Accounts receivable, net

9 Months Ended

Nov. 01, 2014

Accounts receivable, net

8. Accounts receivable, net

Signet’s accounts receivable primarily consist of Sterling Jewelers’ customer in-house financing receivables. The accounts receivable portfolio consists of a population that has similar characteristics and is evaluated collectively for impairment. The allowance is an estimate of the expected losses as of the balance sheet date, and is calculated using a proprietary model that analyzes factors such as delinquency rates and recovery rates. A 100% allowance is made for any amount that is more than 90 days aged on a recency basis and any amount associated with an account the owner of which has filed for bankruptcy, as well as an allowance for those amounts 90 days aged and under based on historical loss information and payment performance. The calculation is reviewed by management to assess whether, based on economic events, additional analyses are required to appropriately estimate losses inherent in the portfolio.

(in millions)	November 1, 2014		February 1, 2014		November 2, 2013
Accounts receivable by portfolio segment, net:
Sterling Jewelers customer in-house finance receivables	$	1,280.3	$	1,356.0	$	1,111.8
Other accounts receivable		11.8		18.0		11.7
Total accounts receivable, net	$	1,292.1	$	1,374.0	$	1,123.5

Sterling Jewelers grants credit to customers based on a variety of credit quality indicators, including customer financial information and prior payment experience. On an ongoing basis, management monitors the credit exposure based on past due status and collection experience, as it has found a meaningful correlation between the past due status of customers and the risk of loss.

Other accounts receivable is comprised primarily of gross accounts receivable relating to the insurance loss replacement business in the UK Jewelry division of $9.5 million (February 1, 2014 and November 2, 2013: $12.8 million and $9.9 million, respectively) with a corresponding valuation allowance of $0.3 million (February 1, 2014 and November 2, 2013: $0.3 million and $0.5 million, respectively). The credit function for the Zale division is outsourced and, as such, no material accounts receivable exist as of November 1, 2014.

Allowance for credit losses on Sterling Jewelers’ customer in-house finance receivables:

(in millions)	39 weeks ended November 1, 2014			52 weeks ended February 1, 2014			39 weeks ended November 2, 2013
Beginning balance	$	(97.8	)	$	(87.7	)	$	(87.7	)
Charge-offs		101.0			128.2			91.0
Recoveries		22.1			26.0			19.9
Provision expense		(127.9	)		(164.3	)		(112.8	)
Ending balance	$	(102.6	)	$	(97.8	)	$	(89.6	)
Ending receivable balance evaluated for impairment		1,382.9			1,453.8			1,201.4
Sterling Jewelers’ customer in-house finance receivables, net	$	1,280.3		$	1,356.0		$	1,111.8

Net bad debt expense is calculated as provision expense less recoveries.

Credit quality indicator and age analysis of past due Sterling Jewelers’ customer in-house finance receivables:

	November 1, 2014						February 1, 2014						November 2, 2013
(in millions)	Gross			Valuation allowance			Gross			Valuation allowance			Gross			Valuation allowance
Performing:
Current, aged 0-30 days	$	1,087.9		$	(33.2	)	$	1,170.4		$	(36.3	)	$	946.9		$	(29.0	)
Past due, aged 31-90 days		233.8			(8.2	)		229.9			(8.0	)		201.1			(7.2	)
Non Performing:
Past due, aged more than 90 days		61.2			(61.2	)		53.5			(53.5	)		53.4			(53.4	)
	$	1,382.9		$	(102.6	)	$	1,453.8		$	(97.8	)	$	1,201.4		$	(89.6	)
	November 1, 2014						February 1, 2014						November 2, 2013
(as a percentage of the ending receivable balance)	Gross			Valuation allowance			Gross			Valuation allowance			Gross			Valuation allowance
Performing		95.6	%		3.1	%		96.3	%		3.2	%		95.6	%		3.2	%
Non Performing		4.4	%		100.0	%		3.7	%		100.0	%		4.4	%		100.0	%
		100.0	%		7.4	%		100.0	%		6.7	%		100.0	%		7.5	%

Securitized credit card receivables

The Sterling Jewelers division securitizes a portion of its credit card receivables through its Sterling Jewelers Receivables Master Note Trust established on May 15, 2014. See Note 19 for additional information on this asset-backed securitization facility.