E-Z-GO 2000 Annual Report Download - page 28

between $140 and $160 million which will be incurred primarily during 2001. Ongoing annualized
savings are expected to be $100 to $120 million, beginning in 2002, with $50 to $70 million realized
in 2001. Substantially all planned actions will be executed by year-end 2001, with an estimated net
reduction in the global workforce of over 3,600.
In conjunction with the initiation of the 2000 restructuring program and the Company’s fourth quarter
multi-year financial planning process, management identified certain indicators of potential impair-
ment of long-lived assets including goodwill. As a result, the Company performed an impairment
review which identified impaired goodwill of $194 million in Industrial Products, $128 million in
Fastening Systems and $27 million in Automotive, as well as impaired fixed assets of $1 million in
Automotive resulting in an aggregate write-down of $350 million. The largest portions of the goodwill
charge were at TECT ($178 million) and Flexalloy ($96 million). Key impairment indicators during 2000
with respect to TECT, a manufacturer of air and land-based gas turbine engines components and air-
frame structures, were deteriorating margins and its inability to generate new contracts combined
with declining sales from its largest customer representing approximately 50% of TECT’s total rev-
enues. Key indicators for Flexalloy, a vendor-managed inventory company, serving primarily the heavy
truck industry within Fastening Systems, were its performance against plan and the negative effect
on its vendor-managed business model by other supply chain competitors. Flexalloy’s business is
dependent upon large customers and the service level for larger customers cannot be easily repli-
cated without substantial additional investment. Also, the synergies within Fastening Systems, which
were initially viewed to be significant due to Textron’s existing market share, have been considerably
less than anticipated. The undiscounted cash flow projections performed for the applicable operating
units were less than the carrying amounts of long-lived assets including goodwill indicating that there
was impairment. Accordingly, Textron recorded the goodwill write-down to the extent the carrying
amount of goodwill exceeded its fair value.
During the last several months of 2000, the value of Textron’s e-business investment portfolio has
fallen substantially. The Company has determined that this decline in value is other than temporary
and has taken a pre-tax charge of $117 million to write-down its e-business investment portfolio to
its current value. The application of e-business technology across the Company remains an impor-
tant strategic investment for Textron.
Textron recorded pre-tax charges of $18 million and $87 million in 1999 and 1998, respectively, related
to restructuring activities. The charges include severance costs, asset impairments and other exit
related costs associated with the cost reduction efforts and plant closures in the former Industrial seg-
ment, and headcount reductions in the Aircraft segment as discussed further in Note 17.
In the third quarter of 1999, Textron recorded a gain of $19 million as a result of shares granted to
Textron from Manulife Financial Corporation's initial public offering on their demutualization of
Manufacturers Life Insurance Company.
In August 1998, Textron announced that it had reached an agreement to sell Avco Financial Services
(AFS) to Associates First Capital Corporation. The sale was completed on January 6, 1999. AFS is
classified as a discontinued operation in 1999 and 1998.
The liquidity and capital resources of Textron’s operations are best understood by separately consid-
ering its independent borrowing groups, Textron Manufacturing and Textron Finance. Textron
Manufacturing consists of Textron Inc., the parent company, consolidated with the entities which
operate in the Aircraft, Automotive, Fastening Systems and Industrial Products business segments,
whose financial results are a reflection of the ability to manage and finance the development, pro-
duction and delivery of tangible goods and services. Textron Finance consists of Textron’s wholly-
Liquidity & Capital Resources
Discontinued Operations
TEXTRON 2000 ANNUAL REPORT 26