E-Z-GO 2002 Annual Report Download - page 68

Warranty and Product Maintenance Contracts
Textron provides limited warranty and product maintenance programs, including parts and labor, for
certain products for periods ranging from one to five years. Textron estimates the costs that may be
incurred under these programs and records a liability in the amount of such costs at the time product
revenue is recognized. Factors that affect this liability include the number of products sold, historical
and anticipated rates of warranty claims and cost per claim. Textron periodically assesses the adequa-
cy of its recorded warranty and product maintenance liabilities and adjusts the amounts as necessary.
Changes in Textron’s warranty and product maintenance liability in 2002 and 2001 are as follows:
December 28, December 29,
(In millions) 2002 2001
Accrual at beginning of year $ 257 $ 241
Provision 170 162
Settlement (161) (142)
Adjustments to pre-existing liabilities 35 (4)
Accrual at end of year $ 301 $ 257
For 2002, the adjustments to pre-existing liabilities include $31 million in costs for the recall, inspection
and customer care program at Lycoming described in Note 17.
Research and Development Costs
Company-funded research and development costs include amounts for company-initiated programs,
the cost sharing portions of customer-initiated programs, and losses incurred on customer-initiated pro-
grams. Textron also carries out research and development under contracts with others, primarily the
U.S. Government. A significant portion of company-initiated programs include independent research
and development related to government products and services which is recoverable through overhead
cost allowances.
Company-funded and customer-funded research and development costs are as follows:
(In millions) 2002 2001 2000
Company-funded $ 207 $ 366 $ 307
Customer-funded 379 323 414
Total research and development $ 586 $ 689 $ 721
Textron has five reportable segments: Aircraft, Fastening Systems, Industrial Products, Industrial Com-
ponents and Finance. See Note 1 for principal markets and pages 16 through 17 for products of Tex-
tron’s segments.
Textron’s reportable segments are strategically aligned based on the manner in which Textron manages
its various operations. The accounting policies of the segments are the same as those described in the
summary of significant accounting policies in Note 1. Textron evaluates segment performance based on
segment profit. Segment profit for Textron Manufacturing excludes interest expense, certain corporate
expenses, special charges and gains and losses from the disposition of significant business units. Tex-
tron Finance includes interest income, interest expense and distributions on preferred securities of
Finance subsidiary trust and excludes special charges as part of segment profit. To reflect the adoption
of SFAS No. 142 and the fact that Textron does not include amortization of goodwill in its internal evalua-
tion of segment performance, Textron has recast its segment data for comparability by reclassifying
goodwill amortization out of segment profit in prior periods. Provisions for losses on finance receivables
involving the sale or lease of Textron products are recorded by the selling manufacturing division.
The Aircraft segment is comprised of two product groups: fixed-wing aircraft and rotor aircraft. Fixed-
wing aircraft revenues were $3,286 million, $3,176 million and $2,956 million in 2002, 2001 and 2000,
respectively. Rotor aircraft revenues were $1,636 million, $1,621 million and $1,581 million in 2002, 2001
and 2000, respectively. The Industrial Products segment primarily includes defense systems, golf car and
turf care equipment and electrical and telecommunication products. Defense systems revenues were
$488 million, $490 million and $470 million in 2002, 2001 and 2000, respectively. Golf car and turf care
equipment revenues were $732 million, $738 million and $823 million in 2002, 2001 and 2000, respec-
tively, and electrical and telecommunications products revenues were $341 million, $430 million and
$454 million, respectively.
Note 19
Segment
Reporting
66