Receivables

6 Months Ended

May 03, 2020

Receivables

Receivables

(4)  Receivables

Past due balances of Receivables still accruing finance income represent the total balance held (principal plus accrued interest) with any payment amounts 30 days or more past the contractual payment due date.

The Company monitors the credit quality of Receivables based on delinquency status. Non-performing Receivables represent loans for which the Company has ceased accruing finance income. Generally, when retail notes, revolving charge accounts, and finance lease accounts are 90 days delinquent, accrual of finance income and lease revenue is suspended. Generally, when a wholesale receivable becomes 60 days delinquent, the Company determines whether the accrual of finance income on interest-bearing wholesale receivables should be suspended. Finance income for non-performing Receivables is recognized on a cash basis. Accrual of finance income is generally resumed when the receivable becomes contractually current and collections are reasonably assured.

Receivable balances are written off to the allowance for credit losses when, in the judgment of management, they are considered uncollectible. Generally, when retail notes and finance lease accounts are 120 days delinquent, the collateral is repossessed or the account is designated for litigation, and the estimated uncollectible amount, after charging the dealer’s withholding account, if any, is written off to the allowance for credit losses. Revolving charge accounts are generally deemed to be uncollectible and written off to the allowance for credit losses when delinquency reaches 120 days. Generally, when a wholesale account becomes 60 days delinquent, the Company determines whether the collateral should be repossessed or the account designated for litigation, and the estimated uncollectible amount is written off to the allowance for credit losses.

Due to the significant, negative effects of COVID, the Company provided short-term relief to dealers and retail customers during the second quarter of 2020. The relief was provided in regional programs and on a case-by-case basis with customers that were generally current in their payment obligations. For retail receivable customers, which include retail notes, financing leases, and revolving charge accounts, the relief generally included payment deferrals of three months or less. The retail receivables granted relief, which were primarily construction accounts, represented approximately 4 percent of the retail receivables balance at May 3, 2020. The relief provided to dealers generally included payment deferrals of three months or less and short-term interest rate reductions in certain markets. The wholesale receivables granted relief, which primarily related to agriculture and turf dealers, represented approximately 5 percent of the wholesale receivables balance at May 3, 2020.

An age analysis of past due Receivables that are still accruing interest and non-performing Receivables was as follows (in millions of dollars):

	May 3, 2020
					90 Days
	30-59 Days		60-89 Days		or Greater		Total
	Past Due		Past Due		Past Due		Past Due
Retail notes:
Agriculture and turf	$	151.2	$	75.3	$	2.6	$	229.1
Construction and forestry		97.7		44.3				142.0
Revolving charge accounts:
Agriculture and turf		30.7		11.9				42.6
Construction and forestry		4.0		1.2				5.2
Wholesale receivables:
Agriculture and turf		8.1		.9		2.6		11.6
Construction and forestry		1.5		1.6		1.0		4.1
Financing leases:
Agriculture and turf		19.0		6.8		.7		26.5
Construction and forestry		2.0		1.5				3.5
Total Receivables	$	314.2	$	143.5	$	6.9	$	464.6

	Total		Total Non-				Total
	Past Due		Performing		Current		Receivables
Retail notes:
Agriculture and turf	$	229.1	$	204.4	$	15,692.0	$	16,125.5
Construction and forestry		142.0		121.0		3,150.1		3,413.1
Revolving charge accounts:
Agriculture and turf		42.6		41.4		3,215.9		3,299.9
Construction and forestry		5.2		1.1		82.5		88.8
Wholesale receivables:
Agriculture and turf		11.6		3.4		7,557.5		7,572.5
Construction and forestry		4.1		2.0		1,764.8		1,770.9
Financing leases:
Agriculture and turf		26.5		12.1		487.5		526.1
Construction and forestry		3.5		4.6		136.4		144.5
Total Receivables	$	464.6	$	390.0	$	32,086.7	$	32,941.3

	November 3, 2019
					90 Days
	30-59 Days		60-89 Days		or Greater		Total
	Past Due		Past Due		Past Due		Past Due
Retail notes:
Agriculture and turf	$	120.0	$	64.2	$	1.5	$	185.7
Construction and forestry		73.9		26.6				100.5
Revolving charge accounts:
Agriculture and turf		19.1		9.2				28.3
Construction and forestry		3.2		1.2				4.4
Wholesale receivables:
Agriculture and turf		4.1		1.9		.8		6.8
Construction and forestry		.1		.3		.3		.7
Financing leases:
Agriculture and turf		14.6		7.8		.5		22.9
Construction and forestry		2.8		.7				3.5
Total Receivables	$	237.8	$	111.9	$	3.1	$	352.8

