E-Z-GO 2004 Annual Report Download - page 84

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 mil-
lion 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.
An analysis of the restructuring program and related reserve account is summarized below:
Other
Severance Contract Associated Fixed Asset
(In millions) Costs Terminations Costs Impairments Total
Balance at December 29, 2001 $ 28 $ 3 $ — $ — $ 31
Additions 60 5 22 13 100
Reserves deemed unnecessary (6) (1) — — (7)
Non-cash utilization — — — (13) (13)
Cash paid (60) (4) (22) — (86)
Balance at December 28, 2002 $ 22 $ 3 $ — $ — $ 25
Additions 69 2 20 47 138
Reserves deemed unnecessary (1) — — — (1)
Non-cash utilization — — — (47) (47)
Cash paid (58) (2) (20) — (80)
Balance at January 3, 2004 $ 32 $ 3 $ — $ — $ 35
Additions 67 44 25 13 149
Reserves deemed unnecessary (2) — — — (2)
Gains on sale of fixed assets — — — (4) (4)
Non-cash utilization — — — (9) (9)
Cash paid (66) (4) (25) — (95)
Balance at January 1, 2005 $ 31 $ 43 $ — $ — $ 74
Severance costs are generally paid on a monthly basis over the severance period granted to each employee or on a lump sum basis
when required. Severance costs include outplacement costs, which are paid in accordance with normal payment terms. Contract
termination costs are generally paid upon exiting the facility or over the remaining lease term. Other associated costs primarily
include outsourcing certain operations, plant rearrangement, machinery and equipment relocation, and employee replacement and
relocation costs, which are paid in accordance with normal payment terms.
The specific restructuring measures and associated estimated costs are based on Textron’s best judgment under prevailing circum-
stances. Textron believes that the restructuring reserve balance of $74 million is adequate to cover the costs presently accruable
relating to activities formally identified and committed to under approved plans as of January 1, 2005 and anticipates that all
actions related to these liabilities will be completed within a twelve-month period.
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Textron Inc.