E-Z-GO 2011 Annual Report Download - page 32

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Provision for Losses on Finance Receivables
(Dollars in millions)
2011
2010
2009
Provision for losses on finance receivables
$ 12
$ 143
$ 267
% change compared with prior period
(92)%
(46)%
The provision for loan losses decreased $131 million in 2011 from 2010 primarily due to a decline in new troubled accounts in the
Finance segment’s non-captive portfolio during 2011 and a $36 million reversal of the allowance for losses related to one
significant Timeshare account. In 2010, the provision decreased $124 million from 2009, primarily due to a decline in the
accounts identified as nonaccrual during the year.
Valuation Allowance on Transfer of Golf Mortgage Portfolio to Held for Sale
On a periodic basis, we evaluate our liquidation strategy for the non-captive finance portfolios as we continue to execute our exit
plan. In connection with this evaluation, we also review our definition of the foreseeable future. Due to the relative stability of the
golf market through the end of 2011, we believe that the foreseeable future now can be extended to a period of one to two years as
opposed to the six- to nine-month period we previously used. Based on this change, in the fourth quarter of 2011, we determined
that we no longer had the intent to hold the remaining Golf Mortgage portfolio for investment for the foreseeable future, and,
accordingly, transferred $458 million of the remaining Golf Mortgage finance receivables, net of an $80 million allowance for loan
losses, from the held for investment classification to the held for sale classification. These finance receivables were recorded at
fair value at the time of the transfer, resulting in a $186 million charge recorded to Valuation allowance on transfer of Golf
Mortgage portfolio to held for sale.
Special Charges
There were no amounts recorded within special charges in 2011. In 2010 and 2009, special charges included restructuring charges
related to a global restructuring program that totaled $99 million and $237 million, respectively, primarily related to severance
costs and asset impairment charges. In the fourth quarter of 2008, we initiated a restructuring program to reduce overhead costs
and improve productivity across the company and announced the exit of portions of our commercial finance business. This
restructuring program primarily included corporate and segment direct and indirect workforce reductions and the closure and
consolidation of certain operations throughout the company. In the fourth quarter of 2010, we initiated the final series of
restructuring actions under this program, which included workforce reductions in the Bell, Textron Systems and Industrial
segments and at Corporate, along with the decision to exit a plant in the Industrial segment. Upon the completion of this program
at the end of 2010, we had terminated approximately 12,100 positions worldwide representing approximately 28% of our global
workforce since the inception of the program and had exited 30 leased and owned facilities and plants.
In 2010, special charges also included a $91 million non-cash pre-tax charge to reclassify a foreign exchange loss from equity to
the Statement of Operations as a result of substantially liquidating a Canadian Finance entity. In 2009, special charges also include
a goodwill impairment charge of $80 million in the Industrial segment.
Other Losses (Gains), net
In 2011, other losses (gains), net includes $55 million in losses on the early extinguishment of a portion of our convertible notes
which was largely offset by a $52 million gain from the collection on notes receivable in connection with the disposition of the
Fluid & Power business in 2008 as discussed in Note 2 to the Consolidated Financial Statements. In 2009, we recorded a $50
million gain on the sale of assets related to CESCOM.
Income Tax Expense (Benefit)
Our effective rate was 28.1% in 2011, (6.4)% in 2010 and (51.0)% in 2009, and generally differs from the U.S. federal statutory
rate of 35% due to certain earnings from our operations in lower-tax jurisdictions throughout the world. The jurisdictions with
favorable tax rates that have the most significant effective rate impact in the periods presented include primarily Canada and
China. We have not provided for U.S. taxes for those earnings because we plan to reinvest all of those earnings indefinitely
outside of the United States. Our effective rate will fluctuate based on the mix of earnings from our U.S. and foreign operations.
For a full reconciliation of our effective rate to the U.S. federal statutory rate of 35% see Note 14 to the Consolidated Financial
Statements.
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Textron Inc. Annual Report • 2011 21