E-Z-GO 2008 Annual Report Download - page 96

Textron Inc.
We have net operating loss and credit carryforwards at the end of each year as follows:
(In millions) 2008 2007
Non-U.S. net operating loss carryforwards with no expiration $ 154 $ 141
Non-U.S. net operating loss carryforwards expiring through 2023 34 14
State credit carryforwards beginning to expire in 2018 14 15
The undistributed earnings of our non-U.S. subsidiaries approximated $281 million at the end of 2008. We consider the undistributed earnings,
on which taxes have not previously been provided, to be indefinitely reinvested; therefore, tax is not provided on these earnings. It is not
practicable to estimate the amount of tax that might be payable on these earnings in the event they are no longer indefinitely reinvested.
Note 16. Commitments and Contingencies
We are subject to legal proceedings and other claims arising out of the conduct of our business, including proceedings and claims relating to
commercial and financial transactions; government contracts; compliance with applicable laws and regulations; production partners; product
liability; employment; and environmental, safety and health matters. Some of these legal proceedings and claims seek damages, fines or penalties
in substantial amounts or remediation of environmental contamination. As a government contractor, we are subject to audits, reviews and
investigations to determine whether our operations are being conducted in accordance with applicable regulatory requirements. Under federal
government procurement regulations, certain claims brought by the U.S. Government could result in our being suspended or debarred from U.S.
Government contracting for a period of time. On the basis of information presently available, we do not believe that existing proceedings and
claims will have a material effect on our financial position or results of operations.
The Internal Revenue Service (IRS) has challenged our tax positions related to certain lease transactions within the Finance segment. During the
third quarter of 2008, the IRS made a settlement offer to numerous companies, including Textron, to resolve the disputed tax treatment of these
leases. Based on the terms of the offer and our decision to accept the offer, we revised our estimate of this tax contingency. Final resolution of this
matter will result in the acceleration of future cash payments to the IRS, which we expect will occur over a period of years in connection with the
conclusion of IRS examinations of the relevant tax years. At January 3, 2009, $199 million of federal deferred tax liabilities were recorded in our
balance sheet related to these leases.
ARH Program Termination
On October 16, 2008, we received notification from the U.S. Department of Defense that it would not certify the continuation of the Armed
Reconnaissance Helicopter (ARH) program to Congress under the Nunn-McCurdy Act, resulting in the termination of the program for the
convenience of the Government. The ARH program included a development phase, covered by the System Development and Demonstration
(SDD) contract, and a production phase. We are in the process of establishing the termination costs for the SDD contract, which we believe will be
fully recoverable from the U.S. Government.
Prior to termination of the program, we obtained inventory and incurred vendor obligations for long-lead time materials related to the anticipated
Low Rate Initial Production (LRIP) contracts to maintain the program schedule based on our belief that the LRIP contracts would be awarded.
We have since terminated these vendor contracts and have initiated negotiations to settle our termination obligations, which we estimate may
cost up to approximately $80 million. We continue to evaluate the utility of the related inventory to other Bell programs, customers, or vendors.
This review and the related discussions with vendors are ongoing. We estimate that our potential loss resulting from our LRIP-related vendor
obligations will be between approximately $50 million and $80 million. At January 3, 2009, our reserves related to this program totaled
$50 million. We intend to provide a termination proposal to the U.S. Government to request reimbursement of costs expended in support of the
LRIP program.
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. Our accrued environmental 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. Circumstances that can affect the reliability and precision of the accruals include the identification of additional sites,
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