CATERPILLAR INC | 2013 | FY | 3

Cat Financial Financing Activities
A.
Wholesale inventory receivables
 
Wholesale inventory receivables are receivables of Cat Financial that arise when Cat Financial provides financing for a dealer’s purchase of inventory. These receivables are included in Receivables—trade and other and Long-term receivables—trade and other in Statement 3 and were $1,945 million, $2,152 million, and $1,990 million at December 31, 2013, 2012 and 2011, respectively.
 
 
Contractual maturities of outstanding wholesale inventory receivables:
(Millions of dollars)
 
December 31, 2013
Amounts Due In
 
Wholesale
Installment
Contracts
 
Wholesale
Finance
Leases
 
Wholesale
Notes
 
Total
2014
 
$
258

 
$
125

 
$
636

 
$
1,019

2015
 
106

 
95

 
231

 
432

2016
 
77

 
58

 
150

 
285

2017
 
39

 
31

 
18

 
88

2018
 
17

 
13

 
5

 
35

Thereafter
 
3

 
—

 
—

 
3

 
 
500

 
322

 
1,040

 
1,862

Guaranteed residual value
 
—

 
90

 
—

 
90

Unguaranteed residual value
 
—

 
35

 
—

 
35

Less: Unearned income
 
(8
)
 
(31
)
 
(3
)
 
(42
)
Total
 
$
492

 
$
416

 
$
1,037

 
$
1,945

 
 
 
 
 
 
 
 
 

 
Please refer to Note 18 and Table III for fair value information.
B.
Finance receivables
 
Finance receivables are receivables of Cat Financial, which generally can be repaid or refinanced without penalty prior to contractual maturity. Total finance receivables reported in Statement 3 are net of an allowance for credit losses.
 
Cat Financial provides financing only when acceptable criteria are met. Credit decisions are based on, among other things, the customer’s credit history, financial strength and intended use of equipment. Cat Financial typically maintains a security interest in retail financed equipment and requires physical damage insurance coverage on financed equipment.

Contractual maturities of outstanding finance receivables:
(Millions of dollars)
 
December 31, 2013
Amounts Due In
 
Retail
Installment
Contracts
 
Retail Finance
Leases
 
Retail
Notes
 
Total
2014
 
$
2,105

 
$
3,234

 
$
3,627

 
$
8,966

2015
 
1,627

 
2,183

 
2,263

 
6,073

2016
 
1,093

 
1,292

 
1,758

 
4,143

2017
 
590

 
581

 
1,475

 
2,646

2018
 
198

 
203

 
669

 
1,070

Thereafter
 
26

 
139

 
1,070

 
1,235

 
 
5,639

 
7,632

 
10,862

 
24,133

Guaranteed residual value
 
—

 
354

 
—

 
354

Unguaranteed residual value
 
—

 
486

 
—

 
486

Less: Unearned income
 
(93
)
 
(730
)
 
(89
)
 
(912
)
Total
 
$
5,546

 
$
7,742

 
$
10,773

 
$
24,061

 
 
 
 
 
 
 
 
 

 
Please refer to Note 18 and Table III for fair value information.
C.
Credit quality of financing receivables and allowance for credit losses
 
Cat Financial applies a systematic methodology to determine the allowance for credit losses for finance receivables.  Based upon Cat Financial’s analysis of credit losses and risk factors, portfolio segments are as follows:
 
•
Customer - Finance receivables with retail customers.

•
Dealer - Finance receivables with Caterpillar dealers.
 
Cat Financial further evaluates portfolio segments by the class of finance receivables, which is defined as a level of information (below a portfolio segment) in which the finance receivables have the same initial measurement attribute and a similar method for assessing and monitoring credit risk.  Typically, Cat Financial’s finance receivables within a geographic area have similar credit risk profiles and methods for assessing and monitoring credit risk.  Cat Financial’s classes, which align with management reporting for credit losses, are as follows:
 
•
North America - Finance receivables originated in the United States or Canada.

•
Europe - Finance receivables originated in Europe, Africa, Middle East and the Commonwealth of Independent States.

•
Asia Pacific - Finance receivables originated in Australia, New Zealand, China, Japan, South Korea and Southeast Asia.

•
Mining - Finance receivables related to large mining customers worldwide.

•
Latin America - Finance receivables originated in Central and South American countries and Mexico.

