E-Z-GO 2007 Annual Report Download - page 46

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25
Textron Inc.
Finance Group Cash Flows of Continuing Operations
(In millions) 2007 2006 2005
Operating activities $ 262 $ 338 $ 247
Investing activities (281) (1,680) (950)
Financing activities 29 1,391 587
Cash used for investing activities decreased in 2007, compared with 2006, largely due to a $774 million decrease in fi nance receivable
originations, net of collections, a $481 million increase in proceeds from receivable sales and securitizations, and the $164 million impact in
2006 of cash used for an acquisition. Proceeds from receivable sales increased primarily due to the sale of $588 million of receivables into the
distribution fi nance revolving securitization in the fi rst quarter of 2007. In 2006, more cash was used for investing activities resulting in higher net
cash outfl ows for originations of $655 million, primarily due to increased growth in the fi nance receivable portfolio, partially offset by higher
proceeds from receivable sales of $130 million.
The decrease in fi nancing cash infl ows in 2007 primarily refl ects a reduction in borrowings due to lower managed receivable growth in
comparison with 2006. In addition, during 2007, we used the proceeds from the sale of receivables, including securitizations to fund asset
growth, instead of additional borrowings. In 2006, more cash was obtained from fi nancing activities, principally due to an increase in debt
outstanding to fund asset growth.
Consolidated Cash Flows of Continuing Operations
(In millions) 2007 2006 2005
Operating activities $ 1,027 $ 1,017 $ 952
Investing activities (1,469) (2,062) (1,223)
Financing activities 87 399 284
Operating cash fl ows have increased over the past three years, primarily due to earnings growth. Other sources and uses of cash from operating
activities are primarily related to our Manufacturing group and are discussed in more detail within the “Manufacturing Group Cash Flows of
Continuing Operations” section above.
Cash used for investing activities decreased in 2007, compared with 2006, largely due to a $786 million decrease in fi nance receivable
originations, net of collections (excluding $12 million from captive fi nancing activities) and a $424 million increase in proceeds from receivable
sales and securitizations collections (excluding $57 million from captive fi nancing activities). These decreases were partially offset by $590 million
in higher cash outfl ows for acquisitions. In 2007, we acquired four businesses, including AAI, for a total outfl ow of $1.1 billion, while in 2006, we
acquired three businesses for $502 million, including the Overwatch Systems and Electrolux Financial Corporation acquisitions.
We received less cash from fi nancing activities in 2007, primarily due to a reduction in borrowings, largely a result of lower managed receivable
growth in comparison with 2006. In addition, during 2007, we used the proceeds from the sale of receivables, including securitizations to fund
asset growth, instead of additional borrowings. The decrease in cash borrowed by the Finance group in 2007 from 2006 was partially offset by
proceeds from the issuance of $350 million in 10-year notes by the Manufacturing group in 2007, a $457 million decrease in the purchases of our
common stock and $90 million in lower dividend payments due to timing.
Captive Financing
Through our Finance group, we provide diversifi ed commercial fi nancing to third parties. In addition, this group fi nances retail purchases and
leases for new and used aircraft and equipment manufactured by our Manufacturing group, otherwise known as captive fi nancing. In the
Consolidated Statements of Cash Flows, cash received from customers or from securitizations is refl ected as operating activities when received
from third parties. However, in the cash fl ow information provided for the separate borrowing groups, cash fl ows related to captive fi nancing
activities are refl ected based on the operations of each group. For example, when product is sold by our Manufacturing group to a customer and
is fi nanced by the Finance group, the origination of the fi nance receivable is recorded within investing activities as a cash outfl ow in the Finance
group’s Statement of Cash Flows. Meanwhile, in the Manufacturing group’s Statement of Cash Flows, the cash received from the Finance group
on the customer’s behalf is recorded within operating cash fl ows as a cash infl ow. Although cash is transferred between the two borrowing groups,
there is no cash transaction reported in the consolidated cash fl ows at the time of the original fi nancing. These captive fi nancing activities, along
with all signifi cant intercompany transactions, are reclassifi ed or eliminated from the Consolidated Statements of Cash Flows.