RECEIVABLES

12 Months Ended

Oct. 30, 2022

11. RECEIVABLES

Trade Accounts and Notes Receivable

Trade accounts and notes receivable at October 30, 2022 and October 31, 2021 in millions of dollars follow:


	2022		2021
Trade accounts and notes receivable:
Production & precision ag	$	2,397	$	1,204
Small ag & turf		2,065		1,683
Construction & forestry		1,948		1,321
Trade accounts and notes receivable – net	$	6,410	$	4,208

Trade accounts and notes receivable 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, 52 percent of the company’s trade accounts and notes receivable are located in the U.S. and Canada at October 30, 2022. There is not a disproportionate concentration of credit risk with any single dealer.

The allowance for credit losses on trade accounts and notes receivable at October 30, 2022, October 31, 2021, and November 1, 2020, as well as the related activity, in millions of dollars follow:


	2022		2021		2020
Beginning of year balance	$	41	$	39	$	72
ASU No. 2016-13				(2)
Provision		1		10
Write-offs		(5)		(7)		(23)
Recoveries						1
Translation adjustments		(1)		1		(11)
End of year balance	$	36	$	41	$	39

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 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 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.

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 30, 2022 and October 31, 2021 in millions of dollars follow:


	2022				2021
	Unrestricted/Securitized				Unrestricted/Securitized
Retail notes:
Agriculture and turf	$	23,830	$	4,868	$	21,736	$	4,041
Construction and forestry		4,396		1,179		4,334		712
Total		28,226		6,047		26,070		4,753
Wholesale notes		3,285				2,577
Revolving charge accounts		4,316				3,880
Financing leases (direct and sales-type)		2,832				2,879
Total financing receivables		38,659		6,047		35,406		4,753
Less:
Unearned finance income:
Retail notes		1,358		95		1,131		80
Wholesale notes		12				11
Revolving charge accounts		61				55
Financing leases		285				258
Total		1,716		95		1,455		80
Allowance for credit losses		309		16		152		14
Financing receivables – net	$	36,634	$	5,936	$	33,799	$	4,659

Financing receivables have significant concentrations of credit risk in the agriculture and turf and construction and forestry markets. On a geographic basis, 85 percent of the company’s financing receivables were located in the U.S. and Canada at October 30, 2022. There is no disproportionate concentration of credit risk with any single customer or dealer. The company retains as collateral security in the equipment associated with retail notes, wholesale notes, and financing leases, and requires theft and physical damage insurance on such equipment.

Financing receivables at October 30, 2022 and October 31, 2021 related to the company’s sales of equipment that were included in the previous table consisted of the following in millions of dollars:


	2022		2021
Retail notes*:
Agriculture and turf	$	1,392	$	1,977
Construction and forestry		304		378
Total		1,696		2,355
Wholesale notes		3,285		2,577
Sales-type leases		799		1,269
Total		5,780		6,201
Less:
Unearned finance income:
Retail notes		133		159
Wholesale notes		12		11
Sales-type leases		67		98
Total		212		268
Financing receivables related to the company’s sales of equipment	$	5,568	$	5,933

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

Included in the table above were $10 million of securitized construction and forestry retail notes at October 31, 2021.

Financing receivable installments, including unearned finance income, at October 30, 2022 and October 31, 2021 were scheduled as follows in millions of dollars:


	2022				2021
	Unrestricted/Securitized				Unrestricted/Securitized
Due in months:
0 – 12	$	17,032	$	2,226	$	15,205	$	1,904
13 – 24		7,975		1,667		7,412		1,323
25 – 36		5,987		1,209		5,629		885
37 – 48		4,297		709		3,991		478
49 – 60		2,559		227		2,397		150
Thereafter		809		9		772		13
Total	$	38,659	$	6,047	$	35,406	$	4,753

The maximum terms for retail notes are seven years for agriculture and turf equipment, and five years for construction and forestry equipment. The maximum term for financing leases is seven years. In total, wholesale notes turned four times during 2022 and three times during 2021.

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 resumed when the receivable becomes contractually current and collections are reasonably assured.