•
Caterpillar Power Finance - Finance receivables related to marine vessels with Caterpillar engines worldwide and Caterpillar electrical power generation, gas compression and co-generation systems and non-Caterpillar equipment that is powered by these systems worldwide.
 
Impaired loans and finance leases
 
For all classes, a loan or finance lease is considered impaired, based on current information and events, if it is probable that Cat Financial will be unable to collect all amounts due according to the contractual terms of the loan or finance lease.  Loans and finance leases reviewed for impairment include loans and finance leases that are past due, non-performing or in bankruptcy. Recognition of income is suspended and the loan or finance lease is placed on non-accrual status when management determines that collection of future income is not probable (generally after 120 days past due except in locations where local regulatory requirements dictate a different method, or in instances in which relevant information is known that warrants placing the loan or finance lease on non-accrual status).  Accrual is resumed, and previously suspended income is recognized, when the loan or finance lease becomes contractually current and/or collection doubts are removed.  Cash receipts on impaired loans or finance leases are recorded against the receivable and then to any unrecognized income.
 
During 2013, Cat Financial changed the classification of certain loans and finance leases previously reported as impaired. While these loans and finance leases had been incorrectly reported as impaired, the related allowance for these loans and finance leases was appropriately measured; therefore, this change had no impact on the allowance for credit losses. The impact of incorrectly reporting these loans and finance leases as impaired was not considered material to previously issued financial statements; however, prior period impaired loan and finance lease balances have been revised throughout Notes 6 and 18.

At December 31, 2013, 2012 and 2011, there were no impaired loans or finance leases for the Dealer portfolio segment.  The average recorded investment for impaired loans and finance leases within the Dealer portfolio segment was zero during 2013, 2012 and 2011. 

Individually impaired loans and finance leases for the Customer portfolio segment were as follows:

 
December 31, 2013
(Millions of dollars)
Recorded
Investment
 
Unpaid
Principal
Balance
 
Related
Allowance
Impaired Loans and Finance Leases With No Allowance Recorded
 

 
 

 
 

Customer
 

 
 

 
 

North America
$
23

 
$
22

 
$
—

Europe
48

 
47

 
—

Asia Pacific
7

 
7

 
—

Mining
134

 
134

 
—

Latin America
11

 
11

 
—

Caterpillar Power Finance
223

 
222

 
—

Total
$
446

 
$
443

 
$
—

 
 
 
 
 
 
Impaired Loans and Finance Leases With An Allowance Recorded
 

 
 

 
 

Customer
 

 
 

 
 

North America
$
13

 
$
13

 
$
4

Europe
20

 
19

 
7

Asia Pacific
16

 
16

 
2

Mining
—

 
—

 
—

Latin America
23

 
23

 
6

Caterpillar Power Finance
110

 
106

 
51

Total
$
182

 
$
177

 
$
70

 
 
 
 
 
 
Total Impaired Loans and Finance Leases
 

 
 

 
 

Customer
 

 
 

 
 

North America
$
36

 
$
35

 
$
4

Europe
68

 
66

 
7

Asia Pacific
23

 
23

 
2

Mining
134

 
134

 
—

Latin America
34

 
34

 
6

Caterpillar Power Finance
333

 
328

 
51

Total
$
628

 
$
620

 
$
70

 
 
 
 
 
 




 
December 31, 2012
(Millions of dollars)
Recorded
Investment
 
Unpaid
Principal
Balance
 
Related
Allowance
Impaired Loans and Finance Leases With No Allowance Recorded
 

 
 

 
 

Customer
 

 
 

 
 

North America
$
28

 
$
27

 
$
—

Europe
45

 
45

 
—

Asia Pacific
2

 
2

 
—

Mining
1

 
1

 
—

Latin America
7

 
7

 
—

Caterpillar Power Finance
295

 
295

 
—

Total
$
378

 
$
377

 
$
—

 
 
 
 
 
 
Impaired Loans and Finance Leases With An Allowance Recorded
 

 
 

 
 

Customer
 

 
 

 
 

North America
$
25

 
$
23

 
$
7

Europe
28

 
26

 
11

Asia Pacific
19

 
19

 
4

Mining
—

 
—

 
—

Latin America
30

 
30

 
8

Caterpillar Power Finance
113

 
109

 
24

Total
$
215

 
$
207

 
$
54

 
 
 
 
 
 
Total Impaired Loans and Finance Leases
 

 
 

 
 

Customer
 

 
 

 
 

