E-Z-GO 1999 Annual Report Download - page 54

Translation of foreign currencies, foreign exchange transactions and foreign
currency exchange contracts
Foreign currency denominated assets and liabilities are translated into U.S. dollars with the
adjustments from the currency rate changes being recorded in the currency translation adjustment
account in shareholders’ equity until the related foreign entity is sold or substantially liquidated.
Non-U.S. dollar financing transactions, including currency swaps, are used to effectively hedge
long-term investments in foreign operations with the same corresponding currency. Foreign currency
gains and losses on the hedge of the long-term investments are recorded in the currency translation
adjustment with the offset recorded as an adjustment to the non-U.S. dollar financing liability.
Forward exchange contracts are used to hedge certain foreign currency transactions and certain
firm sales and purchase commitments denominated in foreign currencies. Gains and losses from
currency rate changes on hedges of foreign currency transactions are recorded currently in income.
Gains and losses relating to the hedge of firm sales and purchase commitments are included in
the measurement of the underlying transactions when they occur. Foreign exchange gains and
losses included in income have not been material.
The table below summarizes by major currency Textron’s forward exchange contracts and
currency swaps in U.S. dollars. The buy amounts represent the U.S. dollar equivalent of com-
mitments to purchase foreign currencies and the sell amounts represent the U.S. dollar equiv-
alent of commitments to sell foreign currencies. The foreign currency amounts have been
translated into a U.S. dollar equivalent using the exchange rate at the balance sheet date.
Buy Contracts Sell Contracts
Contract Unrealized Contract Unrealized
(In millions) Amount Gain/(Loss) Amount Gain/(Loss)
January 1, 2000
British Pound $ 74 $ 1 $485 $ 7
Canadian Dollar 263 5 15 –
Euro 7 – 447 18
Other 11 – 35 –
Total $355 $ 6 $982 $ 25
January 2, 1999
British Pound $ 45 $ – $375 $ –
Canadian Dollar 228 (9) 8 –
German Mark 135 –339 (5)
French Franc 1 –119 (4)
Other 6 –43 (1)
Total $415 $(9) $884 $(10)
9. Litchfield Financial Corporation (Litchfield, a subsidiary of Textron Financial
Corporation) was acquired by Textron Financial Corporation during 1999. Prior to the
acquisition, Litchfield issued Series A Preferred Securities to the public (for $26 million),
the proceeds of which were invested by the trust in $26 million aggregate principal
amount of Litchfield’s newly issued 10% Series A Junior Subordinated Debentures (Series
A Debentures), due 2029. The debentures are the sole asset of the trust. The preferred
securities were recorded by Textron Financial Corporation at the fair value of $29 million
as of the acquisition date. The amounts due to the trust under the subordinated debentures
and the related income statement amounts have been eliminated in Textron’s consolidated
financial statements.
The preferred securities accrue and pay cash distributions quarterly at a rate of 10% per
annum. The trust’s obligation under the Series A Preferred Securities are fully and uncondi-
tionally guaranteed by Litchfield. The trust will redeem all of the outstanding Series A
Preferred Securities when the Series A Debentures are paid at maturity on June 30, 2029, or
otherwise become due. Litchfield will have the right to redeem 100% of the principal plus
accrued and unpaid interest on or after June 30, 2004.
Textron Finance –
Mandatorily
Redeemable
Preferred
Securities of
Finance
Subsidiary
Holding
Debentures
52 Consistent Growth