E-Z-GO 2002 Annual Report Download - page 57

The table below summarizes, by major currency, Textron Manufacturing’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 equiv-
alent 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 28, 2002
British Pound $ 7 $ — $ 1 $ —
Canadian Dollar 216 (4) 9 —
Euro 97 1 219 —
Other 85 (1) 87 1
Total $ 405 $ (4) $ 316 $ 1
December 29, 2001
British Pound $ 7 $ — $ — $ —
Canadian Dollar 217 (7) 23 —
Euro 23 (3) 67 —
Other 106 — 162 —
Total $ 353 $ (10) $ 252 $ —
Stock-based Compensation Hedging
Textron manages the expense related to stock-based compensation awards using cash settlement for-
ward contracts on its common stock. The use of these forward contracts modifies Textron’s compensa-
tion expense exposure to changes in the stock price with the intent to reduce potential variability. The
fair value of these instruments at December 28, 2002 was a $3 million liability. Gains and losses on these
instruments are recorded as an adjustment to compensation expense when the award is charged to
expense. These contracts generated expense of $4 million, $22 million and $69 million in 2002, 2001
and 2000, respectively.
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 28, 2002 December 29, 2001
Estimated Estimated
Carrying Fair Carrying Fair
(In millions) Value Value Value Value
Textron Manufacturing:
Debt $ (1,711) $ (1,839) $ (1,934) $ (1,972)
Textron Finance:
Finance receivables 4,809 4,943 4,795 4,884
Debt (4,840) (4,935) (4,188) (4,208)
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 is fully and unconditionally guaranteed by Litch-
field. The trust will redeem all of the outstanding Series A Preferred Securities when the Series A Deben-
tures 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. As a result of
its acquisition of Litchfield, Textron Financial Corporation has agreed to make payments to the holders of
the Preferred Securities when due, to the extent not paid by or on behalf of the trust or subsidiary.
Note 10
Textron Finance -
Obligated
Mandatorily
Redeemable
Preferred
Securities of
Finance
Subsidiary
Holding Solely
Junior
Subordinated
Debentures
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