E-Z-GO 2009 Annual Report Download - page 71

Notes to the Consolidated Financial Statements
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Both borrowing groups extinguished through open market repurchases an aggregate of $745 million in outstanding debt securities prior to
maturity during 2009, resulting in gains of $54 million. Also in 2009, both borrowing groups completed separate cash tender offers for up to a
$650 million aggregate principal amount of five separate series of outstanding debt securities with maturity dates ranging from November 2009 to
June 2012. In completing these tender offers, we extinguished an aggregate of $587 million of outstanding debt securities with maturity dates
ranging from 2009 to 2012 and recognized a loss of $1 million in 2009.
The following table shows required payments during the next five years on debt outstanding at January 2, 2010:
(In millions) 2010 2011 2012 2013 2014
Manufacturing group $ 134 $ 18 $ 1,326 $ 950 $ 5
Finance group 1,738 506 1,895 672 197
$ 1,872 $ 524 $ 3,221 $ 1,622 $ 202
On July 14, 2009, a finance subsidiary of Textron Inc. entered into a credit agreement with the Export-Import Bank of the United States that
established a $500 million credit facility to provide funding to finance purchases of aircraft by non-U.S. buyers from Cessna and Bell. The facility
is structured to be available for financing sales to international customers who take delivery of new aircraft by December 2010. At January 2,
2010, we had $179 million in outstanding notes under this facility that are due in 2015 and thereafter.
Our aggregate $3 billion in committed bank lines of credit historically have been in support of commercial paper and letters of credit issuances
only. 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 are due in April 2012. There were no borrowings
outstanding related to these lines of credit at the end of 2008.
4.50% Convertible Senior Notes
On May 5, 2009, we issued $600 million of 4.50% Convertible Senior Notes (Convertible Notes) with a maturity date of May 1, 2013 and interest
payable semiannually on May 1 and November 1. The Convertible Notes are convertible at the holder’s option, under certain circumstances, into
shares of our common stock at an initial conversion rate of 76.1905 shares of common stock per $1,000 principal amount of Convertible Notes,
which is equivalent to an initial conversion price of approximately $13.125 per share. Upon conversion, we have the right to settle the conversion
of each $1,000 principal amount of Convertible Notes with any of the three following alternatives: (1) shares of our common stock, (2) cash or (3)
a combination of cash and shares of our common stock.
The Convertible Notes are convertible only under the following certain circumstances: (1) during any calendar quarter commencing after June 30,
2009 and only during such calendar quarter if the last reported sale price of our common stock for at least 20 trading days during the 30
consecutive trading days ending on the last trading day of the preceding calendar quarter is more than 130% of the applicable conversion price
per share of common stock on the last trading day of such preceding calendar quarter, (2) during the five-business-day period after any 10
consecutive trading day measurement period in which the trading price per $1,000 principal amount of Convertible Notes for each day in the
measurement period was less than 98% of the product of the last reported sale price of our common stock and the applicable conversion rate, (3)
if specified distributions to holders of our common stock are made or specified corporate transactions occur or (4) at any time on or after February
19, 2013.
Our common stock price exceeded the conversion threshold price of $17.06 per share for at least 20 trading days during the 30 consecutive
trading days ended December 31, 2009. Accordingly, the notes are convertible at the holder’s option through March 31, 2010. We may deliver
shares of common stock, cash or a combination of cash and shares of common stock in satisfaction of our obligations upon conversion of the
Convertible Notes. We intend to settle the face value of the Convertible Notes in cash. We have continued to classify these Convertible Notes as
long-term based on our intent and ability to maintain the debt outstanding for a least one year through the use of various funding sources
available to us.
The net proceeds from the issuance of the Convertible Notes totaled approximately $582 million after deducting discounts, commissions and
expenses. The Convertible Notes are accounted for in accordance with generally accepted accounting principles, which require us to separately
account for the liability (debt) and the equity (conversion option) components of the Convertible Notes in a manner that reflects our non-
convertible debt borrowing rate. Accordingly, we recorded a debt discount and corresponding increase to additional paid-in capital of
approximately $135 million as of the date of issuance. We are amortizing the debt discount utilizing the effective interest method over the life of
the Convertible Notes, which increases the effective interest rate of the Convertible Notes from its coupon rate of 4.50% to 11.72%. Transaction
costs of $18 million were proportionately allocated between the liability and equity components.