E-Z-GO 2001 Annual Report Download - page 59

Textron has also entered into a joint venture w ith TAG Aviation USA, Inc. to sell fractional share interests
in small business jets. During 2001 and 2000, Textron recorded revenue of $38 million and $26 million,
respectively, for the sale of aircraft to this venture through arm’s length transactions. Profit on these sales
is initially deferred then recognized on a pro-rata basis as fractional share interests are sold to third parties.
Textron has guaranteed one-half of the venture’s debt and lease obligations up to a maximum of $70
million. At December 29, 2001, Textron’s portion of the outstanding debt and operating lease commitments
covered by this guarantee totaled $25 million.
While Textron has several other joint venture agreements that have external financing arrangements, Textron
has only guaranteed approximately $15 million in debt obligations related to these ventures.
Commitments and Contingencies
Textron is subject to legal proceedings and other claims arising out of the conduct of Textron’s business,
relating to private transactions, government contracts, production partners, product liability, employment,
and environmental, safety and health matters. Some of these legal proceedings and claims 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 proceedings and claims w ill not have a
material effect on Textron’s financial position or results of operations.
Cessna is a defendant in a previously-reported action filed in June 1991 in the Circuit Court in and for Escambia
County, Florida, brought by certain individuals for injuries incurred in a 1989 crash of a Cessna 185 aircraft.
In January 2002, the parties reached an agreement to settle this action. The amount of the settlement in
excess of that which w ill be paid by Cessna’s insurance carriers w ill be covered by pre-existing product
liability reserves.
In the ordinary course of business, Textron enters into letters of credit and other similar arrangements
with financial institutions. The letters of credit typically serve as a guarantee of payment or performance to
certain third parties in accordance w ith specified terms and conditions. M anagement know s of no event
of default that would require Textron to satisfy these guarantees at year-end 2001.
In addition to its financing relationship w ith Textron Finance, OmniQuip also utilizes third-party finance
institutions to provide w holesale financing to certain of its customers. While these finance receivables are
not reflected on Textron's balance sheet, the finance institutions generally have recourse to OmniQuip and
may require OmniQuip to repurchase equipment related to customer defaults. The balance of this portfolio
at December 29, 2001 and December 30, 2000 w as $57 million and $43 million, respectively.
Leases
Rental expense approximated $103 million, $101 million and $94 million in 2001, 2000 and 1999, respectively.
Future minimum rental commitments for noncancellable operating leases in effect at year-end 2001
approximated $61 million for 2002; $50 million for 2003; $35 million for 2004; $26 million for 2005; $21 million
for 2006; and a total of $192 million thereafter.
Environmental Remediation
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 w hich can affect the accruals’ reliability and precision include identification
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 w hich 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 ow ned 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 liabilities to be in the range
of $50 million to $160 million. At year-end 2001, environmental reserves of approximately $93 million, of
which $15 million are classified as current liabilities, have been established to address these specific
estimated potential liabilities. Textron estimates that its accrued environmental remediation liabilities w ill
likely be paid over the next five to ten years.
16. Commitments,
Contingencies
and
Environmental
Remediation
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