E-Z-GO 2007 Annual Report Download - page 69

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Notes to the Consolidated Financial Statements
48
In September 2005, our Board of Directors approved management’s recommendation to explore strategic alternatives for the Fastening Systems
business. Based on the approval of this recommendation and the likelihood of execution, we determined that an impairment indicator existed for
both the Fastening Systems’ goodwill and its long-lived assets. In our assessment of potential impairment of the goodwill, we estimated the fair
value of the business based on current market data. This fair value amount then was compared with the carrying amount of the business. As the
carrying amount exceeded the fair value, we then measured the amount of goodwill impairment loss. The excess of the fair value of the business
over the fair value amounts assigned to its assets and liabilities represents the implied fair value of goodwill. The carrying amount of the goodwill
exceeded the implied fair value of that goodwill, resulting in an impairment loss of $335 million in 2005.
Our Board of Directors authorized the divestiture of the Fastening Systems business in December 2005, and we recorded an after-tax charge of
approximately $52 million. This charge included $37 million related to previously deferred foreign currency translation losses and $7 million in
curtailment losses for employee retirement plans. After these charges, we assessed the estimated fair value of the business and determined that no
further adjustment to the carrying value was required at that time. In the second quarter of 2006, we recorded an additional $120 million after-tax
impairment charge to record the business at the estimated fair value less cost to sell at that time based on offers received from potential purchasers.
Operating results for our discontinued businesses, primarily related to Fastening Systems, are as follows:
(In millions) 2007 2006 2005
Revenues $ — $ 1,101 $ 1,936
Loss from discontinued operations before special charges — (94) (388)
Special charges — — (11)
Loss from discontinued operations — (94) (399)
Income tax (expense) benefi t — (11) 40
Operating loss from discontinued operations, net of income taxes — (105) (359)
Gain on disposal, net of income taxes 2 — 46
Income (loss) from discontinued operations, net of income taxes $ 2 $ (105) $ (313)
Gain on disposal, net of income taxes is primarily related to a tax benefi t recorded with the sale of the InteSys business in 2005.
We generally use a centralized approach to the cash management and fi nancing of our manufacturing operations and, accordingly, do not allocate
debt or interest expense to our discontinued businesses. Any debt and related interest expense of a specifi c entity within a business is recorded by
the respective entity. General corporate overhead previously allocated to the businesses for reporting purposes is excluded from amounts
reported as discontinued operations.
At December 29, 2007, assets and liabilities of discontinued operations primarily relate to the sale of the Fastening Systems business. For 2007,
cash fl ows provided by operating and investing activities are primarily related to taxes.
Note 3. Business Acquisitions, Goodwill and Intangible Assets
2007 Business Acquisitions
In 2007, we acquired four businesses for cash totaling $1.1 billion. The results of operations for these acquired businesses have been included in
the Consolidated Statement of Operations since the dates of each respective acquisition. Pro forma information has not been included as the
amounts are immaterial.
On November 14, 2007, we acquired a majority ownership interest in United Industrial Corporation (“UIC”), a publicly held company (NYSE:
UIC), pursuant to a cash tender offer for $81 per share. UIC operates through its wholly owned subsidiary, AAI Corporation (“AAI”). AAI is a
leading provider of intelligent aerospace and defense systems, including unmanned aircraft and ground control stations, aircraft and satellite test
equipment, training systems and countersniper devices. UIC has been integrated into our Bell segment, where we believe it adds important
capabilities to our existing aerospace and defense businesses and advances our strategy to deliver broader and more integrated solutions to our
customers. In December, we completed the acquisition and obtained 100% ownership of UIC.