UPS 2009 Annual Report Download - page 79
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UNITED PARCEL SERVICE, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)
NOTE 3. FINANCE RECEIVABLES
The following is a summary of finance receivables at December 31, 2009 and 2008 (in millions):
2009 2008
Commercial term loans .................................................. $305 $420
Investment in finance leases .............................................. 92 126
Asset-based lending ..................................................... 151 345
Receivable factoring .................................................... 107 90
Gross finance receivables ................................................ 655 981
Less: Allowance for credit losses .......................................... (31) (25)
Balance at December 31 ................................................. $624 $956
Outstanding receivable balances at December 31, 2009 and 2008 are net of unearned income of $19 and $26
million, respectively.
When we “factor” (i.e., purchase) a customer invoice from a client, we record the customer receivable as an
asset and also establish a liability for the funds due to the client, which is recorded in accounts payable on the
consolidated balance sheet. The following is a reconciliation of receivable factoring balances at December 31,
2009 and 2008 (in millions):
2009 2008
Customer receivable balances ............................................. $107 $ 90
Less: Amounts due to client ............................................... (88) (62)
Net funds employed ..................................................... $ 19 $28
Non-earning finance receivables were $115 and $94 million at December 31, 2009 and 2008, respectively,
of which $81 and $57 million are U.S. government guaranteed portions of loans. The following is a rollforward
of the allowance for credit losses on finance receivables (in millions):
2009 2008
Balance at January 1 ..................................................... $25 $13
Provisions charged to operations ........................................... 25 28
Charge-offs, net of recoveries ............................................. (19) (16)
Balance at December 31 .................................................. $31 $25
The carrying value of finance receivables at December 31, 2009, by contractual maturity, is shown below
(in millions). Actual maturities may differ from contractual maturities because some borrowers have the right to
prepay these receivables without prepayment penalties.
Carrying
Value
Due in one year or less ....................................................... $294
Due after one year through three years ........................................... 54
Due after three years through five years .......................................... 38
Due after five years .......................................................... 269
$655
67