E-Z-GO 2003 Annual Report Download - page 35

In May 2003, the FASB issued SFAS No. 150, “Accounting for Certain Financial Instruments with Charac-
teristics of Both Liabilities and Equity.” SFAS No. 150 requires that an issuer classify certain financial
instruments as liabilities. Many of the instruments included within the Statement’s scope, such as
mandatorily redeemable shares, were previously classified as equity. SFAS No. 150 was effective for
financial instruments entered into or modified after May 31, 2003 and was effective at the beginning of
the first interim period beginning after June 15, 2003 for all other instruments. As required, Textron
adopted this Statement when it became effective in July 2003 and reported its obligated mandatorily
redeemable preferred securities as liabilities and all related expenses prospectively as components of
income from operations.
Subsequent to adoption, on November 7, 2003, the FASB issued FASB Staff Position (FSP) 150-3,
“Effective Date, Disclosures, and Transition for Mandatorily Redeemable Financial Instruments of Cer-
tain Nonpublic Entities and Certain Mandatorily Redeemable Noncontrolling Interests under FASB State-
ment No. 150, Accounting for Certain Financial Instruments with Characteristics of Both Liabilities and
Equity.”FSP 150-3 deferred the effective date of SFAS No. 150 for certain mandatorily redeemable non-
controlling interests. Textron’s obligated mandatorily redeemable preferred securities were included in
this deferral. FSP 150-3 states that entities that have already adopted SFAS No. 150 for instruments with-
in the scope of its indefinite deferral shall reverse the effects of that adoption in the first fiscal period
beginning after the date the FSP was issued. Textron will adopt FSP 150-3 in the first quarter of 2004.
Since Textron Finance’s mandatorily redeemable preferred securities will be included in the adoption of
FIN 46 in the first quarter of 2004, and Textron Manufacturing redeemed its preferred securities in July
2003, the adoption of FSP 150-3 will have no impact on Textron’s results of operations or financial position.
On December 8, 2003, the Medicare Prescription Drug, Improvement and Modernization Act of 2003
(the “Act”) was signed into law. This Act introduced a prescription drug benefit under Medicare Part D
along with a federal subsidy to sponsors of retiree health care benefit plans that provide a similar bene-
fit. On January 12, 2004, the FASB issued FSP 106-1, “Accounting and Disclosure Requirements Relat-
ed to the Medicare Prescription Drug, Improvement and Modernization Act of 2003,” to address the
accounting and disclosure implications resulting from the Act. FSP 106-1 is effective for financial state-
ments for fiscal years ending after December 7, 2003 and provides a one-time election to delay report-
ing the effects of the Act until authoritative guidance on the accounting for the federal subsidy is issued.
Textron has elected to defer accounting for the Act in accordance with this one-time election until
authoritative guidance on the appropriate accounting is issued.
Forward-looking Information: Certain statements in this Annual Report and other oral and written state-
ments made by Textron from time to time are forward-looking statements, including those that discuss
strategies, goals, outlook or other non-historical matters; or project revenues, income, returns or other
financial measures. These forward-looking statements speak only as of the date on which they are
made, and we undertake no obligation to update or revise any forward-looking statements. These for-
ward-looking statements are subject to risks and uncertainties that may cause actual results to differ
materially from those contained in the statements, including the following: (a) the extent to which Textron
is able to achieve savings from its restructuring plans; (b) uncertainty in estimating the amount and tim-
ing of restructuring charges and related costs; (c) changes in worldwide economic and political condi-
tions that impact interest and foreign exchange rates; (d) the occurrence of work stoppages and strikes
at key facilities of Textron or Textron’s customers or suppliers; (e) government funding and program
approvals affecting products being developed or sold under government programs; (f) cost and deliv-
ery performance under various program and development contracts; (g) the adequacy of cost esti-
mates for various customer care programs including servicing warranties; (h) the ability to control costs
and successful implementation of various cost reduction programs; (i) the timing of certifications of new
aircraft products; (j) the occurrence of further downturns in customer markets to which Textron products
are sold or supplied or where Textron Finance offers financing; (k) changes in aircraft delivery schedules
or cancellation of orders; (l) the impact of changes in tax legislation (including the expiration of “bonus
depreciation” provisions scheduled to end in 2004); (m) Textron’s ability to offset, through cost reduc-
tions, raw material price increases and pricing pressure brought by original equipment manufacturer
customers; (n) the availability and cost of insurance; (o) pension plan income falling below current fore-
casts; (p) Textron Finance’s ability to maintain portfolio credit quality; (q) Textron Finance’s access to
debt financing at competitive rates; and (r) uncertainty in estimating contingent liabilities and establish-
ing reserves tailored to address such contingencies.
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