E-Z-GO 2007 Annual Report Download - page 47

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Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations
Reclassifi cation and elimination adjustments included in the Consolidated Statement of Cash Flows are summarized below:
(In millions) 2007 2006 2005
Reclassifi cations from investing activities:
Finance receivable originations for Manufacturing group inventory sales $ (1,160) $ (1,015) $ (824)
Cash received from customers, sale of receivables and securitizations 881 691 724
Other (7) (36) 11
Total reclassifi cations from investing activities (286) (360) (89)
Dividends paid by Finance group to Manufacturing group (135) (80) (100)
Total reclassifi cations and adjustments $ (421) $ (440) $ (189)
Consolidated Discontinued Operations Cash Flows
(In millions) 2007 2006 2005
Operating activities $ 22 $ (48) $ 84
Investing activities 63 653 28
Financing activities — 2 (1)
Discontinued operations cash fl ows in 2007 are primarily related to the realization of cash tax benefi ts. In 2006, cash infl ows from investing
activities are primarily due to net cash proceeds of $636 million for the sale of the Fastening Systems business. See Note 2 to the Consolidated
Financial Statements for details concerning this sale.
Capital Resources
The debt (net of cash)-to-capital ratio for our Manufacturing group as of December 29, 2007 was 32%, compared with 29% at December 30,
2006, and the gross debt-to-capital ratio as of December 29, 2007 was 38%, compared with 40% at December 30, 2006.
Our Manufacturing group targets a gross debt-to-capital ratio that is consistent with an A rated company. Consistent with the methodology used
by members of the fi nancial community, leverage of the Manufacturing group excludes the debt of our Finance group. In turn, our Finance group
limits its borrowings to an amount, taking into account the risk profi le of its assets, consistent with a single A credit rating. Surplus capital of
Textron Financial Corporation is returned to Textron Inc.
Borrowings historically have been a secondary source of funds for our Manufacturing group and, along with the collection of fi nance receivables,
are a primary source of funds for our Finance group. Both borrowing groups utilize a broad base of fi nancial sources for their respective liquidity
and capital needs. Our credit ratings are predominantly a function of our ability to generate operating cash fl ows and satisfy certain fi nancial
ratios. Since high-quality credit ratings provide us with access to a broad base of global investors at an attractive cost, we target a long-term A
rating from the independent debt-rating agencies. The credit ratings and outlooks of these three debt-rating agencies by borrowing group are
as follows:
Standard &
Fitch Moody’s Poor’s
Long-term ratings:
Manufacturing A- A3 A-
Finance A- A3 A-
Short-term ratings:
Manufacturing F2 P2 A2
Finance F2 P2 A2
Outlook Positive Stable Stable
Under separate shelf registration statements fi led with the Securities and Exchange Commission, we may issue public debt and other securities in
one or more offerings up to a total maximum offering of $2.0 billion, and the Finance group may issue an unlimited amount of public debt
securities. In the fourth quarter of 2007, we issued $350 million in 10-year notes under our registration statement. At December 29, 2007, we had
$1.2 billion available under our registration statement. During 2007, the Finance group issued $1.4 billion of term debt and CAD 220 million of
term debt under its registration statement. In addition, the Finance group issued $300 million of 6% Fixed-to-Floating Rate Junior Subordinated
Notes, which mature in 2067. The Finance group has the right to redeem the notes at par beginning in 2017 and is obligated to redeem the notes
beginning in 2042.