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RECEIVABLES

12 Months Ended

Oct. 31, 2021

13. RECEIVABLES

Trade Accounts and Notes Receivable

Trade accounts and notes receivable at October 31, 2021 and November 1, 2020 in millions of dollars follow:


	2021		2020
Trade accounts and notes receivable:
Production & precision ag	$	1,204	$	1,397
Small ag & turf		1,683		1,484
Construction & forestry		1,321		1,290
Trade accounts and notes receivable – net	$	4,208	$	4,171

Trade accounts and notes receivable have significant concentrations of credit risk in the agriculture and turf market and construction and forestry market as shown in the previous table. On a geographic basis, there is no disproportionate concentration of credit risk in any area.

The allowance for credit losses on trade accounts and notes receivable at October 31, 2021, November 1, 2020, and November 3, 2019, as well as the related activity, in millions of dollars follow:


	2021		2020		2019
Beginning of year balance	$	39	$	72	$	70
ASU No. 2016-13		(2)
Provision		10				8
Write-offs		(7)		(23)		(14)
Recoveries				1		4
Translation adjustments		1		(11)		4
End of year balance	$	41	$	39	$	72

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

Trade accounts and notes receivable primarily arise from sales of goods to independent dealers. See Note 2 for the company’s revenue recognition policy. The company evaluates and assesses dealers on an ongoing basis as to their creditworthiness and generally secures the receivables by retaining a security interest in the goods associated with the trade receivables or with other financial instruments. 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.

During 2020 and to a much lesser extent in 2021, the company provided short-term payment relief on trade accounts and notes

receivable to customers that were negatively affected by the economic effects of COVID. The relief was provided both in regional programs and case-by-case situations with creditworthy customers. This relief generally included payment deferrals not exceeding three months, extending interest-free periods for up to an additional three months with the total interest-free period not to exceed one year, or reducing interest rates for a maximum of three months. The trade receivables granted relief that remained outstanding at October 31, 2021 were not material. This balance at November 1, 2020 was $75 million, or approximately 2 percent of the trade receivable portfolio. Outside of these actions, the company did not modify its normal sales terms with customers that are outlined in Note 2.

For customers who obtained payment relief, subsequent sales transactions are evaluated to confirm the revenue recognition criteria are met, including that the sales price is determinable and collectability of the payments is probable based on the terms outlined in the contract.

Financing Receivables

While the company implemented a new operating model in fiscal year 2021 resulting in new operating segments, assets managed by financial services, including most financing receivables and equipment on operating leases, continue to be evaluated by market (agriculture and turf or construction and forestry).

Financing receivables at October 31, 2021 and November 1, 2020 in millions of dollars follow:


	2021				2020
	Unrestricted/Securitized				Unrestricted/Securitized
Retail notes:
Agriculture and turf	$	21,736	$	4,041	$	17,780	$	4,134
Construction and forestry		4,334		712		3,629		680
Total		26,070		4,753		21,409		4,814
Wholesale notes		2,577				3,547
Revolving charge accounts		3,880				3,962
Financing leases (direct and sales-type)		2,879				2,364
Total financing receivables		35,406		4,753		31,282		4,814
Less:
Unearned finance income:
Retail notes		1,131		80		1,066		98
Wholesale notes		11				18
Revolving charge accounts		55				60
Financing leases		258				217
Total		1,455		80		1,361		98
Allowance for credit losses		152		14		171		13
Financing receivables – net	$	33,799	$	4,659	$	29,750	$	4,703

Financing receivables have significant concentrations of credit risk in the agriculture and turf and construction and forestry markets as shown in the previous table. On a geographic basis, there is no 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 31, 2021 and November 1, 2020 related to the company’s sales of equipment that were included in the table above consisted of the following in millions of dollars:


	2021				2020
	Unrestricted/Securitized				Unrestricted/Securitized
Retail notes*:
Agriculture and turf	$	1,977			$	1,971
Construction and forestry		368	$	10		335	$	27
Total		2,345		10		2,306		27
Wholesale notes		2,577				3,547
Sales-type leases		1,269				1,045
Total		6,191		10		6,898		27
Less:
Unearned finance income:
Retail notes		159				178
Wholesale notes		11				18
Sales-type leases		98				82
Total		268				278
Financing receivables related to the company’s sales of equipment	$	5,923	$	10	$	6,620	$	27

