Finance Assets

Finance Receivables

Finance receivables are comprised of sales-type lease receivables and unsecured revolving loan receivables. Sales-type lease receivables are generally due in monthly, quarterly or semi-annual installments over periods ranging from three to five years. Loan receivables arise primarily from financing services offered to our customers for postage and related supplies. Loan receivables are generally due each month; however, customers may rollover outstanding balances.

Finance receivables at March 31, 2014 and December 31, 2013 consisted of the following:



	March 31, 2014
	North America			International			Total
Sales-type lease receivables
Gross finance receivables	$	1,340,592		$	450,071		$	1,790,663
Unguaranteed residual values	113,423			21,584			135,007
Unearned income	(280,590		)	(101,170		)	(381,760		)
Allowance for credit losses	(12,907		)	(9,779		)	(22,686		)
Net investment in sales-type lease receivables	1,160,518			360,706			1,521,224
Loan receivables
Loan receivables	387,394			50,732			438,126
Allowance for credit losses	(10,994		)	(1,941		)	(12,935		)
Net investment in loan receivables	376,400			48,791			425,191
Net investment in finance receivables	$	1,536,918		$	409,497		$	1,946,415

	December 31, 2013
	North America			International			Total
Sales-type lease receivables
Gross finance receivables	$	1,456,420		$	456,759		$	1,913,179
Unguaranteed residual values	121,339			21,553			142,892
Unearned income	(299,396		)	(101,311		)	(400,707		)
Allowance for credit losses	(14,165		)	(9,703		)	(23,868		)
Net investment in sales-type lease receivables	1,264,198			367,298			1,631,496
Loan receivables
Loan receivables	397,815			49,054			446,869
Allowance for credit losses	(11,165		)	(1,916		)	(13,081		)
Net investment in loan receivables	386,650			47,138			433,788
Net investment in finance receivables	$	1,650,848		$	414,436		$	2,065,284

Allowance for Credit Losses and Aging of Receivables

We estimate our finance receivable risks and provide an allowance for credit losses accordingly. We evaluate the adequacy of the allowance for credit losses based on historical loss experience, the nature and volume of our portfolios, adverse situations that may affect a client's ability to pay, prevailing economic conditions and our ability to manage the collateral and make adjustments to the allowance as necessary. This evaluation is inherently subjective and actual results may differ significantly from estimated reserves.

We establish credit approval limits based on the credit quality of the client and the type of equipment financed. Our policy is to discontinue revenue recognition for lease receivables that are more than 120 days past due and for unsecured loan receivables that are more than 90 days past due. We resume revenue recognition when payments reduce the account balance aging to 60 days or less past due. Finance receivables deemed uncollectible are written off against the allowance after all collection efforts have been exhausted and management deems the account to be uncollectible. We believe that our finance receivable credit risk is limited because of our large number of clients, small account balances for most of our clients, and geographic and industry diversification.

Activity in the allowance for credit losses for the three months ended March 31, 2014 and 2013 was as follows:



	Sales-type Lease Receivables						Loan Receivables
	North America			International			North America			International			Total
Balance at January 1, 2014	$	14,165		$	9,703		$	11,165		$	1,916		$	36,949
Amounts charged to expense	1,052			169			2,492			361			4,074
Accounts written off	(2,310		)	(93		)	(2,663		)	(336		)	(5,402		)
Balance at March 31, 2014	$	12,907		$	9,779		$	10,994		$	1,941		$	35,621

	Sales-type Lease Receivables						Loan Receivables
	North America			International			North America			International			Total
Balance at January 1, 2013	$	16,979		$	8,662		$	12,322		$	2,131		$	40,094
Amounts charged to expense	1,067			360			2,462			70			3,959
Accounts written off	(2,474		)	(1,255		)	(2,955		)	(389		)	(7,073		)
Balance at March 31, 2013	$	15,572		$	7,767		$	11,829		$	1,812		$	36,980

Aging of Receivables

The aging of gross finance receivables at March 31, 2014 and December 31, 2013 was as follows:



