E-Z-GO 2014 Annual Report Download - page 27

Download and view the complete annual report

Please find page 27 of the 2014 E-Z-GO annual report below. You can navigate through the pages in the report by either clicking on the pages listed below, or by using the keyword search tool below to find specific information within the annual report.

Page out of 94

  • 1
  • 2
  • 3
  • 4
  • 5
  • 6
  • 7
  • 8
  • 9
  • 10
  • 11
  • 12
  • 13
  • 14
  • 15
  • 16
  • 17
  • 18
  • 19
  • 20
  • 21
  • 22
  • 23
  • 24
  • 25
  • 26
  • 27
  • 28
  • 29
  • 30
  • 31
  • 32
  • 33
  • 34
  • 35
  • 36
  • 37
  • 38
  • 39
  • 40
  • 41
  • 42
  • 43
  • 44
  • 45
  • 46
  • 47
  • 48
  • 49
  • 50
  • 51
  • 52
  • 53
  • 54
  • 55
  • 56
  • 57
  • 58
  • 59
  • 60
  • 61
  • 62
  • 63
  • 64
  • 65
  • 66
  • 67
  • 68
  • 69
  • 70
  • 71
  • 72
  • 73
  • 74
  • 75
  • 76
  • 77
  • 78
  • 79
  • 80
  • 81
  • 82
  • 83
  • 84
  • 85
  • 86
  • 87
  • 88
  • 89
  • 90
  • 91
  • 92
  • 93
  • 94

Interest Expense
(Dollars in millions)
2014
2013
2012
Interest expense
$ 191
$ 173
$ 212
% change compared with prior period
10%
(18)%
Interest expense on the Consolidated Statement of Operations includes interest for both the Manufacturing and Finance borrowing
groups with interest related to intercompany borrowings eliminated. Consolidated interest expense increased $18 million, 10%, in
2014, compared with 2013, primarily due to a $31 million impact related to financing the Beechcraft acquisition, partially offset by
$9 million of lower interest expense due to the maturity of our convertible notes in the second quarter of 2013. In 2013,
consolidated interest expense decreased $39 million, 18%, compared with 2012, primarily due to lower average debt outstanding.
Income Tax Expense
Our effective tax rate was 29.1% in 2014, 26.1% in 2013 and 30.9% in 2012. This rate generally differs from the U.S. federal
statutory tax rate of 35% due to certain earnings from operations in lower-tax jurisdictions throughout the world, as well as the
research credit. The jurisdictions with favorable tax rates that have the most significant effective tax rate impact in the periods
presented include 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.
In 2013, our effective tax rate was reduced by approximately 4.0% due to the tax benefit recognized upon the retroactive
reinstatement and extension of the Federal Research and Development Tax Credit for the period from January 1, 2012 to
December 31, 2013. In 2014, this credit was extended through the end of 2014, resulting in a 1.5% reduction in our effective tax
rate.
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: Textron Aviation, which consists of the
legacy Cessna segment combined with the recently-acquired Beechcraft business, 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, certain corporate expenses and acquisition and restructuring costs related to the
Beechcraft acquisition. The measurement for the Finance segment includes interest income and expense along with intercompany
interest income and expense.
In our discussion of comparative results for the Manufacturing group, changes in revenues 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 revenues 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 refers to the revenues 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. 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 28% of our 2014 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.
21 Textron Inc. Annual Report • 2014