Accounts Receivable

3 Months Ended

Mar. 31, 2021

Accounts receivable and allowance for credit losses

When we extend credit on an unsecured basis, our exposure to expected credit losses depends on the financial condition of our customers and other macroeconomic factors beyond our control, such as deteriorating conditions in the world economy or in the industries we serve, changes in oil prices and political instability. While we actively monitor and manage our credit exposure and work to respond to both changes in our customers’ financial conditions or macroeconomic events, there can be no guarantee we will be able to mitigate all of these risks successfully.

We perform ongoing credit evaluations of our customers and adjust credit limits based upon payment history and the customer’s current creditworthiness based on expected exposure. Although we analyze customers’ payment history and expected creditworthiness, since we extend credit on an unsecured basis to most of our customers, there is a possibility that any accounts receivable not collected may ultimately need to be written off.

We had accounts receivable of $1.7 billion and $1.2 billion as of March 31, 2021 and December 31, 2020, respectively. We also had an allowance for credit losses, primarily related to accounts receivable, of $47.5 million and $57.3 million, as of March 31, 2021 and December 31, 2020, respectively. Changes to the expected credit loss provision during the three months ended March 31, 2021 include global economic outlook considerations as a result of the Company’s assessment of reasonable and supportable forward-looking information, including the expected overall impact of the ongoing pandemic effects mainly to the aviation segment. Write-off of uncollectible receivables during the three months ended March 31, 2021 resulted from negative impacts of the pandemic combined with pre-existing financial difficulties experienced by certain customers. Based on an aging analysis as of March 31, 2021, 96% of our net accounts receivable were outstanding less than 60 days.

The following table sets forth activities in our allowance for credit losses (in millions):


	Total
Balance as of December 31, 2020	$	57.3
Charges to allowance for credit losses	3.6
Write-off of uncollectible receivables	(13.8)
Recoveries of credit losses	0.4

Balance as of March 31, 2021	$	47.5

Receivable sales programs

We have receivables purchase agreements (“RPAs”) with Wells Fargo Bank, N.A. and Citibank, N.A. that allow for the sale of our accounts receivable in an amount up to 100% of our outstanding qualifying accounts receivable balances and receive cash consideration equal to the total balance, less a discount margin equal to LIBOR plus 1.00% to 3.25%, which varies based on the outstanding accounts receivable at any given time and assumes maximum utilization of the RPA facilities. Accounts receivable sold under the RPAs are accounted for as sales, in accordance with FASB ASC Topic 860, Transfers and Servicing, and excluded from Accounts receivable, net of allowance for credit losses on the accompanying Condensed Consolidated Balance Sheets. Fees and interest paid under the RPAs is recorded within Interest expense and other financing costs, net on the Condensed Consolidated Statements of Income and Comprehensive Income.

Under the RPAs, accounts receivable sold, which remained outstanding as of March 31, 2021 and December 31, 2020, were $389.5 million and $306.9 million, respectively. The fees and interest paid under the RPAs were $4.4 million and $4.4 million for the three months ended March 31, 2021 and 2020, respectively. For the three months ended March 31, 2021 and 2020, cash payments to the owners of account receivables were $1.9 billion and $1.8 billion, respectively, and cash proceeds from the sale of account receivables were $2.0 billion and $1.7 billion, respectively.