E-Z-GO 2000 Annual Report Download - page 58

December 30, 2000 January 1, 2000
Estimated Estimated
Carrying Fair Carrying Fair
(In millions) Value Value Value Value
Assets:
Textron Finance:
Finance receivables $4,767 $4,840 $4,624 $4,642
Interest rate exchange agreements –(6) ––
Other 141 141 46 46
Liabilities:
Textron Manufacturing:
Debt 2,061 2,105 1,745 1,740
Interest rate exchange agreements –(8) –7
Marketable security price forward contracts 26 26 (5) (5)
Textron Finance:
Debt 4,667 4,688 4,551 4,535
Interest rate exchange agreements –17 – (2)
Foreign exchange contracts:
Textron Manufacturing (1) (1) – (6)
Currency swaps:
Textron Manufacturing ––(21) (25)
Textron Finance – 1 ––
(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 deter-
mined by independent investment bankers or discounted cash flow analyses. The estimated fair values of variable-rate debt approximated their carry-
ing values. The estimated fair values of interest rate exchange agreements were determined by discounted cash flow analysis and represent the
estimated amounts that Textron or its counterparty would be required to pay to assume the other party’s obligations under the agreements. The esti-
mated fair values of the foreign exchange contracts and currency swaps were determined by Textron’s foreign exchange banks.
(iii) The estimated fair values of marketable security price forward contracts were determined by quoted market prices of the related securities and repre-
sents the amount Textron or its counterparty are required to pay under these agreements.
Contingencies
Textron is subject to legal proceedings arising out of the conduct of the Company’s business. These
proceedings include claims arising from private transactions, government contracts, product liability
and environmental, safety and health matters. Some of these legal proceedings seek damages, fines
or penalties in substantial amounts or remediation of environmental contamination. Under federal
government procurement regulations, certain claims brought by the U.S. Government could result in
Textron’s suspension or debarment from U.S. Government contracting for a period of time. On the
basis of information presently available, Textron believes that these suits and proceedings will not
have a material effect on the Company’s financial position or results of operations.
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 environmental liabilities are undis-
counted and do not take into consideration possible future insurance proceeds or significant
amounts from claims against other third parties.
Textron’s accrued estimated environmental liabilities are based upon currently available facts, existing
technology and presently enacted laws and regulations and are subject to a number of factors and
uncertainties. Circumstances which can affect the accruals’ reliability and precision include identifica-
tion of additional sites, environmental regulations, level of cleanup required, technologies available,
number and financial condition of other contributors to remediation and the time period over which
remediation may occur. Accrued liabilities relate to disposal costs, U.S. Environmental Protection
Agency oversight costs, legal fees and operating and maintenance costs for both currently and formerly
owned or operated facilities. 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 financial position or results of
operations. Based upon information currently available Textron estimates potential environmental liabili-
ties to be in the range of $70 million to $200 million. As of December 30, 2000, environmental reserves
of approximately $133 million, of which $15 million are classified as current liabilities, have been estab-
lished to address these specific estimated potential liabilities. Textron estimates that its accrued envi-
ronmental remediation liabilities will likely be paid over the next five to ten years.
Contingencies and Environmental Remediation19
TEXTRON 2000 ANNUAL REPORT 56