Receivables

3 Months Ended

Jan. 29, 2023

Receivables

Receivables

(4)  Receivables

Credit Quality

The Company monitors the credit quality of Receivables based on delinquency status. 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. Non-performing Receivables represent receivables for which the Company has ceased accruing finance income. Generally, when Customer Receivables are 90 days delinquent, accrual of finance income and lease revenue is suspended, and accrued finance income and lease revenue previously recognized is reversed. 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 and whether accrued finance income previously recognized should be reversed. During the first three months of 2023 and 2022, $2.8 million and $3.8 million, respectively, of accrued finance income and lease revenue was reversed on non-performing Receivables. Finance income and lease revenue for non-performing Receivables is recognized on a cash basis. Accrual of finance income and lease revenue is resumed when the receivable becomes contractually current and collections are reasonably assured. During the first quarter of both 2023 and 2022, $3.1 million of finance income and lease revenue was recognized from cash payments on non-performing Receivables.

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 financing lease accounts are 120 days delinquent, the collateral is repossessed or the account is designated for litigation, and the estimated uncollectible amount from the customer 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.

The credit quality analysis of Customer Receivables by year of origination was as follows (in millions of dollars):

	January 29, 2023
	2023		2022		2021		2020		2019		Prior Years		Revolving Charge Accounts		Total
Customer Receivables:
Agriculture and turf
Current	$	2,458.1	$	10,776.6	$	6,318.7	$	3,112.2	$	1,292.6	$	566.4	$	2,686.3	$	27,210.9
30-59 days past due		1.7		29.4		29.2		48.2		10.4		42.8		27.2		188.9
60-89 days past due		1.3		12.2		10.5		18.0		3.7		14.1		5.9		65.7
90+ days past due				1.2		.2		2.9		1.0		.2				5.5
Non-performing		.3		35.1		43.3		29.1		15.0		19.6		7.8		150.2
Construction and forestry
Current		553.7		2,156.3		1,339.0		538.4		177.7		68.5		99.0		4,932.6
30-59 days past due		1.5		9.9		23.6		34.3		15.7		52.1		4.6		141.7
60-89 days past due		.4		4.3		15.7		17.7		6.4		23.0		2.0		69.5
90+ days past due				.1		.2		.4		.2						.9
Non-performing				38.9		51.8		26.1		13.0		6.5		1.2		137.5
Total Customer Receivables	$	3,017.0	$	13,064.0	$	7,832.2	$	3,827.3	$	1,535.7	$	793.2	$	2,834.0	$	32,903.4

	October 30, 2022
	2022		2021		2020		2019		2018		Prior Years		Revolving Charge Accounts		Total
Customer Receivables:
Agriculture and turf
Current	$	11,764.5	$	6,958.0	$	3,488.7	$	1,519.7	$	582.8	$	153.2	$	4,022.7	$	28,489.6
30-59 days past due		40.1		55.8		31.4		15.0		6.4		2.7		18.4		169.8
60-89 days past due		11.8		19.5		10.8		4.4		2.0		1.1		4.5		54.1
90+ days past due		.4		.2		.2										.8
Non-performing		24.7		38.4		29.2		13.7		11.2		10.2		7.8		135.2
Construction and forestry
Current		2,373.7		1,526.3		658.1		230.7		57.2		10.5		107.7		4,964.2
30-59 days past due		44.5		40.6		20.7		7.6		1.8		.6		3.1		118.9
60-89 days past due		18.1		11.4		6.0		3.0		.7		.1		1.0		40.3
90+ days past due		.3		1.3				1.4								3.0
Non-performing		19.3		51.2		27.6		15.4		5.5		2.9		.6		122.5
Total Customer Receivables	$	14,297.4	$	8,702.7	$	4,272.7	$	1,810.9	$	667.6	$	181.3	$	4,165.8	$	34,098.4

	January 30, 2022
	2022		2021		2020		2019		2018		Prior Years		Revolving Charge Accounts		Total
Customer Receivables:
Agriculture and turf
Current	$	2,181.1	$	10,156.1	$	5,099.4	$	2,469.2	$	1,175.8	$	539.0	$	2,565.0	$	24,185.6
30-59 days past due		4.4		67.7		39.7		23.8		12.6		5.7		23.5		177.4
60-89 days past due		.2		17.5		13.3		7.6		4.2		2.2		4.7		49.7
90+ days past due				1.5				.1		.1		.1				1.8
Non-performing		.4		27.9		45.0		26.0		22.1		20.0		5.9		147.3
Construction and forestry
Current		625.7		2,131.1		1,050.4		471.3		159.0		39.5		80.8		4,557.8
30-59 days past due		7.4		58.5		32.1		18.0		5.5		1.6		2.6		125.7
60-89 days past due				20.5		15.1		6.5		1.9		.7		1.1		45.8
90+ days past due				1.0		1.8		2.0								4.8
Non-performing		.4		26.4		44.7		30.2		12.1		6.3		1.2		121.3
Total Customer Receivables	$	2,819.6	$	12,508.2	$	6,341.5	$	3,054.7	$	1,393.3	$	615.1	$	2,684.8	$	29,417.2

The credit quality analysis of wholesale receivables by year of origination was as follows (in millions of dollars):

	January 29, 2023
	2023		2022		2021		2020		2019		Prior Years		Revolving		Total
Wholesale receivables:
Agriculture and turf
Current	$	114.6	$	283.2	$	45.7	$	20.2	$	3.7	$	1.2	$	7,349.9	$	7,818.5
30+ days past due				.3										9.2		9.5
Non-performing														5.9		5.9
Construction and forestry
Current		5.8		3.8		23.7		1.0		.3		.1		1,875.8		1,910.5
30+ days past due														7.7		7.7
Non-performing
Total wholesale receivables	$	120.4	$	287.3	$	69.4	$	21.2	$	4.0	$	1.3	$	9,248.5	$	9,752.1

