RECEIVABLES

12 Months Ended

Oct. 31, 2011

RECEIVABLES

RECEIVABLES

12. RECEIVABLES

Trade Accounts and Notes Receivable

Trade accounts and notes receivable at October 31 consisted of the following in millions of dollars:

	2011		2010
Trade accounts and notes:
Agriculture and turf	$	2,618	$	2,929
Construction and forestry	676		535
Trade accounts and notes receivable–net	$	3,294	$	3,464

At October 31, 2011 and 2010, dealer notes included in the previous table were $97 million and $852 million, and the allowance for doubtful trade receivables was $72 million and $71 million, respectively.

The equipment operations sell a significant portion of their trade receivables to financial services and provide compensation to these operations at approximate market rates of interest.

Trade accounts and notes receivable primarily arise from sales of goods to independent dealers. Under the terms of the sales to dealers, interest is charged to dealers on outstanding balances, from the earlier of the date when goods are sold to retail customers by the dealer or the expiration of certain interest-free periods granted at the time of the sale to the dealer, until payment is received by the company. Dealers cannot cancel purchases after the equipment is shipped and are responsible for payment even if the equipment is not sold to retail customers. The interest-free periods are determined based on the type of equipment sold and the time of year of the sale. These periods range from one to twelve months for most equipment. Interest-free periods may not be extended. Interest charged may not be forgiven and the past due interest rates exceed market rates. The company evaluates and assesses dealers on an ongoing basis as to their creditworthiness and generally retains a security interest in the goods associated with the trade receivables. The company is obligated to repurchase goods sold to a dealer upon cancellation or termination of the dealer’s contract for such causes as change in ownership and closeout of the business.

Trade accounts and notes receivable have significant concentrations of credit risk in the agriculture and turf sector and construction and forestry sector as shown in the previous table. On a geographic basis, there is not a disproportionate concentration of credit risk in any area.

Financing Receivables

Financing receivables at October 31 consisted of the following in millions of dollars:

	2011				2010
	Unrestricted/Securitized				Unrestricted/Securitized
Retail notes:
Equipment:
Agriculture and turf	$	12,969	$	2,597	$	11,740	$	1,865
Construction and forestry	1,036		362		920		427
Recreational products	4				5
Total	14,009		2,959		12,665		2,292
Wholesale notes	3,006				2,232
Revolving charge accounts	2,518				2,355
Financing leases (direct and sales-type)	1,242				1,092
Operating loans	84				239
Total financing receivables	20,859		2,959		18,583		2,292
Less:
Unearned finance income:
Equipment notes	635		36		590		27
Financing leases	121				113
Total	756		36		703		27
Allowance for doubtful receivables	179		18		198		27
Financing receivables – net	$	19,924	$	2,905	$	17,682	$	2,238

The residual values for investments in financing leases at October 31, 2011 and 2010 totaled $75 million and $64 million, respectively.

Financing receivables have significant concentrations of credit risk in the agriculture and turf sector and construction and forestry sector as shown in the previous table. On a geographic basis, there is not a disproportionate concentration of credit risk in any area. The company retains as collateral a security interest in the equipment associated with retail notes, wholesale notes and financing leases.

Financing receivables at October 31 related to the company’s sales of equipment that were included in the table above consisted of the following in millions of dollars:

	2011		2010
	Unrestricted		Unrestricted
Retail notes*:
Equipment:
Agriculture and turf	$	1,633	$	1,492
Construction and forestry	310		295
Total	1,943		1,787
Wholesale notes	3,006		2,232
Sales-type leases	776		655
Total	$	5,725	$	4,674
Less:
Unearned finance income:
Equipment notes	$	197	$	179
Sales-type leases	64		57
Total	261		236
Financing receivables related to the company’s sales of equipment	$	5,464	$	4,438

* These retail notes generally arise from sales of equipment by company-owned dealers or through direct sales.

Financing receivable installments, including unearned finance income, at October 31 are scheduled as follows in millions of dollars:

	2011				2010
	Unrestricted/Securitized				Unrestricted/Securitized
Due in months:
0–12	$	10,311	$	1,192	$	9,114	$	1,043
13–24	3,937		807		3,538		662
25–36	2,960		524		2,606		391
37–48	2,032		305		1,821		159
49–60	1,196		119		1,092		35
Thereafter	423		12		412		2
Total	$	20,859	$	2,959	$	18,583	$	2,292

The maximum terms for retail notes are generally seven years for agriculture and turf equipment and five years for construction and forestry equipment. The maximum term for financing leases is generally five years, while the average term for wholesale notes is less than twelve months.

