E-Z-GO 1998 Annual Report Download - page 48

The following table shows required payments during the next five years on debt out-
standing at the end of 1998. The payments schedule excludes amounts that may become
payable under credit facilities and revolving credit agreements.
(In millions) 1999 2000 2001 2002 2003
Textron Manufacturing $ 64 $ 82 $155 $ 32 $ 39
Textron Finance 559 507 338 – –
$623 $589 $493 $ 32 $ 39
Textron Manufacturing maintains credit facilities with various banks for both short- and
long-term borrowings. At year-end, Textron Manufacturing had (a) a $1.0 billion domestic credit
agreement with 24 banks available on a fully revolving basis until April 1, 2003, (b) $500 million
credit agreement with the same banks (terminated in January 1999), (c) $990 million credit
agreement with six banks (terminated in January 1999), (d) $105 million in multi-currency
credit agreements with three banks available through December 29, 2002 and (e) $160 million
in other credit facilities available with various banks. At year-end 1998, $1.1 billion of the credit
facilities was not used or reserved as support for commercial paper or bank borrowings.
Textron Finance has lines of credit with various banks aggregating $1.2 billion at year-
end 1998, of which $114 million was not used or reserved as support for commercial
paper or bank borrowings. Lending agreements limit Textron Finance’s net assets avail-
able for cash dividends and other payments to Textron Manufacturing to approximately
$169 million of Textron Finance’s net assets of $473 million at year-end 1998. Textron
Finance’s loan agreements also contain provisions regarding additional debt, creation of
liens or guarantees, and the making of investments.
Textron Manufacturing has agreed to cause TFC to maintain certain minimum levels of
financial performance. No payments from Textron Manufacturing were necessary in 1998,
1997, or 1996 for TFC to meet these standards.
8. Interest rate exchange agreements
Interest rate exchange agreements are used to help manage interest rate risk by converting cer-
tain variable-rate debt to fixed-rate debt and vice versa. These agreements involve the exchange
of fixed-rate interest for variable-rate amounts over the life of the agreement without the
exchange of the notional amount. Interest rate exchange agreements are accounted for on the
accrual basis with the differential to be paid or received recorded currently as an adjustment
to interest expense. Premiums paid to terminate agreements designated as hedges are
deferred and amortized to expense over the remaining term of the original life of the contract.
If the underlying debt is then paid early, unamortized premiums are recognized as an
adjustment to the gain or loss associated with the debt’s extinguishment.
Some agreements that require the payment of fixed-rate interest are designated against
specific long-term variable-rate borrowings, while the balance is designated against exist-
ing short-term borrowings through maturity and their anticipated replacements. Textron
continuously monitors variable-rate borrowings to maintain the level of borrowings above
the notional amount of the designated agreements. If it is not probable variable-rate bor-
rowings will continuously exceed the notional amount of the designated agreements, the
excess is marked to market and the associated gain or loss recorded in income.
During 1998, Textron Manufacturing terminated $275 million fixed-pay interest rate
exchange agreements. Agreements that effectively fix the rate of interest on variable-rate
borrowings are summarized as follows:
January 2, 1999 January 3, 1998
Fixed-pay interest rate exchange agreements
Weighted Weighted
Weighted average Weighted average
Notional average remaining Notional average remaining
(Dollars in millions) amount interest rate term amount interest rate term
Textron Manufacturing $ – – – $275 9.01% 1.5
Textron Finance
(expires in 1999) 250 6.26% 0.6 450 6.02% 1.2
$250 6.26% 0.6 $725 7.15% 1.3
Derivatives and
Foreign
Currency
Transactions
44 1998 TEXTRON ANNUAL REPORT