E-Z-GO 2000 Annual Report Download - page 50

quarter of 2001 as a cumulative effect of change in accounting principle. The effect of this change in
accounting will not be material to the Company’s results of operations and financial position.
Litchfield Financial Corporation (Litchfield, a subsidiary of Textron Financial Corporation) was
acquired by Textron Financial Corporation during 1999. Prior to the acquisition, a trust sponsored
and wholly-owned by 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 unconditionally 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.
In 1996, a trust sponsored and wholly-owned by Textron issued preferred securities to the public
(for $500 million) and shares of its common securities to Textron (for $15.5 million), the proceeds of
which were invested by the trust in $515.5 million aggregate principal amount of Textron’s newly
issued 7.92% Junior Subordinated Deferrable Interest Debentures, due 2045. The debentures are
the sole asset of the trust. The proceeds from the issuance of the debentures were used by Textron
for the repayment of long-term borrowings and for general corporate purposes. The amounts due
to the trust under the debentures and the related income statement amounts have been elimi-
nated in Textron’s consolidated financial statements.
The preferred securities accrue and pay cash distributions quarterly at a rate of 7.92% per annum.
Textron has guaranteed, on a subordinated basis, distributions and other payments due on the pre-
ferred securities. The guarantee, when taken together with Textron’s obligations under the debentures
and in the indenture pursuant to which the debentures were issued and Textron’s obligations under
the Amended and Restated Declaration of Trust governing the trust, provides a full and uncondi-
tional guarantee of amounts due on the preferred securities. The preferred securities are mandatorily
redeemable upon the maturity of the debentures on March 31, 2045, or earlier to the extent of any
redemption by Textron of any debentures. The redemption price in either such case will be $25 per
share plus accrued and unpaid distributions to the date fixed for redemption.
Preferred Stock
Textron has authorization for 15,000,000 shares of preferred stock. Each share of $2.08 Preferred
Stock ($23.63 approximate stated value) is convertible into 4.4 shares of common stock and can be
redeemed by Textron for $50 per share. Each share of $1.40 Preferred Dividend Stock ($11.82
approximate stated value) is convertible into 3.6 shares of common stock and can be redeemed by
Textron for $45 per share.
Common Stock
Textron has authorization for 500,000,000 shares of 12.5 cent per share par value common stock.
Performance Share Units and Stock Options
Textron’s 1999 Long-Term Incentive Plan (the “1999 Plan”) authorizes awards to key employees of Textron
and its related companies in three forms: (a) options to purchase Textron shares; (b) performance share
units and (c) restricted stock. The maximum number of share awards that are authorized by the 1999
Plan are: (a) 8,000,000 options to purchase Textron shares; (b) 1,000,000 performance units and (c)
500,000 shares of restricted stock.
Shareholders’ Equity12
Textron – Obligated Mandatorily Redeemable Preferred Securities of
Subsidiary Trust Holding Solely Textron Junior Subordinated Debt Securities
11
Textron Finance – Obligated Mandatorily Redeemable Preferred Securities
of Finance Subsidiary Holding Solely Junior Subordinated Debentures
10
TEXTRON 2000 ANNUAL REPORT 48