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) by year of origination was as follows in millions of dollars:


	October 30, 2022
	2022		2021		2020		2019
Retail customer receivables:
Agriculture and turf
Current	$	13,500	$	7,984	$	4,091	$	1,875
30-59 days past due		46		63		36		17
60-89 days past due		14		25		13		6
90+ days past due		1
Non-performing		27		60		44		28
Construction and forestry
Current		2,964		1,974		842		292
30-59 days past due		53		52		23		9
60-89 days past due		19		16		7		3
90+ days past due		1		4		1		3
Non-performing		25		61		34		19
Total retail customer receivables	$	16,650	$	10,239	$	5,091	$	2,252

	October 30, 2022
	2018		Prior Years		Revolving Charge Accounts		Total
Retail customer receivables:
Agriculture and turf
Current	$	785	$	200	$	4,111	$	32,546
30-59 days past due		7		3		19		191
60-89 days past due		2		1		5		66
90+ days past due								1
Non-performing		18		19		8		204
Construction and forestry
Current		73		12		108		6,265
30-59 days past due		2		1		3		143
60-89 days past due		1				1		47
90+ days past due				1				10
Non-performing		7		3				149
Total retail customer receivables	$	895	$	240	$	4,255	$	39,622


	October 31, 2021
	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

	October 31, 2021
	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 wholesale receivables by year of origination was as follows in millions of dollars:


	October 30, 2022
	2022		2021		2020		2019
Wholesale receivables:
Agriculture and turf
Current	$	387	$	64	$	27	$	4
30+ days past due
Non-performing								1
Construction and forestry
Current		7		29		2		1
30+ days past due
Non-performing
Total wholesale receivables	$	394	$	93	$	29	$	6

	October 30, 2022
	2018		Prior Years		Revolving		Total
Wholesale receivables:
Agriculture and turf
Current			$	2	$	2,371	$	2,855
30+ days past due
Non-performing								1
Construction and forestry
Current				1		377		417
30+ days past due
Non-performing
Total wholesale receivables			$	3	$	2,748	$	3,273


	October 31, 2021
	2021		2020		2019		2018
Wholesale receivables:
Agriculture and turf
Current	$	346	$	80	$	22	$	9
30+ days past due
Non-performing						12
Construction and forestry
Current		41		7		7
30+ days past due
Non-performing
Total wholesale receivables	$	387	$	87	$	41	$	9

	October 31, 2021
	2017		Prior Years		Revolving		Total
Wholesale receivables:
Agriculture and turf
Current	$	3			$	1,696	$	2,156
30+ days past due
Non-performing								12
Construction and forestry
Current		1	$	1		340		397
30+ days past due				1				1
Non-performing
Total wholesale receivables	$	4	$	2	$	2,036	$	2,566

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
2022
Allowance:
Beginning of year balance	$	138	$	21	$	7	$	166
Provision (credit)		197		(2)		(3)		192
Write-offs		(61)		(27)				(88)
Recoveries		22		30				52
Translation adjustments		3						3
End of year balance*	$	299	$	22	$	4	$	325

Financing receivables:
End of year balance	$	35,367	$	4,255	$	3,273	$	42,895


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

* Individual allowances were not significant.

As part of the allowance setting process, the company continues to monitor the economy, including potential impacts of inflation and rising interest rates, among other factors, and qualitative adjustments to the allowance are incorporated, as necessary. In 2022, the allowance for credit losses on retail notes and financing lease receivables increased due to higher reserves related to the events in Russia / Ukraine and higher portfolio balances. This was partially offset by continued positive agricultural market conditions, which drove favorable impacts on the allowance. Similar to the strong performance in 2021, the revolving portfolio experienced low write-offs and solid recoveries. 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.

Financing receivable analysis metrics follow in millions of dollars:


	2022		2021
Percent of the overall financing receivable portfolio:
Past-due amounts		1.07		1.09
Non-performing		.83		.96
Allowance for credit losses		.76		.43
Deposits held as credit enhancements	$	158	$	154

A troubled debt restructuring is a significant 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. The following table includes receivable contracts identified as troubled debt restructurings:


	2022		2021		2020
Number of receivable contracts		276		397		574
Pre-modification balance in millions	$	12	$	18	$	108
Post modification balance in millions		10		17		95

Troubled debt restructurings in 2022 and 2021 related to retail notes, while 2020 modifications related to wholesale receivables in Argentina. The short-term relief related to COVID (primarily granted in 2020) did not meet the definition of a troubled debt restructuring. In 2022, 2021, and 2020, there were no significant troubled debt restructurings that subsequently defaulted and were written off. At October 30, 2022, the company had no commitments to lend to customers whose accounts were modified in troubled debt restructurings.

Other Receivables

Other receivables at October 30, 2022 and October 31, 2021 consisted of the following in millions of dollars:


	2022		2021
Taxes receivable	$	1,450	$	1,436
Collateral on derivatives		709		13
Receivables from unconsolidated affiliates				27
Other		333		289
Other receivables	$	2,492	$	1,765