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 ~~August 1, 2021~~January 30, 2022

☐ 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~~JDCC/22	New York Stock Exchange
2.00% Senior Notes Due 2031	JDCC 31	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.


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 ~~August 1, 2021,~~February 24, 2022, 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~~Statements of Consolidated Income

(Unaudited)

(in millions)


	Three Months Ended				Nine Months Ended				Three Months Ended
	August 1		August 2		August 1		August 2		January 30		January 31
	2021		2020		2021		2020		2022		2021
Revenues
Finance income earned on retail notes	$	234.4	$	234.9	$	705.9	$	701.4	$	240.0	$	237.3
Lease revenues										241.5		263.6
Revolving charge account income		77.3		87.8		216.1		242.7		66.5		72.9
Finance income earned on wholesale receivables		77.5		84.6		231.1		305.3		59.9		73.3
Lease revenues		255.7		270.3		775.5		817.8
Other income		38.0		18.4		86.6		47.5		35.0		9.9
Total revenues		682.9		696.0		2,015.2		2,114.7		642.9		657.0
Expenses
Interest expense		114.1		161.3		373.1		597.7		99.5		134.0
Operating expenses:
Depreciation of equipment on operating leases										168.8		194.8
Administrative and operating expenses		105.5		92.0		304.3		357.9		96.4		92.5
Fees paid to John Deere		40.8		24.8		111.7		73.0		39.7		31.5
Provision (credit) for credit losses		15.7		16.0		(.5)		100.8		(1.2)		(.6)
Depreciation of equipment on operating leases		180.1		211.8		559.5		639.6
Total operating expenses		342.1		344.6		975.0		1,171.3		303.7		318.2
Total expenses		456.2		505.9		1,348.1		1,769.0		403.2		452.2
Income of consolidated group before income taxes		226.7		190.1		667.1		345.7		239.7		204.8
Provision for income taxes		41.5		44.4		139.5		75.9		52.0		39.0
Income of consolidated group		185.2		145.7		527.6		269.8		187.7		165.8
Equity in income of unconsolidated affiliate		.7		.5		2.2		1.6		1.9		.9
Net income		185.9		146.2		529.8		271.4		189.6		166.7
Less: Net income attributable to noncontrolling interests		.2				.2		.1
Net income attributable to the Company	$	185.7	$	146.2	$	529.6	$	271.3	$	189.6	$	166.7

See Condensed Notes to Interim Consolidated Financial Statements.

John Deere Capital Corporation and Subsidiaries

~~Statement~~Statements of Consolidated Comprehensive Income

(Unaudited)

(in millions)


	Three Months Ended				Nine Months Ended				Three Months Ended
	August 1		August 2		August 1		August 2		January 30		January 31
	2021		2020		2021		2020		2022		2021

Net income	$	185.9	$	146.2	$	529.8	$	271.4	$	189.6	$	166.7

Other comprehensive income (loss), net of income taxes
Cumulative translation adjustment		(16.7)		50.0		22.6		28.2		(36.4)		35.7
Unrealized gain (loss) on derivatives		.6		4.2		5.9		(4.8)
Unrealized gain on derivatives										13.0		3.0
Unrealized gain (loss) on debt securities		(.2)		.6		(.1)				(.2)		.1
Other comprehensive income (loss), net of income taxes		(16.3)		54.8		28.4		23.4		(23.6)		38.8

Comprehensive income of consolidated group		169.6		201.0		558.2		294.8		166.0		205.5
Less: Comprehensive income attributable to noncontrolling interests		.2				.2		.1
Comprehensive income attributable to the Company	$	169.4	$	201.0	$	558.0	$	294.7	$	166.0	$	205.5

See Condensed Notes to Interim Consolidated Financial Statements.

John Deere Capital Corporation and Subsidiaries

Consolidated Balance ~~Sheet~~Sheets

(Unaudited)

(in millions)


	August 1		November 1		August 2		January 30		October 31		January 31
	2021		2020		2020		2022		2021		2021
Assets
Cash and cash equivalents	$	682.7	$	674.6	$	624.9	$	664.5	$	677.0	$	622.5
Marketable securities		2.1		2.2		2.4		1.8		2.1		2.2
Receivables:
Retail notes		19,009.6		17,158.0		15,112.4		22,336.1		21,343.5		18,364.6
Retail notes securitized		5,408.2		4,689.2		5,446.2		3,517.9		4,662.4		3,928.0
Revolving charge accounts		3,687.7		3,827.4		3,918.3		2,684.8		3,740.1		2,621.7
Wholesale receivables		7,731.2		7,093.3		8,428.8		6,312.0		5,951.3		7,835.5
Financing leases		846.5		789.4		743.6		878.4		972.3		739.5
Total receivables		36,683.2		33,557.3		33,649.3		35,729.2		36,669.6		33,489.3
Allowance for credit losses		(139.0)		(129.1)		(140.6)		(121.4)		(129.0)		(149.5)
Total receivables – net		36,544.2		33,428.2		33,508.7		35,607.8		36,540.6		33,339.8
Other receivables		96.6		88.1		106.9		91.5		85.1		100.4
Receivables from John Deere		333.7		583.2		804.5		156.8		191.6		487.7
Equipment on operating leases – net		4,963.8		5,297.8		5,257.2		4,745.6		4,947.6		5,032.6
Notes receivable from John Deere		366.0		350.0		366.8		371.7		393.5		300.0
Investment in unconsolidated affiliate		21.6		19.3		18.9		22.7		21.9		20.9
Deferred income taxes		34.9		27.1		37.3		30.4		32.7		31.1
Other assets		367.2		386.7		427.8		334.4		324.5		388.7
Total Assets	$	43,412.8	$	40,857.2	$	41,155.4	$	42,027.2	$	43,216.6	$	40,325.9

Liabilities and Stockholder’s Equity
Short-term borrowings:
Short-term external borrowings:
Commercial paper and other notes payable	$	507.0	$	187.5	$	1,012.0	$	568.6	$	678.9	$	314.1
Securitization borrowings		5,264.6		4,656.2		5,324.1		3,473.8		4,595.2		3,951.5
John Deere		5,859.2		5,249.5		3,796.3
Current maturities of long-term borrowings		5,746.0		5,741.6		4,910.2
Total short-term borrowings		17,376.8		15,834.8		15,042.6
Current maturities of long-term external borrowings								6,104.0		5,819.1		5,686.8
Total short-term external borrowings								10,146.4		11,093.2		9,952.4
Notes payable to John Deere								5,306.4		5,619.4		5,227.4
Other payables to John Deere		45.7		30.1		42.6		186.3		97.6		43.9
Accounts payable and accrued expenses		839.0		922.3		876.0		782.8		876.0		805.2
Deposits withheld from dealers and merchants		125.5		114.8		105.6
Deposits held from dealers and merchants								126.1		131.8		126.9
Deferred income taxes		288.9		345.9		423.3		260.5		265.1		330.1
Long-term borrowings		20,136.7		19,311.1		20,492.1
Long-term external borrowings								20,566.5		20,607.3		19,497.5
Total liabilities		38,812.6		36,559.0		36,982.2		37,375.0		38,690.4		35,983.4
Commitments and contingencies (Note 9)
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		3,165.0		2,891.6		2,762.9		3,240.6		3,091.0		2,897.1
Accumulated other comprehensive loss		(49.4)		(77.8)		(74.0)		(73.0)		(49.4)		(39.0)
Total Company stockholder’s equity		4,598.4		4,296.6		4,171.7		4,650.4		4,524.4		4,340.9
Noncontrolling interests		1.8		1.6		1.5		1.8		1.8		1.6
Total stockholder’s equity		4,600.2		4,298.2		4,173.2		4,652.2		4,526.2		4,342.5
Total Liabilities and Stockholder’s Equity	$	43,412.8	$	40,857.2	$	41,155.4	$	42,027.2	$	43,216.6	$	40,325.9

See Condensed Notes to Interim Consolidated Financial Statements.

John Deere Capital Corporation and Subsidiaries

~~Statement~~Statements of Consolidated Cash Flows

(Unaudited)

(in millions)


	Nine Months Ended					Three Months Ended
	August 1		August 2			January 30		January 31
	2021		2020			2022		2021
Cash Flows from Operating Activities:
Net income	$	529.8	$	271.4		$	189.6	$	166.7
Adjustments to reconcile net income to net cash					��
provided by operating activities:
Provision (credit) for credit losses		(.5)		100.8			(1.2)		(.6)
Provision for depreciation and amortization		576.6		652.2			175.1		199.8
Credit for deferred income taxes		(59.8)		(106.3)			(5.8)		(13.9)
Impairment charges				30.8
Undistributed earnings of unconsolidated affiliate		(2.0)		(1.4)			(1.9)		(.9)
Change in accounts payable and accrued expenses		(26.7)		(16.1)			(72.6)		(58.6)
Change in accrued income taxes payable/receivable		(22.8)		32.0			11.7		(32.7)
Other		48.8		129.3			(26.2)		40.9
Net cash provided by operating activities		1,043.4		1,092.7			268.7		300.7

Cash Flows from Investing Activities:
Cost of receivables acquired (excluding wholesale)		(16,373.9)		(13,844.2)			(5,197.5)		(5,041.8)
Collections of receivables (excluding wholesale)		13,854.5		12,760.9			6,294.1		5,898.2
(Increase) decrease in wholesale receivables – net		(578.3)		353.8
Increase in wholesale receivables – net							(457.9)		(632.5)
Cost of equipment on operating leases acquired		(1,290.3)		(1,359.4)			(317.4)		(305.9)
Proceeds from sales of equipment on operating leases		1,121.4		978.3			362.0		356.3
Cost of notes receivable acquired from John Deere		(234.4)		(163.9)			(107.1)		(33.0)
Collections of notes receivable from John Deere		229.2		78.2			106.3		91.6
Other		(2.1)		(44.0)			(6.5)		(5.2)
Net cash used for investing activities		(3,273.9)		(1,240.3)
Net cash provided by investing activities							676.0		327.7

Cash Flows from Financing Activities:
Increase (decrease) in commercial paper and other notes payable – net		319.5		(444.5)			(110.3)		126.7
Increase in securitization borrowings – net		610.4		1,048.5
Increase in payable to John Deere – net		578.4		1,775.8
Proceeds from issuance of long-term borrowings		5,210.4		3,062.5
Payments of long-term borrowings		(4,214.2)		(5,008.7)
Decrease in securitization borrowings – net							(1,122.6)		(705.8)
Decrease in short-term borrowings with John Deere – net							(181.0)		(123.6)
Proceeds from issuance of long-term external borrowings							1,799.3		1,523.1
Payments of long-term external borrowings							(1,302.4)		(1,367.7)
Dividends paid		(230.0)		(250.0)			(40.0)		(135.0)
Debt issuance costs		(27.7)		(21.9)			(6.1)		(9.1)
Net cash provided by financing activities		2,246.8		161.7
Net cash used for financing activities							(963.1)		(691.4)

Effect of exchange rate changes on cash, cash equivalents, and restricted cash		3.9		(.9)			(5.2)		6.7
Net increase in cash, cash equivalents, and restricted cash		20.2		13.2
Net decrease in cash, cash equivalents, and restricted cash							(23.6)		(56.3)
Cash, cash equivalents, and restricted cash at beginning of period *		769.4		710.9			772.8		769.4
Cash, cash equivalents, and restricted cash at end of period *	$	789.6	$	724.1		$	749.2	$	713.1

* At ~~August 1,~~January 30, 2022, October 31, 2021, January 31, 2021, and November 1, 2020, ~~August 2, 2020, and November 3, 2019,~~ restricted cash, which is reported in other assets on the consolidated balance sheet, was ~~$106.9~~$84.7 million, ~~$94.8~~$95.8 million, ~~$99.2~~$90.6 million and ~~$78.3~~$94.8 million, respectively. The restricted cash primarily relates to the securitization of receivables (see Note 5).

See Condensed Notes to Interim Consolidated Financial Statements.

John Deere Capital Corporation and Subsidiaries

~~Statement~~Statements of Changes in Consolidated Stockholder’s Equity

For the Three ~~and Nine~~ Months Ended ~~August 1,~~January 30, 2022 and January 31, 2021 ~~and August 2, 2020~~

(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 August 2, 2020
Balance May 3, 2020	$	3,997.2	$	1,482.8	$	2,641.7	$	(128.8)	$	1.5
Balance November 1, 2020											$	4,298.2	$	1,482.8	$	2,891.6		$	(77.8)	$	1.6
ASU No. 2016-13 adoption												(26.2)				(26.2)
Net income		146.2				146.2						166.7				166.7
Other comprehensive income		54.8						54.8				38.8							38.8
Dividends declared		(25.0)				(25.0)						(135.0)				(135.0)
Balance August 2, 2020	$	4,173.2	$	1,482.8	$	2,762.9	$	(74.0)	$	1.5
Balance January 31, 2021											$	4,342.5	$	1,482.8	$	2,897.1		$	(39.0)	$	1.6

Nine Months Ended August 2, 2020
Balance November 3, 2019	$	4,128.4	$	1,482.8	$	2,741.6	$	(97.4)	$	1.4
Net income		271.4				271.3				.1
Other comprehensive income		23.4						23.4
Dividends declared		(250.0)				(250.0)
Balance August 2, 2020	$	4,173.2	$	1,482.8	$	2,762.9	$	(74.0)	$	1.5

Three Months Ended August 1, 2021
Balance May 2, 2021	$	4,525.6	$	1,482.8	$	3,074.3	$	(33.1)	$	1.6
Balance October 31, 2021											$	4,526.2	$	1,482.8	$	3,091.0		$	(49.4)	$	1.8
Net income		185.9				185.7				.2		189.6				189.6
Other comprehensive loss		(16.3)						(16.3)				(23.6)							(23.6)
Dividends declared		(95.0)				(95.0)						(40.0)				(40.0)
Balance August 1, 2021	$	4,600.2	$	1,482.8	$	3,165.0	$	(49.4)	$	1.8

Nine Months Ended August 1, 2021
Balance November 1, 2020	$	4,298.2	$	1,482.8	$	2,891.6	$	(77.8)	$	1.6
ASU No. 2016-13 adoption (see Note 2)		(26.2)				(26.2)
Net income		529.8				529.6				.2
Other comprehensive income		28.4						28.4
Dividends declared		(230.0)				(230.0)
Balance August 1, 2021	$	4,600.2	$	1,482.8	$	3,165.0	$	(49.4)	$	1.8
Balance January 30, 2022											$	4,652.2	$	1,482.8	$	3,240.6		$	(73.0)	$	1.8

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

John Deere Capital Corporation (Capital Corporation) and its subsidiaries are collectively called the Company. John Deere Financial Services, Inc. (JDFS), a wholly-owned finance holding subsidiary of Deere & Company, owns all of the outstanding common stock of Capital Corporation. The Company provides and administers financing for retail purchases of new equipment manufactured by Deere & Company’s production and precision agriculture operations, small agriculture and turf operations, and construction and forestry operations and used equipment taken in trade for this equipment. References to agriculture and turf include both production and precision agriculture and small agriculture and turf. 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~~non-John 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~~Additionally, the Company ~~also~~ provides wholesale financing ~~for inventories~~to dealers of John Deere agriculture and turf and construction and forestry equipment, primarily to finance inventories of equipment for ~~dealers of~~ those ~~products~~dealers (wholesale receivables). In addition, the Company leases John Deere equipment and a limited amount of ~~non-Deere~~non-John 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 generally secures its Receivables, other than certain revolving charge accounts, by retaining as collateral a security ~~interest~~ in the goods associated with those Receivables or with the use of other collateral.

