E-Z-GO 1999 Annual Report Download - page 60

The components of Textron’s net deferred tax asset were as follows:
(In millions) January 1, 2000 January 2, 1999
Textron Finance transactions, principally leasing $(353) $(350)
Self insured liabilities (including environmental) 184 205
Obligation for postretirement benefits 171 186
Fixed assets, principally depreciation (164) (171)
Deferred compensation 144 152
Inventory (51) (48)
Allowance for credit losses 38 33
Other, principally timing of other expense deductions 187 192
$ 156 $ 199
Deferred income taxes have not been provided for the undistributed earnings of
foreign subsidiaries, which approximated $500 million at the end of 1999. Management
intends to reinvest those earnings for an indefinite period, except for distributions having
an immaterial tax effect. If foreign subsidiaries’ earnings were distributed, 1999 taxes, net
of foreign tax credits, would be increased by approximately $65 million.
16. To enhance the competitiveness and profitability of its core businesses, Textron recorded
a pretax charge of $87 million in the second quarter of 1998 ($54 million after-tax or
$0.32 per diluted share). This charge was recorded based on the decision to exit several
small, nonstrategic product lines in Automotive and the former Systems and Components
divisions which did not meet Textron’s return criteria, and to realign certain operations in
the Industrial segment. The pretax charges associated with the Automotive and Industrial
segments were $25 million and $52 million, respectively. The charge also included the
cost of a litigation settlement of $10 million related to the Aircraft segment. Severance
costs were included in special charges and are based on established policies and practices.
The provision does not include costs associated with the transfer of equipment and
personnel, inventory obsolescence, or other normal operating costs associated with the
realignment actions.
In 1999, the Company reassessed the remaining actions anticipated in the 1998 pro-
gram and determined that certain projects should be delayed or cancelled while other
provisions were no longer necessary. Specifically, provisions for severance and exit costs
associated with the decision to exit certain automotive product lines were no longer
required due to a decision to build different products in a plant originally anticipated to
be closed. In the Industrial segment, certain cost reduction programs in the Fluid and
Power Group have been suspended as a result of management’s evaluation of the oppor-
tunities presented by the David Brown acquisition. Some smaller programs have been
delayed as the Company re-examines strategic alternatives. Others were completed at
costs less than originally anticipated.
Concurrently, the Company initiated a series of new cost reduction efforts in the
Industrial segment designed to significantly reduce headcount from levels at the beginning
of the year. Significant actions include the downsizing of an underperforming plant in
Europe and targeted headcount reductions across most Industrial divisions. Headcount
reductions were also effected at Bell Helicopter.
As a result of the above, the Company reversed approximately $24 million of reserves no
longer deemed necessary for the 1998 program and recorded severance accruals of approxi-
mately $21 million and recorded a charge related to asset impairment of $5 million.
Textron recorded additional restructuring charges for the Industrial segment, primarily
for severance ($7 million) and asset impairment ($9 million) associated with the
announced closing of seven facilities. The Company continues to evaluate additional
programs and expects cost reduction efforts to continue over the next year. Additional
charges may be required in the future when such programs become finalized. As of
January 1, 2000, approximately 1,700 employees had been terminated under these
programs.
Special (Credits)/
Charges
58 Consistent Growth