Deere John Capital 10Q 2022 Q3 Quarterly report

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, D.C. 20549

FORM 10-Q

(Mark One)

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

For the quarterly period ended July 31, 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.)

P.O. Box 5328 Madison, Wisconsin 53705-0328 (Address of principal executive offices)
Telephone Number: (800) 438-7394

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


Title of each class	Trading symbol	Name of each exchange on which registered
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 September 1, 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

Statements of Consolidated Income

(Unaudited)

(in millions)


	Three Months Ended				Nine Months Ended
	July 31		August 1		July 31		August 1
	2022		2021		2022		2021
Revenues
Finance income earned on retail notes	$	256.9	$	234.4	$	739.7	$	705.9
Lease revenues		237.7		255.7		715.7		775.5	��
Revolving charge account income		77.4		77.3		209.8		216.1
Finance income earned on wholesale receivables		89.9		77.5		220.8		231.1
Other income		27.3		38.0		97.5		86.6
Total revenues		689.2		682.9		1,983.5		2,015.2
Expenses
Interest expense		137.4		114.1		292.6		373.1
Operating expenses:
Depreciation of equipment on operating leases		166.2		180.1		500.8		559.5
Administrative and operating expenses		106.7		105.5		318.3		304.3
Fees paid to John Deere		36.5		40.8		175.8		111.7
Provision (credit) for credit losses		9.2		15.7		21.2		(.5)
Total operating expenses		318.6		342.1		1,016.1		975.0
Total expenses		456.0		456.2		1,308.7		1,348.1
Income of consolidated group before income taxes		233.2		226.7		674.8		667.1
Provision for income taxes		61.3		41.5		157.8		139.5
Income of consolidated group		171.9		185.2		517.0		527.6
Equity in income of unconsolidated affiliate		.6		.7		3.6		2.2
Net income		172.5		185.9		520.6		529.8
Less: Net income (loss) attributable to noncontrolling interests				.2		(.1)		.2
Net income attributable to the Company	$	172.5	$	185.7	$	520.7	$	529.6

See Condensed Notes to Interim Consolidated Financial Statements.

John Deere Capital Corporation and Subsidiaries

Statements of Consolidated Comprehensive Income

(Unaudited)

(in millions)


	Three Months Ended				Nine Months Ended
	July 31		August 1		July 31		August 1
	2022		2021		2022		2021

Net income	$	172.5	$	185.9	$	520.6	$	529.8

Other comprehensive income (loss), net of income taxes
Cumulative translation adjustment		(18.1)		(16.7)		(88.7)		22.6
Unrealized gain (loss) on derivatives		(2.2)		.6		38.5		5.9
Unrealized loss on debt securities		(.2)		(.2)		(.6)		(.1)
Other comprehensive income (loss), net of income taxes		(20.5)		(16.3)		(50.8)		28.4

Comprehensive income of consolidated group		152.0		169.6		469.8		558.2
Less: Comprehensive income (loss) attributable to noncontrolling interests				.2		(.1)		.2
Comprehensive income attributable to the Company	$	152.0	$	169.4	$	469.9	$	558.0

See Condensed Notes to Interim Consolidated Financial Statements.

John Deere Capital Corporation and Subsidiaries

Consolidated Balance Sheets

(Unaudited)

(in millions)


	July 31		October 31		August 1
	2022		2021		2021
Assets
Cash and cash equivalents	$	657.1	$	677.0	$	682.7
Marketable securities		1.3		2.1		2.1
Receivables:
Retail notes		22,262.8		21,343.5		19,009.6
Retail notes securitized		5,154.1		4,662.4		5,408.2
Revolving charge accounts		4,003.9		3,740.1		3,687.7
Wholesale receivables		8,151.3		5,951.3		7,731.2
Financing leases		962.8		972.3		846.5
Total receivables		40,534.9		36,669.6		36,683.2
Allowance for credit losses		(127.3)		(129.0)		(139.0)
Total receivables – net		40,407.6		36,540.6		36,544.2
Other receivables		93.4		85.1		96.6
Receivables from John Deere		168.3		191.6		333.7
Equipment on operating leases – net		4,777.5		4,947.6		4,963.8
Notes receivable from John Deere		279.2		393.5		366.0
Investment in unconsolidated affiliate		22.3		21.9		21.6
Deferred income taxes		29.5		32.7		34.9
Other assets		315.7		324.5		367.2
Total Assets	$	46,751.9	$	43,216.6	$	43,412.8

Liabilities and Stockholder’s Equity
Short-term external borrowings:
Commercial paper and other notes payable	$	4,092.8	$	678.9	$	507.0
Securitization borrowings		4,918.5		4,595.2		5,264.6
Current maturities of long-term external borrowings		6,476.7		5,819.1		5,746.0
Total short-term external borrowings		15,488.0		11,093.2		11,517.6
Notes payable to John Deere		4,499.8		5,619.4		5,859.2
Other payables to John Deere		446.6		97.6		45.7
Accounts payable and accrued expenses		870.2		876.0		839.0
Deposits held from dealers and merchants		128.6		131.8		125.5
Deferred income taxes		239.1		265.1		288.9
Long-term external borrowings		20,393.6		20,607.3		20,136.7
Total liabilities		42,065.9		38,690.4		38,812.6
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
Retained earnings		3,301.7		3,091.0		3,165.0
Accumulated other comprehensive loss		(100.2)		(49.4)		(49.4)
Total Company stockholder’s equity		4,684.3		4,524.4		4,598.4
Noncontrolling interests		1.7		1.8		1.8
Total stockholder’s equity		4,686.0		4,526.2		4,600.2
Total Liabilities and Stockholder’s Equity	$	46,751.9	$	43,216.6	$	43,412.8

See Condensed Notes to Interim Consolidated Financial Statements.

