E-Z-GO 2004 Annual Report Download - page 42

Download and view the complete annual report

Please find page 42 of the 2004 E-Z-GO annual report below. You can navigate through the pages in the report by either clicking on the pages listed below, or by using the keyword search tool below to find specific information within the annual report.

Page out of 102

  • 1
  • 2
  • 3
  • 4
  • 5
  • 6
  • 7
  • 8
  • 9
  • 10
  • 11
  • 12
  • 13
  • 14
  • 15
  • 16
  • 17
  • 18
  • 19
  • 20
  • 21
  • 22
  • 23
  • 24
  • 25
  • 26
  • 27
  • 28
  • 29
  • 30
  • 31
  • 32
  • 33
  • 34
  • 35
  • 36
  • 37
  • 38
  • 39
  • 40
  • 41
  • 42
  • 43
  • 44
  • 45
  • 46
  • 47
  • 48
  • 49
  • 50
  • 51
  • 52
  • 53
  • 54
  • 55
  • 56
  • 57
  • 58
  • 59
  • 60
  • 61
  • 62
  • 63
  • 64
  • 65
  • 66
  • 67
  • 68
  • 69
  • 70
  • 71
  • 72
  • 73
  • 74
  • 75
  • 76
  • 77
  • 78
  • 79
  • 80
  • 81
  • 82
  • 83
  • 84
  • 85
  • 86
  • 87
  • 88
  • 89
  • 90
  • 91
  • 92
  • 93
  • 94
  • 95
  • 96
  • 97
  • 98
  • 99
  • 100
  • 101
  • 102

21
Textron Inc.
Textron Inc. provides a support agreement to Textron Finance that requires Textron Inc. to maintain 100% ownership of
Textron Finance. The agreement also requires Textron Finance to maintain fixed charge coverage of no less than 125% and
consolidated shareholder’s equity of no less than $200 million. Textron Finance’s bank agreements prohibit the termination
of the support agreement.
Textron’s financial position continued to be strong at the end of 2004 and included cash and cash equivalents of $732 million,
compared with $838 million at the end of 2003. During 2004, cash flows from operations were the primary source of funds for the
operating needs, restructuring activities, dividends and capital expenditures. Management analyzes operating cash flows for Tex-
tron Manufacturing by tracking free cash flow, which is calculated using net cash provided by operating activities, adding back
after-tax cash used for restructuring activities and proceeds on the sale of fixed assets, then subtracting capital expenditures,
including those financed with capital leases.
Operating Cash Flows
(In millions)
2004 2002003 2002
Consolidated $ 949 $ 985 $ 676
Textron Manufacturing $ 973 $ 691 $ 481
Textron Finance $ 161 $ 242 $ 198
On a consolidated basis, operating cash flows have remained fairly consistent over the past two years. Textron Manufacturing’s
operating cash flows have increased significantly over the past two years, reflecting improved operating performance and enter-
prise management initiatives. The $282 million increase in Textron Manufacturing’s operating cash flows is largely due to a
decrease in working capital of $205 million in 2004, compared with a $65 million increase in working capital in 2003. A significant
portion of this decrease was due to an increase in customer deposits in the Bell and Cessna segments largely due to an increase in
orders for jets and commercial helicopters. Textron Manufacturing’s operating cash flows include after-tax cash used to finance
Textron’s restructuring program totaling $67 million in 2004, $54 million in 2003 and $57 million in 2002. Operating cash flows in
2003 included a $109 million tax refund received in 2003.
Investing Cash Flows
(In millions)
2004 2002003 2002
Consolidated $ (844) $ (65) $ (734)
Textron Manufacturing $ (202) $ (210) $ 324
Textron Finance $ (756) $ 272 $ (1,008)
On a consolidated basis, investing cash flows are largely driven by Textron Finance. Textron Finance increased its use of cash for
investing activities primarily due to a $768 million decrease in proceeds from the sale of finance receivables and securitizations
and a $227 million increase in finance receivable originations, net of repayments. The reduction in proceeds from receivable sales
was largely attributable to the sale of a small-ticket equipment portfolio in 2003 for $329 million, a $130 million increase in the
utilization of the distribution finance conduit and franchise portfolio sales of $123 million in 2003. The significant increase in 2003
was primarily due to a $389 million decrease in finance receivable originations, net of repayments, $196 million in higher pro-
ceeds from finance receivable sales and a nonrecurring $510 million repayment in 2002 of an advance made to Textron Manufac-
turing.
Excluding the nonrecurring repayment in 2002 of an advance of $510 million from Textron Finance, Textron Manufacturing’s use of
cash for investing activities has been fairly consistent and is largely driven by capital expenditures. Capital expenditures for Tex-
tron Manufacturing totaled $334 million in 2004, $306 million in 2003 and $298 million in 2002, including expenditures pur-
chased through capital leases of $44 million in 2004, $26 million in 2003 and $23 million in 2002.
Textron Finance’s investing activities include $892 million, $886 million and $969 million in non-cash activity for finance receiv-
ables originated in connection with the sale of inventory in 2004, 2003 and 2002, respectively. Cash received from customers and
securitizations related to the sale of inventory is also included within Textron Finance’s investing activities totaling $727 million,
$972 million and $1,059 million, in 2004, 2003 and 2002, respectively. Within the consolidated statement of cash flows these
amounts have been eliminated from investing activities and are recorded as a net amount in operating cash flows under the caption
“Captive finance receivables, net.”