Finance Receivables, Net

3 Months Ended

Mar. 31, 2013

Finance Receivables, Net [Abstract]

Finance Receivables, Net

Accounts Receivable, Net

Accounts receivable, net were as follows:

	March 31, 2013			December 31, 2012
Amounts billed or billable	$	2,825		$	2,639
Unbilled amounts	349			335
Allowance for doubtful accounts	(109		)	(108		)
Accounts Receivable, Net	$	3,065		$	2,866

Unbilled amounts include amounts associated with percentage-of-completion accounting and other earned revenues not currently billable due to contractual provisions. Amounts to be invoiced in the subsequent month for current services provided are included in amounts billable, and at March 31, 2013 and December 31, 2012 were approximately $1,027 and $1,049, respectively.

We perform ongoing credit evaluations of our customers and adjust credit limits based upon customer payment history and current creditworthiness. The allowance for uncollectible accounts receivables is determined principally on the basis of past collection experience as well as consideration of current economic conditions and changes in our customer collection trends.

Accounts Receivable Sales Arrangements

Accounts receivable sales arrangements are utilized in the normal course of business as part of our cash and liquidity management. We have facilities in the U.S., Canada and several countries in Europe that enable us to sell certain accounts receivable without recourse to third-parties. The accounts receivables sold are generally short-term trade receivables with payment due dates of less than 60 days.

All of our arrangements involve the sale of our entire interest in groups of accounts receivables for cash. In most instances a portion of the sales proceeds are held back by the purchaser and payment is deferred until collection of the related receivables sold. Such holdbacks are not considered legal securities nor are they certificated. We report collections on such receivables as operating cash flows in the Condensed Consolidated Statements of Cash Flows because such receivables are the result of an operating activity and the associated interest rate risk is de minimis due to its short-term nature. Our risk of loss following the sales of accounts receivable is limited to the outstanding deferred purchase price receivable. These receivables are included in the caption “Other current assets” in the accompanying Condensed Consolidated Balance Sheets and were $115 and $116 at March 31, 2013 and December 31, 2012, respectively.

Under most of the arrangements, we continue to service the sold accounts receivable. When applicable, a servicing liability is recorded for the estimated fair value of the servicing. The amounts associated with the servicing liability were not material.

Of the accounts receivable sold and derecognized from our balance sheet, $768 and $766 remained uncollected as of March 31, 2013 and December 31, 2012, respectively. Accounts receivables sales were as follows:

	Three Months Ended March 31,
	2013		2012
Accounts receivable sales	$	854	$	875
Deferred proceeds	115		147
Loss on sales of accounts receivable	4		6
Estimated increase (decrease) to operating cash flows(1)	16		(68		)

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(1) Represents the difference between current and prior year fourth quarter receivable sales adjusted for the effects of: (i) the deferred proceeds, (ii) collections prior to the end of the quarter and (iii) currency.

Finance Receivables, Net

Sale of Finance Receivables

In 2012, we sold our entire interest in a group of U.S. lease finance receivables from our Document Technology segment with a net carrying value of $682 to a third-party financial institution for cash proceeds of $630 and a beneficial interest from the purchaser of $101. As of March 31, 2013, the principal value of the receivables sold and derecognized from our balance sheet was $575 (sales value of approximately $633).

The ultimate purchaser has no recourse to our other assets for the failure of customers to pay principal and interest when due beyond our beneficial interest of which $42 and $61 is included in “Other current assets” and “Other long-term assets”, respectively, in the accompanying Condensed Consolidated Balance Sheets at March 31, 2013. The beneficial interest is held by a bankruptcy-remote subsidiary and therefore is not available to satisfy any of our creditor obligations. We report collections on the beneficial interest as operating cash flows in the Condensed Consolidated Statements of Cash Flows because such beneficial interests are the result of an operating activity and the associated interest rate risk is de minimis considering it has a weighted average life of less than 2 years. Collections on the beneficial interest were approximately $2 for the three months ended March 31, 2013.

Finance Receivables – Allowance for Credit Losses and Credit Quality

Finance receivables include sales-type leases, direct financing leases and installment loans. Our finance receivable portfolios are primarily in the U.S., Canada and Europe. We generally establish customer credit limits and estimate the allowance for credit losses on a country or geographic basis. Our policy and methodology used to establish our allowance for doubtful accounts has been consistently applied over all periods presented.

The following table is a rollforward of the allowance for doubtful finance receivables as well as the related investment in finance receivables:

Allowance for Credit Losses:	United States			Canada			Europe			Other(3)		Total
Balance at December 31, 2012	$	50		$	31		$	85		$	4	$	170
Provision	2			2			9			—		13
Charge-offs	(2		)	(4		)	(15		)	—		(21		)
Recoveries and other(1)	1			—			(3		)	—		(2		)
Balance at March 31, 2013	51			29			76			4		160
Finance receivables as of March 31, 2013 collectively evaluated for impairment(2)	$	1,991		$	756		$	2,304		$	211	$	5,262
Balance at December 31, 2011	$	75		$	33		$	91		$	2	$	201
Provision	2			1			12			—		15
Charge-offs	(4		)	(3		)	(12		)	—		(19		)
Recoveries and other(1)	1			2			2			1		6
Balance at March 31, 2012	74			33			93			3		203
Finance receivables as of March 31, 2012 collectively evaluated for impairment(2)	$	2,889		$	829		$	2,614		$	136	$	6,468

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(1) Includes the impacts of foreign currency translation and adjustments to reserves necessary to reflect events of non-payment such as customer accommodations and contract terminations.

(2) Total Finance receivables exclude residual values of $2 and $5, and the allowance for credit losses of $160 and $203 at March 31, 2013 and 2012, respectively.

