E-Z-GO 2005 Annual Report Download - page 44

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24
Textron Inc.
Special Charges by Segment
Restructuring Expense
Other Other Total
Severance Contract Fixed Asset Associated Charges Special
(In millions)
Costs Terminations Impairments Costs Total (Gain) Charges
2005
Industrial $ 2 $ — $ — $ 4 $ 6 $ — $ 6
Corporate —————112112
$2$—$—$4 $6$112$118
2004
Bell $ — $ — $ (1) $ — $ (1) $ — $ (1)
Industrial 28 37 1 6 72 — 72
Corporate —————(12) (12)
$ 28 $ 37 $ — $ 6 $ 71 $ (12) $ 59
2003
Bell $ 2 $ — $ — $ — $ 2 $ — $ 2
Cessna 8 — 1 — 9 — 9
Industrial 17 2 10 13 42 — 42
Finance 4 — 2 — 6 — 6
Corporate 3 — — — 3 15 18
$34 $ 2 $13 $13 $62 $15 $77
Liquidity and Capital Resources
Textron’s financings are conducted through two borrowing groups: Textron Manufacturing and Textron Finance. This framework is designed to
enhance Textron’s borrowing power by separating the Finance segment. To support creditors in evaluating the separate borrowing groups, Textron
presents separate balance sheets and statements of cash flows for each borrowing group. Textron Manufacturing consists of Textron Inc., the par-
ent company, consolidated with the entities that operate in the Bell, Cessna and Industrial business segments, whose financial results are a reflec-
tion of the ability to manage and finance the development, production and delivery of tangible goods and services. Textron Finance consists of
Textron’s wholly owned commercial finance subsidiary, Textron Financial Corporation, consolidated with its subsidiaries. The financial results of
Textron Finance are a reflection of its ability to provide financial services in a competitive marketplace, at appropriate pricing, while managing the
associated financial risks. The fundamental differences between each borrowing group’s activities result in different measures used by investors,
rating agencies and analysts.
A portion of Textron Finance’s business involves financing retail purchases and leases for new and used aircraft and equipment manufactured by
Textron Manufacturing. The cash flows related to these captive financing activities are reflected as operating activities (by Textron Manufacturing)
and as investing activities (by Textron Finance) based on each group’s operations. These captive financing transactions have been eliminated, and
cash from customers or from securitizations is recognized in operating activities within the Consolidated Statements of Cash Flows when received.
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 2005 and included aggregate cash and cash equivalents of $796 million, com-
pared with $697 million at the end of 2004. During 2005, cash flows from operations were the primary source of funds for our operating needs,
dividends and capital expenditures. Management analyzes operating cash flows for Textron Manufacturing by tracking free cash flow, which is
calculated using net cash provided by operating activities, adding back proceeds on the sale of property, plant and equipment, then subtracting
capital expenditures, including those financed with capital leases.