UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, D.C. 20549

FORM 10-Q

(Mark One)

☒QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the quarterly period ended ~~July 28, 2019~~February 2, 2020

☐TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the transition period from ____ to ____

Commission file no: 1-6458

JOHN DEERE CAPITAL CORPORATION

(Exact name of registrant as specified in its charter)



Delaware (State of Incorporation)		36-2386361 (IRS Employer Identification No.)

10587 Double R Boulevard, Suite 100 Reno, Nevada 89521 (Address of principal executive offices)
Telephone Number: (775) 786-5527

Securities Registered Pursuant to Section 12(b) of the Act:


Title of each class	Trading symbol	Name of each exchange on which registered
2.75% Senior Notes Due 2022	DE22B	New York Stock Exchange

Indicate by check mark whether the registrant: (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.

Yes ☒No ☐

Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files).

Yes ☒No ☐

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer”, “smaller reporting company”, and “emerging growth company” in Rule 12b-2 of the Exchange Act. (Check one):


Large accelerated filer	☐	Accelerated filer	☐
Non-accelerated filer	☒	Smaller reporting company	☐
		Emerging growth company	☐

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).

Yes ☐No ☒

At ~~July 28, 2019,~~February 2, 2020, 2,500 shares of common stock, without par value, of the registrant were outstanding, all of which were owned by John Deere Financial Services, Inc., a wholly-owned subsidiary of Deere & Company.

The registrant meets the conditions set forth in General Instruction H(1)(a) and (b) of Form 10-Q and is therefore filing this Form with certain reduced disclosures as permitted by those instructions.

PART I. FINANCIAL INFORMATION

Item 1. Financial Statements.

John Deere Capital Corporation and Subsidiaries

Statement of Consolidated Income

For the Three Months Ended February 2, 2020 and January 27, 2019

(Unaudited)

(in millions)


	Three Months Ended				Nine Months Ended
	July 28		July 29		July 28		July 29
	2019		2018		2019		2018		2020		2019
Revenues
Finance income earned on retail notes	$	241.5	$	193.7	$	665.0	$	562.6	$	234.8	$	208.9
Revolving charge account income		94.3		91.7		243.0		235.6		80.7		72.1
Finance income earned on wholesale receivables		141.9		122.8		400.9		332.0		110.3		116.3
Lease revenues		256.7		231.2		741.6		670.9		274.9		239.5
Other income		7.4		21.7		55.1		62.7		17.9		24.0
Total revenues		741.8		661.1		2,105.6		1,863.8		718.6		660.8
Expenses
Interest expense		256.2		196.1		734.7		530.5		219.8		226.5
Operating expenses:
Administrative and operating expenses		102.6		92.4		313.3		306.7		123.5		98.2
Fees paid to John Deere		15.2		22.0		42.0		55.0		24.9		14.8
Provision for credit losses		23.4		27.6		50.3		43.7		12.1		.8
Depreciation of equipment on operating leases		188.0		173.3		544.3		511.1		213.5		175.4
Total operating expenses		329.2		315.3		949.9		916.5		374.0		289.2
Total expenses		585.4		511.4		1,684.6		1,447.0		593.8		515.7
Income of consolidated group before income taxes		156.4		149.7		421.0		416.8		124.8		145.1
Provision (credit) for income taxes		11.8		30.0		71.4		(220.3)
Provision for income taxes										26.1		23.9
Income of consolidated group		144.6		119.7		349.6		637.1		98.7		121.2
Equity in income of unconsolidated affiliate		.4		.4		1.4		1.6		.7		.6
Net income		145.0		120.1		351.0		638.7		99.4		121.8
Less: Net income (loss) attributable to noncontrolling interests		.2		(.1)		.2		(.1)
Less: Net income attributable to noncontrolling interests										.2		.1
Net income attributable to the Company	$	144.8	$	120.2	$	350.8	$	638.8	$	99.2	$	121.7

See Condensed Notes to Interim Consolidated Financial Statements.

John Deere Capital Corporation and Subsidiaries

Statement of Consolidated Comprehensive Income

For the Three Months Ended February 2, 2020 and January 27, 2019

(Unaudited)

(in millions)


	Three Months Ended				Nine Months Ended
	July 28		July 29		July 28		July 29
	2019		2018		2019		2018		2020		2019

Net income	$	145.0	$	120.1	$	351.0	$	638.7	$	99.4	$	121.8

Other comprehensive income (loss), net of income taxes
Cumulative translation adjustment		(3.4)		(19.3)		(9.8)		(5.5)		(4.8)		.8
Unrealized gain (loss) on derivatives		(6.2)		(.8)		(21.3)		9.4
Unrealized loss on derivatives										(.3)		(8.4)
Unrealized loss on debt securities										(.4)
Other comprehensive income (loss), net of income taxes		(9.6)		(20.1)		(31.1)		3.9		(5.5)		(7.6)

Comprehensive income of consolidated group		135.4		100.0		319.9		642.6		93.9		114.2
Less: Comprehensive income (loss) attributable to noncontrolling interests		.2		(.1)		.2		(.1)
Less: Comprehensive income attributable to noncontrolling interests										.2		.1
Comprehensive income attributable to the Company	$	135.2	$	100.1	$	319.7	$	642.7	$	93.7	$	114.1

See Condensed Notes to Interim Consolidated Financial Statements.

John Deere Capital Corporation and Subsidiaries

Consolidated Balance Sheet

(Unaudited)

(in millions)


	July 28		October 28		July 29		February 2		November 3		January 27
	2019		2018		2018		2020		2019		2019
Assets
Cash and cash equivalents	$	649.1	$	608.4	$	1,072.4	$	642.6	$	632.6	$	859.2
Marketable securities		6.9						2.3		3.2		4.0
Receivables:
Retail notes		13,437.5		14,156.0		12,839.1		14,791.5		15,150.5		13,254.5
Retail notes securitized		5,159.1		3,954.9		4,582.9		4,443.7		4,349.6		4,505.9
Revolving charge accounts		3,798.7		3,797.6		3,686.9		2,673.2		3,863.0		2,685.9
Wholesale receivables		10,299.5		7,967.6		9,050.3		9,146.3		8,706.8		8,990.4
Financing leases		716.9		770.6		728.1		668.2		751.6		702.5
Total receivables		33,411.7		30,646.7		30,887.3		31,722.9		32,821.5		30,139.2
Allowance for credit losses		(110.4)		(106.7)		(115.7)		(103.1)		(100.6)		(106.7)
Total receivables – net		33,301.3		30,540.0		30,771.6		31,619.8		32,720.9		30,032.5
Other receivables		83.2		532.0		80.2		94.6		75.1		120.6
Receivables from John Deere		235.3		59.3		55.7		408.7		331.9		66.9
Equipment on operating leases – net		5,323.3		5,102.5		4,861.8		5,525.7		5,530.5		4,942.0
Notes receivable from John Deere		277.3		195.4		191.8		282.5		291.7		221.1
Investment in unconsolidated affiliate		16.0		15.2		15.2		17.0		16.4		15.7
Deferred income taxes		36.3		36.8		40.2		34.0		33.2		36.8
Other assets		514.6		575.9		494.2		447.1		454.4		586.7
Total Assets	$	40,443.3	$	37,665.5	$	37,583.1	$	39,074.3	$	40,089.9	$	36,885.5

Liabilities and Stockholder’s Equity
Short-term borrowings:
Commercial paper and other notes payable	$	1,162.5	$	2,112.9	$	2,198.1	$	1,241.7	$	1,460.9	$	2,469.0
Securitization borrowings		4,994.8		3,881.7		4,437.5		4,373.9		4,277.0		4,397.1
John Deere		2,294.8		1,376.8		1,563.6		1,395.5		1,855.3		182.2
Current maturities of long-term borrowings		6,269.5		4,587.6		5,111.3		5,577.6		5,716.6		4,330.7
Total short-term borrowings		14,721.6		11,959.0		13,310.5		12,588.7		13,309.8		11,379.0
Other payables to John Deere		55.3		342.5		331.1		36.6		47.4		227.0
Accounts payable and accrued expenses		767.0		871.6		787.0		857.5		886.7		771.9
Deposits withheld from dealers and merchants		138.8		166.0		169.2		128.5		137.5		146.9
Deferred income taxes		615.1		824.2		458.7		503.8		527.7		801.5
Long-term borrowings		20,035.4		19,432.2		18,591.5		20,861.9		21,052.4		19,575.0
Total liabilities		36,333.2		33,595.5		33,648.0		34,977.0		35,961.5		32,901.3
Commitments and contingencies (Note 7)
Commitments and contingencies (Note 8)
Stockholder’s equity:
Common stock, without par value (issued and outstanding – 2,500 shares owned by John Deere Financial Services, Inc.)		1,482.8		1,482.8		1,482.8		1,482.8		1,482.8		1,482.8
Retained earnings		2,723.2		2,652.4		2,503.5		2,715.8		2,741.6		2,574.1
Accumulated other comprehensive income (loss)		(97.0)		(65.9)		(51.9)
Accumulated other comprehensive loss								(102.9)		(97.4)		(73.5)
Total Company stockholder’s equity		4,109.0		4,069.3		3,934.4		4,095.7		4,127.0		3,983.4
Noncontrolling interests		1.1		.7		.7		1.6		1.4		.8
Total stockholder’s equity		4,110.1		4,070.0		3,935.1		4,097.3		4,128.4		3,984.2
Total Liabilities and Stockholder’s Equity	$	40,443.3	$	37,665.5	$	37,583.1	$	39,074.3	$	40,089.9	$	36,885.5

See Condensed Notes to Interim Consolidated Financial Statements.

John Deere Capital Corporation and Subsidiaries

Statement of Consolidated Cash Flows

For the ~~Nine~~Three Months Ended ~~July 28,~~February 2, 2020 and January 27, 2019 ~~and July 29, 2018~~

(Unaudited)

(in millions)


	2019		2018		2020		2019
Cash Flows from Operating Activities:
Net income	$	351.0	$	638.7	$	99.4	$	121.8
Adjustments to reconcile net income to net cash
provided by operating activities:
Provision for credit losses		50.3		43.7		12.1		.8
Provision for depreciation and amortization		561.7		528.1		217.2		181.0
Credit for deferred income taxes		(202.9)		(363.8)		(24.1)		(20.4)
Undistributed earnings of unconsolidated affiliate		(1.2)		(1.4)		(.7)		(.6)
Change in accounts payable and accrued expenses		18.4		51.2		(17.7)		(29.7)
Change in accrued income taxes payable/receivable		448.0		(47.9)		5.5		443.5
Other		139.6		128.0		50.3		45.3
Net cash provided by operating activities		1,364.9		976.6		342.0		741.7

Cash Flows from Investing Activities:
Cost of receivables acquired (excluding wholesale)		(12,884.6)		(12,205.3)		(4,151.3)		(3,973.9)
Collections of receivables (excluding wholesale)		12,215.9		11,718.7		5,593.2		5,457.1
Increase in wholesale receivables – net		(2,362.5)		(2,188.8)		(452.0)		(1,013.1)
Cost of equipment on operating leases acquired		(1,672.5)		(1,560.8)		(543.4)		(418.5)
Proceeds from sales of equipment on operating leases		870.4		823.1		332.6		273.5
Cost of notes receivable with John Deere		(105.2)		(44.8)
Collections of notes receivable with John Deere		31.4		2.5
Cost of notes receivable acquired from John Deere						(22.3)		(24.3)
Collections of notes receivable from John Deere						31.2		1.4
Purchases of marketable securities		(11.0)						(4.0)
Proceeds from maturities and sales of marketable securities		4.0
Other		(44.6)		(25.8)		(12.7)		(25.0)
Net cash used for investing activities		(3,958.7)		(3,481.2)
Net cash provided by investing activities						775.3		273.2

Cash Flows from Financing Activities:
Increase (decrease) in commercial paper and other notes payable – net		(948.8)		157.6		(219.6)		354.4
Increase in securitization borrowings – net		1,115.4		320.2		95.9		514.3
Increase in payable to John Deere – net		948.1		1,011.8
Decrease in payable to John Deere – net						(445.4)		(1,193.6)
Proceeds from issuance of long-term borrowings		5,150.2		4,680.2		1,105.0		1,509.6
Payments of long-term borrowings		(3,332.4)		(3,277.9)		(1,501.3)		(1,759.3)
Dividends paid		(280.0)		(365.0)		(125.0)		(200.0)
Capital investment from John Deere		.2		.3
Debt issuance costs		(25.2)		(22.0)		(7.5)		(5.8)
Net cash provided by financing activities		2,627.5		2,505.2
Net cash used for financing activities						(1,097.9)		(780.4)

Effect of exchange rate changes on cash, cash equivalents, and restricted cash		(6.3)		(11.6)		(1.2)		(.1)
Net increase (decrease) in cash, cash equivalents, and restricted cash		27.4		(11.0)
Net increase in cash, cash equivalents, and restricted cash						18.2		234.4
Cash, cash equivalents, and restricted cash at beginning of period		711.8		1,181.4		710.9		711.8
Cash, cash equivalents, and restricted cash at end of period	$	739.2	$	1,170.4	$	729.1	$	946.2

See Condensed Notes to Interim Consolidated Financial Statements.

John Deere Capital Corporation and Subsidiaries

Statement of Changes in Consolidated Stockholder’s Equity

For the Three ~~and Nine~~ Months Ended ~~July 28,~~February 2, 2020 and January 27, 2019 ~~and July 29, 2018~~

(Unaudited)

(in millions)


			Company Stockholder										Company Stockholder
							Accumulated										Accumulated
	Total						Other		Non-		Total						Other		Non-
	Stockholder’s		Common		Retained		Comprehensive		Controlling		Stockholder’s		Common		Retained		Comprehensive		Controlling
	Equity		Stock		Earnings		Income (Loss)		Interests		Equity		Stock		Earnings		Income (Loss)		Interests

Three Months Ended July 29, 2018
Balance April 29, 2018	$	3,834.8	$	1,482.8	$	2,383.3	$	(31.8)	$	.5
Net income (loss)		120.1				120.2				(.1)
Other comprehensive loss		(20.1)						(20.1)
Capital investment		.3								.3
Balance July 29, 2018	$	3,935.1	$	1,482.8	$	2,503.5	$	(51.9)	$	.7

Nine Months Ended July 29, 2018
Balance October 29, 2017	$	3,657.2	$	1,482.8	$	2,229.7	$	(55.8)	$	.5
Net income (loss)		638.7				638.8				(.1)
Other comprehensive income		3.9						3.9
Dividends declared		(365.0)				(365.0)
Capital investment		.3								.3
Balance July 29, 2018	$	3,935.1	$	1,482.8	$	2,503.5	$	(51.9)	$	.7

Three Months Ended July 28, 2019
Balance April 28, 2019	$	4,024.6	$	1,482.8	$	2,628.4	$	(87.4)	$	.8
Net income		145.0				144.8				.2
Other comprehensive loss		(9.6)						(9.6)
Dividends declared		(50.0)				(50.0)
Capital investment		.1								.1
Balance July 28, 2019	$	4,110.1	$	1,482.8	$	2,723.2	$	(97.0)	$	1.1

Nine Months Ended July 28, 2019
Balance October 28, 2018	$	4,070.0	$	1,482.8	$	2,652.4	$	(65.9)	$	.7	$	4,070.0	$	1,482.8	$	2,652.4	$	(65.9)	$	.7
Net income		351.0				350.8				.2		121.8				121.7				.1
Other comprehensive loss		(31.1)						(31.1)				(7.6)						(7.6)
Dividends declared		(280.0)				(280.0)						(200.0)				(200.0)
Capital investment		.2								.2
Balance July 28, 2019	$	4,110.1	$	1,482.8	$	2,723.2	$	(97.0)	$	1.1
Balance January 27, 2019											$	3,984.2	$	1,482.8	$	2,574.1	$	(73.5)	$	.8

Balance November 3, 2019											$	4,128.4	$	1,482.8	$	2,741.6	$	(97.4)	$	1.4
Net income												99.4				99.2				.2
Other comprehensive loss												(5.5)						(5.5)
Dividends declared												(125.0)				(125.0)
Balance February 2, 2020											$	4,097.3	$	1,482.8	$	2,715.8	$	(102.9)	$	1.6

See Condensed Notes to Interim Consolidated Financial Statements.

John Deere Capital Corporation and Subsidiaries

Condensed Notes to Interim Consolidated Financial Statements

(Unaudited)

(1) Organization and Consolidation

~~The interim consolidated financial statements of~~ John Deere Capital Corporation (Capital Corporation) and its subsidiaries ~~(collectively~~are collectively called the ~~Company) have been prepared by the~~Company. John Deere Financial Services, Inc. (JDFS), a wholly-owned finance holding subsidiary of Deere & Company, ~~without audit, pursuant to the rules and regulations~~owns all of the U.S. Securities and Exchange Commission (SEC). Certain information and footnote disclosures normally included in annual financial statements prepared in accordance with accounting principles generally accepted in the U.S. have been condensed or omitted as permitted by such rules and regulations. All adjustments, consistingoutstanding common stock of normal recurring adjustments, have been included. Management believes that the disclosures are adequate to present fairly the financial position, results of operations, and cash flows at the dates and for the periods presented. It is suggested that these interim consolidated financial statements be read in conjunction with the consolidated financial statements and the notes thereto appearing in the Company’s latest annual report on Form 10-K. Results for interim periods are not necessarily indicative of those to be expected for the fiscal year.

