E-Z-GO 2009 Annual Report Download - page 14

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Textron Inc.
Orders from Cessna customers, which cover a wide spectrum of industries worldwide, are included in backlog when the customer enters into a
definitive purchase agreement and the initial customer deposit is received. We work with our customers to provide estimated delivery dates, which
may be adjusted based on the customers’ needs or our production schedule, but do not establish definitive delivery dates until approximately six
months before expected delivery. There is considerable uncertainty as to when or whether backlog will convert to revenues as the conversion
depends on production capacity, customer needs and credit availability; these factors also may be impacted by the economy and public
perceptions of private corporate jet usage. While backlog is an indicator of future revenues, we cannot reasonably estimate the year each order in
backlog ultimately will result in revenues and cash flows.
Orders remain in backlog until the aircraft is delivered or upon cancellation by the customer. Upon cancellation, deposits are used to defray costs,
including remarketing fees, cost to reconfigure the aircraft and other costs incurred as a result of the cancellation. Remaining deposits, if any, may
be retained or refunded at our discretion.
Approximately 64% of our total backlog at January 2, 2010 represents orders that are not expected to be filled in 2010, and approximately 10% is
attributable to the Citation CJ4 aircraft, which we expect will first be delivered in 2010.
The U.S. Government is obligated only up to the amount of funding formally appropriated for a contract. The difference between the award value of
the contract and the amount formally appropriated (funded) represents unfunded backlog, which generally includes cost plus type contracts. At
January 2, 2010, approximately 1% of our backlog with the U.S. Government was unfunded.
U.S. Government Contracts
In 2009, approximately 31% of our consolidated revenues were generated by or resulted from contracts with the U.S. Government. This business
is subject to competition, changes in procurement policies and regulations, the continuing availability of funding, which is dependent upon
congressional appropriations, national and international priorities for defense spending, world events, and the size and timing of programs in
which we may participate.
Our contracts with the U.S. Government generally may be terminated by the U.S. Government for convenience or if we default in whole or in part
by failing to perform under the terms of the applicable contract. If the U.S. Government terminates a contract for convenience, we normally will be
entitled to payment for the cost of contract work performed before the effective date of termination, including, if applicable, reasonable profit on
such work, as well as reasonable termination costs. If, however, the U.S. Government terminates a contract for default, generally: (a) we will be
paid the contract price for completed supplies delivered and accepted, an agreed-upon amount for manufacturing materials delivered and
accepted and for the protection and preservation of property, and for partially completed products accepted by the U.S. Government; (b) the U.S.
Government will not be liable for our costs with respect to unaccepted items and will be entitled to repayment of advance payments and progress
payments related to the terminated portions of the contract; and (c) we may be liable for excess costs incurred by the U.S. Government in
procuring undelivered items from another source.
Research and Development
Information regarding our research and development expenditures is contained in Note 17 to the Consolidated Financial Statements on page 84
of this Annual Report on Form 10-K.
Patents and Trademarks
We own, or are licensed under, numerous patents throughout the world relating to products, services and methods of manufacturing. Patents
developed while under contract with the U.S. Government may be subject to use by the U.S. Government. We also own or license active trademark
registrations and pending trademark applications in the U.S. and in various foreign countries or regions, as well as trade names and service
marks. While our intellectual property rights in the aggregate are important to the operation of our business, we do not believe that any existing
patent, license, trademark or other intellectual property right is of such importance that its loss or termination would have a material adverse effect
on our business taken as a whole. Some of these trademarks, trade names and service marks are used in this Annual Report on Form 10-K and
other reports, including: AAI; AH-1Z; BA609; Bell/Agusta Aerospace Company, LLC; Bell Helicopter; Bravo; Cadillac Gage; Caravan; Caravan
675; Caravan Amphibian; Cessna; Cessna 350; Cessna 400; Citation; CitationAir; CitationAir Jetcard; Citation Encore+; Citation Sovereign;
Citation X; Citation XLS+; CJ1; CJ1+; CJ2; CJ2+; CJ3; CJ4; Eclipse; Excel; E-Z-GO; Fly Smart; Fly Bell; Grand Caravan; Greenlee; H-1; Huey II;
Kautex; Kiowa Warrior; Klauke; Lycoming; McCauley; Mustang; NGFS; Next Generation Fuel System; Overwatch Textron Systems; Paladin;
PDCue; Power Advantage; Progressive; ProParts; Quick Draw Loan; Rothenberger LLC; RXV; Shadow; SkyBOOKS; SkyCatcher; Skyhawk;
Skyhawk SP; Skylane; SkyPLUS; Sovereign; ST 4X4; Stationair; Super Cargomaster; SuperCobra; SYMTX; TDCue; Tempo; Textron; Textron
Business Services; Textron Business Systems; Textron Defense Systems; Textron Financial Corporation; Textron Global Technology Center;
Textron Marine & Land Systems; Textron Six Sigma; Textron Systems; Turbo Skylane; Turbo Stationair; UAV SYSTEMS SPECIALIST; UH-1Y;