E-Z-GO 1999 Annual Report Download - page 53

Agreements that effectively fix the rate of interest on variable-rate borrowings are
summarized as follows:
January 1, 2000 January 2, 1999
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 $ 941 4.69% 0.3 $–– –
Textron Finance 300 5.76% 0.8 250 6.26% 0.6
$1,241 4.95% 0.4 $250 6.26% 0.6
Textron Manufacturing’s and Textron Finance’s fixed-pay interest rate exchange agreements
were designated against specific long-term variable-rate debt. Textron Manufacturing’s
agreements were entered in June 1999 to insulate Textron against potential interest rate
increases on variable-rate debt around year-end 1999. These agreements, which expire in
March 2000, effectively adjusted the average rate of interest on variable-rate debt in 1999
to 4.69% from 4.76%. Textron Finance’s agreements effectively adjusted the average rate of
interest on variable-rate debt in 1999 to 5.64% from 5.57%. These agreements expire as
follows: $200 million (5.72%) in 2000 and $100 million (5.85%) in 2001
.
Agreements that have the effect of varying the rate of interest on fixed-rate borrowings
are summarized as follows:
January 1, 2000 January 2, 1999
Variable-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 $852 6.39% 2.5 $635 8.26% 5.5
Textron Finance* 125 5.84% 0.4 50 5.22% 0.5
$977 6.32% 2.2 $685 8.04% 5.1
*Amounts at January 1, 2000 represent basis swaps to lock-in desired spreads between certain interest-earning assets and certain
interest-bearing liabilities. These basis swaps require United States Prime Rate-based payments (5.84%) and LIBOR-based
receipts (6.07%) at year-end 1999.
During 1999, Textron Manufacturing terminated $479 million variable-pay interest
rate exchange agreements related to the retirement of $553 million of debt. Textron
Manufacturing’s and Textron Finance’s variable-pay interest rate exchange agreements
were designated against specific long-term fixed-rate debt. Textron Manufacturing’s
agreements effectively adjusted the average rate of interest on fixed-rate notes in 1999
to 5.92% from 6.18%. These agreements expire as follows: $437 million (6.13%) in 2000,
$26 million (10.64%) in 2001, $36 million (9.77%) in 2002, and $353 million (6.06%)
through 2020. Textron Finance had agreements ($50 million notional amounts) which
expired in 1999 that adjusted the average rate of interest on fixed-rate notes during the
current year to 6.74% from 6.79%.
Textron had minimal exposure to loss from nonperformance by the counterparties
to its interest rate exchange agreements at the end of 1999, and does not anticipate
nonperformance by counterparties in the periodic settlements of amounts due. Textron
currently minimizes this potential for risk by entering into contracts exclusively with
major, financially sound counterparties having no less than a long-term bond rating
of “A,” by continuously monitoring the counterparties’ credit ratings, and by limiting
exposure with any one financial institution. The credit risk generally is limited to
the amount by which the counterparties’ contractual obligations exceed Textron’s
obligations to the counterparty.
1999 Textron Annual Report 51