The preparation of financial statements in conformity with accounting principles generally accepted in the U.S. requires management to make estimates and assumptions that affect the reported amounts and related disclosures. Actual results could differ from those estimates.

The Company uses a 52/53 week fiscal year with quarters ending on the last Sunday in the reporting period. The third quarter ends for fiscal year 2019 and 2018 were July 28, 2019 and July 29, 2018, respectively. Both periods contained 13 weeks.

Capital Corporation. The Company provides and administers financing for retail purchases of new equipment manufactured by Deere & Company’s agriculture and turf and construction and forestry operations and used equipment taken in trade for this equipment. The Company generally purchases retail installment sales and loan contracts (retail notes) from Deere & Company and its wholly-owned subsidiaries (collectively called John Deere). John Deere generally acquires these retail notes through John Deere retail dealers. The Company also purchases and finances a limited amount of non-Deere retail notes. The Company also finances and services revolving charge accounts, in most cases acquired from and offered through merchants in the agriculture and turf and construction and forestry markets (revolving charge accounts). The Company also provides wholesale financing for inventories of John Deere agriculture and turf and construction and forestry equipment for dealers of those products (wholesale receivables). In addition, the Company leases John Deere equipment and a limited amount of non-Deere equipment to retail customers (financing and operating leases). The Company also offers credit enhanced international export financing to select customers and dealers, which generally involves John Deere products. Retail notes, revolving charge accounts, wholesale receivables, and financing leases are collectively called “Receivables.” Receivables and equipment on operating leases are collectively called “Receivables and Leases.”

The Company has prepared its interim consolidated financial statements, without audit, pursuant to the rules and regulations of the U.S. Securities and Exchange Commission (SEC). Certain information and footnote disclosures normally included in annual financial statements prepared in accordance with accounting principles generally accepted in the U.S. have been condensed or omitted as permitted by such rules and regulations. All adjustments, consisting of normal recurring adjustments, have been included. Management believes that the disclosures are adequate to present fairly the financial position, results of operations, and cash flows at the dates and for the periods presented. It is suggested that these interim consolidated financial statements be read in conjunction with the consolidated financial statements and the notes thereto appearing in the Company’s latest annual report on Form 10-K. Results for interim periods are not necessarily indicative of those to be expected for the fiscal year.

The Company uses a 52/53 week fiscal year with quarters ending on the last Sunday in the reporting period. The first quarter ends for fiscal year 2020 and 2019 were February 2, 2020 and January 27, 2019, respectively. Both periods contained 13 weeks.

(2) New Accounting Standards

New Accounting Standards Adopted

In the first quarter of ~~2019,~~2020, the Company adopted Financial Accounting Standards Board (FASB) Accounting Standards Update (ASU) No. 2014-09, Revenue from Contracts with Customers (Topic 606), which supersedes the revenue recognition requirements in Accounting Standards Codification (ASC) 605, Revenue Recognition, using a modified-retrospective approach. The ASU is based on the principle that revenue is recognized to depict the transfer of goods or services to customers in an amount that reflects the consideration to which the entity expects to be entitled in exchange for those goods or services. A five-step model is used to determine the amount and timing of revenue recognized. The adoption did not have a material effect on the Company’s consolidated financial statements.

In the first quarter of 2019, the Company adopted ASU No. 2016-01, Recognition and Measurement of Financial Assets and Financial Liabilities, which amends ASC 825-10, Financial Instruments – Overall. This ASU changed the treatment for available-for-sale equity investments by recognizing unrealized fair value changes directly in net income and no longer in other comprehensive income (OCI). The Company does not own any available-for-sale equity securities. As a result, the adoption did not have a material effect on the Company’s consolidated financial statements.

In the first quarter of 2019, the Company adopted ASU No. 2016-18, Restricted Cash, which amends ASC 230, Statement of Cash Flows. The ASU requires that restricted cash be included with cash and cash equivalents in the statement of cash flows. The Company held restricted cash of $90.1 million, $103.4 million, $98.0 million, and $125.9 million at July 28, 2019, October 28, 2018, July 29, 2018, and October 29, 2017, respectively. The restricted cash primarily relates to the securitization of receivables and is reported in other assets on the consolidated balance sheet. The ASU was adopted using a retrospective transition approach resulting in an update to the 2018 statement of consolidated cash flows. The ASU did not have a material effect on the Company’s consolidated financial statements.

In the first quarter of 2019, the Company early adopted ASU No. 2017-12, Targeted Improvements to Accounting for Hedging Activities, which amends ASC 815, Derivatives and Hedging. The purpose of this ASU is to better align a company’s risk management activities and financial reporting for hedging relationships, simplify the hedge accounting requirements, and improve the disclosures of hedging arrangements. The adoption did not have a material effect on the Company’s consolidated financial statements (see Note 10). The Company continues to evaluate potential additional hedge accounting relationships provided by the new standard to further improve risk management.

~~The Company also adopted the following standards in the first quarter of 2019, none of which had a material effect on the Company’s consolidated financial statements:~~

~~Accounting Standards Updates~~


~~2016-15~~	~~Classification of Certain Cash Receipts and Cash Payments, which amends ASC 230, Statement of Cash Flows~~
~~2016-16~~	~~Intra-Entity Transfers of Assets Other Than Inventory, which amends ASC 740, Income Taxes~~
~~2017-01~~	~~Clarifying the Definition of a Business, which amends ASC 805, Business Combinations~~
~~2017-09~~	~~Scope of Modification Accounting, which amends ASC 718, Compensation - Stock Compensation~~
~~2018-13~~	~~Disclosure Framework - Changes to the Disclosure Requirements for Fair Value Measurement, which amends ASC 820, Fair Value Measurement~~
~~2018-16~~	~~Inclusion of the Secured Overnight Financing Rate (SOFR) Overnight Index Swap (OIS) Rate as a Benchmark Interest Rate for Hedge Accounting Purposes, which amends ASC 815, Derivatives and Hedging~~

~~New Accounting Standards to be Adopted~~

~~In February 2016, the FASB issued ASU No.~~ 2016-02, Leases (Topic 842), which supersedes ~~ASC~~Accounting Standards Codification (ASC) 840, Leases. This ASU was adopted using a modified-retrospective approach. The ASU’s primary change is the requirement for lessee entities to recognize a lease liability for payments and a right of use asset during the term of operating lease arrangements. The ASU ~~does~~did not significantly change the lessee’s recognition, measurement, and presentation of expenses and cash flows from the previous accounting standard. Lessors’ accounting under the ASC is largely unchanged from the previous accounting standard. The ASU adds new disclosures about the Company’s leasing activities. The Company elected the optional practical expedients to not reassess whether existing contracts contain leases, not reassess lease classification, and not reassess initial direct costs for existing leases. The Company did not elect the hindsight practical expedient. In ~~July 2018,~~addition, the ~~FASB issued~~Company elected to combine lease and non-lease components for all asset classes and to not recognize a right of use asset or lease liability for arrangements that qualify as short-term leases. Upon adoption of the ASU, the Company recorded right of use assets and lease liabilities for operating leases of $5.1 million and $5.1 million, respectively. The right of use assets are recorded in other assets and the lease liabilities are recorded in accounts payable and accrued expenses on the consolidated balance sheet. Since the right of use assets and lease liabilities are not significant, no further lessee disclosures have been included in the condensed notes to the interim consolidated financial statements. See Note 6 for additional disclosures related to lessor arrangements. The adoption did not have a material effect on the Company’s operating results or cash flows.

In the first quarter of 2020, the Company adopted the clarifications to ASU No. ~~2018-10,~~2017-12, Targeted Improvements to Accounting for Hedging Activities, included in ASU No. 2019-04, Codification Improvements to Topic ~~842, Leases~~326, Financial Instruments – Credit Losses, Topic 815, Derivatives and ~~ASU No. 2018-11, Leases: Targeted Improvements. Both ASUs amend ASC 842, Leases.~~Hedging, and Topic 825, Financial Instruments. The ~~provisions affecting~~adoption did not have a material effect on the ~~Company in these ASUs are an option that will not require earlier periods~~Company’s consolidated financial statements.

New Accounting Standards to be restated at the adoption date and an option for lessors, if certain criteria are met, to avoid separating the lease and nonlease components (such as preventative maintenance services) in an agreement. In December 2018, the FASB issued ASU No. 2018-20, Narrow-Scope Improvements for Lessors. This ASU provides an election for

lessors to exclude sales and related taxes from consideration in the contract, requires lessors to exclude from revenue and expense lessor costs paid directly to a third party by lessees, and clarifies lessors’ accounting for variable payments related to both lease and nonlease components. In March 2019, the FASB issued ASU No. 2019-01, Leases: Codification Improvements. The ASU allows certain lessors, including captive finance companies, to use their cost as the fair value of the to-be-leased asset. The ASU also clarifies the presentation of lease payments in the statement of cash flows and the required transition disclosures. The effective date will be the first quarter of fiscal year 2020. The Company is evaluating the potential effects on the consolidated financial statements and will adopt the ASU using the modified-retrospective approach that will not require earlier periods to be restated.Adopted

In June 2016, the FASB issued ASU No. 2016-13, Measurement of Credit Losses on Financial Instruments, which establishes ASC 326, Financial Instruments – Credit Losses. The ASU revises the measurement of credit losses for financial assets measured at amortized cost from an incurred loss ~~methodology~~ to an expected loss methodology. The ASU affects receivables, debt securities, net investment in leases, and most other financial assets that represent a right to receive cash. Additional disclosures about significant estimates and credit quality are also required. In November 2018, the FASB issued ASU No. 2018-19, Codification Improvements to Topic 326, Financial Instruments – Credit Losses. This ASU clarifies that receivables from operating leases are accounted for using the lease guidance and not as financial instruments. In May 2019, the FASB issued ASU No. 2019-05, Targeted Transition Relief, which amends ASC 326. This ASU provides an option to irrevocably elect to measure certain individual financial assets at fair value instead of amortized cost. The effective date will be the first quarter of fiscal year 2021. The ~~ASUs~~ASU will be adopted using a modified-retrospective approach. The Company is developing models to estimate expected credit losses, assessing appropriate assumptions, designing new procedures and controls, and evaluating the potential effects on the consolidated financial statements.

In August 2018, the FASB issued ASU No. 2018-15, Customer’s Accounting for Implementation Costs Incurred in a Cloud Computing Arrangement That Is a Service Contract, which amends ASC 350-40, Intangibles – Goodwill and Other – Internal-Use Software. This ASU requires customers in a hosting arrangement that is a service contract to evaluate the implementation costs of the hosting arrangement using the guidance to develop internal-use software. The project development stage determines the implementation costs that are capitalized or expensed. Capitalized implementation costs are amortized over the term of the service arrangement and are presented in the same income statement line item as the service contract costs. The effective date will be the first quarter of fiscal year 2021, with early adoption permitted. The Company will adopt the ASU on a prospective basis. The Company is evaluating the potential effects on the Company’s consolidated financial statements.

In April 2019, the FASB issued ASU No. 2019-04, Codification Improvements to Topic 326, Financial Instruments – Credit Losses, Topic 815, Derivatives and Hedging, and Topic 825, Financial Instruments. The effective dates for the separate portions of the ASU and the expected effect on the consolidated financial statements are as ~~follows:~~follows for the portions that have not yet been adopted: (1) clarifications to ASU No. 2016-13, Measurement of Credit Losses on Financial Instruments, is the first quarter of fiscal year 2021, which is under evaluation, (2) clarifications to ASU No. 2017-12, Targeted Improvements to Accounting for Hedging Activities, is the first quarter of fiscal year 2020, with early adoption permitted, which will not have a material effect, and ~~(3)~~(2) clarifications to ASU No. 2016-01, Recognition and Measurement of Financial Assets and Financial Liabilities is the first quarter of fiscal year 2021, ~~with early adoption permitted,~~ which will not have a material ~~effect.~~effect on the Company’s consolidated financial statements.

9In December 2019, the FASB issued ASU No. 2019-12, Simplifying the Accounting for Income Taxes, which amends ASC 740, Income Taxes. This ASU simplifies the accounting for income taxes by modifying the treatment of intraperiod tax allocation in certain circumstances, eliminating an exception to recognizing deferred tax liabilities for outside basis differences for foreign equity method investments and foreign subsidiaries when ownership or control changes, and modifying interim period tax calculations when a loss is forecast. In addition, the ASU also provides guidance for the accounting of a franchise tax that is partially based on income, requires that enacted changes in tax laws or rates be included in the annual effective rate determination in the period that includes the enactment date, and clarifies the tax accounting of a step up in tax basis of goodwill. The effective date will be the first quarter of fiscal year 2022, with early adoption permitted. The guidance related to the foreign equity method investments, foreign subsidiaries, and franchise taxes will be adopted using a modified-retrospective approach. The remaining provisions will be adopted prospectively. The adoption is not expected to have a material effect on the Company’s consolidated financial statements.

(3) Other Comprehensive Income Items

The after-tax changes in accumulated other comprehensive income (loss) were as follows (in millions of dollars):


			Unrealized		Accumulated				Unrealized		Unrealized		Accumulated
	Cumulative		Gain (Loss)		Other		Cumulative		Gain (Loss)		Gain (Loss)		Other
	Translation		on		Comprehensive		Translation		on		on		Comprehensive
	Adjustment		Derivatives		Income (Loss)		Adjustment		Derivatives		Debt Securities		Income (Loss)
Balance October 29, 2017	$	(60.0)	$	4.2	$	(55.8)
Other comprehensive income (loss) items before reclassification		(5.5)		11.9		6.4
Amounts reclassified from accumulated other comprehensive income				(2.5)		(2.5)
Net current period other comprehensive income (loss)		(5.5)		9.4		3.9
Balance July 29, 2018	$	(65.5)	$	13.6	$	(51.9)

Balance October 28, 2018	$	(80.7)	$	14.8	$	(65.9)	$	(80.7)	$	14.8			$	(65.9)
Other comprehensive income (loss) items before reclassification		(9.8)		(16.8)		(26.6)		.8		(6.8)				(6.0)
Amounts reclassified from accumulated other comprehensive income				(4.5)		(4.5)				(1.6)				(1.6)
Net current period other comprehensive income (loss)		(9.8)		(21.3)		(31.1)		.8		(8.4)				(7.6)
Balance July 28, 2019	$	(90.5)	$	(6.5)	$	(97.0)
Balance January 27, 2019							$	(79.9)	$	6.4			$	(73.5)

Balance November 3, 2019							$	(88.4)	$	(7.0)	$	(2.0)	$	(97.4)
Other comprehensive income (loss) items before reclassification								(4.8)		(1.2)		(.4)		(6.4)
Amounts reclassified from accumulated other comprehensive income										.9				.9
Net current period other comprehensive income (loss)								(4.8)		(.3)		(.4)		(5.5)
Balance February 2, 2020							$	(93.2)	$	(7.3)	$	(2.4)	$	(102.9)

109

Following are amounts recorded in and reclassifications out of other comprehensive income (loss), and the income tax effects, (in millions of dollars):


	Before		Tax		After		Before		Tax		After
	Tax		(Expense)		Tax		Tax		(Expense)		Tax
Three Months Ended July 28, 2019	Amount		Credit		Amount
Three Months Ended February 2, 2020							Amount		Credit		Amount
Cumulative translation adjustment							$	(4.8)			$	(4.8)
Unrealized gain (loss) on derivatives:
Unrealized hedging gain (loss)								(1.6)	$	.4		(1.2)
Reclassification of realized (gain) loss to:
Interest rate contracts – Interest expense								1.2		(.3)		.9
Net unrealized gain (loss) on derivatives								(.4)		.1		(.3)
Unrealized gain (loss) on debt securities:
Unrealized holding gain (loss)								(.9)		.5		(.4)
Total other comprehensive income (loss)							$	(6.1)	$	.6	$	(5.5)

Three Months Ended January 27, 2019
Cumulative translation adjustment	$	(3.4)			$	(3.4)	$	.8			$	.8
Unrealized gain (loss) on derivatives:
Unrealized hedging gain (loss)		(6.7)	$	1.4		(5.3)		(8.6)	$	1.8		(6.8)
Reclassification of realized (gain) loss to:
Interest rate contracts – Interest expense		(1.1)		.2		(.9)		(2.1)		.5		(1.6)
Net unrealized gain (loss) on derivatives		(7.8)		1.6		(6.2)		(10.7)		2.3		(8.4)
Total other comprehensive income (loss)	$	(11.2)	$	1.6	$	(9.6)	$	(9.9)	$	2.3	$	(7.6)

Nine Months Ended July 28, 2019
Cumulative translation adjustment	$	(9.8)			$	(9.8)
Unrealized gain (loss) on derivatives:
Unrealized hedging gain (loss)		(21.3)	$	4.5		(16.8)
Reclassification of realized (gain) loss to:
Interest rate contracts – Interest expense		(5.7)		1.2		(4.5)
Net unrealized gain (loss) on derivatives		(27.0)		5.7		(21.3)
Total other comprehensive income (loss)	$	(36.8)	$	5.7	$	(31.1)

Three Months Ended July 29, 2018
Cumulative translation adjustment	$	(19.3)			$	(19.3)
Unrealized gain (loss) on derivatives:
Unrealized hedging gain (loss)		1.4	$	(.3)		1.1
Reclassification of realized (gain) loss to:
Interest rate contracts – Interest expense		(2.5)		.6		(1.9)
Net unrealized gain (loss) on derivatives		(1.1)		.3		(.8)
Total other comprehensive income (loss)	$	(20.4)	$	.3	$	(20.1)

Nine Months Ended July 29, 2018
Cumulative translation adjustment	$	(5.5)			$	(5.5)
Unrealized gain (loss) on derivatives:
Unrealized hedging gain (loss)		16.1	$	(4.2)		11.9
Reclassification of realized (gain) loss to:
Interest rate contracts – Interest expense		(3.4)		.9		(2.5)
Net unrealized gain (loss) on derivatives		12.7		(3.3)		9.4
Total other comprehensive income (loss)	$	7.2	$	(3.3)	$	3.9

(4)Receivables

Past due balances of Receivables still accruing finance income represent the total balance held (principal plus accrued interest) with any payment amounts 30 days or more past the contractual payment due date.