* 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 31, 2021 and November 1, 2020 were scheduled as follows in millions of dollars:


	2021				2020
	Unrestricted/Securitized				Unrestricted/Securitized
Due in months:
0 – 12	$	15,205	$	1,904	$	14,983	$	1,971
13 – 24		7,412		1,323		6,180		1,354
25 – 36		5,629		885		4,556		889
37 – 48		3,991		478		3,145		460
49 – 60		2,397		150		1,794		129
Thereafter		772		13		624		11
Total	$	35,406	$	4,753	$	31,282	$	4,814

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 seven years. The average term for wholesale notes is less than twelve months.

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 from the customer 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 during 2020, and to a much lesser extent in 2021. 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 financing receivables granted relief that remained outstanding at October 31, 2021 and November 1, 2020 represented approximately 3 percent and 4 percent of the financing receivable portfolio, respectively. The majority of financing receivables granted short-term relief are beyond the deferral period and have either resumed making payments or are reported as delinquent based on the modified payment schedule.

The company monitors the credit quality of financing receivables based on delinquency status. The credit quality analysis of retail notes, financing leases, and revolving charge accounts (collectively, retail customer receivables) was as follows in millions of dollars at October 31, 2021:


	Year of Origination
	2021		2020		2019		2018
Retail customer receivables:
Agriculture and turf
Current	$	12,877	$	6,676	$	3,463	$	1,738
30-59 days past due		43		53		29		16
60-89 days past due		16		23		12		6
90+ days past due				1
Non-performing		23		57		53		32
Construction and forestry
Current		3,122		1,575		754		273
30-59 days past due		50		40		27		7
60-89 days past due		15		11		9		6
90+ days past due		1		2		3		3
Non-performing		26		56		39		17
Total retail customer receivables	$	16,173	$	8,494	$	4,389	$	2,098

	Year of Origination
	2017		Prior Years		Revolving Charge Accounts		Total
Retail customer receivables:
Agriculture and turf
Current	$	728	$	211	$	3,704	$	29,397
30-59 days past due		7		3		14		165
60-89 days past due		3		1		4		65
90+ days past due								1
Non-performing		17		23		7		212
Construction and forestry
Current		57		7		92		5,880
30-59 days past due		4		1		3		132
60-89 days past due		1				1		43
90+ days past due		4		2				15
Non-performing		7		3				148
Total retail customer receivables	$	828	$	251	$	3,825	$	36,058

The credit quality analysis of retail customer receivables was as follows in millions of dollars at November 1, 2020:


	2020
	Retail Notes & Financing Leases		Revolving Charge Accounts		Total
Retail customer receivables:
Agriculture and turf
Current	$	21,597	$	3,787	$	25,384
30-59 days past due		135		13		148
60-89 days past due		64		4		68
90+ days past due		2				2
Non-performing		263		6		269
Construction and forestry
Current		4,859		88		4,947
30-59 days past due		111		2		113
60-89 days past due		55		1		56
90+ days past due		14				14
Non-performing		106		1		107
Total retail customer receivables	$	27,206	$	3,902	$	31,108

The credit quality analysis of wholesale receivables was as follows in millions of dollars at October 31, 2021:


	Year of Origination
	2021		2020		2019		2018
Wholesale receivables:
Agriculture and turf
Current	$	346	$	80	$	22	$	9
30-59 days past due
60-89 days past due
90+ days past due
Non-performing						12
Construction and forestry
Current		41		7		7
30-59 days past due
60-89 days past due
90+ days past due
Non-performing
Total wholesale receivables	$	387	$	87	$	41	$	9