	Total		Total Non-				Total
	Past Due		Performing		Current		Receivables
Retail notes:
Agriculture and turf	$	185.7	$	168.7	$	15,831.5	$	16,185.9
Construction and forestry		100.5		112.9		3,100.8		3,314.2
Revolving charge accounts:
Agriculture and turf		28.3		6.1		3,727.9		3,762.3
Construction and forestry		4.4		.9		95.4		100.7
Wholesale receivables:
Agriculture and turf		6.8		6.3		6,544.6		6,557.7
Construction and forestry		.7		2.9		2,145.5		2,149.1
Financing leases:
Agriculture and turf		22.9		11.6		569.8		604.3
Construction and forestry		3.5		2.5		141.3		147.3
Total Receivables	$	352.8	$	311.9	$	32,156.8	$	32,821.5

	April 28, 2019
					90 Days
	30-59 Days		60-89 Days		or Greater		Total
	Past Due		Past Due		Past Due		Past Due
Retail notes:
Agriculture and turf	$	116.7	$	66.8	$	.7	$	184.2
Construction and forestry		86.7		39.8				126.5
Revolving charge accounts:
Agriculture and turf		23.6		11.8				35.4
Construction and forestry		3.7		1.3				5.0
Wholesale receivables:
Agriculture and turf		5.1		2.1		.8		8.0
Construction and forestry		.4						.4
Financing leases:
Agriculture and turf		4.4		1.7		.1		6.2
Construction and forestry		2.6		.7				3.3
Total Receivables	$	243.2	$	124.2	$	1.6	$	369.0

	Total		Total Non-				Total
	Past Due		Performing		Current		Receivables
Retail notes:
Agriculture and turf	$	184.2	$	197.7	$	14,621.5	$	15,003.4
Construction and forestry		126.5		110.7		2,774.4		3,011.6
Revolving charge accounts:
Agriculture and turf		35.4		47.1		3,059.2		3,141.7
Construction and forestry		5.0		1.0		88.2		94.2
Wholesale receivables:
Agriculture and turf		8.0		6.2		8,606.6		8,620.8
Construction and forestry		.4		4.5		2,184.0		2,188.9
Financing leases:
Agriculture and turf		6.2		11.6		462.9		480.7
Construction and forestry		3.3		2.9		140.1		146.3
Total Receivables	$	369.0	$	381.7	$	31,936.9	$	32,687.6

Allowances for credit losses on Receivables are maintained in amounts considered to be appropriate in relation to the Receivables outstanding based on historical loss experience by product category, portfolio duration, delinquency trends, economic conditions in the Company’s major markets and geographies, and credit risk quality.

An analysis of the allowance for credit losses and investment in Receivables was as follows (in millions of dollars):

	Three Months Ended
	May 3, 2020
			Revolving
	Retail		Charge		Wholesale		Financing		Total
	Notes		Accounts		Receivables		Leases		Receivables
Allowance:
Beginning of period balance	$	48.5	$	39.3	$	9.9	$	5.4	$	103.1
Provision (credit) for credit losses		53.5		19.2		(.3)		.3		72.7
Write-offs		(19.8)		(22.4)				(.4)		(42.6)
Recoveries		1.3		6.2		.1		.1		7.7
Translation adjustments		(.2)				(.6)		(.3)		(1.1)
End of period balance	$	83.3	$	42.3	$	9.1	$	5.1	$	139.8

	Six Months Ended
	May 3, 2020
			Revolving
	Retail		Charge		Wholesale		Financing		Total
	Notes		Accounts		Receivables		Leases		Receivables
Allowance:
Beginning of period balance	$	48.3	$	39.3	$	7.6	$	5.4	$	100.6
Provision (credit) for credit losses		66.6		18.1		(.5)		.6		84.8
Write-offs		(33.3)		(28.8)		(.8)		(.8)		(63.7)
Recoveries		1.9		13.7		.9		.2		16.7
Translation adjustments		(.2)				1.9		(.3)		1.4
End of period balance	$	83.3	$	42.3	$	9.1	$	5.1	$	139.8
Balance individually evaluated *	$	2.5			$	4.7			$	7.2
Receivables:
End of period balance	$	19,538.6	$	3,388.7	$	9,343.4	$	670.6	$	32,941.3
Balance individually evaluated *	$	94.5	$	.1	$	17.6	$	1.0	$	113.2

*    Remainder is collectively evaluated.

The negative economic effects related to COVID and other macroeconomic issues have significantly affected certain retail borrowers, particularly of construction equipment. As a result, the allowance for credit losses increased $36.7 million in the second quarter of 2020, reflecting higher estimated credit losses inherent in the Receivable portfolio.

