E-Z-GO 2009 Annual Report Download - page 92

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Textron Inc.
The undistributed earnings of our non-U.S. subsidiaries approximated $335 million at January 2, 2010. We consider the undistributed earnings,
on which taxes previously have not 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 no longer are 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.
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 submitted our claim for the termination costs for the SDD contract in October 2009 and believe that these
costs are 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 are negotiating to settle our termination obligations. In October 2009, we filed a claim with the
U.S. Government to request reimbursement of costs expended in support of the LRIP program. On December 17, 2009, we received a decision
from the Contracting Officer of the Department of the Army that denied this claim in its entirety. We plan to appeal this decision in the first quarter
of 2010. At January 2, 2010, our reserves related to this program totaled $50 million, which we believe are adequate to cover our exposure.
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,
environmental regulations, level of cleanup required, technologies available, number and financial condition of other contributors to remediation,
and the time period over which remediation may occur. We believe that any changes to the accruals that may result from these factors and
uncertainties will not have a material effect on our financial position or results of operations.
Based upon information currently available, we estimate that our potential environmental liabilities are within the range of $43 million to
$173 million. At January 2, 2010, environmental reserves of approximately $77 million have been established to address these specific estimated
potential liabilities, including $18 million for sites related to our discontinued operations. We estimate that we will likely pay our accrued
environmental remediation liabilities over the next five to 10 years and have classified $15 million as current liabilities. Expenditures to evaluate
and remediate contaminated sites for continuing operations approximated $7 million, $15 million and $7 million in 2009, 2008 and 2007,
respectively, and discontinued operations expenditures totaled $4 million and $2 million in 2009 and 2008, respectively.
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