E-Z-GO 2008 Annual Report Download - page 80

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Textron Inc.
hedge of net investments. We also may utilize currency forwards as hedges of our related foreign net investments. Currency effects of these
hedges, which are reflected in the cumulative translation adjustment account within other comprehensive income (loss), produced a $46 million
after-tax gain during 2008, leaving an accumulated net gain balance of $3 million.
Stock-Based Compensation Hedges
We manage the expense related to stock-based compensation awards using cash settlement forward contracts on our common stock. The use of
these forward contracts modifies compensation expense exposure to changes in the stock price with the intent to reduce potential variability. Cash
received or paid on the contract settlement is included in cash flows from operating activities, consistent with the classification of the cash flows
on the underlying hedged compensation expense.
Fair Values of Derivative Instruments
Assets Liabilities
(In millions) 2008 2007 2008 2007
Derivatives designated as hedging instruments
Fair value hedges
Finance group:
Interest rate exchange contracts $ 112 $ 19 $ (7) $ (1)
Total fair value hedges 112 19 (7) (1)
Cash flow hedges
Manufacturing group:
Foreign currency exchanges contracts 2 50 (41) (6)
Commodity contracts — — (4) (4)
Forward contracts for Textron Inc. stock — 62 (98) —
Finance group:
Interest rate exchange contracts 21 — (1) —
Total cash flow hedges 23 112 (144) (10)
Total derivatives designated as hedging instruments $ 135 $ 131 $ (151) $ (11)
Derivatives not designated as hedging instruments
Manufacturing group:
Foreign currency exchange contracts $ — $ — $ (43) $ (8)
Finance group:
Interest rate exchange contracts — — (13) —
Total derivatives not designated as hedging instruments $ — $ — $ (56) $ (8)
The fair values of derivative instruments for the Manufacturing group are included in either other current assets or accrued liabilities in our
balance sheet. For the Finance group, they are included in either other assets or other liabilities.
The effect of derivative instruments in the statements of operations is as follows:
Amount of Gain(Loss)
(In millions) Gain(Loss) Location 2008 2007
Fair Value Hedges
Manufacturing group:
Interest rate exchange contracts Interest expense, net $ — $ (5)
Finance group:
Interest rate exchange contracts Interest expense, net 113 37
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