	Three Months Ended
	April 28, 2019
			Revolving
	Retail		Charge		Wholesale		Financing		Total
	Notes		Accounts		Receivables		Leases		Receivables
Allowance:
Beginning of period balance	$	51.2	$	42.3	$	7.9	$	5.3	$	106.7
Provision for credit losses		8.1		16.3		.2		1.5		26.1
Write-offs		(6.4)		(21.5)				(1.0)		(28.9)
Recoveries		1.3		5.2				.2		6.7
Translation adjustments		(.1)				(.1)				(.2)
End of period balance	$	54.1	$	42.3	$	8.0	$	6.0	$	110.4

	Six Months Ended
	April 28, 2019
			Revolving
	Retail		Charge		Wholesale		Financing		Total
	Notes		Accounts		Receivables		Leases		Receivables
Allowance:
Beginning of period balance	$	51.6	$	42.3	$	8.0	$	4.8	$	106.7
Provision (credit) for credit losses		12.6		15.4		(3.7)		2.6		26.9
Write-offs		(13.2)		(25.4)				(1.6)		(40.2)
Recoveries		3.2		10.0		3.6		.2		17.0
Translation adjustments		(.1)				.1
End of period balance	$	54.1	$	42.3	$	8.0	$	6.0	$	110.4
Balance individually evaluated *	$	1.8			$	2.9	$	.7	$	5.4
Receivables:
End of period balance	$	18,015.0	$	3,235.9	$	10,809.7	$	627.0	$	32,687.6
Balance individually evaluated *	$	73.6	$	2.4	$	9.4	$	1.1	$	86.5

*    Remainder is collectively evaluated.

Receivables are considered impaired when it is probable the Company will be unable to collect all amounts due according to the contractual terms. Receivables reviewed for impairment generally include those that are either past due, or have provided bankruptcy notification, or require significant collection efforts. Receivables that are impaired are generally classified as non-performing.

An analysis of impaired Receivables was as follows (in millions of dollars):

			Unpaid				Average
	Recorded		Principal		Specific		Recorded
	Investment		Balance		Allowance		Investment
May 3, 2020 *
Receivables with specific allowance:
Retail notes	$	4.1	$	4.0	$	2.5	$	4.2
Wholesale receivables		15.5		15.5		4.7		15.9
Total with specific allowance		19.6		19.5		7.2		20.1
Receivables without specific allowance:
Retail notes		24.4		23.9				25.5
Wholesale receivables		2.0		2.0				2.2
Total without specific allowance		26.4		25.9				27.7
Total	$	46.0	$	45.4	$	7.2	$	47.8
Agriculture and turf	$	41.0	$	40.4	$	7.2	$	42.5
Construction and forestry		5.0		5.0				5.3
Total	$	46.0	$	45.4	$	7.2	$	47.8
November 3, 2019 *
Receivables with specific allowance:
Retail notes	$	4.9	$	4.6	$	1.9	$	5.0
Wholesale receivables		5.3		5.3		2.9		5.7
Total with specific allowance		10.2		9.9		4.8		10.7
Receivables without specific allowance:
Retail notes		22.9		22.4				25.0
Wholesale receivables		3.9		3.9				4.1
Total without specific allowance		26.8		26.3				29.1
Total	$	37.0	$	36.2	$	4.8	$	39.8
Agriculture and turf	$	30.3	$	29.7	$	4.6	$	32.0
Construction and forestry		6.7		6.5		.2		7.8
Total	$	37.0	$	36.2	$	4.8	$	39.8
April 28, 2019 *
Receivables with specific allowance:
Retail notes	$	4.8	$	4.6	$	1.8	$	4.9
Wholesale receivables		5.9		5.9		2.9		5.8
Financing leases		.7		.6		.7		.7
Total with specific allowance		11.4		11.1		5.4		11.4
Receivables without specific allowance:
Retail notes		25.3		24.8				26.5
Wholesale receivables		1.3		1.3				.5
Total without specific allowance		26.6		26.1				27.0
Total	$	38.0	$	37.2	$	5.4	$	38.4
Agriculture and turf	$	32.7	$	32.1	$	5.1	$	33.1
Construction and forestry		5.3		5.1		.3		5.3
Total	$	38.0	$	37.2	$	5.4	$	38.4

*    Finance income recognized was not material.

A troubled debt restructuring is generally the modification of debt in which a creditor grants a concession it would not otherwise consider to a debtor that is experiencing financial difficulties. These modifications may include a reduction of the stated interest rate, an extension of the maturity dates, a reduction of the face amount or maturity amount of the debt, or a reduction of accrued interest. During the first six months of 2020, the Company identified 192 Receivable contracts, primarily retail notes, as troubled debt restructurings with aggregate balances of $7.3 million pre-modification and $7.1 million post-modification. The short-term relief related to COVID mentioned earlier did not meet the definition of a troubled debt restructuring. During the first six months of 2019, there were 135 Receivable contracts, primarily retail notes, with aggregate balances of $4.3 million pre-modification and $4.0 million post-modification. During these same periods, there were no significant troubled debt restructurings that subsequently defaulted and were written off. At May 3, 2020, the Company had no commitments to lend additional funds to borrowers whose accounts were modified in troubled debt restructurings.