The Company monitors the credit quality of Receivables based on delinquency status. Non-performing Receivables represent loans for which the Company has ceased accruing finance income. Generally, when retail notes, revolving charge accounts, and finance lease accounts are 90 days delinquent, accrual of finance income and lease revenue is suspended. Generally, when a wholesale receivable becomes 60 days delinquent, the Company determines whether the accrual of finance income on interest-bearing wholesale receivables should be suspended. Finance income for non-performing Receivables is recognized on a cash basis. Accrual of finance income is generally resumed when the receivable becomes contractually current and collections are reasonably assured.

During the first quarter of 2019, the Company amended the timing in which finance income and lease revenue is generally suspended on retail notes, revolving charge accounts, and finance lease accounts from 120 days delinquent to 90 days delinquent. This change in estimate was made on a prospective basis and did not have a significant effect on the Company’s consolidated financial statements. Management’s methodology to determine the collectability of delinquent accounts was not affected by the change.

Receivable balances are written off to the allowance for credit losses when, in the judgement of management, they are considered uncollectible. Generally, when retail notes and finance lease accounts are 120 days delinquent, the collateral is repossessed or the account is designated for litigation, and the estimated uncollectible amount, after charging the dealer’s withholding account, if any, is written off to the allowance for credit losses. Revolving charge accounts are generally deemed to be uncollectible and written off to the allowance for credit losses when delinquency reaches 120 days. Generally, when a wholesale account becomes 60 days delinquent, the Company determines whether the collateral should be repossessed or the account designated for litigation, and the estimated uncollectible amount is written off to the allowance for credit losses.

An age analysis of past due Receivables that are still accruing interest and non-performing Receivables was as follows (in millions of dollars):


	July 28, 2019								February 2, 2020
					90 Days								90 Days
	30-59 Days		60-89 Days		or Greater		Total		30-59 Days		60-89 Days		or Greater		Total
	Past Due		Past Due		Past Due		Past Due		Past Due		Past Due		Past Due		Past Due
Retail notes:
Agriculture and turf	$	107.7	$	53.0	$	2.8	$	163.5	$	123.7	$	53.4	$	3.0	$	180.1
Construction and forestry		82.3		33.6				115.9		89.5		34.3				123.8
Revolving charge accounts:
Agriculture and turf		22.4		5.1				27.5		51.4		14.1				65.5
Construction and forestry		3.9		1.4				5.3		4.1		1.4				5.5
Wholesale receivables:
Agriculture and turf		4.4		.2		.7		5.3		7.6		2.3		1.5		11.4
Construction and forestry		1.1		1.5		.2		2.8		3.8		.1		.3		4.2
Financing leases:
Agriculture and turf		11.9		13.3		.2		25.4		8.2		3.8		.4		12.4
Construction and forestry		2.8		.5				3.3		1.5		2.2				3.7
Total Receivables	$	236.5	$	108.6	$	3.9	$	349.0	$	289.8	$	111.6	$	5.2	$	406.6


	Total		Total Non-				Total		Total		Total Non-				Total
	Past Due		Performing		Current		Receivables		Past Due		Performing		Current		Receivables
Retail notes:
Agriculture and turf	$	163.5	$	173.2	$	15,139.6	$	15,476.3	$	180.1	$	187.2	$	15,464.8	$	15,832.1
Construction and forestry		115.9		115.6		2,888.8		3,120.3		123.8		109.4		3,169.9		3,403.1
Revolving charge accounts:
Agriculture and turf		27.5		10.0		3,662.4		3,699.9		65.5		5.6		2,516.8		2,587.9
Construction and forestry		5.3		1.4		92.1		98.8		5.5		1.0		78.8		85.3
Wholesale receivables:
Agriculture and turf		5.3		6.1		8,065.2		8,076.6		11.4		9.9		7,219.4		7,240.7
Construction and forestry		2.8		3.6		2,216.5		2,222.9		4.2		1.8		1,899.6		1,905.6
Financing leases:
Agriculture and turf		25.4		22.1		524.5		572.0		12.4		12.4		495.1		519.9
Construction and forestry		3.3		2.4		139.2		144.9		3.7		4.4		140.2		148.3
Total Receivables	$	349.0	$	334.4	$	32,728.3	$	33,411.7	$	406.6	$	331.7	$	30,984.6	$	31,722.9


	November 3, 2019
					90 Days
	30-59 Days		60-89 Days		or Greater		Total
	Past Due		Past Due		Past Due		Past Due
Retail notes:
Agriculture and turf	$	120.0	$	64.2	$	1.5	$	185.7
Construction and forestry		73.9		26.6				100.5
Revolving charge accounts:
Agriculture and turf		19.1		9.2				28.3
Construction and forestry		3.2		1.2				4.4
Wholesale receivables:
Agriculture and turf		4.1		1.9		.8		6.8
Construction and forestry		.1		.3		.3		.7
Financing leases:
Agriculture and turf		14.6		7.8		.5		22.9
Construction and forestry		2.8		.7				3.5
Total Receivables	$	237.8	$	111.9	$	3.1	$	352.8


	Total		Total Non-				Total
	Past Due		Performing		Current		Receivables
Retail notes:
Agriculture and turf	$	185.7	$	168.7	$	15,831.5	$	16,185.9
Construction and forestry		100.5		112.9		3,100.8		3,314.2
Revolving charge accounts:
Agriculture and turf		28.3		6.1		3,727.9		3,762.3
Construction and forestry		4.4		.9		95.4		100.7
Wholesale receivables:
Agriculture and turf		6.8		6.3		6,544.6		6,557.7
Construction and forestry		.7		2.9		2,145.5		2,149.1
Financing leases:
Agriculture and turf		22.9		11.6		569.8		604.3
Construction and forestry		3.5		2.5		141.3		147.3
Total Receivables	$	352.8	$	311.9	$	32,156.8	$	32,821.5

October 28, 2018






90 Days


30-59 Days

60-89 Days

or Greater

Total

Past Due

Past Due

Past Due

Past Due

Retail notes:

Agriculture and turf

$
119.7

$
67.5

$
57.5

$
244.7

Construction and forestry

75.9

44.8

49.7

170.4

Revolving charge accounts:

Agriculture and turf

22.8

8.3

4.6

35.7

Construction and forestry

4.0

1.2

.8

6.0

Wholesale receivables:

Agriculture and turf

1.7

.4

1.1

3.2

Construction and forestry

1.2

1.2

Financing leases:

Agriculture and turf

9.9

6.1

2.3

18.3

Construction and forestry

1.7

1.1

.9

3.7

Total Receivables

$
236.9

$
129.4

$
116.9

$
483.2


	January 27, 2019
					90 Days
	30-59 Days		60-89 Days		or Greater		Total
	Past Due		Past Due		Past Due		Past Due
Retail notes:
Agriculture and turf	$	142.7	$	56.3	$	.6	$	199.6
Construction and forestry		95.8		45.3				141.1
Revolving charge accounts:
Agriculture and turf		53.9		17.6				71.5
Construction and forestry		5.6		2.1				7.7
Wholesale receivables:
Agriculture and turf		6.4		.4		.8		7.6
Construction and forestry		.7		.7		2.5		3.9
Financing leases:
Agriculture and turf		7.2		4.5		.7		12.4
Construction and forestry		2.7		3.0				5.7
Total Receivables	$	315.0	$	129.9	$	4.6	$	449.5


	Total		Total Non-				Total		Total		Total Non-				Total
	Past Due		Performing		Current		Receivables		Past Due		Performing		Current		Receivables
Retail notes:
Agriculture and turf	$	244.7	$	95.9	$	14,838.6	$	15,179.2	$	199.6	$	185.9	$	14,398.8	$	14,784.3
Construction and forestry		170.4		28.5		2,732.8		2,931.7		141.1		98.6		2,736.4		2,976.1
Revolving charge accounts:
Agriculture and turf		35.7		1.3		3,659.2		3,696.2		71.5		7.4		2,514.1		2,593.0
Construction and forestry		6.0				95.4		101.4		7.7		1.4		83.8		92.9
Wholesale receivables:
Agriculture and turf		3.2		7.3		6,135.5		6,146.0		7.6		5.1		7,090.8		7,103.5
Construction and forestry		1.2				1,820.4		1,821.6		3.9				1,883.0		1,886.9
Financing leases:
Agriculture and turf		18.3		8.4		597.5		624.2		12.4		14.3		528.0		554.7
Construction and forestry		3.7		.6		142.1		146.4		5.7		2.9		139.2		147.8
Total Receivables	$	483.2	$	142.0	$	30,021.5	$	30,646.7	$	449.5	$	315.6	$	29,374.1	$	30,139.2

July 29, 2018






90 Days


30-59 Days

60-89 Days

or Greater

Total

Past Due

Past Due

Past Due

Past Due

Retail notes:

Agriculture and turf

$
109.7

$
43.9

$
47.3

$
200.9

Construction and forestry

98.0

41.8

47.8

187.6

Revolving charge accounts:

Agriculture and turf

22.8

6.3

6.2

35.3

Construction and forestry

3.6

1.6

1.0

6.2

Wholesale receivables:

Agriculture and turf

2.4

.5

1.4

4.3

Construction and forestry

2.4

1.7

4.1

Financing leases:

Agriculture and turf

9.6

6.5

5.6

21.7

Construction and forestry

2.4

.8

.1

3.3

Total Receivables

$
250.9

$
103.1

$
109.4

$
463.4

Total

Total Non-



Total

Past Due

Performing

Current

Receivables

Retail notes:

Agriculture and turf

$
200.9

$
82.1

$
14,305.5

$
14,588.5

Construction and forestry

187.6

28.0

2,617.9

2,833.5

Revolving charge accounts:

Agriculture and turf

35.3

1.1

3,548.0

3,584.4

Construction and forestry

6.2

96.3

102.5

Wholesale receivables:

Agriculture and turf

4.3

5.2

7,372.1

7,381.6

Construction and forestry

4.1

1,664.6

1,668.7

Financing leases:

Agriculture and turf

21.7

6.1

556.9

584.7

Construction and forestry

3.3

1.4

138.7

143.4

Total Receivables

$
463.4

$
123.9

$
30,300.0

$
30,887.3

Allowances for credit losses on Receivables are maintained in amounts considered to be appropriate in relation to the Receivables outstanding based on historical loss experience by product category, portfolio duration, delinquency trends, economic conditions in the Company’s major markets and geographies, and credit risk quality.

An analysis of the allowance for credit losses and investment in Receivables was as follows (in millions of dollars):


	Three Months Ended										Three Months Ended
	July 28, 2019										February 2, 2020
			Revolving										Revolving
	Retail		Charge		Wholesale		Financing		Total		Retail		Charge		Wholesale		Financing		Total
	Notes		Accounts		Receivables		Leases		Receivables		Notes		Accounts		Receivables		Leases		Receivables
Allowance:
Beginning of period balance	$	54.1	$	42.3	$	8.0	$	6.0	$	110.4	$	48.3	$	39.3	$	7.6	$	5.4	$	100.6
Provision (credit) for credit losses		5.5		17.9		(.3)		.3		23.4		13.1		(1.1)		(.2)		.3		12.1
Write-offs		(7.2)		(25.4)		(.1)		(.5)		(33.2)		(13.5)		(6.4)		(.8)		(.4)		(21.1)
Recoveries		1.8		7.5		.4		.1		9.8		.6		7.5		.8		.1		9.0
Translation adjustments																2.5				2.5
End of period balance	$	54.2	$	42.3	$	8.0	$	5.9	$	110.4	$	48.5	$	39.3	$	9.9	$	5.4	$	103.1
Balance individually evaluated *											$	2.2			$	5.3			$	7.5

Receivables:
End of period balance											$	19,235.2	$	2,673.2	$	9,146.3	$	668.2	$	31,722.9
Balance individually evaluated *											$	77.6	$	.1	$	18.0	$	.7	$	96.4

Nine Months Ended

July 28, 2019

Revolving

Retail

Charge

Wholesale

Financing

Total

Notes

Accounts

Receivables

Leases

Receivables

Allowance:

Beginning of period balance

$
51.6

$
42.3

$
8.0

$
4.8

$
106.7

Provision (credit) for credit losses

18.1

33.3

(4.0)

2.9

50.3

Write-offs

(20.4)

(50.8)

(.1)

(2.1)

(73.4)

Recoveries

5.0

17.5

4.0

.3

26.8

Translation adjustments

(.1)

.1

End of period balance

$
54.2

$
42.3

$
8.0

$
5.9

$
110.4

Balance individually evaluated *

$
2.0

$
2.9

$
.6

$
5.5

Receivables:

End of period balance

$
18,596.6

$
3,798.7

$
10,299.5

$
716.9

$
33,411.7

Balance individually evaluated *

$
60.8

$
.2

$
10.1

$
1.7

$
72.8

* Remainder is collectively evaluated.

Three Months Ended

July 29, 2018

Revolving

Retail

Charge

Wholesale

Financing

Total

Notes

Accounts

Receivables

Leases

Receivables

Allowance:

Beginning of period balance

$
56.6

$
39.7

$
9.9

$
8.6

$
114.8

Provision for credit losses

5.9

20.4

.8

.5

27.6

Write-offs

(6.3)

(25.1)

(.2)

(.8)

(32.4)

Recoveries

.8

4.7

.2

.3

6.0

Translation adjustments

(.2)

(.1)

(.3)

End of period balance

$
56.8

$
39.7

$
10.6

$
8.6

$
115.7


	Nine Months Ended										Three Months Ended
	July 29, 2018										January 27, 2019
			Revolving										Revolving
	Retail		Charge		Wholesale		Financing		Total		Retail		Charge		Wholesale		Financing		Total
	Notes		Accounts		Receivables		Leases		Receivables		Notes		Accounts		Receivables		Leases		Receivables
Allowance:
Beginning of period balance	$	55.7	$	39.7	$	9.9	$	8.5	$	113.8	$	51.6	$	42.3	$	8.0	$	4.8	$	106.7
Provision for credit losses		12.0		28.8		1.1		1.8		43.7
Provision (credit) for credit losses												4.5		(.9)		(3.9)		1.1		.8
Write-offs		(16.1)		(44.1)		(.6)		(2.3)		(63.1)		(6.8)		(3.9)				(.6)		(11.3)
Recoveries		5.4		15.3		.1		.6		21.4		1.9		4.8		3.6				10.3
Translation adjustments		(.2)				.1				(.1)						.2				.2
End of period balance	$	56.8	$	39.7	$	10.6	$	8.6	$	115.7	$	51.2	$	42.3	$	7.9	$	5.3	$	106.7
Balance individually evaluated *	$	.1			$	3.3	$	.1	$	3.5	$	.1			$	2.8			$	2.9

Receivables:
End of period balance	$	17,422.0	$	3,686.9	$	9,050.3	$	728.1	$	30,887.3	$	17,760.4	$	2,685.9	$	8,990.4	$	702.5	$	30,139.2
Balance individually evaluated *	$	55.5	$	.9	$	7.4	$	.2	$	64.0	$	56.4	$	1.9	$	7.0			$	65.3

* Remainder is collectively evaluated.

Receivables are considered impaired when it is probable the Company will be unable to collect all amounts due according to the contractual terms. Receivables reviewed for impairment generally include those that are either past due, or have provided bankruptcy notification, or require significant collection efforts. Receivables that are impaired are generally classified as ~~non-performing.~~non performing.