North America
$
53

 
$
50

 
$
7

Europe
73

 
71

 
11

Asia Pacific
21

 
21

 
4

Mining
1

 
1

 
—

Latin America
37

 
37

 
8

Caterpillar Power Finance
408

 
404

 
24

Total
$
593

 
$
584

 
$
54

 
 
 
 
 
 




 
December 31, 2011
(Millions of dollars)
Recorded
Investment
 
Unpaid
Principal
Balance
 
Related
Allowance
Impaired Loans and Finance Leases With No Allowance Recorded
 

 
 

 
 

Customer
 

 
 

 
 

North America
$
83

 
$
80

 
$
—

Europe
47

 
46

 
—

Asia Pacific
4

 
4

 
—

Mining
8

 
8

 
—

Latin America
9

 
9

 
—

Caterpillar Power Finance
175

 
170

 
—

Total
$
326

 
$
317

 
$
—

 
 
 
 
 
 
Impaired Loans and Finance Leases With An Allowance Recorded
 

 
 

 
 

Customer
 

 
 

 
 

North America
$
23

 
$
20

 
$
6

Europe
22

 
21

 
8

Asia Pacific
9

 
9

 
3

Mining
—

 
—

 
—

Latin America
19

 
19

 
4

Caterpillar Power Finance
85

 
85

 
13

Total
$
158

 
$
154

 
$
34

 
 
 
 
 
 
Total Impaired Loans and Finance Leases
 

 
 

 
 

Customer
 

 
 

 
 

North America
$
106

 
$
100

 
$
6

Europe
69

 
67

 
8

Asia Pacific
13

 
13

 
3

Mining
8

 
8

 
—

Latin America
28

 
28

 
4

Caterpillar Power Finance
260

 
255

 
13

Total
$
484

 
$
471

 
$
34

 
 
 
 
 
 





 
 
Years ended December 31,
 
 
2013
 
2012
 
2011
(Millions of dollars)
 
Average
Recorded
Investment
 
Interest
Income
Recognized
 
Average
Recorded
Investment
 
Interest
Income
Recognized
 
Average
Recorded
Investment
 
Interest
Income
Recognized
Impaired Loans and Finance Leases With No Allowance Recorded
 
 

 
 

 
 

 
 

 
 
 
 
Customer
 
 

 
 

 
 

 
 

 
 
 
 
North America
 
$
25

 
$
3

 
$
50

 
$
3

 
$
91

 
$
4

Europe
 
49

 
1

 
45

 
1

 
11

 
—

Asia Pacific
 
4

 
—

 
3

 
—

 
5

 
—

Mining
 
61

 
3

 
8

 
—

 
8

 
1

Latin America
 
11

 
—

 
6

 
—

 
9

 
1

Caterpillar Power Finance
 
271

 
5

 
220

 
2

 
221

 
6

Total
 
$
421

 
$
12

 
$
332

 
$
6

 
$
345

 
$
12

 
 
 
 
 
 
 
 
 
 
 
 
 
Impaired Loans and Finance Leases With An Allowance Recorded
 
 

 
 

 
 

 
 

 
 
 
 
Customer
 
 

 
 

 
 

 
 

 
 
 
 
North America
 
$
18

 
$
1

 
$
25

 
$
1

 
$
56

 
$
2

Europe
 
22

 
1

 
27

 
1

 
20

 
—

Asia Pacific
 
18

 
1

 
15

 
1

 
11

 
1

Mining
 
1

 
—

 
—

 
—

 
—

 
—

Latin America
 
44

 
2

 
27

 
2

 
11

 
—

Caterpillar Power Finance
 
135

 
1

 
94

 
—

 
61

 
—

Total
 
$
238

 
$
6

 
$
188

 
$
5

 
$
159

 
$
3

 
 
 
 
 
 
 
 
 
 
 
 
 
Total Impaired Loans and Finance Leases
 
 

 
 

 
 

 
 

 
 
 
 
Customer
 
 

 
 

 
 

 
 

 
 
 
 
North America
 
$
43

 
$
4

 
$
75

 
$
4

 
$
147

 
$
6

Europe
 
71

 
2

 
72

 
2

 
31

 
—

Asia Pacific
 
22

 
1

 
18

 
1

 
16

 
1

Mining
 
62

 
3

 
8

 
—

 
8

 
1

Latin America
 
55

 
2

 
33

 
2

 
20

 
1

Caterpillar Power Finance
 
406

 
6

 
314

 
2

 
282

 
6

Total
 
$
659

 
$
18

 
$
520

 
$
11

 
$
504

 
$
15

 
 
