12. RECEIVABLES

Trade Accounts and Notes Receivable

Trade accounts and notes receivable at October 29, 2017 and October 30, 2016 in millions of dollars follows:


	2017		2016
Trade accounts and notes:
Agriculture and turf	$	2,991	$	2,438
Construction and forestry		934		573
Trade accounts and notes receivable – net	$	3,925	$	3,011

At October 29, 2017 and October 30, 2016, dealer notes included in the previous table were $140 million and $143 million, and the allowance for credit losses was $56 million and $50 million, respectively.

The equipment operations sell a significant portion of their trade receivables to financial services and provide compensation to these operations at approximate market rates of interest.

Trade accounts and notes receivable primarily arise from sales of goods to independent dealers. Under the terms of the sales to dealers, interest is primarily charged to dealers on outstanding balances, from the earlier of the date when goods are sold to retail customers by the dealer or the expiration of certain interest-free periods granted at the time of the sale to the dealer, until payment is received by the company. Dealers cannot cancel purchases after the equipment is shipped and are responsible for payment even if the equipment is not sold to retail customers. The interest-free periods are determined based on the type of equipment sold and the time of year of the sale. These periods range from one to twelve months for most equipment. Interest-free periods may not be extended. Interest charged may not be forgiven and the past due interest rates exceed market rates. The company evaluates and assesses dealers on an ongoing basis as to their creditworthiness and generally retains a security interest in the goods associated with the trade receivables. In certain jurisdictions, the company is obligated to repurchase goods sold to a dealer upon cancellation or termination of the dealer’s contract for such causes as change in ownership and closeout of the business.

Trade accounts and notes receivable have significant concentrations of credit risk in the agriculture and turf sector and construction and forestry sector as shown in the previous table. On a geographic basis, there is not a disproportionate concentration of credit risk in any area.

Financing Receivables

Financing receivables at October 29, 2017 and October 30, 2016 in millions of dollars follow:


	2017				2016
	Unrestricted/Securitized				Unrestricted/Securitized
Retail notes:
Agriculture and turf	$	15,200	$	3,651	$	14,152	$	4,615
Construction and forestry		2,297		599		2,201		620
Total		17,497		4,250		16,353		5,235
Wholesale notes		3,653				3,971
Revolving charge accounts		3,629				3,135
Financing leases (direct and sales-type)		1,613				1,326
Total financing receivables		26,392		4,250		24,785		5,235
Less:
Unearned finance income:
Retail notes		972		78		812		94
Financing leases		142				109
Total		1,114		78		921		94
Allowance for credit losses		174		13		162		14
Financing receivables – net	$	25,104	$	4,159	$	23,702	$	5,127

The residual values for investments in financing leases at October 29, 2017 and October 30, 2016 totaled $244 million and $156 million, respectively.

Financing receivables have significant concentrations of credit risk in the agriculture and turf sector and construction and forestry sector as shown in the previous table. On a geographic basis, there is not a disproportionate concentration of credit risk in any area. The company generally retains as collateral a security interest in the equipment associated with retail notes, wholesale notes, and financing leases.

Financing receivables at October 29, 2017 and October 30, 2016 related to the company’s sales of equipment that were included in the table above consisted of the following in millions of dollars:


	2017		2016
	Unrestricted		Unrestricted
Retail notes*:
Agriculture and turf	$	2,099	$	1,896
Construction and forestry		368		336
Total		2,467		2,232
Wholesale notes		3,653		3,971
Sales-type leases		763		648
Total		6,883		6,851
Less:
Unearned finance income:
Retail notes		231		202
Sales-type leases		53		42
Total		284		244
Financing receivables related to the company’s sales of equipment	$	6,599	$	6,607

* These retail notes generally arise from sales of equipment by company-owned dealers or through direct sales.