1614

An analysis of impaired Receivables was as follows (in millions of dollars):


			Unpaid				Average				Unpaid				Average
	Recorded		Principal		Specific		Recorded		Recorded		Principal		Specific		Recorded
	Investment		Balance		Allowance		Investment		Investment		Balance		Allowance		Investment
July 28, 2019 *
Receivables with specific allowance:
Retail notes	$	4.8	$	4.6	$	2.0	$	4.8
Wholesale receivables		5.3		5.3		2.9		5.8
Financing leases		.6		.5		.6		.6
Total with specific allowance		10.7		10.4		5.5		11.2

Receivables without specific allowance:
Retail notes		23.3		22.8				25.4
Wholesale receivables		4.8		4.8				4.3
Total without specific allowance		28.1		27.6				29.7
Total	$	38.8	$	38.0	$	5.5	$	40.9

Agriculture and turf	$	30.7	$	30.1	$	5.2	$	32.2
Construction and forestry		8.1		7.9		.3		8.7
Total	$	38.8	$	38.0	$	5.5	$	40.9

October 28, 2018 *
February 2, 2020 *
Receivables with specific allowance:
Retail notes	$	.8	$	.6	$	.1	$	.9	$	5.9	$	5.5	$	2.2	$	5.9
Wholesale receivables		5.8		5.8		2.8		6.7		14.8		14.8		5.3		15.2
Total with specific allowance		6.6		6.4		2.9		7.6		20.7		20.3		7.5		21.1

Receivables without specific allowance:
Retail notes		23.9		23.6				26.1		21.5		21.1				22.7
Wholesale receivables		2.4		2.4				2.6		2.8		2.8				2.8
Total without specific allowance		26.3		26.0				28.7		24.3		23.9				25.5
Total	$	32.9	$	32.4	$	2.9	$	36.3	$	45.0	$	44.2	$	7.5	$	46.6

Agriculture and turf	$	28.8	$	28.4	$	2.9	$	31.7	$	38.4	$	37.8	$	7.3	$	39.8
Construction and forestry		4.1		4.0				4.6		6.6		6.4		.2		6.8
Total	$	32.9	$	32.4	$	2.9	$	36.3	$	45.0	$	44.2	$	7.5	$	46.6

July 29, 2018 *
November 3, 2019 *
Receivables with specific allowance:
Retail notes	$	.9	$	.8	$	.1	$	.9	$	4.9	$	4.6	$	1.9	$	5.0
Wholesale receivables		6.4		6.4		3.3		7.6		5.3		5.3		2.9		5.7
Financing leases		.2		.2		.1		.2
Total with specific allowance		7.5		7.4		3.5		8.7		10.2		9.9		4.8		10.7
									��
Receivables without specific allowance:
Retail notes		24.9		24.7				26.6		22.9		22.4				25.0
Wholesale receivables		.2		.2				.3		3.9		3.9				4.1
Total without specific allowance		25.1		24.9				26.9		26.8		26.3				29.1
Total	$	32.6	$	32.3	$	3.5	$	35.6	$	37.0	$	36.2	$	4.8	$	39.8

Agriculture and turf	$	26.8	$	26.5	$	3.4	$	29.5	$	30.3	$	29.7	$	4.6	$	32.0
Construction and forestry		5.8		5.8		.1		6.1		6.7		6.5		.2		7.8
Total	$	32.6	$	32.3	$	3.5	$	35.6	$	37.0	$	36.2	$	4.8	$	39.8

January 27, 2019 *
Receivables with specific allowance:
Retail notes									$	.8	$	.7	$	.1	$	.8
Wholesale receivables										5.9		5.9		2.8		5.7
Total with specific allowance										6.7		6.6		2.9		6.5

Receivables without specific allowance:
Retail notes										24.1		23.6				24.1
Wholesale receivables										.1		.1				.4
Total without specific allowance										24.2		23.7				24.5
Total									$	30.9	$	30.3	$	2.9	$	31.0

Agriculture and turf									$	26.4	$	25.9	$	2.9	$	26.6
Construction and forestry										4.5		4.4				4.4
Total									$	30.9	$	30.3	$	2.9	$	31.0

* Finance income recognized was not material.

1715

A troubled debt restructuring is generally the modification of debt in which a creditor grants a concession it would not otherwise consider to a debtor that is experiencing financial difficulties. These modifications may include a reduction of the stated interest rate, an extension of the maturity dates, a reduction of the face amount or maturity amount of the debt, or a reduction of accrued interest. During the first ~~nine~~three months of ~~2019,~~2020, the Company identified ~~233~~73 Receivable contracts, primarily retail notes, as troubled debt restructurings with aggregate balances of ~~$11.7~~$2.2 million pre-modification and ~~$11.3~~$2.0 million post-modification. During the first ~~nine~~three months of ~~2018,~~2019, there were ~~286~~64 Receivable contracts, primarily retail notes, with aggregate balances of ~~$16.2~~$1.5 million pre-modification and ~~$15.4~~$1.4 million post-modification. During these same periods, there were no0 significant troubled debt restructurings that subsequently defaulted and were written off. At ~~July 28, 2019,~~February 2, 2020, the Company had no0 commitments to lend additional funds to borrowers whose accounts were modified in troubled debt restructurings.

(5) Securitization of Receivables

The Company, as a part of its overall funding strategy, periodically transfers certain Receivables (retail notes) into variable interest entities (VIEs) that are special purpose entities (SPEs), or non-VIE banking operations, as part of its asset-backed securities programs (securitizations). The structure of these transactions is such that the transfer of the retail notes did not meet the accounting criteria for sales of receivables, and is, therefore, accounted for as a secured borrowing. SPEs utilized in securitizations of retail notes differ from other entities included in the Company’s consolidated statements because the assets they hold are legally isolated. Use of the assets held by the SPEs or the non-VIEs is restricted by terms of the documents governing the securitization transactions.

In these securitizations, the retail notes are transferred to certain SPEs or to non-VIE banking operations, which in turn issue debt to investors. The debt securities issued to the third party investors result in secured borrowings, which are recorded as “Securitization borrowings” on the balance sheet. The securitized retail notes are recorded as “Retail notes securitized” on the balance sheet. The total restricted assets on the consolidated balance sheet related to these securitizations include the retail notes securitized less an allowance for credit losses, and other assets primarily representing restricted cash. Restricted cash results from contractual requirements in securitized borrowing arrangements and serves as a credit enhancement. The restricted cash is used to satisfy payment deficiencies, if any, in the required payments on secured borrowings. The balance of restricted cash is contractually stipulated and is either a fixed amount as determined by the initial balance of the retail notes securitized or a fixed percentage of the outstanding balance of the retail notes securitized. The restriction is removed either after all secured borrowing payments are made or proportionally as these receivables are collected and borrowing obligations reduced. For those securitizations in which retail notes are transferred into SPEs, the SPEs supporting the secured borrowings are consolidated unless the Company does not have both the power to direct the activities that most significantly impact the SPEs’ economic performance and the obligation to absorb losses or the right to receive benefits that could potentially be significant to the SPEs. No additional support to these SPEs beyond what was previously contractually required has been provided during the reporting periods.

In certain securitizations, the Company consolidates the SPEs since it has both the power to direct the activities that most significantly impact the SPEs’ economic performance through its role as servicer of all the Receivables held by the SPEs and the obligation through variable interests in the SPEs to absorb losses or receive benefits that could potentially be significant to the SPEs. The restricted assets (retail notes securitized, allowance for credit losses, and other assets) of the consolidated SPEs totaled ~~$3,425.2~~$2,490.1 million, ~~$2,592.4~~$2,894.4 million, and ~~$2,970.7~~$2,136.8 million at ~~July 28,~~February 2, 2020, November 3, 2019, ~~October 28, 2018,~~ and ~~July 29, 2018,~~January 27, 2019, respectively. The liabilities (securitization borrowings and accrued interest) of these SPEs totaled ~~$3,316.4~~$2,442.1 million, ~~$2,519.6~~$2,847.2 million, and ~~$2,860.2~~$2,091.8 million at ~~July 28,~~February 2, 2020, November 3, 2019, ~~October 28, 2018,~~ and ~~July 29, 2018,~~January 27, 2019, respectively. The credit holders of these SPEs do not have legal recourse to the Company’s general credit.

In certain securitizations, the Company transfers retail notes to non-VIE banking operations, which are not consolidated since the Company does not have a controlling interest in the entities. The Company’s carrying values and interests related to the securitizations with the unconsolidated non-VIEs were restricted assets (retail notes securitized, allowance for credit losses, and other assets) of ~~$532.6~~$596.6 million, ~~$427.9~~$447.0 million, and ~~$502.2~~$722.8 million at ~~July 28,~~February 2, 2020, November 3, 2019, ~~October 28, 2018,~~ and ~~July 29, 2018,~~January 27, 2019, respectively. The liabilities ~~(securitization~~

1816

(securitization borrowings and accrued interest) were ~~$492.7~~$567.3 million, ~~$399.8~~$420.5 million, and ~~$462.9~~$676.0 million at ~~July 28,~~February 2, 2020, November 3, 2019, ~~October 28, 2018,~~ and ~~July 29, 2018,~~January 27, 2019, respectively.

In certain securitizations, the Company transfers retail notes into bank-sponsored, multi-seller, commercial paper conduits, which are SPEs that are not consolidated. The Company does not service a significant portion of the conduits’ receivables, and therefore, does not have the power to direct the activities that most significantly impact the conduits’ economic performance. These conduits provide a funding source to the Company (as well as other transferors into the conduit) as they fund the retail notes through the issuance of commercial paper. The Company’s carrying values and variable interest related to these conduits were restricted assets (retail notes securitized, allowance for credit losses, and other assets) of ~~$1,286.1~~$1,440.5 million, ~~$1,033.2~~$1,079.2 million, and ~~$1,212.9~~$1,745.2 million at ~~July 28,~~February 2, 2020, November 3, 2019, ~~October 28, 2018,~~ and ~~July 29, 2018,~~January 27, 2019, respectively. The liabilities (securitization borrowings and accrued interest) related to these conduits were ~~$1,189.6~~$1,369.7 million, ~~$965.5~~$1,015.2 million, and ~~$1,117.9~~$1,632.4 million at ~~July 28,~~February 2, 2020, November 3, 2019, ~~October 28, 2018,~~ and ~~July 29, 2018,~~January 27, 2019, respectively.

The Company’s carrying amount of the liabilities to the unconsolidated conduits, compared to the maximum exposure to loss related to these conduits, which would only be incurred in the event of a complete loss on the restricted assets was as follows (in millions of dollars):


	July 28		February 2
	2019		2020
Carrying value of liabilities	$	1,189.6	$	1,369.7
Maximum exposure to loss		1,286.1		1,440.5

The total assets of unconsolidated VIEs related to securitizations were approximately ~~$34.4~~$41.1 billion at ~~July 28, 2019.~~February 2, 2020.

The components of consolidated restricted assets related to secured borrowings in securitization transactions were as follows (in millions of dollars):


	July 28		October 28		July 29		February 2		November 3		January 27
	2019		2018		2018		2020		2019		2019
Retail notes securitized	$	5,159.1	$	3,954.9	$	4,582.9	$	4,443.7	$	4,349.6	$	4,505.9
Allowance for credit losses		(12.9)		(9.6)		(11.5)		(7.9)		(11.2)		(10.1)
Other assets		97.7		108.2		114.4		91.4		82.2		109.0
Total restricted securitized assets	$	5,243.9	$	4,053.5	$	4,685.8	$	4,527.2	$	4,420.6	$	4,604.8

The components of consolidated secured borrowings and other liabilities related to securitizations were as follows (in millions of dollars):


	July 28		October 28		July 29		February 2		November 3		January 27
	2019		2018		2018		2020		2019		2019
Securitization borrowings	$	4,994.8	$	3,881.7	$	4,437.5	$	4,373.9	$	4,277.0	$	4,397.1
Accrued interest on borrowings		3.9		3.2		3.5		5.2		5.9		3.1
Total liabilities related to restricted securitized assets	$	4,998.7	$	3,884.9	$	4,441.0	$	4,379.1	$	4,282.9	$	4,400.2

The secured borrowings related to these restricted securitized retail notes are obligations that are payable as the retail notes are liquidated. Repayment of the secured borrowings depends primarily on cash flows generated by the restricted assets. Due to the Company's short-term credit rating, cash collections from these restricted assets are not required to be placed into a segregated collection account until immediately prior to the time payment is required to the secured creditors. At ~~July 28, 2019,~~February 2, 2020, the maximum remaining term of all restricted securitized retail notes was approximately ~~six~~seven years.

The Company’s restricted cash held at February 2, 2020, November 3, 2019, January 27, 2019, and October 28, 2018 was $86.5 million, $78.3 million, $87.0 million and $103.4 million, respectively. The

restricted cash primarily relates to the securitization of receivables and is reported in other assets on the consolidated balance sheet and in cash, cash equivalents, and restricted cash on the statement of consolidated cash flows.

(6) Leases

The Company leases John Deere equipment and a limited amount of non-Deere equipment to retail customers through sales-type, direct financing, and operating leases. Sales-type and direct financing leases are reported in financing leases on the consolidated balance sheet. Operating leases are reported in equipment on operating leases – net on the consolidated balance sheet.

Initial lease terms generally range from less than one year to seven years. Leases offered by the Company may include early termination and renewal options. At the end of a lease, the lessee generally has the option to purchase the underlying equipment for a fixed price or return it to the dealer. If the equipment is returned to the dealer, the dealer also has the option to purchase the equipment or return it to the Company for remarketing.

The Company estimates the residual values for operating leases at lease inception based on several factors, including lease term, expected hours of usage, historical wholesale sale prices, return experience, intended use of the equipment, market dynamics and trends, and dealer residual guarantees. The Company reviews residual value estimates during the lease term and tests the carrying value of its operating lease assets for impairment when events or circumstances necessitate. The depreciation is adjusted on a straight-line basis over the remaining lease term if residual value estimates decline. Lease agreements include usage limits and specifications on machine condition, which allow the Company to assess lessees for excess use or damages to the underlying equipment.

The Company has elected to combine lease and nonlease components. The nonlease components primarily relate to preventative maintenance and extended warranty agreements financed by the customer. The Company has also elected to report consideration related to sales and value added taxes net of the related tax expense. Property taxes on leased assets are recorded on a gross basis in lease revenues and administrative and operating expenses on the statement of consolidated income. Variable lease revenues primarily relate to separately invoiced property taxes on leased equipment in certain markets and late fees.

Lease revenues earned by the Company were as follows (in millions of dollars):


	Three Months Ended
	February 2, 2020
Sales-type and direct financing lease revenues	$	11.6
Operating lease revenues		258.5
Variable lease revenues		4.8
Total lease revenues	$	274.9

At the time of accepting a lease that qualifies as a sales-type or direct financing lease, the Company records the gross amount of lease payments receivable, estimated residual value of the leased equipment, and unearned finance income. The unearned finance income is recognized as revenue over the lease term using the interest method.

Sales-type and direct financing lease receivables by product category were as follows (in millions of dollars):


	February 2		November 3
	2020		2019
Agriculture and turf	$	425.5	$	422.7
Construction and forestry		154.5		153.2
Total		580.0		575.9
Guaranteed residual values		113.1		195.1
Unguaranteed residual values		57.1		61.1
Unearned finance income		(82.0)		(80.5)
Financing leases receivable	$	668.2	$	751.6

Scheduled payments, including guaranteed residual values, on sales-type and direct financing lease receivables at February 2, 2020 were as follows (in millions of dollars):


	February 2
	2020
Due in:
Remainder of 2020	$	260.1
2021		182.1
2022		129.4
2023		72.2
2024		36.7
Later years		12.6
Total	$	693.1

Scheduled payments on financing lease receivables under the previous lease standard at November 3, 2019 were as follows (in millions of dollars):


	November 3
	2019
Due in:
2020	$	225.6
2021		155.2
2022		103.8
2023		58.3
2024		24.2
Later years		8.8
Total	$	575.9

Lease payments from equipment on operating leases are recorded as income on a straight-line method over the lease terms. Operating lease assets are recorded at cost and depreciated to their estimated residual value on a straight-line method over the terms of the leases.

The cost of equipment on operating leases by product category was as follows (in millions of dollars):


	February 2		November 3
	2020		2019
Agriculture and turf	$	5,145.3	$	5,109.4
Construction and forestry		1,784.4		1,778.6
Total		6,929.7		6,888.0
Accumulated depreciation		(1,404.0)		(1,357.5)
Equipment on operating leases - net	$	5,525.7	$	5,530.5

The total operating lease residual values at February 2, 2020 and November 3, 2019 were $3,892.4 million and $3,876.5 million, respectively. Certain operating leases are subject to residual value guarantees. The total residual value guarantees were $60.7 million and $65.7 million at February 2, 2020 and November 3, 2019, respectively.

