E-Z-GO 2001 Annual Report Download - page 51

expected to be reclassified to earnings in the next 12 months as the underlying transactions occur. Textron
Manufacturing also enters into certain foreign currency derivative instruments that do not meet hedge
accounting criteria, and are primarily intended to protect against exposure related to intercompany
financing transactions and income from international operations. The fair value of these instruments at
year-end 2001 and the net impact of the related gains and losses on selling and administrative expense
was not material in 2001.
The table below summarizes, by major currency, Textron M anufacturing’s forward exchange contracts in
U.S. dollars. The buy and sell amounts represent the U.S. dollar equivalent of commitments to purchase
and 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)
December 29, 2001
British Pound $7 $– $– $–
Canadian Dollar 217 (7) 23 –
Euro 23 (3) 67 –
Other 106 – 162 –
Total $353 $(10) $252 $ –
December 30, 2000
British Pound $208 $ (1) $105 $ –
Canadian Dollar 281 – 15 –
Euro 116 – 51 –
Other 26 – 38 1
Total $631 $ (1) $209 $ 1
Net Investment Hedging
Textron hedges its net investment position in major currencies and generates foreign currency interest
payments, that offset other transactional exposures in these currencies. To accomplish this, Textron
borrows directly in foreign currency and designates a portion of foreign currency debt as a hedge of net
investments. In addition, certain currency forwards are designated as hedges of Textron’s related foreign
net investments. Currency effects of these hedges w hich are reflected in the cumulative translation adjust-
ment account within OCL, produced a $9 million after-tax gain during 2001, leaving an accumulated net
balance of $36 million.
Stock-based Compensation Hedging
Textron manages the expense related to stock-based compensation awards using cash settlement forward
contracts on its common stock. The use of these forw ard contracts modifies Textron’s compensation
expense exposure to changes in the stock price w ith the intent to reduce potential variability. The fair value
of these instruments at December 29, 2001 w as a $11 million liability. Gains and losses on these instru-
ments are recorded as an adjustment to compensation expense w hen the award is charged to expense.
These contracts generated expense of $22 million and $69 million in 2001 and 2000, respectively, and
income of approximately $5 million in 1999.
Fair Values of Financial Instruments
The carrying amounts and estimated fair values of Textron’s financial instruments that are not reflected in
the financial statements at fair value as a matter of accounting policy, are as follows:
December 29, 2001 December 30, 2000
Estimated Estimated
Carrying Fair Carrying Fair
(In millions) Value Value Value Value
Textron Manufacturing:
Debt $(1,934) $ (1,972) $(2,061) $ (2,105)
Textron Finance:
Finance receivables 4,795 4,884 4,767 4,840
Debt (4,188) (4,208) (4,667) (4,688)
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