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FINANCING RECEIVABLES | 9 Months Ended
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Aug. 02, 2020
FINANCING RECEIVABLES |
FINANCING RECEIVABLES | (11) Financing Receivables 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. The Company ceases accruing finance income when these receivables are generally 90 days delinquent. Generally, when receivables are 120 days delinquent the estimated uncollectible amount, after charging the dealer’s withholding account, if any, is 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. Due to the significant, negative effects of COVID on dealers and retail customers, the Company provided short-term payment relief to dealers and retail customers on financing receivables, which includes retail notes, wholesale notes, revolving charge accounts, and sales-type and direct financing leases. The relief was provided in regional programs and case-by-case situations with customers that were generally current in their payment obligations. This relief generally included payment deferrals or reduced financing rates of three months or less. The balance of financing receivables granted relief was approximately 5 percent of the total financing receivable balance at August 2, 2020. The delinquency status of receivables granted relief is based on the modified payment schedule. An age analysis of past due financing receivables that are still accruing interest and non-performing financing receivables in millions of dollars follows:
​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​
​ | ​ | August 2, 2020 | ​
​ |  | ​ | ​ |  | ​ | ​ |  | 90 Days |  | ​ | ​ |
​ | ​ | 30-59 Days | ​ | 60-89 Days | ​ | or Greater | ​ | Total | ​
​ | ​ | Past Due | ​ | Past Due | ​ | Past Due | ​ | Past Due | ​
Retail Notes: | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​
Agriculture and turf |  | $ | 131 |  | $ | 63 |  | $ | 2 |  | $ | 196 | ​
Construction and forestry | ​ | ​ | 65 | ​ | ​ | 22 | ​ | ​ | 12 | ​ | ​ | 99 | ​
Other: | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​
Agriculture and turf | ​ | ​ | 37 | ​ | ​ | 17 | ​ | ​ | 2 | ​ | ​ | 56 | ​
Construction and forestry | ​ | ​ | 28 | ​ | ​ | 19 | ​ | ​ | ​ | ​ | ​ | 47 | ​
Total |  | $ | 261 |  | $ | 121 |  | $ | 16 |  | $ | 398 | ​
​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​
​ |  | ​ | ​ | ​ | ​ | ​ | ​ |  | ​ | ​ | Total | ​
​ | ​ | Total | ​ | Total | ​ | ​ | ​ | ​ | Financing | ​
​ | ​ | Past Due | ​ | Non-Performing | ​ | Current | ​ | Receivables | ​
Retail Notes: | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​
Agriculture and turf |  | $ | 196 |  | $ | 306 |  | $ | 19,255 |  | $ | 19,757 | ​
Construction and forestry | ​ | ​ | 99 | ​ | ​ | 102 | ​ | ​ | 3,748 | ​ | ​ | 3,949 | ​
Other: | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​
Agriculture and turf | ​ | ​ | 56 | ​ | ​ | 81 | ​ | ​ | 8,161 | ​ | ​ | 8,298 | ​
Construction and forestry | ​ | ​ | 47 | ​ | ​ | 40 | ​ | ​ | 1,392 | ​ | ​ | 1,479 | ​
Total |  | $ | 398 |  | $ | 529 |  | $ | 32,556 | ​ | ​ | 33,483 | ​
Less allowance for credit losses | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | 200 | ​
Total financing receivables – net | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ |  | $ | 33,283 | ​
​
​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​
​ | ​ | November 3, 2019 | ​
​ |  | ​ | ​ |  | ​ | ​ |  | 90 Days |  | ​ | ​ |