Lease payments for equipment on operating leases at February 2, 2020 were scheduled as follows (in millions of dollars):


	February 2
	2020
Due in:
Remainder of 2020	$	615.0
2021		575.9
2022		303.0
2023		126.2
2024		33.9
Later years		.9
Total	$	1,654.9

Rental payments for equipment on operating leases under the previous lease standard at November 3, 2019 were scheduled as follows (in millions of dollars):


	November 3
	2019
Due in:
2020	$	738.3
2021		484.4
2022		231.6
2023		92.8
2024		14.1
Later years		.3
Total	$	1,561.5

The Company discusses with lessees and dealers options to purchase the equipment or extend the lease prior to lease maturity. Equipment returned to the Company upon termination of leases is remarketed by the Company. The matured operating lease inventory balances at February 2, 2020 and November 3, 2019 were $127.4 million and $160.8 million, respectively. Matured operating lease inventory is reported in other assets on the consolidated balance sheet.

~~(6)~~(7) Notes Receivable from John Deere

The Company makes loans to affiliated companies. The Company receives interest from John Deere at competitive market interest rates. The lending agreements mature over the next seven years. Interest earned from John Deere was ~~$4.5 million in the third quarter and $12.1~~$4.4 million in the first ~~nine~~three months of ~~2019,~~2020, compared with ~~$2.8 million and $8.0~~$3.6 million for the same ~~periods~~period last year.

The Company had notes receivable from John Deere with the following affiliated companies as follows (in millions of dollars):


	July 28		October 28		July 29		February 2		November 3		January 27
	2019		2018		2018		2020		2019		2019
Limited Liability Company John Deere Financial	$	148.9	$	123.5	$	115.9	$	115.3	$	148.3	$	127.7
Banco John Deere S.A.		128.4		71.9		75.9		167.2		143.4		71.1
Industrias John Deere Argentina S.A.												22.3
Total Notes Receivable from John Deere	$	277.3	$	195.4	$	191.8	$	282.5	$	291.7	$	221.1

~~(7)~~(8) Commitments and Contingencies

At ~~July 28, 2019,~~February 2, 2020, John Deere Financial Inc., the John Deere finance subsidiary in Canada, had ~~$1,139.7~~$1,665.7 million of medium-term notes outstanding, and a fair value liability of ~~$24.6~~$23.9 million for derivatives outstanding, prior to considering applicable netting provisions, with a notional amount of ~~$2,505.1~~$3,369.9 million that were guaranteed by Capital Corporation. The weighted average interest rate on the medium-term notes at ~~July 28, 2019~~February 2, 2020 was 2.7 percent with a maximum remaining maturity of approximately ~~five~~seven years.

Capital Corporation has a variable interest in John Deere Canada Funding Inc. (JDCFI), a wholly-owned subsidiary of John Deere Financial Inc., which was created as a VIE to issue debt in public markets to fund the operations of affiliated companies in Canada. Capital Corporation has a variable interest in JDCFI because it provides guarantees for all debt issued by JDCFI, however it does not consolidate JDCFI because it does not have the power to direct the activities that most significantly impact JDCFI’s economic performance. Capital Corporation has no0 carrying value of assets or liabilities related to JDCFI. Its maximum exposure to loss is the amount of the debt issued by JDCFI and guaranteed by Capital Corporation, which was ~~$1,671.6~~$1,665.7 million at ~~July 28, 2019.~~February 2, 2020. The weighted average interest rate on the debt at ~~July 28, 2019~~February 2, 2020 was 2.3 percent with a maximum remaining maturity of approximately four years. No additional support beyond what was previously contractually required has been provided to JDCFI during the reporting periods.

The Company has commitments to extend credit to customers and John Deere dealers through lines of credit and other pre-approved credit arrangements. The Company applies the same credit policies and approval process for these commitments to extend credit as it does for its Receivables. Collateral is not required for these commitments, but if credit is extended, collateral may be required upon funding. The amount of unused commitments to extend credit to John Deere dealers was ~~$6.3~~$7.3 billion at ~~July 28, 2019.~~February 2, 2020. The amount of unused commitments to extend credit to customers was ~~$28.6~~$29.4 billion at ~~July 28, 2019.~~February 2, 2020. A significant portion of these commitments is not expected to be fully drawn upon; therefore, the total commitment amounts likely do not represent a future cash requirement. The Company generally has the right to unconditionally cancel, alter, or amend the terms of these commitments at any time. Over 95 percent of the unused commitments to extend credit to customers relate to revolving charge accounts. At ~~July 28, 2019,~~February 2, 2020, Capital Corporation had ~~$44.3~~$76.0 million in unused loan commitments denominated in rubles to Limited Liability Company John Deere Financial, the John Deere finance subsidiary in Russia.

At ~~July 28, 2019,~~February 2, 2020, the Company had restricted other assets associated with borrowings related to securitizations (see Note 5). Excluding the securitization programs, the remaining balance of restricted other assets was not material as of ~~July 28, 2019.~~February 2, 2020.

The Company is subject to various unresolved legal actions which arise in the normal course of its business, the most prevalent of which relate to retail credit matters. The Company believes the reasonably possible range of losses for these unresolved legal actions would not have a material effect on its consolidated financial statements.

~~(8)~~(9) Income Taxes

In 2019, the Company is subject to additional provisions of the U.S. tax reform legislation enacted in December 2017 (tax reform). The Company’s 2019 U.S. statutory corporate income tax rate is 21 percent and was approximately 23.3 percent for 2018. The provisions of tax reform affecting the Company in 2019 include a tax on global intangible low-taxed income (GILTI), a tax determined by base erosion and anti-abuse tax benefits (BEAT) for certain payments between a U.S. corporation and foreign subsidiaries, a limitation on the deductibility of certain executive compensation, a deduction for foreign derived intangible income (FDII), and interest expense limitations. Based on the current interpretations of tax reform legislation and related regulations, along with the Company’s 2019 forecasts, the Company does not expect the combined effect of these provisions to be significant for the 2019 provision for income taxes.

In 2019 and 2018, the Company recorded discrete tax adjustments related to the remeasurement of the Company’s net deferred tax liabilities to the new corporate income tax rate and for the deemed earnings repatriation tax (repatriation tax). Those adjustments for the third quarter and first nine months of 2019 and 2018 were as follows (in millions of dollars):

Three Months Ended

Nine Months Ended

July 28

July 29

July 28

July 29

2019

2018

2019

2018

Net deferred tax liability remeasurement

$
(3.6)

$
4.8

$
(326.0)

Deemed earnings repatriation tax

$
(13.9)

(13.9)

15.7

Total discrete tax (benefit) expense

$
(13.9)

$
(3.6)

$
(9.1)

$
(310.3)

The full year 2018 discrete tax benefit for the remeasurement of the net deferred tax liabilities was $362.9 million and the repatriation tax expense was $20.6 million. The repatriation tax determination for the 2018 U.S. income tax return was completed in the third quarter of 2019 and resulted in a discrete tax benefit of approximately $13.9 million. The discrete benefit was based on adjustments from completing the 2018 income tax returns and the interpretation of the tax law and associated regulations for the repatriation tax, primarily related to fiscal year end companies. The Company paid the repatriation tax in 2019 with a U.S. income tax overpayment.

The taxable income of the Company is included in the consolidated U.S. income tax return of Deere & Company. Under a tax sharing agreement with Deere & Company, the Company’s provision (credit) for income taxes is generally recorded as if Capital Corporation and each of its subsidiaries filed separate income tax returns, with a modification for realizability of certain tax benefits. The difference between the provision (credit) for income taxes recorded by the Company and the provision (credit) for income taxes calculated on an unmodified, separate return basis was not significant for any periods presented.

The Company’s unrecognized tax benefits at ~~July 28, 2019~~February 2, 2020 were ~~$32.6~~$27.7 million, compared to ~~$36.3~~$32.5 million at ~~October 28, 2018.~~November 3, 2019. The liability at ~~July 28,~~February 2, 2020, November 3, 2019, ~~October 28, 2018,~~ and ~~July 29, 2018~~January 27, 2019 consisted of approximately ~~$16.4~~$14.6 million, ~~$19.4~~$17.6 million, and ~~$17.8~~$14.5 million, respectively, which would affect the effective tax rate if the tax benefits were recognized. The remaining liability was related to tax positions for which there are offsetting tax receivables, or the uncertainty was only related to timing. The Company expects that any reasonably possible change in the amounts of unrecognized tax benefits in the next 12 months would not be significant.

~~(9)~~(10) Fair Value Measurements

Fair value is defined as the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date. To determine fair value, the Company uses various methods including market and income approaches. The Company utilizes valuation models and techniques that maximize the use of observable inputs. The models are industry-standard models that consider various assumptions including time values and yield curves as well as other economic measures. These valuation techniques are consistently applied.

Level 1 measurements consist of quoted prices in active markets for identical assets or liabilities. Level 2 measurements include significant other observable inputs such as quoted prices for similar assets or liabilities in active markets; identical assets or liabilities in inactive markets; observable inputs such as interest rates and yield curves; and other market-corroborated inputs. Level 3 measurements include significant unobservable inputs.

The fair values of financial instruments that do not approximate the carrying values were as follows (in millions of dollars):


	July 28, 2019				October 28, 2018				July 29, 2018				February 2, 2020				November 3, 2019				January 27, 2019
	Carrying		Fair		Carrying		Fair		Carrying		Fair		Carrying		Fair		Carrying		Fair		Carrying		Fair
	Value		Value *		Value		Value *		Value		Value *		Value		Value *		Value		Value *		Value		Value *
Receivables financed – net	$	28,155.1	$	28,165.9	$	26,594.7	$	26,390.4	$	26,200.2	$	26,016.4	$	27,184.0	$	27,221.8	$	28,382.5	$	28,396.6	$	25,536.7	$	25,408.9
Retail notes securitized – net		5,146.2		5,154.2		3,945.3		3,894.6		4,571.4		4,517.4		4,435.8		4,463.9		4,338.4		4,361.9		4,495.8		4,454.4
Securitization borrowings		4,994.8		5,017.6		3,881.7		3,869.5		4,437.5		4,425.9		4,373.9		4,403.3		4,277.0		4,301.7		4,397.1		4,391.1
Current maturities of long-term borrowings		6,269.5		6,276.3		4,587.6		4,577.8		5,111.3		5,111.4		5,577.6		5,597.5		5,716.6		5,727.9		4,330.7		4,322.4
Long-term borrowings		20,035.4		20,298.1		19,432.2		19,535.8		18,591.5		18,704.3		20,861.9		21,236.0		21,052.4		21,369.9		19,575.0		19,663.9

* Fair value measurements above were Level 3 for all Receivables and Level 2 for all borrowings.

Fair values of Receivables that were issued long-term were based on the discounted values of their related cash flows at interest rates currently being offered by the Company for similar Receivables. The fair values of the remaining Receivables approximated the carrying amounts.

Fair values of long-term borrowings and short-term securitization borrowings were based on current market quotes for identical or similar borrowings and credit risk, or on the discounted values of their related cash flows at current market interest rates. Certain long-term borrowings have been swapped to current variable interest rates. The carrying values of these long-term borrowings include adjustments related to fair value hedges.

Assets and liabilities measured at fair value as Level 2 measurements on a recurring basis were as follows (in millions of dollars):


	July 28		October 28		July 29		February 2		November 3		January 27
	2019		2018		2018		2020		2019		2019
Marketable securities
International debt securities	$	6.9					$	2.3	$	3.2	$	4.0
Receivables from John Deere
Derivatives:
Interest rate contracts		234.4	$	55.9	$	53.3		408.3		331.4		65.3
Cross-currency interest rate contracts		.9		3.4		2.4		.4		.5		1.6
Other assets
Derivatives:
Interest rate contracts		.1		.4		.7						.2
Foreign exchange contracts		4.7		22.0		11.2		13.4		1.9		11.1
Total assets *	$	247.0	$	81.7	$	67.6	$	424.4	$	337.0	$	82.2

Other payables to John Deere
Derivatives:
Interest rate contracts	$	53.3	$	342.4	$	329.5	$	33.1	$	44.4	$	225.0
Cross-currency interest rate contracts		2.0		.1		1.6		3.5		3.0		2.0
Accounts payable and accrued expenses
Derivatives:
Foreign exchange contracts		5.6		1.4		5.6		2.1		9.9		12.3
Total liabilities	$	60.9	$	343.9	$	336.7	$	38.7	$	57.3	$	239.3

* Excluded from this table were the Company’s cash equivalents, which were carried at cost that approximates fair value. The cash equivalents consist primarily of time deposits and money market funds.

The international debt securities mature within one year or less. At ~~July 28, 2019,~~February 2, 2020, the amortized cost basis and fair value of these available-for-sale debt securities were ~~$6.9~~$5.9 million and ~~$6.9~~$2.3 million, respectively.

Fair value, nonrecurring Level 3 measurements ~~related to~~from impairments were as follows (in millions of dollars):


	Fair Value *				Losses
					Three Months Ended
	February 2	November 3		January 27	February 2	January 27
	2020	2019		2019	2020	2019
Equipment on operating leases – net		$	855.4
Other assets			141.9
Total		$	997.3

* See Receivables with specific allowances in Note 4 that were not ~~significant during any periods presented. See Note 4 for additional information.~~significant.

The following is a description of the valuation methodologies the Company uses to measure certain financial instruments on the balance sheet at fair value:

Marketable ~~Securities~~securities – The international debt securities were valued using quoted prices for identical assets in inactive markets.

Derivatives – The Company’s derivative financial instruments consist of interest rate swaps and caps, foreign currency forwards and swaps, and cross-currency interest rate swaps. The portfolio is valued based on an income approach (discounted cash flow) using market observable inputs, including swap curves and both forward and spot exchange rates for currencies.

Receivables – Specific reserve impairments are based on the fair value of the collateral, which is measured using a market approach (appraisal values or realizable values). Inputs include a selection of realizable values.

Equipment on operating leases - net – The impairments are based on an income approach (discounted cash flow), using the contractual payments, plus an estimate of equipment sale price at lease maturity. Inputs include realized sales values.

Other assets – Impairments are based on the fair value of the matured operating lease inventory, which is measured using a market approach. Inputs include realized sales values.

~~(10)~~(11) Derivative Instruments

It is the Company’s policy that derivative transactions are executed only to manage exposures arising in the normal course of business and not for the purpose of creating speculative positions or trading. The Company manages the relationship of the types and amounts of its funding sources to its Receivable and Lease portfolios in an effort to diminish risk due to interest rate and foreign currency fluctuations, while responding to favorable

financing opportunities. The Company also has foreign currency exposures at some of its foreign and domestic operations related to financing in currencies other than the functional currencies.

All derivatives are recorded at fair value on the balance sheet. Cash collateral received or paid is not offset against the derivative fair values on the balance sheet. Each derivative is designated as a cash flow hedge, a fair value hedge, or remains undesignated. All designated hedges are formally documented as to the relationship with the hedged item as well as the risk-management strategy. Both at inception and on an ongoing basis the hedging instrument is assessed as to its effectiveness. If and when a derivative is determined not to be highly effective as a hedge, or the underlying hedged transaction is no longer likely to occur, or the hedge designation is removed, or the derivative is terminated, hedge accounting is discontinued.

Cash flow hedges

Certain interest rate contracts (swaps) were designated as hedges of future cash flows from borrowings. The total notional amounts of the receive-variable/pay-fixed interest rate contracts at ~~July 28,~~February 2, 2020, November 3, 2019, ~~October 28, 2018,~~ and ~~July 29, 2018~~January 27, 2019 were ~~$2,500.0~~$2,900.0 million, ~~$3,050.0~~$3,150.0 million, and ~~$2,400.0~~$2,800.0 million, respectively. Fair value gains or losses on these cash flow hedges were recorded in ~~OCI~~other comprehensive income (OCI) and subsequently reclassified into interest expense in the same periods during which the hedged transactions affected earnings. These amounts offset the effects of interest rate changes on the related borrowings. The cash flows from these contracts were recorded in operating activities in the statement of consolidated cash flows.

The amount of loss recorded in OCI at ~~July 28, 2019~~February 2, 2020 that is expected to be reclassified to interest expense in the next twelve months if interest rates remain unchanged is approximately ~~$5.1~~$6.7 million after-tax. There were no0 gains or losses reclassified from OCI to earnings based on the probability that the original forecasted transaction would not occur.

Fair value hedges

Certain interest rate contracts (swaps) were designated as fair value hedges of borrowings. The total notional amounts of these receive-fixed/pay-variable interest rate contracts at ~~July 28,~~February 2, 2020, November 3, 2019, ~~October 28, 2018,~~ and ~~July 29, 2018~~January 27, 2019 were ~~$8,864.9~~$8,743.0 million, ~~$8,096.6~~$8,336.9 million, and ~~$7,562.2~~$8,247.4 million, respectively. The fair value gains or losses on these contracts were generally offset by fair value gains or losses on the hedged items (fixed-rate borrowings) with both items recorded in interest expense.

