Receivables

Receivables consisted of the following (in millions):



	September 30,
	2012			2011
U.S. government:
Amounts billed	$	99.2		$	318.8
Cost and profits not billed	251.7			172.3
	350.9			491.1
Other trade receivables	633.0			568.8
Finance receivables	5.2			23.6
Notes receivable	24.6			33.7
Other receivables	35.6			27.4
	1,049.3			1,144.6
Less allowance for doubtful accounts	(18.0		)	(29.5		)
	$	1,031.3		$	1,115.1

Costs and profits not billed generally result from undefinitized change orders on existing long-term contracts and “not-to-exceed” undefinitized contracts whereby the Company cannot invoice the customer the full price under the contract or contract change order until such contract or change order is definitized and agreed to with the customer following a review of costs under such a contract award even though the contract deliverables may have been met. Definitization of a change order on an existing long-term contract or a sole source contract begins when the U.S. government customer undertakes a detailed review of the Company’s submitted costs and proposed margin related to the contract and concludes with a final change order. The Company recognizes revenue on undefinitized contracts to the extent that it can reasonably and reliably estimate the expected final contract price and when collectability is reasonably assured. At September 30, 2012, the Company had recorded $83.4 million of revenue on contracts which remained undefinitized as of that date. To the extent that contract definitization results in changes to previously estimated or incurred costs or revenues, the Company records those adjustments as a change in estimate. The Company updated its estimated costs under several undefinitized change orders and recorded $7.8 million of revenue related to such updates during fiscal 2012. As all costs associated with these contracts had been previously expensed, the change increased net income by $5.0 million or $0.05 per share, for fiscal 2012.

Classification of receivables in the Consolidated Balance Sheets consisted of the following (in millions):



	September 30,
	2012		2011
Current receivables	$	1,018.6	$	1,089.1
Long-term receivables	12.7		26.0
	$	1,031.3	$	1,115.1

Finance Receivables: Finance receivables represent sales-type leases resulting from the sale of the Company's products and the purchase of finance receivables from lenders pursuant to customer defaults under program agreements with finance companies. Finance receivables originated by the Company generally include a residual value component. Residual values are determined based on the expectation that the underlying equipment will have a minimum fair market value at the end of the lease term. This residual value accrues to the Company at the end of the lease. The Company uses its experience and knowledge as an original equipment manufacturer and participant in end markets for the related products along with third-party studies to estimate residual values. The Company monitors these values for impairment on a periodic basis and reflects any resulting reductions in value in current earnings. Finance receivables are written down if management determines that the specific borrower does not have the ability to repay the loan amounts due in full.

Finance receivables consisted of the following (in millions):



	September 30,
	2012			2011
Finance receivables	$	6.0		$	27.9
Less unearned income	(0.8		)	(4.3		)
Net finance receivables	5.2			23.6
Less allowance for doubtful accounts	(1.4		)	(11.5		)
	$	3.8		$	12.1

Contractual maturities of the Company’s finance receivables at September 30, 2012 were as follows: 2013 - $2.7 million; 2014 - $0.3 million; 2015 - $1.3 million; 2016 - $0.8 million; 2017 - $0.4 million; and thereafter - $0.5 million. Historically, obligors have paid off finance receivables prior to their contractual due dates, although actual repayment timing is impacted by a number of factors, including the economic environment at the time. As a result, contractual maturities are not to be regarded as a forecast of future cash flows.

Delinquency is the primary indicator of credit quality of finance receivables. The Company maintains a general allowance for finance receivables considered doubtful of future collection based upon historical experience. Additional allowances are established based upon the Company’s perception of the quality of the finance receivables, including the length of time the receivables are past due, past experience of collectability and underlying economic conditions. In circumstances where the Company believes collectability is no longer reasonably assured, a specific allowance is recorded to reduce the net recognized receivable to the amount reasonably expected to be collected. The terms of the finance agreements generally give the Company the ability to take possession of the underlying collateral. The Company may incur losses in excess of recorded allowances if the financial condition of its customers were to deteriorate or the full amount of any anticipated proceeds from the sale of the collateral supporting its customers’ financial obligations is not realized.