	March 31, 2014
	Sales-type Lease Receivables				Loan Receivables
	North America		International		North America		International		Total
< 31 days	$	1,272,429	$	413,892	$	369,365	$	48,540	$	2,104,226
> 30 days and < 61 days	26,751		11,198		9,836		1,177		48,962
> 60 days and < 91 days	20,887		11,440		3,500		536		36,363
> 90 days and < 121 days	6,642		4,089		2,040		183		12,954
> 120 days	13,883		9,452		2,653		296		26,284
Total	$	1,340,592	$	450,071	$	387,394	$	50,732	$	2,228,789
Past due amounts > 90 days
Still accruing interest	$	6,642	$	4,089	$	—	$	—	$	10,731
Not accruing interest	13,883		9,452		4,693		479		28,507
Total	$	20,525	$	13,541	$	4,693	$	479	$	39,238



	December 31, 2013
	Sales-type Lease Receivables				Loan Receivables
	North America		International		North America		International		Total
< 31 days	$	1,383,253	$	425,923	$	379,502	$	42,573	$	2,231,251
> 30 days and < 61 days	32,102		11,760		10,464		4,391		58,717
> 60 days and < 91 days	20,830		5,724		3,330		1,363		31,247
> 90 days and < 121 days	6,413		3,979		1,809		311		12,512
> 120 days	13,822		9,373		2,710		416		26,321
Total	$	1,456,420	$	456,759	$	397,815	$	49,054	$	2,360,048
Past due amounts > 90 days
Still accruing interest	$	6,413	$	3,979	$	—	$	—	$	10,392
Not accruing interest	13,822		9,373		4,519		727		28,441
Total	$	20,235	$	13,352	$	4,519	$	727	$	38,833

Credit Quality

In extending and managing credit lines to new and existing clients, we use a combination of an automated credit score, where available, and a detailed manual review of the client’s financial condition and, when applicable, payment history. Once credit is granted, the payment performance of the client is managed through automated collections processes and is supplemented with direct follow up should an account become delinquent. We have robust automated collections and extensive portfolio management processes. The portfolio management processes ensure that our global strategy is executed, collection resources are allocated appropriately and enhanced tools and processes are implemented as needed.

We use a third party to score the majority of the North America portfolio on a quarterly basis using a commercial credit score. We do not use a third party to score our International portfolios because the cost to do so is prohibitive, it is a localized process and there is no single credit score model that covers all countries.

The table below shows the North America portfolio at March 31, 2014 and December 31, 2013 by relative risk class (low, medium, high) based on the relative scores of the accounts within each class. The relative scores are determined based on a number of factors, including the company type, ownership structure, payment history and financial information. A fourth class is shown for accounts that are not scored. Absence of a score is not indicative of the credit quality of the account. The degree of risk, as defined by the third party, refers to the relative risk that an account in the next 12 month period may become delinquent.


•	Low risk accounts are companies with very good credit scores and are considered to approximate the top 30% of all commercial borrowers.


•	Medium risk accounts are companies with average to good credit scores and are considered to approximate the middle 40% of all commercial borrowers.


•	High risk accounts are companies with poor credit scores, are delinquent or are at risk of becoming delinquent and are considered to approximate the bottom 30% of all commercial borrowers.



	March 31, 2014		December 31, 2013
Sales-type lease receivables
Low	$	1,024,369	$	1,081,853
Medium	205,935		244,379
High	46,768		51,851
Not Scored	63,520		78,337
Total	$	1,340,592	$	1,456,420
Loan receivables
Low	$	272,234	$	279,607
Medium	89,219		95,524
High	10,663		11,511
Not Scored	15,278		11,173
Total	$	387,394	$	397,815

Troubled Debt

We maintain a program for U.S. clients in our North America loan portfolio who are experiencing financial difficulties, but are able to make reduced payments over an extended period of time. Upon acceptance into the program, the client’s credit line is closed and interest accrual is suspended. There is generally no forgiveness of debt or reduction of balances owed. The balance of loans in this program, related loan loss allowance and write-offs are insignificant to the overall portfolio.

Leveraged Leases

Our investment in leveraged lease assets at March 31, 2014 and December 31, 2013 consisted of the following:



	March 31, 2014			December 31, 2013
Rental receivables	$	56,317		$	61,721
Unguaranteed residual values	12,729			13,235
Principal and interest on non-recourse loans	(31,061		)	(35,449		)
Unearned income	(4,295		)	(5,097		)
Investment in leveraged leases	33,690			34,410
Less: deferred taxes related to leveraged leases	(13,769		)	(15,078		)
Net investment in leveraged leases	$	19,921		$	19,332