12. RECEIVABLES

Trade Accounts and Notes Receivable

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


	2013		2012

Trade accounts and notes:
Agriculture and turf	$	3,127	$	3,074
Construction and forestry	631		725
Trade accounts and notes receivable—net	$	3,758	$	3,799

At October 31, 2013 and 2012, dealer notes included in the previous table were $75 million and $95 million, and the allowance for credit losses was $67 million and $66 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 primarily 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:


	2013					2012
	Unrestricted/Securitized					Unrestricted/Securitized

Retail notes:
Equipment:
Agriculture and turf		$	16,209	$	3,602		$	14,144	$	3,126
Construction and forestry		1,449		607			1,091		553
Total		17,658		4,209			15,235		3,679
Wholesale notes		4,802					3,888
Revolving charge accounts		2,593					2,488
Financing leases (direct and sales-type)		1,513					1,411
Operating loans		32					42
Total financing receivables		26,598		4,209			23,064		3,679
Less:
Unearned finance income:
Equipment notes		665		42			619		44
Financing leases		141					126
Total		806		42			745		44
Allowance for credit losses		159		14			160		17
Financing receivables – net		$	25,633	$	4,153		$	22,159	$	3,618

The residual values for investments in financing leases at October 31, 2013 and 2012 totaled $94 million and $79 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:


	2013			2012
	Unrestricted			Unrestricted

Retail notes*:
Equipment:
Agriculture and turf		$	2,042		$	1,810
Construction and forestry		364			313
Total		2,406			2,123
Wholesale notes		4,802			3,888
Sales-type leases		826			836
Total		$	8,034		$	6,847

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


	2013			2012
	Unrestricted			Unrestricted

Less:
Unearned finance income:
Equipment notes		$	191		$	191
Sales-type leases		58			61
Total		249			252
Financing receivablesrelated to the company’ssales of equipment		$	7,785		$	6,595

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


	2013					2012
	Unrestricted/Securitized					Unrestricted/Securitized

Due in months:
0 – 12		$	13,343	$	1,663		$	11,486	$	1,437
13 – 24		4,879		1,177			4,257		1,004
25 – 36		3,750		808			3,232		712
37 – 48		2,620		422			2,278		399
49 – 60		1,610		130			1,356		120
Thereafter		396		9			455		7
Total		$	26,598	$	4,209		$	23,064	$	3,679

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, 2013 and 2012, the unpaid balances of receivables administered but not owned were $82 million and $120 million, respectively. At October 31, 2013 and 2012, worldwide financing receivables administered, which include financing receivables administered but not owned, totaled $29,868 million and $25,897 million, respectively.

Past due balances of financing 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 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 financing receivables that are still accruing interest and non-performing financing receivables at October 31, 2013 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		$	75		$	26		$	20		$	121
Construction and forestry		39			14			9			62
Other:
Agriculture and turf		28			9			5			42
Construction and forestry		12			4			3			19
Total		$	154		$	53		$	37		$	244

				Total						Total
	Total			Non-						Financing
	Past Due			Performing			Current			Receivables

Retail Notes:
Agriculture and turf		$	121		$	102		$	18,942		$	19,165
Construction and forestry		62			12			1,921			1,995
Other:
Agriculture and turf		42			13			7,613			7,668
Construction and forestry		19			3			1,109			1,131
Total		$	244		$	130		$	29,585		29,959
Less allowance for credit losses											173
Total financing receivables - net											$	29,786

An age analysis of past due financing receivables that are still accruing interest and non-performing financing receivables at October 31, 2012 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		$	60		$	25		$	17		$	102
Construction and forestry		39			18			9			66
Other:
Agriculture and turf		21			6			3			30
Construction and forestry		8			2			2			12
Total		$	128		$	51		$	31		$	210


				Total					Total
	Total			Non-					Financing
	Past Due			Performing			Current		Receivables

Retail Notes:
Agriculture and turf		$	102		$	117	$	16,432		$	16,651
Construction and forestry		66			13		1,521			1,600
Other:
Agriculture and turf		30			11		6,464			6,505
Construction and forestry		12			3		1,183			1,198
Total		$	210		$	144	$	25,600		25,954
Less allowance for credit losses										177
Total financing receivables - net										$	25,777

