Finance Assets and Lessor Operating Leases

12 Months Ended

Dec. 31, 2019

Finance Assets and Lessor Operating Leases

Finance Assets

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 clients for postage and supplies. Most loan receivables are generally due each month; however, customers may rollover outstanding balances. Interest is recognized on loan receivables using the effective interest method and related annual fees are initially deferred and recognized ratably over the annual period covered. Client acquisition costs are expensed as incurred.

Finance receivables consisted of the following:



	December 31, 2019									December 31, 2018
	North America			International			Total			North America			International			Total
Sales-type lease receivables
Gross finance receivables	$	1,055,852		$	224,202		$	1,280,054		$	1,110,898		$	242,036		$	1,352,934
Unguaranteed residual values	41,934			11,789			53,723			52,637			12,772			65,409
Unearned income	(319,281		)	(65,888		)	(385,169		)	(383,453		)	(55,113		)	(438,566		)
Allowance for credit losses	(10,920		)	(2,085		)	(13,005		)	(10,253		)	(2,355		)	(12,608		)
Net investment in sales-type lease receivables	767,585			168,018			935,603			769,829			197,340			967,169
Loan receivables
Loan receivables	298,247			27,926			326,173			300,319			29,270			329,589
Allowance for credit losses	(5,906		)	(740		)	(6,646		)	(6,777		)	(837		)	(7,614		)
Net investment in loan receivables	292,341			27,186			319,527			293,542			28,433			321,975
Net investment in finance receivables	$	1,059,926		$	195,204		$	1,255,130		$	1,063,371		$	225,773		$	1,289,144

Maturities of gross loan receivables and gross sales-type lease receivables at December 31, 2019 were as follows:



	Sales-type Lease Receivables						Loan Receivables
	North America		International		Total		North America		International		Total
2020	$	422,688	$	88,282	$	510,970	$	265,091	$	27,926	$	293,017
2021	300,669		64,001		364,670		11,295		—		11,295
2022	195,533		42,421		237,954		9,778		—		9,778
2023	102,765		22,042		124,807		4,649		—		4,649
2024	33,309		6,549		39,858		6,341		—		6,341
Thereafter	888		907		1,795		1,093		—		1,093
Total	$	1,055,852	$	224,202	$	1,280,054	$	298,247	$	27,926	$	326,173

Allowance for Credit Losses

Activity in the allowance for credit losses was as follows:



	Sales-type Lease Receivables						Loan Receivables
	North America			International			North America			International			Total
Balance at December 31, 2016	$	8,247		$	2,647		$	8,517		$	1,089		$	20,500
Amounts charged to expense	7,544			1,280			6,273			510			15,607
Accounts written off	(8,070		)	(1,133		)	(7,692		)	(579		)	(17,474		)
Balance at December 31, 2017	7,721			2,794			7,098			1,020			18,633
Amounts charged to expense	7,928			1,315			6,825			532			16,600
Accounts written off	(5,396		)	(1,754		)	(7,146		)	(715		)	(15,011		)
Balance at December 31, 2018	10,253			2,355			6,777			837			20,222
Amounts charged to expense	5,672			1,157			4,746			569			12,144
Accounts written off	(5,005		)	(1,427		)	(5,617		)	(666		)	(12,715		)
Balance at December 31, 2019	$	10,920		$	2,085		$	5,906		$	740		$	19,651

Aging of Receivables

The aging of gross finance receivables was as follows:



	December 31, 2019
	Sales-type Lease Receivables				Loan Receivables
	North America		International		North America		International		Total
1 - 90 days	$	1,032,912	$	220,819	$	294,001	$	27,697	$	1,575,429
> 90 days	22,940		3,383		4,246		229		30,798
Total	$	1,055,852	$	224,202	$	298,247	$	27,926	$	1,606,227
Past due amounts > 90 days
Still accruing interest	$	4,835	$	1,081	$	2,094	$	121	$	8,131
Not accruing interest	18,105		2,302		2,152		108		22,667
Total	$	22,940	$	3,383	$	4,246	$	229	$	30,798



	December 31, 2018
	Sales-type Lease Receivables				Loan Receivables
	North America		International		North America		International		Total
1 - 90 days	$	1,069,290	$	238,114	$	294,126	$	29,079	$	1,630,609
> 90 days	41,608		3,922		6,193		191		51,914
Total	$	1,110,898	$	242,036	$	300,319	$	29,270	$	1,682,523
Past due amounts > 90 days
Still accruing interest	$	7,917	$	1,111	$	1,769	$	72	$	10,869
Not accruing interest	33,691		2,811		4,424		119		41,045
Total	$	41,608	$	3,922	$	6,193	$	191	$	51,914

Credit Quality

The extension of credit lines to new and existing clients uses 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 portfolio because the cost to do so is prohibitive, given that 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 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. Some accounts are not scored; however, 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 may become delinquent in the next 12 month period.


•	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.



	December 31,
	2019		2018
Sales-type lease receivables
Low	$	837,386	$	922,414
Medium	161,204		131,650
High	21,041		22,110
Not Scored	36,221		34,724
Total	$	1,055,852	$	1,110,898
Loan receivables
Low	$	216,295	$	238,620
Medium	63,302		43,952
High	5,140		5,947
Not Scored	13,510		11,800
Total	$	298,247	$	300,319

Lease Income

Lease income from sales-type leases was as follows:



	Years Ended December 31,
	2019		2018		2017
Profit recognized at commencement ⁽¹⁾	$	142,353	$	171,938	$	157,375
Interest income	229,719		245,751		253,224
Total lease income from sales-type leases	$	372,072	$	417,689	$	410,599

⁽¹⁾ Lease contracts do not include variable lease payments.

Lessor Operating Leases

We also lease mailing equipment under operating leases with terms of one to five years. Maturities of these operating leases are as follows:



2020	$	33,903
2021	17,158
2022	7,836
2023	5,369
2024	1,072
Total	$	65,338