E-Z-GO 2008 Annual Report Download - page 74

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Textron Inc.
Finance receivables include installment contracts, revolving loans, golf course and resort mortgages, distribution finance receivables, and finance
and leveraged leases. Installment contracts and finance leases have initial terms ranging from two to 20 years and primarily are secured by the
financed equipment. Installment contracts generally require the customer to pay a significant down payment, along with periodic scheduled
principal payments that reduce the outstanding balance through the term of the loan. Finance leases include residual values expected to be
realized at contractual maturity. Leases with no significant residual value at the end of the contractual term are classified as installment contracts,
as their legal and economic substance is more equivalent to a secured borrowing than a finance lease with a significant residual value. In the
contractual maturities table in the “Finance Receivables Held for Investment” section below, contractual maturities for finance leases classified as
installment contracts represent the minimum lease payments, net of the unearned income to be recognized over the life of the lease. Total
minimum lease payments and unearned income related to these contracts were $1.2 billion and $299 million, respectively, at January 3, 2009 and
$1.0 billion and $315 million, respectively, at December 29, 2007. Minimum lease payments due under these contracts for each of the next five
years are as follows: $202 million in 2009, $184 million in 2010, $177 million in 2011, $145 million in 2012 and $140 million in 2013. Minimum
lease payments due under finance leases for each of the next five years are as follows: $143 million in 2009, $110 million in 2010, $73 million in
2011, $37 million in 2012 and $13 million in 2013.
Revolving loans and distribution finance receivables generally mature within one to five years. Revolving loans are secured by trade receivables,
inventory, plant and equipment, pools of vacation interval resort notes receivables, finance receivable portfolios, pools of residential and
recreational land loans, and the underlying property. Distribution finance receivables generally are secured by the inventory of the financed
distributor and include floorplan financing for third-party dealers for inventory sold by the E-Z-GO and Jacobsen businesses.
Golf course and resort mortgages are secured by real property and generally are limited to 75% or less of the property’s appraised market value at
loan origination. Golf course mortgages have initial terms ranging from five to 10 years with amortization periods from 15 to 25 years. Golf course
mortgages consist of loans with an average balance of $6 million and a weighted-average remaining contractual maturity of five years. Resort
mortgages generally represent construction and inventory loans with an average balance of $10 million and a weighted-average remaining
contractual maturity of four years.
Leveraged leases are secured by the ownership of the leased equipment and real property and have initial terms up to approximately 30 years.
Leveraged leases reflect contractual maturities net of contractual nonrecourse debt payments and include residual values expected to be realized
at contractual maturity.
Finance Receivables Held for Investment
The contractual maturities of finance receivables held for investment at January 3, 2009 were as follows:
Finance Receivables
Contractual Maturities Outstanding
(In millions) 2009 2010 2011 2012 2013 Thereafter 2008 2007
Installment contracts $ 392 $ 351 $ 354 $ 362 $ 358 $ 970 $ 2,787 $ 2,052
Revolving loans 226 200 444 249 61 28 1,208 2,254
Golf course and resort mortgages 191 132 256 170 148 309 1,206 1,240
Distribution finance receivables 468 144 25 4 5 1 647 1,900
Finance leases 151 145 97 81 23 111 608 613
Leveraged leases 46 (2) 17 (11) (11) 420 459 544
$ 1,474 $ 970 $ 1,193 $ 855 $ 584 $ 1,839 6,915 8,603
Allowance for credit losses (191) (89)
$ 6,724 $ 8,514
Finance receivables often are repaid or refinanced prior to maturity. Accordingly, the above tabulations should not be regarded as a forecast of
future cash collections. Finance receivable receipts related to distribution finance receivables and revolving loans are based on historical cash
flow experience.
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