E-Z-GO 2004 Annual Report Download - page 76

$31 million and $25 million, respectively. Gains and losses on these instruments are recorded as an adjustment to compensation
expense when the award is charged to expense. These contracts impacted net income by $28 million in 2004, $23 million in 2003
and $(3) million in 2002. Cash received or paid on the contract settlement is included in cash flows from operating activities, con-
sistent with the classification of the cash flows on the underlying hedged compensation expense.
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 are as follows:
January 1, 2005 January 3, 2004
Estimated Estimated
Carrying Fair Carrying Fair
(In millions) Value Value Value Value
Textron Manufacturing:
Debt $ (1,791) $ (1,902) $ (2,027) $ (2,177)
Textron Finance:
Finance receivables $ 4,888 $ 4,842 $ 4,313 $ 4,274
Debt $ (4,783) $ (4,864) $ (4,407) $ (4,552)
Finance receivables exclude the fair value of finance and leveraged leases totaling $949 million at January 1, 2005 and $822 mil-
lion at January 3, 2004, as these leases are recorded at fair value in the consolidated balance sheet.
Note 10 Mandatorily Redeemable Preferred Securities
Textron adopted SFAS No. 150, “Accounting for Certain Financial Instruments with Characteristics of Both Liabilities and Equity,”
in the third quarter of 2003. Upon adoption, Textron Finance classified its obligated mandatorily redeemable preferred securities
previously classified as equity as a liability.
In June 2004, Textron Financial Corporation redeemed all of its $26 million Litchfield 10% Series A Junior Subordinated Deben-
tures, due 2029. The debentures were held by a trust sponsored and wholly owned by Litchfield Financial Corporation, a sub-
sidiary of Textron Financial Corporation. The proceeds from the redemption were used to redeem all of the $26 million Litchfield
Capital Trust I 10% Series A Trust Preferred Securities at par value of $10 per share. There was no gain or loss on the redemption.
In July 2003, Textron redeemed its 7.92% Junior Subordinated Deferrable Interest Debentures, due 2045. The debentures were
held by Textron’s wholly owned trust, and the proceeds from their redemption were used to redeem all of the $500 million Textron
Capital I trust preferred securities with a 7.92% dividend yield. Upon the redemption, $15 million in unamortized issuance costs
were written off and recorded in special charges.
Note 11 Shareholders’ Equity
Capital Stock
Textron has authorization for 15,000,000 shares of preferred stock and 500,000,000 shares of 12.5 cent per share par value com-
mon stock. Each share of $2.08 Preferred Stock ($23.63 approximate stated value) is convertible into 4.4 shares of common stock
and can be redeemed by Textron for $50 per share. Each share of $1.40 Preferred Dividend Stock ($11.82 approximate stated
value) is convertible into 3.6 shares of common stock and can be redeemed by Textron for $45 per share.
Performance Share Units and Stock Options
Textron’s 1999 Long-Term Incentive Plan (the “1999 Plan”) authorizes awards to key employees of Textron in three forms: (a)
options to purchase Textron shares, (b) performance share units and (c) restricted stock. Options to purchase Textron shares have
a maximum term of ten years and vest ratably over a three-year period, beginning with the 2003 grants. Prior grants vested ratably
over two years. Restricted stock grants vest one-third each in the third, fourth and fifth year following the grant. In 2004 and 2003,
Textron’s shareholders approved amendments to the 1999 Plan to revise the maximum number of shares authorized to 17,500,000
options to purchase Textron shares, 2,000,000 performance units and 2,000,000 shares of restricted stock.
55
Textron Inc.