E-Z-GO 2011 Annual Report Download - page 72

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61
In 2011, 2010 and 2009, our Finance group paid our Manufacturing group $284 million, $416 million and $654 million,
respectively, related to the sale of Textron-manufactured products to third parties that were financed by the Finance group. Our
Cessna and Industrial segments also received proceeds in those years of $2 million, $10 million and $13 million, respectively,
from the sale of equipment from their manufacturing operations to our Finance group for use under operating lease agreements.
Operating agreements specify that our Finance group has recourse to our Manufacturing group for certain uncollected amounts
related to these transactions. At December 31, 2011 and January 1, 2011, the amounts guaranteed by the Manufacturing group
totaled $88 million and $69 million, respectively. Our Manufacturing group has established reserves for losses on its balance sheet
within accrued and other liabilities for the receivables it guarantees.
In 2009, Textron Inc. agreed to lend TFC funds to pay down maturing debt. The interest rate on this borrowing was 5% at
December 31, 2011 and 7% at January 1, 2011. As of December 31, 2011 and January 1, 2011, the outstanding balance due to
Textron Inc. for these borrowings was $490 million and $315 million, respectively. These amounts are included in other current
assets for the Manufacturing group and other liabilities for the Finance group in the Consolidated Balance Sheets.
Finance Receivables Held for Sale
At the end of 2011 and 2010, approximately $418 million and $413 million of finance receivables were classified as held for sale.
At December 31, 2011, finance receivables held for sale primarily include the entire Golf Mortgage portfolio and a portion of the
Timeshare portfolio. 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. Also, in 2011, we transferred a total of $125 million of
Timeshare finance receivables to the held for sale classification, based on an agreement to sell a portion of the portfolio that was
sold in the fourth quarter of 2011 and interest in other portions of the portfolio. In 2010, we transferred $219 million of Timeshare
finance receivables to the held for sale classification as a result of an unanticipated inquiry we have received to purchase these
finance receivables; we determined a sale of these finance receivables would be consistent with our goal to maximize the
economic value of our portfolio and accelerate cash collections. We received proceeds of $383 million and $582 million in 2011
and 2010, respectively, from the sale of finance receivables held for sale and $10 million and $86 million, respectively, from
collections.
Note 5. Inventories
Inventories are composed of the following:
(In millions)
December 31,
2011
January 1,
2011
Finished goods $ 1,012 $ 784
Work in process 2,202 2,125
Raw materials and components 399 506
3,613 3,415
Progress/milestone payments (1,211) (1,138)
$ 2,402 $ 2,277
Inventories valued by the LIFO method totaled $1.0 billion and $1.3 billion at the end of 2011 and 2010, respectively, and the
carrying values of these inventories would have been approximately $422 million and $441 million, respectively, higher had our
LIFO inventories been valued at current costs. Inventories related to long-term contracts, net of progress/milestone payments,
were $414 million and $322 million at the end of 2011 and 2010, respectively.
Textron Inc. Annual Report • 2011 61