Receivables, Loans, Notes Receivable, and Others

9 Months Ended

Sep. 30, 2021

Receivables [Abstract]

Loans, Notes, Trade and Other Receivables Disclosure

6. TRADE RECEIVABLES FACILITY

On September 30, 2021 the Company and the U.S. bankruptcy-remote special purpose entity ("SPE") amended and restated the principal agreements for the T/R Facility. The amended and restated agreements add the trade receivables originated by certain U.S. and Canadian subsidiaries of the Company to the T/R Facility. Furthermore, the amended and restated agreements enable the U.S. SPE to from time to time to sell short-term trade receivables from certain customer trade accounts to PNC and the other unaffiliated purchasers on a revolving basis. The T/R Facility has a term of two years, which the Company and the U.S. SPE intend to renew.

Under the T/R Facility, the Company and the other U.S. and Canadian subsidiaries continuously sell their trade receivables as they are originated to the U.S. SPE and another newly formed Canadian bankruptcy-remote special purpose entity (collectively, the “SPEs”), as applicable. None of the assets or credit of either SPE is available to satisfy the debts and obligations owed to the creditors of the Company or any other person until the obligations of the SPEs under the T/R Facility have been satisfied. The Company controls and therefore consolidates the SPEs in its condensed consolidated financial statements.

As cash is collected on the trade receivables, the U.S. SPE has the ability to continuously transfer ownership and control of new qualifying receivables to PNC and the other unaffiliated purchasers such that the total outstanding balance of trade receivables sold can be up to $300 million at any point in time, which is the maximum purchase commitment of PNC and the other unaffiliated purchasers. The future outstanding balance of trade receivables that are sold is expected to vary based on the level of activity and other factors and could be less than the maximum purchase commitment of $300 million. The total outstanding balance of trade receivables that have been sold and derecognized by the U.S. SPE to PNC and the other unaffiliated purchasers is approximately $274 million as of September 30, 2021. The SPEs collectively owned $293 million (excluding the $274 million of trade receivables sold to PNC and the other unaffiliated purchasers on September 30, 2021) and $428 million of trade receivable as of September 30, 2021 and December 31, 2020, respectively, and these amounts are included in accounts receivable, net in the Company’s Condensed Consolidated Balance Sheets.     

Upon the amendment and restatement of the T/R Facility, the Company received an initial benefit from cash from operations of approximately $274 million in the three and nine months ended September 30, 2021, respectively. Continuous cash activity related to the T/R Facility is reflected in cash from operating activities in the condensed consolidated statement of cash flows. The U.S. SPE incurs fees due and payable to PNC and the other unaffiliated purchasers participating in the T/R Facility. Those fees, which are immaterial, are recorded within other expense, net in the condensed consolidated statements of income. In addition, each of the SPEs has provided a full recourse guarantee in favor of PNC and the other unaffiliated purchasers of the full and timely payment of all trade receivables sold to them by the U.S. SPE. The guarantee is collateralized by all the trade receivables owned by each of the SPEs that have not been sold to PNC or the other unaffiliated purchasers. The reserve recognized for this recourse obligation as of September 30, 2021 is not material.

The Company, or in the case of any Canadian trade receivables, NCR Canada Corp., continues to be involved with the trade receivables even after they are transferred to the SPEs (or further transferred to PNC and the other unaffiliated purchasers) by acting as servicer. In addition to any obligations as servicer, the Company and each of its subsidiaries acting as an originator under the T/R Facility provide the SPEs with customary recourse in respect of (i) certain dilutive events with respect to the trade receivables sold to the SPEs that are caused by the Company or another originator and (ii) in the event of certain violations by the Company or another originator of their representations and warranties with respect to the trade receivables sold to the SPEs. These servicing and originator liabilities of the Company and its subsidiaries (other than the SPEs) under the T/R Facility are not expected to be material, given the high quality of the customers underlying the receivables and the anticipated short collection period.

The T/R Facility includes other customary representations and warranties, affirmative and negative covenants and default and termination provisions, which provide for the acceleration of amounts owed to PNC and the other unaffiliated purchasers thereunder in circumstances including, but not limited to, failure to pay capital or yield on when due, breach of representation, warranty or covenant, certain insolvency events or failure to maintain the security interest in the trade receivables, and defaults under other material indebtedness.