John Deere Capital Corporation and Subsidiaries

Statements of Consolidated Cash Flows

(Unaudited)

(in millions)


	Nine Months Ended
	July 31		August 1
	2022		2021
Cash Flows from Operating Activities:
Net income	$	520.6	$	529.8
Adjustments to reconcile net income to net cash
provided by operating activities:
Provision (credit) for credit losses		21.2		(.5)
Provision for depreciation and amortization		519.5		576.6
Credit for deferred income taxes		(32.8)		(59.8)
Undistributed earnings of unconsolidated affiliate		(3.4)		(2.0)
Change in accounts payable and accrued expenses		(20.5)		(26.7)
Change in accrued income taxes payable/receivable		18.9		(22.8)
Other		(125.4)		48.8
Net cash provided by operating activities		898.1		1,043.4

Cash Flows from Investing Activities:
Cost of receivables acquired (excluding wholesale)		(17,199.4)		(16,373.9)
Collections of receivables (excluding wholesale)		15,059.4		13,854.5
Increase in wholesale receivables – net		(2,439.9)		(578.3)
Cost of equipment on operating leases acquired		(1,390.9)		(1,290.3)
Proceeds from sales of equipment on operating leases		1,105.9		1,121.4
Cost of notes receivable acquired from John Deere		(226.7)		(234.4)
Collections of notes receivable from John Deere		342.2		229.2
Other		(7.0)		(2.1)
Net cash used for investing activities		(4,756.4)		(3,273.9)

Cash Flows from Financing Activities:
Increase in commercial paper and other notes payable – net		3,407.0		319.5
Increase in securitization borrowings – net		325.7		610.4
Increase (decrease) in short-term borrowings with John Deere – net		(716.3)		578.4
Proceeds from issuance of long-term external borrowings		5,371.5		5,210.4
Payments of long-term external borrowings		(4,197.5)		(4,214.2)
Dividends paid		(310.0)		(230.0)
Debt issuance costs		(23.8)		(27.7)
Net cash provided by financing activities		3,856.6		2,246.8

Effect of exchange rate changes on cash, cash equivalents, and restricted cash		(13.3)		3.9
Net increase (decrease) in cash, cash equivalents, and restricted cash		(15.0)		20.2
Cash, cash equivalents, and restricted cash at beginning of period		772.8		769.4
Cash, cash equivalents, and restricted cash at end of period	$	757.8	$	789.6

Components of cash, cash equivalents, and restricted cash:
Cash and cash equivalents	$	657.1	$	682.7
Restricted cash*		100.7		106.9
Total cash, cash equivalents, and restricted cash	$	757.8	$	789.6

* Restricted cash is reported in other assets on the consolidated balance sheets and primarily relates to the securitization of receivables (see Note 5).

See Condensed Notes to Interim Consolidated Financial Statements.

John Deere Capital Corporation and Subsidiaries

Statements of Changes in Consolidated Stockholder’s Equity

For the Three and Nine Months Ended July 31, 2022 and August 1, 2021

(Unaudited)

(in millions)


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

Three Months Ended August 1, 2021
Balance May 2, 2021	$	4,525.6	$	1,482.8	$	3,074.3	$	(33.1)	$	1.6
Net income		185.9				185.7				.2
Other comprehensive loss		(16.3)						(16.3)
Dividends declared		(95.0)				(95.0)
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		(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

Three Months Ended July 31, 2022
Balance May 1, 2022	$	4,669.0	$	1,482.8	$	3,264.2	$	(79.7)	$	1.7
Net income		172.5				172.5
Other comprehensive loss		(20.5)						(20.5)
Dividends declared		(135.0)				(135.0)
Balance July 31, 2022	$	4,686.0	$	1,482.8	$	3,301.7	$	(100.2)	$	1.7

Nine Months Ended July 31, 2022
Balance October 31, 2021	$	4,526.2	$	1,482.8	$	3,091.0	$	(49.4)	$	1.8
Net income (loss)		520.6				520.7				(.1)
Other comprehensive loss		(50.8)						(50.8)
Dividends declared		(310.0)				(310.0)
Balance July 31, 2022	$	4,686.0	$	1,482.8	$	3,301.7	$	(100.2)	$	1.7

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 independent John Deere retail dealers. The Company also purchases and finances a limited amount of 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). Additionally, the Company provides wholesale financing to dealers of John Deere agriculture and turf and construction and forestry equipment, primarily to finance inventories of equipment for those dealers (wholesale receivables). In addition, the Company leases John Deere equipment and a limited amount of 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 security in the goods associated with those Receivables or with the use of other collateral.

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 years 2022 and 2021 were July 31, 2022 and August 1, 2021, respectively. Both third quarters contained 13 weeks, while both year-to-date periods contained 39 weeks. Unless otherwise stated, references to particular years or quarters refer to the Company's fiscal years generally ending in October and the associated periods in those fiscal years.

The Company is the primary beneficiary of and 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 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 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. Actual results could differ from those estimates.

New Accounting Standards

The Company closely monitors all Accounting Standard Updates (ASUs) issued by the Financial Accounting Standards Board (FASB) and other authoritative guidance. ASUs adopted in 2022 did not have a material impact on the Company’s financial statements.

In March 2022, the FASB issued ASU No. 2022-02, Financial Instruments – Credit Losses (Topic 326): Troubled Debt Restructurings and Vintage Disclosures, which will be effective in the first quarter of fiscal year 2024. The ASU eliminates the accounting guidance for troubled debt restructurings, enhances disclosures for certain receivable modifications related to borrowers experiencing financial difficulty, and requires disclosure of current period gross write-offs by year of origination. ASU No. 2022-02 and other ASUs to be adopted in future periods are being evaluated and at this point are not expected to have a material impact on the Company’s financial statements.