 
 
 
 
 
 
 
 
 
 
 
 
Non-accrual and past due loans and finance leases
 
For all classes, Cat Financial considers a loan or finance lease past due if any portion of a contractual payment is due and unpaid for more than 30 days.  Recognition of income is suspended and the loan or finance lease is placed on non-accrual status when management determines that collection of future income is not probable (generally after 120 days past due except in locations where local regulatory requirements dictate a different method, or in instances in which relevant information is known that warrants placing the loan or finance lease on non-accrual status).  Accrual is resumed, and previously suspended income is recognized, when the loan or finance lease becomes contractually current and/or collection doubts are removed.
 
As of December 31, 2013, 2012 and 2011, there were no loans or finance leases on non-accrual status for the Dealer portfolio segment.
 
The investment in customer loans and finance leases on non-accrual status was as follows:
 
 
December 31,
(Millions of dollars)
 
2013
 
2012
 
2011
Customer
 
 
 
 

 
 

North America
 
$
26

 
$
59

 
$
112

Europe
 
28

 
38

 
58

Asia Pacific
 
50

 
36

 
24

Mining
 
23

 
12

 
12

Latin America
 
179

 
148

 
108

Caterpillar Power Finance
 
119

 
220

 
158

Total
 
$
425

 
$
513

 
$
472

 
 
 
 
 
 
 

 
Aging related to loans and finance leases was as follows:
 
(Millions of dollars)
 
December 31, 2013
 
 
31-60 Days Past Due
 
61-90 Days Past Due
 
91+
Days Past Due
 
Total Past
Due
 
Current
 
Total
Finance
Receivables
 
91+ Still
Accruing
Customer
 
 

 
 

 
 

 
 

 
 

 
 

 
 

North America
 
$
37

 
$
12

 
$
24

 
$
73

 
$
6,508

 
$
6,581

 
$
—

Europe
 
26

 
15

 
29

 
70

 
2,805

 
2,875

 
6

Asia Pacific
 
54

 
23

 
59

 
136

 
2,752

 
2,888

 
11

Mining
 
3

 
—

 
12

 
15

 
2,128

 
2,143

 
—

Latin America
 
54

 
25

 
165

 
244

 
2,474

 
2,718

 
5

Caterpillar Power Finance
 
55

 
30

 
60

 
145

 
2,946

 
3,091

 
—

Dealer
 
 

 
 

 
 

 


 
 

 


 
 

North America
 
—

 
—

 
—

 
—

 
2,283

 
2,283

 
—

Europe
 
—

 
—

 
—

 
—

 
150

 
150

 
—

Asia Pacific
 
—

 
—

 
—

 
—

 
583

 
583

 
—

Mining
 
—

 
—

 
—

 
—

 
1

 
1

 
—

Latin America
 
—

 
—

 
—

 
—

 
748

 
748

 
—

Caterpillar Power Finance
 
—

 
—

 
—

 
—

 
—

 
—

 
—

Total
 
$
229

 
$
105

 
$
349

 
$
683

 
$
23,378

 
$
24,061

 
$
22

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
(Millions of dollars)
 
December 31, 2012
 
 
31-60 Days Past Due
 
61-90 Days Past Due
 
91+
Days Past Due
 
Total Past
Due
 
Current
 
Total
Finance
Receivables
 
91+ Still
Accruing
Customer
 
 

 
 

 
 

 
 

 
 

 
 

 
 

North America
 
$
35

 
$
8

 
$
52

 
$
95

 
$
5,872

 
$
5,967

 
$
—

Europe
 
23

 
9

 
36

 
68

 
2,487

 
2,555

 
6

Asia Pacific
 
53

 
19

 
54

 
126

 
2,912

 
3,038

 
18

Mining
 
—

 
1

 
12

 
13

 
1,960

 
1,973

 
—

Latin America
 
62

 
19

 
138

 
219

 
2,500

 
2,719

 
—

Caterpillar Power Finance
 
15

 
14

 
126

 
155

 
3,017

 
3,172

 
4

Dealer
 
 

 
 

 
 

 


 
 

 


 
 