~~Beginning in~~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 years 2022 and 2021 ~~John Deere implemented a new operating model~~were January 30, 2022 and ~~reporting structure. With this change, John Deere’s agriculture~~January 31, 2021, respectively. Both periods contained 13 weeks. Unless otherwise stated, references to particular years or quarters refer to the Company's fiscal years generally ending in October and ~~turf operations were divided into two new segments: production~~the associated periods in those fiscal years.

Variable Interest Entities

The Company is the primary beneficiary of and ~~precision agriculture~~consolidates certain variable interest entities (VIEs) that are special purpose entities (SPEs) related to the securitization of receivables. See Note 5 for more information on these SPEs.

(2) Summary of Significant Accounting Policies and small agriculture and turf. There were no changes to John Deere’s construction and forestry or financial services segments. Receivables and Leases managed by the Company continue to be evaluated by market (agriculture and turf and construction and forestry). References to agriculture and turf include both production and precision agriculture and small agriculture and turf.New Accounting Standards

Quarterly Financial Statements

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 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 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~~Annual Report on Form 10-K. Results for interim periods are not necessarily indicative of those to be expected for the fiscal year.

Use of Estimates in Financial Statements

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. ~~The COVID pandemic has resulted in uncertainties in the Company’s business, which may result in actual outcomes differing~~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 2021 and 2020 were August 1, 2021 and August 2, 2020, respectively. Both third quarters contained 13 weeks, while both year-to-date periods contained 39 weeks. Unless otherwise stated, references to particular years, quarters, or months refer to the Company's fiscal years generally ending in October and the associated periods in those fiscal years.

~~(2) New Accounting Standards~~

New Accounting Standards ~~Adopted~~

InThe Company closely monitors all Accounting Standard Updates (ASUs) issued by the ~~first quarter of 2021, the Company adopted~~ Financial Accounting Standards Board (FASB) Accounting Standards Update (ASU) No. 2016-13, Measurement of Credit Losses on Financial Instruments, which establishes Accounting Standards Codification (ASC) 326, Financial Instruments – Credit Losses. This ASU wasand other authoritative guidance. ASUs adopted ~~using a~~ ~~modified-retrospective~~ approach. The ASU, along with related amendments, revised the measurement of credit losses for financial assets measured at amortized cost from an incurred loss 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.~~

The Company holds deposits from dealers (dealer deposits), which are recorded in deposits withheld from dealers and merchants, to absorb certain credit losses. Prior to adopting this ASU, the allowance for credit losses was estimated on probable credit losses incurred after consideration of recoveries from dealer deposits. The ASU considers dealer deposits and certain credit insurance contracts as freestanding credit enhancements. As a result, after adoption, credit losses recovered from dealer deposits and certain credit insurance contracts are presented in other income and no longer as part of the allowance for credit losses or the provision for credit losses. The ASU also modified the treatment of the estimated write-off on delinquent receivables by no longer including the estimated benefit of charges to the dealer deposits in the write-off amount (see Note 4). This change increases the estimated write-offs on delinquent financing receivables with the benefit of credit losses recovered from dealer deposits presented in other income. This benefit, in both situations, is recorded when the dealer deposits are charged and no longer based on estimated recoveries.

~~The effects of adopting the ASU on the consolidated balance sheet were as follows (in millions of dollars):~~

November 1

Cumulative Effect

November 2

2020

from Adoption

2020
Assets

Allowance for credit losses

$
(129.1)

$
(19.7)

$
(148.8)
Deferred income taxes

27.1

.7

27.8

Liabilities

Accounts payable and accrued expenses

$
922.3

$
(.5)

$
921.8
Deposits withheld from dealers and merchants

114.8

13.5

128.3
Deferred income taxes

345.9

(5.8)

340.1

Stockholder’s equity

Retained earnings

$
2,891.6

$
(26.2)

$
2,865.4

~~Note 4 contains additional disclosures as well as the Company’s updated allowance for credit losses accounting policy.~~

~~The Company also adopted the following standards in 2021, none of which had~~2022 did not have a material ~~effect~~impact on the Company’s ~~consolidated~~ financial ~~statements:~~

~~Accounting Standards Updates~~


~~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
~~No. 2019-04~~	~~Codification Improvements to Topic 326, Financial Instruments – Credit Losses, Topic 815, Derivatives and Hedging, and Topic 825, Financial Instruments~~
~~No. 2021-01~~	~~Reference Rate Reform (Topic 848): Scope~~statements, and ASUs to be adopted in future periods are not expected to have a material impact on the Company’s financial statements.

~~New Accounting Standards to be Adopted~~

~~The Company will adopt the following standards in future periods, none of which are expected to have a material effect on the Company’s consolidated financial statements:~~

~~Accounting Standards Updates~~


~~No. 2019-12~~	~~Simplifying the Accounting for Income Taxes, which amends ASC 740, Income Taxes~~
~~No. 2020-08~~	~~Codification Improvements to Subtopic 310-20, Receivables – Nonrefundable Fees and Other Costs~~

~~(3) Other Comprehensive Income Items~~

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

Unrealized

Unrealized

Accumulated

Cumulative

Gain (Loss)

Gain (Loss)

Other

Translation

on

on

Comprehensive

Adjustment

Derivatives

Debt Securities

Income (Loss)

Balance November 3, 2019

$
(88.4)

$
(7.0)

$
(2.0)

$
(97.4)

Other comprehensive income (loss) items before reclassification

28.2

(13.9)

14.3

Amounts reclassified from accumulated other comprehensive income

9.1

9.1

Net current period other comprehensive income (loss)

28.2

(4.8)

23.4

Balance August 2, 2020

$
(60.2)

$
(11.8)

$
(2.0)

$
(74.0)

Balance November 1, 2020

$
(69.5)

$
(6.7)

$
(1.6)

$
(77.8)

Other comprehensive income (loss) items before reclassification

22.6

(.6)

(.1)

21.9

Amounts reclassified from accumulated other comprehensive income

6.5

6.5

Net current period other comprehensive income (loss)

22.6

5.9

(.1)

28.4

Balance August 1, 2021

$
(46.9)

$
(.8)

$
(1.7)

$
(49.4)

(3) Other Comprehensive Income Items

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


	January 30		October 31		January 31
	2022		2021		2021
Cumulative translation adjustment	$	(90.9)	$	(54.5)	$	(33.8)
Unrealized gain (loss) on derivatives		19.8		6.8		(3.7)
Unrealized loss on debt securities		(1.9)		(1.7)		(1.5)
Total accumulated other comprehensive income (loss)	$	(73.0)	$	(49.4)	$	(39.0)

Amounts recorded in and reclassifications out of other comprehensive income (loss), and the income tax effects were as follows (in millions of dollars):


	Before		Tax		After		Before		Tax		After
	Tax		(Expense)		Tax		Tax		(Expense)		Tax
Three Months Ended August 1, 2021	Amount		Credit		Amount
Three Months Ended January 30, 2022							Amount		Credit		Amount
Cumulative translation adjustment	$	(16.7)			$	(16.7)	$	(36.4)			$	(36.4)
Unrealized gain (loss) on derivatives:
Unrealized hedging gain (loss)		(.9)	$	.2		(.7)		15.4	$	(3.3)		12.1
Reclassification of realized (gain) loss to:
Interest rate contracts – Interest expense		1.6		(.3)		1.3		1.1		(.2)		.9
Net unrealized gain (loss) on derivatives		.7		(.1)		.6		16.5		(3.5)		13.0
Unrealized gain (loss) on debt securities:
Unrealized holding gain (loss)				(.2)		(.2)		(.3)		.1		(.2)
Total other comprehensive income (loss)	$	(16.0)	$	(.3)	$	(16.3)	$	(20.2)	$	(3.4)	$	(23.6)

Nine Months Ended August 1, 2021
Three Months Ended January 31, 2021
Cumulative translation adjustment	$	22.6			$	22.6	$	35.7			$	35.7
Unrealized gain (loss) on derivatives:
Unrealized hedging gain (loss)		(.8)	$	.2		(.6)		(.5)	$	.1		(.4)
Reclassification of realized (gain) loss to:
Interest rate contracts – Interest expense		8.2		(1.7)		6.5		4.3		(.9)		3.4
Net unrealized gain (loss) on derivatives		7.4		(1.5)		5.9		3.8		(.8)		3.0
Unrealized gain (loss) on debt securities:
Unrealized holding gain (loss)		(.2)		.1		(.1)		.1				.1
Total other comprehensive income (loss)	$	29.8	$	(1.4)	$	28.4	$	39.6	$	(.8)	$	38.8

Three Months Ended August 2, 2020
Cumulative translation adjustment	$	50.0			$	50.0
Unrealized gain (loss) on derivatives:
Unrealized hedging gain (loss)		(1.1)	$	.2		(.9)
Reclassification of realized (gain) loss to:
Interest rate contracts – Interest expense		6.4		(1.3)		5.1
Net unrealized gain (loss) on derivatives		5.3		(1.1)		4.2
Unrealized gain (loss) on debt securities:
Unrealized holding gain (loss)		.6				.6
Total other comprehensive income (loss)	$	55.9	$	(1.1)	$	54.8

Nine Months Ended August 2, 2020
Cumulative translation adjustment	$	28.2			$	28.2
Unrealized gain (loss) on derivatives:
Unrealized hedging gain (loss)		(17.6)	$	3.7		(13.9)
Reclassification of realized (gain) loss to:
Interest rate contracts – Interest expense		11.5		(2.4)		9.1
Net unrealized gain (loss) on derivatives		(6.1)		1.3		(4.8)
Unrealized gain (loss) on debt securities:
Unrealized holding gain (loss)		(.8)		.8
Total other comprehensive income (loss)	$	21.3	$	2.1	$	23.4

108

(4) Receivables

Credit Quality

The Company monitors the credit quality of Receivables based on delinquency status. 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. Non-performing Receivables represent receivables for which the Company has ceased accruing finance income. Generally, when retail notes, revolving charge accounts, and financing lease accounts are 90 days delinquent, accrual of finance income and lease revenue is suspended, and accrued finance income and lease revenue previously recognized is reversed. 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 and whether accrued finance income previously recognized should be reversed. During the first three months of 2022, $3.8 million of accrued finance income and lease revenue was reversed on non-performing Receivables. Finance income and lease revenue for non-performing Receivables is recognized on a cash basis. Accrual of finance income and lease revenue is generally resumed when the receivable becomes contractually current and collections are reasonably assured. Finance income and lease revenue of $3.1 million was recognized from cash payments on non-performing Receivables during the first three months of 2022.

Receivable balances are written off to the allowance for credit losses when, in the judgment of management, they are considered uncollectible. Generally, when retail notes and financing lease accounts are 120 days delinquent, the collateral is repossessed or the account is designated for litigation, and the estimated uncollectible amount from the customer 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.

Due to the economic effects of COVID, the Company provided short-term payment relief to dealers and retail customers during 2020, and to a much lesser extent in 2021. The relief was provided in regional programs and on a case-by-case basis with customers that were generally current in their payment obligations. Receivables granted relief since the beginning of the pandemic that remained outstanding at August 1, 2021 represented approximately 3 percent of the Receivables balance. The majority of Receivables granted short-term relief are beyond the deferral period and have either resumed making payments or are reported as delinquent based on the modified payment schedule.

