E-Z-GO 2008 Annual Report Download - page 70

Download and view the complete annual report

Please find page 70 of the 2008 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 114

  • 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
  • 109
  • 110
  • 111
  • 112
  • 113
  • 114

Textron Inc.
Upon the sale of Fluid & Power, we retained sponsorship of a defined benefit pension plan for former employees and retirees of the U.K.-based
businesses. No additional benefits can be earned under this plan, and future cash contributions to the plan are not expected to be significant. At
January 3, 2009, the fair value of the plan assets totaled $198 million, and the projected benefit obligation totaled $188 million.
Revenue, results of operations and gains on disposal for our discontinued businesses are as follows:
(In millions) 2008 2007 2006
Revenue $ 560 $ 610 $ 1,618
Income (loss) from discontinued operations before income taxes 34 51 (76)
Income taxes 3 15 16
Operating income (loss) from discontinued operations, net of income taxes 31 36 (92)
Gains on disposal, net of income taxes 111 2 —
Income (loss) from discontinued operations, net of income taxes $ 142 $ 38 $ (92)
Note 3. Business Acquisitions, Goodwill and Intangible Assets
Goodwill
The changes in the carrying amount of goodwill, by segment, are as follows:
Textron
(In millions) Cessna Bell Systems Industrial Finance Total
Balance at December 31, 2005 $ 322 $ 17 $ 85 $ 354 $ 169 $ 947
Acquisitions — — 259 — — 259
Foreign currency translation — — — 14 — 14
Balance at December 30, 2006 322 17 344 368 169 1,220
Acquisitions — 1 857 11 — 869
Foreign currency translation — — — 13 — 13
Other — — (17) — — (17)
Balance at December 29, 2007 322 18 1,184 392 169 2,085
Acquisitions and purchase price adjustments — (5) (44) — — (49)
Transfers — 17 (17) — — —
Impairment — — — — (169) (169)
Foreign currency translation — — — (2) — (2)
Balance at January 3, 2009 $ 322 $ 30 $ 1,123 $ 390 $ — $ 1,865
As discussed in Note 12, Special Charges, based on current market conditions and the plan to downsize the Finance segment, we recorded a non-
cash pre-tax impairment charge in the fourth quarter of 2008 of $169 million to eliminate all goodwill at the Finance segment.
During the second half of 2008, Kautex was negatively impacted by the significant downturn in the automotive industry which caused
deterioration in its revenues and segment profit. Our annual evaluation of goodwill recoverability for Kautex was extended to include our
projections and outlook for the automotive industry as of the end of the fourth quarter, and we believe the carrying value of the reporting unit is
recoverable at January 3, 2009. We anticipate volumes to continue to be lower through 2010. From 2009 through 2013, for purposes of our
goodwill analysis, we have assumed an average annual sales growth rate of 6% with operating profit margins returning to recent historical levels
by 2013. Operating profit margin improvements are expected to result from significant restructuring activities, including realignment of excess
capacity through personnel reductions, as well as from higher volumes. A 50-basis-point reduction in the estimated operating profit margins
during the 2009 to 2013 period, used in our discounted cash flow model, would reduce the estimated fair value of Kautex by up to $60 million and
may result in the carrying value of the business exceeding its estimated fair value, potentially resulting in an impairment charge. At January 3,
2009, the goodwill allocated to Kautex totaled $130 million.
Our operating plans and projections for our Golf & Turfcare component anticipate operating margin improvements over the five-year planning
period resulting in high single-digit margins, and assume annual revenue growth of approximately 4%. A 100-basis-point decline in our
operating margin assumptions would reduce the estimated fair value by up to approximately $50 million and may result in the carrying value of
57