North America
 
—

 
—

 
—

 
—

 
2,063

 
2,063

 
—

Europe
 
—

 
—

 
—

 
—

 
185

 
185

 
—

Asia Pacific
 
—

 
—

 
—

 
—

 
751

 
751

 
—

Mining
 
—

 
—

 
—

 
—

 
1

 
1

 
—

Latin America
 
—

 
—

 
—

 
—

 
884

 
884

 
—

Caterpillar Power Finance
 
—

 
—

 
—

 
—

 
—

 
—

 
—

Total
 
$
188

 
$
70

 
$
418

 
$
676

 
$
22,632

 
$
23,308

 
$
28

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
  
(Millions of dollars)
 
December 31, 2011
 
 
31-60 Days Past Due
 
61-90 Days Past Due
 
91+
Days Past Due
 
Total Past
Due
 
Current
 
Total
Finance
Receivables
 
91+ Still
Accruing
Customer
 
 

 
 

 
 

 
 

 
 

 
 

 
 

North America
 
$
74

 
$
39

 
$
111

 
$
224

 
$
5,378

 
$
5,602

 
$
9

Europe
 
27

 
11

 
57

 
95

 
2,129

 
2,224

 
10

Asia Pacific
 
47

 
23

 
38

 
108

 
2,769

 
2,877

 
14

Mining
 
—

 
—

 
12

 
12

 
1,473

 
1,485

 
—

Latin America
 
32

 
15

 
99

 
146

 
2,339

 
2,485

 
—

Caterpillar Power Finance
 
14

 
16

 
125

 
155

 
2,765

 
2,920

 
25

Dealer
 
 

 
 

 
 

 
 

 
 

 
 

 
 

North America
 
—

 
—

 
—

 
—

 
1,689

 
1,689

 
—

Europe
 
—

 
—

 
—

 
—

 
57

 
57

 
—

Asia Pacific
 
—

 
—

 
—

 
—

 
161

 
161

 
—

Mining
 
—

 
—

 
—

 
—

 
—

 
—

 
—

Latin America
 
—

 
—

 
—

 
—

 
480

 
480

 
—

Caterpillar Power Finance
 
—

 
—

 
—

 
—

 
—

 
—

 
—

Total
 
$
194

 
$
104

 
$
442

 
$
740

 
$
19,240

 
$
19,980

 
$
58

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 

Allowance for credit loss activity
 
The allowance for credit losses as of December 31, 2013 was $375 million compared with $423 million as of December 31, 2012.  The overall decrease of $48 million in the allowance for credit losses during the year reflects a $55 million decrease associated with the lower allowance rate, partially offset by a $7 million increase due to an increase in Cat Financial's net finance receivables portfolio. The lower allowance rate reflects write-offs taken in 2013, primarily related to Cat Financial's European marine portfolio that had been previously provided for in the allowance for credit losses, favorable changes in Cat Financial's estimated probabilities of default (due to improved financial health of Cat Financial's customers), continued refinements of estimated loss emergence periods and general improvement in the economic conditions of the industries Cat Financial serves.

The allowance for credit losses as of December 31, 2012 was $423 million compared with $366 million as of December 31, 2011. The overall increase of $57 million in allowance for credit losses during the year reflects a $51 million increase in allowance due to an increase in Cat Financial’s net finance receivables portfolio and a $6 million increase associated with the higher allowance rate.

An analysis of the allowance for credit losses during 2013, 2012 and 2011 was as follows:
(Millions of dollars)
 
December 31, 2013
 
 
Customer
 
Dealer
 
Total
Allowance for Credit Losses:
 
 

 
 

 
 

Balance at beginning of year
 
$
414

 
$
9

 
$
423

Receivables written off
 
(179
)
 
—

 
(179
)
Recoveries on receivables previously written off
 
56

 
—

 
56

Provision for credit losses
 
83

 
1

 
84

Other
 
(9
)
 
—

 
(9
)
Balance at end of year
 
$
365

 
$
10

 
$
375

 
 
 
 
 
 
 
Individually evaluated for impairment
 
$
70

 
$
—

 
$
70

Collectively evaluated for impairment
 
295

 
10

 
305

Ending Balance
 
$
365

 
$
10

 
$
375

 
 
 
 
 
 
 
Recorded Investment in Finance Receivables:
 
 

 
 

 
 

Individually evaluated for impairment
 
$
628

 
$
—

 
$
628

Collectively evaluated for impairment
 
19,668

 
3,765

 
23,433

Ending Balance
 
$
20,296

 
$
3,765

 
$
24,061

 
 
 
 
 
 
 
 
(Millions of dollars)
 
December 31, 2012
 
 
Customer
 
Dealer
 
Total
Allowance for Credit Losses:
 
