E-Z-GO 2010 Annual Report Download - page 91

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Note 15. Contingencies and Commitments
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, health and safety 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.
On April 6, 2010, a jury in the Philadelphia Common Pleas Court returned verdicts against Avco Corporation, which includes the
Lycoming Engines operating division, in an aviation products liability case involving a 1999 accident. In January 2011, this matter
was settled with the plaintiffs at no additional expense to us beyond the estimated defense costs we previously accrued in 2010.
In the ordinary course of business, we enter into standby letter of credit agreements and surety bonds with financial institutions to
meet various performance and other obligations. These outstanding letter of credit arrangements and surety bonds aggregated to
approximately $325 million at the end of 2010.
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 $40 million
to $170 million. At January 1, 2011, environmental reserves of approximately $78 million have been established to address these
specific estimated liabilities, including $20 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 $5 million, $7 million
and $15 million in 2010, 2009 and 2008, respectively, and discontinued operations expenditures totaled $5 million, $4 million and $2
million in 2010, 2009 and 2008, respectively.
Repurchase Commitments
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
$181 million at January 1, 2011 and $186 million at January 2, 2010.
Leases
Rental expense approximated $92 million in 2010, $100 million in 2009 and $106 million in 2008. Future minimum rental
commitments for noncancelable operating leases in effect at January 1, 2011 approximated $60 million for 2011, $47 million for
2012, $38 million for 2013, $31 million for 2014, $27 million for 2015 and a total of $152 million thereafter.
Loan Commitments
At January 2, 2010, the Finance group had $192 million of unused commitments primarily to fund new and existing customers under
revolving lines of credit. 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.