(3) Includes developing market countries and smaller units.

We evaluate our customers based on the following credit quality indicators:

• Investment grade: This rating includes accounts with excellent to good business credit, asset quality and the capacity to meet financial obligations. These customers are less susceptible to adverse effects due to shifts in economic conditions or changes in circumstance. The rating generally equates to a Standard & Poors (S&P) rating of BBB- or better. Loss rates in this category are normally minimal at less than 1%.

• Non-investment grade: This rating includes accounts with average credit risk that are more susceptible to loss in the event of adverse business or economic conditions. This rating generally equates to a BB S&P rating. Although we experience higher loss rates associated with this customer class, we believe the risk is somewhat mitigated by the fact that our leases are fairly well dispersed across a large and diverse customer base. In addition, the higher loss rates are largely offset by the higher rates of return we obtain on such leases. Loss rates in this category are generally in the range of 2% to 4%.

• Substandard: This rating includes accounts that have marginal credit risk such that the customer’s ability to make repayment is impaired or may likely become impaired. We use numerous strategies to mitigate risk including higher rates of interest, prepayments, personal guarantees and etc. Accounts in this category include customers who were downgraded during the term of the lease from investment and non-investment grade status when the lease was originated. Accordingly, there is a distinct possibility for a loss of principal and interest or customer default. The loss rates in this category are around 10%.

Credit quality indicators are updated at least annually and the credit quality of any given customer can change during the life of the portfolio. Details about our finance receivables portfolio based on industry and credit quality indicators are as follows:

	March 31, 2013								December 31, 2012
	Investment Grade		Non-investment Grade		Substandard		Total Finance Receivables		Investment Grade		Non-investment Grade		Substandard		Total Finance Receivables
Finance and other services	$	259	$	150	$	65	$	474	$	252	$	147	$	59	$	458
Government and education	722		15		5		742		750		15		4		769
Graphic arts	103		80		123		306		92		90		137		319
Industrial	113		40		16		169		115		31		17		163
Healthcare	105		26		21		152		109		37		14		160
Other	72		33		43		148		70		39		34		143
Total United States	1,374		344		273		1,991		1,388		359		265		2,012
Finance and other services	140		111		35		286		151		116		40		307
Government and education	109		11		2		122		117		10		2		129
Graphic arts	38		33		27		98		37		34		30		101
Industrial	65		40		24		129		66		40		29		135
Other	71		39		11		121		75		43		11		129
Total Canada	423		234		99		756		446		243		112		801
France	266		286		121		673		274		294		134		702
U.K./Ireland	194		142		46		382		215		155		50		420
Central(1)	283		426		48		757		315		445		56		816
Southern(2)	127		209		68		404		139		230		73		442
Nordics(3)	45		40		3		88		49		36		9		94
Total Europe	915		1,103		286		2,304		992		1,160		322		2,474
Other	160		45		6		211		148		39		7		194
Total	$	2,872	$	1,726	$	664	$	5,262	$	2,974	$	1,801	$	706	$	5,481

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(1) Switzerland, Germany, Austria, Belgium and Holland.

(2) Italy, Greece, Spain and Portugal.

(3) Sweden, Norway, Denmark and Finland.

The aging of our billed finance receivables is based upon the number of days an invoice is past due and is as follows:

	March 31, 2013
	Current			31-90 Days Past Due		>90 Days Past Due		Total Billed Finance Receivables		Unbilled Finance Receivables		Total Finance Receivables		Finance Receivables >90 Days and Accruing
Finance and other services	$	12		$	2	$	1	$	15	$	459	$	474	$	12
Government and education	20			5		3		28		714		742		31
Graphic arts	15			1		—		16		290		306		6
Industrial	5			1		1		7		162		169		6
Healthcare	4			1		1		6		146		152		6
Other	5			1		—		6		142		148		4
Total United States	61			11		6		78		1,913		1,991		65
Canada	4			3		1		8		748		756		30
France	8			1		3		12		661		673		50
U.K./Ireland	(1		)	1		2		2		380		382		6
Central(1)	3			3		4		10		747		757		28
Southern(2)	24			5		13		42		362		404		65
Nordics(3)	1			—		—		1		87		88		—
Total Europe	35			10		22		67		2,237		2,304		149
Other	5			1		1		7		204		211		—
Total	$	105		$	25	$	30	$	160	$	5,102	$	5,262	$	244
	December 31, 2012
	Current			31-90 Days Past Due		>90 Days Past Due		Total Billed Finance Receivables		Unbilled Finance Receivables		Total Finance Receivables		Finance Receivables >90 Days and Accruing
Finance and other services	$	12		$	3	$	2	$	17	$	441	$	458	$	18
Government and education	21			5		3		29		740		769		42
Graphic arts	16			1		1		18		301		319		12
Industrial	5			2		1		8		155		163		6
Healthcare	6			2		1		9		151		160		9
Other	5			1		1		7		136		143		6
Total United States	65			14		9		88		1,924		2,012		93
Canada	2			3		2		7		794		801		30
France	—			5		1		6		696		702		22
U.K./Ireland	2			—		2		4		416		420		2
Central(1)	3			2		4		9		807		816		30
Southern(2)	20			8		14		42		400		442		72
Nordics(3)	1			—		—		1		93		94		—
Total Europe	26			15		21		62		2,412		2,474		126
Other	2			1		—		3		191		194		—
Total	$	95		$	33	$	32	$	160	$	5,321	$	5,481	$	249

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(1) Switzerland, Germany, Austria, Belgium and Holland.

(2) Italy, Greece, Spain and Portugal.

(3) Sweden, Norway, Denmark and Finland.