 

 
 

 
 

Balance at beginning of year
 
$
360

 
$
6

 
$
366

Receivables written off
 
(149
)
 
—

 
(149
)
Recoveries on receivables previously written off
 
47

 
—

 
47

Provision for credit losses
 
157

 
3

 
160

Other
 
(1
)
 
—

 
(1
)
Balance at end of year
 
$
414

 
$
9

 
$
423

 
 
 
 
 
 
 
Individually evaluated for impairment
 
$
54

 
$
—

 
$
54

Collectively evaluated for impairment
 
360

 
9

 
369

Ending Balance
 
$
414

 
$
9

 
$
423

 
 
 
 
 
 
 
Recorded Investment in Finance Receivables:
 
 

 
 

 
 

Individually evaluated for impairment
 
$
593

 
$
—

 
$
593

Collectively evaluated for impairment
 
18,831

 
3,884

 
22,715

Ending Balance
 
$
19,424

 
$
3,884

 
$
23,308

 
 
 
 
 
 
 







(Millions of dollars)
 
December 31, 2011
 
 
Customer
 
Dealer
 
Total
Allowance for Credit Losses:
 
 

 
 
 
 
Balance at beginning of year
 
$
357

 
$
5

 
$
362

Receivables written off
 
(210
)
 
—

 
(210
)
Recoveries on receivables previously written off
 
52

 
—

 
52

Provision for credit losses
 
167

 
1

 
168

Other
 
(6
)
 
—

 
(6
)
Balance at end of year
 
$
360

 
$
6

 
$
366

 
 
 
 
 
 
 
Individually evaluated for impairment
 
$
34

 
$
—

 
$
34

Collectively evaluated for impairment
 
326

 
6

 
332

Ending Balance
 
$
360

 
$
6

 
$
366

 
 
 
 
 
 
 
Recorded Investment in Finance Receivables:
 
 
 
 
 
 
Individually evaluated for impairment
 
$
484

 
$
—

 
$
484

Collectively evaluated for impairment
 
17,109

 
2,387

 
19,496

Ending Balance
 
$
17,593

 
$
2,387

 
$
19,980

 
 
 
 
 
 
 
 
Credit quality of finance receivables
 
The credit quality of finance receivables is reviewed on a monthly basis.  Credit quality indicators include performing and non-performing.  Non-performing is defined as finance receivables currently over 120 days past due and/or on non-accrual status or in bankruptcy.  Finance receivables not meeting the criteria listed above are considered performing.  Non-performing receivables have the highest probability for credit loss.  The allowance for credit losses attributable to non-performing receivables is based on the most probable source of repayment, which is normally the liquidation of collateral.  In determining collateral value, Cat Financial estimates the current fair market value of the collateral less selling costs. In addition, Cat Financial considers credit enhancements such as additional collateral and contractual third-party guarantees in determining the allowance for credit losses attributable to non-performing receivables.
 
The recorded investment in performing and non-performing finance receivables was as follows:
(Millions of dollars)
 
December 31, 2013
 
 
Customer
 
Dealer
 
Total
Performing
 
 

 
 

 
 

North America
 
$
6,555

 
$
2,283

 
$
8,838

Europe
 
2,847

 
150

 
2,997

Asia Pacific
 
2,838

 
583

 
3,421

Mining
 
2,120

 
1

 
2,121

Latin America
 
2,539

 
748

 
3,287

Caterpillar Power Finance
 
2,972

 
—

 
2,972

Total Performing
 
$
19,871

 
$
3,765

 
$
23,636

 
 
 
 
 
 
 
Non-Performing
 
 

 
 

 
 

North America
 
$
26

 
$
—

 
$
26

Europe
 
28

 
—

 
28

Asia Pacific
 
50

 
—

 
50

Mining
 
23

 
—

 
23

Latin America
 
179

 
—

 
179

Caterpillar Power Finance
 
119

 
—

 
119

Total Non-Performing
 
$
425

 
$
—

 
$
425

 
 
 
 
 
 
 
Performing & Non-Performing
 
 

 
 

 
 

North America
 
$
6,581

 
$
2,283

 
$
8,864

Europe
 
2,875

 
150

 
3,025

Asia Pacific
 
2,888

 
583

 
3,471

Mining
 
2,143

 
1

 
2,144

Latin America
 
2,718

 
748

 
3,466

Caterpillar Power Finance
 
3,091

 
—

 
3,091

Total
 
$
20,296

 
$
3,765

 
$
24,061

 
 
