E-Z-GO 2007 Annual Report Download - page 49

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Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations
Operating leases represent undiscounted obligations under noncancelable leases. Purchase obligations represent undiscounted obligations for
which we are committed to purchase goods and services as of December 29, 2007. The ultimate liability for these obligations may be reduced
based upon termination provisions included in certain purchase contracts, the costs incurred to date by vendors under these contracts or by
recourse under fi rm contracts with the U.S. Government under normal termination clauses.
In January 2005, we contracted with a third-party service provider for the oversight of our information technology infrastructure, including
maintenance, operational oversight and purchases of hardware (the “IT Contract”). The IT Contract covers a 10-year period and is subject to
variable pricing and quantity provisions for both purchases of computer hardware and system design modifi cations. We have retained the right to
approve signifi cant design, equipment purchase and related decisions by the service provider. We can terminate the IT Contract for convenience
prior to its full term and would consequently be subject to variable termination fees that decline over time and do not exceed $46 million at
December 29, 2007.
Finance Group
The following table summarizes our Finance group’s known contractual obligations, as defi ned by reporting regulations. Due to the nature of
fi nance companies, we also have contractual cash receipts that will be received in the future. We generally borrow funds at various contractual
maturities to match the maturities of our fi nance receivables. The contractual payments and receipts as of December 29, 2007 are detailed below:
Payments/Receipts Due by Period
Less than More than
(In millions) 1 Year 2 Years 3 Years 4 Years 5 Years 5 Years Total
Contractual payments:
Commercial paper and other
short-term debt $ 1,461 $ — $ — $ — $ — $ — $ 1,461
Term debt 1,259 1,551 1,913 592 42 477 5,834
Loan commitments 49 2 — 3 — — 54
Operating leases 6 5 4 4 1 2 22
Total contractual payments 2,775 1,558 1,917 599 43 479 7,371
Cash and receipts:
Finance receivables 3,362 1,484 669 645 686 1,757 8,603
Operating leases 28 23 22 19 15 30 137
Total receipts 3,390 1,507 691 664 701 1,787 8,740
Cash 60 — — — — — 60
Total cash and receipts 3,450 1,507 691 664 701 1,787 8,800
Net cash and receipts (payments) $ 675 $ (51) $ (1,226) $ 65 $ 658 $ 1,308 $ 1,429
Cumulative net cash and receipts $ 675 $ 624 $ (602) $ (537) $ 121 $ 1,429
Finance receivable receipts related to fi nance leases and term loans are based on contractual cash fl ows, while receipts related to revolving loans
are based on historical cash fl ow experience. These amounts could differ due to prepayments, charge-offs and other factors. Receipts and
contractual payments exclude fi nance charges from receivables, debt interest payments, proceeds from sale of operating lease equipment and
other items.
As shown in the preceding table, our cash and receipts are expected to be suffi cient to cover maturing debt and other contractual liabilities for the
next two years. At December 29, 2007, our Finance group had $2.7 billion in debt and $406 million in other liabilities that are payable within the
next 12 months.
At December 29, 2007, our Finance group had unused commitments to fund new and existing customers under $1.6 billion of committed
revolving lines of credit, compared with $1.3 billion at December 30, 2006. These loan commitments generally have an original duration of
less than three years and do not necessarily represent future cash requirements since many of the agreements will not be used to the extent
committed or will expire unused. We are not exposed to interest rate changes on these commitments since the interest rates are not set until the
loans are funded.