E-Z-GO 2008 Annual Report Download - page 48

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35
Consolidated Discontinued Operations Cash Flows
The cash flows from discontinued operations are summarized below:
(In millions) 2008 2007 2006
Operating activities $ (23) $ 54 $ (3)
Investing activities 476 64 641
Financing activities (2) (2) 1
In the fourth quarter of 2008, we received net cash proceeds from the sale of the Fluid & Power business of approximately $479 million, which is
recorded in investing activities. After taxes and other deal-related expenses are paid, we expect total net after-tax proceeds for the sale to be
approximately $380 million. This excludes any cash proceeds related to the final payment to be determined based on the Fluid & Power 2008
operating results. In 2007, cash flows from investing activities are primarily related to the realization of cash tax benefits from the Fastening
Systems business. In 2006, cash inflows from investing activities include 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 these dispositions.
Off-Balance Sheet Arrangements
Performance Guarantee
In 2004, through our Bell Helicopter business, we formed AgustaWestlandBell LLC (AWB LLC) with AgustaWestland North America Inc. (AWNA).
This venture was created for the joint design, development, manufacture, sale, customer training and product support of the VH-71 helicopter, and
certain variations and derivatives thereof, to be offered and sold to departments or agencies of the U.S. Government. In March 2005, AWB LLC
received a $1.2 billion cost reimbursement-type subcontract from Lockheed Martin for the System Development and Demonstration phase of the
U.S. Marine Corps Helicopter Squadron Program, which was increased to $1.4 billion in December 2008. We guaranteed to Lockheed Martin the
due and prompt performance by AWB LLC of all its obligations under this subcontract, provided that our liability under the guaranty shall not
exceed 49% of AWB LLC’s aggregate liability to Lockheed Martin under the subcontract. AgustaWestland N.V., AWNA’s parent company, has
guaranteed the remaining 51% to Lockheed Martin. We have entered into cross-indemnification agreements with AgustaWestland N.V. in which
each party indemnifies the other related to any payments required under these agreements that result from the indemnifying party’s workshare
under any subcontracts received. AWB LLC’s maximum obligation is 50% of the total contract value, of $676 million, for a maximum amount of
our liability under the guarantee of $331 million at January 3, 2009 through completion. Under the current phase of the contract, we do not believe
that there is any performance risk with respect to the guarantee. In late January 2009, the Pentagon declared a Nunn-McCurdy Act breach for this
program due to cost overruns, requiring recertification of the program. We do not have enough information at this time to make a determination of
whether the program will be recertified; however, if the program were to be terminated, we do not believe that the guarantee will be triggered as it
relates solely to performance under the subcontract.
Finance Receivable Sales and Securitizations
The Finance group primarily sells finance receivables utilizing asset-backed securitization structures. As a result of these transactions, finance
receivables are removed from the balance sheet, and the proceeds received are used to reduce recorded debt levels. Despite the reduction in the
recorded balance sheet position, we generally retain a subordinated interest in the finance receivables sold through securitizations, which may
affect operating results through periodic fair value adjustments.
We utilize off-balance sheet financing arrangements to further diversify funding alternatives, and termination of these arrangements would reduce
our short-term funding alternatives, which could result in increased funding costs for our managed finance receivable portfolio. While these
arrangements do not contain provisions that require us to repurchase significant amounts of receivables previously sold, there are risks that
could reduce the availability of these funding alternatives in the future. Potential barriers to the continued use of these off-balance sheet
arrangements include deterioration in finance receivable portfolio quality, downgrades in our debt credit ratings, and a reduction of new finance
receivable originations in the businesses that utilize these funding arrangements. We do not expect any of these factors to have a material impact
on our liquidity or income from operations, and if we were required to consolidate these arrangements, it would have no impact on our existing
debt covenants.
Textron Inc.