At October 31, 2011 and 2010, the unpaid balances of receivables administered but not owned were $146 million and $202 million, respectively. At October 31, 2011 and 2010, worldwide financing receivables administered, which include financing receivables administered but not owned, totaled $22,974 million and $20,123 million, respectively.

Past due balances of financing receivables 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 financing receivables represent loans for which the company has ceased accruing finance income. These receivables are generally 120 days delinquent and the estimated uncollectible amount, after charging the dealer’s withholding account, has been written off to the allowance for credit losses. Finance income for non-performing receivables is recognized on a cash basis. Accrual of finance income is resumed when the receivable becomes contractually current and collections are reasonably assured.

An age analysis of past due and non-performing financing receivables at October 31, 2011 follows in millions of dollars:

	30-59		60-89		90 Days
	Days		Days		or Greater		Total
	Past Due		Past Due		Past Due*		Past Due
Retail Notes:
Agriculture and turf	$	81	$	30	$	25	$	136
Construction and forestry	45		20		11		76
Other:
Agriculture and turf	23		10		5		38
Construction and forestry	7		4		2		13
Total	$	156	$	64	$	43	$	263

			Total				Total
	Total		Non-				Financing
	Past Due		Performing		Current		Receivables
Retail Notes:
Agriculture and turf	$	136	$	132	$	14,667	$	14,935
Construction and forestry	76		17		1,264		1,357
Recreational products					4		4
Other:
Agriculture and turf	38		16		5,655		5,709
Construction and forestry	13		5		1,003		1,021
Total	$	263	$	170	$	22,593	23,026
Less allowance for doubtful receivables							197
Total financing receivables - net							$	22,829

* Financing receivables that are 90 days or greater past due and still accruing finance income.

An analysis of the allowance for doubtful financing receivables and investment in financing receivables during 2011 follow in millions of dollars:

				Revolving
	Retail			Charge
	Notes			Accounts			Other			Total
Allowance
Beginning of year balance	$	144		$	44		$	37		$	225
Provision	3			8			(2		)	9
Write-offs	(29		)	(40		)	(10		)	(79		)
Recoveries	12			28			2			42
End of year balance	$	130		$	40		$	27		$	197
Balance individually evaluated*	$	1								$	1
Financing receivables
End of year balance	$	16,296		$	2,518		$	4,212		$	23,026
Balance individually evaluated*	$	12					$	11		$	23

* Remainder is collectively evaluated.

A comparative analysis of the allowance for doubtful financing receivables follows in millions of dollars:

	2011			2010			2009
Beginning of year balance	$	225		$	239		$	170
Provision	9			100			195
Write-offs	(79		)	(147		)	(165		)
Recoveries	42			31			25
Translation adjustments				2			14
End of year balance	$	197		$	225		$	239

Financing 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 the impaired financing receivables at October 31, 2011 follows in millions of dollars:

			Unpaid				Average
	Recorded		Principal		Specific		Recorded
	Investment		Balance		Allowance		Investment
Receivables with specific allowance*	$	7	$	7	$	1	$	8
Receivables without a specific allowance**	9		9				12
Total	$	16	$	16	$	1	$	20
Agriculture and turf	$	11	$	11	$	1	$	14
Construction and forestry	$	5	$	5			$	6

* Finance income recognized was not material.

**Primarily retail notes.

Investments in financing receivables on non-accrual status at October 31, 2011 and 2010 were $170 million and $225 million, respectively. Total financing receivable amounts 30 days or more past due were $263 million at October 31, 2011, compared with $359 million at October 31, 2010. These past-due amounts represented 1.14 percent and 1.78 percent of the receivables financed at October 31, 2011 and 2010, respectively. The allowance for doubtful financing receivables represented .86 percent and 1.12 percent of financing receivables outstanding at October 31, 2011 and 2010, respectively. In addition, at October 31, 2011 and 2010, the company’s financial services operations had $188 million and $182 million, respectively, of deposits withheld from dealers and merchants available for potential credit losses.

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 2011, the company identified 213 financing receivable contracts, primarily retail notes, as troubled debt restructurings with aggregate balances of $11 million pre-modification and $10 million post-modification. During this same period, the company’s troubled debt restructurings that subsequently defaulted and were written off were not material. At October 31, 2011, the company had no commitments to lend additional funds to borrowers whose accounts were modified in troubled debt restructurings.

Other Receivables

Other receivables at October 31 consisted of the following in millions of dollars:

	2011		2010
Taxes receivable	$	844	$	746
Reinsurance receivables	242
Other	245		180
Other receivables	$	1,331	$	926

Reinsurance receivables are associated with the financial services’ crop insurance subsidiary. There were no reinsurance receivables in 2010 (see Note 9).