Accounts Receivable and Finance Receivables

12 Months Ended

Dec. 28, 2024

Accounts Receivable and Finance Receivables

Accounts Receivable

Accounts receivable is composed of the following:


(In millions)	December 28, 2024		December 30, 2023
Commercial	$	738	$	831
U.S. Government contracts	230		63
	968		894
Allowance for credit losses	(19)		(26)
Total	$	949	$	868

Finance Receivables

Finance receivables are presented in the following table:


(In millions)	December 28, 2024		December 30, 2023
Finance receivables	$	622	$	609
Allowance for credit losses	(19)		(24)
Total finance receivables, net	$	603	$	585

Finance receivables primarily includes loans provided to purchasers of new and pre-owned Textron Aviation aircraft and Bell helicopters. These loans generally have initial terms ranging from five years to twelve years and amortization terms ranging from five years to fifteen years; the average loan balance was $2.0 million at December 28, 2024. Loans generally require the customer to pay a significant down payment, along with periodic scheduled principal payments that reduce the outstanding balance through the term of the loan. Our finance receivables are diversified across geographic region and borrower industry. At December 28,

2024, 58% of our finance receivables were distributed internationally and 42% throughout the U.S., compared with 57% and 43%, respectively, at December 30, 2023.

Finance Receivable Portfolio Quality

We internally assess the quality of our finance receivables based on a number of key credit quality indicators and statistics such as delinquency, loan balance to estimated collateral value and the financial strength of individual borrowers and guarantors. Because many of these indicators are difficult to apply across an entire class of receivables, we evaluate individual loans on a quarterly basis and classify these loans into three categories based on the key credit quality indicators for the individual loan. These three categories are performing, watchlist and nonaccrual.

We classify finance receivables as nonaccrual if credit quality indicators suggest full collection of principal and interest is doubtful. In addition, we automatically classify accounts as nonaccrual once they are contractually delinquent by more than three months unless collection of principal and interest is not doubtful. 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 that do not meet the watchlist or nonaccrual categories are classified as performing.

We measure delinquency based on the contractual payment terms of our finance receivables. 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 categorized based on the credit quality indicators and by delinquency aging category are summarized as follows:


(Dollars in millions)	December 28, 2024		December 30, 2023
Performing	$	612	$	571
Watchlist	—		23
Nonaccrual	10		15
Nonaccrual as a percentage of finance receivables	1.61%		2.46%
Current and less than 31 days past due	$	609	$	589
31-60 days past due	13		16
61-90 days past due	—		—
Over 90 days past due	—		4
60+ days contractual delinquency as a percentage of finance receivables	—%		0.66%

At December 28, 2024, 44% of our performing finance receivables were originated since the beginning of 2022 and 26% were originated from 2019 to 2021 with the remainder prior to 2019. For finance receivables categorized as nonaccrual, 100% were originated prior to 2021.

On a quarterly basis, we evaluate individual larger balance accounts for impairment. 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 described 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. Our impaired finance receivables were insignificant at December 28, 2024 and December 30, 2023.