E-Z-GO 2009 Annual Report Download - page 39

30
Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations
Cash flows from continuing operations for the Manufacturing group as presented in our Consolidated Statement of Cash Flows are
summarized below:
(In millions) 2009 2008 2007
Operating activities $ 738 $ 407 $ 1,144
Investing activities (288) (637) (1,469)
Financing activities 563 (159) (75)
Cash flow from operating activities increased $331 million in 2009, compared with 2008, largely due to $562 million in lower capital
contributions paid to the Finance group, net of dividends received, and working capital improvements, partially offset by lower earnings. We used
$48 million in working capital in 2009, compared with $434 million in 2008, largely related to significant inventory reductions. In 2008, cash flow
from operating activities decreased, primarily due to a $625 million capital contribution made to the Finance group.
Investing cash flows in 2009, 2008 and 2007 primarily include capital expenditures of $238 million, $537 million and $369 million, respectively.
The decrease in 2009 is largely due to a reduction in discretionary spending due to the economic recession. In addition, in 2008 and 2007, we
paid $109 million and $1.1 billion, respectively, for acquisitions, primarily related to AAI.
Financing activities provided more cash in 2009, compared with 2008, primarily due to the draw of our $1.2 billion on bank lines of credit, a
portion of which was used to repay outstanding commercial paper borrowings, net proceeds of $442 million from the issuance of the Convertible
Notes (net of hedge), $333 million in cash from the issuance of our common stock and common stock warrants, $595 million in net proceeds
from the issuance of senior notes and a decrease in dividends paid. These increases in cash provided were partially offset by an $869 million
decrease in commercial paper borrowings in 2009, compared with an $867 million increase in these borrowings in 2008. In addition, we made
$412 million in payments to settle advances against our company-owned officer life insurance policies in 2009, while in 2008, we received
$222 million in advances against these policies.
We have not repurchased any of our common stock (other than in connection with an executive compensation award) since we suspended all
share repurchase activity under our repurchase program in September 2008. Under Board-authorized share repurchase programs, we spent
$533 million in 2008 and $304 million in 2007 for share repurchases representing approximately 12 million and 6 million shares of common
stock, respectively.
On February 25, 2009, we announced that our Board of Directors had voted to reduce our quarterly dividend to $0.02 per share for the first
quarter of 2009 in an effort to increase our liquidity in the long-term interest of our shareholders. Accordingly, the annual dividend decreased to
$0.08 in 2009 from $0.92 in 2008. Dividend payments to shareholders totaled $21 million, $284 million and $154 million in 2009, 2008 and
2007, respectively. In 2008, the timing of our quarterly dividend payments resulted in four payments, compared with three payments in 2007.
Capital Contributions Paid To and Dividends Received From the Finance Group
Under a Support Agreement between Textron Inc. and TFC, Textron Inc. is required to maintain a controlling interest in TFC. The agreement also
requires Textron Inc. to ensure that TFC maintains fixed charge coverage of no less than 125% and consolidated shareholder’s equity of no less
than $200 million. Due to a goodwill impairment charge of $169 million at TFC, along with other charges resulting from the exit plan discussed
above, on December 29, 2008, Textron Inc. was required to make a cash payment to TFC, which was reflected as a capital contribution, to
maintain compliance with the fixed charge coverage ratio required by the support agreement and to maintain the leverage ratio required by its
credit facility. Cash contributions paid to TFC and dividends paid by TFC to Textron Inc. are detailed below.
(In millions) 2009 2008 2007
Dividends paid by TFC to Textron Inc. $ 349 $ 142 $ 135
Capital contributions paid to TFC under Support Agreement (270) (625) —
An additional cash contribution of $75 million was made to TFC on January 12, 2010 to maintain compliance with the fixed charge coverage
ratio required by the Support Agreement.