XML 27 R13.htm IDEA: XBRL DOCUMENT v3.20.4
Finance and Other Receivables
 12 Months Ended
Dec. 31, 2020
Receivables [Abstract]  
Finance and Other Receivables

E.

FINANCE AND OTHER RECEIVABLES

Finance and other receivables include the following:

 

At December 31,

 

2020

 

 

2019

 

Loans

 

$

5,839.1

 

 

$

5,241.7

 

Finance leases

 

 

3,944.7

 

 

 

3,906.7

 

Dealer wholesale financing

 

 

2,012.4

 

 

 

2,907.4

 

Operating lease receivables and other

 

 

151.5

 

 

 

142.6

 

 

 

$

11,947.7

 

 

$

12,198.4

 

Less allowance for losses:

 

 

 

 

 

 

 

 

Loans and leases

 

 

(120.4

)

 

 

(104.4

)

Dealer wholesale financing

 

 

(3.4

)

 

 

(4.3

)

Operating lease receivables and other

 

 

(3.2

)

 

 

(3.7

)

 

 

$

11,820.7

 

 

$

12,086.0

 

 

Included in Finance and other receivables, net on the Consolidated Balance Sheets is accrued interest receivable (net of allowance for credit losses) of $35.6 and $29.5 as of December 31, 2020 and December 31, 2019, respectively. The net activity of dealer direct loans and dealer wholesale financing on new trucks is shown in the operating section of the Consolidated Statements of Cash Flows since those receivables finance the sale of Company inventory.

Annual minimum payments due on loans are as follows:

 

Beginning January 1,

 

 

 

LOANS

 

2021

 

 

 

$

1,758.4

 

2022

 

 

 

 

1,480.1

 

2023

 

 

 

 

1,223.6

 

2024

 

 

 

 

881.8

 

2025

 

 

 

 

380.0

 

Thereafter

 

 

 

 

115.2

 

 

 

 

 

$

5,839.1

 

 

Annual minimum payments due on finance lease receivables and a reconciliation of the undiscounted cash flows to the net investment in finance leases are as follows:

 

 

 

 

 

FINANCE

 

Beginning January 1,

 

 

 

LEASES

 

2021

 

 

 

$

1,310.4

 

2022

 

 

 

 

1,030.5

 

2023

 

 

 

 

775.0

 

2024

 

 

 

 

458.8

 

2025

 

 

 

 

223.4

 

Thereafter

 

 

 

 

82.5

 

 

 

 

 

 

3,880.6

 

Unguaranteed residual values

 

 

 

 

458.8

 

Unearned interest on finance leases

 

 

 

 

(394.7

)

Net investment in finance leases

 

 

 

$

3,944.7

 

 

Experience indicates substantially all of dealer wholesale financing will be repaid within one year. In addition, repayment experience indicates that some loans, leases and other finance receivables will be paid prior to contract maturity, while others may be extended or modified.

For the following credit quality disclosures, finance receivables are classified into two portfolio segments, wholesale and retail. The retail portfolio is further segmented into dealer retail and customer retail. The dealer wholesale segment consists of truck inventory financing to PACCAR dealers. The dealer retail segment consists of loans and leases to participating dealers and franchises that use the proceeds to fund customers’ acquisition of commercial vehicles and related equipment. The customer retail segment consists of loans and leases directly to customers for the acquisition of commercial vehicles and related equipment. Customer retail receivables are further segregated between fleet and owner/operator classes. The fleet class consists of customer retail accounts operating more than five trucks. All other customer retail accounts are considered owner/operator. These two classes have similar measurement attributes, risk characteristics and common methods to monitor and assess credit risk.

Allowance for Credit Losses: The allowance for credit losses is summarized as follows:

 

 

 

2020

 

 

 

DEALER

 

 

CUSTOMER

 

 

 

 

 

 

 

 

 

 

 

WHOLESALE

 

 

RETAIL

 

 

RETAIL

 

 

OTHER*

 

 

TOTAL**

 

Balance at January 1

 

$

4.3

 

 

$

9.2

 

 

$

101.4

 

 

$

3.7

 

 

$

118.6

 

Provision for losses

 

 

(1.0

)

 

 

(.8

)

 

 

30.1

 

 

 

.5

 

 

 

28.8

 

Charge-offs

 

 

 