The credit quality analysis of retail notes, financing leases, and revolving charge accounts (collectively, Customer Receivables) ~~at August 1, 2021~~by year of origination was as follows (in millions of dollars):


	Year of Origination																January 30, 2022
	2021		2020		2019		2018		2017		Prior		Revolving Charge Accounts		Total		2022		2021		2020		2019		2018		Prior		Revolving Charge Accounts		Total
Customer Receivables:
Agriculture and turf
Current	$	8,075.6	$	6,472.1	$	3,246.0	$	1,695.6	$	733.9	$	207.4	$	3,570.9	$	24,001.5	$	2,181.1	$	10,156.1	$	5,099.4	$	2,469.2	$	1,175.8	$	539.0	$	2,565.0	$	24,185.6
30-59 days past due		31.1		42.1		25.1		14.9		5.3		2.7		11.4		132.6		4.4		67.7		39.7		23.8		12.6		5.7		23.5		177.4
60-89 days past due		11.7		21.4		10.0		4.4		2.6		1.1		3.4		54.6		.2		17.5		13.3		7.6		4.2		2.2		4.7		49.7
90+ days past due		.1		.5		.2		.2								1.0				1.5				.1		.1		.1				1.8
Non-performing		11.0		45.8		31.6		28.3		13.1		14.4		5.7		149.9		.4		27.9		45.0		26.0		22.1		20.0		5.9		147.3
Construction and forestry
Current		1,765.6		1,413.7		715.0		281.3		63.2		10.6		91.5		4,340.9		625.7		2,131.1		1,050.4		471.3		159.0		39.5		80.8		4,557.8
30-59 days past due		28.2		38.0		21.8		8.0		2.7		.7		2.9		102.3		7.4		58.5		32.1		18.0		5.5		1.6		2.6		125.7
60-89 days past due		11.3		16.1		8.6		4.2		1.3		.3		1.1		42.9				20.5		15.1		6.5		1.9		.7		1.1		45.8
90+ days past due		3.2				4.5										7.7				1.0		1.8		2.0								4.8
Non-performing		9.0		44.1		36.0		17.7		7.2		3.8		.8		118.6		.4		26.4		44.7		30.2		12.1		6.3		1.2		121.3
Total Customer Receivables	$	9,946.8	$	8,093.8	$	4,098.8	$	2,054.6	$	829.3	$	241.0	$	3,687.7	$	28,952.0	$	2,819.6	$	12,508.2	$	6,341.5	$	3,054.7	$	1,393.3	$	615.1	$	2,684.8	$	29,417.2

119


	October 31, 2021
	2021		2020		2019		2018		2017		Prior		Revolving Charge Accounts		Total
Customer Receivables:
Agriculture and turf
Current	$	11,318.1	$	5,719.1	$	2,842.5	$	1,431.0	$	582.8	$	119.9	$	3,620.9	$	25,634.3
30-59 days past due		34.7		47.5		24.2		13.7		5.9		2.9		13.1		142.0
60-89 days past due		12.8		17.4		8.4		5.1		2.4		.7		3.2		50.0
90+ days past due		.5		.5		.1		.2		.1						1.4
Non-performing		20.1		44.5		26.4		22.3		10.6		12.5		6.4		142.8
Construction and forestry
Current		2,356.4		1,198.5		573.5		215.6		42.5		5.4		92.3		4,484.2
30-59 days past due		36.6		33.0		21.1		5.8		2.0		.1		2.7		101.3
60-89 days past due		12.5		8.4		5.0		2.6		.5		.2		1.0		30.2
90+ days past due		.1		.4		.9				.1						1.5
Non-performing		21.9		50.0		33.9		15.1		6.3		2.9		.5		130.6
Total Customer Receivables	$	13,813.7	$	7,119.3	$	3,536.0	$	1,711.4	$	653.2	$	144.6	$	3,740.1	$	30,718.3


	January 31, 2021
	2021		2020		2019		2018		2017		Prior		Revolving Charge Accounts		Total
Customer Receivables:
Agriculture and turf
Current	$	2,233.8	$	8,126.9	$	4,264.4	$	2,338.4	$	1,137.2	$	464.9	$	2,498.1	$	21,063.7
30-59 days past due		2.7		50.0		35.1		24.4		10.8		6.0		26.3		155.3
60-89 days past due		.1		13.8		11.7		8.4		3.7		2.8		4.2		44.7
90+ days past due						.8		.2		.1		.2				1.3
Non-performing		.3		34.4		52.5		40.2		21.6		24.0		6.5		179.5
Construction and forestry
Current		582.3		1,723.8		974.0		447.5		123.4		30.1		81.8		3,962.9
30-59 days past due		3.7		46.8		27.9		14.5		4.7		1.2		2.9		101.7
60-89 days past due		.4		12.8		15.1		6.5		2.1		.6		1.2		38.7
90+ days past due				8.6		4.9										13.5
Non-performing				23.5		28.8		22.4		11.0		6.1		.7		92.5
Total Customer Receivables	$	2,823.3	$	10,040.6	$	5,415.2	$	2,902.5	$	1,314.6	$	535.9	$	2,621.7	$	25,653.8

The credit quality analysis of ~~Customer Receivables at November 1, 2020 and August 2, 2020~~wholesale receivables by year of origination was as follows (in millions of dollars):


	November 1, 2020						August 2, 2020						January 30, 2022
	Retail Notes & Financing Leases		Revolving Charge Accounts		Total		Retail Notes & Financing Leases		Revolving Charge Accounts		Total		2022		2021		2020		2019		2018		Prior		Revolving		Total
Customer Receivables:
Wholesale receivables:
Agriculture and turf
Current	$	18,341.2	$	3,710.3	$	22,051.5	$	17,188.9	$	3,794.6	$	20,983.5	$	101.1	$	237.1	$	54.2	$	11.3	$	6.5	$	2.1	$	4,510.5	$	4,922.8
30-59 days past due		111.4		11.5		122.9		114.3		18.3		132.6
60-89 days past due		47.6		3.5		51.1		59.4		3.5		62.9
90+ days past due		2.0				2.0		3.6				3.6
30+ days past due																										12.6		12.6
Non-performing		172.7		5.4		178.1		204.9		7.4		212.3														6.3		6.3
Construction and forestry
Current		3,759.5		92.3		3,851.8		3,572.8		90.2		3,663.0		3.5		35.7		2.3		2.7		.2				1,324.9		1,369.3
30-59 days past due		82.0		2.4		84.4		60.4		2.6		63.0
60-89 days past due		38.8		1.1		39.9		14.6		1.0		15.6
90+ days past due		1.9				1.9
30+ days past due																										1.0		1.0
Non-performing		79.5		.9		80.4		83.3		.7		84.0
Total Customer Receivables	$	22,636.6	$	3,827.4	$	26,464.0	$	21,302.2	$	3,918.3	$	25,220.5
Total wholesale receivables													$	104.6	$	272.8	$	56.5	$	14.0	$	6.7	$	2.1	$	5,855.3	$	6,312.0

~~The credit quality analysis of wholesale receivables at August 1, 2021 was as follows (in millions of dollars):~~


	Year of Origination																October 31, 2021
	2021		2020		2019		2018		2017		Prior		Revolving		Total		2021		2020		2019		2018		2017		Prior		Revolving		Total
Wholesale receivables:
Agriculture and turf															��
Current	$	260.9	$	106.2	$	30.6	$	12.5	$	3.1	$	.5	$	5,946.0	$	6,359.8	$	339.6	$	77.1	$	21.1	$	9.2	$	2.7	$	.4	$	4,233.4	$	4,683.5
30-59 days past due														10.1		10.1
60-89 days past due														3.8		3.8
90+ days past due														2.8		2.8
30+ days past due																														12.0		12.0
Non-performing														4.3		4.3														6.7		6.7
Construction and forestry
Current		7.5		5.1		3.9		.4						1,332.0		1,348.9		39.4		4.0		3.4		.3						1,199.6		1,246.7
30-59 days past due														1.3		1.3
60-89 days past due														.2		.2
90+ days past due
30+ days past due																														2.4		2.4
Non-performing
Total wholesale receivables	$	268.4	$	111.3	$	34.5	$	12.9	$	3.1	$	.5	$	7,300.5	$	7,731.2	$	379.0	$	81.1	$	24.5	$	9.5	$	2.7	$	.4	$	5,454.1	$	5,951.3

~~The credit quality analysis of wholesale receivables at November 1, 2020 and August 2, 2020 was as follows (in millions of dollars):~~


					January 31, 2021
	November 1, 2020		August 2, 2020		2021		2020		2019		2018		2017		Prior		Revolving		Total
Wholesale receivables:
Agriculture and turf
Current	$	5,693.7	$	6,905.0	$	78.5	$	216.5	$	61.5	$	17.8	$	7.5	$	1.3	$	6,092.5	$	6,475.6
30-59 days past due		3.9		10.9
60-89 days past due		4.4		1.1
90+ days past due		1.1		1.4
30+ days past due								.2										12.4		12.6
Non-performing		4.0		3.8														4.1		4.1
Construction and forestry
Current		1,385.9		1,499.6		2.6		7.9		5.4		.6						1,323.3		1,339.8
30-59 days past due		.3		3.4
60-89 days past due				.3
90+ days past due				1.1
30+ days past due																		3.4		3.4
Non-performing				2.2
Total wholesale receivables	$	7,093.3	$	8,428.8	$	81.1	$	224.6	$	66.9	$	18.4	$	7.5	$	1.3	$	7,435.7	$	7,835.5

Allowance for Credit Losses

The allowance for credit losses is an estimate of the credit losses expected over the life of the Company’s Receivable portfolio. The Company measures expected credit losses on a collective basis when similar risk characteristics exist. Risk characteristics considered by the Company include product category, market, geography, credit risk, and remaining duration. Receivables that do not share risk characteristics with other receivables in the portfolio are evaluated on an individual basis. Non-performing Receivables are included in the estimate of expected credit losses.

The Company utilizes loss forecast models, which are selected based on the size and credit risk of the underlying pool of receivables, to estimate expected credit losses. Transition matrix models are used for large and complex Customer Receivable pools, while weighted average remaining maturity (WARM) models are used for smaller and less complex Customer Receivable pools. Transition matrix models, which are used for the majority of the Customer Receivables, estimate credit losses using historical delinquency and default information to assign probabilities that a receivable will pay as contractually scheduled or become delinquent and advance through the various delinquency stages. The model simulates the runoff of the portfolio, month-by-month, over the life of the receivables until the balances are fully repaid or default, using roll rates applied to the outstanding portfolio. The roll rates are applied based on the delinquency status of the customer accounts and are further segmented based on the credit risk and remaining duration of the underlying receivables. Estimated recovery rates are applied to the balance at default to calculate the expected credit losses. The modeled expected credit losses are adjusted based on reasonable and supportable forecasts, which may include economic indicators such as commodity prices, industry equipment sales, unemployment rates, and housing starts. The WARM models apply historical average annual loss rates, adjusted for current and forecasted economic conditions, to the projected portfolio runoff. Expected credit losses on wholesale receivables are based on historical loss rates, adjusted for current economic conditions and reasonable and supportable forecasts. Management reviews each model’s output quarterly, and qualitative adjustments are incorporated as necessary.

Recoveries from freestanding credit enhancements, such as dealer deposits, and certain credit insurance contracts are not included in the estimate of expected credit losses. Recoveries from dealer deposits are recognized in other income on the statement of consolidated income when the dealer’s withholding account is charged. During the three and nine months ended August 1, 2021, $3.2 million and $9.8 million, respectively, were recorded in other income related to recoveries from freestanding credit enhancements. Prior to the adoption of ASU No. 2016-13, the allowance for credit losses was estimated on probable credit losses incurred after consideration of expected recoveries from freestanding credit enhancements.

1311

charged. During the three months ended January 30, 2022 and January 31, 2021, recoveries from freestanding credit enhancements recorded in other income were $1.1 million and $.9 million, respectively.

An analysis of the allowance for credit losses and investment in Receivables during 2022 was as follows (in millions of dollars):


	Three Months Ended
	January 30, 2022
	Retail Notes		Revolving
	& Financing		Charge		Wholesale		Total
	Leases		Accounts		Receivables		Receivables
Allowance:
Beginning of period balance	$	96.5	$	20.8	$	11.7	$	129.0
Provision (credit) for credit losses*		7.9		(9.4)		.1		(1.4)
Write-offs		(12.5)		(4.0)				(16.5)
Recoveries		2.9		7.8				10.7
Translation adjustments		(.1)				(.3)		(.4)
End of period balance	$	94.7	$	15.2	$	11.5	$	121.4

Receivables:		��
End of period balance	$	26,732.4	$	2,684.8	$	6,312.0	$	35,729.2

*Excludes provision for credit losses on unfunded commitments of $.2 million. The estimated credit losses related to unfunded commitments are recorded in accounts payable and accrued expenses on the consolidated balance sheet.

The allowance for credit losses decreased $7.6 million in the first three months of 2022, led by decreases in the revolving charge accounts and retail notes and financing leases portfolios. These portfolios are benefiting from favorable agriculture market conditions driven by higher commodity prices and net farm income, which is contributing to stronger payment performance.

An analysis of the allowance for credit losses and investment in Receivables during 2021 was as follows (in millions of dollars):

Three Months Ended

August 1, 2021

Retail Notes

Revolving

& Financing

Charge

Wholesale

Total

Leases

Accounts

Receivables

Receivables

Allowance:

Beginning of period balance

$
101.3

$
18.9

$
9.6

$
129.8

Provision (credit) for credit losses*

13.6

(.1)

2.2

15.7

Write-offs

(8.5)

(8.4)

(.2)

(17.1)

Recoveries

3.2

7.6

10.8

Translation adjustments

(.2)

.1

(.1)

(.2)

End of period balance

$
109.4

$
18.1

$
11.5

$
139.0


	Nine Months Ended								Three Months Ended
	August 1, 2021								January 31, 2021
	Retail Notes		Revolving						Retail Notes		Revolving
	& Financing		Charge		Wholesale		Total		& Financing		Charge		Wholesale		Total
	Leases		Accounts		Receivables		Receivables		Leases		Accounts		Receivables		Receivables
Allowance:
Beginning of period balance	$	76.9	$	42.3	$	9.9	$	129.1	$	76.9	$	42.3	$	9.9	$	129.1
ASU No. 2016-13 adoption (see Note 2)		32.5		(12.2)		(.6)		19.7
ASU No. 2016-13 adoption										32.5		(12.2)		(.6)		19.7
Provision (credit) for credit losses*		11.2		(15.9)		2.1		(2.6)		6.7		(9.7)				(3.0)
Write-offs		(19.7)		(22.7)		(.3)		(42.7)		(4.1)		(5.3)				(9.4)
Recoveries		8.1		26.6				34.7		2.8		9.2				12.0
Translation adjustments		.4				.4		.8		.9				.2		1.1
End of period balance	$	109.4	$	18.1	$	11.5	$	139.0	$	115.7	$	24.3	$	9.5	$	149.5

Receivables:
End of period balance	$	25,264.3	$	3,687.7	$	7,731.2	$	36,683.2	$	23,032.1	$	2,621.7	$	7,835.5	$	33,489.3

*Excludes provision for credit losses on unfunded commitments of ~~$2.1 million for the nine months ended August 1, 2021, which is~~$2.4 million. The estimated credit losses related to unfunded commitments are recorded in accounts payable and accrued expenses on the consolidated balance sheet. ~~There was 0 change in the provision for credit losses on unfunded commitments for the third quarter of 2021.~~

~~The allowance for credit losses on Receivables increased $9.2 million in the third quarter of 2021, primarily due to growth in the retail notes and financing leases portfolio.~~

For the first nine months of 2021, the allowance for credit losses increased $9.9 million, primarily due to the adoption of ASU No. 2016-13 and growth in the retail notes and financing leases portfolio. These increases were partially offset by a reduction in the allowance on revolving charge accounts and a lower allowance on construction and forestry retail notes and financing leases. The allowance on revolving charge accounts was favorably impacted by strong payment performance due to continued improvements in the agriculture market, while expected credit losses on construction and forestry retail notes and financing leases decreased due to improving market conditions and better than expected performance of accounts granted payment relief due to the economic effects of COVID.

