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30 Textron Inc. Annual Report ● 2012
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 29,
2012
December 31,
2011
Finance receivables $ 1,934 $ 2,477
N
onaccrual finance receivables 143 321
Allowance for losses 84 156
Ratio of nonaccrual finance receivables to finance receivables 7.39% 12.96%
Ratio of allowance for losses on impaired nonaccrual finance receivables to impaired nonaccrual finance
receivables 21.24% 28.52%
Ratio of allowance for losses on finance receivables to nonaccrual finance receivables 58.74% 48.60%
Ratio of allowance for losses on finance receivables to finance receivables 4.34% 6.30%
60+ days contractual delinquency as a percentage of finance receivables 4.65% 6.70%
60+ days contractual delinquency $ 90 $ 166
Repossessed assets and properties 81 199
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 $140
million at the end of 2012, compared with $418 million at the end of 2011.
Nonaccrual finance receivables decreased $178 million, 55%, from 2011, primarily due to reductions of $129 million in the
Timeshare portfolio and $38 million in the Captive portfolio. The decrease in the Timeshare portfolio was primarily due to the
liquidation of one significant account. The Captive portfolio decreased mostly due to repossession of collateral and cash
collections, partially offset by new accounts identified as nonaccrual in 2012.
Liquidity and Capital Resources
Our financings are conducted through two separate borrowing groups. The Manufacturing group consists of Textron Inc.
consolidated with its majority-owned subsidiaries that operate in the Cessna, Bell, Textron Systems and Industrial segments. The
Finance group, which also is the Finance segment, consists of TFC, its consolidated subsidiaries and three other finance
subsidiaries owned by Textron Inc. We designed this framework to enhance our borrowing power by separating the Finance group.
Our Manufacturing group operations include the development, production and delivery of tangible goods and services, while our
Finance group provides financial services. Due to the fundamental differences between each borrowing group’s activities,
investors, rating agencies and analysts use different measures to evaluate each group’s performance. To support those evaluations,
we present balance sheet and cash flow information for each borrowing group within the Consolidated Financial Statements.
Key information that is utilized in assessing our liquidity is summarized below:
(In millions)
December 29,
2012
December 31,
2011
Manufacturing group
Cash and equivalents $ 1,378 $ 871
Debt 2,301 2,459
Shareholders’ equity 2,991 2,745
Capital (debt plus shareholders’ equity) 5,292 5,204
N
et debt (net of cash and equivalents) to capital 24% 37%
Debt to capital 44% 47%
Finance group
Cash and equivalents $ 35 $ 14
Debt 1,686 1,974
We believe that our calculations of debt to capital and net debt to capital are useful measures as they provide a summary indication
of the level of debt financing (i.e., leverage) that is in place to support our capital structure, as well as to provide an indication of
the capacity to add further leverage. We believe that with our existing cash and equivalents, along with the cash we expect to
generate from our manufacturing operations, we will have sufficient cash to meet our future needs.