 

 

 

 

 

 

 

(26.6

)

 

 

(1.4

)

 

 

(28.0

)

Recoveries

 

 

 

 

 

 

 

 

 

 

5.3

 

 

 

.4

 

 

 

5.7

 

Currency translation and other

 

 

.1

 

 

 

 

 

 

 

1.8

 

 

 

 

 

 

 

1.9

 

Balance at December 31

 

$

3.4

 

 

 

8.4

 

 

$

112.0

 

 

$

3.2

 

 

$

127.0

 

 

 

 

2019

 

 

 

DEALER

 

 

CUSTOMER

 

 

 

 

 

 

 

 

 

 

 

WHOLESALE

 

 

RETAIL

 

 

RETAIL

 

 

OTHER*

 

 

TOTAL

 

Balance at January 1

 

$

6.8

 

 

$

10.0

 

 

$

93.8

 

 

$

3.2

 

 

$

113.8

 

Provision for losses

 

 

(1.6

)

 

 

(1.0

)

 

 

14.2

 

 

 

3.8

 

 

 

15.4

 

Charge-offs

 

 

(.6

)

 

 

 

 

 

 

(24.2

)

 

 

(3.6

)

 

 

(28.4

)

Recoveries

 

 

 

 

 

 

 

 

 

 

10.7

 

 

 

.3

 

 

 

11.0

 

Currency translation and other

 

 

(.3

)

 

 

.2

 

 

 

.7

 

 

 

 

 

 

 

.6

 

Balance at December 31

 

$

4.3

 

 

$

9.2

 

 

$

95.2

 

 

$

3.7

 

 

$

112.4

 

 

*

Operating lease and other trade receivables.

**

   The beginning balance has been adjusted for the adoption of ASU 2016-13.

 

 

 

 

2018

 

 

 

DEALER

 

 

CUSTOMER

 

 

 

 

 

 

 

 

 

 

 

WHOLESALE

 

 

RETAIL

 

 

RETAIL

 

 

OTHER*

 

 

TOTAL

 

Balance at January 1

 

$

6.0

 

 

$

9.4

 

 

$

92.5

 

 

$

9.3

 

 

$

117.2

 

Provision for losses

 

 

1.0

 

 

 

.7

 

 

 

13.6

 

 

 

1.2

 

 

 

16.5

 

Charge-offs

 

 

 

 

 

 

 

 

 

 

(20.0

)

 

 

(7.5

)

 

 

(27.5

)

Recoveries

 

 

 

 

 

 

 

 

 

 

9.9

 

 

 

.4

 

 

 

10.3

 

Currency translation and other

 

 

(.2

)

 

 

(.1

)

 

 

(2.2

)

 

 

(.2

)

 

 

(2.7

)

Balance at December 31

 

$

6.8

 

 

$

10.0

 

 

$

93.8

 

 

$

3.2

 

 

$

113.8

 

 

*

Operating lease and other trade receivables.

Information regarding finance receivables evaluated and determined individually and collectively is as follows:

 

 

 

 

 

DEALER

 

 

CUSTOMER

 

 

 

 

 

At December 31, 2020

 

 

 

WHOLESALE

 

 

RETAIL

 

 

RETAIL

 

 

TOTAL

 

Amortized cost basis for impaired finance

   receivables evaluated individually

 

 

 

 

 

 

 

$

1.2

 

 

$

86.7

 

 

$

87.9

 

Allowance for impaired finance receivables

   determined individually

 

 

 

 

 

 

 

 

 

 

 

 

5.6

 

 

 

5.6

 

Amortized cost basis for finance receivables

   evaluated collectively

 

 

 

$

2,012.4

 

 

 

1,701.9

 

 

 

7,994.0

 

 

 

11,708.3

 

Allowance for finance receivables determined

   collectively

 

 

 

 

3.4

 

 

 

8.4

 

 

 

106.4

 

 

 

118.2

 

 

 

 

 

 

DEALER

 

 

CUSTOMER

 

 

 

 

 

At December 31, 2019

 

 

 

WHOLESALE

 

 

RETAIL

 

 

RETAIL

 

 

TOTAL

 

Amortized cost basis for impaired finance

   receivables evaluated individually

 

 

 

 

 

 

 

$

2.3

 

 

$

47.6

 

 

$

49.9

 