(3) Other Comprehensive Income Items

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


	July 31		October 31		August 1
	2022		2021		2021
Cumulative translation adjustment	$	(143.2)	$	(54.5)	$	(46.9)
Unrealized gain (loss) on derivatives		45.3		6.8		(.8)
Unrealized loss on debt securities		(2.3)		(1.7)		(1.7)
Total accumulated other comprehensive income (loss)	$	(100.2)	$	(49.4)	$	(49.4)

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
	Tax		(Expense)		Tax
Three Months Ended July 31, 2022	Amount		Credit		Amount
Cumulative translation adjustment	$	(18.1)			$	(18.1)
Unrealized gain (loss) on derivatives:
Unrealized hedging gain (loss)		.8	$	(.2)		.6
Reclassification of realized (gain) loss to:
Interest rate contracts – Interest expense		(3.6)		.8		(2.8)
Net unrealized gain (loss) on derivatives		(2.8)		.6		(2.2)
Unrealized gain (loss) on debt securities:
Unrealized holding gain (loss)		(.3)		.1		(.2)
Total other comprehensive income (loss)	$	(21.2)	$	.7	$	(20.5)

Nine Months Ended July 31, 2022
Cumulative translation adjustment	$	(88.7)			$	(88.7)
Unrealized gain (loss) on derivatives:
Unrealized hedging gain (loss)		51.4	$	(10.8)		40.6
Reclassification of realized (gain) loss to:
Interest rate contracts – Interest expense		(2.7)		.6		(2.1)
Net unrealized gain (loss) on derivatives		48.7		(10.2)		38.5
Unrealized gain (loss) on debt securities:
Unrealized holding gain (loss)		(.9)		.3		(.6)
Total other comprehensive income (loss)	$	(40.9)	$	(9.9)	$	(50.8)

Three Months Ended August 1, 2021
Cumulative translation adjustment	$	(16.7)			$	(16.7)
Unrealized gain (loss) on derivatives:
Unrealized hedging gain (loss)		(.9)	$	.2		(.7)
Reclassification of realized (gain) loss to:
Interest rate contracts – Interest expense		1.6		(.3)		1.3
Net unrealized gain (loss) on derivatives		.7		(.1)		.6
Unrealized gain (loss) on debt securities:
Unrealized holding gain (loss)				(.2)		(.2)
Total other comprehensive income (loss)	$	(16.0)	$	(.3)	$	(16.3)

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

(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 third quarter and first nine months of 2022, $2.0 million and $8.8 million, respectively, 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. During the third quarter and first nine months of 2022, finance income and lease revenue of $4.8 million and $11.8 million, respectively, was recognized from cash payments on non-performing Receivables.

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.

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


	July 31, 2022
	2022		2021		2020		2019		2018		Prior Years		Revolving Charge Accounts		Total
Customer Receivables:
Agriculture and turf
Current	$	8,134.7	$	8,017.6	$	4,027.6	$	1,819.9	$	742.6	$	256.9	$	3,868.8	$	26,868.1
30-59 days past due		34.5		55.4		28.9		16.9		6.9		2.9		17.0		162.5
60-89 days past due		14.0		18.0		10.9		5.1		2.0		.9		4.2		55.1
90+ days past due				.2		.2				.1						.5
Non-performing		16.0		40.3		29.6		16.6		12.8		12.2		6.6		134.1
Construction and forestry
Current		1,868.7		1,712.0		772.5		297.7		82.4		17.2		103.2		4,853.7
30-59 days past due		40.0		45.5		22.1		11.3		3.4		1.1		2.6		126.0
60-89 days past due		11.9		13.0		11.1		4.1		1.0		.3		.7		42.1
90+ days past due				7.3		2.1		.4								9.8
Non-performing		8.1		50.6		40.9		20.2		7.3		3.8		.8		131.7
Total Customer Receivables	$	10,127.9	$	9,959.9	$	4,945.9	$	2,192.2	$	858.5	$	295.3	$	4,003.9	$	32,383.6


	October 31, 2021
	2021		2020		2019		2018		2017		Prior Years		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


	August 1, 2021
	2021		2020		2019		2018		2017		Prior Years		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
30-59 days past due		31.1		42.1		25.1		14.9		5.3		2.7		11.4		132.6
60-89 days past due		11.7		21.4		10.0		4.4		2.6		1.1		3.4		54.6
90+ days past due		.1		.5		.2		.2								1.0
Non-performing		11.0		45.8		31.6		28.3		13.1		14.4		5.7		149.9
Construction and forestry
Current		1,765.6		1,413.7		715.0		281.3		63.2		10.6		91.5		4,340.9
30-59 days past due		28.2		38.0		21.8		8.0		2.7		.7		2.9		102.3
60-89 days past due		11.3		16.1		8.6		4.2		1.3		.3		1.1		42.9
90+ days past due		3.2				4.5										7.7
Non-performing		9.0		44.1		36.0		17.7		7.2		3.8		.8		118.6
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

The credit quality analysis of wholesale receivables by year of origination was as follows (in millions of dollars):


	July 31, 2022
	2022		2021		2020		2019		2018		Prior Years		Revolving		Total
Wholesale receivables:
Agriculture and turf
Current	$	286.0	$	96.3	$	32.7	$	5.9	$	.8	$	1.6	$	6,347.8	$	6,771.1
30+ days past due														10.6		10.6
Non-performing														5.6		5.6
Construction and forestry
Current		8.4		31.5		1.7		.7		.2				1,318.5		1,361.0
30+ days past due														3.0		3.0
Non-performing
Total wholesale receivables	$	294.4	$	127.8	$	34.4	$	6.6	$	1.0	$	1.6	$	7,685.5	$	8,151.3