Financing receivable installments, including unearned finance income, at October 29, 2017 and October 30, 2016 are scheduled as follows in millions of dollars:


	2017				2016
	Unrestricted/Securitized				Unrestricted/Securitized
Due in months:
0 – 12	$	13,237	$	2,027	$	12,835	$	2,269
13 – 24		5,056		1,256		4,760		1,536
25 – 36		3,708		672		3,386		931
37 – 48		2,518		243		2,219		408
49 – 60		1,398		50		1,181		84
Thereafter		475		2		404		7
Total	$	26,392	$	4,250	$	24,785	$	5,235

The maximum terms for retail notes are generally seven years for agriculture and turf equipment and five years for construction and forestry equipment. The maximum term for financing leases is generally five years, while the average term for wholesale notes is less than twelve months.

At October 29, 2017 and October 30, 2016, the unpaid balances of receivables administered but not owned were $10 million and $15 million, respectively. At October 29, 2017 and October 30, 2016, worldwide financing receivables administered, which include financing receivables administered but not owned, totaled $29,273 million and $28,844 million, respectively.

Past due balances of financing receivables still accruing finance income represent the total balance held (principal plus accrued interest) with any payment amounts 30 days or more past the contractual payment due date. Non-performing financing receivables represent loans for which the company has ceased accruing finance income. These receivables are generally 120 days delinquent and the estimated uncollectible amount, after charging the dealer’s withholding account, has been written off to the allowance for credit losses. Finance income for non-performing receivables is recognized on a cash basis. Accrual of finance income is generally resumed when the receivable becomes contractually current and collections are reasonably assured.

An age analysis of past due financing receivables that are still accruing interest and non-performing financing receivables at October 29, 2017 and October 30, 2016 follows in millions of dollars:


	30-59		60-89		90 Days
	Days		Days		or Greater		Total
	Past Due		Past Due		Past Due		Past Due
2017
Retail Notes:
Agriculture and turf	$	118	$	54	$	49	$	221
Construction and forestry		75		33		39		147
Other:
Agriculture and turf		27		14		7		48
Construction and forestry		11		6		2		19
Total	$	231	$	107	$	97	$	435


			Total				Total
	Total		Non-				Financing
	Past Due		Performing		Current		Receivables
Retail Notes:
Agriculture and turf	$	221	$	173	$	17,508	$	17,902
Construction and forestry		147		30		2,618		2,795
Other:
Agriculture and turf		48		12		7,610		7,670
Construction and forestry		19		5		1,059		1,083
Total	$	435	$	220	$	28,795		29,450
Less allowance for credit losses								187
Total financing receivables - net							$	29,263


	30-59		60-89		90 Days
	Days		Days		or Greater		Total
	Past Due		Past Due		Past Due		Past Due
2016
Retail Notes:
Agriculture and turf	$	115	$	57	$	65	$	237
Construction and forestry		78		32		25		135
Other:
Agriculture and turf		26		11		6		43
Construction and forestry		10		5		4		19
Total	$	229	$	105	$	100	$	434


			Total				Total
	Total		Non-				Financing
	Past Due		Performing		Current		Receivables
Retail Notes:
Agriculture and turf	$	237	$	191	$	17,526	$	17,954
Construction and forestry		135		35		2,558		2,728
Other:
Agriculture and turf		43		9		7,286		7,338
Construction and forestry		19		9		957		985
Total	$	434	$	244	$	28,327		29,005
Less allowance for credit losses								176
Total financing receivables - net							$	28,829

An analysis of the allowance for credit losses and investment in financing receivables follows in millions of dollars:


			Revolving
	Retail		Charge
	Notes		Accounts		Other		Total
2017
Allowance:
Beginning of year balance	$	113	$	40	$	23	$	176
Provision		46		33		9		88
Write-offs		(56)		(53)		(7)		(116)
Recoveries		20		20		1		41
Translation adjustments		(2)						(2)
End of year balance*	$	121	$	40	$	26	$	187