​ | ​ | 30-59 Days | ​ | 60-89 Days | ​ | or Greater | ​ | Total | ​
​ | ​ | Past Due | ​ | Past Due | ​ | Past Due | ​ | Past Due |
Retail Notes: | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​
Agriculture and turf | ​ | $ | 138 | ​ | $ | 73 | ​ | $ | 1 | ​ | $ | 212 | ​
Construction and forestry | ​ |  | 79 | ​ | ​ | 29 |  | ​ | 4 |  | ​ | 112 |
Other: | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​
Agriculture and turf | ​ |  | 39 | ​ | ​ | 19 |  | ​ | 1 |  | ​ | 59 |
Construction and forestry | ​ |  | 26 | ​ | ​ | 7 |  | ​ | ​ |  | ​ | 33 |
Total | ​ | $ | 282 | ​ | $ | 128 | ​ | $ | 6 | ​ | $ | 416 | ​
​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​
​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ |  | ​ | ​ | Total |
​ | ​ | Total | ​ | Total | ​ | ​ | ​ | ​ | Financing |
​ | ​ | Past Due | ​ | Non-Performing | ​ | Current | ​ | Receivables |
Retail Notes: | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​
Agriculture and turf | ​ | $ | 212 | ​ | $ | 268 | ​ | $ | 18,931 | ​ | $ | 19,411 | ​
Construction and forestry | ​ | ​ | 112 |  | ​ | 127 |  | ​ | 3,450 |  | ​ | 3,689 |
Other: | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​
Agriculture and turf | ​ | ​ | 59 |  | ​ | 28 |  | ​ | 8,986 |  | ​ | 9,073 |
Construction and forestry | ​ | ​ | 33 |  | ​ | 26 |  | ​ | 1,496 |  | ​ | 1,555 |
Total | ​ | $ | 416 | ​ | $ | 449 | ​ | $ | 32,863 | ​ | ​ | 33,728 |
Less allowance for credit losses | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | 150 |
Total financing receivables – net | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | $ | 33,578 | ​
​
​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​
​ | ​ | July 28, 2019 | ​
​ |  | ​ | ​ |  | ​ | ​ |  | 90 Days |  | ​ | ​ |
​ | ​ | 30-59 Days | ​ | 60-89 Days | ​ | or Greater | ​ | Total | ​
​ | ​ | Past Due | ​ | Past Due | ​ | Past Due | ​ | Past Due | ​
Retail Notes: | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​
Agriculture and turf |  | $ | 136 | ​ | $ | 63 |  | $ | 3 |  | $ | 202 |
Construction and forestry | ​ | ​ | 87 | ​ | ​ | 35 | ​ |  | 2 | ​ | ​ | 124 | ​
Other: | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​
Agriculture and turf | ​ | ​ | 38 | ​ | ​ | 22 | ​ |  | ​ | ​ | ​ | 60 | ​
Construction and forestry | ​ | ​ | 17 | ​ | ​ | 7 | ​ |  | ​ | ​ | ​ | 24 | ​
Total | ​ | $ | 278 | ​ | $ | 127 | ​ | $ | 5 | ​ | $ | 410 | ​
​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​
​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | Total | ​
​ | ​ | Total | ​ | Total | ​ | ​ | ​ | ​ | Financing | ​
​ | ​ | Past Due | ​ | Non-Performing | ​ | Current | ​ | Receivables | ​
Retail Notes: | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​
Agriculture and turf | ​ | $ | 202 | ​ | $ | 301 | ​ | $ | 18,038 | ​ | $ | 18,541 | ​
Construction and forestry | ​ | ​ | 124 | ​ |  | 135 | ​ |  | 3,249 | ​ | ​ | 3,508 | ​
Other: | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​
Agriculture and turf | ​ | ​ | 60 | ​ |  | 37 | ​ |  | 8,833 | ​ | ​ | 8,930 | ​
Construction and forestry | ​ | ​ | 24 | ​ |  | 14 | ​ |  | 1,417 | ​ | ​ | 1,455 | ​
Total | ​ | $ | 410 | ​ | $ | 487 | ​ | $ | 31,537 | ​ | ​ | 32,434 | ​
Less allowance for credit losses | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | 185 | ​
Total financing receivables – net | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | $ | 32,249 | ​
​ An analysis of the allowance for credit losses and investment in financing receivables in millions of dollars during the periods follows:
​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​
​ | ​ | ​ | ​ | ​ | Revolving | ​ | ​ | ​ | ​ | ​ | ​ | ​
​ | ​ | Retail | ​ | Charge | ​ | ​ | ​ | ​ | ​ | ​ | ​
​ | ​ | Notes | ​ | Accounts | ​ | Other | ​ | Total | ​
Three Months Ended August 2, 2020 | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​
Allowance: |  |  |  |  |  |  |  |  |  |  | ​ | ​ |
Beginning of period balance |  | $ | 119 |  | $ | 43 | ​ | $ | 33 | ​ | $ | 195 | ​
Provision (credit) | ​ | ​ | 5 | ​ | ​ | 14 | ​ | ​ | (1) | ​ | ​ | 18 | ​
Write-offs | ​ | ​ | (7) | ​ | ​ | (22) | ​ | ​ | (2) | ​ | ​ | (31) | ​
Recoveries | ​ | ​ | 6 | ​ | ​ | 8 | ​ | ​ | 1 | ​ | ​ | 15 | ​
Translation adjustments | ​ | ​ | 2 | ​ | ​ | ​ | ​ | ​ | 1 | ​ | ​ | 3 | ​
End of period balance * |  | $ | 125 |  | $ | 43 | ​ | $ | 32 | ​ | $ | 200 | ​
​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​
Nine Months Ended August 2, 2020 | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​
Allowance: |  | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​
Beginning of period balance |  | $ | 89 |  | $ | 40 | ​ | $ | 21 | ​ | $ | 150 | ​
Provision | ​ | ​ | 79 | ​ | ​ | 32 | ​ | ​ | 13 | ​ | ​ | 124 | ​
Write-offs | ​ | ​ | (47) | ​ | ​ | (51) | ​ | ​ | (6) | ​ | ​ | (104) | ​
Recoveries | ​ | ​ | 10 | ​ | ​ | 22 | ​ | ​ | 2 | ​ | ​ | 34 | ​
Translation adjustments | ​ | ​ | (6) | ​ | ​ | ​ | ​ | ​ | 2 | ​ | ​ | (4) | ​
End of period balance * |  | $ | 125 |  | $ | 43 | ​ | $ | 32 | ​ | $ | 200 | ​
Financing receivables: | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​
End of period balance |  | $ | 23,706 |  | $ | 3,997 | ​ | $ | 5,780 | ​ | $ | 33,483 | ​
Balance individually evaluated ** |  | $ | 160 |  | $ | 1 | ​ | $ | 67 | ​ | $ | 228 | ​
* Individual allowances were not significant. ** Remainder is collectively evaluated. The negative economic effects related to COVID and other macroeconomic issues have significantly affected certain retail borrowers, particularly of construction equipment. As a result, the allowance for credit losses increased $50 million in the first nine months of 2020 reflecting estimated credit losses inherent in the financing receivables.
​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​
​ | ​ | ​ | ​ | ​ | Revolving | ​ | ​ | ​ | ​ | ​ | ​ |
​ | ​ | Retail | ​ | Charge | ​ | ​ | ​ | ​ | ​ | ​ |
​ | ​ | Notes | ​ | Accounts | ​ | Other | ​ | Total | ​
Three Months Ended July 28, 2019 | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​
Allowance: |  | ​ |  |  | ​ |  |  | ​ |  |  | ​ |  | ​
Beginning of period balance | ​ | $ | 115 |  | $ | 43 | ​ | $ | 24 | ​ | $ | 182 | ​
Provision | ​ |  | 7 | ​ | ​ | 18 | ​ | ​ | 1 | ​ |  | 26 | ​
Write-offs | ​ |  | (9) | ​ | ​ | (26) | ​ | ​ | (1) | ​ |  | (36) | ​
Recoveries | ​ |  | 5 | ​ | ​ | 8 | ​ | ​ | ​ | ​ |  | 13 | ​
Translation adjustments | ​ |  | 2 | ​ | ​ | ​ | ​ | ​ | (2) | ​ |  | ​ | ​
End of period balance * | ​ | $ | 120 | ​ | $ | 43 | ​ | $ | 22 | ​ | $ | 185 | ​
​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​
Nine Months Ended July 28, 2019 | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​
Allowance: |  |  |  |  |  |  |  |  |  |  | ​ | ​ | ​
Beginning of period balance | ​ | $ | 113 |  | $ | 43 | ​ | $ | 22 | ​ | $ | 178 | ​
Provision | ​ |  | 21 | ​ | ​ | 34 | ​ | ​ | 7 | ​ |  | 62 | ​
Write-offs | ​ |  | (29) | ​ | ​ | (51) | ​ | ​ | (5) | ​ |  | (85) | ​
