E-Z-GO 2005 Annual Report Download - page 46

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26
Textron Inc.
increases were partially offset by higher cash outflows from a $182 million increase in purchases of Textron common stock, $81 million in lower
proceeds from employee stock ownership plans and a $54 million increase in dividend payments, primarily due to the timing of dividend pay-
ments with four quarters paid in 2005 and only three quarters paid in 2004.
In 2004, the decrease in cash used by financing activities in the consolidated cash flows principally reflects a $715 million increase in cash pro-
vided by Textron Finance reflecting an increase in debt outstanding to fund asset growth, partially offset by a decrease at Textron Manufacturing
largely due to higher cash outflows from a $351 million increase in purchases of Textron common stock.
Principal Payments and Retirements of Long-Term Debt
In 2005, 2004 and 2003, Textron Manufacturing made principal payments of $417 million, $360 million and $503 million, respectively. In 2005,
2004 and 2003, Textron Finance made principal payments on long-term debt of $0.8 billion, $1.3 billion and $1.4 billion, respectively.
Stock Repurchases
On January 26, 2006, Textron’s Board of Directors authorized a new 12-million-share repurchase program. This program supercedes Textron’s
previous authorization, which was exhausted in January. In 2005, 2004 and 2003, Textron repurchased approximately 8,035,000, 6,534,000 and
1,951,000 shares of common stock, respectively, under its Board-authorized share repurchase programs for an aggregate cost of $606 million,
$425 million and $66 million, respectively.
Dividends
Textron’s Board of Directors approved dividends of $1.40 per common share in 2005. On January 26, 2006, the Board of Directors authorized a
$0.15 per share increase in Textron’s annualized common stock dividend to $1.55 per share and, accordingly, a quarterly dividend of $0.3875 per
share for holders of record at the close of business on March 10, 2006. Dividend payments to shareholders totaled $189 million, $135 million
and $222 million in 2005, 2004 and 2003, respectively. The 2003 payments include an additional payment made for the fourth quarter dividend,
which is typically paid in the following year.
Discontinued Operations Cash Flows
(In millions)
2005 2004 2003
Operating activities $ 84 $ 1 $ 129
Investing activities $ 28 $ (18) $ 400
Financing activities $ (1) $ — $ (99)
Cash flows from discontinued operations include Textron Manufacturing’s Fastening Systems, OmniQuip and InteSys businesses, and Textron
Finance’s small business finance operation. See Note 2 to the Consolidated Financial Statements for details concerning these dispositions. In
2003, cash provided by investing activities included the receipt of $421 million in cash upon the sale of substantially all of the small business
finance operation, and $198 million in tax refunds and cash proceeds related to the sale of the OmniQuip business, partially offset by $197 million
in finance receivable originations, net of repayments.
Capital Resources
Textron Manufacturing’s debt (net of cash)-to-capital ratio as of December 31, 2005 was 26%, compared with 25% at January 1, 2005. Textron
Manufacturing’s gross debt-to-capital ratio as of December 31, 2005 was 37%, compared with 33% at January 1, 2005. Textron Manufacturing
has established a gross debt-to-capital ratio target in the mid-thirties. Consistent with the methodology used by members of the financial com-
munity, 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.
Borrowings have historically been a secondary source of funds for Textron Manufacturing and, along with the collection of finance receivables,
are a primary source of funds for Textron Finance. Both Textron Manufacturing and Textron Finance utilize a broad base of financial sources for
their respective liquidity and capital needs. Our credit ratings are predominantly a function of our ability to generate operating cash flow and sat-
isfy certain financial ratios. Since high-quality credit ratings provide us with access to a broad base of global investors at an attractive cost, we tar-
get a long-term A rating from the independent debt-rating agencies. In November 2005, Fitch upgraded its outlook for Textron Manufacturing and
Textron Finance to positive, while Moody’s and Standard & Poor’s have assessed the outlook for both groups as stable. The credit ratings of these
three debt-ratings agencies are as follows: