E-Z-GO 2009 Annual Report Download - page 62

Liabilities for environmental matters are recorded on a site-by-site basis when it is probable that an obligation has been incurred and the cost can
be reasonably estimated. We estimate our accrued environmental liabilities using currently available facts, existing technology, and presently
enacted laws and regulations, all of which are subject to a number of factors and uncertainties. Our environmental liabilities are undiscounted and
do not take into consideration possible future insurance proceeds or significant amounts from claims against other third parties.
Research and Development Costs
Research and development costs that are either not specifically covered by contracts or represent our share under cost-sharing arrangements are
charged to expense as incurred. Research and development costs incurred under contracts with others are reported as cost of sales over the
period that revenue is recognized.
Income Taxes
Deferred tax assets and liabilities are determined based on temporary differences between the financial reporting and tax bases of assets and
liabilities, applying tax rates expected to be enacted for the year in which we expect the differences will reverse or settle. Based on the evaluation of
available evidence, we recognize future tax benefits, such as net operating loss carryforwards, to the extent that we believe it is more likely than
not that we will realize these benefits. We periodically assess the likelihood that we will be able to recover our deferred tax assets and reflect any
changes in our estimates in the valuation allowance, with a corresponding adjustment to earnings or OCI, as appropriate. In assessing the need
for a valuation allowance, we look to the future reversal of existing taxable temporary differences, taxable income in carryback years, the feasibility
of tax planning strategies and estimated future taxable income. We recognize net tax-related interest and penalties for continuing operations in
income tax expense.
Note 2. Discontinued Operations
On April 3, 2009, we sold HR Textron, an operating unit previously reported within the Textron Systems segment, for $376 million in cash
proceeds. The sale resulted in an after-tax gain of $8 million after final settlement and net after-tax proceeds of approximately $280 million.
In November 2008, we completed the sale of the Fluid & Power business unit and recorded an after-tax gain of $111 million. We received
approximately $527 million in cash proceeds from the sale, along with a six-year note with a face value of $28 million. In connection with the final
settlement of the transaction in the third quarter of 2009, we also received a five-year note with a face value of $30 million, which had no
significant impact on the net gain from disposition. These notes are recorded in the Consolidated Balance Sheet net of a valuation allowance.
The HR Textron and Fluid & Power businesses met the discontinued operations criteria and have been included in discontinued operations for all
periods presented in our Consolidated Financial Statements. At January 2, 2010, the assets and liabilities of our discontinued businesses
primarily relate to income taxes. At January 3, 2009, the assets of our discontinued businesses included $167 million of goodwill, $66 million in
inventory, $30 million in accounts receivables, $27 million in property, plant and equipment and $44 million in other assets. Liabilities of our
discontinued operations at January 3, 2009 included accounts payable and accrued expenses and other liabilities, primarily related to income
taxes. 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.
Revenue, results of operations and gains on disposal for our discontinued businesses are as follows:
(In millions) 2009 2008 2007
Revenue $ 48 $ 796 $ 830
Income (loss) from discontinued operations before income taxes (2) 63 69
Income tax expense (benefit) (38) 12 20
Operating income from discontinued operations, net of income taxes 36 51 49
Net gain on disposals, net of income taxes 6 111 2
Income from discontinued operations, net of income taxes $ 42 $ 162 $ 51
We generally use a centralized approach to the cash management and financing 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 specific 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.
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Textron Inc.