generated from businesses that were acquired within the previous
12 months. For segment profit, mix represents a change due to the composition of products and/or services sold at different profit
margins. Inflation represents higher material, wages, benefits, pension or other costs. Cost performance reflects an increase or
decrease in research and development, depreciation, selling and administrative costs, warranty, product liability, quality/scrap,
labor efficiency, overhead, product line profitability, start-up, ramp up and cost-reduction initiatives or other manufacturing inputs.
Approximately 30% of our 2013 revenues were derived from contracts with the U.S. Government. For our segments that have
significant contracts with the U.S. Government, we typically express changes in segment profit related to the government business
in terms of volume, changes in program performance or changes in contract mix. Changes in volume that are discussed in net
sales typically drive corresponding changes in our segment profit based on the profit rate for a particular contract. Changes in
program performance typically relate to profit recognition associated with revisions to total estimated costs at completion that
reflect improved or deteriorated operating performance or award fee rates. Changes in contract mix refers to changes in operating
margin due to a change in the relative volume of contracts with higher or lower fee rates such that the overall average margin rate
for the segment changes.
Cessna
% Change
(Dollars in millions) 2013 2012 2011 2013 2012
Revenues $ 2,784 $ 3,111 $ 2,990 (11)% 4%
Operating expenses 2,832 3,029 2,930 (7)% 3%
Segment (loss) profit (48) 82 60 — 37%
Profit margin (2)% 3% 2%
Backlog $ 1,018 $ 1,062 $ 1,889 (4)% (44)%