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Textron Inc. Annual Report ● 2012 57
loan becomes contractually current through payment according to the original terms of the loan or, if a loan has been modified,
following a period of performance under the terms of the modification, provided we conclude that collection of all principal and
interest is no longer doubtful. Previously suspended interest income is recognized at that time.
Accounts are classified as watchlist when credit quality indicators have deteriorated as compared with typical underwriting
criteria, and we believe collection of full principal and interest is probable but not certain. All other finance receivables held for
investment that do not meet the watchlist or nonaccrual categories are classified as performing.
A summary of finance receivables held for investment categorized based on the credit quality indicators discussed above is as
follows:
December 29, 2012 December 31, 2011
(In millions) Performing Watchlist Nonaccrual Total Performing Watchlist Nonaccrual Total
Captive $ 1,476 $ 130 $ 98 $ 1,704 $ 1,558 $ 251 $ 136 $ 1,945
N
on-captive* 185 — 45 230 317 30 185 532
Total $ 1,661 $ 130 $ 143 $ 1,934 $ 1,875 $ 281 $ 321 $ 2,477
% of Total 85.9% 6.7% 7.4% 75.7% 11.3% 13.0%
*Non-captive nonaccrual finance receivables are primarily related to the Timeshare portfolio.
We measure delinquency based on the contractual payment terms of our loans and leases. In determining the delinquency aging
category of an account, any/all principal and interest received is applied to the most past-due principal and/or interest amounts due.
If a significant portion of the contractually due payment is delinquent, the entire finance receivable balance is reported in
accordance with the most past-due delinquency aging category.
Finance receivables held for investment by delinquency aging category is summarized in the table below:
December 29, 2012 December 31, 2011
(In millions)
Less Than
31 Days
Past Due
31-60
Days
Past Due
61-90
Days
Past Due
Over
90 Days
Past Due
Total
Less Than
31 Days
Past Due
31-60
Days
Past Due
61-90
Days
Past Due
Over
90 Days
Past Due
Total
Captive $ 1,531 $ 87 $ 55 $ 31 $ 1,704 $ 1,758 $ 69 $ 43 $ 75 $ 1,945
N
on-captive 226 — 1 3 230 481 3 — 48 532
Total $ 1,757 $ 87 $ 56 $ 34 $ 1,934 $ 2,239 $ 72 $ 43 $ 123 $ 2,477
We had no accrual status loans that were greater than 90 days past due at December 29, 2012 or December 31, 2011. At
December 29, 2012 and December 31, 2011, 60+ days contractual delinquency as a percentage of finance receivables held for
investment was 4.65% and 6.70%, respectively.
Loan Modifications
Troubled debt restructurings occur when we have either modified the contract terms of finance receivables held for investment for
borrowers experiencing financial difficulties or accepted a transfer of assets in full or partial satisfaction of the loan balance. The
types of modifications we typically make include extensions of the original maturity date of the contract, extensions of revolving
borrowing periods, delays in the timing of required principal payments, deferrals of interest payments, advances to protect the
value of our collateral and principal reductions contingent on full repayment prior to the maturity date. The changes effected by
modifications made during 2012 and 2011 to finance receivables held for investment were not material.
Impaired Loans
We evaluate individual finance receivables held for investment in non-homogeneous portfolios and larger accounts in
homogeneous loan portfolios for impairment on a quarterly basis. Finance receivables classified as held for sale are reflected at
the lower of cost or fair value and are excluded from these evaluations. A finance receivable is considered impaired when it is
probable that we will be unable to collect all amounts due according to the contractual terms of the loan agreement based on our
review of the credit quality indicators discussed above. Impaired finance receivables include both nonaccrual accounts and
accounts for which full collection of principal and interest remains probable, but the account’s original terms have been, or are
expected to be, significantly modified. If the modification specifies an interest rate equal to or greater than a market rate for a
finance receivable with comparable risk, the account is not considered impaired in years subsequent to the modification. There
was no significant interest income recognized on impaired loans in 2012 or 2011.