1412

~~An analysis of the allowance for credit losses and investment in Receivables during 2020 was as follows (in millions of dollars):~~

Three Months Ended

August 2, 2020

Retail Notes

Revolving

& Financing

Charge

Wholesale

Total

Leases

Accounts

Receivables

Receivables

Allowance:

Beginning of period balance

$
88.4

$
42.3

$
9.1

$
139.8

Provision (credit) for credit losses

3.3

13.2

(.5)

16.0

Write-offs

(5.5)

(21.3)

(.1)

(26.9)

Recoveries

2.4

8.1

.4

10.9

Translation adjustments

.4

.4

.8

End of period balance

$
89.0

$
42.3

$
9.3

$
140.6

Nine Months Ended

August 2, 2020

Retail Notes

Revolving

& Financing

Charge

Wholesale

Total

Leases

Accounts

Receivables

Receivables

Allowance:








Beginning of period balance

$
53.7

$
39.3

$
7.6

$
100.6

Provision (credit) for credit losses

70.5

31.3

(1.0)

100.8

Write-offs

(39.6)

(50.1)

(.9)

(90.6)

Recoveries

4.5

21.8

1.3

27.6

Translation adjustments

(.1)

2.3

2.2

End of period balance

$
89.0

$
42.3

$
9.3

$
140.6

Receivables:

End of period balance

$
21,302.2

$
3,918.3

$
8,428.8

$
33,649.3

The allowance for credit losses increased $40.0 million in the first nine months of 2020 primarily due to the negative economic effects of COVID and other macroeconomic issues, which significantly affected certain retail borrowers, particularly of construction equipment.

Troubled Debt ~~Restructurings~~Restructuring

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 date, 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 ~~2021,~~2022, the Company identified ~~287~~87 Receivable contracts, primarily retail notes, as troubled debt restructurings with aggregate balances of ~~$10.3~~$3.1 million pre-modification and ~~$9.4~~$2.2 million post-modification. During the first ~~nine~~three months of ~~2020,~~2021, there were ~~328~~95 Receivable contracts, primarily retail notes, with aggregate balances of ~~$12.6~~$5.5 million pre-modification and ~~$11.6~~$5.4 million post-modification. ~~The short-term relief related to COVID mentioned on page 11 did not meet the definition of a troubled debt restructuring.~~ During these same periods, there were 0 significant troubled debt restructurings that subsequently defaulted and were written off. At ~~August 1, 2021,~~January 30, 2022, the Company had 0 commitments to provide additional financing to customers whose accounts were modified in troubled debt restructurings.

(5) Securitization of Receivables

~~The Company, as~~As a part of its overall funding strategy, the Company periodically transfers certain Receivables (retail notes) into ~~variable interest entities (VIEs)~~VIEs that are ~~special purpose entities (SPEs),~~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 does 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, which in turn issue debt to investors, or to non-VIE banking operations, which ~~in turn issue debt to investors. The debt securities issued~~provide funding directly to the ~~third-party investors result~~Company. The funding provided by these third parties results in secured borrowings, which are recorded as “Securitization borrowings” on the consolidated balance sheet. The securitized retail notes are recorded as “Retail notes securitized” on the consolidated 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 ~~$3,605.3~~$2,649.4 million, ~~$2,897.5~~$3,093.6 million, and ~~$3,342.5~~$2,424.7 million at ~~August 1,~~January 30, 2022, October 31, 2021, ~~November 1, 2020,~~ and ~~August 2, 2020,~~January 31, 2021, respectively. The liabilities (securitization borrowings and accrued interest) of these SPEs totaled ~~$3,487.2~~$2,575.4 million, ~~$2,856.2~~$3,024.0 million, and ~~$3,258.8~~$2,403.4 million at ~~August 1,~~January 30, 2022, October 31, 2021, ~~November 1, 2020,~~ and ~~August 2, 2020,~~January 31, 2021, respectively. The credit holders of these SPEs do not have legal recourse to the Company’s general credit.

~~In certain securitizations, the~~The Company ~~transfers~~has a revolving warehouse facility to utilize bank conduit facilities to securitize retail notes, ~~to non-VIE banking operations, which are not consolidated since the Company does not have a controlling interest~~described further in the ~~entities.~~following paragraphs. The ~~Company’s carrying values~~facility was renewed in November 2021 with an expiration in November 2022 and ~~interests related~~a reduction of the total capacity or “financing limit” from $2,000.0 million to the securitizations with the unconsolidated non-VIEs were restricted assets (retail notes securitized, allowance for credit losses, and other assets) of $554.5 million, $549.7 million, and $642.4 million at August 1, 2021, November 1, 2020, and August 2, 2020, respectively. The liabilities (securitization borrowings and accrued interest) were $520.5 million, $528.1 million, and $606.0 million at August 1, 2021, November 1, 2020, and August 2, 2020, respectively.

1613

~~In certain securitizations,~~$1,000.0 million. As a result of the reduced capacity, the Company repurchased $511.1 million of outstanding short-term securitization borrowings in November 2021, in addition to the normal monthly liquidations as a result of payments collected on the retail notes. At the end of the contractual revolving period, unless the banks and the Company agree to renew, the Company would liquidate the secured borrowings over time as payments on the retail notes are collected.

Through the revolving warehouse facility, 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 ~~$1,341.2~~$767.0 million, ~~$1,327.3~~$1,175.8 million, and ~~$1,551.3~~$1,120.0 million at ~~August 1,~~January 30, 2022, October 31, 2021, ~~November 1, 2020,~~ and ~~August 2, 2020,~~January 31, 2021, respectively. The liabilities (securitization borrowings and accrued interest) related to these conduits were ~~$1,259.0~~$719.7 million, ~~$1,275.1~~$1,112.8 million, and ~~$1,463.4~~$1,097.0 million at ~~August 1,~~January 30, 2022, October 31, 2021, ~~November 1, 2020,~~ and ~~August 2, 2020,~~January 31, 2021, 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):


	August 1		January 30
	2021		2022
Carrying value of liabilities	$	1,259.0	$	719.7
Maximum exposure to loss		1,341.2		767.0

The total assets of the unconsolidated ~~VIEs~~conduits related to securitizations were ~~approximately $37~~$14 billion at ~~August 1, 2021.~~January 30, 2022.

In addition, through the revolving warehouse facility, the Company transfers retail notes to banks, which may elect to fund the retail notes through the use of their own funding sources. These non-VIE banking operations are not consolidated since the Company does not have a controlling interest in them. 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 $191.7 million, $486.1 million, and $463.0 million at January 30, 2022, October 31, 2021, and January 31, 2021, respectively. The liabilities (securitization borrowings and accrued interest) were $179.9 million, $460.1 million, and $453.5 million at January 30, 2022, October 31, 2021, and January 31, 2021, respectively.

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


	August 1		November 1		August 2		January 30		October 31		January 31
	2021		2020		2020		2022		2021		2021
Retail notes securitized	$	5,408.2	$	4,689.2	$	5,446.2	$	3,517.9	$	4,662.4	$	3,928.0
Allowance for credit losses		(19.9)		(12.6)		(14.0)		(10.1)		(13.5)		(14.7)
Other assets		112.7		97.9		104.0		100.3		106.6		94.4
Total restricted securitized assets	$	5,501.0	$	4,774.5	$	5,536.2	$	3,608.1	$	4,755.5	$	4,007.7

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


	August 1		November 1		August 2		January 30		October 31		January 31
	2021		2020		2020		2022		2021		2021
Securitization borrowings	$	5,264.6	$	4,656.2	$	5,324.1	$	3,473.8	$	4,595.2	$	3,951.5
Accrued interest on borrowings		2.1		3.2		4.1		1.2		1.7		2.4
Total liabilities related to restricted securitized assets	$	5,266.7	$	4,659.4	$	5,328.2	$	3,475.0	$	4,596.9	$	3,953.9

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 ~~August 1, 2021,~~January 30, 2022, the maximum remaining term of all restricted securitized retail notes was approximately ~~seven~~six years.

(6) Leases

The Company leases John Deere equipment and a limited amount of ~~non-Deere~~non-John 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.

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


	Three Months Ended				Nine Months Ended				Three Months Ended
	August 1		August 2		August 1		August 2		January 30		January 31
	2021		2020		2021		2020		2022		2021
Sales-type and direct financing lease revenues	$	12.7	$	12.0	$	35.8	$	34.3	$	13.0	$	11.8
Operating lease revenues		237.9		253.5		724.3		768.8		223.1		246.6
Variable lease revenues		5.1		4.8		15.4		14.7		6.2		7.4
Total lease revenues	$	255.7	$	270.3	$	775.5	$	817.8	$	242.3	$	265.8

Variable lease revenues reported above primarily relate to separately invoiced property taxes on leased equipment in certain markets, late fees, and ~~late~~excess use and damage fees. Excess use and damage fees of $.8 million and $2.2 million for the three months ended January 30, 2022 and January 31, 2021, respectively, were reported in other income on the statement of consolidated income.

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


	August 1		November 1		August 2		January 30		October 31		January 31
	2021		2020		2020		2022		2021		2021
Agriculture and turf	$	5,043.4	$	5,210.4	$	5,082.8	$	4,903.2	$	5,053.4	$	5,023.7
Construction and forestry		1,391.3		1,595.3		1,648.3		1,244.3		1,323.6		1,518.8
Total		6,434.7		6,805.7		6,731.1		6,147.5		6,377.0		6,542.5
Accumulated depreciation		(1,470.9)		(1,507.9)		(1,473.9)		(1,401.9)		(1,429.4)		(1,509.9)
Equipment on operating leases - net	$	4,963.8	$	5,297.8	$	5,257.2	$	4,745.6	$	4,947.6	$	5,032.6

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 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 are revised. There were 0 impairment losses on operating leases recorded during the nine months ended August 1, 2021. During the nine months ended August 2, 2020, the Company recorded impairment losses on operating leases of $21.0 million due to higher expected return rates and lower estimated values of used construction equipment. The operating lease impairment losses were recorded in administrative and operating expenses on the statement of consolidated income.

~~The total~~Total operating lease residual values at ~~August 1,~~January 30, 2022, October 31, 2021, ~~November 1, 2020,~~ and ~~August 2, 2020~~January 31, 2021 were ~~$3,598.9~~$3,409.5 million, ~~$3,826.3~~$3,547.6 million, and ~~$3,791.7~~$3,706.8 million, respectively. Certain operating leases are subject to residual value guarantees. The total residual value guarantees were ~~$247.3~~$319.9 million, ~~$141.0~~$295.8 million, and ~~$110.1~~$162.5 million at ~~August 1,~~January 30, 2022, October 31, 2021, ~~November 1, 2020,~~ and ~~August 2, 2020,~~January 31, 2021, respectively. The increase in residual value guarantees is primarily due to guarantees provided by John Deere dealers, which generally provide a first-loss residual value guarantee on operating lease originations effective after January 2020.

The Company discusses with lessees and dealers options to purchase the equipment or extend the lease prior to operating lease maturity. Equipment returned to the Company upon termination of leases is remarketed by the Company. The matured operating lease inventory balances at ~~August 1,~~January 30, 2022, October 31, 2021, ~~November 1, 2020,~~ and ~~August 2, 2020~~January 31, 2021 were ~~$46.9~~$18.8 million, ~~$64.5~~$25.4 million, and ~~$100.7~~$72.6 million, respectively. Matured operating lease inventory is reported in other assets on the consolidated balance sheet. During the nine months ended August 2, 2020, the Company recorded impairment losses on matured operating lease inventory of $9.8 million due to lower estimated values of used construction equipment. There were 0 impairment losses recorded on matured operating lease inventory during the nine months ended August 1, 2021. The impairment losses on

~~matured operating lease inventory were included in administrative and operating expenses on the statement of consolidated income.~~

Due to the economic effects of COVID, the Company provided short-term payment relief to lessees during 2020, and to a much lesser extent in 2021. The relief was provided in regional programs and on a case-by-case basis with customers that were generally current in their payment obligations. The operating leases granted relief since the beginning of the pandemic that remained outstanding at August 1, 2021 represented approximately 2 percent of the Company’s operating lease portfolio. The majority of operating leases granted short-term relief are beyond the deferral period and have resumed making payments.

(7) Notes Receivable from and Payable to 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 ~~$3.8~~$5.4 million ~~for the third quarter and $10.3~~ in the first ~~nine~~three months of ~~2021,~~2022, compared with ~~$4.4 million and $12.4~~$3.3 million for the same ~~periods~~period last year, ~~respectively.~~which is recorded in other income.

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


	August 1		November 1		August 2		January 30		October 31		January 31
	2021		2020		2020		2022		2021		2021
Limited Liability Company John Deere Financial	$	198.6	$	132.5	$	125.6	$	196.9	$	233.7	$	89.4
Banco John Deere S.A.		167.4		217.5		241.2		174.8		159.8		210.6
Total Notes Receivable from John Deere	$	366.0	$	350.0	$	366.8	$	371.7	$	393.5	$	300.0

The Company also obtains funding from affiliated companies. At January 30, 2022, October 31, 2021, and January 31, 2021, the Company had notes payable to John Deere of $5,306.4 million, $5,619.4 million and $5,227.4 million, respectively. The intercompany borrowings are primarily short-term in nature or contain a due on demand call option. At January 30, 2022, the Company had $557.2 million of long-term intercompany loans without a due on demand call option, which mature in 2024. The Company pays interest to John Deere for these borrowings based on competitive market rates. Interest expense paid to John Deere was $16.4 million and $9.9 million for the three months ended January 30, 2022 and January 31, 2021, respectively, which is recorded in fees paid to John Deere.

