E-Z-GO 2006 Annual Report Download - page 87

Download and view the complete annual report

Please find page 87 of the 2006 E-Z-GO annual report below. You can navigate through the pages in the report by either clicking on the pages listed below, or by using the keyword search tool below to find specific information within the annual report.

Page out of 108

  • 1
  • 2
  • 3
  • 4
  • 5
  • 6
  • 7
  • 8
  • 9
  • 10
  • 11
  • 12
  • 13
  • 14
  • 15
  • 16
  • 17
  • 18
  • 19
  • 20
  • 21
  • 22
  • 23
  • 24
  • 25
  • 26
  • 27
  • 28
  • 29
  • 30
  • 31
  • 32
  • 33
  • 34
  • 35
  • 36
  • 37
  • 38
  • 39
  • 40
  • 41
  • 42
  • 43
  • 44
  • 45
  • 46
  • 47
  • 48
  • 49
  • 50
  • 51
  • 52
  • 53
  • 54
  • 55
  • 56
  • 57
  • 58
  • 59
  • 60
  • 61
  • 62
  • 63
  • 64
  • 65
  • 66
  • 67
  • 68
  • 69
  • 70
  • 71
  • 72
  • 73
  • 74
  • 75
  • 76
  • 77
  • 78
  • 79
  • 80
  • 81
  • 82
  • 83
  • 84
  • 85
  • 86
  • 87
  • 88
  • 89
  • 90
  • 91
  • 92
  • 93
  • 94
  • 95
  • 96
  • 97
  • 98
  • 99
  • 100
  • 101
  • 102
  • 103
  • 104
  • 105
  • 106
  • 107
  • 108

66
Note 14. Special Charges
Special charges totaled $118 million for 2005 and included $112 million in charges related to the 2001 disposition of the Automotive Trim busi-
ness (“Trim”) and $6 million in restructuring expense in the Industrial segment. In 2004, special charges totaled $59 million and included $71
million in restructuring expense principally in the Industrial segment, partially offset by a $12 million gain on the sale of common stock acquired
in connection with the Trim disposition.
In connection with the disposition of Trim to subsidiaries of C&A, we acquired preferred stock in C&A Products Co. (“C&A Products”) and C&A
common stock. In the first quarter of 2005, we recorded a $52 million impairment charge to write down the preferred stock based on an agreement
to sell the stock to a third party. In the second quarter of 2005, based on C&A Products’ filing for Chapter 11 bankruptcy protection and relevant
market considerations, we wrote off the remaining book value of the preferred stock of $39 million.
In connection with the Trim disposition, our Finance group has recourse to our Manufacturing group for equipment leases with the subsidiaries of
C&A. The outstanding balance on these leases totaled approximately $61 million at December 30, 2006. Based on uncertainties related to these
leases, our Manufacturing group recorded a $10 million reserve to special charges in the fourth quarter of 2005.
Certain other operating leases were transferred and assigned to subsidiaries of C&A upon the sale of Trim. As discussed in Note 17, we guaran-
teed C&A’s payments under these operating leases and for an environmental matter. In the fourth quarter of 2005, based on C&A’s failure to pay
certain leases, as well as the negotiations entered into at the time for the sale of C&A’s European operations, we recorded an $11 million charge to
cover our exposure under these leases, along with certain environmental and workers’ compensation matters.
Restructuring –
Our company-wide restructuring program was substantially completed at the end of 2005. We approved and committed to a
restructuring program in the fourth quarter of 2000 to improve returns at core businesses and to complete the integration of certain acquisitions.
This program subsequently was expanded as part of our strategic effort to improve operating efficiencies. This restructuring program included
corporate and segment direct and indirect workforce reductions, consolidation of facilities, rationalization of certain product lines, outsourcing of
non-core production activity, the divestiture of non-core businesses, and the streamlining of sales and administrative overhead. Under this pro-
gram, we reduced our workforce by approximately 8,000 employees from continuing operations, representing approximately 19% of our global
workforce since the program was first announced, and closed 85 facilities.
Since inception of this program through December 31, 2005, we incurred total program costs of $306 million, which is composed of $164 million
in severance costs, $44 million in contract termination costs, $34 million in asset impairment charges (net of gains on the sale of fixed assets)
and $64 million in other associated costs. Total program costs incurred by segment include $219 million in the Industrial segment, $38 million in
the Cessna segment, $29 million in the Bell segment, $9 million in the Finance segment and $11 million at Corporate.
An analysis of restructuring reserves is summarized below:
Other
Severance Contract Fixed Asset Associated
(In millions)
Costs Terminations Impairments Costs Total
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
During 2006, our restructuring reserves were reduced to $30 million by cash payments and immaterial refinements to previous estimates. The
remaining reserve primarily is related to contract termination costs for one lease in the Industrial segment, which will be paid out over the next
13 years.
Notes to the Consolidated Financial Statements