E-Z-GO 2009 Annual Report Download - page 34

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25
Textron Inc.
During 2009, we proceeded with our plan to exit the non-captive commercial finance business in our Finance segment. We made the decision to
exit this business in the fourth quarter of 2008 in order to address our long-term liquidity position in light of disruption and instability in the
capital markets. The plan is being effected through a combination of orderly liquidation and selected sales and is expected, depending on market
conditions, to be substantially complete over the next two to three years. The Finance segment also announced a restructuring program in the
fourth quarter of 2008 primarily related to headcount reductions and asset impairments resulting from the exit plan. See “Special Charges”
section on pages 18 to 20 regarding charges taken as a result of the exit plan, which are not reflected in segment profit.
Finance Revenues
Finance segment revenues decreased $362 million in 2009, compared with 2008, primarily due to the following:
• A $157 million impact from higher portfolio losses;
• $92 million impact from lower market interest rates;
• $70 million in lower securitization gains, net of impairments;
• $62 million in lower average nance receivables of $1.0 billion;
• $37 million in higher suspended earnings on nonaccrual nance receivables; partially offset by
• $55 million in gains on debt extinguishment.
Portfolio losses recognized in 2009 include discounts taken on the sale or early termination of nance assets, including $60 million in discounts
associated with the liquidation of distribution nance and golf mortgage nance receivables, $53 million in impairment charges related to
automobile manufacturing equipment and investments in real estate associated with matured leveraged leases and $25 million in higher
impairment charges associated with repossessed aircraft.
In 2008, revenues in the Finance segment decreased $152 million, compared with 2007, primarily due to the following:
• A $163 million impact from lower market interest rates;
• $20 million in lower securitization gains, net of impairments; and
• A lower gain on the sale of a leveraged lease investment of $16 million; partially offset by the
• $24 million benet from variable-rate receivable interest rate oors and
• A $21 million impact from higher average nance receivables of $258 million.
Finance Segment Profit (Loss)
The Finance segment loss increased $244 million in 2009, compared with 2008, primarily due to a $157 million impact from higher portfolio
losses, $70 million in lower securitization gains, net of impairments, $37 million in higher suspended earnings on nonaccrual nance receivables
and a $33 million increase in provision for loan losses, partially offset by $55 million in gains on debt extinguishment.
In 2008, segment prot in the Finance segment decreased $272 million, compared with 2007, primarily due to a $201 million increase in the
provision for loan losses, a $51 million impact of higher borrowing costs, relative to market rates, $20 million in lower securitization gains, net of
impairments, a $16 million lower gain on the sale of a leveraged lease investment, partially offset by a $24 million benet from variable-rate
receivable interest rate floors.
We increased the allowance for loan losses significantly in 2009 and 2008 in response to the economic recession, declining collateral values and
the lack of liquidity available to our borrowers and their customers. We also increased our estimate of credit losses as a result of our decision to
exit portions of the finance business in the fourth quarter of 2008, which we believe will negatively impact credit losses over the duration of our
portfolio. In 2009, the increase was primarily due to an increase in both the rate and severity of defaults resulting from the economic recession
and due to declining aircraft values. The increase was partially offset by a $73 million decrease in the provision for the distribution nance