	October 31, 2021
	2021		2020		2019		2018		2017		Prior Years		Revolving		Total
Wholesale receivables:
Agriculture and turf
Current	$	339.6	$	77.1	$	21.1	$	9.2	$	2.7	$	.4	$	4,233.4	$	4,683.5
30+ days past due														12.0		12.0
Non-performing														6.7		6.7
Construction and forestry
Current		39.4		4.0		3.4		.3						1,199.6		1,246.7
30+ days past due														2.4		2.4
Non-performing
Total wholesale receivables	$	379.0	$	81.1	$	24.5	$	9.5	$	2.7	$	.4	$	5,454.1	$	5,951.3


	August 1, 2021
	2021		2020		2019		2018		2017		Prior Years		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
30+ days past due														16.7		16.7
Non-performing														4.3		4.3
Construction and forestry															��
Current		7.5		5.1		3.9		.4						1,332.0		1,348.9
30+ days past due														1.5		1.5
Non-performing
Total wholesale receivables	$	268.4	$	111.3	$	34.5	$	12.9	$	3.1	$	.5	$	7,300.5	$	7,731.2

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.

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 statements of consolidated income when the dealer’s withholding account is charged. Recoveries from freestanding credit enhancements recorded in other income were $2.4 million for the third quarter and $5.4 million for the first nine months of 2022, respectively, compared with $3.2 million and $9.8 million for the same periods last year, 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
	July 31, 2022
	Retail Notes		Revolving
	& Financing		Charge		Wholesale		Total
	Leases		Accounts		Receivables		Receivables
Allowance:
Beginning of period balance	$	95.9	$	17.4	$	11.2	$	124.5
Provision for credit losses*		5.2		3.2				8.4
Write-offs		(6.1)		(10.5)				(16.6)
Recoveries		4.1		7.3				11.4
Translation adjustments		(.3)		(.1)				(.4)
End of period balance	$	98.8	$	17.3	$	11.2	$	127.3


	Nine Months Ended
	July 31, 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*		24.0		(3.7)		.3		20.6
Write-offs		(31.9)		(22.0)		(.2)		(54.1)
Recoveries		10.7		22.2				32.9
Translation adjustments		(.5)				(.6)		(1.1)
End of period balance	$	98.8	$	17.3	$	11.2	$	127.3

Receivables:
End of period balance	$	28,379.7	$	4,003.9	$	8,151.3	$	40,534.9

*Excludes provision for credit losses on unfunded commitments of $.8 million and $.6 million for the three and nine months ended July 31, 2022, respectively. The estimated credit losses related to unfunded commitments are recorded in accounts payable and accrued expenses on the consolidated balance sheets.

The allowance for credit losses increased marginally in the third quarter, in part due to higher portfolio balances, and was slightly lower for the first nine months of 2022, reflecting continued positive agricultural market conditions. As part of the allowance setting process, the Company continues to monitor the economy, including potential impacts of inflation, commodity prices, and interest rates on portfolio performance and adjustments to the allowance are incorporated, as necessary.

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
	August 1, 2021
	Retail Notes		Revolving
	& Financing		Charge		Wholesale		Total
	Leases		Accounts		Receivables		Receivables
Allowance:
Beginning of period balance	$	76.9	$	42.3	$	9.9	$	129.1
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)
Write-offs		(19.7)		(22.7)		(.3)		(42.7)
Recoveries		8.1		26.6				34.7
Translation adjustments		.4				.4		.8
End of period balance	$	109.4	$	18.1	$	11.5	$	139.0

Receivables:
End of period balance	$	25,264.3	$	3,687.7	$	7,731.2	$	36,683.2

*Excludes provision for credit losses on unfunded commitments, which were none and $2.1 million for the three and nine months ended August 1, 2021, respectively. The estimated credit losses related to unfunded commitments are recorded in accounts payable and accrued expenses on the consolidated balance sheets.

Troubled Debt Restructuring

A troubled debt restructuring is 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 months of 2022, the Company identified 175 Receivable contracts, primarily retail notes, as troubled debt restructurings with aggregate balances of $6.5 million pre-modification and $5.3 million post-modification. During the first nine months of 2021, there were 287 Receivable contracts, primarily retail notes, with aggregate balances of $10.3 million pre-modification and $9.4 million post-modification. During these same periods, there were no significant troubled debt restructurings that subsequently defaulted and were written off. At July 31, 2022, the Company had no commitments to provide additional financing to customers whose accounts were modified in troubled debt restructurings.

(5) Securitization of Receivables

As a part of its overall funding strategy, the Company periodically transfers certain Receivables (retail notes) into VIEs that are 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.

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


	July 31		October 31		August 1
	2022		2021		2021
Retail notes securitized	$	5,154.1	$	4,662.4	$	5,408.2
Allowance for credit losses		(14.7)		(13.5)		(19.9)
Other assets (primarily restricted cash)		136.2		106.6		112.7
Total restricted securitized assets	$	5,275.6	$	4,755.5	$	5,501.0

Securitization borrowings	$	4,918.5	$	4,595.2	$	5,264.6
Accrued interest on borrowings		3.4		1.7		2.1
Total liabilities related to restricted securitized assets	$	4,921.9	$	4,596.9	$	5,266.7

(6) Leases

The Company leases John Deere equipment and a limited amount of 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 sheets. Operating leases are reported in equipment on operating leases – net on the consolidated balance sheets.

