E-Z-GO 2008 Annual Report Download - page 42

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29
Textron Inc.
We expect the economic uncertainty and capital market turbulence to continue into 2009. In order to ensure that we have sufficient liquidity to
repay our maturing debt obligations during the first quarter of 2010 and beyond, our focus will be the maximization of cash flow through the
following initiatives:
– Liquidation of finance receivables, including selected sales of finance receivables held for sale by our Finance group;
– Realignment of production in our commercial manufacturing businesses to match lower expected demand;
– Cost reduction activities, including reducing our workforce, freezing salaries, curtailing most discretionary spending, including some
reductions in product development, and reducing most areas of discretionary capital spending; and
– Reduction of working capital with a focus on inventory management.
In 2008, our Board of Directors declared quarterly dividends of $0.23 per common share. On February 25, 2009, we announced that our Board of
Directors has voted to reduce our quarterly dividend to $0.02 per share for the first quarter of 2009. This decision is intended to increase our
liquidity in the long-term interest of our shareholders. The decision to pay a dividend is reviewed quarterly and requires declaration by our Board
of Directors.
In addition, we are continuing to explore other potential avenues of liquidity, including funding sources in the capital markets and are actively
pursuing new financing structures for the Finance group, which would be secured directly by its finance receivable portfolio, as well as extensions
of existing securitization vehicles. In December 2008, the Finance group extended the revolving term of its Aviation Finance securitization by one
year, which is estimated to provide additional liquidity of approximately $100 million during 2009 as the current portfolio securing this funding
source matures and is replaced with additional finance receivables.
Depending on the success of the above cash flow initiatives and changes in external factors affecting the marketability and value of our assets, we
may consider the sale of additional assets in the finance business or the sale of certain manufacturing businesses. We believe that with the
successful execution of the Finance group’s exit plan, combined with other liquidity actions discussed above and the cash we expect to generate
from our manufacturing operations, we will be able to raise cash sufficient to meet our future liquidity needs.
Bank Facilities and Other Sources of Capital
Our aggregate $3.0 billion in committed bank lines of credit have historically been in support of commercial paper and letters of credit issuances
only. There were no borrowings outstanding related to the Manufacturing group’s $1.25 billion facility or the Finance group’s $1.75 billion facility
at the end of 2008 or 2007. In February 2009, due to the unavailability of term debt and difficulty in accessing sufficient commercial paper on a
daily basis, we drew the available balance from these credit facilities. Amounts borrowed under the credit facilities will not be due until April 2012.
A portion of the proceeds will be used to repay all of our outstanding commercial paper as it comes due.
The debt (net of cash)-to-capital ratio for our Manufacturing group was 46% at January 3, 2009, compared with 32% at December 29, 2007, and
the gross debt-to-capital ratio at January 3, 2009 was 52%, compared with 38% at December 29, 2007.
The Manufacturing group maintains an effective shelf registration statement filed with the Securities and Exchange Commission that allows it to
issue an unlimited amount of public debt and other securities, and the Finance group maintains an effective shelf registration statement that
allows it to issue an unlimited amount of public debt securities. In the first half of 2008, the Finance group issued $675 million of term debt under
its registration statement.
Contractual Obligations
Finance Group
Due to the nature of finance companies, we believe that it is meaningful to include contractual cash receipts that we expect to receive in the future.
The Finance group generally borrows funds at various contractual maturities to match the maturities of its finance receivables. The following table
summarizes the Finance group’s liquidity position, including all managed finance receivables and both on- and off-balance sheet funding sources
as of January 3, 2009, for the specified periods: