E-Z-GO 2004 Annual Report Download - page 45

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24
Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations
Textron maintains defined benefit pension plans and postretirement benefit plans other than pensions as discussed in Note 12 to
the consolidated financial statements. Included in the table above are discounted estimated benefit payments to be made by Tex-
tron related to unfunded pension and other postretirement benefit plans. Actual benefit payments are dependent on a number of
factors, including mortality assumptions, expected retirement age, rate of compensation increases and medical trend rates, which
are subject to change in future years. Textron also expects to make contributions to its funded pension plans in the range of $30
million to $35 million per year over the next five years, which are not reflected in this table.
Other long-term liabilities primarily include undiscounted amounts on the consolidated balance sheet as of January 1, 2005
representing obligations under deferred compensation arrangements and estimated environmental remediation costs. Payments
under deferred compensation arrangements have been estimated based on management’s assumptions of expected retirement age,
mortality, stock price and rates of return on participant deferrals. Timing of cash flows associated with environmental remediation
costs are largely based on historical experience.
Operating leases represent undiscounted obligations under noncancelable leases.
Purchase obligations represent undiscounted obligations for which Textron is committed to purchase goods and services as of
January 1, 2005. Textron’s ultimate liability for these obligations may be reduced based upon termination provisions included in
certain purchase contracts, the costs incurred to date by vendors under these contracts or by recourse under firm contracts with
the U.S. Government under normal termination clauses.
Effective January 2, 2005, Textron engaged a third-party service provider to assume oversight of its information technology infra-
structure, including maintenance, operational oversight and purchases of hardware (the “IT Contract”). The IT Contract covers a
ten-year period and is subject to variable pricing and quantity provisions for both purchases of computer hardware and system
design modifications. Textron retains the right to approve significant design, equipment purchase and related decisions by the ser-
vice provider. Textron has the ability to terminate the IT Contract prior to its full-term and would consequently be subject to variable
termination fees that decline over time and do not exceed $70 million in 2005.
The following table summarizes Textron Finance’s known contractual obligations to make future payments. Due to the nature of
finance companies, Textron Finance also has contractual cash receipts that will be received in the future. Textron Finance generally
borrows funds at various contractual maturities to match the maturities of its finance receivables. The contractual payments and
receipts as of January 1, 2005 are detailed below:
Payments/Receipts Due by Period
Less than More than
(In millions)
1 Year 2 Years 3 Years 4 Years 5 Years 5 Years Total
Textron Finance:
Contractual payments:
Commercial paper and other short-
term debt $ 1,307 $ — $ — $ — $ — $ — $ 1,307
Term debt 656 985 983 42 542 268 3,476
Operating leases 55442323
Total contractual payments 1,968 990 987 46 544 271 4,806
Contractual receipts:
Finance receivables 2,303 683 526 516 397 1,412 5,837
Operating leases 27 19 16 12 10 24 108
Total contractual receipts 2,330 702 542 528 407 1,436 5,945
Cash 127—————127
Total cash and contractual receipts 2,457 702 542 528 407 1,436 6,072
Net cash and contractual receipts
(payments) $ 489 $ (288) $ (445) $ 482 $ (137) $ 1,165 $ 1,266
Cumulative net cash and contractual
receipts (payments) $ 489 $ 201 $ (244) $ 238 $ 101 $ 1,266
Finance receivables are based on contractual cash flows. These amounts could differ due to prepayments, charge-offs and other
factors. Contractual receipts and payments exclude finance charges and discounts from receivables, debt interest payments, pro-
ceeds from sale of operating lease equipment and other items.