(8) Long-Term External Borrowings

Long-term external borrowings of the Company at ~~August 1,~~January 30, 2022, October 31, 2021, ~~November 1, 2020,~~ and ~~August 2, 2020~~January 31, 2021 consisted of the following (in millions of dollars):


	August 1		November 1		August 2		January 30		October 31		January 31
	2021		2020		2020		2022		2021		2021
Senior Debt:
Medium-term notes	$	20,174.1	$	19,320.6	$	20,499.8	$	20,614.7	$	20,649.2	$	19,510.7
Other notes		19.8		38.2		43.3		8.4		15.6		38.6
Total senior debt		20,193.9		19,358.8		20,543.1		20,623.1		20,664.8		19,549.3
Unamortized debt discount and debt issuance costs		(57.2)		(47.7)		(51.0)		(56.6)		(57.5)		(51.8)
Total	$	20,136.7	$	19,311.1	$	20,492.1	$	20,566.5	$	20,607.3	$	19,497.5

The medium-term notes in the table above include unamortized fair value adjustments related to interest rate swaps. The principal balances of the medium-term notes were ~~$19,722.5, $18,668.9,~~$20,541.0 million, $20,378.2 million, and ~~$19,722.7~~$18,949.6 million at ~~August 1,~~January 30, 2022, October 31, 2021, ~~November 1, 2020,~~ and ~~August 2, 2020,~~January 31, 2021, respectively.

(9) Commitments and Contingencies

At ~~August 1, 2021,~~January 30, 2022, John Deere Financial Inc., the John Deere finance subsidiary in Canada, had ~~$2,049.2~~$2,197.8 million of medium-term notes outstanding, and a fair value liability of ~~$43.6~~$40.8 million for derivatives outstanding, prior to considering applicable netting provisions, with notional amounts of ~~$3,021.5~~$2,676.6 million that were guaranteed by Capital Corporation. The weighted average interest rate on the medium-term notes at ~~August 1, 2021~~January 30, 2022 was ~~2.2~~2.0 percent with a maximum remaining maturity of approximately ~~six~~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 0 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 ~~$964.3~~$784.9 million at ~~August 1, 2021.~~January 30, 2022. The weighted average interest rate on the debt at ~~August 1, 2021~~January 30, 2022 was 2.6 percent with a maximum remaining maturity of approximately two 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 ~~$10.0~~$10.9 billion at ~~August 1, 2021.~~January 30, 2022. The amount of unused commitments to extend credit to customers was ~~$28.8~~$30.1 billion at ~~August 1, 2021.~~January 30, 2022. 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. The Company recorded a reserve for estimated credit losses on unfunded commitments that are not unconditionally cancellable of $3.1 million at January 30, 2022, which is recorded in accounts payable and accrued expenses on the consolidated balance sheet.

At ~~August 1, 2021,~~January 30, 2022, Capital Corporation had ~~$131.2~~$215.6 million in unused loan commitments, which are unconditionally cancellable, denominated in rubles to Limited Liability Company John Deere Financial, the John Deere finance subsidiary in Russia.

At ~~August 1, 2021,~~January 30, 2022, 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 ~~August 1, 2021.~~January 30, 2022.

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.

(10) ~~Income Taxes~~

The Company’s unrecognized tax benefits at August 1, 2021 were $29.6 million, compared to $33.3 million at November 1, 2020, and $31.0 million at August 2, 2020. The liability at August 1, 2021, November 1, 2020, and August 2, 2020 consisted of approximately $19.9 million, $17.2 million, and $16.1 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 material.

~~(11)~~ 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.

2017

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


	August 1, 2021				November 1, 2020				August 2, 2020				January 30, 2022				October 31, 2021				January 31, 2021
	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	$	31,155.9	$	31,264.6	$	28,751.6	$	28,931.7	$	28,076.5	$	28,275.8	$	32,100.0	$	32,055.4	$	31,891.7	$	31,903.6	$	29,426.5	$	29,666.0
Retail notes securitized – net		5,388.3		5,454.3		4,676.6		4,772.9		5,432.2		5,543.9		3,507.8		3,521.4		4,648.9		4,694.2		3,913.3		4,001.7
Securitization borrowings		5,264.6		5,289.3		4,656.2		4,697.6		5,324.1		5,380.7		3,473.8		3,459.3		4,595.2		4,600.0		3,951.5		3,985.8
Current maturities of long-term borrowings		5,746.0		5,800.4		5,741.6		5,801.1		4,910.2		4,958.2
Long-term borrowings		20,136.7		20,557.9		19,311.1		19,784.4		20,492.1		21,038.2
Current maturities of long-term external borrowings														6,104.0		6,110.6		5,819.1		5,842.3		5,686.8		5,752.7
Long-term external borrowings														20,566.5		20,629.5		20,607.3		20,887.5		19,497.5		19,992.3

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 external borrowings and 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 external borrowings have been swapped to current variable interest rates. The carrying values of these long-term external 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):


	August 1		November 1		August 2		January 30		October 31		January 31
	2021		2020		2020		2022		2021		2021
Marketable securities
International debt securities	$	2.1	$	2.2	$	2.4	$	1.8	$	2.1	$	2.2
Receivables from John Deere
Derivatives:
Interest rate contracts		331.7		575.5		795.4		133.3		186.2		484.3
Cross-currency interest rate contracts		2.0		7.7		9.1		23.5		5.4		3.4
Other assets
Derivatives:
Foreign exchange contracts		.5		3.8		3.7
Foreign currency exchange contracts								27.3		1.1		1.2
Total assets	$	336.3	$	589.2	$	810.6	$	185.9	$	194.8	$	491.1

Other payables to John Deere
Derivatives:
Interest rate contracts	$	43.4	$	29.4	$	42.5	$	186.0	$	96.1	$	42.1
Cross-currency interest rate contracts		2.3		.7		.1		.3		1.5		1.8
Accounts payable and accrued expenses
Derivatives:
Foreign exchange contracts		1.7		.9		6.2
Foreign currency exchange contracts								1.4		4.8		3.0
Total liabilities	$	47.4	$	31.0	$	48.8	$	187.7	$	102.4	$	46.9

All fair value measurements in the table above were Level 2. Excluded from the table above 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 over the next nine years. At ~~August 1, 2021,~~January 30, 2022, the amortized cost basis and fair value of these available-for-sale debt securities were ~~$4.7~~$4.8 million and ~~$2.1~~$1.8 million, respectively.

2118

~~Fair~~Unrealized losses at January 30, 2022 were not recognized in income due to the ability and intent to hold to maturity.

There were no assets or liabilities measured at fair value on a nonrecurring ~~Level 3 measurements from impairments, excluding~~basis, other than Receivables with specific allowances which were not material, ~~were as follows (in millions~~during each of ~~dollars):~~

Fair Value

Losses

Three Months Ended

Nine Months Ended

August 1

November 1

August 2

August 1

August 2

August 1

August 2

2021

2020

2020

2021

2020

2021

2020
Equipment on operating leases – net

$
340.3

$
21.0
Other assets

56.5

9.8
Total

$
396.8

$
30.8

~~The fair value shown for November 1, 2020 in~~ the ~~table above represents the fair value assessment at May 3, 2020, as the result of impairments taken on operating leases~~periods ended January 30, 2022, October 31, 2021, and ~~matured operating lease inventory in the second quarter of 2020 (see Note 6).~~January 31, 2021.

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

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

Derivatives – The Company’s derivative financial instruments consist of interest rate contracts (swaps and caps), foreign currency exchange contracts (futures, forwards, and swaps), and cross-currency interest rate contracts (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 were based on an income approach (discounted cash flow), using the contractual payments, plus estimates of return rates and equipment sale price at lease maturity. Inputs included historical return rates and realized sales values.

~~Other assets~~ – The impairments of the matured operating lease inventory were measured at the fair value of that inventory. The valuations were based on a market approach. The inputs included sales of comparable assets.

~~(12)~~(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 consolidated balance sheet. Cash collateral received or paid is not offset against the derivative fair values on the consolidated balance sheet. The cash flows from these contracts are recorded in operating activities in the statement of consolidated cash flows. 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, the underlying hedged transaction is no longer likely to occur, 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 ~~August 1,~~January 30, 2022, October 31, 2021, ~~November 1, 2020,~~ and ~~August 2, 2020~~January 31, 2021 were ~~$1,750.0~~$2,700.0 million, ~~$1,550.0~~$2,700.0 million, and ~~$1,900.0~~$2,350.0 million, respectively. Fair value gains or losses on these cash flow hedges were recorded in other comprehensive income (OCI) and subsequently reclassified into interest expense in the same periods during which the hedged transactions impact 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~~gain recorded in OCI at ~~August 1, 2021~~January 30, 2022 that is expected to be reclassified to interest expense in the next twelve months if interest rates remain unchanged is ~~approximately $1.0~~$6.7 million after-tax. NaN gains or losses were 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 the receive-fixed/pay-variable interest rate contracts at ~~August 1,~~January 30, 2022, October 31, 2021, ~~November 1, 2020,~~ and ~~August 2, 2020~~

January 31, 2021 were ~~$7,934.9~~$7,600.8 million, ~~$6,525.7~~$7,313.6 million, and ~~$8,179.8~~$7,592.0 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

Hedging Adjustments Included in the

Carrying Amount

Carrying

Active

Amount of

Hedging

Discontinued

August 1, 2021

Hedged Item

Relationships

Relationships

Total

Current maturities of long-term borrowings

$
187.8

$
4.0

$
(.9)

$
3.1

Long-term borrowings

8,165.4

261.3

190.3

451.6

November 1, 2020

Current maturities of long-term borrowings

$
2.5

$
2.5

$
2.5

Long-term borrowings

7,149.8

$
530.0

121.6

651.6

August 2, 2020

Current maturities of long-term borrowings

$
104.6

$
2.6

$
2.0

$
4.6

Long-term borrowings

8,826.4

737.6

39.5

777.1


			Cumulative Increase (Decrease) of Fair Value
			Hedging Adjustments Included in the
			Carrying Amount
	Carrying		Active
	Amount of		Hedging		Discontinued
January 30, 2022	Hedged Item		Relationships		Relationships		Total
Current maturities of long-term external borrowings	$	185.5	$	1.7	$	8.1	$	9.8
Long-term external borrowings		7,464.5		(107.6)		181.3		73.7

October 31, 2021
Current maturities of long-term external borrowings	$	189.5	$	2.7	$	(1.7)	$	1.0
Long-term external borrowings		7,361.7		48.3		222.7		271.0

January 31, 2021
Current maturities of long-term external borrowings	$	1.3			$	1.3	$	1.3
Long-term external borrowings		8,120.1	$	423.8		137.3		561.1

Derivatives Not Designated as Hedging Instruments

The Company has certain interest rate contracts (swaps and caps), foreign currency exchange contracts (futures, 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 the interest rate swaps at ~~August 1,~~January 30, 2022, October 31, 2021, ~~November 1, 2020,~~ and ~~August 2, 2020~~January 31, 2021 were ~~$2,921.4~~$2,798.0 million, ~~$2,336.6~~$2,970.4 million, and ~~$2,423.2~~$2,527.7 million, the foreign currency exchange contracts were ~~$98.0~~$967.9 million, ~~$172.6~~$96.7 million, and ~~$211.1~~$113.0 million, and the cross-currency interest rate contracts were ~~$197.4~~$302.9 million, ~~$111.5~~$237.5 million, and ~~$123.5~~$144.7 million, respectively. To facilitate borrowings through securitization of retail notes, interest rate caps were sold with notional amounts of $1,469.4 million, $1,645.4 million, and $1,743.9 million at January 30, 2022, October 31, 2021, and January 31, 2021, respectively. Interest rate caps were also purchased with notional amounts of $1,469.4 million, $1,645.4 million, and $1,743.9 million at the same dates, respectively. The fair value gains or losses from the interest rate contracts were recognized currently in interest expense and the gains or losses from foreign currency exchange contracts in administrative and operating expenses, generally offsetting over time the expenses on the exposures being hedged.

2320

To facilitate borrowings through securitization of retail notes, interest rate caps were sold with notional amounts of $1,807.6 million, $1,961.4 million, and $2,171.0 million at August 1, 2021, November 1, 2020, and August 2, 2020, respectively. Interest rate caps were also purchased with notional amounts of $1,807.6 million, $1,961.4 million, and $2,171.0 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):


	August 1		November 1		August 2		January 30		October 31		January 31
	2021		2020		2020		2022		2021		2021
Receivables from John Deere
Designated as hedging instruments:
Interest rate contracts	$	321.0	$	565.2	$	785.3	$	102.7	$	162.8	$	474.3

Not designated as hedging instruments:
Interest rate contracts		10.7		10.3		10.1		30.6		23.4		10.0
Cross-currency interest rate contracts		2.0		7.7		9.1		23.5		5.4		3.4
Total not designated		12.7		18.0		19.2		54.1		28.8		13.4

Other Assets
Not designated as hedging instruments:
Foreign exchange contracts		.5		3.8		3.7
Total not designated		.5		3.8		3.7
Foreign currency exchange contracts								27.3		1.1		1.2

Total derivative assets	$	334.2	$	587.0	$	808.2	$	184.1	$	192.7	$	488.9

Other Payables to John Deere
Designated as hedging instruments:
Interest rate contracts	$	32.3	$	12.7	$	24.1	$	164.1	$	79.0	$	27.7

Not designated as hedging instruments:
Interest rate contracts		11.1		16.7		18.4		21.9		17.1		14.4
Cross-currency interest rate contracts		2.3		.7		.1		.3		1.5		1.8
Total not designated		13.4		17.4		18.5		22.2		18.6		16.2

Accounts Payable and Accrued Expenses
Not designated as hedging instruments:
Foreign exchange contracts		1.7		.9		6.2
Foreign currency exchange contracts								1.4		4.8		3.0

Total derivative liabilities	$	47.4	$	31.0	$	48.8	$	187.7	$	102.4	$	46.9

2421

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
	August 1		August 2		August 1		August 2		January 30		January 31
	2021		2020		2021		2020		2022		2021
Fair Value Hedges
Interest rate contracts - Interest expense	$	139.9	$	76.7	$	(70.7)	$	568.0	$	(139.5)	$	(52.3)

Cash Flow Hedges
Recognized in OCI
Interest rate contracts - OCI (pretax)		(.9)		(1.1)		(.8)		(17.6)		15.4		(.5)

Reclassified from OCI
Interest rate contracts - Interest expense		(1.6)		(6.4)		(8.2)		(11.5)		(1.1)		(4.3)

Not Designated as Hedges
Interest rate contracts - Interest expense *	$	(2.9)	$	(2.2)	$	(4.5)	$	(3.0)	$	(3.3)	$	(2.5)
Foreign exchange contracts - Administrative and operating expenses *		(4.5)		(47.2)		(20.0)		47.3
Foreign currency exchange contracts - Administrative and operating expenses *										67.8		(12.6)
Total not designated	$	(7.4)	$	(49.4)	$	(24.5)	$	44.3	$	64.5	$	(15.1)

* Includes interest and foreign currency 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 ~~August 1,~~January 30, 2022 and January 31, 2021 ~~and August 2, 2020~~ were ~~gains~~losses of ~~$133.3~~$122.6 million and $62.8 million, respectively. The amounts the Company recognized on these affiliate party transactions for the nine months ended August 1, 2021 and August 2, 2020 were a loss of $91.6 million and a gain of $568.1$63.8 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 permits the net settlement of amounts owed in the event of default or termination. None of the Company’s derivative agreements contain credit-risk-related contingent features.

