E-Z-GO 2002 Annual Report Download - page 26

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ables, partially offset by the net benefit of $49 million from restructuring activities. During 2001, Textron
recorded an impairment charge at OmniQuip of $317 million, including goodwill of $306 million and
intangibles of $11 million, as discussed in the “Special Charges” section.
Industrial Components
2002 vs. 2001
The Industrial Components segment’s revenues and profit decreased $1,547 million and $100 million,
respectively. Revenues and profit declined $1.666 billion and $94 million, respectively, due to the
divestitures of Trim, TECT and several small product lines in 2001. Excluding the divestitures, revenues
increased $119 million while profit decreased $6 million. The revenue increase was primarily due to
higher sales volume of $166 million at Kautex, primarily as a result of new product launches and a
stronger automotive market, and the favorable impact of foreign exchange of $27 million, partially offset
by lower volume of $51 million in the industrial businesses as a result of soft markets and customer price
reductions of $23 million. Excluding the divestitures, the profit decrease was primarily due to customer
price reductions of $23 million and the nonrecurring impact of a gain of $7 million on the sale of a prod-
uct line in 2001, partially offset by improved cost performance of $12 million and a contribution of $10
million from the higher volume.
2001 vs. 2000
The Industrial Components segment’s revenues and profit decreased $456 million and $126 million,
respectively. Revenues decreased due to lower volume of $334 million, primarily due to North American
automotive original equipment manufacturer production decreases, the divestiture of non-core product
lines of $92 million, customer price reductions of $75 million and the unfavorable impact of foreign
exchange of $20 million, partially offset by the contribution from acquisitions of $65 million. Profit
decreased due to the reduced contribution of $99 million from the lower sales, customer price reduc-
tions of $75 million, the lower contribution of $7 million from the sale of non-core product lines and the
unfavorable impact of $6 million from foreign exchange, partially offset by improved cost performance of
$52 million and a $7 million gain on the sale of a small product line.
Finance
2002 vs. 2001
The Finance segment’s revenues and profit decreased $79 million and $88 million, respectively. Rev-
enues decreased primarily due to lower average yields on finance receivables of $95 million (7.7% in
2002, compared to 9.4% in 2001) reflecting the lower interest rate environment, primarily due to reduc-
tions in the prime rate, partially offset by $8 million due to higher average finance receivables and higher
operating lease revenue of $8 million. Profit decreased due to a higher provision for losses of $57 million
($139 million in 2002 vs. $82 million in 2001), higher operating expenses of $21 million and lower interest
margin (7.18% in 2002 and 7.55% in 2001) of $10 million, primarily due to higher relative borrowing
costs. The increase in the provision for losses reflects higher net charge-offs of $54 million and the
strengthening of the allowance for losses on receivables. Higher net charge-offs reflect increases pri-
marily in liquidating portfolios including syndicated bank loans, principally related to the telecommuni-
cation industry, and small business finance. The allowance for losses on receivables as a percentage of
total finance receivables was 2.9% at December 28, 2002, compared to 2.6% at December 29, 2001.
The increase in operating expenses was primarily related to higher legal and collection expenses of $16
million and higher expenses of $6 million related to growth in managed receivables.
The Finance segment’s nonperforming assets include nonaccrual accounts that are not guaranteed by
Textron Manufacturing, for which interest has been suspended, and repossessed assets. During 2002,
nonperforming assets increased $84 million to 3.33% of finance assets from 2.13% at December 29,
2001. The significant components of this increase include $35 million in resort finance, $21 million in air-
craft finance, $17 million in media finance and $12 million in franchise finance. Textron Finance esti-
mates that nonperforming assets will generally be in the range of 2-4% of finance assets depending on
economic conditions. Textron Finance expects modest improvements in portfolio quality as it liquidates
certain portfolios. However, a prolonged economic downturn could have a negative effect on the overall
portfolio quality. The allowance for losses on receivables as a percentage of nonaccrual finance receiv-
ables was 92% at December 28, 2002, compared to 126% at December 29, 2001. The decrease in the
percentage represents an increase in nonaccrual finance receivables at December 28, 2002, supported
by strong collateral.
24
00 01 02
2% (13%) (49%)
$3,618
$3,162
$1,615
01 00 02
5% (37%) (47)%
$341
$215
$115
Industrial Components
Revenues
Segment Profit
00 01 02
49% 3% (11%)
$691
$709
$630
01 00 02
53% 1% (43)%
$202
$205
$117
Finance
Revenues
Segment Profit