E-Z-GO 1999 Annual Report Download - page 34

ongoing margin improvement, primarily at Golf, Turf Care And Specialty Products and
Textron Systems. These benefits were partially offset by the divestitures of Speidel in the
fourth quarter 1997 and Fuel Systems in the second quarter 1998, the impact of a one-month
strike at a Textron Turf Care And Specialty Products plant in the second quarter 1998, and
unfavorable contract adjustments related to certain Industrial Component products.
Finance
1999 vs. 1998
The Finance segment’s revenues increased $96 million (26%), while income increased
$15 million (13%). Revenues increased due to a higher level of average receivables
($4.252 billion in 1999 vs. $3.190 billion in 1998), reflecting both acquisitive and
organic growth, and an increase in syndication and servicing fee income. This was
partially offset by lower yields on receivables, reflecting lower prevailing interest rates.
Income increased as the benefit of higher revenues was partially offset by higher expenses
related to growth in managed receivables and a higher provision for loan losses related to
growth in receivables and higher charge-offs in the revolving credit portfolio. This was
partially offset by a lower provision for loan losses in the real estate portfolio. Included in
1999 results was a gain of $4.7 million on the sale of an investment in the third quarter,
while third quarter 1998 results included a gain of $3.4 million on the securitization of
Textron-related receivables.
1998 vs. 1997
The Finance segment’s revenues increased $17 million (5%), while income increased
$5 million (5%). Revenues increased due to a higher level of average receivables
($3.190 billion in 1998 vs. $3.128 billion in 1997) and an increase in residual, prepay-
ment and portfolio servicing income. Income increased as the benefit of the higher
revenues and a lower provision for losses was partially offset by higher expenses related
to growth in managed receivables. Both years included a gain of approximately
$3 million on the securitization of Textron-related receivables.
Special (credits)/charges
As discussed in Note 16, Textron has recorded pre-tax charges of $18 million and
$87 million in 1999 and 1998, respectively, related to restructuring activities. The charges
include asset impairments, severance costs, and other exit related costs associated with
cost reduction programs and announced plant closures. Textron continues to evaluate
additional programs and expects cost reduction efforts to continue over the next year.
Additional charges may be required in the future when such programs become finalized.
In the third quarter of 1999, Textron recorded a gain of $19 million as a result of
shares granted to Textron from Manulife Financial Corporation’s initial public offering
on their demutualization of Manufacturers Life Insurance Company.
Discontinued Operations
In August 1998, Textron announced that it had reached an agreement to sell Avco
Financial Services (AFS) to Associates First Capital Corporation. The sale was completed
on January 6, 1999. AFS has been classified as a discontinued operation for all periods.
1998 vs. 1997
Income from discontinued operations of $165 million was $21 million lower than 1997’s
income from discontinued operations of $186 million. The decrease was due to (a) lower
earnings in the U.S. Finance business as a result of an increase in the provision for
receivables (receivables increased in 1998 while receivables decreased in 1997) and a
decrease in the gain on sales of receivables, (b) lower earnings in Hong Kong due to a
weakening economy and (c) the unfavorable impact of foreign exchange rates primarily
in Australia and Canada. This unfavorable impact was partially offset by an increase in
insurance earnings due to improved loss experience and an increase in capital gains.
The liquidity and capital resources of Textron’s operations are best understood by sepa-
rately considering its independent borrowing groups, Textron Manufacturing and Textron
Finance. Textron Manufacturing consists of Textron Inc., the parent company, consoli-
dated with the entities which operate in the Aircraft, Automotive and Industrial business
Liquidity & Capital
Resources
Discontinued
Operations
32 Consistent Growth
$463
$367
$350
999897
26%5%7%
Finance
Revenues
$128
$113
$108
999897
13%5%13%
Operating
Income