E-Z-GO 2010 Annual Report Download - page 44

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We maintain defined benefit pension plans and postretirement benefit plans other than pensions as discussed in Note 14 to the
Consolidated Financial Statements. Included in the above table are discounted estimated benefit payments we expect to make related
to unfunded pension and other postretirement benefit plans. Actual benefit payments are dependent on a number of factors, including
mortality assumptions, expected retirement age, rate of compensation increases and medical trend rates, which are subject to change in
future years. Our policy for funding pension plans is to make contributions annually, consistent with applicable laws and regulations;
however, future contributions to our pension plans are not included in the above table. In 2011, we expect to make contributions to
our funded pension plans of approximately $200 million and approximately $30 million in the Retirement Account Plan. Based on
our current assumptions, which may change with changes in market conditions, our current contribution estimates for each of the
years from 2012 through 2015 are estimated to be in the range of approximately $100 million to $400 million under the plan
provisions in place at this time.
Other long-term liabilities included in the table consist primarily of undiscounted amounts in the Consolidated Balance Sheet as of
January 1, 2011, representing obligations under deferred compensation arrangements and estimated environmental remediation costs.
Payments under deferred compensation arrangements have been estimated based on management’s assumptions of expected
retirement age, mortality, stock price and rates of return on participant deferrals. The timing of cash flows associated with
environmental remediation costs is largely based on historical experience. Other long-term liabilities, such as deferred taxes,
unrecognized tax benefits and product liability and litigation reserves, have been excluded from the table due to the uncertainty of the
timing of payments combined with the absence of historical trends to be used as a predictor for such payments.
Operating leases represent undiscounted obligations under noncancelable leases. Purchase obligations represent undiscounted
obligations for which we are committed to purchase goods and services as of January 1, 2011. The ultimate liability for these
obligations may be reduced based upon termination provisions included in certain purchase contracts, the costs incurred to date by
vendors under these contracts or by recourse under firm contracts with the U.S. Government under normal termination clauses.
Finance Group
The following table summarizes the known contractual obligations, as defined by reporting regulations, of our Finance group
as of January 1, 2011, as well as an estimate of the year in which these obligations are expected to be paid:
(In millions)
2011
2012
2013
2014
2015
2016 and
Thereafter
Total
Liabilities reflected in balance sheet:
Multi-year bank lines of credit
$ —
$ 1,440
$ —
$ —
$ —
$ —
$ 1,440
Term debt
400
76
578
136
36
130
1,356
Securitized debt *
86
78
86
68
96
116
530
Subordinated debt
—
—
—
—
—
300
300
Interest on borrowings **
80
57
40
31
30
46
284
Liabilities not reflected in balance sheet:
Operating leases
5
1
1
1
—
—
8
Total Finance group
$ 571
$ 1,652
$ 705
$ 236
$ 162
$ 592
$ 3,918
* Securitized debt payments do not represent contractual obligations of the Finance group, and we do not provide legal recourse to
investors who purchase interests in the securitizations beyond the credit enhancement inherent in the retained subordinate
interests.
** Interest payments reflect the current interest rate paid on the related debt. They do not include anticipated changes in market
interest rates, which could have an impact on the interest rate according to the terms of the related debt.
On January 1, 2011, the Finance group also had $257 million in other liabilities, primarily accounts payable and accrued expenses,
that are payable within the next 12 months.
Critical Accounting Estimates
To prepare our Consolidated Financial Statements to be in conformity with generally accepted accounting principles, we must make
complex and subjective judgments in the selection and application of accounting policies. The accounting policies that we believe are
most critical to the portrayal of our financial condition and results of operations are listed below. We believe these policies require
our most difficult, subjective and complex judgments in estimating the effect of inherent uncertainties. This section should be read in
conjunction with Note 1 to the Consolidated Financial Statements, which includes other significant accounting policies.
Allowance for Losses on Finance Receivables Held for Investment
Finance receivables held for investment are generally recorded at the amount of outstanding principal less allowance for losses. We
maintain the allowance for losses on finance receivables at a level considered adequate to cover inherent losses in the portfolio based
on management’s evaluation and analysis by product line. For larger balance accounts specifically identified as impaired, including
large accounts in homogenous portfolios, a reserve is established based on comparing the carrying value to either a) the expected
future cash flows, discounted at the finance receivable’s effective interest rate; or b) the fair value, if the finance receivable is
collateral dependent. The expected future cash flows consider collateral value; financial performance and liquidity of our borrower;