Xerox 2015 Annual Report Download - page 107

• Non-investment grade: This rating includes accounts with average credit risk that are more susceptible to
loss in the event of adverse business or economic conditions. This rating generally equates to a BB S&P
rating. Although we experience higher loss rates associated with this customer class, we believe the risk is
somewhat mitigated by the fact that our leases are fairly well dispersed across a large and diverse customer
base. In addition, the higher loss rates are largely offset by the higher rates of return we obtain with such
leases. Loss rates in this category are generally in the range of 2% to 4%.
• Substandard: This rating includes accounts that have marginal credit risk such that the customer’s ability to
make repayment is impaired or may likely become impaired. We use numerous strategies to mitigate risk
including higher rates of interest, prepayments, personal guarantees, etc. Accounts in this category include
customers who were downgraded during the term of the lease from investment and non-investment grade
evaluation when the lease was originated. Accordingly there is a distinct possibility for a loss of principal and
interest or customer default. The loss rates in this category are around 10%.
Credit quality indicators are updated at least annually, and the credit quality of any given customer can change
during the life of the portfolio. Details about our finance receivables portfolio based on industry and credit quality
indicators are as follows:
December 31, 2015 December 31, 2014
Investment
Grade
Non-
investment
Grade
Sub-
standard
Tot al
Finance
Receivables
Investment
Grade
Non-
investment
Grade
Sub-
standard
Tot al
Finance
Receivables
Finance and other services $ 191 $ 184 $ 58 $433 $195 $159 $55$ 409
Government and education 536 13 4 553 589 13 3 605
Graphic arts 145 86 119 350 148 79 90 317
Industrial 84 44 18 146 92 41 18 151
Healthcare 83 24 13 120 84 26 14 124
Other 52 48 29 129 55 38 29 122
Total United States 1,091 399 241 1,731 1,163 356 209 1,728
Finance and other services 55 35 9 99 54 31 12 97
Government and education 59 7 2 68 76 8 286
Graphic arts 45 35 21 101 58 49 36 143
Industrial 23 12 3 38 24 13 441
Other 33 23 3 59 34 19 457
Total Canada(1) 215 112 38 365 246 120 58 424
France 203 207 101 511 253 234 129 616
U.K/Ireland 235 91 3 329 255 101 6 362
Central(2) 206 186 25 417 230 278 30 538
Southern(3) 36 138 17 191 60 148 36 244
Nordic(4) 24 35 2 61 25 49 175
Total Europe 704 657 148 1,509 823 810 202 1,835
Other 165 257 79 501 195 163 40 398
Total $ 2,175 $ 1,425 $ 506 $ 4,106 $2,427 $1,449 $509 $4,385
__________
(1) Historically, the Company had included certain Canadian customers with graphic arts activity in their industry sector. In 2014, these
customers were reclassified to Graphic Arts to better reflect their primary business activity.
(2) Switzerland, Germany, Austria, Belgium and Holland.
(3) Italy, Greece, Spain and Portugal.
(4) Sweden, Norway, Denmark and Finland.
The aging of our receivables portfolio is based upon the number of days an invoice is past due. Receivables that
are more than 90 days past due are considered delinquent. Receivable losses are charged against the allowance
when management believes the uncollectibility of the receivable is confirmed and is generally based on individual
credit evaluations, results of collection efforts and specific circumstances of the customer. Subsequent recoveries,
if any, are credited to the allowance.
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