E-Z-GO 2014 Annual Report Download - page 64

The following table shows required payments during the next five years on debt outstanding at January 3, 2015:
(In millions)
2015
2016
2017
2018
2019
Manufacturing group
$ 8
$ 408
$ 358
$ 82
$ 480
Finance group
128
302
96
70
54
Total
$ 136
$ 710
$ 454
$ 152
$ 534
Textron has a senior unsecured revolving credit facility that expires in October 2018 for an aggregate principal amount of $1.0
billion, of which up to $100 million is available for the issuance of letters of credit. At January 3, 2015, there were no amounts
borrowed against the facility, and there were $35 million of letters of credit issued against it.
6% Fixed-to-Floating Rate Junior Subordinated Notes
The Finance group’s $299 million of 6% Fixed-to-Floating Rate Junior Subordinated Notes are unsecured and rank junior to all of
its existing and future senior debt. The notes mature on February 15, 2067; however, we have the right to redeem the notes at par
on or after February 15, 2017 and are obligated to redeem the notes beginning on February 15, 2042. Interest on the notes is fixed
at 6% until February 15, 2017 and floats at the three-month London Interbank Offered Rate + 1.735% thereafter.
Support Agreement
Under a Support Agreement, Textron Inc. is required to ensure that TFC maintains fixed charge coverage of no less than 125% and
consolidated shareholder’s equity of no less than $200 million. Cash payments of $240 million were made to TFC in 2012 to
maintain compliance with the fixed charge coverage ratio.
Note 8. Derivative Instruments and Fair Value Measurements
We measure fair value at the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction
between market participants at the measurement date. We prioritize the assumptions that market participants would use in pricing
the asset or liability into a three-tier fair value hierarchy. This fair value hierarchy gives the highest priority (Level 1) to quoted
prices in active markets for identical assets or liabilities and the lowest priority (Level 3) to unobservable inputs in which little or
no market data exist, requiring companies to develop their own assumptions. Observable inputs that do not meet the criteria of
Level 1, which include quoted prices for similar assets or liabilities in active markets or quoted prices for identical assets and
liabilities in markets that are not active, are categorized as Level 2. Level 3 inputs are those that reflect our estimates about the
assumptions market participants would use in pricing the asset or liability based on the best information available in the
circumstances. Valuation techniques for assets and liabilities measured using Level 3 inputs may include methodologies such as
the market approach, the income approach or the cost approach and may use unobservable inputs such as projections, estimates
and management’s interpretation of current market data. These unobservable inputs are utilized only to the extent that observable
inputs are not available or cost effective to obtain.
Assets and Liabilities Recorded at Fair Value on a Recurring Basis
We manufacture and sell our products in a number of countries throughout the world, and, therefore, we are exposed to
movements in foreign currency exchange rates. We utilize foreign currency exchange contracts to manage this volatility. Our
foreign currency exchange contracts are measured at fair value using the market method valuation technique. The inputs to this
technique utilize current foreign currency exchange forward market rates published by third-party leading financial news and data
providers. These are observable data that represent the rates that the financial institution uses for contracts entered into at that
date; however, they are not based on actual transactions so they are classified as Level 2. At January 3, 2015 and December 28,
2013, we had foreign currency exchange contracts with notional amounts upon which the contracts were based of $696 million and
$636 million, respectively. At January 3, 2015, the fair value amounts of our foreign currency exchange contracts were a $16
million asset and a $26 million liability. At December 28, 2013, the fair value amounts of our foreign currency exchange contracts
were a $2 million asset and a $15 million liability.
We primarily utilize forward exchange contracts which have maturities of no more than three years. These contracts qualify as
cash flow hedges and are intended to offset the effect of exchange rate fluctuations on forecasted sales, inventory purchases and
overhead expenses. At January 3, 2015, we had a net deferred loss of $13 million in Accumulated other comprehensive loss
related to these cash flow hedges. Net gains and losses recognized in earnings and Accumulated other comprehensive loss on cash
flow hedges, including gains and losses related to hedge ineffectiveness, were not significant in the periods presented.
We hedge our net investment position in major currencies and generate foreign currency interest payments that offset other
transactional exposures in these currencies. To accomplish this, we borrow directly in foreign currency and designate a portion of
foreign currency debt as a hedge of a net investment. We record changes in the fair value of these contracts in other comprehensive
58 Textron Inc. Annual Report • 2014