Notes Receivable: Notes receivable include amounts related to refinancing of trade accounts and finance receivables. As of September 30, 2012, approximately 96% of the notes receivable balance outstanding was due from three parties. The Company routinely evaluates the creditworthiness of its customers and establishes reserves where the Company believes collectability is no longer reasonably assured. Notes receivable are written down if management determines that the specific borrower does not have the ability to repay the loan in full. Certain notes receivable are collateralized by a security interest in the underlying assets and/or other assets owned by the debtor. The Company may incur losses in excess of recorded allowances if the financial condition of its customers were to deteriorate or the full amount of any anticipated proceeds from the sale of the collateral supporting its customers' financial obligations is not realized.

Quality of Finance and Notes Receivable: The Company does not accrue interest income on finance and notes receivables in circumstances where the Company believes collectability is no longer reasonably assured. Any cash payments received on nonaccrual finance and notes receivable are applied first to principal balances. The Company does not resume accrual of interest income until the customer has shown that it is capable of meeting its financial obligations by making timely payments over a sustained period of time. The Company determines past due or delinquency status based upon the due date of the receivable.

Finance and notes receivable aging and accrual status consisted of the following (in millions):



	September 30,
	Finance Receivables						Notes Receivables
	2012			2011			2012			2011
Aging of receivables that are past due:
Greater than 30 days and less than 60 days	$	0.1		$	0.5		$	—		$	—
Greater than 60 days and less than 90 days	—			0.1			—			—
Greater than 90 days	1.3			6.5			—			0.5

Receivables on nonaccrual status	3.4			17.6			19.0			0.5
Receivables past due 90 days or more and still accruing	—			—			—			—

Receivables subject to general reserves	1.5			0.4			—			8.6
Allowance for doubtful accounts	—			—			—			(0.1		)
Receivables subject to specific reserves	3.7			23.2			24.6			25.1
Allowance for doubtful accounts	(1.4		)	(11.5		)	(8.0		)	(8.8		)

Receivables subject to specific reserves also include loans that the Company has modified in troubled debt restructurings as a concession to customers experiencing financial difficulty. To minimize the economic loss, the Company may modify certain finance and notes receivable. Modifications generally consist of restructured payment terms and time frames in which no payments are required. At September 30, 2012, restructured finance receivables and notes receivables were $4.1 million and $23.1 million, respectively. Losses on troubled debt restructurings were not significant during fiscal 2012 or 2011. The Company restructured a $19.0 million outstanding note receivable in fiscal 2012 through a combination of extended payment terms, commitment by the customer to purchase an agreed upon quantity of equipment over a specified time horizon and a reduced payment obligation if the customer meets the equipment purchase and repayment schedule.

Changes in the Company’s allowance for doubtful accounts were as follows (in millions):



	Fiscal Year Ended September 30, 2012
	Finance Receivables			Notes Receivable			Trade and Other Receivables			Total
Allowance for doubtful accounts at beginning of year	$	11.5		$	8.9		$	9.1		$	29.5
Provision for doubtful accounts, net of recoveries	(3.4		)	(0.4		)	1.5			(2.3		)
Charge-off of accounts	(6.7		)	(0.5		)	(1.9		)	(9.1		)
Disposition of a business	—			—			(0.1		)	(0.1		)
Foreign currency translation	—			—			—			—
Allowance for doubtful accounts at end of year	$	1.4		$	8.0		$	8.6		$	18.0



	Fiscal Year Ended September 30, 2011
	Finance Receivables			Notes Receivable			Trade and Other Receivables			Total
Allowance for doubtful accounts at beginning of year	$	20.9		$	9.4		$	11.7		$	42.0
Provision for doubtful accounts, net of recoveries	(0.5		)	1.9			0.6			2.0
Charge-off of accounts	(8.9		)	(2.5		)	(3.1		)	(14.5		)
Disposition of a business	—			—			—			—
Foreign currency translation	—			0.1			(0.1		)	—
Allowance for doubtful accounts at end of year	$	11.5		$	8.9		$	9.1		$	29.5