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


	Three Months Ended				Nine Months Ended
	July 31		August 1		July 31		August 1
	2022		2021		2022		2021
Sales-type and direct financing lease revenues	$	14.7	$	12.7	$	40.2	$	35.8
Operating lease revenues		217.9		237.9		659.8		724.3
Variable lease revenues		5.6		6.5		17.6		20.4
Total lease revenues	$	238.2	$	257.1	$	717.6	$	780.5

Variable lease revenues reported above primarily relate to separately invoiced property taxes on leased equipment in certain markets, late fees, and excess use and damage fees. Excess use and damage fees are reported in other income on the statements of consolidated income. Excess use and damage fees were $.5 million and $1.9 million for the third quarter and first nine months ended July 31, 2022, respectively, compared with $1.4 million and $5.0 million for the same periods last year, respectively.

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


	July 31		October 31		August 1
	2022		2021		2021
Agriculture and turf	$	4,951.3	$	5,053.4	$	5,043.4
Construction and forestry		1,178.9		1,323.6		1,391.3
Total		6,130.2		6,377.0		6,434.7
Accumulated depreciation		(1,352.7)		(1,429.4)		(1,470.9)
Equipment on operating leases - net	$	4,777.5	$	4,947.6	$	4,963.8

Total operating lease residual values at July 31, 2022, October 31, 2021, and August 1, 2021 were $3,352.8 million, $3,547.6 million, and $3,598.9 million, respectively. Certain operating leases are subject to

residual value guarantees. The total residual value guarantees were $464.9 million, $295.8 million, and $247.3 million at July 31, 2022, October 31, 2021, and August 1, 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 July 31, 2022, October 31, 2021, and August 1, 2021 were $16.6 million, $25.4 million, and $46.9 million, respectively. Matured operating lease inventory is reported in other assets on the consolidated balance sheets.

(7) Notes Receivable from and Payable to John Deere

The Company provides loans to and holds other receivables from affiliated companies. The loan agreements mature over the next seven years and charge interest at competitive market interest rates. Interest earned from John Deere is recorded in other income and was $2.5 million for the third quarter and $12.7 million in the first nine months of 2022, respectively, compared with $3.8 million and $10.3 million for the same periods last year, respectively.

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


	July 31		October 31		August 1
	2022		2021		2021
Limited Liability Company John Deere Financial			$	233.7	$	198.6
Banco John Deere S.A.	$	270.4		159.8		167.4
John Deere Agricultural Holdings, Inc.		8.8
Total Notes Receivable from John Deere	$	279.2	$	393.5	$	366.0

Limited Liability Company John Deere Financial (JDF Russia) is a John Deere financial services affiliate in Russia. The Company previously provided ruble-denominated loans to JDF Russia to fund JDF Russia’s retail portfolio. The Company had entered into non-designated cross-currency interest rate contracts and foreign currency exchange contracts to hedge against interest rate and foreign currency exchange risk associated with the loans. In April 2022, the loans to JDF Russia and related derivative contracts were assumed by Deere & Company for cash at carrying value as of the date of assumption.

John Deere Agricultural Holdings, Inc. (JDAH) is a John Deere equipment operations affiliate in Russia. The Company purchased wholesale receivables from this affiliate related to independent John Deere dealers in Russia. The affiliate receivable from JDAH represents cash collections on the Russia wholesale portfolio that have not yet been remitted to the Company. The remaining outstanding wholesale portfolio in Russia held by the Company did not represent a significant portion of its wholesale receivable portfolio at July 31, 2022. John Deere currently requires prepayment of existing equipment inventory in Russia, and, as such, no further wholesale receivables are being purchased by the Company.

The Company also obtains funding from affiliated companies. At July 31, 2022, October 31, 2021, and August 1, 2021, the Company had notes payable to John Deere of $4,499.8 million, $5,619.4 million and $5,859.2 million, respectively. The intercompany borrowings are primarily short-term in nature or contain a due on demand call option. At July 31, 2022, $509.9 million of the intercompany borrowings were long-term 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, which is recorded in fees paid to John Deere, was $23.7 million for the third quarter and $57.6 million for the first nine months of 2022, compared with $14.9 million and $36.3 million for the same periods last year, respectively.

(8) Long-Term External Borrowings

Long-term external borrowings of the Company at July 31, 2022, October 31, 2021, and August 1, 2021 consisted of the following (in millions of dollars):


	July 31		October 31		August 1
	2022		2021		2021
Senior Debt:
Medium-term notes	$	20,450.3	$	20,649.2	$	20,174.1
Other notes		2.9		15.6		19.8
Total senior debt		20,453.2		20,664.8		20,193.9
Unamortized debt discount and debt issuance costs		(59.6)		(57.5)		(57.2)
Total	$	20,393.6	$	20,607.3	$	20,136.7

Medium-term notes are primarily offered by prospectus and issued at fixed and variable rates. 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 $20,796.7 million, $20,378.2 million, and $19,722.5 million at July 31, 2022, October 31, 2021, and August 1, 2021, respectively, and have serial maturity dates from 2023 through 2032. All outstanding medium-term notes and other notes in the table above are senior unsecured borrowings and generally rank equally with each other.

In April 2022, the Company issued $600.0 million of sustainability-linked medium-term notes with an initial interest rate of 3.35 percent, which are due in 2029. This transaction supports John Deere’s commitment to environmental sustainability. Failure to meet the stated sustainability performance target will result in a 25-basis point increase to the interest rate payable on the 2029 notes from and including April 2026.