Allowance for impaired finance receivables

   determined individually

 

 

 

 

 

 

 

 

 

 

 

 

6.5

 

 

 

6.5

 

Amortized cost basis for finance receivables

   evaluated collectively

 

 

 

$

2,907.4

 

 

 

1,643.3

 

 

 

7,455.2

 

 

 

12,005.9

 

Allowance for finance receivables determined

   collectively

 

 

 

 

4.3

 

 

 

9.2

 

 

 

88.7

 

 

 

102.2

 

 

The amortized cost basis for finance receivables that are on non-accrual status is as follows:

 

At December 31,

 

 

 

 

 

 

 

2020

 

 

 

2019

 

Dealer:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Retail

 

 

 

 

 

 

 

$

1.2

 

 

$

2.3

 

Customer retail:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Fleet

 

 

 

 

 

 

 

 

78.6

 

 

 

40.2

 

Owner/operator

 

 

 

 

 

 

 

 

8.1

 

 

 

7.2

 

 

 

 

 

 

 

 

 

$

87.9

 

 

$

49.7

 

 

 

Impaired Loans: Impaired loans are summarized below. The impaired loans with specific reserve represent the unpaid principal balance. The amortized cost basis of impaired loans as of December 31, 2020 and 2019 was not significantly different than the unpaid principal balance.

 

 

 

DEALER

 

 

CUSTOMER RETAIL

 

 

 

 

 

At December 31, 2020

 

WHOLESALE

 

RETAIL

 

 

FLEET

 

 

OWNER/ OPERATOR

 

 

TOTAL

 

Impaired loans with a specific reserve

 

 

 

 

 

 

 

$

22.6

 

 

$

2.1

 

 

$

24.7

 

Associated allowance

 

 

 

 

 

 

 

 

(1.6

)

 

 

(.3

)

 

 

(1.9

)

 

 

 

 

 

 

 

 

 

21.0

 

 

 

1.8

 

 

 

22.8

 

Impaired loans with no specific reserve

 

 

 

$

1.2

 

 

 

 

 

 

 

 

 

 

 

1.2

 

Net carrying amount of impaired loans

 

 

 

$

1.2

 

 

$

21.0

 

 

$

1.8

 

 

$

24.0

 

Average amortized cost basis

 

 

 

$

1.6

 

 

$

26.5

 

 

$

2.8

 

 

$

30.9

 

 

 

 

DEALER

 

 

CUSTOMER RETAIL

 

 

 

 

 

At December 31, 2019

 

WHOLESALE

 

 

RETAIL

 

 

FLEET

 

 

OWNER/ OPERATOR

 

 

TOTAL

 

Impaired loans with a specific reserve

 

 

 

 

 

 

 

 

 

$

10.9

 

 

$

3.1

 

 

$

14.0

 

Associated allowance

 

 

 

 

 

 

 

 

 

 

(2.1

)

 

 

(.6

)

 

 

(2.7

)

 

 

 

 

 

 

 

 

 

 

 

8.8

 

 

 

2.5

 

 

 

11.3

 

Impaired loans with no specific reserve

 

 

 

 

 

$

2.3

 

 

 

6.7

 

 

 

.4

 

 

 

9.4

 

Net carrying amount of impaired loans

 

 

 

 

 

$

2.3

 

 

$

15.5

 

 

$

2.9

 

 

$

20.7

 

Average amortized cost basis

 

$

4.9

 

 

$

2.4

 

 

$

16.6

 

 

$

3.4

 

 

$

27.3

 

 

During the period the loans above were considered impaired, interest income recognized on a cash basis was as follows:

 

Year Ended December 31,

 

 

 

 

 

2020

 

 

2019

 

 

2018

 

Dealer:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Retail

 

 

 

 

 

$

.2

 

 

$

.2

 

 

 

 

 

Customer retail:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Fleet

 

 

 

 

 

 

1.5

 

 

 

1.3

 

 

$

2.0

 

Owner/operator

 

 

 

 

 

 

.2

 

 

 

.2

 

 

 

.2

 

 

 

 

 

 

 

$

1.9

 

 

$

1.7

 

 

$

2.2

 

 

Credit Quality: The Company's customers are principally concentrated in the transportation industry in North America, Europe and Australia. The Company’s portfolio assets are diversified over a large number of customers and dealers with no single customer or dealer balances representing over 5% of the total portfolio assets. The Company retains as collateral a security interest in the related equipment.

