E-Z-GO 2007 Annual Report Download - page 73

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Notes to the Consolidated Financial Statements
52
The net investments in fi nance leases, excluding leases classifi ed as installment contracts, and leveraged leases are provided below:
(In millions) 2007 2006
Finance leases:
Total minimum lease payments receivable $ 568 $ 517
Estimated residual values of leased equipment 267 267
835 784
Less unearned income (222) (194)
Net investment in fi nance leases $ 613 $ 590
Leveraged leases:
Rental receivable, net of nonrecourse debt $ 531 $ 546
Estimated residual values of leased assets 297 329
828 875
Less unearned income (284) (260)
Investment in leveraged leases 544 615
Deferred income taxes (408) (410)
Net investment in leveraged leases $ 136 $ 205
In the fi rst quarter of 2007, we adopted FASB Staff Position (“FSP”) No. 13-2, “Accounting for a Change or Projected Change in the Timing of
Cash Flows Relating to Income Taxes Generated by a Leveraged Lease Transaction” (“FSP 13-2”). FSP 13-2 requires a recalculation of returns on
leveraged leases if there is a change or projected change in the timing of cash fl ows related to income taxes generated by the leveraged leases.
The impact of any estimated change in projected cash fl ows must be reported as an adjustment to the net leveraged lease investment and retained
earnings at the date of adoption. Our Finance group has leveraged leases with an initial investment balance of $209 million that we estimate could
be impacted by changes in the timing of cash fl ows related to income taxes. Upon the adoption, we reduced retained earnings for the $33 million
cumulative effect of a change in accounting principle and reduced our investment in these leveraged leases by $50 million and deferred income
tax liabilities by $17 million.
Our Finance group manages and services fi nance receivables for a variety of investors, participants and third-party portfolio owners. The total
managed and serviced fi nance receivable portfolio, including owned fi nance receivables, was $12.5 billion at the end of 2007 and $11.5 billion at
the end of 2006. Managed receivables include owned fi nance receivables and fi nance receivables sold in securitizations and private transactions
where we retain some element of credit risk and continue to service the portfolio.
Our fi nance receivables are diversifi ed across geographic region, borrower industry and type of collateral. At December 29, 2007, 78% of our
fi nance receivables were distributed throughout the United States, compared with 83% at the end of 2006. The most signifi cant collateral
concentration was in general aviation, which accounted for 22% of managed receivables at the end of 2007 and 19% at the end of 2006. Industry
concentrations in the golf and vacation interval industries accounted for 15% and 13%, respectively, of managed receivables at December 29,
2007, compared with 16% and 13%, respectively, at the end of 2006.
Transactions between Finance and Manufacturing Groups
A portion of our Finance group’s business involves fi nancing retail purchases and leases for new and used aircraft and equipment manufactured
by our Manufacturing group. The captive fi nance receivables for these inventory sales that are included in our Finance group’s balance sheets are
summarized below:
December 29, December 30,
(In millions) 2007 2006
Installment contracts $ 1,184 $ 912
Finance leases 535 487
Distribution fi nance 31 73
Total $ 1,750 $ 1,472