E-Z-GO 2006 Annual Report Download - page 25

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Item 1. Business of Textron
Finance Segment
Our Finance segment consists of Textron Financial Corporation and its subsidiaries. Textron Financial Corporation is a diversified commercial
finance company with core operations in six markets:
• Asset-Based Lending provides asset-based loans to middle-market companies in several industries, and provides factoring arrangements pri-
marily for freight companies;
•
Aviation Finance provides financing for new and used Cessna business jets, single engine turboprops, piston-engine airplanes, Bell heli-
copters and other general aviation aircraft;
• Distribution Finance primarily offers inventory finance programs for dealers of products manufactured by Textron and for dealers of a variety of
other household, housing, leisure, agricultural and technology products;
• Golf Finance primarily makes mortgage loans for the acquisition and refinancing of golf courses and provides term financing for E-Z-GO golf
cars and Jacobsen turf-care equipment;
•
Resort Finance primarily extends loans to developers of vacation interval resorts, secured primarily by notes receivable and interval inventory;
and
•
Structured Capital primarily engages in long-term leases of large-ticket equipment and real estate, primarily with investment grade lessees.
Textron Financial Corporation’s other financial services and products include transaction syndication, equipment appraisal and disposition, and
portfolio servicing offered through Textron Business Services, Inc.
Textron Financial Corporation’s financing activities are confined almost exclusively to secured lending and leasing to commercial markets.
Textron Financial Corporation’s services are offered primarily in North America. However, Textron Financial Corporation finances certain Textron
products worldwide, principally Bell helicopters and Cessna aircraft. Textron Financial Corporation also finances many of the sales at E-Z-GO
and Jacobsen.
In 2006, 2005 and 2004, Textron Financial Corporation paid Textron $1.0 billion, $0.8 billion and $0.9 billion, respectively, related to the sale of
Textron-manufactured products that were financed by Textron Financial Corporation. Textron also received proceeds in those years of $63 million,
$41 million and $77 million, respectively, from the sale of equipment from its manufacturing operations to Textron Financial Corporation for use
under operating lease agreements.
The commercial finance environment in which Textron Financial Corporation operates is highly fragmented and extremely competitive. Textron
Financial Corporation is subject to competition from various types of financing institutions, including banks, leasing companies, insurance com-
panies, commercial finance companies and finance operations of equipment vendors. Competition within the commercial finance industry is pri-
marily focused on price, terms, structure and service.
Textron Financial Corporation’s largest business risk is the collectibility of its finance receivable portfolio. See “Finance Portfolio Quality” in Man-
agement’s Discussion and Analysis of Financial Condition and Results of Operations on pages 20 and 21 for a detailed discussion of the credit
quality of this portfolio.
Backlog
U.S. Government backlog was $3.5 billion and $3.3 billion at the end of 2006 and 2005, respectively, including backlog at Bell Helicopter of $2.4
billion in 2006 and $2.2 billion in 2005. Approximately 96% of the 2006 backlog was funded at December 30, 2006. Unfunded backlog repre-
sents the award value of U.S. Government contracts received, generally related to cost-plus type contracts, in excess of the funding formally
appropriated by the U.S. Government. The U.S. Government is obligated only up to the funded amount of the contract. Additional funding is
appropriated as the contract progresses.
Commercial backlog from unaffiliated customers was $9.8 billion and $7.4 billion in 2006 and 2005, respectively, including backlog at Cessna of
$8.5 billion in 2006 and $6.3 billion in 2005. A significant portion of Cessna’s backlog represents orders from a major fractional jet customer.
Orders from this fractional aircraft operator are included in backlog when the customer enters into a definitive master agreement and has estab-
lished preliminary delivery dates for the aircraft. Preliminary delivery dates are subject to change through amendment to the master agreement.
Final delivery dates are established approximately 12 to 18 months prior to delivery. Orders from other customers are included in backlog upon
the customer entering into a definitive purchase order and receipt of required deposits.