E-Z-GO 2005 Annual Report Download - page 89

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An analysis of the restructuring program and related reserve account is summarized below:
Other
Severance Contract Fixed Asset Associated
(In millions) Costs Terminations Impairments Costs Total
Balance at December 28, 2002 $ 14 $ 2 $ — $ — $ 16
Additions 35 2 13 13 63
Reserves deemed unnecessary (1) — — — (1)
Non-cash utilization — — (13) — (13)
Cash paid (39) (2) — (13) (54)
Balance at January 3, 2004 $ 9 $ 2 $ — $ — $ 11
Additions 30 37 4 6 77
Reserves deemed unnecessary (2) — — — (2)
Gains on sale of fixed assets — — (4) — (4)
Cash paid (25) (3) — (6) (34)
Balance at January 1, 2005 $ 12 $ 36 $ — $ — $ 48
Additions 2 — — 4 6
Cash paid (11) (2) — (4) (17)
Balance at December 31, 2005 $ 3 $ 34 $ — $ — $ 37
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.
Other Charges (Gain)
In connection with the disposition of Automotive Trim to subsidiaries of Collins & Aikman Corporation (“C&A”), Textron Finance has recourse to
Textron Manufacturing for equipment leases with the subsidiaries. The outstanding balance on these leases totaled approximately $70 million at
December 31, 2005. During the fourth quarter of 2005, the lease term for these leases expired and C&A failed to make one of its lease payments.
While Textron Finance is currently in negotiations with C&A to renew these leases, Textron Manufacturing recorded an additional reserve of $10
million in the fourth quarter of 2005 based on uncertainties related to these leases. Consistent with other C&A-related charges and gains, Textron
recorded this charge in Special Charges.
In addition to the Textron Finance equipment leases, certain operating leases were transferred and assigned to subsidiaries of C&A upon the sale
of Trim. As discussed in Note 18, Textron has guaranteed C&A’s payments under these operating leases and certain environmental matters. In
May 2005, C&A and substantially all of its subsidiaries, including C&A Products Co. (“C&A Products”), filed for Chapter 11 bankruptcy protec-
tion, and in July 2005, C&A’s European subsidiaries filed a group-wide administration order in the United Kingdom. These filings effectively
reduced Textron’s ability to seek recourse from C&A under the indemnity provisions of the purchase and sale agreement, should a default occur.
Based on C&A’s recent failure to pay certain leases, as well as the negotiations entered into as part of the potential sale of C&A’s European opera-
tions, Textron recorded $11 million in the fourth quarter of 2005 to cover its exposure under these leases, along with certain environmental and
workers’ compensation matters. Consistent with other C&A-related charges and gains, Textron recorded this charge in Special Charges.
Textron also acquired preferred stock in C&A Products and C&A common stock in connection with the Trim disposition. In March 2005, Textron
agreed to sell approximately 60 percent of its preferred stock in C&A Products to Heartland Industrial Partners, L.P. (“Heartland”) for a combina-
tion of cash and other consideration with a total value of approximately $25 million. Heartland also had the option to purchase the remaining pre-
ferred shares for an aggregate price of $20 million. Textron recorded a pre-tax impairment charge of approximately $52 million in the first quarter
of 2005 to write down the preferred shares to fair market value based on the value determined by the agreement and other market considerations.
With C&A Products’ filing for Chapter 11 bankruptcy protection, Heartland’s obligation to purchase the preferred stock was effectively terminated.
Based on relevant market considerations, Textron recorded approximately $39 million in Special Charges in the second quarter of 2005 to write
off the remaining book value of its investment in the preferred stock.
Notes to the Consolidated Financial Statements