E-Z-GO 2001 Annual Report Download - page 49

Textron Manufacturing maintains credit facilities w ith various banks for both short- and long-term borrow -
ings. At year-end, Textron M anufacturing had (a) a $1.0 billion domestic credit agreement w ith 21 banks
available on a revolving basis until April 2003, (b) a $600 million domestic credit agreement w ith five banks
available through M ay 2002 and (c) $71 million in multi-currency agreements with tw o banks available
through December 2002. At year-end 2001, $1.5 billion of the credit facilities was not used or reserved as
support for commercial paper or bank borrowings.
December 29),December 30),
(In millions) 2001 2000
Textron Finance:
Borrowings under or supported by credit facilities*$688 $966
6.84% average rate debt; due 2002 to 2004 1,512 1,432
2.41% average rate variable notes; due 2002 to 2004 1,988 2,269
Total Textron Finance debt $4,188 $4,667
*The w eighted average interest rates on these borrowings, before the effect of interest rate exchange agreements, were 2.5% , 6.7% and
6.4% at year-end 2001, 2000 and 1999, respectively. Comparable rates during the years 2001, 2000 and 1999 w ere 4.2% , 6.4% and 5.4% ,
respectively.
Textron Finance has its primary lines of credit with various banks aggregating $1.5 billion at year-end 2001,
of w hich $500 million will expire in 2002 and $1.0 billion w ill expire in 2006. Of these lines, $875 million
was not used or reserved as support for commercial paper or bank borrow ings. Lending agreements limit
Textron Finance’s net assets available for cash dividends and other payments to Textron M anufacturing to
approximately $452 million of Textron Finance’s net assets of $1,009 million at year-end 2001. Textron
Finance’s loan agreements also contain provisions regarding additional debt, creation of liens or guarantees
and the making of investments.
The following table show s required payments during the next five years on debt outstanding at the end
of 2001. The payment schedule excludes amounts that are payable under or supported by long-term credit
facilities.
(In millions) 2002 2003 2004 2005 2006
Textron M anufacturing $ 527 $ 10 $ 307 $273 $3
Textron Finance 1,580 983 938 – –
$2,107 $ 993 $1,245 $273 $3
Textron Manufacturing has agreed to cause Textron Finance to maintain certain minimum levels of
financial performance. No payments from Textron M anufacturing w ere necessary in 2001, 2000 or 1999
for Textron Finance to meet these standards.
Due to Textron M anufacturing
On December 20, 2001, Textron M anufacturing entered into a promissory demand note agreement w ith
Textron Finance, w hereby Textron Finance can borrow up to $600 million. At year-end 2001, the amount
outstanding under this agreement is $510 million which has not been eliminated, and is included in total
assets and total liabilities on the consolidated balance sheet. This note w as repaid in January 2002.
Extraordinary Loss from Debt Retirement
During 1999, Textron retired $553 million of long-term high-coupon debt and terminated $479 million of
interest rate exchange agreements designated as hedges of the retired borrow ings. As a result of this
retirement, Textron recorded an after-tax loss in 1999 of $43 million, w hich has been reflected as an
extraordinary item.
Interest Rate Hedging
Textron Manufacturing’s policy is to manage interest cost using a mix of fixed- and variable-rate debt. To
manage this mix in a cost efficient manner, Textron M anufacturing w ill enter into interest rate sw aps to
agree to exchange, at specified intervals, the difference between fixed and variable interest amounts
calculated by reference to an agreed-upon notional principal amount. The mark-to-market values of both
the fair value hedge instruments and underlying debt obligations are recorded as equal and offsetting
unrealized gains and losses in interest expense. At December 31, 2000, Textron M anufacturing had sw aps
with a fair value of $8 million designated as fair value hedges of underlying fixed-rate debt obligations
which w as recorded as a reduction of debt. In M arch 2001, Textron M anufacturing terminated all
8. Derivatives and
Other Financial
Instruments
Textron Annual Report 47