E-Z-GO 2007 Annual Report Download - page 45

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24
Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations
We assess liquidity for our Manufacturing group in terms of our ability to provide adequate cash to fund our operating, investing and fi nancing
activities. Our principal source of liquidity is operating cash fl ows. We also have liquidity available to us via committed bank lines of credit and
the commercial paper market, as well as access to the public capital markets that provide us with long-term capital at satisfactory terms.
For 2008, we expect future signifi cant uses of cash for our Manufacturing group to include investments in businesses and new product
development, capital expenditures, repurchases of common stock, dividends to shareholders and debt retirement. For 2008, we expect capital
expenditures of about $550 million and stock repurchases in the range of 3 million to 4 million shares. We expect to fund both of these future
uses of cash with cash generated by operating activities.
Our Finance group mitigates liquidity risk (i.e., the risk that we will be unable to fund maturing liabilities or the origination of new fi nance
receivables) by developing and preserving reliable sources of capital. We use a variety of fi nancial resources to meet these capital needs. Cash for
the Finance group is provided from fi nance receivable collections, sales and securitizations, as well as the issuance of commercial paper and term
debt in the public and private markets. This diversity of capital resources enhances its funding fl exibility, limits dependence on any one source of
funds, and results in cost-effective funding. The Finance group also can borrow from the Manufacturing group when the availability of such
borrowings creates an economic advantage to Textron in comparison with borrowings from other sources. In making particular funding decisions,
management considers market conditions, prevailing interest rates and credit spreads, and the maturity profi le of its assets and liabilities.
On July 18, 2007, our Board of Directors approved a two-for-one split of our common stock to be effected in the form of a 100% stock dividend.
The additional shares resulting from the stock split were distributed on August 24, 2007 to shareholders of record on August 3, 2007. Also, on
July 18, 2007, our Board of Directors approved a 19% increase in our annualized common stock dividend rate from $0.775 per share to $0.92 per
share and authorized the repurchase of up to 24 million shares of our common stock. The rate at which we expect to repurchase shares under this
authorization will depend on various factors, including prevailing share price and alternate uses of cash.
Manufacturing Group Cash Flows of Continuing Operations
(In millions) 2007 2006 2005
Operating activities $ 1,186 $ 1,119 $ 894
Investing activities (1,474) (742) (362)
Financing activities (77) (1,072) (403)
Operating cash fl ows have increased over the past three years, primarily due to earnings growth. Changes in our working capital components
resulted in a $50 million use of cash in 2007, a $206 million source of cash in 2006 and a $21 million use of cash in 2005. A signifi cant use of
operating cash is related to increased production and inventory build-up primarily to support increasing sales at Bell and Cessna. Cash used for
inventories totaled $473 million, $379 million and $181 million in 2007, 2006 and 2005, respectively. Partially offsetting the use of cash for
inventories, and also related to increasing sales, were customer deposits within accrued liabilities, which provided a signifi cant source of operating
cash. Net cash received from customers on deposit totaled $297 million, $141 million and $(28) million in 2007, 2006 and 2005, respectively.
Investing cash fl ows have largely been driven by cash outfl ows for acquisitions that totaled $1.1 billion in 2007, largely due to the acquisition of
AAI, and $338 million in 2006, primarily due to Overwatch Systems. Other signifi cant investing cash outfl ows include capital expenditures of
$391 million in 2007, $419 million in 2006 and $356 million in 2005.
We used $995 million less cash for fi nancing activities in 2007, compared with 2006. The decrease is due principally to the issuance of
$350 million in 10-year notes in 2007, the paydown of $242 million of short-term debt in 2006 and a $457 million decrease in 2007 in purchases
of our common stock from 2006. In 2007, 2006 and 2005, we repurchased approximately 6 million, 17 million and 16 million shares of common
stock, respectively, under Board-authorized share repurchase programs.
Dividend payments to shareholders totaled $154 million, $244 million and $189 million in 2007, 2006 and 2005, respectively. The timing of our
quarterly dividend payments resulted in three payments in 2007, fi ve payments in 2006 and four payments in 2005.