Receivables, Net

Accounts Receivable Sales Arrangements

We have facilities in the U.S., Canada and several countries in Europe that enable us to sell to third-parties, on an on-going basis, certain accounts receivable without recourse. The accounts receivables sold are generally short-term trade receivables with payment due dates of less than 60 days. One of the facilities in the U.S. enables us to sell receivables on a revolving basis to a wholly-owned consolidated bankruptcy-remote special purpose subsidiary, which in turn sells such receivables to a third-party commercial paper conduit. Receivables of $92 were sold under this revolving facility program in the three months ended March 31, 2012.

The agreements involve the sale of entire groups of accounts receivable for cash. In certain 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. These receivables are included in the caption “Other current assets” in the accompanying Condensed Consolidated Balance Sheets and were $148 and $97 at March 31, 2012 and December 31, 2011, respectively. The balance at March 31, 2012 includes receivables of $41 held by the bankruptcy-remote subsidiary, noted in the revolving arrangement above, which are not available to satisfy any of our creditor obligations.

Under most of the agreements, 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, $809 and $815 remained uncollected as of March 31, 2012 and December 31, 2011, respectively. Accounts receivables sales were as follows:



	Three Months Ended March 31,
	2012			2011
Accounts receivable sales	$	875		$	730
Deferred proceeds	147			94
Fees associated with sales	6			4
Estimated decrease to operating cash flows⁽¹⁾	(68		)	(24		)

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(1)	Represents the difference between current and prior period 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 – 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:



	United States			Canada			Europe			Other⁽³⁾		Total
Allowance for Credit Losses:
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

Allowance for Credit Losses:
Balance at December 31, 2010	$	91		$	37		$	81		$	3	$	212
Provision	7			4			11			—		22
Charge-offs	(10		)	(5		)	(8		)	—		(23		)
Recoveries and other⁽¹⁾	(1		)	2			3			—		4
Balance at March 31, 2011	87			38			87			3		215
Finance receivables as of March 31, 2011 collectively evaluated for impairment⁽²⁾	$	3,074		$	874		$	2,865		$	76	$	6,889

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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 $5 and $11, and the allowance for credit losses of $203 and $215 at March 31, 2012 and 2011, 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, 2012
	Investment Grade		Non-investment Grade		Substandard		Total Finance Receivables
Finance and Other Services	$	346	$	364	$	144	$	854
Government and Education	784		22		4		810
Graphic Arts	123		192		171		486
Industrial	171		84		31		286
Healthcare	120		49		26		195
Other	89		106		63		258
Total United States	1,633		817		439		2,889
Finance and Other Services	153		113		51		317
Government and Education	121		10		4		135
Graphic Arts	39		39		35		113
Industrial	59		42		33		134
Other	75		44		11		130
Total Canada	447		248		134		829
France	242		360		89		691
U.K./Ireland	208		163		58		429
Central⁽¹⁾	332		480		59		871
Southern⁽²⁾	214		246		61		521
Nordics⁽³⁾	65		34		3		102
Total Europe	1,061		1,283		270		2,614
Other	97		32		7		136
Total	$	3,238	$	2,380	$	850	$	6,468

	December 31, 2011
	Investment Grade		Non-investment Grade		Substandard		Total Finance Receivables
Finance and Other Services	$	349	$	380	$	160	$	889
Government and Education	821		20		4		845
Graphic Arts	126		200		172		498
Industrial	180		83		32		295
Healthcare	130		42		28		200
Other	97		93		76		266
Total United States	1,703		818		472		2,993
Finance and Other Services	153		118		51		322
Government and Education	121		9		4		134
Graphic Arts	36		39		35		110
Industrial	56		41		34		131
Other	74		42		12		128
Total Canada	440		249		136		825
France	246		354		92		692
U.K./Ireland	201		162		54		417
Central⁽¹⁾	330		494		57		881



Southern⁽²⁾	219		256		63		538
Nordics⁽³⁾	60		39		3		102
Total Europe	1,056		1,305		269		2,630
Other	75		26		7		108
Total	$	3,274	$	2,398	$	884	$	6,556

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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, 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	$	14	$	4	$	2	$	20	$	834	$	854	$	22
Government and Education	18		6		4		28		782		810		52
Graphic Arts	13		2		1		16		470		486		13
Industrial	7		2		1		10		276		286		10
Healthcare	4		2		1		7		188		195		9
Other	6		1		—		7		251		258		6
Total United States	62		17		9		88		2,801		2,889		112
Canada	3		3		1		7		822		829		26
France	1		1		1		3		688		691		13
U.K./Ireland	5		1		3		9		420		429		4
Central⁽¹⁾	4		3		4		11		860		871		53
Southern⁽²⁾	21		10		12		43		478		521		83
Nordics⁽³⁾	1		—		—		1		101		102		—
Total Europe	32		15		20		67		2,547		2,614		153
Other	3		—		—		3		133		136		1
Total	$	100	$	35	$	30	$	165	$	6,303	$	6,468	$	292

	December 31, 2011
	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	$	18	$	4	$	1	$	23	$	866	$	889	$	15
Government and Education	21		5		2		28		817		845		29
Graphic Arts	16		2		1		19		479		498		7
Industrial	7		2		1		10		285		295		6
Healthcare	5		2		—		7		193		200		5
Other	8		1		—		9		257		266		4
Total United States	75		16		5		96		2,897		2,993		66
Canada	3		2		1		6		819		825		27
France	1		1		1		3		689		692		16
U.K./Ireland	3		2		3		8		409		417		4
Central⁽¹⁾	7		2		3		12		869		881		46
Southern⁽²⁾	31		4		13		48		490		538		82
Nordics⁽³⁾	1		—		—		1		101		102		—
Total Europe	43		9		20		72		2,558		2,630		148
Other	2		1		—		3		105		108		—
Total	$	123	$	28	$	26	$	177	$	6,379	$	6,556	$	241

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


(2)	Italy, Greece, Spain and Portugal.


(3)	Sweden, Norway, Denmark and Finland.