FINANCING RECEIVABLES

9 Months Ended

Jul. 28, 2019

FINANCING RECEIVABLES

FINANCING RECEIVABLES

(11)  Financing Receivables

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. Beginning in the first quarter of 2019, the Company ceased accruing finance income when these receivables are generally 90 days delinquent. Previously, finance income ceased accruing when the receivables were generally 120 days delinquent. This change in estimate was made on a prospective basis and did not have a significant effect on the Company’s consolidated financial statements. Management’s methodology to determine the collectability of delinquent accounts was not affected by the change.

Generally, when receivables are 120 days delinquent the estimated uncollectible amount, after charging the dealer’s withholding account, if any, is 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 generally 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 in millions of dollars follows:

	July 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	$	136	$	63	$	3	$	202
Construction and forestry		87		35		2		124
Other:
Agriculture and turf		38		22				60
Construction and forestry		17		7				24
Total	$	278	$	127	$	5	$	410
							Total
	Total		Total				Financing
	Past Due		Non-Performing		Current		Receivables
Retail Notes:
Agriculture and turf	$	202	$	301	$	18,038	$	18,541
Construction and forestry		124		135		3,249		3,508
Other:
Agriculture and turf		60		37		8,833		8,930
Construction and forestry		24		14		1,417		1,455
Total	$	410	$	487	$	31,537		32,434
Less allowance for credit losses								185
Total financing receivables – net							$	32,249

	October 28, 2018
					90 Days
	30-59 Days		60-89 Days		or Greater		Total
	Past Due		Past Due		Past Due		Past Due
Retail Notes:
Agriculture and turf	$	133	$	74	$	63	$	270
Construction and forestry		79		45		52		176
Other:
Agriculture and turf		36		16		8		60
Construction and forestry		18		5		3		26
Total	$	266	$	140	$	126	$	532
							Total
	Total		Total				Financing
	Past Due		Non-Performing		Current		Receivables
Retail Notes:
Agriculture and turf	$	270	$	201	$	17,836	$	18,307
Construction and forestry		176		40		3,101		3,317
Other:
Agriculture and turf		60		15		8,274		8,349
Construction and forestry		26		3		1,252		1,281
Total	$	532	$	259	$	30,463		31,254
Less allowance for credit losses								178
Total financing receivables – net							$	31,076

	July 29, 2018
					90 Days
	30-59 Days		60-89 Days		or Greater		Total
	Past Due		Past Due		Past Due		Past Due
Retail Notes:
Agriculture and turf	$	138	$	53	$	54	$	245
Construction and forestry		105		43		50		198
Other:
Agriculture and turf		37		14		12		63
Construction and forestry		12		6		3		21
Total	$	292	$	116	$	119	$	527
							Total
	Total		Total				Financing
	Past Due		Non-Performing		Current		Receivables
Retail Notes:
Agriculture and turf	$	245	$	203	$	17,048	$	17,496
Construction and forestry		198		42		2,967		3,207
Other:
Agriculture and turf		63		14		8,009		8,086
Construction and forestry		21		3		1,249		1,273
Total	$	527	$	262	$	29,273		30,062
Less allowance for credit losses								187
Total financing receivables – net							$	29,875

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

			Revolving
	Retail		Charge
	Notes		Accounts		Other		Total
Three Months Ended July 28, 2019
Allowance:
Beginning of period balance	$	115	$	43	$	24	$	182
Provision		7		18		1		26
Write-offs		(9)		(26)		(1)		(36)
Recoveries		5		8				13
Translation adjustments		2				(2)
End of period balance *	$	120	$	43	$	22	$	185
Nine Months Ended July 28, 2019
Allowance:
Beginning of period balance	$	113	$	43	$	22	$	178
Provision		21		34		7		62
Write-offs		(29)		(51)		(5)		(85)
Recoveries		15		17		1		33
Translation adjustments						(3)		(3)
End of period balance *	$	120	$	43	$	22	$	185
Financing receivables:
End of period balance	$	22,049	$	3,877	$	6,508	$	32,434
Balance individually evaluated **	$	145			$	10	$	155

* Individual allowances were not significant.

** Remainder is collectively evaluated.

			Revolving
	Retail		Charge
	Notes		Accounts		Other		Total
Three Months Ended July 29, 2018
Allowance:
Beginning of period balance	$	120	$	40	$	27	$	187
Provision		8		21		3		32
Write-offs		(9)		(26)		(1)		(36)
Recoveries		3		5				8
Translation adjustments		(4)						(4)
End of period balance *	$	118	$	40	$	29	$	187
Nine Months Ended July 29, 2018
Allowance:
Beginning of period balance	$	121	$	40	$	26	$	187
Provision		13		29		7		49
Write-offs		(23)		(44)		(5)		(72)
Recoveries		13		15		1		29
Translation adjustments		(6)						(6)
End of period balance *	$	118	$	40	$	29	$	187
Financing receivables:
End of period balance	$	20,703	$	3,750	$	5,609	$	30,062
Balance individually evaluated **	$	120	$	1	$	13	$	134

* Individual allowances were not significant.

** Remainder is collectively evaluated.

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 in millions of dollars follows:

			Unpaid				Average
	Recorded		Principal		Specific		Recorded
	Investment		Balance		Allowance		Investment
July 28, 2019*
Receivables with specific allowance **	$	37	$	36	$	13	$	37
Receivables without a specific allowance **		35		33				39
Total	$	72	$	69	$	13	$	76
Agriculture and turf	$	51	$	50	$	9	$	52
Construction and forestry	$	21	$	19	$	4	$	24
October 28, 2018*
Receivables with specific allowance **	$	28	$	27	$	10	$	30
Receivables without a specific allowance **		37		35				41
Total	$	65	$	62	$	10	$	71
Agriculture and turf	$	50	$	48	$	9	$	54
Construction and forestry	$	15	$	14	$	1	$	17
July 29, 2018*
Receivables with specific allowance **	$	31	$	30	$	12	$	33
Receivables without a specific allowance **		37		35				40
Total	$	68	$	65	$	12	$	73
Agriculture and turf	$	51	$	49	$	10	$	54
Construction and forestry	$	17	$	16	$	2	$	19

*  Finance income recognized was not material.

** Primarily 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 the first nine months of 2019, the Company identified 416 receivable contracts, primarily trade receivables and retail notes, as troubled debt restructurings with aggregate balances of $34 million pre-modification and $33 million post-modification. During the first nine months of 2018, there were 410 receivable contracts, primarily retail notes, identified as troubled debt restructurings with aggregate balances of $22 million pre-modification and $22 million post-modification. During these same periods, there were no significant troubled debt restructurings that subsequently defaulted and were written off. At July 28, 2019, the Company had commitments to lend approximately $13 million to borrowers whose accounts were modified in troubled debt restructurings.