E-Z-GO 2007 Annual Report Download - page 92

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Textron Inc.
Note 17. Guarantees and Indemnifi cations
We extend a variety of fi nancial and performance guarantees to third parties as provided in the table below:
December 29, 2007 December 30, 2006
Maximum Carrying Maximum Carrying
Potential Amount of Potential Amount of
(In millions) Payment* Liability Payment* Liability
Manufacturing group:
Performance guarantee $ 300 $ — $ 227 $ —
Guaranteed minimum resale contracts 30 3 30 3
Guarantees related to dispositions 17 29 46 23
Debt obligations of joint ventures 4 — 4 —
Finance group:
Loss-sharing agreements 29 — 29 —
* These agreements include uncapped guarantees as described below.
Performance Guarantee
In 2004, through our Bell Helicopter business, we formed AgustaWestlandBell LLC (“AWB LLC”) with AgustaWestland North America Inc.
(“AWNA”). This venture was created for the joint design, development, manufacture, sale, customer training and product support of the VH-71
helicopter, and certain variations and derivatives thereof, to be offered and sold to departments or agencies of the U.S. Government. In March 2005,
AWB LLC received a $1.2 billion cost reimbursement-type subcontract from Lockheed Martin for the System Development and Demonstration
phase of the U.S. Marine Corps Helicopter Squadron Program. We guaranteed to Lockheed Martin the due and prompt performance by AWB LLC
of all its obligations under this subcontract, provided that our liability under the guaranty shall not exceed 49% of AWB LLC’s aggregate liability to
Lockheed Martin under the subcontract. AgustaWestland N.V., AWNA’s parent company, has guaranteed the remaining 51% to Lockheed Martin.
We have entered into cross-indemnifi cation agreements with AgustaWestland N.V. in which each party indemnifi es the other related to any
payments required under these agreements that result from the indemnifying party’s workshare under any subcontracts received. AWB LLC’s
maximum obligation is 50% of the total contract value, which equates to $613 million, for a maximum amount of our liability under the guarantee
of $300 million at December 29, 2007 through completion.
Guaranteed Minimum Resale Contracts
We have a number of guaranteed minimum resale value contracts associated with certain past aircraft sales. If the fair value of an aircraft falls
below a minimum guaranteed amount, we may be required to make a future payment to the customer or provide a minimum trade-in value
toward a new aircraft. These agreements generally include operating restrictions such as maximum usage over the contract period or minimum
maintenance requirements. We also have guaranteed the minimum resale value of certain customer-owned aircraft anticipated to be traded in
upon completion of a model currently under development. These contracts expire as follows: $3 million in each year in 2008, 2009, 2010 and
2011 and $18 million in 2012.
Guarantees Related to Dispositions
We indemnifi ed the purchaser of the Fastening Systems business for remediation costs related to pre-existing environmental conditions to the
extent they exist at the sold locations. We have estimated the fair value of these indemnifi cations at approximately $28 million. Potential payments
under these obligations are not capped and, as a result, the maximum potential obligation cannot be determined. We also have other obligations,
some which are capped, arising from sales of certain other businesses, including representations and warranties and related indemnities for
environmental, health and safety, and tax and employment matters. The maximum potential payment related to other obligations that are capped is
$17 million, while the maximum potential payment for the obligations that are not capped cannot be determined.
Loss-Sharing Agreements
In connection with the sale of a note receivable in 2005, our Finance group has indemnifi ed the purchaser against potential losses in limited
circumstances. The maximum potential exposure of the indemnity is estimated to be $29 million, but, due to the extremely low probability of
occurrence and several other mitigating factors, including a specifi c indemnifi cation from the original note issuer, no signifi cant fair value has
been attributed to the indemnity.
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