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1998 TEXTRON ANNUAL REPORT 39
Notes to Consolidated Financial Statements
1. Summary of Significant Accounting Policies
Significant accounting policies appear in italics as an integral part of the notes to the
financial statements to which the policies relate.
Nature of Operations and Principles of Consolidation
Textron is a global multi-industry company with manufacturing and finance operations. Its
principal markets (listed within segments in order of the amount of 1998 revenues) and
the major locations of such markets are as follows:
Segment Principal markets Major locations
Aircraft • Business jets • North America
• Commercial and military helicopters • Asia/Pacific
• General aviation • South America
• Overnight express package carriers • Western Europe
• Commuter airlines, relief flights, tourism, and freight
Automotive • Automotive original equipment manufacturers and their suppliers • North America
• Western Europe
Industrial • Fastening systems: automotive, electronics, aerospace, • North America
other OEMs, distributors, and consumers • Western Europe
• Golf and turf-care products: golf courses, resort communities, • Asia/Pacific
and commercial and industrial users • South America
• Industrial components: commercial aerospace and defense
• Fluid and power systems: original equipment manufacturers,
distributors, and end-users of a wide variety of products
Finance • Commercial loans and leases • North America
The consolidated financial statements include the accounts of Textron and all of its
majority- and wholly-owned subsidiaries. All significant intercompany transactions are
eliminated. Paul Revere is reflected as a discontinued operation for 1996 and Avco
Financial Services is reflected as a discontinued operation for all periods presented.
Textron consists of two borrowing groups – Textron Parent Company Borrowing
Group (Textron Manufacturing) and Textron’s finance subsidiary (Textron Finance).
Textron Manufacturing consists of all entities of Textron (primarily manufacturing)
other than its wholly-owned commercial finance subsidiary. Textron Finance consists
of Textron Financial Corporation (TFC).
The preparation of these financial statements in conformity with generally accepted
accounting principles requires management to make estimates and assumptions that
affect these statements and accompanying notes. Some of the more significant estimates
include inventory valuation, residual values of leased assets, allowance for losses on
finance receivables, product liability, workers compensation, environmental, and warranty
reserves, and amounts reported under long-term contracts. Management’s estimates are
based on the facts and circumstances available at the time estimates are made, past
historical experience, risk of loss, general economic conditions and trends, and manage-
ment’s assessments of the probable future outcome of these matters. Consequently,
actual results could differ from such estimates.
2. Acquisitions
During 1998, Textron acquired the following companies: (a) Ransomes PLC – a UK-based
manufacturer of commercial turf-care machinery; (b) Sükosim – a German-based fastener
manufacturer, (c) Peiner – a German-based fastener company; (d) Ring Screw Works – a
Michigan-based supplier of specialty threaded fasteners to the automotive industry; (e)
Datacom Technologies – a Washington-based manufacturer of cable test instruments, (f)
Midland Industrial Plastics – a UK-based manufacturer of automotive interior and exteri-
or trim, (g) David Brown Group PLC – a UK-based designer and manufacturer of industri-
al gears and mechanical and hydraulic transmission systems, (h) Systran – an Oregon fac-
toring company and (i) Business Leasing Group, a division of NationsCredit Commercial
Corporation, specializing in vendor finance. The total cost of these acquisitions was
approximately $1.1 billion, including notes issued for approximately $160 million. In addi-
tion, approximately $190 million of debt was assumed as a result of these acquisitions.
Acquisitions and
Dispositions
Financial
Statement
Presentation