 
 
 
 
 
 
 
(Millions of dollars)
 
December 31, 2012
 
 
Customer
 
Dealer
 
Total
Performing
 
 

 
 

 
 

North America
 
$
5,908

 
$
2,063

 
$
7,971

Europe
 
2,517

 
185

 
2,702

Asia Pacific
 
3,002

 
751

 
3,753

Mining
 
1,961

 
1

 
1,962

Latin America
 
2,571

 
884

 
3,455

Caterpillar Power Finance
 
2,952

 
—

 
2,952

Total Performing
 
$
18,911

 
$
3,884

 
$
22,795

 
 
 
 
 
 
 
Non-Performing
 
 

 
 

 
 

North America
 
$
59

 
$
—

 
$
59

Europe
 
38

 
—

 
38

Asia Pacific
 
36

 
—

 
36

Mining
 
12

 
—

 
12

Latin America
 
148

 
—

 
148

Caterpillar Power Finance
 
220

 
—

 
220

Total Non-Performing
 
$
513

 
$
—

 
$
513

 
 
 
 
 
 
 
Performing & Non-Performing
 
 

 
 

 
 

North America
 
$
5,967

 
$
2,063

 
$
8,030

Europe
 
2,555

 
185

 
2,740

Asia Pacific
 
3,038

 
751

 
3,789

Mining
 
1,973

 
1

 
1,974

Latin America
 
2,719

 
884

 
3,603

Caterpillar Power Finance
 
3,172

 
—

 
3,172

Total
 
$
19,424

 
$
3,884

 
$
23,308

 
 
 
 
 
 
 
 
(Millions of dollars)
 
December 31, 2011
 
 
Customer
 
Dealer
 
Total
Performing
 
 

 
 

 
 

North America
 
$
5,490

 
$
1,689

 
$
7,179

Europe
 
2,166

 
57

 
2,223

Asia Pacific
 
2,853

 
161

 
3,014

Mining
 
1,473

 
—

 
1,473

Latin America
 
2,377

 
480

 
2,857

Caterpillar Power Finance
 
2,762

 
—

 
2,762

Total Performing
 
$
17,121

 
$
2,387

 
$
19,508

 
 
 
 
 
 
 
Non-Performing
 
 

 
 

 
 

North America
 
$
112

 
$
—

 
$
112

Europe
 
58

 
—

 
58

Asia Pacific
 
24

 
—

 
24

Mining
 
12

 
—

 
12

Latin America
 
108

 
—

 
108

Caterpillar Power Finance
 
158

 
—

 
158

Total Non-Performing
 
$
472

 
$
—

 
$
472

 
 
 
 
 
 
 
Performing & Non-Performing
 
 

 
 

 
 

North America
 
$
5,602

 
$
1,689

 
$
7,291

Europe
 
2,224

 
57

 
2,281

Asia Pacific
 
2,877

 
161

 
3,038

Mining
 
1,485

 
—

 
1,485

Latin America
 
2,485

 
480

 
2,965

Caterpillar Power Finance
 
2,920

 
—

 
2,920

Total
 
$
17,593

 
$
2,387

 
$
19,980

 
 
 
 
 
 
 

Troubled Debt Restructurings
 
A restructuring of a loan or finance lease receivable constitutes a troubled debt restructuring (TDR) when the lender grants a concession it would not otherwise consider to a borrower experiencing financial difficulties.  Concessions granted may include extended contract maturities, inclusion of interest only periods, below market interest rates, and extended skip payment periods.
 
TDRs are reviewed along with other receivables as part of management’s ongoing evaluation of the adequacy of the allowance for credit losses.  The allowance for credit losses attributable to TDRs is based on the most probable source of repayment, which is normally the liquidation of collateral.  In determining collateral value, Cat Financial estimates the current fair market value of the collateral less selling costs. In addition, Cat Financial factors in credit enhancements such as additional collateral and contractual third-party guarantees in determining the allowance for credit losses attributable to TDRs.
 
There were no loans or finance lease receivables modified as TDRs during the years ended December 31, 2013, 2012 and 2011 for the Dealer portfolio segment.
 
