E-Z-GO 1999 Annual Report Download - page 49

portfolio. Management evaluates the allowance by examining current delinquencies, the charac-
teristics of the existing accounts, historical loss experience, the value of the underlying collateral,
and general economic conditions and trends.
Finance receivables are written-off when they are determined to be uncollectible. Finance
receivables are written down to the fair value of the related collateral (less estimated costs to
sell) when the collateral is repossessed or when no payment has been received for six months,
unless management deems the loans collectible. Foreclosed real estate loans and repossessed
assets are transferred from finance receivables to other assets at the lower of fair value (less
estimated costs to sell) or the outstanding loan balance.
Commercial installment contracts have initial terms ranging from one to 12 years.
Commercial real estate and golf course mortgages have initial terms ranging from three
to seven years. Finance leases have initial terms up to 12 years. Leveraged leases have
initial terms up to approximately 30 years. Floorplan and revolving receivables generally
mature within one year.
At the end of 1999 and 1998, Textron Finance had nonaccrual loans and leases totaling
$84 million and $70 million, respectively. Approximately $65 million and $46 million of
these respective amounts were considered impaired, which excludes finance leases and
homogeneous loan portfolios. The allowance for losses on receivables related to impaired
loans was $21 million and $15 million at the end of 1999 and 1998. The average recorded
investment in impaired loans during 1999 and 1998 were $47 million and $51 million,
respectively. The percentage of net write-offs to average finance receivables was 0.5% in
1999, 0.5% in 1998, and 0.6% in 1997.
The following table displays the contractual maturity of the finance receivables. It
does not necessarily reflect future cash collections because of various factors including
the refinancing of receivables and repayments prior to maturity. Cash collections from
receivables, excluding finance charges and portfolio sales, were $3.9 billion and $3.4 billion
in 1999 and 1998, respectively. In the same periods, the ratio of cash collections to average
net receivables was approximately 96% and 108%, respectively.
Less Finance receivables
Contractual maturities finance outstanding
(In millions) 2000 2001 After 2001 charges 1999 1998
Installment contracts $ 435 $327 $1,577 $202 $2,137 $1,339
Floorplan receivables 573 78 7 1 657 572
Revolving loans 614 176 619 9 1,400 556
Finance leases 153 139 323 106 509 424
Real estate and golf
course mortgages 124 38 391 4 549 375
Leveraged leases 29 11 589 281 348 346
$1,928 $769 $3,506 $603 5,600 3,612
Less allowance for credit losses 113 84
$5,487 $3,528
The net investment in finance leases and leveraged leases were as follows:
(In millions) 1999 1998
Finance and leveraged lease receivables $ 656 $ 590
Estimated residual values on equipment and assets 589 559
1,245 1,149
Unearned income (388) (379)
Investment in leases 857 770
Deferred income taxes arising from leveraged leases (260) (256)
Net investment in leases $ 597 $ 514
The activity in the allowance for losses on finance receivables is as follows:
(In millions) 1999 1998 1997
Balance at the beginning of the year $84 $ 77 $ 75
Provision for losses 32 20 21
Charge-offs (28) (21) (25)
Recoveries 556
Acquisitions and other 20 3 –
Balance at the end of the year $113 $ 84 $ 77
1999 Textron Annual Report 47