E-Z-GO 1999 Annual Report Download - page 48

ment’s assessments of the probable future outcome of these matters. Consequently, actual
results could differ from such estimates.
During 1999, Textron Manufacturing entered into a promissory note agreement with
Textron Finance, whereby Textron Finance could borrow up to $1.25 billion from Textron
Manufacturing. The maximum amount outstanding under this agreement during 1999 was
$1.0 billion. The amount of interest expense/income incurred/earned by Textron Finance
and
Textron Manufacturing, respectively, was approximately $15 million for 1999. Textron
Finance’s operating income includes interest expense incurred under this agreement. This
agreement was cancelled during the second quarter of 1999.
2. Acquisitions
During 1999, Textron Manufacturing segments acquired 14 companies and entered into
two joint ventures which in turn, each acquired companies. The largest of these acquisi-
tions were Flexalloy Inc. – a provider of vendor managed inventory services for the North
American fastener markets; OmniQuip International, Inc. – a leading manufacturer of
light construction equipment including telescopic material handlers, aerial work plat-
forms and skid steer loaders and InteSys Technologies Inc. – a provider of plastics and
metal engineered assemblies. The total cost of the acquisitions and investments in joint
ventures was approximately $1.2 billion, including treasury stock issued for $32 million
and debt assumed of $308 million.
In addition, in 1999 Textron Finance had acquisitions totaling $1.3 billion, including
debt assumed of $547 million. The largest of these acquisitions were Litchfield Financial
Corporation, a commercial finance company specializing in the vacation ownership
(timeshare) industry and the aircraft and franchise finance divisions of GreenTree
Financial Servicing Corporation. Capital contributions made by Textron Manufacturing
to Textron Finance in support of these acquisitions were $337 million.
During 1998, Textron acquired nine companies. The largest of these acquisitions were
Ransomes PLC – a UK-based manufacturer of commercial turf-care machinery; Ring Screw
Works – a Michigan-based supplier of specialty threaded fasteners to the automotive indus-
try; and David Brown Group PLC – a UK-based designer and manufacturer of industrial gears
and mechanical and hydraulic transmission systems. The total cost of these acquisitions was
approximately $1.1 billion, including notes issued for approximately $160 million. In addi-
tion, approximately $230 million of debt was assumed as a result of these acquisitions.
In 1997, Textron acquired Germany-based Kautex Group, a worldwide supplier of blow-
molded plastic fuel tanks and other automotive components and systems for approximately
$350 million, which includes the assumption of debt. In addition, Textron acquired Brazil-
based Brazaco Mapri Industrias, S.A.S., South America’s leading maker of fasteners for a
purchase price of $70 million paid in the first quarter of 1998. Smaller acquisitions made
in 1997 aggregated approximately $70 million.
The acquisitions were accounted for as purchases and accordingly, the results of operations of
each acquired company are included in the statement of income from the date of acquisition.
Dispositions
On August 11, 1998, Textron announced that it had reached an agreement to sell Avco
Financial Services (AFS) to Associates First Capital Corporation for $3.9 billion in cash.
The sale was completed on January 6, 1999. Net after-tax proceeds were approximately
$2.9 billion, resulting in an after-tax gain of $1.65 billion. Textron has presented AFS as
a discontinued operation in these financial statements.
Fuel Systems Textron was sold to Woodward Governor Company for $160 million
in cash in June 1998, at a pretax gain of $97 million ($54 million after-tax). In 1997,
Textron completed the sale of its 83.3% owned subsidiary, the Paul Revere Corporation
to Provident Companies, Inc. Net proceeds to Textron after adjustments and contingent
payments were approximately $800 million (which included the value of shares of
Provident common stock subsequently sold for $245 million).
3. Interest income is recognized in revenues using the interest method to provide a constant rate of
return over the terms of the receivables. Direct loan origination costs and fees received are deferred
and amortized over the loans’ contractual lives. The accrual of interest income is suspended for
accounts which are contractually delinquent by more than three months. Accrual of interest
resumes and suspended interest income is recognized when loans become contractually current.
Provisions for losses on finance receivables are charged to income in amounts sufficient to
maintain the allowance at a level considered adequate to cover losses in the existing receivable
Finance
Receivables
Acquisitions and
Dispositions
46 Consistent Growth