E-Z-GO 2009 Annual Report Download - page 67

Notes to the Consolidated Financial Statements
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Our nonaccrual finance receivables include impaired finance receivables, as well as accounts in homogeneous loan portfolios that are not
considered to be impaired but are contractually delinquent by more than three months. A summary of these finance receivables and the related
allowance for losses by collateral type is as follows:
January 2, 2010 January 3, 2009
Allowance Allowance
for Losses for Losses
Impaired on Impaired Impaired on Impaired
Nonaccrual Nonaccrual Nonaccrual Nonaccrual Nonaccrual Nonaccrual
Finance Finance Finance Finance Finance Finance
Collateral Type (In millions) Receivables Receivables Receivables Receivables Receivables Receivables
Timeshare notes receivable* $ 259 $ 254 $ 53 $ 78 $ 74 $ 9
General aviation aircraft 286 272 46 17 6 2
Golf course property 166 165 27 107 107 25
Resort construction/inventory 104 104 — — — —
Dealer inventory 88 68 14 43 34 3
Hotels 78 78 7 — — —
Other 59 43 6 32 13 4
Total $ 1,040 $ 984 $ 153 $ 277 $ 234 $ 43
* Finance receivables collateralized primarily by timeshare notes receivable also may be collateralized by certain real estate and other assets of our borrowers.
The increase in nonaccrual finance receivables primarily is attributable to the lack of liquidity available to borrowers in the timeshare portfolio,
weaker general economic conditions and depressed aircraft values. The increase in timeshare notes receivable includes one $203 million
account, of which $120 million is collateralized by notes receivable and $83 million is collateralized by several resort properties, which are
included in the resort construction/inventory line above.
The average recorded investment in impaired nonaccrual finance receivables was $603 million in 2009, $143 million in 2008 and $53 million
in 2007. The average recorded investment in impaired accrual finance receivables amounted to $136 million in 2009, $34 million in 2008 and
$31 million in 2007. Nonaccrual finance receivables resulted in the Finance segment’s revenues being reduced by $53 million, $16 million and
$7 million for 2009, 2008 and 2007, respectively.
Captive and Other Intercompany Financing
Our Finance group provides financing for retail purchases and leases for new and used aircraft and equipment manufactured by our
Manufacturing group. The captive finance receivables for these inventory sales that are included in the Finance group’s balance sheets are
summarized below:
January 2, January 3,
(In millions) 2010 2009
Installment contracts $ 1,462 $ 1,468
Finance leases 388 544
Distribution finance 72 33
Total $ 1,922 $ 2,045
Operating agreements specify that our Finance group has recourse to our Manufacturing group for certain uncollected amounts related to these
transactions. Our Manufacturing group has established reserves for losses on its balance sheet within accrued and other liabilities for the
receivables it guarantees. These reserves are established for amounts that potentially are uncollectible or if the collateral values are considered
insufficient to cover the outstanding receivable. If an account is deemed uncollectible and the collateral is repossessed by our Finance group, our
Manufacturing group is charged for the deficiency. If the collateral is not repossessed, the receivable is transferred from the Finance group’s
balance sheet to the Manufacturing group’s balance sheet. The Manufacturing group then is responsible for any additional collection efforts.
When this occurs, any related reserve previously established by the Manufacturing group is reclassified from accrued or other liabilities and
netted against the receivable or asset transferred from the Finance group.