E-Z-GO 1998 Annual Report Download - page 57

15. The estimated fair value amounts shown below were determined from available market
information and valuation methodologies. Because considerable judgment is required in
interpreting market data, the estimates are not necessarily indicative of the amounts that
could be realized in a current market exchange.
January 2, 1999 January 3, 1998
Estimated Estimated
Carrying fair Carrying fair
(In millions) value value value value
Assets:
Textron Finance:
Finance receivables $2,774 $2,837 $2,280 $2,334
Other 46 46 31 31
Liabilities:
Textron Manufacturing:
Debt 2,615 2,706 1,221 1,276
Interest rate exchange agreements – (11) –10
Textron Finance:
Debt 2,829 2,836 2,365 2,380
Interest rate exchange agreements –1––
Foreign exchange contracts – 9 –4
Currency swaps 14 10 (4) (4)
Notes:
(i) Finance receivables – The estimated fair values of real estate loans and commercial installment contracts were based on
discounted cash flow analyses. The estimated fair values of variable-rate receivables approximated the net carrying value.
The estimated fair values of nonperforming loans were based on discounted cash flow analyses using risk-adjusted interest
rates or the fair value of the related collateral.
(ii) Debt, interest rate exchange agreements, foreign exchange contracts and currency swaps – The estimated fair value of
fixed-rate debt was determined by independent investment bankers or discounted cash flow analyses. The estimated fair
values of variable-rate debt approximated their carrying values. The estimated fair values of interest rate exchange agree-
ments were determined by independent investment bankers and represent the estimated amounts that Textron or its coun-
terparty would be required to pay to assume the other party’s obligations under the agreements. The estimated fair values of
the foreign exchange contracts and currency swaps were determined by Textron’s foreign exchange banks.
16. Contingencies
Textron is subject to a number of lawsuits, investigations and claims arising out of the
conduct of its business, including those relating to commercial transactions, government
contracts, product liability, and environmental, safety and health matters. Some seek
compensatory, treble or punitive damages in substantial amounts; fines, penalties or
restitution; or remediation of contamination. Some are or purport to be class actions.
Under federal government procurement regulations, some could result in suspension or
debarment of Textron or its subsidiaries from U.S. government contracting for a period
of time. On the basis of information presently available, Textron believes that any liability
for these suits and proceedings would not have a material effect on Textron’s net income
or financial condition.
Environmental Remediation
Environmental liabilities are recorded based on the most probable cost if known or on
the estimated minimum cost, determined on a site-by-site basis. Textron’s environmen-
tal liabilities are undiscounted and do not take into consideration possible future insur-
ance proceeds or significant amounts from claims against other third parties.
Textron’s accrued estimated environmental liabilities are based on assumptions which
are subject to a number of factors and uncertainties. Circumstances which can affect the
accruals’ reliability and precision include identification of additional sites, environmental
regulations, level of cleanup required, technologies available, number and financial condi-
tion of other contributors to remediation, and the time period over which remediation
may occur. Textron believes that any changes to the accruals that may result from these
factors and uncertainties will not have a material effect on Textron’s net income or finan-
cial condition. Textron estimates that its accrued environmental remediation liabilities
will likely be paid over the next five to ten years.
Contingencies and
Environmental
Remediation
Fair Value of
Financial
Instruments
1998 TEXTRON ANNUAL REPORT 53