(9) Commitments and Contingencies

At July 31, 2022, John Deere Financial Inc., the John Deere finance subsidiary in Canada, had $2,186.5 million of medium-term notes outstanding, and a fair value liability of $101.9 million for derivatives outstanding, prior to considering applicable netting provisions, with notional amounts of $2,772.1 million that were guaranteed by Capital Corporation. The weighted average interest rate on the medium-term notes at July 31, 2022 was 2.0 percent with a maximum remaining maturity of approximately 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 no 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 $624.7 million at July 31, 2022. The weighted average interest rate on the debt at July 31, 2022 was 2.8 percent with a maximum remaining maturity of approximately one year. 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 $8.6 billion at July 31, 2022. The amount of unused commitments to extend credit to customers was $31.7 billion at July 31, 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 $3.5 million at July 31, 2022, which is

recorded in accounts payable and accrued expenses on the consolidated balance sheets.

At July 31, 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 July 31, 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) Fair Value Measurements

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

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

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


	July 31, 2022				October 31, 2021				August 1, 2021
	Carrying		Fair		Carrying		Fair		Carrying		Fair
	Value		Value		Value		Value		Value		Value
Receivables financed – net	$	35,268.2	$	34,617.9	$	31,891.7	$	31,903.6	$	31,155.9	$	31,264.6
Retail notes securitized – net		5,139.4		4,988.8		4,648.9		4,694.2		5,388.3		5,454.3
Securitization borrowings		4,918.5		4,861.4		4,595.2		4,600.0		5,264.6		5,289.3
Current maturities of long-term external borrowings		6,476.7		6,426.0		5,819.1		5,842.3		5,746.0		5,800.4
Long-term external borrowings		20,393.6		20,087.6		20,607.3		20,887.5		20,136.7		20,557.9

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

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

Fair values of long-term 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 on a recurring basis were as follows (in millions of dollars):


	July 31		October 31		August 1
	2022		2021		2021
Marketable securities
International debt securities	$	1.3	$	2.1	$	2.1
Receivables from John Deere
Derivatives		168.3		191.6		333.7
Other assets
Derivatives		1.8		1.1		.5
Total assets	$	171.4	$	194.8	$	336.3

Other payables to John Deere
Derivatives	$	446.6	$	97.6	$	45.7
Accounts payable and accrued expenses
Derivatives		22.1		4.8		1.7
Total liabilities	$	468.7	$	102.4	$	47.4

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 eight years. At July 31, 2022, the amortized cost basis and fair value of these available-for-sale debt securities were $4.9 million and $1.3 million, respectively. Unrealized losses at July 31, 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 basis, other than Receivables with specific allowances which were not material, during each of the periods ended July 31, 2022, October 31, 2021, and August 1, 2021.

The following is a description of the valuation methodologies the Company uses to measure certain 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.

(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 sheets. Cash collateral received or paid is not offset against the derivative fair values on the consolidated balance sheets. The cash flows from these contracts are recorded in operating activities in the statements 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 July 31, 2022, October 31, 2021, and August 1, 2021 were $2,350.0 million, $2,700.0 million, and $1,750.0 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 amount of gain recorded in OCI at July 31, 2022 that is expected to be reclassified to interest expense in the next twelve months if interest rates remain unchanged is $34.3 million after-tax. No 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 July 31, 2022, October 31, 2021, and August 1, 2021 were $7,600.0 million, $7,313.6 million, and $7,934.9 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 sheets related to borrowings designated in fair value hedging relationships were as follows (in millions of dollars). Fair value hedging adjustments are included in the carrying amount of the hedged item.


	Active Hedging Relationships				Discontinued Hedging Relationship
	Carrying		Cumulative		Carrying Amount		Cumulative
	Amount of		Fair Value		of Formerly		Fair Value
July 31, 2022	Hedged Item		Hedging Adjustment		Hedged Item		Hedging Adjustment
Current maturities of long-term external borrowings					$	2,604.6	$	5.0
Long-term external borrowings	$	7,178.1	$	(385.9)		5,728.0		39.5

October 31, 2021
Current maturities of long-term external borrowings	$	191.2	$	2.7	$	1,997.4	$	(1.7)
Long-term external borrowings		7,139.0		48.3		6,287.3		222.7

August 1, 2021
Current maturities of long-term external borrowings	$	188.7	$	4.0	$	1,898.4	$	(.9)
Long-term external borrowings		7,975.1		261.3		5,830.9		190.3

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 July 31, 2022, October 31, 2021, and August 1, 2021 were $3,313.2 million, $2,970.4 million, and

$2,921.4 million, the foreign currency exchange contracts were $930.0 million, $96.7 million, and $98.0 million, and the cross-currency interest rate contracts were $125.7 million, $237.5 million, and $197.4 million, respectively. To facilitate borrowings through securitization of retail notes, interest rate caps were sold with notional amounts of $1,144.8 million, $1,645.4 million, and $1,807.6 million at July 31, 2022, October 31, 2021, and August 1, 2021, respectively. Interest rate caps were also purchased with notional amounts of $1,144.8 million, $1,645.4 million, and $1,807.6 million at the same dates, respectively. The fair value gains or losses from derivatives not designated as hedging instruments were recorded in the statements of consolidated income, generally offsetting over time the exposure on the hedged item.

