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Textron Inc. Annual Report ● 2012 79
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, 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.
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 $323 million and $260 million at the end of 2012 and 2011, respectively.
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 installation of remediation systems, 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 $44
million to $188 million. At December 29, 2012, environmental reserves of approximately $73 million have been established to
address these specific estimated liabilities. We estimate that we will likely pay our accrued environmental remediation liabilities
over the next five to 10 years and have classified $20 million as current liabilities. Expenditures to evaluate and remediate
contaminated sites approximated $15 million, $9 million and $10 million in 2012, 2011 and 2010, respectively.
Leases
Rental expense approximated $97 million in 2012, $93 million in 2011 and $92 million in 2010. Future minimum rental
commitments for noncancelable operating leases in effect at December 29, 2012 approximated $58 million for 2013, $46 million
for 2014, $37 million for 2015, $31 million for 2016, $22 million for 2017 and a total of $150 million thereafter.
Note 16. Supplemental Cash Flow Information
We have made the following cash payments:
(In millions) 2012 2011 2010
Interest paid:
Manufacturing group $ 135 $ 135 $ 145
Finance group 64 89 127
Taxes paid, net of refunds received:
Manufacturing group (7) 30 59
Finance group 43 (65) 101
Cash paid for interest by the Finance group included amounts paid to the Manufacturing group of $11 million, $26 million and $32
million in 2012, 2011 and 2010, respectively.
In 2012 and 2010, net taxes paid by the Finance group included payments of $111 million and $103 million primarily from
settlements related to the IRS’s challenge of tax deductions claimed in prior years for certain leveraged lease transactions.