E-Z-GO 2009 Annual Report Download - page 93

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Notes to the Consolidated Financial Statements
84
Leases
Rental expense approximated $100 million in 2009, $106 million in 2008 and $100 million in 2007. Future minimum rental commitments for
noncancelable operating leases in effect at January 2, 2010 approximated $65 million for 2010, $51 million for 2011, $43 million for 2012,
$33 million for 2013, $27 million for 2014 and a total of $167 million thereafter.
Loan Commitments
At January 2, 2010, the Finance group had $350 million of unused commitments to fund new and existing customers under revolving lines of
credit, construction loans and equipment loans and leases. These commitments generally have an original duration of less than three years, and
funding under these facilities is dependent on the availability of eligible collateral and compliance with customary financial covenants. Since
many of the agreements will not be used to the extent committed or will expire unused, the total commitment amount does not necessarily
represent future cash requirements. We also have ongoing customer relationships, including manufacturers and dealers in the distribution
finance product line, which do not contractually obligate us to provide funding; however, we may choose to fund under certain of these
relationships to facilitate an orderly liquidation and mitigate credit losses.
Note 17. Research and Development
Company-funded and customer-funded research and development costs are as follows:
(In millions) 2009 2008 2007
Company-funded $ 401 $ 465 $ 358
Customer-funded 443 501 446
Total research and development $ 844 $ 966 $ 804
Our customer-funded research and development costs primarily are related to U.S. Government contracts, including development contracts for
the V-22, H-1, Intelligent Battlefield Systems and the Unmanned Aircraft System, and, prior to termination, the ARH and VH-71.
Note 18. Guarantees and Indemnifications
During 2009, we entered into contracts to sell used aircraft that entitle the customer to resell the aircraft back to us at predetermined values
ranging from 80% to 100% of the customer’s purchase price for a limited period of time, generally not exceeding 24 months for used aircraft and
36 months for used fractional share interests. Revenue recognition on these sales has been deferred and totaled $186 million at January 2, 2010.
In connection with the disposition of certain businesses, we indemnified the purchasers for remediation costs related to pre-existing
environmental conditions to the extent they exist at the sold locations and certain retained litigation matters. In addition, we have other obligations
arising from sales of businesses, including representations and warranties and related indemnities for tax and employment matters. We have
estimated the fair value of uncapped indemnifications at approximately $21 million, which is reflected as a liability in our Consolidated Balance
Sheet. The maximum potential payment cannot be determined for these uncapped indemnifications, while the maximum potential payment related
to capped obligations is $17 million. The fair value of the capped obligations is estimated to be insignificant. At January 2, 2010, we did not
believe there were any capped or uncapped matters that could have a significant adverse effect on our financial position, results of operations or
liquidity. During 2009 and 2008, we incurred approximately $5 million and $2 million, respectively, in environmental remediation costs related to
these guarantees.
We enter into software license agreements with customers through our Overwatch Systems business. These software license agreements
generally include certain provisions for indemnifying customers against liabilities if our software products infringe a third party’s intellectual
property rights. To date, we have not incurred any material costs as a result of such indemnifications and have not accrued any liabilities related to
such obligations. The risk that we will be required to perform on any of these indemnifications is low.
In June 2009, we received notification that the VH-71 helicopter program was terminated for convenience by the U.S. Government, and the related
performance guarantee was canceled in October 2009.