E-Z-GO 2011 Annual Report Download - page 41

Finance Segment Loss
Finance segment loss increased $96 million, 41%, in 2011 compared with 2010, primarily due to the following factors:
$186 million valuation allowance recorded on the transfer of the remaining Golf Mortgage portfolio from held for investment to
the held for sale classification during the fourth quarter of 2011; and
$61 million reduction in interest margin resulting from the lower average finance receivable balance; partially offset by
$131 million in lower provision for loan losses, primarily the result of a decline in new troubled accounts in the non-captive
portfolio during 2011 and a $36 million reversal of the allowance for losses related to one significant Timeshare account; and
$44 million in lower administrative expenses, primarily due to lower compensation expense associated with a workforce
reduction and other cost reductions related to the exit of the non-captive business.
In 2010, the Finance segment loss decreased by $57 million, 19%, compared with 2009, primarily due to the following factors:
$124 million in lower provision for loan losses, primarily due to a decline in the accounts identified as nonaccrual during the year;
$81 million in lower portfolio losses, net of gains;
$41 million in lower operating and administrative expenses, primarily due to lower compensation expense associated with the
workforce reduction; and
$28 million in lower securitization losses, net of gains; partially offset by
$54 million in lower gains on debt extinguishments;
$52 million reduction in interest margin resulting from the lower average finance receivable balance and a $26 million impact
related to variable rate receivable interest rate floors;
$39 million impact from lower servicing fees, investment and other income; and
$32 million impact from lower interest rate on debt and lower accretion of the valuation allowance on finance receivable held for
sale.
Finance Portfolio Quality
The following table reflects information about the Finance segment’s credit performance related to finance receivables held for
investment:
(Dollars in millions)
December 31,
2011
January 1,
2011
Finance receivables
$ 2,477
$ 4,213
Nonaccrual finance receivables
321
850
Allowance for losses
156
342
Ratio of nonaccrual finance receivables to finance receivables
12.96%
20.17%
Ratio of allowance for losses on impaired nonaccrual finance receivables to impaired nonaccrual finance
receivables
28.52%
23.82%
Ratio of allowance for losses on finance receivables to nonaccrual finance receivables
48.60%
40.30%
Ratio of allowance for losses on finance receivables to finance receivables
6.30%
8.13%
60+ days contractual delinquency as a percentage of finance receivables
6.70%
9.77%
60+ days contractual delinquency
$ 166
$ 411
Repossessed assets and properties
128
157
Operating assets received in satisfaction of troubled finance receivables
71
107
Finance receivables held for sale are reflected at the lower of cost or fair value on the Consolidated Balance Sheets and are not
included in the credit performance statistics above. Finance receivables held for sale in the non-captive portfolio totaled $418
million at the end of 2011, compared with $413 million at the end of 2010, as the transfer of the remaining Golf Mortgage
portfolio from held for investment to the held for sale classification was largely offset by sales and liquidations. This transfer also
resulted in an $80 million reduction in the allowance for loan losses. At the end of 2011, finance receivables reported in the above
table included $532 million of finance receivables held for investment in the non-captive portfolio, reflecting a $1.3 billion
reduction from the 2010 year-end balance for this portfolio, primarily due to liquidations and the transfer of the remaining Golf
Mortgage portfolio.
30
30 Textron Inc. Annual Report • 2011