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


	July 31		October 31		August 1
	2022		2021		2021
Receivables from John Deere
Designated as hedging instruments:
Interest rate contracts	$	81.8	$	162.8	$	321.0

Not designated as hedging instruments:
Interest rate contracts		82.5		23.4		10.7
Cross-currency interest rate contracts		4.0		5.4		2.0
Total not designated		86.5		28.8		12.7

Other Assets
Not designated as hedging instruments:
Foreign currency exchange contracts		1.8		1.1		.5

Total derivative assets	$	170.1	$	192.7	$	334.2

Other Payables to John Deere
Designated as hedging instruments:
Interest rate contracts	$	391.0	$	79.0	$	32.3

Not designated as hedging instruments:
Interest rate contracts		54.5		17.1		11.1
Cross-currency interest rate contracts		1.1		1.5		2.3
Total not designated		55.6		18.6		13.4

Accounts Payable and Accrued Expenses
Not designated as hedging instruments:
Foreign currency exchange contracts		22.1		4.8		1.7

Total derivative liabilities	$	468.7	$	102.4	$	47.4

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


	Three Months Ended				Nine Months Ended
	July 31		August 1		July 31		August 1
	2022		2021		2022		2021
Fair Value Hedges
Interest rate contracts - Interest expense	$	145.5	$	139.9	$	(483.5)	$	(70.7)

Cash Flow Hedges
Recognized in OCI
Interest rate contracts - OCI (pretax)		.8		(.9)		51.4		(.8)

Reclassified from OCI
Interest rate contracts - Interest expense		3.6		(1.6)		2.7		(8.2)

Not Designated as Hedges
Interest rate contracts - Interest expense *	$	(3.8)	$	(2.9)	$	39.3	$	(4.5)
Foreign currency exchange contracts - Administrative and operating expenses *		18.5		(4.5)		83.0		(20.0)
Total not designated	$	14.7	$	(7.4)	$	122.3	$	(24.5)

* 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 July 31, 2022 and August 1, 2021 were gains of $145.2 million and $133.3 million, respectively. The amounts the Company recognized on these affiliate party transactions for the nine months ended July 31, 2022 and August 1, 2021 were losses of $432.3 million and $91.6 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 transactions are with both unrelated external counterparties and with John Deere. For derivatives 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 the Company has agreed to absorb any losses and expenses John Deere incurs if an unrelated external counterparty fails to meet its obligations on a derivative transaction that John Deere entered into to manage exposures of the Company. The loss sharing agreement did not increase the maximum amount of loss that the Company would incur, after considering collateral received and netting arrangements, as of July 31, 2022, October 31, 2021, and August 1, 2021.

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


July 31, 2022
Derivatives:	Gross Amounts Recognized		Netting Arrangements		Collateral	Net Amount
Assets
External	$	1.8	$	(.4)		$	1.4
John Deere		168.3		(105.3)			63.0
Liabilities
External		22.1		(.4)			21.7
John Deere		446.6		(105.3)			341.3


October 31, 2021
Derivatives:	Gross Amounts Recognized		Netting Arrangements		Collateral	Net Amount
Assets
External	$	1.1	$	(.3)		$	.8
John Deere		191.6		(97.6)			94.0
Liabilities
External		4.8		(.3)			4.5
John Deere		97.6		(97.6)


August 1, 2021
Derivatives:	Gross Amounts Recognized		Netting Arrangements		Collateral	Net Amount
Assets
External	$	.5	$	(.1)		$	.4
John Deere		333.7		(43.1)			290.6
Liabilities
External		1.7		(.1)			1.6
John Deere		45.7		(43.1)			2.6

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, 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 supply and demand for its products.

Industry sales of large agricultural machinery in the U.S. and Canada are expected to be up about 15 percent. Industry sales of small agriculture and turf equipment in the U.S. and Canada are expected to be flat. Industry sales of agricultural machinery in Europe are forecast to be flat. In South America, industry sales of tractors and combines are projected to be up about 10 to 15 percent. Asia industry sales of agricultural machinery are forecast to be down moderately. Construction equipment industry sales in the U.S. and Canada are expected to increase about 10 percent, while compact construction equipment industry sales in the U.S. and Canada are anticipated to be flat to down 5 percent. Forestry global industry equipment sales are expected to be flat to down 5 percent. Global roadbuilding equipment industry sales are forecasted to be flat to up 5 percent.

The Company’s full-year 2022 results are expected to be slightly lower than fiscal 2021 due to less favorable financing spreads, a higher provision for credit losses, and higher selling, general, and administrative expenses, partially offset by income earned on a higher average portfolio.

Items of concern include global and regional political conditions, economic and trade policies, inflationary pressures, the ongoing pandemic, capital market disruptions, changes in demand and pricing for new and used equipment, and the other items discussed in the “Forward-Looking Statements” below. Significant fluctuations in foreign currency exchange rates, volatility in the prices of many commodities, and supply chain disruptions could also impact the Company’s results.

2022 Compared with 2021

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


	Three Months Ended				Nine Months Ended
	July 31		August 1		July 31		August 1
	2022		2021		2022		2021
Total revenues	$	689.2	$	682.9	$	1,983.5	$	2,015.2
Net income attributable to the Company		172.5		185.7		520.7		529.6

Total revenues increased for the third quarter of 2022 primarily due to an average portfolio that was 7 percent higher, partially offset by lower average financing rates and lower gains on operating lease residual values compared to the same period last year. Total revenues decreased for the first nine months of 2022 due to lower average financing rates, partially offset by an average portfolio that was 6 percent higher compared to the same period last year.

Net income for the third quarter decreased due to unfavorable discrete income tax adjustments, less favorable financing spreads, and lower gains on operating lease residual values. Partially offsetting these factors was income earned on a higher average portfolio. For the first nine months, net income decreased mainly due to less favorable financing spreads, a higher provision for credit losses, and unfavorable discrete income tax

adjustments, partially offset by income earned on a higher average portfolio. Discrete income tax adjustments are included within other in the charts below.