The amounts recorded in the consolidated balance sheet related to borrowings designated in fair value hedging relationships were as follows (in millions of dollars):


			Cumulative Increase (Decrease) of Fair Value								Cumulative Increase (Decrease) of Fair Value
			Hedging Adjustments Included in the								Hedging Adjustments Included in the
			Carrying Amount								Carrying Amount
	Carrying		Active						Carrying		Active
	Amount of		Hedging		Discontinued				Amount of		Hedging		Discontinued
July 28, 2019	Hedged Item		Relationships		Relationships		Total
February 2, 2020									Hedged Item		Relationships		Relationships		Total
Current maturities of long-term borrowings	$	187.3	$	1.1	$	(4.8)	$	(3.7)	$	(5.2)			$	(5.2)	$	(5.2)
Long-term borrowings		8,774.0		182.7		(49.7)		133.0		9,061.3	$	372.6		(21.0)		351.6

November 3, 2019
Current maturities of long-term borrowings									$	185.4	$	.3	$	(4.4)	$	(4.1)
Long-term borrowings										8,378.1		292.8		(31.6)		261.2

January 27, 2019
Current maturities of long-term borrowings									$	191.5	$	1.1	$	(4.4)	$	(3.3)
Long-term borrowings										7,805.2		(176.3)		(41.2)		(217.5)

Derivatives not designated as hedging instruments

The Company has certain interest rate contracts (swaps and caps), foreign exchange contracts (forwards and swaps), and cross-currency interest rate contracts (swaps), which were not formally designated as hedges. These derivatives were held as economic hedges for underlying interest rate or foreign currency exposures primarily for certain borrowings. The total notional amounts of these interest rate swaps at ~~July 28,~~February 2, 2020, November 3, 2019, ~~October 28, 2018,~~ and ~~July 29, 2018~~January 27, 2019 were ~~$1,963.0~~$2,342.2 million, ~~$1,899.6~~$2,312.4 million, and ~~$1,766.2~~$1,888.0 million, the foreign exchange contracts were ~~$1,034.2~~$1,365.1 million, ~~$1,564.3~~$691.6 million, and ~~$2,144.1~~$1,683.5 million, and the cross-currency interest rate contracts were ~~$81.9~~$100.0 million, ~~$71.8~~$91.1 million, and ~~$86.1~~$78.8 million, respectively. To facilitate borrowings through securitization of retail notes, interest rate caps were sold with notional amounts of

~~$1,813.8~~ $1,963.2 million, ~~$1,519.1~~$1,611.3 million, and ~~$1,715.2~~$2,292.8 million at ~~July 28,~~February 2, 2020, November 3, 2019, ~~October 28, 2018,~~ and ~~July 29, 2018,~~January 27, 2019, respectively. Interest rate caps were also purchased with notional amounts of ~~$1,813.8~~$1,963.2 million, ~~$1,519.1~~$1,611.3 million, and ~~$1,715.2~~$2,292.8 million at the same dates. The fair value gains or losses from the interest rate contracts were recognized currently in interest expense and the gains or losses from foreign exchange contracts in administrative and operating expenses, generally offsetting over time the expenses on the exposures being hedged. The cash flows from these non-designated contracts were recorded in operating activities in the statement of consolidated cash flows.

Fair values of derivative instruments in the consolidated balance sheet were as follows (in millions of dollars):

July 28

October 28

July 29

2019

2018

2018

Receivables from John Deere

Designated as hedging instruments:

Interest rate contracts

$
229.0

$
29.0

$
23.7

Not designated as hedging instruments:

Interest rate contracts

5.4

26.9

29.6

Cross-currency interest rate contracts

.9

3.4

2.4

Total not designated

6.3

30.3

32.0

Other Assets

Not designated as hedging instruments:

Interest rate contracts

.1

.4

.7

Foreign exchange contracts

4.7

22.0

11.2

Total not designated

4.8

22.4

11.9

Total derivative assets

$
240.1

$
81.7

$
67.6

Other Payables to John Deere

Designated as hedging instruments:

Interest rate contracts

$
32.4

$
314.5

$
299.6

Not designated as hedging instruments:

Interest rate contracts

20.9

27.9

29.9

Cross-currency interest rate contracts

2.0

.1

1.6

Total not designated

22.9

28.0

31.5

Accounts Payable and Accrued Expenses

Not designated as hedging instruments:

Foreign exchange contracts

5.6

1.4

5.6

Total derivative liabilities

$
60.9

$
343.9

$
336.7


	February 2		November 3		January 27
	2020		2019		2019
Receivables from John Deere
Designated as hedging instruments:
Interest rate contracts	$	402.0	$	328.8	$	44.2

Not designated as hedging instruments:
Interest rate contracts		6.3		2.6		21.1
Cross-currency interest rate contracts		.4		.5		1.6
Total not designated		6.7		3.1		22.7

Other Assets
Not designated as hedging instruments:
Interest rate contracts						.2
Foreign exchange contracts		13.4		1.9		11.1
Total not designated		13.4		1.9		11.3

Total derivative assets	$	422.1	$	333.8	$	78.2

Other Payables to John Deere
Designated as hedging instruments:
Interest rate contracts	$	16.5	$	26.5	$	201.3

Not designated as hedging instruments:
Interest rate contracts		16.6		17.9		23.7
Cross-currency interest rate contracts		3.5		3.0		2.0
Total not designated		20.1		20.9		25.7

Accounts Payable and Accrued Expenses
Not designated as hedging instruments:
Foreign exchange contracts		2.1		9.9		12.3

Total derivative liabilities	$	38.7	$	57.3	$	239.3

2526

The classification and gains (losses) including accrued interest expense related to derivative instruments on the statement of consolidated income consisted of the following (in millions of dollars):


	Three Months Ended				Nine Months Ended				Three Months Ended
	July 28		July 29		July 28		July 29		February 2		January 27
	2019		2018		2019		2018		2020		2019
Fair Value Hedges
Interest rate contracts - Interest expense	$	192.4	$	(10.2)	$	462.0	$	(262.6)	$	91.1	$	130.4

Cash Flow Hedges
Recognized in OCI
Interest rate contracts - OCI (pretax)		(6.7)		1.4		(21.3)		16.1		(1.6)		(8.6)

Reclassified from OCI
Interest rate contracts - Interest expense		1.1		2.5		5.7		3.4		(1.2)		2.1

Not Designated as Hedges
Interest rate contracts - Interest expense *	$	(9.4)	$	(1.9)	$	(21.1)	$	(3.7)	$	2.0	$	(3.7)
Foreign exchange contracts - Administrative and operating expenses *		8.1		58.2		24.6		26.8		3.7		(23.0)
Total not designated	$	(1.3)	$	56.3	$	3.5	$	23.1	$	5.7	$	(26.7)

*Includes interest and foreign exchange gains (losses) from cross-currency interest rate contracts.

Included in the table above are interest expense and administrative and operating expense amounts the Company incurred on derivatives transacted with John Deere. The amounts the Company recognized on these affiliate party transactions for the three months ended ~~July 28,~~February 2, 2020 and January 27, 2019 ~~and July 29, 2018~~ were ~~a gain~~gains of ~~$184.2~~$89.8 million and a loss of $10.3 million, respectively. The amounts the Company recognized on these affiliate party transactions for the nine months ended July 28, 2019 and July 29, 2018 were a gain of $444.4 million and a loss of $265.0$126.3 million, respectively.

Counterparty Risk and Collateral

Derivative instruments are subject to significant concentrations of credit risk to the banking sector. The Company manages individual unrelated external counterparty exposure by setting limits that consider the credit rating of the unrelated external counterparty, the credit default swap spread of the counterparty, and other financial commitments and exposures between the Company and the unrelated external counterparty banks. All interest rate derivatives are transacted under International Swaps and Derivatives Association (ISDA) documentation. Each master agreement executed with an unrelated external counterparty permits the net settlement of amounts owed in the event of default or termination.

The Company’s outstanding derivatives have been transacted with both unrelated external counterparties and with John Deere. For derivatives transacted with John Deere, the Company utilizes a centralized hedging structure in which John Deere enters into a derivative transaction with an unrelated external counterparty and simultaneously enters into a derivative transaction with the Company. Except for collateral provisions, the terms of the transaction between the Company and John Deere are identical to the terms of the transaction between John Deere and its unrelated external counterparty.

Certain of the Company’s derivative agreements executed directly with the unrelated external counterparties contain credit support provisions that may require the Company to post collateral based on the size of the net liability positions and credit ratings. At ~~July 28,~~February 2, 2020, November 3, 2019, ~~October 28, 2018,~~ and ~~July 29, 2018,~~January 27, 2019, there were no0 aggregate liability positions for derivatives with credit-risk-related contingent features. If the credit-risk-related contingent features were triggered, the Company would be required to post collateral up to an amount equal to any liability position, prior to considering applicable netting provisions.

The Company also has ISDA agreements with John Deere that permit the net settlement of amounts owed between counterparties in the event of early termination. In addition, the Company has a loss sharing agreement with John Deere in which it has agreed to absorb any losses and expenses John Deere incurs if an unrelated

external counterparty fails to meet its obligations on a derivative transaction that John Deere entered into to manage exposures of the Company. The loss sharing agreement did not increase the maximum amount of loss that the Company would incur, after considering collateral received and netting arrangements, as of ~~July 28,~~February 2, 2020, November 3, 2019, ~~October 28, 2018,~~ and ~~July 29, 2018.~~January 27, 2019.

Derivatives are recorded without offsetting for netting arrangements or collateral. The impact on the derivative assets and liabilities for external derivatives and those with John Deere related to netting arrangements and any collateral received or paid were as follows (in millions of dollars):


July 28, 2019
February 2, 2020
Derivatives:	Gross Amounts Recognized		Netting Arrangements		Cash Collateral Received/Paid	Net Amount		Gross Amounts Recognized		Netting Arrangements		Cash Collateral Received/Paid	Net Amount
Assets
External	$	4.8	$	(.5)		$	4.3	$	13.4	$	(.9)		$	12.5
John Deere		235.3		(48.7)			186.6		408.7		(31.6)			377.1
Liabilities
External		5.6		(.5)			5.1		2.1		(.9)			1.2
John Deere		55.3		(48.7)			6.6		36.6		(31.6)			5.0


October 28, 2018
November 3, 2019
Derivatives:	Gross Amounts Recognized		Netting Arrangements		Cash Collateral Received/Paid	Net Amount		Gross Amounts Recognized		Netting Arrangements		Cash Collateral Received/Paid	Net Amount
Assets
External	$	22.4	$	(.1)		$	22.3	$	1.9	$	(.2)		$	1.7
John Deere		59.3		(27.6)			31.7		331.9		(42.6)			289.3
Liabilities
External		1.4		(.1)			1.3		9.9		(.2)			9.7
John Deere		342.5		(27.6)			314.9		47.4		(42.6)			4.8


July 29, 2018
January 27, 2019
Derivatives:	Gross Amounts Recognized		Netting Arrangements		Cash Collateral Received/Paid	Net Amount		Gross Amounts Recognized		Netting Arrangements		Cash Collateral Received/Paid	Net Amount
Assets
External	$	11.9	$	(1.3)		$	10.6	$	11.3	$	(3.0)		$	8.3
John Deere		55.7		(24.4)			31.3		66.9		(43.8)			23.1
Liabilities
External		5.6		(1.3)			4.3		12.3		(3.0)			9.3
John Deere		331.1		(24.4)			306.7		227.0		(43.8)			183.2

2728

~~(11)~~(12) Pension and Other Postretirement Benefits

The Company is a participating employer in certain Deere & Company sponsored defined benefit pension plans for employees in the U.S. and certain defined benefit pension plans outside the U.S. These pension plans provide for benefits that are based primarily on years of service and employee compensation. Pension expense is actuarially determined based on the Company’s employees included in the plan. The Company’s pension expense ~~amounted to $.3 million~~was not significant for the ~~third quarter~~periods ending February 2, 2020 and ~~$.5 million for the first nine months of 2019, compared with $1.4 million and $4.8 million for the same periods last year.~~January 27, 2019. The accumulated benefit obligation and plan net assets for the employees of the Company are not determined separately from Deere & Company. The Company provides defined benefit health care and life insurance plans for certain retired employees in the U.S. as a participating employer in Deere & Company’s sponsored plans. Health care and life insurance benefits expense is actuarially determined based on the Company’s employees included in the plans and amounted to ~~$.7 million for the third quarter and $3.3~~$5.1 million for the first ~~nine~~three months of ~~2019,~~2020, compared with ~~$.6 million and $1.9~~$1.3 million for the same ~~periods~~period last year. The increase from the prior year period is primarily due to a $3.3 million curtailment loss related to voluntary employee-separation programs (see Note 13). Further disclosure for these plans is included in Deere & Company’s Form 10-Q for the quarter ended ~~July 28, 2019.~~February 2, 2020.

(13) Employee-Separation Programs

During the first quarter of 2020, the Company incurred voluntary employee-separation program expenses of $7.7 million, as part of its efforts to create a more efficient organization structure and reduce operating costs. The programs provided for cash payments based on years of service. The expenses were recorded primarily in the period in which the employees irrevocably accepted the separation offer. Included in the total pretax expense noted above was a non-cash charge of $3.3 million resulting from a curtailment in certain OPEB plans (see Note 12). The expenses were recorded in administrative and operating expenses.

2829

Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations.

Results of Operations

Overview

Organization

The Company primarily generates revenues and cash by financing John Deere dealers’ sales and leases of new and used agriculture and turf equipment and construction and forestry equipment. In addition, the Company also provides wholesale financing to dealers of the foregoing equipment and finances retail revolving charge accounts.

Trends and Economic Conditions

Industry sales of agricultural ~~equipment~~machinery in the U.S. and Canada ~~as well as~~are forecast to be down about 5 percent for ~~the European Union (EU) 28 nations~~fiscal year 2020. Industry sales in Europe are forecast to be about the same ~~as last year.~~in 2020. In South ~~American~~America, industry sales of tractors and combines are projected to be ~~about~~approximately the same ~~to 5 percent higher.~~as 2019 levels. Asian sales are forecast to be about the same ~~or decrease slightly.~~in 2020. Industry sales of turf and utility equipment in the U.S. and Canada are expected to be about the same ~~to 5 percent higher for 2019.~~in 2020. John Deere’s agriculture and turf segment sales decreased 64 percent in the ~~third~~first quarter and ~~increased 2 percent for the first nine months. These sales~~ are forecast to ~~increase~~decrease about 25 to 10 percent for fiscal year ~~2019.~~2020. Construction ~~equipment markets reflect generally positive fundamentals and economic growth worldwide.~~industry sales in North America for 2020 are expected to decline 5 to 10 percent. In forestry, global industry sales are expected to be about ~~the same~~5 to 510 percent ~~higher.~~lower. John Deere’s construction and forestry segment sales ~~increased 1~~decreased 10 percent in the ~~third~~first quarter, and ~~11 percent for the first nine months. These sales~~ are forecast to ~~increase~~decrease about 10 to 15 percent in ~~2019, with the two additional months of Wirtgen adding 4 percent~~2020 reflecting slowing construction activity as well as efforts to ~~segment sales.~~bring down field inventory levels.

John Deere’s ~~third quarter~~ results reflect ~~the uncertainty that continues~~early signs of stabilization in the ~~agricultural~~U.S. farm sector. Concerns about export market access, near-term demand for commodities, and overall crop conditions have caused farmers to postpone major equipment purchases. General economic conditions remain positive and are contributing to strong results for the construction and forestry business. The global customer base continues to expand and John Deere is encouraged by the ~~market’s positive~~broad use of precision technologies and believes it is well positioned to strengthen its leadership position in this area. For the quarter, construction sector activity slowed leading to lower sales and profit for the construction and forestry division. Actions to reduce factory production and lower inventories in response to ~~its products and services.~~construction equipment market conditions also negatively affected results. Additionally, the quarter included costs of a voluntary employee-separation program, which is intended to improve John Deere’s flexibility. John Deere is ~~assessing~~also proceeding with a series of measures to create a more focused organizational structure. These steps are leading to improved efficiencies and helping John Deere focus its ~~cost structure through reviews of organization efficiency, a footprint assessment,~~resources and ~~an increased focus~~investments on ~~investments with~~areas that have the most ~~opportunity for differentiation.~~impact on performance.

Net income attributable to the Company in fiscal year ~~2019~~2020 is projected to be approximately ~~$490 million. Net income attributable~~$450 million, compared to ~~the Company~~$419 million in fiscal year ~~2018 of $799 million included a tax benefit related to tax reform of $342 million. Excluding the 2018 benefit from tax reform, results~~2019. Results are expected to benefit from lower losses on lease residual values and income earned from a higher average portfolio, partially offset by a higher provision for credit losses, unfavorable financing spreads, and prior year favorable discrete adjustments to the provision for income ~~taxes, partially offset by unfavorable financing spreads, higher losses on operating lease residual values, and a higher provision for credit losses.~~taxes.

Items of concern include trade agreements, the uncertainty of the effectiveness of governmental actions in respect to monetary and fiscal policies, the impact of sovereign debt, ~~eurozone~~Eurozone and Argentine issues, capital market disruptions, changes in demand and pricing for used equipment, potential effects of epidemics, and geopolitical events. Significant fluctuations in foreign currency exchange rates and volatility in the price of many commodities could also impact the Company’s results.