The Company’s outstanding derivatives ~~have been transacted~~transactions are with both unrelated external counterparties and with John Deere. For derivatives ~~transacted~~transactions 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.

The Company 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 ~~August 1,~~January 30, 2022, October 31, 2021, ~~November 1, 2020,~~ and ~~August 2, 2020.~~January 31, 2021.

2522

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):


August 1, 2021
January 30, 2022
Derivatives:	Gross Amounts Recognized		Netting Arrangements		Collateral	Net Amount		Gross Amounts Recognized		Netting Arrangements		Collateral	Net Amount
Assets
External	$	.5	$	(.1)		$	.4	$	27.3	$	(1.4)		$	25.9
John Deere		333.7		(43.1)			290.6		156.8		(130.9)			25.9
Liabilities
External		1.7		(.1)			1.6		1.4		(1.4)
John Deere		45.7		(43.1)			2.6		186.3		(130.9)			55.4


November 1, 2020
October 31, 2021
Derivatives:	Gross Amounts Recognized		Netting Arrangements		Collateral	Net Amount		Gross Amounts Recognized		Netting Arrangements		Collateral	Net Amount
Assets
External	$	3.8	$	(.7)		$	3.1	$	1.1	$	(.3)		$	.8
John Deere		583.2		(23.5)			559.7		191.6		(97.6)			94.0
Liabilities
External		.9		(.7)			.2		4.8		(.3)			4.5
John Deere		30.1		(23.5)			6.6		97.6		(97.6)


August 2, 2020
January 31, 2021
Derivatives:	Gross Amounts Recognized		Netting Arrangements		Collateral	Net Amount		Gross Amounts Recognized		Netting Arrangements		Collateral	Net Amount
Assets
External	$	3.7	$	(.2)		$	3.5	$	1.2				$	1.2
John Deere		804.5		(35.4)			769.1		487.7	$	(37.9)			449.8
Liabilities
External		6.2		(.2)			6.0		3.0					3.0
John Deere		42.6		(35.4)			7.2		43.9		(37.9)			6.0

~~(13) 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 was not material for the three and nine month periods ended August 1, 2021 and August 2, 2020. 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 $1.5 million for the third quarter and $4.6 million for the first nine months of 2021, compared with $1.7 million and $8.3 million for the same periods last year. The decrease from the prior year is primarily due to a $3.3 million curtailment loss in the first quarter of 2020 related to voluntary employee-separation programs (see Note 14). Further disclosure for these plans is included in Deere & Company’s Form 10-Q for the quarter ended August 1, 2021.

~~(14) Employee-Separation Programs~~

During the first nine months of 2020, the Company incurred voluntary employee-separation program expenses of $8.7 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 for the first nine months of 2020 was a non-cash charge of $3.3 million resulting from a curtailment in certain other postretirement benefit plans during the first quarter of 2020 (see Note 13). The expenses were recorded in ~~administrative and operating expenses~~.

2723

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 production and precision agriculture, small 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 for Fiscal Year 2022

The Company’s acquisition volume of Receivables and Leases is largely dependent upon the level of retail sales and leases of John Deere products. The level of John Deere retail sales and leases is responsive to a variety of economic, financial, climatic, legislative, and other factors that influence demand for its products.

Industry sales of large agricultural machinery in the U.S. and Canada are ~~expected~~forecasted to be up ~~about 25 percent for 2021 compared to the prior year.~~20 percent. Industry sales of ~~small agricultural~~turf and ~~turf~~utility equipment in the U.S. and Canada are expected to be ~~up about 10 percent in 2021.~~flat. Industry sales of agricultural machinery in Europe are ~~forecast~~forecasted to be up about ~~10 to 15 percent.~~5 percent higher. In South America, industry sales of tractors and combines are projected to ~~be up about 20 percent in 2021. Industry~~increase 5 to 10 percent. Asia industry sales of agricultural machinery ~~in Asia~~ are ~~forecast~~forecasted to be ~~up significantly.~~flat. Construction equipment industry sales in the U.S. and Canada for ~~2021~~2022 are expected to increase ~~about 15~~5 to 2010 percent, while compact construction equipment industry sales in the U.S. and Canada are ~~forecast~~anticipated to ~~increase~~be flat to up about ~~20 to 25~~5 percent. ~~In forestry,~~Forestry global industry equipment sales are expected to be ~~about~~10 to 15 percent higher. Global industry roadbuilding equipment sales are forecasted to be up 5 to 10 percent.

~~Compared to the prior year, the~~The Company’s ~~full year 2021~~full-year 2022 results are expected to ~~benefit from improvement~~be slightly lower than fiscal 2021 due to a higher provision for credit losses, lower gains on operating lease residual values, ~~a lower provision for credit losses, more favorable financing spreads,~~ and higher selling, general, and administrative expenses. These factors are expected to be partially offset by income earned on a higher average portfolio.

Items of concern include global and regional political conditions, economic and trade policies, uncertainty of the effectiveness of governmental and private sector actions to address ~~COVID, trade agreements,~~ the ~~uncertainty of the results of monetary and fiscal policies, the impact of elevated levels of sovereign and state debt,~~ongoing pandemic, capital market disruptions, changes in demand and pricing for new and used equipment, ~~geopolitical events,~~ and the other items discussed in the “Safe Harbor Statement” below. Significant fluctuations in foreign currency exchange rates, ~~and~~ volatility in the price of many commodities, and supply chain disruptions could also impact the Company’s ~~results. The future financial effects of COVID are unknown due to many factors. As a result, predicting the Company’s forecasted financial performance is subject to many assumptions~~results.

~~COVID Effects, Actions, and Recent Developments~~

~~The effects of COVID and the related actions of governments and other authorities to contain COVID continue to affect the Company’s operations, results, cash flows, and forecasts.~~

The Company’s first priority in addressing the effects of COVID continues to be the health, safety, and overall welfare of its employees. The Company effectively activated previously established business continuity plans and proactively implemented health and safety measures at its operations around the world.

The Company continued to work closely with its customers, including John Deere dealers and retail customers, in the first nine months of 2021 in connection with short-term payment relief on obligations owed to the Company. Receivables and operating leases granted relief since the beginning of the pandemic that remained outstanding at August 1, 2021 represented approximately 3 percent and 2 percent of the portfolio balances, respectively (see Notes 4 and 6).

~~2021~~2022 Compared with ~~2020~~2021

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

Three Months Ended

Nine Months Ended

August 1

August 2

August 1

August 2


2021

2020

2021

2020

Total revenues

$
682.9

$
696.0

$
2,015.2

$
2,114.7

Net income attributable to the Company

185.7

146.2

529.6

271.3


	Three Months Ended
	January 30		January 31
	2022		2021
Total revenues	$	642.9	$	657.0
Net income attributable to the Company		189.6		166.7

Total revenues for the ~~third~~first quarter ~~and first nine months~~ of ~~2021~~2022 decreased primarily due to lower average financing rates, partially offset by a higher average portfolio and gains on operating lease ~~dispositions in the current year.~~dispositions. Net income for the ~~third~~ quarter ~~and first nine months~~ was higher than the same ~~periods~~period in ~~2020 mainly~~2021 primarily due to income earned on a higher average portfolio balances and improvement on operating lease residual values, and more favorable financing spreads. Additionally, a lower provision for credit losses contributed to the improvement for the first nine months of fiscal 2021. Results for the nine-month period last year also included impairments on lease residual values.

Revenues

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

Three Months Ended

Nine Months Ended

August 1

August 2

%

August 1

August 2

%

2021

2020

Change

2021

2020

Change

Finance income earned from:

Retail notes

$
234.4

$
234.9

$
705.9

$
701.4

1

Revolving charge accounts

77.3

87.8

(12)

216.1

242.7

(11)

Wholesale receivables

77.5

84.6

(8)

231.1

305.3

(24)

Lease revenues

255.7

270.3

(5)

775.5

817.8

(5)

Other income

38.0

18.4

107

86.6

47.5

82


	Three Months Ended
	January 30		January 31		%
	2022		2021		Change
Finance income earned from:
Retail notes	$	240.0	$	237.3	1
Revolving charge accounts		66.5		72.9	(9)
Wholesale receivables		59.9		73.3	(18)
Lease revenues		241.5		263.6	(8)
Other income		35.0		9.9	254

Finance income earned on retail notes was similar to ~~comparable periods in 2020~~2021 primarily due to higher average portfolio balances, offset by lower average financing rates. Finance income earned on revolving charge accounts ~~and~~decreased primarily due to lower average financing rates. Finance income earned on wholesale receivables was lower due to lower average portfolio balances. Lease revenues decreased primarily due to lower average financing rates and lower average portfolio balances. ~~Lease revenues decreased~~

Other income increased for the first quarter of 2022 primarily due to ~~lower average portfolio balances.~~larger gains on operating lease residual values. Better than expected conditions in the agriculture and construction markets are leading to favorable results when the matured operating lease equipment is sold.

Revenues earned from John Deere totaled ~~$157.6~~$138.7 million for the ~~third~~first quarter ~~and $464.4 million in the first nine months~~ of ~~2021,~~2022, compared with ~~$165.8 million and $510.0~~$149.1 million for the same ~~periods~~period last year. The decrease was primarily due to decreased compensation paid by John Deere for waived or reduced finance charges on ~~wholesale receivables~~Receivables and ~~retail notes.~~Leases, which is amortized into income over the lives of the related Receivables and Leases. Revenues earned from John Deere are included in each of the revenue amounts discussed ~~above and in “Other income” on the statement of consolidated income.~~

Other income increased for the third quarter and first nine months of 2021 primarily due to gains on operating lease residual values, which had been revised downward over the term of the leases. Better than expected conditions in the agriculture and construction markets are leading to favorable results when the matured lease equipment is sold. The Company recognized losses on operating lease dispositions in 2020, which were recorded in administrative and operating expenses. In addition, both periods in 2021 benefited from freestanding credit enhancement recoveries (see Note 4), partially offset by lower interest income.above.

2925

Expenses

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

Three Months Ended

Nine Months Ended

August 1

August 2

%

August 1

August 2

%

2021

2020

Change

2021

2020

Change

Interest expense

$
114.1

$
161.3

(29)

$
373.1

$
597.7

(38)

Administrative and operating expenses

105.5

92.0

15

304.3

357.9

(15)

Provision (credit) for credit losses

15.7

16.0

(2)

(.5)

100.8

(100)

Depreciation of equipment on operating leases

180.1

211.8

(15)

559.5

639.6

(13)

Provision for income taxes

41.5

44.4

(7)

139.5

75.9

84


	Three Months Ended
	January 30		January 31		%
	2022		2021		Change
Interest expense	$	99.5	$	134.0	(26)
Depreciation of equipment on operating leases		168.8		194.8	(13)
Administrative and operating expenses		96.4		92.5	4
Fees paid to John Deere		39.7		31.5	26
Provision (credit) for credit losses		(1.2)		(.6)	(100)
Provision for income taxes		52.0		39.0	33

The decrease in interest expense for the ~~third~~first quarter ~~and first nine months~~ of ~~2021~~2022 was primarily due to lower average ~~interest~~borrowing rates.

~~Administrative and~~The depreciation of equipment on operating ~~expenses increased~~leases for the ~~third~~first quarter of ~~2021 compared~~2022 decreased primarily due to ~~2020,~~updated depreciation estimates as a result of improving conditions in the agriculture and construction markets, in addition to lower average balances of equipment on operating leases.

Fees paid to John Deere increased in 2022 primarily due to higher ~~employee incentive compensation. The decrease for the first nine months~~interest on intercompany borrowings from John Deere as a result of ~~2021 compared to 2020 was primarily due to losses and impairments on operating lease residual values recorded~~larger notional balances in ~~the prior year (see Note 6). In the current year, the Company recognized gains on the sale ofoperating lease equipment in other income. Administrative and operating expenses were also impacted by higher employee incentive compensation during the first nine months of 2021.~~certain high interest rate international markets.

The provision (credit) for credit losses ~~decreased $.3 million for the third quarter and $101.3~~was $(1.2) million for the first ~~nine months~~quarter of ~~2021,~~2022 compared to ~~similar~~$(.6) million for 2021. Both periods in 2020. The decrease in the first nine months is primarily due to lower expected losses on retail notes and financing leases caused by improving conditions in the construction and forestry market and better than expected performance of accounts granted payment relief due to the economic effects of COVID. The provision (credit) for credit losses also decreased on revolving charge accounts in 2021, reflectingbenefited from strong payment performance ~~due to continued improvements in the~~on agriculture market. In addition to the factors noted above, the prior year provision also included an increase in the allowance for credit losses in the second quarter of 2020 related to the negative economic effects of COVID and other macroeconomic issues.revolving charge accounts. The annualized provision (credit) for credit losses, as a percentage of the average balance of total Receivables financed, was ~~.18 percent in the third quarter and zero in the first nine months of 2021, compared with .20 percent and .42~~(.01) percent for the ~~same periods last year. See Note 2 and Note 4 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 2021 decreased primarily due to updated depreciation estimates and lower average balances of equipment on operating leases.~~

~~The provision for income taxes decreased in the third~~ quarter of ~~2021 due to a lower effective tax rate~~2022 and ~~favorable discrete items, partially offset by higher pretax income.~~ 2021.

The provision for income taxes increased during the first ~~nine months~~quarter of ~~2021~~2022 primarily due to higher pretax ~~income.~~income and unfavorable discrete tax items.

