ACCOUNTS AND NOTES RECEIVABLE, NET

6 Months Ended

Jul. 02, 2022


(Millions of Dollars)	July 2, 2022		January 1, 2022
Trade accounts receivable	$	1,522.0	$	1,398.2
Trade notes receivable	69.6		75.3
Other accounts receivable	102.7		104.1
Gross accounts and notes receivable	$	1,694.3	$	1,577.6
Allowance for credit losses	(102.2)		(95.9)
Accounts and notes receivable, net	$	1,592.1	$	1,481.7

Trade receivables are dispersed among a large number of retailers, distributors and industrial accounts in many countries. Adequate reserves have been established to cover anticipated credit losses.

The changes in the allowance for credit losses for the three and six months ended July 2, 2022 and July 3, 2021 are as follows:


	Second Quarter				Year-to-Date
(Millions of Dollars)	2022		2021		2022		2021
Beginning Balance	$	107.8	$	109.3	$	95.9	$	106.2
Charged To Costs and Expenses	3.3		(4.9)		14.4		(2.7)
Other, including recoveries and deductions (a)	(8.9)		(1.3)		(8.1)		(0.4)
Balance end of period	$	102.2	$	103.1	$	102.2	$	103.1

(a) Amounts represent charge-offs less recoveries, the impacts of foreign currency translation, acquisitions and net transfers to/from other accounts.

The Company's payment terms are generally consistent with the industries in which their businesses operate and typically range from 30-90 days globally. The Company does not adjust the promised amount of consideration for the effects of a significant financing component when the period between transfer of the product and receipt of payment is less than one year. Any significant financing components for contracts greater than one year are included in revenue over time.

At July 2, 2022 and January 1, 2022, the Industrial segment operating lease receivable was $0.7 million and $21.2 million, respectively, from leasing equipment to customers. The decrease is primarily due to reclassifying $22.9 million to held for sale as of July 2, 2022, related to the Oil & Gas business. Net sales from operating lease revenue were $16.0 million and $28.7 million for the three and six months ended July 2, 2022, respectively. Net sales from operating lease revenue were $11.0 million and $30.6 million for the three and six months ended July 3, 2021, respectively.

The Company has an accounts receivable sale program. According to the terms, the Company sells certain of its trade accounts receivables at fair value to a wholly owned, consolidated, bankruptcy-remote special purpose subsidiary (“BRS"). The BRS, in turn, can sell such receivables to a third-party financial institution (“Purchaser”) for cash. The Purchaser’s maximum cash investment in the receivables at any time is $110.0 million. The purpose of the program is to provide liquidity to the Company. These transfers qualify as sales under ASC 860, Transfers and Servicing, and receivables are derecognized from the Company’s consolidated balance sheet when the BRS sells those receivables to the Purchaser. The Company has no retained interests in the transferred receivables, other than collection and administrative responsibilities. At July 2, 2022 and January 1, 2022, the Company did not record a servicing asset or liability related to its retained responsibility based on its assessment of the servicing fee, market values for similar transactions and its cost of servicing the receivables sold.

At July 2, 2022 and January 1, 2022, net receivables of approximately $110.0 million and $100.0 million, respectively, were derecognized. Proceeds from transfers of receivables to the Purchaser totaled $132.3 million and $214.6 million for the three and six months ended July 2, 2022, respectively, and payments to the Purchaser totaled $108.7 million and $204.6 million, respectively. Proceeds from transfers of receivables to the Purchaser totaled $119.3 million and $182.7 million for the three and six months ended July 3, 2021, respectively, and payments to the Purchaser totaled $83.6 million and $169.5 million, respectively. The program resulted in a pre-tax loss of $0.9 million and $1.3 million for the three and six months ended July 2, 2022, respectively, which included service fees of $0.2 million and $0.4 million, respectively. The program resulted in a pre-tax

loss of $0.4 million and $0.8 million for the three and six months ended July 3, 2021, respectively, which included service fees of $0.2 million and $0.4 million, respectively. All cash flows under the program are reported as a component of changes in accounts receivable within operating activities in the Condensed Consolidated Statements of Cash Flows since all the cash from the Purchaser is received upon the initial sale of the receivable.As of July 2, 2022 and January 1, 2022, the Company's deferred revenue totaled $105.2 million and $117.1 million, respectively, of which $26.1 million and $35.0 million, respectively, was classified as current. As of July 2, 2022, deferred revenue of $10.5 million related to the Oil & Gas business was reclassified as held for sale, all of which was current. Revenue recognized for the six months ended July 2, 2022 and July 3, 2021 that was previously deferred as of January 1, 2022 and January 2, 2021 totaled $11.4 million and $12.1 million, respectively.