2930

~~2019~~2020 Compared with ~~2018~~2019

The total revenues and net income attributable to the Company were as follows (in millions of dollars):


	Three Months Ended				Nine Months Ended				Three Months Ended
	July 28		July 29		July 28		July 29		February 2		January 27
	2019		2018		2019		2018		2020		2019
Total revenues	$	741.8	$	661.1	$	2,105.6	$	1,863.8	$	718.6	$	660.8
Net income attributable to the Company		144.8		120.2		350.8		638.8		99.2		121.7

Total revenues ~~for both periods~~ generally increased due to a higher average portfolio and higher average financing rates. ~~Prior year net~~Net income ~~results~~ for the ~~third~~first quarter ~~and year~~was lower than the same period in 2019 related to ~~date included a favorable~~an increased provision for ~~income taxes associated with tax reform. Results for the current quarter and first nine months included income from a~~credit losses, higher ~~average portfolio and~~losses on lease residual values, prior year favorable discrete adjustments to the provision for income taxes, and greater administrative and operating expenses, partially offset by ~~less favorable financing spreads and~~income earned on a higher ~~losses on operating lease residual values.~~average portfolio.

Revenues

The finance income and lease revenues earned by the Company were as follows (in millions of dollars):


	Three Months Ended					Nine Months Ended					Three Months Ended
	July 28		July 29		%	July 28		July 29		%	February 2		January 27		%
	2019		2018		Change	2019		2018		Change	2020		2019		Change
Finance income earned from:
Retail notes	$	241.5	$	193.7	25	$	665.0	$	562.6	18	$	234.8	$	208.9	12
Revolving charge accounts		94.3		91.7	3		243.0		235.6	3		80.7		72.1	12
Wholesale receivables		141.9		122.8	16		400.9		332.0	21		110.3		116.3	(5)
Lease revenues		256.7		231.2	11		741.6		670.9	11		274.9		239.5	15

~~The increases in finance~~Finance income earned on retail notes and ~~wholesale receivables were~~lease revenues increased primarily due to higher average ~~financing rates~~portfolio balances and higher average ~~portfolio balances.~~financing rates. The ~~increases~~increase in finance income earned on revolving charge accounts ~~and in lease revenues were~~was primarily due to higher average ~~portfolio balances.~~financing rates. Finance income earned on wholesale receivables was lower primarily due to lower average financing rates.

Revenues earned from John Deere totaled ~~$196.6 million in the third quarter and $550.1~~$168.9 million in the first ~~nine~~three months of ~~2019,~~2020, compared with ~~$174.5 million and $476.8~~$164.7 million for the same ~~periods~~period last year. The increase was primarily due to increased compensation paid by John Deere for waived or reduced finance charges on Receivables and Leases. Revenues earned from John Deere are included in the revenue amounts discussed above and in “Other income” on the statement of consolidated ~~income~~.income.

3031

Expenses

Significant expenses incurred by the Company were as follows (in millions of dollars):


	Three Months Ended					Nine Months Ended					Three Months Ended
	July 28		July 29		%	July 28		July 29		%	February 2		January 27		%
	2019		2018		Change	2019		2018		Change	2020		2019		Change
Interest expense	$	256.2	$	196.1	31	$	734.7	$	530.5	38	$	219.8	$	226.5	(3)
Administrative and operating expenses		102.6		92.4	11		313.3		306.7	2		123.5		98.2	26
Depreciation of equipment on operating leases												213.5		175.4	22
Provision for credit losses		23.4		27.6	(15)		50.3		43.7	15		12.1		.8
Depreciation of equipment on operating leases		188.0		173.3	8		544.3		511.1	6
Provision (credit) for income taxes		11.8		30.0	(61)		71.4		(220.3)	132
Provision for income taxes												26.1		23.9	9

The ~~increase~~decrease in interest expense for the ~~third quarter and~~ first ~~nine~~three months of ~~2019~~2020 was primarily due to lower average interest rates, partially offset by higher average ~~borrowing rates~~borrowings.

Administrative and operating expenses increased primarily due to higher losses on lease residual values and voluntary employee-separation costs incurred in the first quarter of 2020.

The depreciation of equipment on operating leases for the first three months of 2020 increased primarily due to updated depreciation estimates and higher average ~~borrowings.~~balances of equipment on operating leases.

The provision for credit losses for the ~~third quarter decreased primarily due to lower net write-offs of revolving charge accounts. The provision for credit losses for the~~ first ~~nine~~three months of ~~2019~~2020 increased primarily due to higher net write-offs of ~~revolving charge accounts and~~ retail notes. The annualized provision for credit losses, as a percentage of the average balance of total Receivables financed, was ~~.29 percent in the third quarter and .21~~.15 percent in the first ~~nine~~three months of ~~2019,~~2020, compared with ~~.37 percent and .20~~.01 percent for the same ~~periods~~period last year. See the Company's most recently filed annual report on Form 10-K for further information regarding the Company's allowance for credit losses policies.

The ~~depreciation of equipment on operating leases for the third quarter and first nine months of 2019 increased primarily due to higher average balances of equipment on operating leases.~~

~~The provision for income taxes decreased in the third quarter primarily due to favorable discrete tax adjustments. The~~ higher provision for income taxes in the first ~~nine~~three months of ~~2019~~2020 was primarily related to favorable discrete adjustments to the ~~tax reform benefits recorded~~provision for income taxes in the prior ~~year. See Note 8 to the interim consolidated financial statements for additional information.~~year period.

Ratio of Earnings to Fixed Charges

The Company’s ratio of earnings to fixed charges was ~~1.61 to 1 for the third quarter of 2019, compared with 1.76 to 1 for the third quarter of 2018. The Company’s ratio of earnings to fixed charges was 1.57~~1.56 to 1 for the first ~~nine~~three months of ~~2019,~~2020, compared with ~~1.78~~1.63 to 1 for the first ~~nine~~three months of ~~2018.~~2019. “Earnings” consist of income before income taxes, the cumulative effect of changes in accounting, and fixed charges excluding unamortized capitalized interest. “Fixed charges” consist of interest on indebtedness, amortization of debt discount and expense, interest related to uncertain tax positions, an estimated amount of rental expense that is deemed to be representative of the interest factor, and capitalized interest.

3132

Receivables and Leases

Receivable and Lease (excluding wholesale) acquisition volumes were as follows (in millions of dollars):

Three Months Ended

July 28

July 29

$

%

2019

2018

Change

Change
Retail notes:









Agriculture and turf

$
2,056.0

$
1,981.8

$
74.2

4
Construction and forestry

511.6

485.6

26.0

5
Total retail notes

2,567.6

2,467.4

100.2

4
Revolving charge accounts

1,705.9

1,613.1

92.8

6
Financing leases

182.3

157.2

25.1

16
Equipment on operating leases

588.0

527.6

60.4

11
Total Receivables and Leases (excluding wholesale)

$
5,043.8

$
4,765.3

$
278.5

6


	Nine Months Ended							Three Months Ended
	July 28		July 29		$		%	February 2		January 27		$		%
	2019		2018		Change		Change	2020		2019		Change		Change
Retail notes:
Agriculture and turf	$	5,770.6	$	5,337.2	$	433.4	8	$	1,656.3	$	1,497.5	$	158.8	11
Construction and forestry		1,367.3		1,363.8		3.5			511.3		425.0		86.3	20
Total retail notes		7,137.9		6,701.0		436.9	7		2,167.6		1,922.5		245.1	13
Revolving charge accounts		5,365.4		5,124.4		241.0	5		1,915.5		1,975.0		(59.5)	(3)
Financing leases		325.7		314.9		10.8	3		69.8		65.5		4.3	7
Equipment on operating leases		1,589.4		1,506.7		82.7	5		529.5		343.2		186.3	54
Total Receivables and Leases (excluding wholesale)	$	14,418.4	$	13,647.0	$	771.4	6	$	4,682.4	$	4,306.2	$	376.2	9

The increase in retail note volumes during the first quarter of 2020 was primarily due to higher retail sales of John Deere equipment. Equipment on operating lease volumes were higher primarily due to increased leases of John Deere used agriculture equipment.

Total Receivables and Leases owned were as follows (in millions of dollars):


	July 28		October 28		July 29		February 2		November 3		January 27
	2019		2018		2018		2020		2019		2019
Retail notes:
Agriculture and turf	$	15,476.3	$	15,179.2	$	14,588.5	$	15,832.1	$	16,185.9	$	14,784.3
Construction and forestry		3,120.3		2,931.7		2,833.5		3,403.1		3,314.2		2,976.1
Total retail notes		18,596.6		18,110.9		17,422.0		19,235.2		19,500.1		17,760.4
Revolving charge accounts		3,798.7		3,797.6		3,686.9		2,673.2		3,863.0		2,685.9
Wholesale receivables		10,299.5		7,967.6		9,050.3		9,146.3		8,706.8		8,990.4
Financing leases		716.9		770.6		728.1		668.2		751.6		702.5
Equipment on operating leases		5,323.3		5,102.5		4,861.8		5,525.7		5,530.5		4,942.0
Total Receivables and Leases	$	38,735.0	$	35,749.2	$	35,749.1	$	37,248.6	$	38,352.0	$	35,081.2

Total Receivables 30 days or more past due, non-performing Receivables, and the allowance for credit losses were as follows (in millions of dollars and as a percentage of the Receivables balance):


	July 28			October 28			July 29			February 2			November 3			January 27
	2019			2018			2018			2020			2019			2019
	Dollars		Percent	Dollars		Percent	Dollars		Percent	Dollars		Percent	Dollars		Percent	Dollars		Percent
Receivables 30 days or more past due	$	349.0	1.04	$	483.2	1.58	$	463.4	1.50	$	406.6	1.28	$	352.8	1.07	$	449.5	1.49
Non-performing Receivables		334.4	1.00		142.0	.46		123.9	.40		331.7	1.05		311.9	.95		315.6	1.05
Allowance for credit losses		110.4	.33		106.7	.35		115.7	.37		103.1	.33		100.6	.31		106.7	.35

Receivables 30 days or more past due continue to accrue finance income. The Company ceases to accrue finance income once Receivables are considered non-performing. An allowance for credit losses is recorded for the estimated uncollectible amount.

~~The allowance~~credit losses is subject to an ongoing evaluation based on many quantitative and qualitative factors, including historical net loss experience by product category, portfolio duration, delinquency trends, economic conditions in the Company’s major markets and geographies, and credit risk quality. The Company believes its allowance is sufficient to provide for losses inherent in its existing Receivable portfolio.

Deposits withheld from dealers and merchants amounted to ~~$138.8~~$128.5 million at ~~July 28, 2019,~~February 2, 2020, compared with ~~$166.0~~$137.5 million at ~~October 28, 2018~~November 3, 2019 and ~~$169.2~~$146.9 million at ~~July 29, 2018.~~January 27, 2019. These balances primarily represent the aggregate dealer retail note and lease withholding accounts from individual John Deere dealers to which losses from retail notes and leases originating from the respective dealers can be charged.

Write-offs and recoveries of Receivables, by product, and as an annualized percentage of average balances held during the period, were as follows (in millions of dollars):

Three Months Ended

July 28, 2019

July 29, 2018

Dollars

Percent

Dollars

Percent
Write-offs:









Retail notes:

Agriculture and turf

$
(1.6)

(.04)

$
(1.4)

(.04)
Construction and forestry

(5.6)

(.73)

(4.9)

(.71)
Total retail notes

(7.2)

(.16)

(6.3)

(.15)
Revolving charge accounts

(25.4)

(2.82)

(25.1)

(2.88)
Wholesale receivables

(.1)

(.2)

(.01)
Financing leases

(.5)

(.30)

(.8)

(.46)
Total write-offs

(33.2)

(.41)

(32.4)

(.43)
Recoveries:

Retail notes:

Agriculture and turf

1.4

.04

.5

.01
Construction and forestry

.4

.05

.3

.04
Total retail notes

1.8

.04

.8

.02
Revolving charge accounts

7.5

.84

4.7

.54
Wholesale receivables

.4

.02

.2

.01
Financing leases

.1

.06

.3

.17
Total recoveries

9.8

.13

6.0

.08
Total net write-offs

$
(23.4)

(.28)

$
(26.4)

(.35)

Nine Months Ended

July 28, 2019

July 29, 2018

Dollars

Percent

Dollars

Percent
Write-offs:









Retail notes:

Agriculture and turf

$
(5.7)

(.05)

$
(5.4)

(.05)
Construction and forestry

(14.7)

(.65)

(10.7)

(.53)
Total retail notes

(20.4)

(.15)

(16.1)

(.13)
Revolving charge accounts

(50.8)

(2.11)

(44.1)

(1.90)
Wholesale receivables

(.1)

(.6)

(.01)
Financing leases

(2.1)

(.41)

(2.3)

(.45)
Total write-offs

(73.4)

(.31)

(63.1)

(.29)
Recoveries:

Retail notes:

Agriculture and turf

4.1

.04

3.9

.04
Construction and forestry

.9

.04

1.5

.07
Total retail notes

5.0

.04

5.4

.04
Revolving charge accounts

17.5

.73

15.3

.66
Wholesale receivables

4.0

.06

.1

Financing leases

.3

.06

.6

.12
Total recoveries

26.8

.11

21.4

.10
Total net write-offs

$
(46.6)

(.20)

$
(41.7)

(.19)


	Three Months Ended
	February 2, 2020			January 27, 2019
	Dollars		Percent	Dollars		Percent
Write-offs:
Retail notes:
Agriculture and turf	$	(1.3)	(.03)	$	(2.0)	(.05)
Construction and forestry		(12.2)	(1.47)		(4.8)	(.65)
Total retail notes		(13.5)	(.28)		(6.8)	(.15)
Revolving charge accounts		(6.4)	(.83)		(3.9)	(.50)
Wholesale receivables		(.8)	(.04)
Financing leases		(.4)	(.23)		(.6)	(.33)
Total write-offs		(21.1)	(.26)		(11.3)	(.15)
Recoveries:
Retail notes:
Agriculture and turf		.3	.01		1.6	.04
Construction and forestry		.3	.04		.3	.04
Total retail notes		.6	.01		1.9	.04
Revolving charge accounts		7.5	.97		4.8	.61
Wholesale receivables		.8	.04		3.6	.18
Financing leases		.1	.06
Total recoveries		9.0	.11		10.3	.14
Total net write-offs	$	(12.1)	(.15)	$	(1.0)	(.01)

Safe Harbor Statement

Safe Harbor Statement under the Private Securities Litigation Reform Act of 1995: Statements under “Overview” and other forward-looking statements herein that relate to future events, expectations and trends involve factors that are subject to change, and risks and uncertainties that could cause actual results to differ materially.

Factors that could materially affect the Company’s operations, access to capital, expenses, and results include changes in, uncertainty surrounding and the impact of governmental trade, banking, monetary, and fiscal policies, including financial regulatory reform and its effects on the consumer finance industry, derivatives, funding costs, and other areas. Actions by central banks, financial, and securities regulators may affect the costs and expenses of financing the Company and the financing rates it is able to offer. The Company’s business is affected by general economic conditions in the global markets in which the Company operates because deteriorating economic conditions and political instability can result in decreased customer confidence, lower demand for equipment, higher credit losses, and greater currency risk. The Company’s business is also affected by actions of banks, financing and leasing companies, and other lenders that compete with the Company for customers; capital market disruptions; significant changes in capital market liquidity and associated funding costs; interest rates (including the availability of IBOR reference rates) and foreign currency exchange rates and their volatility; changes to and compliance with privacy regulations; changes in weather patterns; the political and social stability of the global markets in which the Company operates; the effects of, or response to, terrorism and security threats; wars and other conflicts; natural disasters; and the spread of major ~~epidemics.~~epidemics (including Coronavirus) and responses to epidemics such as government-imposed travel restrictions and extended shut down of businesses.

Significant changes in market liquidity conditions, changes in the Company’s credit ratings, and any failure to comply with financial covenants in credit agreements could impact access to funding and funding costs, which could reduce the Company’s earnings and cash flows. Financial market conditions could also negatively impact customer access to capital for purchases of John Deere’s products and customer confidence and purchase decisions, borrowing and repayment practices, and the number and size of customer loan delinquencies and defaults. A debt crisis, in Europe or elsewhere, could negatively impact currencies, global financial markets, social and political stability, funding sources and costs, asset and obligation values, customers, and Company operations and results. Security breaches, cybersecurity attacks, technology failures, and other disruptions to the Company’s information technology infrastructure also could materially affect results. The Company’s operations could be impaired by changes in the equity, bond, and other financial markets, which would negatively affect earnings.

