E-Z-GO 2004 Annual Report Download - page 86

Textron’s accrued estimated environmental liabilities are based upon currently available facts, existing technology and presently
enacted laws and regulations and are subject to a number of factors and uncertainties. Accrued liabilities relate to disposal costs,
U.S. Environmental Protection Agency oversight costs, legal fees, and operating and maintenance costs for both currently and for-
merly owned or operated facilities. Circumstances that can affect the reliability and precision of the accruals include the identifica-
tion 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 accruals that may result from these factors and uncertainties will not have a material effect on Textron’s financial
position or results of operations. Based upon information currently available, Textron estimates potential environmental liabilities
to be in the range of $41 million to $140 million. At the end of 2004, environmental reserves of approximately $69 million, of
which $9 million are classified as current liabilities, have been established to address these specific estimated potential liabilities.
Textron estimates that its accrued environmental remediation liabilities will likely be paid over the next five to ten years.
Note 16 Arrangements with Off-Balance Sheet Risk
Textron enters into arrangements with off-balance sheet risk in the normal course of business, as discussed below.
Guarantees
Textron has joint venture agreements with external financing arrangements for which Textron has guaranteed approximately $18
million in debt obligations. Textron would be required to make payments under these guarantees if a joint venture defaults under
the debt agreements.
Bell Helicopter and AgustaWestland North America Inc. (“AWNA”) formed the AgustaWestlandBell Limited Liability Company
(“AWB LLC”) in January 2004 for the joint design, development, manufacture, sale, customer training and product support of the
US101 helicopter and certain variations and derivatives thereof, to be offered and sold to departments or agencies of the U.S.
Government. It is anticipated that AWB LLC will contract with either Bell Helicopter or AWNA for any workshare required under any
US101 contracts received.
Bell Helicopter has guaranteed to Lockheed Martin, the prime contractor for the U.S. Marine Corps Marine 1 Helicopter Squadron
(VXX) Program (“VXX Program”), the due and prompt performance of AWB LLC’s obligations under any subcontracts received
from Lockheed Martin, not to exceed 49% of AWB LLC’s aggregate liability. AgustaWestland N.V., AWNA’s parent company, has
guaranteed the remaining 51% to Lockheed Martin. Bell Helicopter and AgustaWestland N.V. have entered into cross-indemnifica-
tion agreements in which each party indemnifies the other related to any payments required under these agreements that result
from the indemnifying party’s workshare under any subcontracts received.
The maximum amount that Bell Helicopter could be required to pay related to this guarantee is dependent on the value of subcon-
tracts received by AWB LLC from Lockheed Martin. As of January 1, 2005, AWB LLC had completed work under subcontracts
received in 2004. On January 28, 2005, Lockheed Martin, with AWB LLC as its principal subcontractor, was selected to design,
develop, manufacture and support the helicopters for the VXX Program; a subcontract for this effort is expected to be issued in the
first quarter of 2005.
In the ordinary course of business, Textron enters into standby letters of credit and surety bonds with financial institutions, princi-
pally to guarantee payment or performance to certain third parties in accordance with specified terms and conditions. At January 1,
2005, there were $168 million of standby letters of credit outstanding and $81 million of surety bonds outstanding. Management
knows of no event of default that would require Textron to satisfy these guarantees at the end of 2004.
Textron has a number of guaranteed minimum resale value contracts associated with certain past aircraft sales. These guarantees
require Textron to make possible future payments to a customer in the event that the fair value of an aircraft falls below a minimum
guaranteed amount or to stipulate a minimum trade-in value. The agreements generally include operating restrictions such as
maximum usage over the guarantee period or minimum maintenance requirements. In addition, Textron has guaranteed the mini-
mum resale value of certain customer-owned aircraft anticipated to be traded in upon completion of a model currently under devel-
opment. Textron has recorded a $2 million liability related to the estimated fair value of the guarantee under these agreements.The
total amount of resale value guaranteed under these agreements at January 1, 2005 was approximately $33 million. Based on the
estimated fair values of the guaranteed aircraft prevailing at January 1, 2005, there is no additional liability related to Textron’s
obligation under these agreements. The guarantee contracts expire as follows: $2 million in 2005, $3 million in 2006,
$2 million in 2008, $3 million in 2009, $2 million in 2010, $2 million in 2011 and $19 million in 2012.
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Textron Inc.