E-Z-GO 2002 Annual Report Download - page 67

for the recall, inspection and customer care program are based on management’s best estimate as of
December 28, 2002. Actual costs could vary depending upon the actual experience of the current pro-
gram, recoveries received from third parties or an expansion of the existing program.
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 with specified terms and conditions. Management knows of no
event of default that would require Textron to satisfy these guarantees at the end of 2002.
In addition to its financing relationship with Textron Finance, OmniQuip also utilizes third-party finance
institutions to provide wholesale 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. OmniQuip
generally obtains a secured interest in any equipment repurchased. The balance of this portfolio at
December 28, 2002 and December 29, 2001 was $47 million and $57 million, respectively.
Textron has a number of guaranteed minimum resale value contracts associated with certain past air-
craft sales. These guarantees require Textron to make possible future payments to a customer in the
event that the fair value of an aircraft falls below a minimum guaranteed amount, or stipulate a minimum
value upon the trade-in for a new replacement aircraft. The agreements generally include operating
restrictions such as maximum usage over the guarantee period or minimum maintenance requirements.
The amount of resale value guaranteed at December 28, 2002 was approximately $160 million. The esti-
mated fair values of the guaranteed aircraft prevailing at December 28, 2002 were greater than the
amount of Textron's guarantees. In addition, for aircraft representing $117 million of the guaranteed
amounts, Textron has $97 million in residual value insurance coverage that would reimburse Textron if
the guaranteed value falls below the insured level. The guarantee contracts expire as follows: $98 mil-
lion in 2003, $37 million in 2004, $5 million in 2005, $3 million in 2006, and $17 million in 2012. Of the
related residual value insurance, $78 million expires in 2003 and $19 million expires in 2004.
Leases
Rental expense approximated $92 million, $103 million and $101 million in 2002, 2001 and 2000,
respectively. Future minimum rental commitments for noncancellable operating leases in effect at the
end of 2002 approximated $70 million for 2003; $54 million for 2004; $38 million for 2005; $28 million for
2006; $22 million for 2007; and a total of $198 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 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 $38 million to $138 million. At the end of 2002, environmental reserves of
approximately $80 million, of which $17 million are classified as current liabilities, have been established
to address these specific estimated potential liabilities. Textron estimates that its accrued environmental
remediation liabilities will likely be paid over the next five to ten years.
Accrued Liabilities
Textron Manufacturing’s accrued liabilities are comprised of the following:
December 28, December 29,
(In millions) 2002 2001
Customer deposits $ 193 $ 279
Warranty and product maintenance contracts 301 257
Salaries, wages and employer taxes 237 212
Contract reserves 153 113
Other 453 547
Total accrued liabilities $ 1,337 $ 1,408
Note 18
Supplemental
Financial
Information
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