E-Z-GO 2010 Annual Report Download - page 38

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26
improved cost performance in 2010 was largely due to the significant efforts made in 2009 to reduce costs through workforce
reductions and other initiatives, along with improved manufacturing leverage due to higher volume.
Factors contributing to 2009 year-over-year segment profit change are provided below:
(In millions)
2009 versus
2008
Volume
$ (265)
Performance
211
Inflation
21
Other
(7)
Total change
$ (40)
In 2009, Industrial segment profit decreased $40 million, 60%, compared with 2008, primarily due to the $265 million impact from
lower volume, partially offset by improved cost performance of $211 million and lower inflation of $21 million. Cost performance
improved largely due to significant efforts made to reduce costs through workforce reductions, employee furloughs and temporary
plant shutdowns.
Finance
% Change
(Dollars in millions)
2010
2009
2008
2010
2009
Revenues
$ 218
$ 361
$ 723
(40)%
(50)%
Segment loss
(237)
(294)
(50)
(19)%
488%
Profit (loss) margin
(109)%
(81)%
(7)%
Our plan to exit the non-captive commercial finance business in our Finance segment is being effected through a combination of
orderly liquidation and selected sales. The exit of the non-captive business is expected to be substantially completed over the next
three to five years, depending on market conditions.
Finance Revenues
Finance segment revenues decreased $143 million, 40%, in 2010 compared with 2009, primarily due to the following:
• $141 million in lower average finance receivables of $1.8 billion and lower servicing fees, investment and other income;
• $54 million in lower gains on debt extinguishment;
• $26 million impact of variable-rate receivable with interest rate floors;
• Partially offset by an $81 million impact from lower portfolio losses; and
• $28 million in lower securitization losses, net of gains.
In 2009, Finance segment revenues decreased $362 million, 50%, 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 finance receivables of $1 billion;
• $37 million in higher suspended earnings on nonaccrual finance receivables;
• Partially offset by $55 million in gains on debt extinguishment.
Portfolio losses, net of gains decreased in 2010, compared with 2009, primarily as a result of $40 million in lower impairment charges
in the structured capital portfolio, $23 million in gains on the sale of two distribution finance receivable portfolios in 2010 and a $21
million decrease in discounts taken on the sale or early termination of finance assets associated with the liquidation of distribution
finance receivables, partially offset by an $11 million increase in impairment charges on owned aircraft that are subject to operating
lease or have been repossessed.
Portfolio losses recognized in 2009 include discounts taken on the sale or early termination of finance assets, including $60 million in
discounts associated with the liquidation of distribution finance and golf mortgage finance receivables, $53 million in impairment
charges related to automobile manufacturing equipment and investments in real estate associated with matured leveraged leases in the
structured capital portfolio, and $25 million in impairment charges associated with repossessed aircraft.
Finance Segment Loss
The Finance segment loss decreased by $57 million, 19%, in 2010, compared with 2009, as the provision for loan losses decreased by
$124 million, primarily due to a decline in the accounts identified as nonaccrual during the year, and we had $81 million in lower portfolio