E-Z-GO 2006 Annual Report Download - page 89

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68
Notes to the Consolidated Financial Statements
revised pricing. We also are reviewing our ability to claim equitable adjustment recovery from the U.S. Government related to certain costs that
potentially could be incurred related to the exercise of these options.
Depending on the results of the SDD contract, our cost-containment efforts, the availability of U.S. Government funding, the number of aircraft
exercised or ultimately contracted for, and the resolution of our discussions with the U.S. Government, we currently estimate that it is reasonably
possible that our exposure could be in the range of no loss to a possible loss of $4 million per aircraft. This estimate excludes the impact of dis-
cussions with the U.S. Government or any potential recoveries including claims for equitable adjustment under the contracts. Due to the uncer-
tainty of this exposure and the ultimate outcome of our discussions, we do not believe that a loss is probable under the guidelines established by
SFAS No.5, “Accounting for Contingencies.” Accordingly, we have not established a reserve at December 30, 2006.
Environmental Remediation
As with other industrial enterprises engaged in similar businesses, we are involved in a number of remedial actions under various federal and
state laws and regulations relating to the environment that impose liability on companies to clean up, or contribute to the cost of cleaning up, sites
on which hazardous wastes or materials were disposed or released. Expenditures to evaluate and remediate contaminated sites approximated $7
million, $6 million and $6 million in 2006, 2005 and 2004, respectively.
We estimate our accrued environmental liabilities using currently available facts, existing technology, and presently enacted laws and regulations,
which all are subject to a number of factors and uncertainties. Our accrued liabilities relate to disposal costs, U.S. Environmental Protection
Agency oversight costs, legal fees, and operating and maintenance costs for both currently and formerly owned or operated facilities. Circum-
stances that can affect the reliability and precision of the accruals include the identification 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. We believe that any changes to the accruals that may result from these factors and uncertainties will not have a material
effect on our financial position or results of operations. Based upon information currently available, we estimate that our potential environmental
liabilities are within the range of $51 million to $168 million. At the end of 2006, environmental reserves of approximately $85 million, of which
$10 million are classified as current liabilities, have been established to address these specific estimated potential liabilities. We estimate that we
will likely pay our accrued environmental remediation liabilities over the next five to 10 years.
Leases
Rental expense approximated $89 million for each year in 2006, 2005 and 2004. Future minimum rental commitments for noncancelable operat-
ing leases in effect at the end of 2006 approximated $63 million for 2007, $54 million for 2008, $46 million for 2009, $39 million for 2010, $31
million for 2011 and a total of $202 million thereafter.
Loan Commitments
At December 30, 2006, our Finance group had unused commitments to fund new and existing customers under $1.3 billion of committed revolv-
ing lines of credit, compared with $1.2 billion at December 31, 2005. These loan commitments generally have an original duration of less than
three years and do not necessarily represent future cash requirements, since many of the agreements will not be used to the extent committed or
will expire unused. We are not exposed to interest rate changes on these commitments since the interest rates are not set until the loans are funded.
Note 16. Research and Development
Company-funded and customer-funded research and development costs are as follows:
(In millions)
2006 2005 2004
Company-funded $ 351 $ 326 $ 291
Customer-funded 435 366 283
Total research and development $ 786 $ 692 $ 574
Our customer-funded research and development costs primarily are related to U.S. Government contracts, including the ARH, V-22 and H-1
development contracts.
As part of the realignment of Bell/Agusta Aerospace Company LLC (“BAAC”) (see Note 18), Bell Helicopter, Agusta S.p.A. and two of its affiliated
companies (collectively, “Agusta”) agreed to share certain Model BA609 development costs. On behalf of BAAC, Agusta will incur development
costs to enhance its investment in BAAC. We record these development costs in consolidation as research and development expense, with a
credit to minority interest for Agusta’s share. Agusta also may make cash contributions to reimburse portions of Bell Helicopter’s development