Recoveries | ​ |  | 15 | ​ | ​ | 17 | ​ | ​ | 1 | ​ |  | 33 | ​
Translation adjustments | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | (3) | ​ |  | (3) | ​
End of period balance * | ​ | $ | 120 | ​ | $ | 43 | ​ | $ | 22 | ​ | $ | 185 | ​
Financing receivables: | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​
End of period balance | ​ | $ | 22,049 |  | $ | 3,877 | ​ | $ | 6,508 | ​ | $ | 32,434 | ​
Balance individually evaluated ** | ​ | $ | 145 |  | ​ | ​ | ​ | $ | 10 | ​ | $ | 155 | ​
* Individual allowances were not significant. ** Remainder is collectively evaluated. 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 in millions of dollars follows:
​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​
​ |  | ​ | ​ |  | Unpaid |  | ​ | ​ |  | Average |
​ | ​ | Recorded | ​ | Principal | ​ | Specific | ​ | Recorded | ​
​ | ​ | Investment | ​ | Balance | ​ | Allowance | ​ | Investment | ​
August 2, 2020* | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​
Receivables with specific allowance *** |  | $ | 92 |  | $ | 91 |  | $ | 23 | ​ | $ | 106 | ​
Receivables without a specific allowance ** | ​ | ​ | 36 | ​ | ​ | 33 | ​ | ​ | ​ | ​ | ​ | 38 | ​
Total |  | $ | 128 |  | $ | 124 |  | $ | 23 | ​ | $ | 144 | ​
Agriculture and turf |  | $ | 106 |  | $ | 103 |  | $ | 17 | ​ | $ | 117 | ​
Construction and forestry |  | $ | 22 |  | $ | 21 | ​ | $ | 6 |  | $ | 27 | ​
​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​
November 3, 2019* | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​
Receivables with specific allowance ** | ​ | $ | 40 | ​ | $ | 39 | ​ | $ | 13 | ​ | $ | 40 | ​
Receivables without a specific allowance ** | ​ |  | 32 | ​ |  | 31 | ​ | ​ | ​ | ​ |  | 37 | ​
Total | ​ | $ | 72 |  | $ | 70 |  | $ | 13 | ​ | $ | 77 | ​
Agriculture and turf | ​ | $ | 49 | ​ | $ | 48 | ​ | $ | 8 | ​ | $ | 52 | ​
Construction and forestry | ​ | $ | 23 | ​ | $ | 22 | ​ | $ | 5 | ​ | $ | 25 | ​
​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​
July 28, 2019* | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​
Receivables with specific allowance ** | ​ | $ | 37 |  | $ | 36 |  | $ | 13 | ​ | $ | 37 | ​
Receivables without a specific allowance ** | ​ |  | 35 | ​ | ​ | 33 | ​ | ​ | ​ | ​ | ​ | 39 | ​
Total | ​ | $ | 72 |  | $ | 69 |  | $ | 13 | ​ | $ | 76 | ​
Agriculture and turf | ​ | $ | 51 |  | $ | 50 |  | $ | 9 | ​ | $ | 52 | ​
Construction and forestry | ​ | $ | 21 |  | $ | 19 | ​ | $ | 4 |  | $ | 24 | ​
* 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 the first nine months of 2020, the Company identified 413 receivable contracts, primarily wholesale receivables in Argentina, as troubled debt restructurings with aggregate balances of $99 million pre-modification and $88 million post-modification. The short-term payment relief related to COVID, mentioned earlier, did not meet the definition of a troubled debt restructuring. During the first nine months of 2019, there were 416 financing receivable contracts, primarily retail notes, identified as troubled debt restructurings with aggregate balances of $34 million pre-modification and $33 million post-modification. During these same periods, there were no significant troubled debt restructurings that subsequently defaulted and were written off. At August 2, 2020, the Company had commitments to lend approximately $16 million to borrowers whose accounts were modified in troubled debt restructurings.

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