E-Z-GO 2003 Annual Report Download - page 52

Inventories aggregating $1.0 billion and $1.1 billion at the end of 2003 and 2002, respectively, were val-
ued by the last-in, first-out (LIFO) method. Had such LIFO inventories been valued at current costs, their
carrying values would have been approximately $224 million and $228 million higher at those respective
dates. The remaining inventories, other than those related to certain long-term contracts, are valued pri-
marily by the first-in, first-out method. Inventories related to long-term contracts, net of progress pay-
ments and customer deposits, were $137 million at the end of 2003 and $11 million at the end of 2002.
Long-term contract receivables at the end of 2003 and 2002 totaled $224 million and $201 million,
respectively. This includes $126 million and $161 million, respectively, of unbilled costs and accrued
profits that had not yet met the contractual billing criteria. Long-term contract receivables do not include
significant amounts billed but unpaid due to contractual retainage provisions or subject to collection
uncertainty. During the second half of 2001, program reviews on certain long-term development and
production contracts indicated reduced profitability expectations, resulting in a $124 million charge to
earnings. The reduced profitability expectations reflected the clarification of several matters including
extended development schedules and planned design changes on a number of programs, as well as
ongoing development efforts.
Property, plant and equipment for Textron Manufacturing is comprised of the following:
December 28,
(In millions) 2002
Land and buildings $ 1,093 $ 1,046
Machinery and equipment 3,280 3,080
4,373 4,126
Less accumulated depreciation 2,448 2,171
$ 1,925 $ 1,955
On December 30, 2001, Textron adopted SFAS No. 142 which required companies to stop amortizing
goodwill and certain intangible assets with indefinite useful lives and requires an annual review for
impairment. All existing goodwill as of December 30, 2001 was required to be tested for impairment on a
reporting unit basis. The reporting unit represents the operating segment unless discrete financial infor-
mation is prepared and reviewed by segment management for businesses one level below that operat-
ing segment (a “component”), in which case such component is the reporting unit. In certain instances,
components of an operating segment have been aggregated and deemed to be a single reporting unit
based on similar economic characteristics of the components. Goodwill is considered to be impaired
when the net book value of a reporting unit exceeds its estimated fair value. Fair values are established
primarily using a discounted cash flow methodology. When available, comparative market multiples are
used to corroborate discounted cash flow results.
With the implementation of SFAS No. 142 in 2002, an after-tax transitional impairment charge of $488
million ($561 million, pre-tax) was taken in the second quarter and retroactively recorded in the first
quarter. The after-tax charge is included in the caption “Cumulative effect of change in accounting prin-
ciple, net of income taxes” and relates to the following segments: $385 million in Industrial, $88 million in
Fastening Systems and $15 million in Finance. For the Industrial and Fastening Systems segments, the
primary factor resulting in the impairment charge was the decline in demand in certain industries in
which these segments operate, especially the telecommunication industry, due to the economic slow
down. The Finance segment’s impairment charge related to the franchise finance division and was pri-
marily the result of decreasing loan volumes and an unfavorable securitization market. No impairment
charge was appropriate for these segments under the previous goodwill impairment accounting stan-
dard, which Textron applied based on undiscounted cash flows.
Changes in goodwill are summarized below:
(In millions)
Balance at December 29, 2001 $ 101 $ 306 $ 473 $ 931 $ 192 $ 2,003
Reclassification of intangible assets — — — 36 1 37
Transitional impairment charge — — (100) (437) (24) (561)
Foreign currency translation — — 17 26 — 43
Balance at December 28, 2002 101 306 390 556 169 1,522
Foreign currency translation — — 30 37 — 67
Balance at January 3, 2004 $ 101 $ 306 $ 420 $ 593 $ 169 $ 1,589
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