An analysis of the allowance for credit losses and investment in financing receivables follows in millions of dollars:


			Revolving
	Retail		Charge
	Notes		Accounts		Other		Total

2013
Allowance:
Beginning of year balance	$	110	$	40	$	27	$	177
Provision (credit)	(2)		5		7		10
Write-offs	(11)		(21)		(3)		(35)
Recoveries	9		17		1		27
Translation adjustments	(5)				(1)		(6)
End of year balance*	$	101	$	41	$	31	$	173
Financing receivables:
End of year balance	$	21,160	$	2,593	$	6,206	$	29,959
Balance individually evaluated	$	21			$	33	$	54

* Individual allowances were not significant.

2012
Allowance:
Beginning of year balance	$	130	$	40	$	27	$	197
Provision (credit)	(12)		8		3		(1)
Write-offs	(8)		(30)		(4)		(42)
Recoveries	10		22		1		33
Translation adjustments	(10)						(10)
End of year balance*	$	110	$	40	$	27	$	177
Financing receivables:
End of year balance	$	18,251	$	2,488	$	5,215	$	25,954
Balance individually evaluated	$	11	$	1	$	1	$	13

* Individual allowances were not significant.

					Revolving
	Retail				Charge
	Notes				Accounts				Other				Total
2011
Allowance:
Beginning of year balance		$	144			$	44			$	37			$	225
Provision (credit)		3				8				(2)				9
Write-offs		(29		)		(40		)		(10		)		(79		)
Recoveries		12				28				2				42
End of year balance*		$	130			$	40			$	27			$	197
Financing receivables:
End of year balance		$	16,296			$	2,518			$	4,212			$	23,026
Balance individually evaluated		$	12							$	11			$	23

* Individual allowances were not significant.

Past-due amounts over 30 days represented .82 percent and .81 percent of the receivables financed at October 31, 2013 and 2012, respectively. The allowance for credit losses represented .58 percent and .68 percent of financing receivables outstanding at October 31, 2013 and 2012, respectively. In addition, at October 31, 2013 and 2012, the company’s financial services operations had $197 million and $194 million, respectively, of deposits withheld from dealers and merchants available for potential credit losses.

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, which are impaired, are generally classified as non-performing.

An analysis of the impaired financing receivables at October 31 follows in millions of dollars:

				Unpaid						Average
	Recorded			Principal			Specific			Recorded
	Investment			Balance			Allowance			Investment
2013*
Receivables with specific allowance**		$	18		$	18		$	4		$	19
Receivables without a specific allowance***		8			8						8
Total		$	26		$	26		$	4		$	27
Agriculture and turf		$	23		$	23		$	4		$	24
Construction and forestry		$	3		$	3					$	3

				Unpaid						Average
	Recorded			Principal			Specific			Recorded
	Investment			Balance			Allowance			Investment
2012*
Receivables with specific allowance**		$	1		$	1		$	1		$	1
Receivables without a specific allowance***		9			9						10
Total		$	10		$	10		$	1		$	11
Agriculture and turf		$	6		$	6		$	1		$	6
Construction and forestry		$	4		$	4					$	5

* Finance income recognized was not material.

** Primarily operating loans and retail notes.

*** Retail notes.

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 2013, 2012 and 2011, the company identified 92, 138 and 213 financing receivable contracts, primarily operating loans and retail notes, as troubled debt restructurings with aggregate balances of $16 million, $5 million and $11 million pre-modification and $15 million, $4 million and $10 million post-modification, respectively. During these same periods, there were no significant troubled debt restructurings that subsequently defaulted and were written off. At October 31, 2013, 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:

	2013		2012
Taxes receivable	$	868	$	971
Reinsurance receivables	351		569
Insurance premium receivables	24		69
Other	221		182
Other receivables	$	1,464	$	1,791

Reinsurance and insurance premium receivables are associated with the financial services’ crop insurance subsidiary (see Note 9).