Financing receivables:
End of year balance	$	20,697	$	3,629	$	5,124	$	29,450

Balance individually evaluated	$	86	$	3	$	20	$	109


2016
Allowance:
Beginning of year balance	$	95	$	40	$	22	$	157
Provision		43		36		5		84
Write-offs		(43)		(55)		(5)		(103)
Recoveries		11		19		1		31
Translation adjustments		7						7
End of year balance*	$	113	$	40	$	23	$	176

Financing receivables:
End of year balance	$	20,682	$	3,135	$	5,188	$	29,005

Balance individually evaluated	$	108	$	8	$	20	$	136


2015
Allowance:
Beginning of year balance	$	109	$	41	$	25	$	175
Provision		22		21		3		46
Write-offs		(26)		(37)		(4)		(67)
Recoveries		10		15		1		26
Translation adjustments		(20)				(3)		(23)
End of year balance*	$	95	$	40	$	22	$	157

Financing receivables:
End of year balance	$	21,567	$	2,740	$	5,494	$	29,801

Balance individually evaluated	$	40			$	6	$	46

* Individual allowances were not significant.

Past-due amounts over 30 days represented 1.48 percent and 1.50 percent of the receivables financed at October 29, 2017 and October 30, 2016, respectively. The allowance for credit losses represented .64 percent and .61 percent of financing receivables outstanding at October 29, 2017 and October 30, 2016, respectively. In addition, at October 29, 2017 and October 30, 2016, the company’s financial services operations had $155 million and $162 million, respectively, of deposits primarily withheld from dealers and merchants available for potential credit losses.

Financing receivables are considered impaired when it is probable the company will be unable to collect all amounts due according to the contractual terms. Receivables reviewed for impairment generally include those that are either past due, or have provided bankruptcy notification, or require significant collection efforts. Receivables that are impaired are generally classified as non-performing.

An analysis of the impaired financing receivables at October 29, 2017 and October 30, 2016 follows in millions of dollars:


			Unpaid				Average
	Recorded		Principal		Specific		Recorded
	Investment		Balance		Allowance		Investment
2017*
Receivables with specific allowance**	$	36	$	33	$	10	$	30
Receivables without a specific allowance***		28		27				24
Total	$	64	$	60	$	10	$	54
Agriculture and turf	$	49	$	46	$	10	$	38
Construction and forestry	$	15	$	14			$	16


2016*
Receivables with specific allowance**	$	31	$	28	$	9	$	29
Receivables without a specific allowance***		29		27				26
Total	$	60	$	55	$	9	$	55
Agriculture and turf	$	33	$	30	$	8	$	27
Construction and forestry	$	27	$	25	$	1	$	28

* Finance income recognized was not material.

** Primarily retail notes.

*** Primarily retail notes and wholesale receivables.

A troubled debt restructuring is generally the modification of debt in which a creditor grants a concession it would not otherwise consider to a debtor that is experiencing financial difficulties. These modifications may include a reduction of the stated interest rate, an extension of the maturity dates, a reduction of the face amount or maturity amount of the debt, or a reduction of accrued interest. During 2017, 2016, and 2015, the company identified 474, 167, and 107 financing receivable contracts, primarily retail notes, as troubled debt restructurings with aggregate balances of $16 million, $19 million, and $8 million pre-modification and $15 million, $18 million, and $7 million post-modification, respectively. In 2017, there were $3 million of troubled debt restructurings that subsequently defaulted and were written off. In 2016 and 2015, there were no significant troubled debt restructurings that subsequently defaulted and were written off. At October 29, 2017, the company had commitments to lend approximately $12 million to borrowers whose accounts were modified in troubled debt restructurings.

Other Receivables

Other receivables at October 29, 2017 and October 30, 2016 consisted of the following in millions of dollars:


	2017		2016
Taxes receivable	$	876	$	702
Other		324		317
Other receivables	$	1,200	$	1,019