E-Z-GO 1998 Annual Report Download - page 46

The activity in the allowance for losses on finance receivables is as follows:
(In millions) 1998 1997 1996
Balance at the beginning of the year $77 $75 $75
Provision for losses 18 21 27
Charge-offs (21) (25) (30)
Recoveries 563
Acquisitions 5––
Balance at the end of the year $84 $77 $75
Textron had both fixed-rate and variable-rate loan commitments totaling $432 million
at year-end 1998. Because interest rates on these commitments are not set until the loans
are funded, Textron is not exposed to interest rate changes.
A portion of TFC’s business involves financing the sale and lease of Textron products.
In 1998, 1997, and 1996, TFC paid Textron $980 million, $736 million, and $663 million,
respectively, for receivables and operating lease equipment. Operating agreements with
Textron specify that TFC generally has recourse to Textron with respect to these pur-
chases. At year-end 1998, finance receivables and operating lease equipment of $540 mil-
lion and $77 million, respectively, ($519 million and $77 million, respectively, at year-end
1997) were due from Textron or subject to recourse to Textron.
Textron Finance manages finance receivables for a variety of investors, participants and
third party portfolio owners. The total managed finance receivable portfolio, including
owned finance receivables, was $4,509 million and $3,829 million, respectively for 1998
and 1997.
Textron Finance’s finance receivables are diversified geographically across the United
States. There are no significant industry or collateral concentrations at the end of 1998.
4. Inventories are carried at the lower of cost or market.
January 2, January 3,
(In millions) 1999 1998
Finished goods $ 483 $ 454
Work in process 878 675
Raw materials 454 366
1,815 1,495
Less progress payments and customer deposits 175 146
$1,640 $1,349
Inventories aggregating $1,008 million at year-end 1998 and $894 million at year-end 1997
were valued by the last-in, first-out (LIFO) method. (Had such LIFO inventories been valued
at current costs, their carrying values would have been approximately $170 million and $159
million higher at those respective dates.) The remaining inventories, other than those related
to certain long-term contracts, are valued generally by the first-in, first-out method.
Inventories related to long-term contracts, net of progress payments and customer
deposits, were $178 million at year-end 1998 and $147 million at year-end 1997.
5. Long-term contracts
Revenues under fixed-price contracts are generally recorded as deliveries are made.
Certain long-term fixed-price contracts provide for the periodic delivery after a lengthy
period of time over which significant costs are incurred or require a significant
amount of development effort in relation to total contract volume. Revenues under those
contracts and all cost-reimbursement-type contracts are recorded as costs are incurred.
Revenues under the V-22 production contract with the U.S. Government, which presently
is a cost-reimbursement-type contract, are recorded as costs are incurred.
Certain contracts are awarded with fixed-price incentive fees. Incentive fees are consid-
ered when estimating revenues and profit rates, and are recorded when these amounts
are reasonably determined. Long-term contract profits are based on estimates of total
sales value and costs at completion. Such estimates are reviewed and revised periodically
throughout the contract life. Revisions to contract profits are recorded when the revisions
are made. Estimated contract losses are recorded when identified.
Long-term
Contracts
Inventories
42 1998 TEXTRON ANNUAL REPORT