E-Z-GO 2003 Annual Report Download - page 34

Textron’s accrued estimated environmental liabilities are based on assumptions that are subject to a
number of factors and uncertainties. Circumstances that can affect the reliability and precision of the
accruals include the 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 which remediation may occur. Textron believes that any changes to the accru-
als that may result from these factors and uncertainties will not have a material effect on Textron’s finan-
cial position or results of operations. Textron estimates that its accrued environmental remediation liabili-
ties will likely be paid over the next five to ten years.
Certain Textron products are sold through the Department of Defense’s Foreign Military Sales Program.
In addition, Textron sells directly to select foreign military organizations. Sales under these programs
totaled approximately 2.1% of Textron’s consolidated revenue in 2003 (less than 0.1% in the case of for-
eign military sales and 2.1% in the case of direct sales) and 2.2% in 2002 (0.1% and 2.1%, respectively).
Such sales include military and commercial helicopters, armored vehicles, turrets and spare parts. In
2003, these sales were made primarily to the countries of Saudi Arabia (40%), United Kingdom (12%)
and Thailand (11%). All sales are made in full compliance with all applicable laws and in accordance
with Textron’s Code of Conduct.
In January 2003, the Financial Accounting Standards Board (FASB) issued Interpretation No. 46 (“FIN
46” or the “Interpretation”), “Consolidation of Variable Interest Entities, an Interpretation of ARB No. 51.”
The Interpretation requires the consolidation of variable interest entities in which an enterprise absorbs a
majority of the entity’s expected losses, receives a majority of the entity’s expected residual returns, or
both, as a result of ownership, contractual or other financial interests in the entity. Currently, entities are
generally consolidated by an enterprise that has a controlling financial interest through ownership of a
majority voting interest in the entity. FIN 46 originally was effective immediately for variable interest enti-
ties created after January 31, 2003 and was effective in the third quarter of Textron’s fiscal 2003 for those
created prior to February 1, 2003. Textron Manufacturing has not modified or entered into any new joint
ventures in 2003. Textron Finance adopted FIN 46 for an agreement that was entered into in June 2003
and determined that the entity was not a variable interest entity.
Subsequent to the original issuance of the Interpretation, the effective date for entities created or inter-
ests obtained prior to February 1, 2003 was deferred, and in December 2003, the FASB issued a revised
version of FIN 46 that provided clarification of the original Interpretation and excluded certain operating
entities from its scope. Public companies are required to apply the provisions of this Interpretation
specifically to entities commonly referred to as special-purpose entities (SPE) in financial statement peri-
ods ending after December 15, 2003. The effective date for all other types of entities within the scope of
the Interpretation is for financial statement periods ending after March 15, 2004.
Textron Manufacturing and Textron Finance will adopt the revised FIN 46 in the first quarter of 2004 when
it applies to non-SPEs for entities created or interests obtained prior to February 2003. Both borrowing
groups have substantially completed the process of evaluating the Interpretation and believe it will not
have a material impact on its results of operations or financial position. In the normal course of business,
Textron has entered into various joint venture agreements that qualify as operating businesses. The
majority of these ventures meet the criteria for exclusion from the scope of FIN 46 and do not require
consolidation.
Textron Manufacturing participates in an agreement with Agusta to share certain costs and profits for the
joint design, development, manufacture, marketing, sale, customer training and product support of Bell
Agusta Aerospace’s BA609 and AB139. These programs have been in the development stage, and only
certain marketing costs are being charged to the venture. Bell Helicopter’s share of the development
costs are being charged to earnings as a period expense. This venture is within the scope of FIN 46 and
is required to be evaluated under the Interpretation in the first quarter of 2004. The impact of consolidat-
ing this venture would not be material to Textron’s results of operations or financial position at this time.
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