E-Z-GO 2006 Annual Report Download - page 43

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Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations
The Manufacturing group’s operating cash flows increased in 2006 compared with 2005 primarily due to the increase in income from continuing
operations and a decrease in working capital components. Consolidated operating cash flows increased primarily due to the increase in income
from continuing operations for both borrowing groups and a decrease in working capital components, partially offset by a $224 million increase
in net captive financing activity as explained below.
Reclassification and Elimination Adjustments
(In millions) 2006 2005 2004
Reclassifications from investing activities:
Finance receivable originations for Manufacturing group inventory sales $ (1,015) $ (824) $ (892)
Cash received from customers and securitizations for captive financing 691 724 727
Other (36) 11 51
Total reclassifications from investing activities (360) (89) (114)
Dividends paid by Finance group to Manufacturing group (80) (100) (71)
Total reclassifications and adjustments $ (440) $ (189) $ (185)
Finance receivable originations for Manufacturing group inventory sales increased in 2006 compared with 2005 primarily due to financings
related to aircraft sales growth during the period. However, cash received for these captive receivables decreased in 2006 as higher cash receipts
from our customers were offset by $126 million in lower proceeds from securitizations.
Investing Cash Flows of Continuing Operations
(In millions) 2006 2005 2004
Manufacturing group $ (742) $ (362) $ (158)
Finance group (1,680) (950) (756)
Reclassifications to operating activities 360 89 114
Consolidated $ (2,062) $ (1,223) $ (800)
Over the past three years, consolidated investing cash flows have been largely driven by increases in cash outflows at our Finance group due to
higher non-captive finance receivable originations, net of cash collections from repayments, sales and securitizations, of $301 million, $198 mil-
lion and $744 million, respectively.
The $380 million increase in cash used for the Manufacturing group in 2006 is largely due to the acquisition of two businesses in the Bell seg-
ment for $338 million in cash, along with an increase in capital expenditures of $63 million. In 2005, the Manufacturing group increased its use of
cash for investing by $204 million with $118 million in higher capital expenditures, along with a $38 million decrease in proceeds that were
received in 2004 from the sale of C&A common stock. The increases in capital expenditures in 2006 and 2005 are primarily related to higher
spending at the Bell segment in response to increased production demands. Capital expenditures related to our manufacturing operations totaled
$435 million in 2006, $371 million in 2005 and $282 million in 2004, including expenditures purchased through capital leases of $16 million in
2006, $15 million in 2005 and $44 million in 2004.
Financing Cash Flows of Continuing Operations
(In millions) 2006 2005 2004
Manufacturing group $ (1,072) $ (403) $ (708)
Finance group 1,391 587 361
Dividends paid by Finance group to Manufacturing group 80 100 71
Consolidated $ 399 $ 284 $ (276)
Our Manufacturing group used $669 million more cash for financing activities in 2006 compared with 2005. The increase is primarily due to the
paydown of $242 million of short-term debt in 2006 compared with the issuance of $281 million of short-term debt in 2005, and to a $164 million
increase in purchases of our common stock. Our Manufacturing group used less cash for financing activities in 2005 than in 2004 principally due
to the issuance of the short-term debt in 2005 and the retirement of debt of $300 million in 2004, partially offset by a $182 million increase in pur-
chases of our common stock and $81 million in lower proceeds from employee stock ownership plans. Our Finance group has continued to
increase its debt outstanding over the past three years to fund asset growth.