	Year of Origination
	2017		Prior Years		Revolving		Total
Wholesale receivables:
Agriculture and turf
Current	$	3			$	1,696	$	2,156
30-59 days past due
60-89 days past due
90+ days past due
Non-performing								12
Construction and forestry
Current		1	$	1		340		397
30-59 days past due
60-89 days past due				1				1
90+ days past due
Non-performing
Total wholesale receivables	$	4	$	2	$	2,036	$	2,566

The credit quality analysis of wholesale receivables was as follows in millions of dollars at November 1, 2020:


	2020
Wholesale receivables:
Agriculture and turf
Current	$	3,010
30-59 days past due
60-89 days past due
90+ days past due
Non-performing		47
Construction and forestry
Current		472
30-59 days past due
60-89 days past due
90+ days past due
Non-performing
Total wholesale receivables	$	3,529

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


	Retail Notes		Revolving
	& Financing		Charge		Wholesale
	Leases		Accounts		Receivables		Total
2021
Allowance:
Beginning of year balance	$	133	$	43	$	8	$	184
ASU No. 2016-13		44		(13)				31
Provision (credit)				(17)		(1)		(18)
Write-offs		(60)		(28)				(88)
Recoveries		20		36				56
Translation adjustments		1						1
End of year balance*	$	138	$	21	$	7	$	166

Financing receivables:
End of year balance	$	32,233	$	3,825	$	2,566	$	38,624


2020
Allowance:
Beginning of year balance	$	107	$	40	$	3	$	150
Provision		81		26		3		110
Write-offs		(65)		(53)				(118)
Recoveries		17		30				47
Translation adjustments		(7)				2		(5)
End of year balance*	$	133	$	43	$	8	$	184

Financing receivables:
End of year balance	$	27,206	$	3,902	$	3,529	$	34,637


2019
Allowance:
Beginning of year balance	$	129	$	43	$	6	$	178
Provision		6		29				35
Write-offs		(47)		(58)				(105)
Recoveries		23		26				49
Translation adjustments		(4)				(3)		(7)
End of year balance*	$	107	$	40	$	3	$	150

Financing receivables:
End of year balance	$	25,151	$	3,943	$	4,634	$	33,728

* Individual allowances were not significant.

In 2021, the allowance for credit losses on retail notes and financing lease receivables increased due to the adoption of ASU No. 2016-13. This was partially offset by lower expected losses in the construction and forestry market and better than expected performance of accounts granted payment relief due to the economic effects of COVID. The allowance for credit losses on revolving charge accounts decreased in 2021, reflecting a decrease due to the adoption of ASU No. 2016-13 and continued improvement in the agricultural and turf market. In 2020, the negative economic effects related to COVID and other macroeconomic issues significantly affected certain retail customers, particularly purchasers of construction equipment.

Past-due amounts over 30 days represented 1.09 percent and 1.16 percent of the receivables financed at October 31, 2021 and November 1, 2020, respectively. Non-performing receivables comprised .96 percent and 1.22 percent of the financing receivables at October 31, 2021 and November 1, 2020, respectively. The allowance for credit losses represented .43 percent and .53 percent of financing receivables outstanding at October 31, 2021 and November 1, 2020, respectively. In addition, at October 31, 2021 and November 1, 2020, the company’s financial services operations had $154 million and $136 million, respectively, of deposits primarily withheld from dealers and merchants as credit enhancements.

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 2021, 2020, and 2019, the company identified 397, 574, and 522 receivable contracts as troubled debt restructurings with aggregate balances of $18 million, $108 million, and $36 million pre-modification and $17 million, $95 million, and $35 million post-modification, respectively. Troubled debt restructurings in 2021 and 2019 primarily related to retail notes, while 2020 modifications primarily related to wholesale receivables in Argentina. The short-term relief related to COVID did not meet the definition of a troubled debt restructuring. In 2021 and 2020, there were no significant troubled debt restructurings that subsequently defaulted and were written off. At October 31, 2021, the company had no commitments to lend to customers whose accounts were modified in troubled debt restructurings.

Other Receivables

Other receivables at October 31, 2021 and November 1, 2020 consisted of the following in millions of dollars:


	2021		2020
Taxes receivable	$	1,436	$	931
Other		302		289
Other receivables	$	1,738	$	1,220