At the inception of each contract, the Company considers the credit risk based on a variety of credit quality factors including prior payment experience, customer financial information, credit-rating agency ratings, loan-to-value ratios and other internal metrics. On an ongoing basis, the Company monitors credit quality based on past due status and collection experience as there is a meaningful correlation between the past due status of customers and the risk of loss.

The Company has three credit quality indicators: performing, watch and at-risk. Performing accounts pay in accordance with the contractual terms and are not considered high-risk. Watch accounts include accounts 31 to 90 days past due and large accounts that are performing but are considered to be high‑risk. Watch accounts are not impaired. At-risk accounts are accounts that are impaired, including TDRs, accounts over 90 days past due and other accounts on non-accrual status.

The table below summarizes the amortized cost basis of the Company’s finance receivables within each credit quality indicator by year of origination and portfolio class.  

 

Revolving

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

At December 31, 2020

Loans

 

 

2020

 

 

2019

 

 

2018

 

 

2017

 

 

2016

 

 

Prior

 

 

Total

 

Dealer:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Wholesale:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Performing

$

2,004.5

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

$

2,004.5

 

Watch

 

7.9

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

7.9

 

 

$

2,012.4

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

$

2,012.4

 

Retail:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Performing

$

20.7

 

 

$

504.2

 

 

$

474.9

 

 

$

268.0

 

 

$

180.1

 

 

$

100.4

 

 

$

132.0

 

 

$

1,680.3

 

Watch

 

 

 

 

 

5.2

 

 

 

10.5

 

 

 

4.5

 

 

 

1.4

 

 

 

 

 

 

 

 

 

 

 

21.6

 

At-risk

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

1.2

 

 

 

 

 

 

 

1.2

 

 

$

20.7

 

 

$

509.4

 

 

$

485.4

 

 

$

272.5

 

 

$

181.5

 

 

$

101.6

 

 

$

132.0

 

 

$

1,703.1

 

Total Dealer

$

2,033.1

 

 

$

509.4

 

 

$

485.4

 

 

$

272.5

 

 

$

181.5

 

 

$

101.6

 

 

$

132.0

 

 

$

3,715.5

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Customer Retail:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Fleet:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Performing

 

 

 

 

$

2,664.9

 

 

$

1,921.6

 

 

$

1,203.7

 

 

$

533.7

 

 

$

234.2

 

 

$

65.2

 

 

$

6,623.3

 

Watch

 

 

 

 

 

13.5

 

 

 

17.8

 

 

 

11.8

 

 

 

5.9

 

 

 

1.5

 

 

 

1.2

 

 

 

51.7

 

At-risk

 

 

 

 

 

8.0

 

 

 

37.0

 

 

 

18.2

 

 

 

12.2

 

 

 

2.4

 

 

 

.8

 

 

 

78.6

 

 

 

 

 

 

$

2,686.4

 

 

$

1,976.4

 

 

$

1,233.7

 

 

$

551.8

 

 

$

238.1

 

 

$

67.2

 

 

$

6,753.6

 

Owner/Operator:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Performing

 

 

 

 

$

554.6

 

 

$

376.4

 

 

$

225.1

 

 

$

105.2

 

 

$

41.2

 

 

$

9.1

 

 

$

1,311.6

 

Watch

 

 

 

 

 

1.6

 

 

 

2.7

 

 

 

2.0

 

 

 

.7

 

 

 

.2

 

 

 

.2

 

 

 

7.4

 

At-risk

 

 

 

 

 

.9

 

 

 

2.1

 

 

 

3.2

 

 

 

1.2

 

 

 

.4

 

 

 

.3

 

 

 

8.1

 

 

 

 

 

 

$

557.1

 

 

$

381.2

 

 

$

230.3

 

 

$

107.1

 

 

$

41.8

 

 

$

9.6

 

 

$

1,327.1

 

Total Customer Retail

 

 

 

 

$

3,243.5

 

 

$

2,357.6

 

 

$

1,464.0

 

 

$

658.9

 

 

$

279.9

 

 

$

76.8

 

 

$

8,080.7

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Total

$

2,033.1

 

 

$

3,752.9

 

 

$

2,843.0

 

 

$

1,736.5

 

 

$

840.4

 

 

$

381.5

 

 

$

208.8

 

 

$

11,796.2

 

 

The tables below summarize the Company’s finance receivables by aging category. In determining past due status, the Company considers the entire contractual account balance past due when any installment is over 30 days past due. Substantially all customer accounts that were greater than 30 days past due prior to credit modification became current upon modification for aging purposes.

