Finance Receivables

6 Months Ended

Jun. 30, 2011

Finance Receivables

Finance Receivables

Note 2 – Finance Receivables

Finance receivables were as follows:

	June 30, 2011					December 31, 2010					June 30, 2010
(In thousands)	Grower Advances			Seller Financing		Grower Advances			Seller Financing		Grower Advances			Seller Financing
Gross receivable	$	61,209		$	37,269	$	80,432		$	39,821	$	76,690		$	42,351
Reserve		(37,900	)		0		(4,552	)		0		(4,406	)		0
Net receivable	$	23,309		$	37,269	$	75,880		$	39,821	$	72,284		$	42,351
Current portion, net	$	23,029		$	5,275	$	55,506		$	5,096	$	60,758		$	5,377
Long-term portion, net		280			31,994		20,374			34,725		11,526			36,974
Net receivable	$	23,309		$	37,269	$	75,880		$	39,821	$	72,284		$	42,351

Activity in the reserve for the company's finance receivables is as follows:

	Grower
(In thousands)	Advances
Reserve at December 31, 2010	$	4,552
Charged to costs and expenses		246
Recoveries		0
Write-offs		0
Foreign exchange and other		(2	)
Reserve at March 31, 2011	$	4,796
Charged to costs and expenses		33,106
Recoveries		0
Write-offs		0
Foreign exchange and other		(2	)
Reserve at June 30, 2011	$	37,900

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 property 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 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 $12 million, $21 million and $18 million at June 30, 2011, December 31, 2010 and June 30, 2010, respectively, are included in "Accounts payable" in the Condensed Consolidated Balance Sheets.

Of the total grower advances, $39 million (including $32 million classified as long-term), $50 million (including $20 million classified as long-term) and $46 million (including $11 million classified as long-term) relates to a Chilean grower of grapes and other produce as of June 30, 2011, December 31, 2010 and June 30, 2010, respectively. In the second quarter of 2011, the company recorded a reserve of $32 million for advances made to this Chilean grower, representing the expected remaining carrying value after collections from the current season's already completed harvest. The reserve was based upon additional information received during the quarter on the grower's credit quality, lower than expected collections through the end of the 2010-2011 Chilean grape season, and a decision in the second quarter of 2011 to change the company's grape sourcing model. As previously disclosed, advances to this grower in past seasons were not fully repaid and although the arrangement was restructured in 2009 to provide for collection over several growing seasons, the grower did not fully comply with the established repayment schedule in 2010 or 2011. Negotiations for various repayment options are ongoing; the outstanding balance remains payable on demand and the company will continue to aggressively pursue recovery of the outstanding balance (including liquidation of certain collateral). Although the company does not have an equity interest in the Chilean grower, it is a variable interest entity because of the balance owed to the company. However, it is not consolidated because the company does not control significant activities of the Chilean grower. The remaining grower advances represent advances to smaller growers.

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. The company also provided seller financing in the 2004 sale of its former Colombian subsidiary in the form of a note receivable in equal installments through 2012. The terms of the seller financing were based on the earnings power of the businesses sold. Payments are current on both seller financing notes receivable.

The company includes finance receivables in the Condensed Consolidated Balance Sheets net of the reserve, with current portions included in "Other receivables, net" and long-term portions included in "Investments and other assets, net." Reserves are established when the company determines it is probable that the counterparty will not repay the finance receivable timely based on the company's knowledge of the counterparty's financial condition and the company's historical loss experience. Reserves are measured for each individual finance receivable using quantitative and qualitative factors, including consideration of the value of any collateral securing the seller financing or grower advance. Interest receivable on an overdue or renegotiated finance receivable is placed into nonaccrual status when collectibility becomes uncertain. Collectibility is assessed at the end of each reporting period and write-offs are recorded only when collection efforts have been abandoned. Recoveries of other receivables previously reserved are credited to income.