	October 30, 2022
	2022		2021		2020		2019		2018		Prior Years		Revolving		Total
Wholesale receivables:
Agriculture and turf
Current	$	381.3	$	62.7	$	25.0	$	3.8	$	.3	$	1.1	$	6,238.1	$	6,712.3
30+ days past due				.1										8.3		8.4
Non-performing														5.5		5.5
Construction and forestry
Current		4.8		28.2		1.4		.4		.1				1,633.8		1,668.7
30+ days past due														9.6		9.6
Non-performing
Total wholesale receivables	$	386.1	$	91.0	$	26.4	$	4.2	$	.4	$	1.1	$	7,895.3	$	8,404.5

	January 30, 2022
	2022		2021		2020		2019		2018		Prior Years		Revolving		Total
Wholesale receivables:
Agriculture and turf
Current	$	101.1	$	237.1	$	54.2	$	11.3	$	6.5	$	2.1	$	4,510.5	$	4,922.8
30+ days past due														12.6		12.6
Non-performing														6.3		6.3
Construction and forestry
Current		3.5		35.7		2.3		2.7		.2				1,324.9		1,369.3
30+ days past due														1.0		1.0
Non-performing
Total wholesale receivables	$	104.6	$	272.8	$	56.5	$	14.0	$	6.7	$	2.1	$	5,855.3	$	6,312.0

Allowance for Credit Losses

The allowance for credit losses is an estimate of the credit losses expected over the life of the Company’s Receivable portfolio. The Company measures expected credit losses on a collective basis when similar risk characteristics exist. Risk characteristics considered by the Company include product category, market, geography, credit risk, and remaining duration. Receivables that do not share risk characteristics with other receivables in the portfolio are evaluated on an individual basis. Non-performing Receivables are included in the estimate of expected credit losses.

Recoveries from freestanding credit enhancements, such as dealer deposits, and certain credit insurance contracts are not included in the estimate of expected credit losses. Recoveries from dealer deposits are recognized in other income on the statements of consolidated income when the dealer’s withholding account is charged. During the three months ended January 29, 2023 and January 30, 2022, recoveries from freestanding credit enhancements recorded in other income were $2.0 million and $1.1 million, respectively.

An analysis of the allowance for credit losses and investment in Receivables during 2023 was as follows (in millions of dollars):

	Three Months Ended
	January 29, 2023
	Retail Notes		Revolving
	& Financing		Charge		Wholesale		Total
	Leases		Accounts		Receivables		Receivables
Allowance:
Beginning of period balance	$	95.4	$	21.9	$	11.1	$	128.4
Provision (credit) for credit losses*		6.8		(3.7)		(.5)		2.6
Write-offs		(10.2)		(7.5)		(.1)		(17.8)
Recoveries		2.4		5.3		.6		8.3
Translation adjustments		.4				(.2)		.2
End of period balance	$	94.8	$	16.0	$	10.9	$	121.7
Receivables:
End of period balance	$	30,069.4	$	2,834.0	$	9,752.1	$	42,655.5

*Excludes provision for credit losses on unfunded commitments of $.9 million. The estimated credit losses related to unfunded commitments are recorded in accounts payable and accrued expenses on the consolidated balance sheets.

The allowance for credit losses decreased $6.7 million in the first three months of 2023, primarily driven by a lower allowance on revolving charge accounts, which continue to benefit from strong fundamentals within the

agricultural market. The allowance for credit losses on retail notes and financing leases was relatively flat during the first quarter of 2023, as the impacts of favorable agricultural conditions were offset by higher expected losses on turf customer accounts. The Company continues to monitor the economy as part of the allowance setting process, including potential impacts of inflation and interest rates, among other factors, and qualitative adjustments to the allowance are incorporated as necessary.

An analysis of the allowance for credit losses and investment in Receivables during 2022 was as follows (in millions of dollars):

	Three Months Ended
	January 30, 2022
	Retail Notes		Revolving
	& Financing		Charge		Wholesale		Total
	Leases		Accounts		Receivables		Receivables
Allowance:
Beginning of period balance	$	96.5	$	20.8	$	11.7	$	129.0
Provision (credit) for credit losses*		7.9		(9.4)		.1		(1.4)
Write-offs		(12.5)		(4.0)				(16.5)
Recoveries		2.9		7.8				10.7
Translation adjustments		(.1)				(.3)		(.4)
End of period balance	$	94.7	$	15.2	$	11.5	$	121.4
Receivables:
End of period balance	$	26,732.4	$	2,684.8	$	6,312.0	$	35,729.2

*Excludes provision for credit losses on unfunded commitments of $.2 million. The estimated credit losses related to unfunded commitments are recorded in accounts payable and accrued expenses on the consolidated balance sheets.

Troubled Debt Restructuring

A troubled debt restructuring is a significant 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 date, a reduction of the face amount or maturity amount of the debt, or a reduction of accrued interest. The following table includes Receivable contracts identified as troubled debt restructurings, which were primarily retail notes (in millions of dollars):

	Three Months Ended
	January 29		January 30
	2023		2022
Number of receivable contracts		36		87
Pre-modification balance	$	1.0	$	3.1
Post-modification balance		1.0		2.2

During the same periods as the table above, there were no significant troubled debt restructurings that subsequently defaulted and were written off. At January 29, 2023, the Company had no commitments to provide additional financing to customers whose accounts were modified in troubled debt restructurings.