 

 

 

DEALER

 

 

CUSTOMER RETAIL

 

 

 

 

 

At December 31, 2020

 

WHOLESALE

 

 

RETAIL

 

 

FLEET

 

 

OWNER/ OPERATOR

 

 

TOTAL

 

Current and up to 30 days past due

 

$

2,012.4

 

 

$

1,703.1

 

 

$

6,718.3

 

 

$

1,314.7

 

 

$

11,748.5

 

31 – 60 days past due

 

 

 

 

 

 

 

 

 

 

12.3

 

 

 

6.5

 

 

 

18.8

 

Greater than 60 days past due

 

 

 

 

 

 

 

 

 

 

23.0

 

 

 

5.9

 

 

 

28.9

 

 

 

$

2,012.4

 

 

$

1,703.1

 

 

$

6,753.6

 

 

$

1,327.1

 

 

$

11,796.2

 

 

 

 

DEALER

 

 

CUSTOMER RETAIL

 

 

 

 

 

At December 31, 2019

 

WHOLESALE

 

 

RETAIL

 

 

FLEET

 

 

OWNER/ OPERATOR

 

 

TOTAL

 

Current and up to 30 days past due

 

$

2,907.4

 

 

$

1,645.6

 

 

$

6,297.1

 

 

$

1,140.7

 

 

$

11,990.8

 

31 – 60 days past due

 

 

 

 

 

 

 

 

 

 

23.0

 

 

 

8.7

 

 

 

31.7

 

Greater than 60 days past due

 

 

 

 

 

 

 

 

 

 

27.6

 

 

 

5.7

 

 

 

33.3

 

 

 

$

2,907.4

 

 

$

1,645.6

 

 

$

6,347.7

 

 

$

1,155.1

 

 

$

12,055.8

 

 

 

Troubled Debt Restructurings: The balance of TDRs was $63.1 and $14.1 at December 31, 2020 and 2019, respectively. At modification date, the pre-modification and post-modification amortized cost basis balances for finance receivables modified during the period by portfolio class were as follows:

 

 

 

2020

 

 

2019

 

 

 

AMORTIZED COST BASIS

 

 

AMORTIZED COST BASIS

 

 

 

PRE-MODIFICATION

 

 

POST-MODIFICATION

 

 

PRE-MODIFICATION

 

 

POST-MODIFICATION

 

Fleet

 

$

72.5

 

 

$

72.5

 

 

$

2.2

 

 

$

2.2

 

Owner/operator

 

 

2.2

 

 

 

2.2

 

 

 

.3

 

 

 

.3

 

 

 

$

74.7

 

 

$

74.7

 

 

$

2.5

 

 

$

2.5

 

 

The effect on the allowance for credit losses from such modifications was not significant at December 31, 2020 and 2019.

 

TDRs modified during the previous twelve months that subsequently defaulted (i.e., became more than 30 days past due) in the years ended December 31, 2020 and 2019 were $4.1 and nil, respectively.

 

There were $2.0 and nil of finance receivables modified as TDRs during the previous twelve months that subsequently defaulted and were charged off for the years ended December 31, 2020 and 2019, respectively.

Repossessions: When the Company determines a customer is not likely to meet its contractual commitments, the Company repossesses the vehicles which serve as collateral for the loans, finance leases and equipment under operating leases. The Company records the vehicles as used truck inventory included in Financial Services Other assets on the Consolidated Balance Sheets. The balance of repossessed inventory at December 31, 2020 and 2019 was $19.3 and $25.6, respectively. Proceeds from the sales of repossessed assets were $85.6, $62.4 and $75.8 for the years ended December 31, 2020, 2019 and 2018, respectively. These amounts are included in Proceeds from asset disposals in the Consolidated Statements of Cash Flows. Write-downs of repossessed equipment on operating leases are recorded as impairments and included in Financial Services Depreciation and other expenses on the Consolidated Statements of Income.