E-Z-GO 2002 Annual Report Download - page 49

Finance Receivables
Textron Finance provides financial services primarily to the aircraft, golf, vacation interval resort, dealer
floorplan and middle market industries under a variety of financing vehicles with various contractual
maturities.
Installment contracts and finance leases have initial terms ranging from one to 20 years, and are primari-
ly secured by the financed equipment. Finance leases include residual values expected to be realized
at contractual maturity. Distribution finance and revolving loans generally mature within one to five years.
Distribution finance receivables are generally secured by the inventory at the financed distributor, while
revolving loans are secured by trade receivables, inventory, plant and equipment, and pools of vacation
interval notes receivables, pools of residential and recreational land lots and the underlying real proper-
ty. Golf course mortgages have initial terms ranging from five to seven years with amortization periods
from 15 to 25 years. Resort mortgages generally represent construction and inventory loans with terms
up to two years. Golf course and resort mortgages are secured by real property and are generally limit-
ed to 75% or less of the property’s appraised market value at loan origination. Leveraged leases are
secured by the ownership of the leased equipment and real property and have initial terms up to 30
years.
At the end of 2002 and 2001, Textron Finance had nonaccrual finance receivables, excluding receiv-
ables with recourse to the Manufacturing group, totaling $182 million and $114 million, respectively.
Approximately $122 million and $54 million of these respective amounts were considered impaired,
which excludes finance leases and homogeneous loan portfolios. The allowance for losses on finance
receivables related to impaired loans was $33 million and $11 million at the end of 2002 and 2001,
respectively. The average recorded investment in impaired loans during 2002 was $97 million, com-
pared to $51 million in 2001.
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 repayment or refinancing of
receivables prior to contractual maturity. Cash collections of finance receivables, excluding proceeds
from receivable sales or securitizations, were $7.7 billion and $5.8 billion in 2002 and 2001, respectively.
The ratio of cash collections (net of finance charges) to average net receivables, excluding distribution
finance receivables and revolving loans, was approximately 54% in 2002 and 65% in 2001.
Finance Receivables
Contractual Maturities Outstanding
(In millions) 2003 2004 2005 2006 Thereafter 2002 2001
Installment contracts $ 275 $ 234 $ 187 $ 166 $ 966 $1,828 $ 2,047
Distribution finance 491 188 51 28 34 792 474
Revolving loans 447 208 115 233 363 1,366 1,579
Finance leases 29 54 40 17 207 347 319
Golf course and resort
mortgages 55 117 231 144 416 963 813
Leveraged leases (16) (19) 22 4 469 460 404
$1,281 $ 782 $ 646 $ 592 $ 2,455 5,756 5,636
Less allowance for credit losses 167 144
$5,589 $ 5,492
The net investment in finance leases and leveraged leases was as follows:
(In millions) 2002 2001
Finance and leveraged lease receivables, net of nonrecourse debt $ 725 $ 490
Estimated residual values on leased assets 589 589
1,314 1,079
Unearned income (507) (356)
Investment in leases 807 723
Deferred income taxes (328) (258)
Net investment in leases $ 479 $ 465
Note 3
Finance
Receivables and
Securitizations
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