Receivables and Leases

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

Three Months Ended

August 1

August 2

$

%

2021

2020

Change

Change
Retail notes:









Agriculture and turf

$
2,948.6

$
2,399.9

$
548.7

23
Construction and forestry

710.7

568.3

142.4

25
Total retail notes

3,659.3

2,968.2

691.1

23
Revolving charge accounts

1,642.3

1,723.0

(80.7)

(5)
Financing leases

184.8

144.7

40.1

28
Equipment on operating leases

475.9

351.2

124.7

36
Total Receivables and Leases (excluding wholesale)

$
5,962.3

$
5,187.1

$
775.2

15

Nine Months Ended

August 1

August 2

$

%

2021

2020

Change

Change
Retail notes:









Agriculture and turf

$
8,465.7

$
6,525.4

$
1,940.3

30
Construction and forestry

2,042.5

1,490.0

552.5

37
Total retail notes

10,508.2

8,015.4

2,492.8

31
Revolving charge accounts

5,429.0

5,487.2

(58.2)

(1)
Financing leases

416.9

335.7

81.2

24
Equipment on operating leases

1,271.1

1,343.3

(72.2)

(5)
Total Receivables and Leases (excluding wholesale)

$
17,625.2

$
15,181.6

$
2,443.6

16


	Three Months Ended
	January 30		January 31		$		%
	2022		2021		Change		Change
Retail notes:
Agriculture and turf	$	2,319.9	$	2,327.7	$	(7.8)
Construction and forestry		674.5		631.9		42.6	7
Total retail notes		2,994.4		2,959.6		34.8	1
Revolving charge accounts		2,088.5		1,991.1		97.4	5
Financing leases		100.2		79.4		20.8	26
Equipment on operating leases		307.5		284.3		23.2	8
Total Receivables and Leases (excluding wholesale)	$	5,490.6	$	5,314.4	$	176.2	3

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

August 1

November 1

August 2

2021

2020

2020
Retail notes:

Agriculture and turf

$
20,056.6

$
18,031.0

$
16,970.9
Construction and forestry

4,361.2

3,816.2

3,587.7
Total retail notes

24,417.8

21,847.2

20,558.6
Revolving charge accounts

3,687.7

3,827.4

3,918.3
Wholesale receivables

7,731.2

7,093.3

8,428.8
Financing leases

846.5

789.4

743.6
Equipment on operating leases

4,963.8

5,297.8

5,257.2
Total Receivables and Leases

$
41,647.0

$
38,855.1

$
38,906.5


	January 30		October 31		January 31
	2022		2021		2021
Retail notes:
Agriculture and turf	$	21,253.9	$	21,518.9	$	18,316.0
Construction and forestry		4,600.1		4,487.0		3,976.6
Total retail notes		25,854.0		26,005.9		22,292.6
Revolving charge accounts		2,684.8		3,740.1		2,621.7
Wholesale receivables		6,312.0		5,951.3		7,835.5
Financing leases		878.4		972.3		739.5
Equipment on operating leases		4,745.6		4,947.6		5,032.6
Total Receivables and Leases	$	40,474.8	$	41,617.2	$	38,521.9

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):

August 1

November 1

August 2

2021

2020

2020

Dollars

Percent

Dollars

Percent

Dollars

Percent

Receivables 30 days or more past due *

$
359.3

.98

$
311.9

.93

$
295.9

.88

Non-performing Receivables *

272.8

.74

262.5

.78

302.3

.90

Allowance for credit losses

139.0

.38

129.1

.38

140.6

.42


	January 30			October 31			January 31
	2022			2021			2021
	Dollars		Percent	Dollars		Percent	Dollars		Percent
Receivables 30 days or more past due	$	418.8	1.17	$	340.8	.93	$	371.2	1.11
Non-performing Receivables		274.9	.77		280.1	.76		276.1	.82
Allowance for credit losses		121.4	.34		129.0	.35		149.5	.45

* The delinquency status of receivables granted payment relief due to COVID is based on the modified payment schedule (see Note 4).

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 credit losses expected over the life of the Receivable portfolio. The Company measures expected credit losses on a collective basis when similar risk characteristics exist. Risk characteristics considered by the Company include product category, market, geography, credit risk, and remaining duration. Receivables that do not share risk characteristics with other receivables in the portfolio are evaluated on an individual basis. While the Company believes its allowance is sufficient to provide for losses over the life of its existing Receivable portfolio, different assumptions or changes in economic conditions would result in changes to the allowance for credit losses and the provision for credit losses. See Note 4 for additional information related to the allowance for credit losses.

Deposits ~~withheld~~held from dealers and merchants amounted to ~~$125.5~~$126.1 million at ~~August 1, 2021,~~January 30, 2022, compared with ~~$114.8~~$131.8 million at ~~November 1, 2020~~October 31, 2021 and ~~$105.6~~$126.9 million at ~~August 2, 2020.~~January 31, 2021. 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. ~~Upon the adoption of ASU 2016-13, recoveries~~Recoveries from dealer deposits are recognized in other income when the dealer’s withholding account is charged.

During the ~~third quarter~~first three months of 2022 and ~~first nine months ended August 1,~~ 2021, ~~$3.2~~$1.1 million and ~~$9.8~~$.9 million, respectively, were recorded in other income related to recoveries from dealer deposits and other freestanding credit enhancements. Prior to the adoption of ASU No. 2016-13, the benefit of credit losses recovered from freestanding credit enhancements, such as dealer deposits, were recognized in the provision for credit losses based on estimated recoveries.

3227

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

August 1, 2021

August 2, 2020

Dollars

Percent

Dollars

Percent
Write-offs:









Retail notes:

Agriculture and turf

$
(2.5)

(.05)

$
(2.1)

(.05)
Construction and forestry

(5.1)

(.48)

(2.9)

(.33)
Total retail notes

(7.6)

(.13)

(5.0)

(.10)
Revolving charge accounts

(8.4)

(.95)

(21.3)

(2.30)
Wholesale receivables

(.2)

(.01)

(.1)

Financing leases

(.9)

(.44)

(.5)

(.28)
Total write-offs

(17.1)

(.19)

(26.9)

(.33)
Recoveries:

Retail notes:

Agriculture and turf

2.8

.06

1.6

.04
Construction and forestry

.3

.03

.5

.06
Total retail notes

3.1

.05

2.1

.04
Revolving charge accounts

7.6

.86

8.1

.87
Wholesale receivables

.4

.02
Financing leases

.1

.05

.3

.17
Total recoveries

10.8

.12

10.9

.13
Total net write-offs

$
(6.3)

(.07)

$
(16.0)

(.20)


	Three Months Ended
	January 30, 2022			January 31, 2021
	Dollars		Percent	Dollars		Percent
Write-offs:
Retail notes and financing leases:
Agriculture and turf	$	(6.1)	(.11)	$	(1.9)	(.04)
Construction and forestry		(6.4)	(.54)		(2.2)	(.22)
Total retail notes and financing leases		(12.5)	(.19)		(4.1)	(.07)
Revolving charge accounts		(4.0)	(.53)		(5.3)	(.71)
Total write-offs		(16.5)	(.19)		(9.4)	(.11)
Recoveries:
Retail notes and financing leases:
Agriculture and turf		2.0	.04		2.5	.05
Construction and forestry		.9	.08		.3	.03
Total retail notes and financing leases		2.9	.04		2.8	.05
Revolving charge accounts		7.8	1.04		9.2	1.23
Total recoveries		10.7	.12		12.0	.14
Total net write-offs	$	(5.8)	(.07)	$	2.6	.03

Nine Months Ended

August 1, 2021

August 2, 2020

Dollars

Percent

Dollars

Percent
Write-offs:









Retail notes:

Agriculture and turf

$
(8.5)

(.06)

$
(8.2)

(.07)
Construction and forestry

(8.9)

(.29)

(30.1)

(1.18)
Total retail notes

(17.4)

(.10)

(38.3)

(.26)
Revolving charge accounts

(22.7)

(.97)

(50.1)

(2.06)
Wholesale receivables

(.3)

(.01)

(.9)

(.01)
Financing leases

(2.3)

(.39)

(1.3)

(.25)
Total write-offs

(42.7)

(.17)

(90.6)

(.37)
Recoveries:

Retail notes:

Agriculture and turf

6.7

.05

2.9

.02
Construction and forestry

1.1

.04

1.1

.04
Total retail notes

7.8

.05

4.0

.03
Revolving charge accounts

26.6

1.13

21.8

.90
Wholesale receivables

1.3

.02
Financing leases

.3

.05

.5

.10
Total recoveries

34.7

.14

27.6

.11
Total net write-offs

$
(8.0)

(.03)

$
(63.0)

(.26)

~~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 changes in demand and pricing for used equipment and resulting impacts on lease residual values; 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 accounting standards; changes in tax rates, estimates, laws, and regulations and Company actions related thereto; changes to and compliance with privacy, banking, and other regulations; changes to and compliance with economic sanctions and export controls laws and regulations; compliance with U.S. and foreign laws when expanding to new markets and otherwise; actions by other regulatory bodies; governmental programs, policies, and tariffs for the benefit of certain industries or sectors; sanctions in particular jurisdictions; retaliatory actions to such changes in trade, banking, monetary, and fiscal policies; the political and social stability of the global markets in which the Company operates; changes in weather patterns; the effects of, or response to, terrorism and security threats; wars and other conflicts; natural disasters; the spread of major epidemics (including the COVID pandemic) and government and industry responses to epidemics, such as travel restrictions and extended shut down of businesses; events that damage the Company’s reputation or brand; significant investigations, claims, lawsuits or other legal proceedings; changes in the ability to attract, develop, engage, and retain qualified personnel; the implementation of the smart industrial operating model and other organizational changes; the failure to realize anticipated savings or benefits of cost reduction, productivity, or efficiency efforts; difficulties related to the conversion and implementation of the Company’s information technology systems; and security breaches, cybersecurity attacks, technology failures and other disruptions to the information technology infrastructure of the Company and John Deere dealers.

~~Uncertainties related to the magnitude and duration of the COVID pandemic may significantly adversely affect John Deere’s and the Company’s business and outlook. These uncertainties include:~~ ~~the duration and impact of any resurgence in COVID cases in any country, state, or region; the emergence, contagiousness, and threat of new and different strains of coronavirus;the availability, acceptance, and effects of vaccines;~~ prolonged reduction or closure of John Deere’s and the Company’s operations, or a delayed recovery in our operations; additional closures as mandated or otherwise made necessary by governmental authorities; additional operating costs due to remote working arrangements, adherence to social distancing guidelines and other COVID-related challenges; increased risk of cyber-attacks on network connections used in remote working arrangements; increased privacy-related risks due to processing health-related personal information; legal claims related to personal protective equipment designed, made, or provided by the Company or alleged exposure to COVID on Company premises; absence of employees due to illness; the impact of the pandemic on the financial condition and credit risk of the Company's customers and dealers, which could affect the demand for financing and lead to higher credit losses and losses on lease residual values; requests by the Company’s customers or dealers for payment deferrals and contract modifications; the impact of disruptions in the global capital markets and/or declines in John Deere’s and the Company’s financial performance, outlook or credit ratings, which could impact John Deere’s and the Company’s ability to obtain funding in the future; and the impact of the pandemic on demand for John Deere’s products and services. It remains unclear when a sustained economic recovery could occur and what a recovery may look like. All of these factors could materially and adversely affect our business, liquidity, results of operations, and financial position.

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, financing and repayment practices, and the number and size of customer delinquencies and defaults. A debt crisis in Europe, Latin America, 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. The Company’s operations could be impaired by changes in the equity, bond, and other financial markets, which would negatively affect earnings.

The 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) uncertainty regarding any new or modified trade arrangements between the United Kingdom and the European Union and/or other countries, (ii) the risk that one or more other European Union countries could come under increasing pressure to leave the European Union, or (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, including as a result of the COVID pandemic, 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.

The Company’s forward-looking statements are based upon assumptions relating to the factors described above, which are sometimes based upon estimates and data prepared by government agencies. Such estimates and data are often revised. The Company, except as required by law, undertakes no obligation to update or revise its forward-looking statements, whether as a result of new developments or otherwise. 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 annual report on Form 10-K and quarterly reports on Form 10-Q (including, but not limited to, the factors discussed in Item 1A. Risk Factors of the annual report on Form 10-K and quarterly reports on Form 10-Q) and other Deere & Company and Capital Corporation filings with the SEC.

Critical Accounting ~~Policies~~Estimates

See the Company’s critical accounting ~~policies~~estimates discussed in the Management’s Discussion and Analysis of Financial Condition and Results of Operations of the most ~~recent annual report~~recently filed Annual Report on Form 10-K. There have been no material changes to these ~~policies, other than as described below related to the allowance for credit losses, as a result of the adoption of ASU No. 2016-13 during the first quarter of 2021.~~

~~Allowance for Credit Losses~~

and complex Customer Receivable pools, while weighted average remaining maturity models are used for smaller and less complex Customer Receivable pools. Expected credit losses on wholesale receivables are based on historical loss rates, adjusted for current economic conditions. The modeled expected credit losses are adjusted based on reasonable and supportable forecasts, which may include economic indicators such as commodity prices, industry equipment sales, unemployment rates, and housing starts. Management reviews each model’s output quarterly, and qualitative adjustments are incorporated as necessary. While the Company believes its allowance is sufficient to provide for losses over the life of its existing Receivable portfolio, different assumptions or changes in economic conditions would result in changes to the allowance for credit losses and the provision for credit losses.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~~Annual Report on Form 10-K.

~~During~~Cash provided by operating activities was $268.7 million in the first ~~nine~~three months of ~~2021,~~2022. Cash provided by investing activities totaled $676.0 million in the first three months of 2022, primarily due to a seasonal decrease in revolving charge account receivables, partially offset by an increase in wholesale receivables. The aggregate ~~net~~ cash provided by operating and ~~financing~~investing activities was used primarily to ~~fund Receivables~~decrease external borrowings, resulting in cash outflows for financing activities of $963.1 million in the first three months of 2022. Cash, cash equivalents, and ~~Leases. Net~~restricted cash decreased $23.6 million during the first three months of 2022.

