E-Z-GO 2004 Annual Report Download - page 34

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13
The decrease of $133 million in 2003 was primarily due to lower profit of $177 million at Cessna and $52 million at E-Z-GO and
Jacobsen largely due to lower sales. These decreases were partially offset by higher profit of $65 million at Bell primarily in its air-
craft engine and commercial helicopter businesses due to certain costs incurred in 2002, as described in the Bell segment section.
Special Charges
Special charges are summarized below:
(In millions)
2004 2003 2002
Restructuring $ 143 $ 137 $ 93
Unamortized issuance costs on preferred securities — 15 —
Gain on sale of C&A common stock (12) — —
C&A common stock impairment — — 38
Total special charges $ 131 $ 152 $ 131
Restructuring Program
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 further expansion of the program as part of its strategic effort to improve operating efficien-
cies, 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, rationalization 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 11,000 employees from continu-
ing operations, representing approximately 19% of its global workforce since the restructuring was first announced. A total of 107
facilities have been closed under this program, including 45 manufacturing plants, primarily in the Industrial and Fastening Sys-
tems segments.
In total, Textron estimates that the entire program for continuing operations will be approximately $540 million (including $11
million related to the divested Automotive Trim business (“Trim”)). As of January 1, 2005, $519 million of cost has been incurred
relating to continuing operations (including $11 million related to Trim), with $213 million in the Industrial segment, $219 million
in the Fastening Systems segment, $38 million in the Cessna segment, $29 million in the Bell segment, $9 million in the Finance
segment and $11 million at Corporate. Costs incurred through January 1, 2005 include $268 million in severance costs, $98 mil-
lion in asset impairment charges (net of gains on the sale of fixed assets), $54 million in contract termination costs and $99 mil-
lion in other associated costs.
Unamortized Issuance Costs
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 redemption 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.
C&A Common Stock
During the second half of 2002, the Collins & Aikman Corporation common stock owned by Textron experienced a decline in mar-
ket value. Textron acquired this stock as a result of the disposition of the Trim business to various operating subsidiaries of Collins
& Aikman Corporation (collectively “C&A”). In December 2002, Moody’s Investor Services (“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
carrying value, Textron determined that the decline in the market value of the stock was other than temporary 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 recorded a pre-tax gain of $12 million in the first quarter of 2004.
Corporate Expenses
Corporate expenses and other, net increased $30 million in 2004 primarily due to nonrecurring income in 2003 and increases in
certain expenses in 2004. The nonrecurring income in 2003 included $7 million related to an expired royalty agreement and $7
million in proceeds from life insurance policies. In 2004, we also experienced higher premiums for Directors and Officers insur-
ance of $6 million, provided $5 million in funding to Textron’s charitable trust and had $4 million in higher executive compensa-
tion primarily related to improved operating results.
Textron Inc.