The ~~anticipated~~ withdrawal of the United Kingdom from the European Union and the perceptions as to the impact of the withdrawal may adversely affect business activity, political stability and economic conditions in the United Kingdom, the European Union and elsewhere. The economic conditions and outlook could be further adversely affected by (i) ~~the~~ uncertainty ~~concerning the timing and terms of the exit, (ii)~~regarding any new or modified ~~trading~~trade arrangements between the United Kingdom and the European Union and/or other countries, ~~(iii)~~(ii) the risk that one or more other European Union countries could come under increasing pressure to leave the European Union, or ~~(iv)~~(iii) the risk that the euro as the single currency of the Eurozone could cease to exist. Any of these developments, or the perception that any of these developments are likely to occur, could affect economic growth or business activity in the United Kingdom or the European Union, and could result in the relocation of businesses, cause business interruptions, lead to economic recession or depression, and impact the stability of the financial markets, availability of credit, currency exchange rates, interest rates, financial institutions, and political, financial and monetary systems. Any of these developments could affect our businesses, liquidity, results of operations and financial position.

The liquidity and ongoing profitability of the Company depend largely on timely access to capital in order to meet future cash flow requirements, and to fund operations, costs, and purchases of John Deere’s products. If general economic conditions deteriorate or capital markets become more volatile, funding could be unavailable or insufficient. Additionally, customer confidence levels may result in declines in credit applications and increases in delinquencies and default rates, which could materially impact the Company’s write-offs and provision for credit losses.

In addition, the Company’s business is closely related to John Deere’s business. Further information, including factors that could materially affect the Company’s and John Deere’s financial results, is included in the most recent Deere & Company Form 10-K and Form 10-Q (including, but not limited to, the factors discussed in Item 1A. Risk Factors of the Form 10-K and quarterly reports on Form 10-Q) and other Deere & Company and Capital Corporation quarterly and other filings with the SEC.

Critical Accounting Policies

See the Company’s critical accounting policies discussed in the Management’s Discussion and Analysis of the most recent annual report filed on Form 10-K. There have been no material changes to these policies.

Capital Resources and Liquidity

For additional information on the Company's dependence on and relationships with Deere & Company, see the Company's most recently filed annual report on Form 10-K.

During the first ~~nine~~three months of ~~2019,~~2020, the aggregate net cash provided by operating and ~~financing~~investing activities was used primarily to ~~fund Receivables and Leases.~~decrease borrowings. Net cash provided by operating activities was ~~$1,364.9~~$342.0 million in the first ~~nine~~three months of ~~2019.~~2020. Net cash provided by ~~financing~~investing activities totaled ~~$2,627.5~~$775.3 million in the first ~~nine~~three months of ~~2019, resulting~~2020, primarily ~~from an increase in total external borrowings~~due to the collections of ~~$1,984.4 million and a net increase in payables to John Deere~~Receivables (excluding wholesale) exceeding the cost of ~~$948.1~~Receivables acquired (excluding wholesale) by $1,441.9 million, partially offset by ~~dividends paid of $280.0 million. Net cash used by investing activities totaled $3,958.7 million in the first nine months of 2019, primarily due to~~ an increase in net wholesale receivables of ~~$2,362.5~~$452.0 million and the cost of equipment on operating leases acquired exceeding proceeds from sales of equipment on operating leases by ~~$802.1~~$210.8 million. Net cash used for financing activities totaled $1,097.9 million in the first three months of 2020, resulting primarily from a net decrease in total external borrowings of $520.0 million, a net decrease in payables to John Deere of $445.4 million, and ~~the cost~~dividends paid of ~~Receivables acquired (excluding wholesale) exceeding the collections of Receivables (excluding wholesale) by $668.7~~

$125.0 million. Cash, cash equivalents, and restricted cash increased ~~$27.4~~$18.2 million during the first ~~nine~~three months of ~~2019.~~2020.

During the first ~~nine~~three months of ~~2018,~~2019, the aggregate net cash provided by operating and ~~financing~~investing activities was used primarily to ~~fund Receivables and Leases.~~decrease borrowings. Net cash provided by operating activities was ~~$976.6~~$741.7 million in the first ~~nine~~three months of ~~2018.~~2019. Net cash provided by ~~financing~~investing activities totaled ~~$2,505.2~~$273.2 million in the first ~~nine~~three months of ~~2018, resulting~~2019, primarily ~~from an increase in total external borrowings~~due to the collections of ~~$1,880.1 million and a net increase in payables to John Deere~~Receivables (excluding wholesale) exceeding the cost of ~~$1,011.8~~Receivables acquired (excluding wholesale) by $1,483.2 million, partially offset by ~~dividends paid of $365.0 million. Net cash used for investing activities totaled $3,481.2 million in the first nine months of 2018, primarily due to~~ an increase in net wholesale receivables of ~~$2,188.8~~$1,013.1 million and the cost of equipment on operating leases acquired exceeding proceeds from sales of equipment on operating leases by ~~$737.7~~$145.0 million. Net cash used for financing activities totaled $780.4 million in the first three months of 2019, resulting primarily from a net decrease in payables to John Deere of $1,193.6 million and ~~the cost~~dividends paid of ~~Receivables acquired (excluding wholesale) exceeding the collections~~$200.0 million, partially offset by an increase in total external borrowings of ~~Receivables (excluding wholesale) by $486.6~~$619.0 million. Cash, cash equivalents, and restricted cash ~~decreased $11.0~~increased $234.4 million during the first ~~nine~~three months of ~~2018.~~2019.

The Company relies on its ability to raise substantial amounts of funds to finance its Receivable and Lease portfolios. The Company has access to most global markets at a reasonable cost and expects to have sufficient sources of global funding and liquidity to meet its funding needs. The Company’s ability to meet its debt obligations is supported in a number of ways. The assets of the Company are self-liquidating in nature. A solid equity position is available to absorb unusual losses on these assets and all commercial paper is backed by unsecured, committed borrowing lines from various banks. Liquidity is also provided by the Company’s ability to securitize these assets and through the issuance of term debt. Additionally, liquidity may be provided through loans from John Deere. The Company’s commercial paper outstanding at ~~July 28,~~February 2, 2020, November 3, 2019, ~~October 28, 2018,~~ and ~~July 29, 2018~~January 27, 2019 was ~~$1,026.1~~$1,131.4 million, ~~$1,987.3~~$1,345.5 million, and ~~$2,123.6~~$2,364.3 million, respectively, while the total cash, cash equivalents, and marketable securities position was ~~$656.0~~$644.9 million, ~~$608.4~~$635.8 million, and ~~$1,072.4~~$863.2 million, respectively. The amount of cash, cash equivalents, and marketable securities held by foreign subsidiaries was approximately ~~$157.1~~$152.6 million, ~~$108.3~~$134.7 million, and ~~$118.2~~$116.6 million at ~~July 28,~~February 2, 2020, November 3, 2019, ~~October 28, 2018,~~ and ~~July 29, 2018,~~January 27, 2019, respectively.

Capital Corporation has a revolving credit agreement to utilize bank conduit facilities to securitize retail notes (see Note 5). ~~At July 28,~~During November 2019, ~~this facility had~~the agreement was renewed with a total capacity, or “financing limit,” of $3,500.0 million of secured financings at any time. After a two-year revolving period, unless the banks and Capital Corporation agree to renew, Capital Corporation would liquidate the secured borrowings over time as payments on the retail notes are collected. At ~~July 28, 2019, $1,681.0~~February 2, 2020, $1,935.0 million of short-term securitization borrowings was outstanding under the agreement.

During the first ~~nine~~three months of ~~2019,~~2020, the Company issued ~~$5,150.2~~$1,105.0 million and retired ~~$3,332.4~~$1,501.3 million of long-term borrowings, which were primarily medium-term notes. During the first ~~nine~~three months of ~~2019,~~2020, the Company also issued ~~$3,309.9~~$759.6 million and retired ~~$2,194.5~~$663.7 million of retail note securitization borrowings and maintained an average commercial paper balance of ~~$2,883.9~~$1,552.2 million. At ~~July 28, 2019,~~February 2, 2020, the Company’s funding profile included ~~$1,162.5~~$1,241.7 million of commercial paper and other notes payable, ~~$4,994.8~~$4,373.9 million of securitization borrowings, ~~$2,294.8~~$1,395.5 million of loans from John Deere, ~~$26,304.9~~$26,439.5 million of unsecured term debt, and ~~$4,110.1~~$4,097.3 million of equity capital. The Company’s funding profile may be altered to reflect such factors as relative costs of funding sources, assets available for securitizations, and capital market accessibility.

Total interest-bearing indebtedness amounted to ~~$34,757.0~~$33,450.6 million at ~~July 28, 2019,~~February 2, 2020, compared with ~~$31,391.2~~$34,362.2 million at ~~October 28, 2018~~November 3, 2019 and ~~$31,902.0~~$30,954.0 million at ~~July 29, 2018.~~January 27, 2019. Total short-term indebtedness amounted to ~~$14,721.6~~$12,588.7 million at ~~July 28, 2019,~~February 2, 2020, compared with ~~$11,959.0~~$13,309.8 million at ~~October 28, 2018~~November 3, 2019 and ~~$13,310.5~~$11,379.0 million at ~~July 29, 2018.~~January 27, 2019. Total long-term indebtedness amounted to ~~$20,035.4~~$20,861.9 million at ~~July 28, 2019,~~February 2, 2020, compared with ~~$19,432.2~~$21,052.4 million at ~~October 28, 2018~~November 3, 2019 and ~~$18,591.5~~$19,575.0 million at ~~July 29, 2018.~~January 27, 2019. The ratio of total interest-bearing debt, including securitization indebtedness, to stockholder’s equity was ~~8.5~~8.2 to 1 at ~~July 28, 2019,~~February 2, 2020, compared with ~~7.7~~8.3 to 1 at ~~October 28, 2018~~November 3, 2019 and ~~8.1~~7.8 to 1 at ~~July 29, 2018.~~January 27, 2019.

Stockholder’s equity was ~~$4,110.1~~$4,097.3 million at ~~July 28, 2019,~~February 2, 2020, compared with ~~$4,070.0~~$4,128.4 million at ~~October 28, 2018~~November 3, 2019 and ~~$3,935.1~~$3,984.2 million at ~~July 29, 2018.~~January 27, 2019. The ~~increase~~decrease in the first ~~nine~~three months of ~~2019~~2020 was

primarily due to dividends paid of $125.0 million, partially offset by net income attributable to the Company of ~~$350.8 million, partially offset by dividends paid of $280.0 million and an unrealized loss on derivatives of $21.3~~$99.2 million.

Lines of Credit

The Company has access to bank lines of credit with various banks throughout the world. Some of the lines are available to both the Company and Deere & Company. Worldwide lines of credit totaled ~~$7,936.4~~$7,910.3 million at ~~July 28, 2019, $5,332.4~~February 2, 2020, $5,692.3 million of which were unused. For the purpose of computing unused credit lines, commercial paper and short-term bank borrowings, excluding secured borrowings and the current portion of long-term borrowings, of the Company and Deere & Company were primarily considered to constitute utilization. Included in the total credit lines at ~~July 28, 2019~~February 2, 2020 was a 364-day credit facility agreement of $2,800.0 million, expiring in fiscal April 2020. In addition, total credit lines included long-term credit facility agreements of $2,500.0 million, expiring in April 2023, and $2,500.0 million, expiring in April 2024. These credit agreements require the Company to maintain its consolidated ratio of earnings to fixed charges at not less than 1.05 to 1 for each fiscal quarter and its ratio of senior debt, excluding securitization indebtedness, to capital base (total subordinated debt and stockholder’s equity excluding accumulated other comprehensive income (loss)) at not more than 11 to 1 at the end of any fiscal quarter. All of these requirements of the credit agreements have been met during the periods included in the consolidated financial statements.

Debt Ratings

The Company's ability to obtain funding is affected by its debt ratings, which are closely related to the outlook for and thefinancial condition of John Deere,, and the nature and availability of support facilities, such as its lines of credit and the support agreement from Deere & Company.

To access public debt capital markets, the Company relies on credit rating agencies to assign short-term and long-term credit ratings to the Company’s securities as an indicator of credit quality for fixed income investors. A credit rating agency may change or withdraw Company ratings based on its assessment of the Company’s current and future ability to meet interest and principal repayment obligations. Each agency’s rating should be evaluated independently of any other rating. Lower credit ratings generally result in higher borrowing costs, including costs of derivative transactions, and reduced access to debt capital markets.

The senior long-term and short-term debt ratings and outlook currently assigned to unsecured Company debt securities by the rating agencies engaged by the Company are the same as those for John Deere. Those ratings are as follows:


	Senior Long-Term	Short-Term	Outlook
Fitch Ratings	A	F1	Stable
Moody’s Investors Service, Inc.	A2	Prime-1	Stable
Standard & Poor’s	A	A-1	Stable

Dividends

Capital Corporation declared and paid cash dividends to John Deere Financial Services, Inc. (JDFS) of ~~$280.0~~$125.0 million and ~~$365.0~~$200.0 million in the first ~~nine~~three months of ~~2019~~2020 and ~~2018,~~2019, respectively. In each case, JDFS paid comparable dividends to Deere & Company.

On ~~August 28, 2019,~~February 27, 2020, Capital Corporation declared a ~~$50.0~~$100.0 million dividend to be paid to JDFS on ~~September~~March 16, ~~2019.~~2020. JDFS, in turn, declared a ~~$50.0~~$100.0 million dividend to Deere & Company, also payable on ~~September~~March 16, ~~2019.~~2020.

Item 3. Quantitative and Qualitative Disclosures About Market Risk.

See the Company’s most recent annual report filed on Form 10-K (Part II, Item 7A). There has been no material change in this information.

Item 4. Controls and Procedures.

The Company’s principal executive officer and its principal financial officer have concluded that the Company’s disclosure controls and procedures (as defined in Rules 13a-15(e) and 15d-15(e) of the Securities Exchange Act of 1934, as amended (Act)) were effective as of ~~July 28, 2019,~~February 2, 2020, based on the evaluation of these controls and procedures required by Rule 13a-15(b) or 15d-15(b) of the Act. During the ~~third~~first quarter, there were no changes that have materially affected or are reasonably likely to materially affect the Company’s internal control over financial reporting.

PART II. OTHER INFORMATION

Item 1. Legal Proceedings.

Item 1A. Risk Factors.

See the Company's most recent annual report on Form 10-K (Part I, Item 1A). There has been no material change in this information. The risks described in the annual report on Form 10-K and the “Safe Harbor Statement” in this report are not the only risks faced by the Company.

Item 2. Unregistered Sales of Equity Securities and Use of Proceeds.

Omitted pursuant to instruction H.

Item 3. Defaults Upon Senior Securities.

Omitted pursuant to instruction H.

Item 4. Mine Safety Disclosures.

Not applicable.

Item 5. Other Information.

None.

Item 6. Exhibits.

Certain instruments relating to long-term borrowings, constituting less than 10% of the registrant’s total assets, are not filed as exhibits herewith pursuant to Item 601(b)(4)(iii)(A) of Regulation S-K. The registrant will file copies of such instruments upon request of the SEC.

3.1	Certificate of Incorporation, as amended (Exhibit 3.1 to Form 10-K of the registrant for the year ended October 31, 1999, Securities and Exchange Commission file number 1-6458*)

3.2	Bylaws, as amended (Exhibit 3.2 to Form 10-K of the registrant for the year ended October 31, 1999, Securities and Exchange Commission file number 1-6458*)

10.1	Second Amendment, dated as of February 21, 2020, to the Asset Purchase Agreement dated October 29, 2001, between Deere & Company and Deere Capital, Inc. (including conformed copy of the Asset Purchase Agreement as Exhibit A thereto) (Exhibit 10.1 to Form 10-Q of Deere & Company for the quarter ended February 2, 2020, Securities & Exchange Commission File No. 1-4121*)

10.2	Second Amendment, dated as of February 21, 2020, to the Asset Purchase Agreement dated October 29, 2001, between John Deere Construction & Forestry Company and Deere Capital, Inc. (including conformed copy of the Asset Purchase Agreement as Exhibit A thereto) (Exhibit 10.2 to Form 10-Q of Deere & Company for the quarter ended February 2, 2020, Securities & Exchange Commission File No. 1-4121*)

31.1	Rule 13a-14(a)/15d-14(a) Certification

31.2	Rule 13a-14(a)/15d-14(a) Certification

32	Section 1350 Certifications

101.SCH	Inline XBRL Taxonomy Extension Schema Document

101.CAL	Inline XBRL Taxonomy Extension Calculation Linkbase Document

101.DEF	Inline XBRL Taxonomy Extension Definition Linkbase Document

101.LAB	Inline XBRL Taxonomy Extension Label Linkbase Document

101.PRE	Inline XBRL Taxonomy Extension Presentation Linkbase Document

104	Cover Page Interactive Data File (formatted as Inline XBRL and contained in Exhibit 101)

* Incorporated by reference. Copies of these exhibits are available from the Company upon request.

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SIGNATURES

Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.




		JOHN DEERE CAPITAL CORPORATION




Date:	~~August 29, 2019~~February 27, 2020	By:	/s/ Ryan D. Campbell
			Ryan D. Campbell
			Senior Vice President and
			Principal Financial Officer and Principal Accounting Officer

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