Cash provided by operating activities was ~~$1,043.4~~$300.7 million in the first ~~nine~~three months of 2021. ~~Net cash~~Cash provided by ~~financing~~investing activities totaled ~~$2,246.8~~$327.7 million in the first nine months of 2021, resulting primarily from a net increase in total external borrowings of $1,926.1 million and a net increase in payables to John Deere of $578.4 million, partially offset by dividends paid of $230.0 million. Net cash used by investing activities totaled $3,273.9 million in the first ninethree months of 2021, primarily due to collections of Customer Receivables exceeding the cost of Customer Receivables acquired, ~~(excluding wholesale) exceeding the collections of Receivables (excluding wholesale)~~partially offset by ~~$2,519.4 million,~~ an increase in wholesale receivables. The net ~~wholesale receivables~~cash inflow related to Customer Receivables was largely driven by a seasonal decrease in revolving charge account receivables. The aggregate cash provided by operating and investing activities was used primarily to decrease external borrowings, resulting in cash outflows for financing activities of ~~$578.3~~$691.4 million ~~and~~in the ~~cost~~first three months of ~~equipment on operating leases acquired exceeding the proceeds from sales of equipment on operating leases by $168.9 million.~~2021. Cash, cash equivalents, and restricted cash ~~increased $20.2~~decreased $56.3 million during the first ~~nine~~three months of 2021.

During the first nine months of 2020, the aggregate net cash provided by operating and financing activities was used primarily to fund Receivables and Leases. Net cash provided by operating activities was $1,092.7 million in the first nine months of 2020. Net cash provided by financing activities totaled $161.7 million in the first nine months of 2020, resulting primarily from a net increase in payables to John Deere of $1,775.8 million, partially offset by a net decrease in total external borrowings of $1,342.2 million and dividends paid of $250.0 million. Net cash used for investing activities totaled $1,240.3 million in the first nine months of 2020, primarily due to the cost of Receivables acquired (excluding wholesale) exceeding the collections of Receivables (excluding wholesale) by $1,083.3 million and the cost of equipment on operating leases acquired exceeding proceeds from sales of equipment on operating leases by $381.1 million, partially offset by a decrease in net wholesale receivables of $353.8 million. Cash, cash equivalents, and restricted cash increased $13.2 million during the first nine months of 2020.

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~~costs and expects to have sufficient sources of global funding and liquidity to meet its funding ~~needs.~~needs in the short term and long term. The Company’s ability to meet its debt obligations is supported in ~~a number of~~several 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.~~debt (both public and private

markets). Additionally, liquidity may be provided through loans from John Deere. The Company’s commercial paper outstanding at ~~August 1,~~January 30, 2022, October 31, 2021, ~~November 1, 2020,~~ and ~~August 2, 2020~~January 31, 2021 was ~~$507.0~~$490.0 million, ~~$125.0~~$662.9 million, and ~~$940.9~~$299.9 million, respectively, while the total cash, cash equivalents, and marketable securities position was ~~$684.8~~$666.3 million, ~~$676.8~~$679.1 million, and ~~$627.3~~$624.7 million, respectively. The amount of cash, cash equivalents, and marketable securities held by foreign subsidiaries was ~~$184.3~~$164.3 million, ~~$163.7~~$158.0 million, and ~~$124.6~~$124.0 million at ~~August 1,~~January 30, 2022, October 31, 2021, ~~November 1, 2020,~~ and ~~August 2, 2020,~~January 31, 2021, respectively.

~~Capital Corporation~~The Company has a revolving ~~credit agreement~~warehouse facility to utilize bank conduit facilities to securitize retail notes (see Note 5). ~~At August 1,~~The facility was renewed in November 2021 ~~this facility had~~with an expiration in November 2022 and a reduction of the total capacity or “financing ~~limit,” of~~limit” from $2,000.0 million to $1,000.0 million. As a result of ~~secured financings at any time. After~~the reduced capacity, the Company repurchased $511.1 million of outstanding short-term securitization borrowings in November 2021, in addition to the normal monthly liquidations as a ~~two-year~~result of payments collected on the retail notes. At January 30, 2022, $899.4 million of securitization borrowings were outstanding under the facility. At the end of the contractual revolving period, unless the banks and ~~Capital Corporation~~the Company agree to renew, ~~Capital Corporation~~the Company would liquidate the secured borrowings over time as payments on the retail notes are collected. ~~At August 1, 2021, $1,778.9 million of short-term securitization borrowings were outstanding under the agreement.~~

During the first ~~nine~~three months of ~~2021,~~2022, the Company issued ~~$5,210.4~~$1,799.3 million and retired ~~$4,214.2~~$1,302.4 million of long-term external borrowings, which ~~were~~ primarily consisted of medium-term notes. During the first ~~nine~~three months of ~~2021,~~2022, the Company also ~~issued $2,800.8 million and~~ retired ~~$2,190.4~~$1,122.6 million of retail note securitization borrowings and maintained an average commercial paper balance of ~~$919.9~~$955.7 million. At ~~August 1, 2021,~~January 30, 2022, the Company’s funding profile included ~~$507.0~~$568.6 million of commercial paper and other notes payable, ~~$5,264.6~~$3,473.8 million of securitization borrowings, ~~$5,859.2~~$5,306.4 million of ~~loans from~~notes payable to John Deere, ~~$25,882.7~~$26,670.5 million of unsecured term debt, and ~~$4,600.2~~$4,652.2 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 ~~$37,513.5~~$36,019.3 million at ~~August 1, 2021,~~January 30, 2022, compared with ~~$35,145.9~~$37,319.9 million at ~~November 1, 2020~~October 31, 2021 and ~~$35,534.7~~$34,677.3 million at ~~August 2, 2020.~~January 31, 2021. Total external short-term indebtedness amounted to ~~$17,376.8~~$10,146.4 million at ~~August 1, 2021,~~January 30, 2022, compared with ~~$15,834.8~~$11,093.2 million at ~~November 1, 2020~~October 31, 2021 and ~~$15,042.6~~$9,952.4 million at ~~August 2, 2020.~~January 31, 2021. Total external long-term indebtedness amounted to ~~$20,136.7~~$20,566.5 million at ~~August 1, 2021,~~January 30, 2022, compared with ~~$19,311.1~~$20,607.3 million at ~~November 1, 2020~~October 31, 2021 and ~~$20,492.1~~$19,497.5 million at ~~August 2, 2020.~~January 31, 2021. Total notes payable to John Deere amounted to $5,306.4 million at January 30, 2022, compared with $5,619.4 million at October 31, 2021 and $5,227.4 million at January 31, 2021. The ratio of total interest-bearing debt, including securitization indebtedness, to stockholder’s equity was ~~8.2~~7.7 to 1 at ~~August 1, 2021,~~January 30, 2022, compared with 8.2 to 1 at ~~November 1, 2020~~October 31, 2021 and ~~8.5~~8.0 to 1 at ~~August 2, 2020.~~January 31, 2021.

Stockholder’s equity was $4,600.2 million at August 1, 2021, compared with $4,298.2 million at November 1, 2020 and $4,173.2 million at August 2, 2020. The increase in the first nine months of 2021 was primarily due to net income attributable to the Company of $529.6 million and a change in the cumulative translation adjustment of $22.6 million, partially offset by dividends paid of $230.0 million and the adoption of ASU No. 2016-13 of $26.2 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 ~~$8,000.0~~$8,078.7 million at ~~August 1, 2021, $6,131.1~~January 30, 2022, $5,865.2 million of which were unused. For the purpose of computing the unused credit lines, commercial paper and short-term bank borrowings, excluding secured borrowings and the current portion of long-term external borrowings, of the Company and John Deere ~~& Company~~ were ~~primarily~~ considered to constitute utilization. Included in the total credit lines at ~~August 1, 2021~~January 30, 2022 was a 364-day credit facility agreement of $3,000.0 million, expiring in fiscal April 2022. In addition, total credit lines included long-term credit facility agreements of $2,500.0 million, expiring in fiscal April 2025, and $2,500.0 million, expiring in fiscal March 2026. The Company expects to extend the terms of these credit facilities. 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 credit agreement requirements 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 the financial 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 security rating is not a recommendation by the rating agency to buy, sell, or hold ~~Company~~the Company’s securities. 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 ~~$230.0~~$40.0 million and ~~$250.0~~$135.0 million in the first ~~nine~~three months of ~~2021~~2022 and ~~2020,~~2021, respectively. In each case, JDFS paid comparable dividends to Deere & Company.

On ~~August 26, 2021,~~February 24, 2022, Capital Corporation declared a ~~$255.0~~$135.0 million dividend to be paid to JDFS on ~~September~~March 15, ~~2021.~~2022. JDFS, in turn, declared a ~~$255.0~~$135.0 million dividend to Deere & Company, also payable on ~~September~~March 15, ~~2021.~~2022.

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 assumptions, risks, and uncertainties that could cause actual results to differ materially.

jurisdictions, including those imposed in connection with the military confrontation between Russia and Ukraine; retaliatory actions to such changes in trade, banking, monetary, and fiscal policies; the potential default of the U.S. federal government if Congress fails to pass a 2022 budget resolution; the political and social stability of the global markets in which the Company operates; changes in weather and climate patterns; the effects of, or response to, terrorism and security threats; wars and other conflicts; natural disasters; the spread of major epidemics or pandemics (including the COVID pandemic) and government and industry responses to epidemics or pandemics, such as travel restrictions and extended shut downs of businesses; events that damage the Company’s reputation or brand; significant investigations, claims, lawsuits or other legal proceedings; success of business strategies; labor relations and contracts, including work stoppages and other disruptions; changes in the ability to attract, develop, engage, and retain qualified personnel; the implementation of the smart industrial operating model and other organizational changes; the failure to realize anticipated savings or benefits of cost reduction, productivity, or efficiency efforts; difficulties related to the conversion and implementation of the Company’s information technology systems; and security breaches, cybersecurity attacks, technology failures and other disruptions to the information technology infrastructure of the Company and John Deere dealers.

Continued uncertainties related to the magnitude, duration, and persistent effects of the COVID pandemic may significantly adversely affect John Deere’s and the Company’s business and outlook. These uncertainties include, among other things: the duration and impact of the resurgence in COVID cases in any country, state, or region; the emergence, contagiousness, and threat of new and different strains of virus; the availability, acceptance, and effectiveness of vaccines; additional closures as mandated or otherwise made necessary by governmental authorities; disruptions in the supply chain, including those caused by industry capacity constraints, material availability, and global logistics delays and constraints arising from, among other things, the transportation capacity of ocean shipping containers, and continued disruptions in the operations of one or more of John Deere’s key suppliers, or the failure of any key suppliers; an increasingly competitive labor market due to a sustained labor shortage or increased turnover caused by the COVID pandemic; additional operating costs due to continued remote working arrangements, and other COVID-related challenges; increased risk of cyberattacks on network connections used in remote working arrangements; increased privacy-related risks due to processing health-related personal information; legal claims related to alleged exposure to COVID on Company premises; absence of employees due to illness; and the impact of the pandemic on the Company’s customers and on John Deere dealers. The sustainability of the economic recovery from the pandemic remains unclear and significant volatility could continue for a prolonged period. These factors, and others that are currently unknown or considered immaterial, could materially and adversely affect the Company’s business, 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.

materially affect the Company’s and John Deere’s financial results, is included in the most recently filed Deere & Company Annual Report on Form 10-K and subsequent Quarterly Report on Form 10-Q (including, but not limited to, the factors discussed in Item 1A, Risk Factors of the Annual Report on Form 10-K and subsequent Quarterly Report on Form 10-Q) and other Deere & Company and Capital Corporation filings with the SEC.

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.~~Omitted pursuant to General Instruction H.

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)~~(the Exchange Act)) were effective as of ~~August 1, 2021,~~January 30, 2022, based on the evaluation of these controls and procedures required by Rule 13a-15(b) or 15d-15(b) of the Exchange 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.

3832

PART II. OTHER INFORMATION

Item 1. Legal Proceedings.

Item 1A. Risk Factors.

See the Company’s most ~~recent annual report~~recently filed 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~~Annual Report on Form 10-K, and the “Safe Harbor Statement” in this report, are not the only risks faced by the Company. Additional risks and uncertainties may also materially affect the Company’s business, financial condition, or operating results. One should not consider the risk factors to be a complete discussion of risks, uncertainties, and assumptions.

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

Omitted pursuant to ~~instruction~~General Instruction H.

Item 3. Defaults Upon Senior Securities.

Omitted pursuant to ~~instruction~~General Instruction H.

Item 4. Mine Safety Disclosures.

Not applicable.

Item 5. Other Information.

None.

3933

Item 6. Exhibits.

Certain instruments relating to long-term ~~borrowings,~~debt, constituting less than 10 percent 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*)

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

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

32	Section 1350 Certifications (furnished herewith)

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.~~

4034

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 26, 2021~~February 24, 2022	By:	/s/ Ryan D. Campbell

			Ryan D. Campbell
			Senior Vice President and
			Principal Financial Officer and Principal Accounting Officer

4135


	November 1		Cumulative Effect		November 2
	2020		from Adoption		2020
Assets
Allowance for credit losses	$	(129.1)	$	(19.7)	$	(148.8)
Deferred income taxes		27.1		.7		27.8

Liabilities
Accounts payable and accrued expenses	$	922.3	$	(.5)	$	921.8
Deposits withheld from dealers and merchants		114.8		13.5		128.3
Deferred income taxes		345.9		(5.8)		340.1

Stockholder’s equity
Retained earnings	$	2,891.6	$	(26.2)	$	2,865.4


			Unrealized		Unrealized		Accumulated
	Cumulative		Gain (Loss)		Gain (Loss)		Other
	Translation		on		on		Comprehensive
	Adjustment		Derivatives		Debt Securities		Income (Loss)
Balance November 3, 2019	$	(88.4)	$	(7.0)	$	(2.0)	$	(97.4)
Other comprehensive income (loss) items before reclassification		28.2		(13.9)				14.3
Amounts reclassified from accumulated other comprehensive income				9.1				9.1
Net current period other comprehensive income (loss)		28.2		(4.8)				23.4
Balance August 2, 2020	$	(60.2)	$	(11.8)	$	(2.0)	$	(74.0)

Balance November 1, 2020	$	(69.5)	$	(6.7)	$	(1.6)	$	(77.8)
Other comprehensive income (loss) items before reclassification		22.6		(.6)		(.1)		21.9
Amounts reclassified from accumulated other comprehensive income				6.5				6.5
Net current period other comprehensive income (loss)		22.6		5.9		(.1)		28.4
Balance August 1, 2021	$	(46.9)	$	(.8)	$	(1.7)	$	(49.4)


	Fair Value				Losses
					Three Months Ended		Nine Months Ended
	August 1	November 1		August 2	August 1	August 2	August 1	August 2
	2021	2020		2020	2021	2020	2021	2020
Equipment on operating leases – net		$	340.3					$	21.0
Other assets			56.5						9.8
Total		$	396.8					$	30.8