Loan and finance lease receivables in the Customer portfolio segment modified as TDRs during the years ended December 31, 2013, 2012, and 2011 were as follows:
 
(Millions of dollars)
 
Year ended December 31, 2013
 
 
 
Number
 of Contracts
 
Pre-TDR
Outstanding 
Recorded
Investment
 
Post-TDR
Outstanding 
Recorded
Investment
 
Customer
 
 

 
 

 
 

 
North America
 
62

 
$
9

 
$
9

 
Europe 
 
51

 
7

 
7

 
Asia Pacific
 
3

 
1

 
1

 
Mining
 
45

 
123

 
123

 
Latin America
 
16

 
2

 
2

 
Caterpillar Power Finance 1 
 
17

 
153

 
157

 
Total 2 
 
194

 
$
295

 
$
299

 
 
 
 
 
 
 
 
 
 
 
Year ended December 31, 2012
 
 
 
Number
 of Contracts
 
Pre-TDR
Outstanding 
Recorded
Investment
 
Post-TDR
Outstanding 
Recorded
Investment
 
Customer
 
 
 
 
 
 
 
North America
 
98

 
$
15

 
$
15

 
Europe 
 
21

 
8

 
8

 
Asia Pacific
 
12

 
3

 
3

 
Mining
 
—

 
—

 
—

 
Latin America
 
41

 
5

 
5

 
Caterpillar Power Finance 1 
 
27

 
253

 
253

 
Total 2 
 
199

 
$
284

 
$
284

 
 
 
 
 
 
 
 
 
 
 
Year ended December 31, 2011
 
 
 
Number
 of Contracts
 
Pre-TDR
Outstanding 
Recorded
Investment
 
Post-TDR
Outstanding 
Recorded
Investment
 
Customer
 
 
 
 
 
 
 
North America
 
71

 
$
13

 
$
13

 
Europe 
 
7

 
44

 
44

 
Asia Pacific
 
—

 
—

 
—

 
Mining
 
—

 
—

 
—

 
Latin America
 
12

 
10

 
10

 
Caterpillar Power Finance 1 
 
35

 
117

 
117

 
Total 2 
 
125

 
$
184

 
$
184

 
 
 
 
 
 
 
 
 

1 
During the years ended December 31, 2013, 2012 and 2011, $25 million, $24 million and $15 million, respectively, of additional funds were subsequently loaned to a borrower whose terms had been modified in a TDR. The $25 million, $24 million and $15 million of additional funds are not reflected in the table above as no incremental modifications have been made with the borrower during the periods presented. At December 31, 2013, remaining commitments to lend additional funds to a borrower whose terms have been modified in a TDR were $6 million.
2 
Modifications include extended contract maturities, inclusion of interest only periods, below market interest rates, and extended skip payment periods.
 
 
 
 
 

TDRs in the Customer portfolio segment with a payment default during the years ended December 31, 2013, 2012, and 2011 which had been modified within twelve months prior to the default date, were as follows:
 
(Millions of dollars)
 
Year ended December 31, 2013
 
Year ended December 31, 2012
 
Year ended December 31, 2011
 
 
 
Number
of Contracts
 
Post-TDR
Recorded
Investment
 
Number
of Contracts
 
Post-TDR
Recorded
Investment
 
Number
of Contracts
 
Post-TDR
Recorded
Investment
 
Customer
 
 

 
 

 
 
 
 
 
 
 
 
 
North America
 
19

 
$
4

 
49

 
$
4

 
48

 
$
26

 
Europe
 
5

 
—

 
—

 
—

 
1

 
1

 
Asia Pacific
 
—

 
—

 
2

 
1

 
—

 
—

 
Mining
 
—

 
—

 
—

 
—

 
—

 
—

 
Latin America
 
—

 
—

 
—

 
—

 
7

 
4

 
Caterpillar Power Finance
 
2

 
3

 
16

 
21

 
14

 
70

 
Total
 
26

 
$
7

 
67

 
$
26

 
70

 
$
101

 
 
 
 
 
 
D.
Securitized Retail Installment Sale Contracts and Finance Leases
 
Cat Financial has periodically transferred certain finance receivables relating to their retail installment sale contracts and finance leases to special-purpose entities (SPEs) as part of their asset-backed securitization program.  These SPEs were concluded to be VIEs. Cat Financial determined that they were the primary beneficiary based on their power to direct activities through their role as servicer and their obligation to absorb losses and right to receive benefits and therefore consolidated these securitization SPEs.

On April 25, 2011, Cat Financial exercised a clean-up call on their only outstanding asset-backed securitization transaction.  As a result, Cat Financial had no assets or liabilities related to their securitization program as of  December 31, 2013, 2012 or 2011.

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