E-Z-GO 2003 Annual Report Download - page 19

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To improve returns at core businesses and to complete the integration of certain acquisitions, Textron
approved and committed to a restructuring program in the fourth quarter of 2000 based upon targeted
cost reductions. This program was expanded in 2001, and in October 2002, Textron announced a fur-
ther expansion of the program as part of its strategic effort to improve operating efficiencies, primarily in
its industrial businesses. Textron’s restructuring program includes corporate and segment direct and
indirect workforce reductions, consolidation of facilities primarily in the United States and Europe, ration-
alization of certain product lines, outsourcing of non-core production activity, the divestiture of non-core
businesses, and streamlining of sales and administrative overhead. Under this restructuring program,
Textron has reduced its workforce by approximately 9,400 employees and has closed 88 facilities,
including 40 manufacturing plants, primarily in the Industrial and Fastening Systems segments. Textron
expects a total reduction of about 10,000 employees, excluding approximately 700 Trim employees and
1,000 OmniQuip employees, representing approximately 18% of its global workforce since the restruc-
turing was first announced.
As of January 3, 2004, $389 million of cost has been incurred relating to continuing operations (includ-
ing $11 million related to Trim) consisting of $209 million in severance costs, $94 million in asset impair-
ment charges, $10 million in contract termination costs and $76 million in other associated costs. Tex-
tron estimates that approximately $127 million in additional program costs will be incurred primarily in
the Fastening Systems and Industrial segments. In total, Textron estimates that the entire program for
continuing operations will be approximately $516 million (including $11 million related to Trim) and will
be substantially complete by 2004.
Textron adopted Statement of Financial Accounting Standards (SFAS) No. 146, “Accounting for Costs
Associated with Exit or Disposal Activities,” as of the beginning of fiscal 2003 for projects initiated after
December 28, 2002. Previously, certain costs related to restructuring that were not accruable under the
prior standard were recorded in segment profit as incurred. With the adoption of this Statement, all
restructuring and related costs for which this Statement applies have been aggregated and recorded in
special charges. Prior period amounts have been reclassified to conform to this presentation.
In July 2003, Textron redeemed its 7.92% Junior Subordinated Deferrable Interest Debentures due
2045. The debentures were held by Textron’s wholly owned trust, and the proceeds from their redemp-
tion were used to redeem all of the $500 million Textron Capital I trust preferred securities. Upon the
redemption, $15 million of unamortized issuance costs were written off.
During the second half of 2002, the Collins & Aikman Corporation (C&A) common stock owned by Tex-
tron experienced a decline in market value. Textron acquired this stock as a result of the disposition of
the Trim business. In December 2002, Moody’s lowered its liquidity rating of C&A. Due to this indicator
and the extended length of time and extent to which the market value of the stock was less than the car-
rying value, Textron determined that the decline in the market value of the stock was other than tempo-
rary and wrote down its investment in the stock for a pre-tax loss of $38 million. Textron sold its remaining
investment in C&A common stock for cash proceeds of $34 million and a pre-tax gain of $12 million in
the first quarter of 2004. During 2001, Textron recorded a $6 million impairment charge related to its e-
business securities and subsequently realized a $3 million net loss on the sale of its remaining e-busi-
ness securities.
Corporate expenses and other, net was $119 million in 2003, compared with $114 million in 2002 and
$152 million in 2001. The large decrease of $38 million in 2002 was primarily due to:
$15 million in lower stock-based compensation and related hedge costs;
Royalty income of $13 million in 2002 related to the Trim divestiture;
Lower costs of $5 million as a result of organizational changes made in 2001; and
Higher income of $4 million related to retirement plans;
Partially offset by an increase of $7 million in product liability reserves related to divested businesses.
Corporate expenses and other, net is expected to increase in 2004 primarily due to certain non-
recurring gains and income in 2003. The 2003 expenses were offset primarily by $7 million in royalty
income under an agreement related to the Trim divestiture that expired in 2003 and $7 million in non-
recurring life insurance gains.
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