Trade and Finance Receivables

TRADE RECEIVABLES

Trade receivables less allowances reflect the net realizable value of the receivables. The company generally does not require collateral or other security to support trade receivables subject to credit risk. To reduce credit risk, the company performs credit investigations prior to establishing customer credit limits and reviews customer credit profiles on an ongoing basis. Allowances against the trade receivables are established based on the company's knowledge of customers' financial condition, historical loss experience and account payment status compared to invoice payment terms. Allowances are recorded and charged to expense when an account is deemed to be uncollectible. Recoveries of trade receivables previously reserved in the allowance are credited to income.

The company's primary markets are in North America and Europe, but it also has sales in the Middle East and other markets. The majority of the company's sales in the Middle East are in Iran under specific licenses from the U.S. government that allow sales of food products to non-sanctioned parties. These sales are in U.S. dollars and represent $31 million of "Trade receivables" on the Condensed Consolidated Balance Sheet at September 30, 2012. Even though the sales in Iran are permitted, the international sanctions against Iran are affecting the ability of Iranian customers to pay invoices within terms because it is difficult for them to obtain U.S. dollars, euros or other suitable currencies in sufficient quantity on a regular basis. Over the course of 2012, the company's receivable balance with these customers has increased, and the company has established payment plans with each of these customers to reduce their balances. Most customers have so far been able to find acceptable methods of payment to comply with their payment plans. However, one significant customer has not, and as a result, the company reserved $7 million of these receivables in the third quarter of 2012 representing balances in excess of related collateral. If this customer is able to find acceptable methods of payment to comply with its payment plan, the reserve may be reversed as appropriate. The company sources bananas from the Philippines for sale in the Middle East under a long term purchase contract with a former joint venture partner through 2016 with committed volumes. The company continues to develop other markets for these bananas, such as Iraq, to diversify its risk in the region.

FINANCE RECEIVABLES

Finance receivables were as follows:



	September 30, 2012					December 31, 2011					September 30, 2011
(In thousands)	Grower Receivables			Seller Financing		Grower Receivables			Seller Financing		Grower Receivables			Seller Financing
Gross receivable	$	42,138		$	31,332	$	46,188		$	35,021	$	54,648		$	36,155
Reserve	(36,837		)	—		(37,519		)	—		(37,923		)	—
Net receivable	$	5,301		$	31,332	$	8,669		$	35,021	$	16,725		$	36,155

Current portion, net	$	5,301		$	3,620	$	8,669		$	4,771	$	16,725		$	5,091
Long-term portion, net	—			27,712		—			30,250		—			31,064
Net receivable	$	5,301		$	31,332	$	8,669		$	35,021	$	16,725		$	36,155

Activity in the reserve for grower receivables is as follows:



(In thousands)	2012			2011
Reserve at beginning of year	$	37,519		$	4,552
Charged to costs and expenses	382			246
Recoveries	(191		)	—
Foreign exchange and other	—			(2		)
Reserve at March 31	$	37,710		$	4,796
Charged to costs and expenses	45			33,106
Recoveries	(516		)	—
Foreign exchange and other	1			(2		)
Reserve at June 30	$	37,240		$	37,900
Charged to costs and expenses	277			20
Recoveries	(680		)	—
Foreign exchange and other	—			3
Reserve at September 30	$	36,837		$	37,923

Seasonal advances may be made to certain qualified growers of other produce, which are normally collected as the other produce is harvested and sold. The company generally requires asset liens and pledges of the season's produce as collateral to support these advances. If sales of the season's produce do not result in full repayment of the advance, the company may exercise the collateral provisions or renegotiate the terms, including terms of interest, to collect the remaining balance. The company also carries payables to growers related to revenue collected from the sale of the other produce that is subsequently remitted to the grower, less outstanding grower advances and a margin retained by the company based upon the terms of the contract. Grower payables of $5 million, $1 million and $11 million at September 30, 2012, December 31, 2011 and September 30, 2011, respectively, are included in "Accounts payable" in the Condensed Consolidated Balance Sheets.

The gross grower receivable balance includes $31 million (all of which is classified as long-term), $32 million (all of which is classified as long-term) and $34 million ($32 million of which is classified as long-term) related to a Chilean grower of grapes and other produce as of September 30, 2012, December 31, 2011 and September 30, 2011, respectively. In June 2011, the company recorded a reserve of $32 million for advances made to this Chilean grower. Late in 2011, the Chilean grower was declared bankrupt; the company continues to aggressively negotiate recovery with the bankruptcy trustee and other creditors of the grower, and has recovered more than $1 million in 2012.

The company provided seller financing in the 2009 sale of the former joint venture that sourced bananas and pineapples from the Philippines for sale in the Middle East and Asia. The financing for the sale of this joint venture is a note receivable in equal installments through 2019. Payments are current on this note receivable. The company also provided seller financing in the 2004 sale of its former Colombian subsidiary in the form of a note receivable, which was fully repaid in July 2012. The terms of the seller financing were based on the earnings power of the businesses sold.