E-Z-GO 2004 Annual Report Download - page 43

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22
Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations
Financing Cash Flows
(In millions)
2004 2002003 2002
Consolidated $ (276) $ (748) $ 36
Textron Manufacturing $ (708) $ (469) $ (803)
Textron Finance $ 361 $ (354) $ 786
On a consolidated basis, the changes in financing cash flows over the past few years are largely driven by changes in the cash
flows for Textron Finance. The increase in cash provided by financing activities in 2004 at Textron Finance is primarily due to a net
increase in commercial paper and other short-term debt to fund asset growth. The cash used in 2003 primarily relates to the pay-
down of commercial paper and other short-term debt from the proceeds received from finance receivable sales. In addition, in
2003, under new and existing shelf registration statements, Textron Finance issued $1.2 billion of term notes, primarily in U.S. and
Canadian markets. In 2002, Textron Finance issued $2.0 billion of term notes to refinance maturing term debt and to repay the
2001 advance of $510 million from Textron Manufacturing.
During 2004, Textron Manufacturing repaid a $300 million 6.375% note using cash and proceeds from commercial paper
issuances. During 2003, Textron Manufacturing issued $250 million in term notes under Textron Inc.’s existing shelf registration
filed with the Securities and Exchange Commission and used the proceeds for the redemption of $500 million in mandatorily
redeemable preferred securities in July 2003.
Proceeds from the exercise of stock options increased $120 million to $187 million in 2004 as more options were exercised
primarily due to the increasing stock price.
Principal Payments and Retirements of Long-Term Debt and Mandatorily Redeemable Preferred Securities
In 2004, 2003 and 2002, Textron Manufacturing made principal payments of $362 million, $508 million and $544 million, respec-
tively. In 2004, 2003 and 2002, Textron Finance made principal payments on long-term debt of $1.3 billion, $1.4 billion and $1.7
billion, respectively.
Stock Repurchases
In October 2004, Textron’s Board of Directors authorized a new 12-million-share repurchase program. This program supercedes
Textron’s previous authorization, under which less than one million shares remained. In 2004, 2003 and 2002, Textron repur-
chased approximately 6,396,000, 1,951,000 and 5,734,000 shares of common stock, respectively, under its Board authorized
share repurchase programs for an aggregate cost of $415 million, $66 million and $248 million, respectively.
Dividends
In October 2004, the Board of Directors authorized a $0.10 per share increase in Textron’s annualized common stock dividend,
from $1.30 per share to $1.40 per share. The first increased dividend payment was paid on January 3, 2005 to holders of record at
the close of business on December 10, 2004, resulting in an annual dividend per common share of $1.325 in 2004, compared with
$1.30 each in 2003 and 2002. Dividend payments to shareholders totaled $135 million, $222 million and $182 million in 2004,
2003 and 2002, respectively. The 2003 payments include an additional payment made for the fourth quarter dividend, which is typ-
ically paid in the following year.
Discontinued Operations Cash Flows
Net cash provided by discontinued operations for Textron Manufacturing includes the OmniQuip and InteSys businesses and
totaled $32 million in 2004, $158 million in 2003 and $20 million in 2002. In 2003, Textron Manufacturing received a $90 million
cash payment upon the sale of its remaining OmniQuip business and a $108 million tax refund related to the sale of the Snorkel
product line and the capital stock of the OmniQuip Textron Inc. holding company.
Net cash provided by discontinued operations for Textron Finance includes the small business finance operation and totaled $175
million in 2003 and $27 million in 2002. In the fourth quarter of 2003, Textron Finance sold substantially all of its small business
direct portfolio for $421 million in cash.
Capital Resources
Textron Manufacturing’s debt (net of cash) to total capital ratio as of January 1, 2005 was 25%, compared with 30% at January 3,
2004. Textron Manufacturing has established a long-term debt-to-capital ratio target in the mid-thirties. Consistent with the
methodology used by members of the financial community, leverage of the manufacturing operations excludes the debt of Textron
Finance. In turn, Textron Finance limits its borrowings to an amount, taking into account the risk profile of its assets, consistent
with a single A credit rating. Surplus capital of Textron Finance is returned to Textron Inc.