12. RECEIVABLES

Trade Accounts and Notes Receivable

Trade accounts and notes receivable at October 28, 2018 and October 29, 2017 in millions of dollars follows:


	2018		2017
Trade accounts and notes:
Agriculture and turf	$	3,210	$	2,991
Construction and forestry		1,794		934
Trade accounts and notes receivable – net	$	5,004	$	3,925

The allowance for credit losses on trade accounts and notes receivable was $70 million, $56 million, and $50 million, respectively, with a provision for credit loss of $37 million, $11 million, and $11 million in fiscal years 2018, 2017, and 2016, respectively. The net write-offs were $16 million, $3 million, and $7 million in fiscal years 2018, 2017, and 2016, respectively. Currency translation impacted the allowance for credit losses by $7 million, $2 million, and $(5) million in fiscal years 2018, 2017, and 2016, 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 include receivables from sales to certain retail customers with payment terms less than twelve months. The customer cannot cancel purchases or return the equipment after delivery. The company evaluates and assesses retail customers at the time of purchase as to their creditworthiness and generally retains a security interest in the goods associated with the receivables.

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 28, 2018 and October 29, 2017 in millions of dollars follow:


	2018				2017
	Unrestricted/Securitized				Unrestricted/Securitized
Retail notes:
Agriculture and turf	$	15,885	$	3,441	$	15,200	$	3,651
Construction and forestry		2,776		675		2,297		599
Total		18,661		4,116		17,497		4,250
Wholesale notes		4,009				3,665
Revolving charge accounts		3,907				3,676
Financing leases (direct and sales-type)		1,948				1,613
Total financing receivables		28,525		4,116		26,451		4,250
Less:
Unearned finance income:
Retail notes		1,069		84		972		78
Wholesale notes		10				12
Revolving charge accounts		45				47
Financing leases		179				142
Total		1,303		84		1,173		78
Allowance for credit losses		168		10		174		13
Financing receivables – net	$	27,054	$	4,022	$	25,104	$	4,159

The 2017 amounts in the table above for wholesale notes and revolving charge accounts were adjusted to be comparable with 2018 by separately presenting the unearned finance income. In the prior year, these balances were shown net of unearned finance income. The total financing receivables - net balance did not change. The residual values for investments in financing leases at October 28, 2018 and October 29, 2017 totaled $294 million and $244 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 28, 2018 and October 29, 2017 related to the company’s sales of equipment that were included in the table above consisted of the following in millions of dollars:


	2018				2017
	Unrestricted/Securitized				Unrestricted
Retail notes*:
Agriculture and turf	$	2,312			$	2,099
Construction and forestry		441	$	77		368
Total		2,753		77		2,467
Wholesale notes		4,009				3,665
Sales-type leases		878				763
Total		7,640		77		6,895
Less:
Unearned finance income:
Retail notes		261		1		231
Wholesale notes		10				12
Sales-type leases		68				53
Total		339		1		296
Financing receivables related to the company’s sales of equipment	$	7,301	$	76	$	6,599

* 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 28, 2018 and October 29, 2017 are scheduled as follows in millions of dollars:


	2018				2017
	Unrestricted/Securitized				Unrestricted/Securitized
Due in months:
0 – 12	$	14,658	$	1,922	$	13,293	$	2,027
13 – 24		5,355		1,160		5,059		1,256
25 – 36		3,911		652		3,708		672
37 – 48		2,663		315		2,518		243
49 – 60		1,480		65		1,398		50
Thereafter		458		2		475		2
Total	$	28,525	$	4,116	$	26,451	$	4,250

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 six years, while the average term for wholesale notes is less than twelve months.

At October 28, 2018 and October 29, 2017, worldwide financing receivables administered, which include financing receivables administered but not owned, totaled $31,082 million and $29,273 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 28, 2018 and October 29, 2017 follows in millions of dollars:


	30-59		60-89		90 Days
	Days		Days		or Greater		Total
	Past Due		Past Due		Past Due		Past Due
2018
Retail Notes:
Agriculture and turf	$	133	$	74	$	63	$	270
Construction and forestry		79		45		52		176
Other:
Agriculture and turf		36		16		8		60
Construction and forestry		18		5		3		26
Total	$	266	$	140	$	126	$	532


			Total				Total
	Total		Non-				Financing
	Past Due		Performing		Current		Receivables
Retail Notes:
Agriculture and turf	$	270	$	201	$	17,836	$	18,307
Construction and forestry		176		40		3,101		3,317
Other:
Agriculture and turf		60		15		8,274		8,349
Construction and forestry		26		3		1,252		1,281
Total	$	532	$	259	$	30,463		31,254
Less allowance for credit losses								178
Total financing receivables - net							$	31,076


	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

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
2018
Allowance:
Beginning of year balance	$	121	$	40	$	26	$	187
Provision		14		38		2		54
Write-offs		(33)		(55)		(6)		(94)
Recoveries		17		20		1		38
Translation adjustments		(6)				(1)		(7)
End of year balance*	$	113	$	43	$	22	$	178

Financing receivables:
End of year balance	$	21,624	$	3,862	$	5,768	$	31,254

Balance individually evaluated	$	122	$	2	$	12	$	136


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

* Individual allowances were not significant.

Past-due amounts over 30 days represented 1.70 percent and 1.48 percent of the receivables financed at October 28, 2018 and October 29, 2017, respectively. The allowance for credit losses represented .57 percent and .64 percent of financing receivables outstanding at October 28, 2018 and October 29, 2017, respectively. In addition, at October 28, 2018 and October 29, 2017, the company’s financial services operations had $156 million and $155 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 past due, 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 28, 2018 and October 29, 2017 follows in millions of dollars:


			Unpaid				Average
	Recorded		Principal		Specific		Recorded
	Investment		Balance		Allowance		Investment
2018*
Receivables with specific allowance**	$	28	$	27	$	10	$	30
Receivables without a specific allowance**		37		35				41
Total	$	65	$	62	$	10	$	71
Agriculture and turf	$	50	$	48	$	9	$	54
Construction and forestry	$	15	$	14	$	1	$	17


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

* 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 2018, 2017, and 2016, the company identified 587, 474, and 167 financing receivable contracts, primarily retail notes, as troubled debt restructurings with aggregate balances of $34 million, $16 million, and $19 million pre-modification and $34 million, $15 million, and $18 million post-modification, respectively. In 2017, there were $3 million of troubled debt restructurings that subsequently defaulted and were written off. In 2018 and 2016, there were no significant troubled debt restructurings that subsequently defaulted and were written off. At October 28, 2018, the company had commitments to lend approximately $10 million to borrowers whose accounts were modified in troubled debt restructurings.

Other Receivables

Other receivables at October 28, 2018 and October 29, 2017 consisted of the following in millions of dollars:


	2018		2017
Taxes receivable	$	1,370	$	876
Other		366		324
Other receivables	$	1,736	$	1,200