E-Z-GO 2003 Annual Report Download - page 28

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26
Borrowings have historically been a secondary source of funds for Textron Manufacturing and, along
with the collection of finance receivables, are a primary source of funds for Textron Finance. Both Textron
Manufacturing and Textron Finance utilize a broad base of financial sources for their respective liquidity
and capital needs. Our credit ratings are predominantly a function of our ability to generate operating
cash flow and satisfy certain financial ratios. Since high-quality credit ratings provide us with access to a
broad base of global investors at an attractive cost, we target a long-term A rating from the independent
debt-rating agencies. As of January 3, 2004, our credit ratings remain strong from all three agencies:
Standard & Poor’s (Textron Manufacturing: A- long-term; A2 short-term; and Textron Finance: A- long-
term; A2 short-term; outlook stable for both groups); Moody’s Investors Service (A3 long-term; P2 short-
term; outlook negative) and Fitch (A- long-term; F2 short-term; outlook negative).
During the first quarter of 2003, Fitch downgraded Textron Manufacturing’s and Textron Finance’s long-
term debt ratings from an A to A- and the short-term debt ratings from F1 to F2 and affirmed its negative
outlook for the ratings. In the second quarter of 2003, Standard & Poor’s downgraded Textron Manufac-
turing’s long-term and short-term ratings to A- and A2, respectively, and affirmed Textron Finance’s long-
term debt rating of A-. Standard & Poor’s also upgraded its outlook from negative to stable for both bor-
rowing groups. The economic environment and its potential impact on the financial performance from
the aerospace and financial services industries were listed as contributing factors to the rating down-
grade. The actions of the rating agencies have had minimal impact on our cost of capital and have not
resulted in any loss of access to capital.
For liquidity purposes, Textron Manufacturing and Textron Finance have a policy of maintaining sufficient
unused lines of credit to support their outstanding commercial paper. None of these lines of credit were
used at January 3, 2004 or at December 28, 2002. Textron Manufacturing has primary revolving credit
facilities of $1.5 billion, of which $1 billion will expire in 2007. During 2003, Textron Manufacturing rene-
gotiated $500 million of the credit facility and extended its expiration to March 2004. In addition, Textron
Manufacturing amended its credit facilities to permit Textron Finance to borrow under those facilities.
Textron Finance also has bank lines of credit of $1.5 billion of which $500 million expires in 2004, and
$1.0 billion expires in 2008. Both $500 million facilities include one-year term out options, effectively
extending their expirations into 2005. At January 3, 2004, the lines of credit not reserved as support for
commercial paper and letters of credit were $1.5 billion for Textron Manufacturing and $966 million for
Textron Finance.
During 2003, Textron Finance filed a shelf registration statement with the Securities and Exchange Com-
mission enabling Textron Finance to issue public debt securities in one or more offerings up to a total
maximum offering of $4 billion. At January 3, 2004, Textron Finance had $3.6 billion available under this
facility. Textron Manufacturing has $650 million available under an existing shelf registration filed with the
Securities and Exchange Commission.
Textron Finance also utilizes the asset securitization market to manage asset exposures and diversify
funding sources. These securitizations provided Textron Finance with an alternate source of liquidity.
Textron Finance anticipates that it will enter into additional securitization transactions in 2004.
The following table summarizes Textron Manufacturing’s known contractual obligations to make future
payments or other consideration pursuant to certain contracts as of January 3, 2004, as well as an esti-
mate of the timing in which these obligations are expected to be satisfied.
(In millions)
Liabilities reflected in balance sheet:
Long-term debt $ 312 $ 377 $ 376 $ 836 $ 1,901
Capital lease obligations 4 21 4 97 126
Pension benefits for unfunded plans 13 24 21 146 204
Postretirement benefits other than pensions 57 105 92 427 681
Other long-term liabilities 106 126 58 250 540
Liabilities not reflected in balance sheet:
Operating leases 77 102 44 152 375
Purchase obligations 974 113 16 39 1,142
Total Textron Manufacturing $ 1,543 $ 868 $ 611 $ 1,947 $ 4,969