Revenues

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


	Three Months Ended					Nine Months Ended
	July 31		August 1		%	July 31		August 1		%
	2022		2021		Change	2022		2021		Change
Finance income earned on:
Retail notes	$	256.9	$	234.4	10	$	739.7	$	705.9	5
Revolving charge accounts		77.4		77.3			209.8		216.1	(3)
Wholesale receivables		89.9		77.5	16		220.8		231.1	(4)
Lease revenues		237.7		255.7	(7)		715.7		775.5	(8)
Other income		27.3		38.0	(28)		97.5		86.6	13

Finance income earned on retail notes increased during the third quarter and first nine months of 2022 compared to 2021, primarily due to higher average portfolio balances, partially offset by lower average financing rates. Finance income earned on revolving charge accounts decreased for the first nine months of 2022 primarily

due to lower average financing rates, partially offset by higher average portfolio balances. Finance income earned on wholesale receivables increased for the third quarter of 2022 due to higher average financing rates and declined for the first nine months of 2022 due to lower average portfolio balances, partially offset by higher average financing rates. Lease revenues decreased in both periods primarily due to lower average financing rates and lower average portfolio balances.

Other income decreased due to lower gains on operating lease dispositions in the third quarter of 2022, while cumulative gains on operating lease dispositions for the first nine months of 2022 were higher, leading to increased other income. While demand for used equipment remains strong, lease gains declined in the third quarter as end-of-lease book values begin to more closely align with equipment sale proceeds.

Revenues earned from John Deere totaled $164.6 million for the third quarter and $452.9 million for the first nine months of 2022, compared with $157.6 million and $464.4 million for the same periods last year, respectively. The increase in the third quarter of 2022 was due to increased compensation paid by John Deere on wholesale receivables, driven by a higher interest rate environment. The decrease for the first nine months of 2022 was primarily due to lower subsidies paid by John Deere related to operating leases. Revenues earned from John Deere are included in each of the revenue amounts discussed above.

Expenses

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


	Three Months Ended					Nine Months Ended
	July 31		August 1		%	July 31		August 1		%
	2022		2021		Change	2022		2021		Change
Interest expense	$	137.4	$	114.1	20	$	292.6	$	373.1	(22)
Depreciation of equipment on operating leases		166.2		180.1	(8)		500.8		559.5	(10)
Administrative and operating expenses		106.7		105.5	1		318.3		304.3	5
Fees paid to John Deere		36.5		40.8	(11)		175.8		111.7	57
Provision (credit) for credit losses		9.2		15.7	(41)		21.2		(.5)
Provision for income taxes		61.3		41.5	48		157.8		139.5	13

The increase in interest expense for the third quarter of 2022 was primarily due to higher average borrowing rates and higher average borrowings. The decrease in interest expense for the first nine months of 2022 was primarily due to gains on non-designated derivatives and lower average borrowing rates, partially offset by higher average borrowings.

The depreciation of equipment on operating leases for the third quarter and first nine months of 2022 decreased primarily due to 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 decreased in the third quarter of 2022 due to lower corporate support fees and increased in the first nine months of 2022 due to the remittance of gains on non-designated derivatives that were assumed by Deere & Company (see Note 7). In addition, both periods in 2022 were impacted by higher interest on intercompany borrowings from John Deere driven by higher average borrowing rates.

The provision (credit) for credit losses decreased in the third quarter of 2022 compared to the same period last year, primarily due to a larger increase in the allowance for credit losses in the third quarter of 2021 compared to the third quarter of 2022. For the first nine months of 2022 the provision (credit) for credit losses increased compared to the first nine months of 2021, driven by higher write-offs in the retail notes and financing leases portfolio. In addition, the prior year also benefited from favorable adjustments to the allowance for credit losses, which did not recur in the current year. The annualized provision (credit) for credit losses, as a percentage of the average balance of total Receivables financed, was .09 percent for the third quarter and .08 percent for the first nine months of 2022, compared with .18 percent and zero for the same periods last year, respectively.

The provision for income taxes increased during the third quarter and first nine months of 2022 primarily due to unfavorable discrete income tax adjustments in 2022 compared to favorable discrete income tax adjustments in 2021.

Receivables and Leases

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


	Three Months Ended
	July 31		August 1		$		%
	2022		2021		Change		Change
Retail notes:
Agriculture and turf	$	3,278.5	$	2,948.6	$	329.9	11
Construction and forestry		689.7		710.7		(21.0)	(3)
Total retail notes		3,968.2		3,659.3		308.9	8
Revolving charge accounts		1,871.3		1,642.3		229.0	14
Financing leases		226.9		184.8		42.1	23
Equipment on operating leases		561.4		475.9		85.5	18
Total Receivables and Leases (excluding wholesale)	$	6,627.8	$	5,962.3	$	665.5	11


	Nine Months Ended
	July 31		August 1		$		%
	2022		2021		Change		Change
Retail notes:
Agriculture and turf	$	8,638.7	$	8,465.7	$	173.0	2
Construction and forestry		2,144.0		2,042.5		101.5	5
Total retail notes		10,782.7		10,508.2		274.5	3
Revolving charge accounts		5,906.6		5,429.0		477.6	9
Financing leases		486.7		416.9		69.8	17
Equipment on operating leases		1,390.1		1,271.1		119.0	9
Total Receivables and Leases (excluding wholesale)	$	18,566.1	$	17,625.2	$	940.9	5

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


	July 31		October 31		August 1
	2022		2021		2021
Retail notes:
Agriculture and turf	$	22,540.4	$	21,518.9	$	20,056.6
Construction and forestry		4,876.5		4,487.0		4,361.2
Total retail notes		27,416.9		26,005.9		24,417.8
Revolving charge accounts		4,003.9		3,740.1		3,687.7
Wholesale receivables		8,151.3		5,951.3		7,731.2
Financing leases		962.8		972.3		846.5
Equipment on operating leases		4,777.5		4,947.6		4,963.8
Total Receivables and Leases	$	45,312.4	$	41,617.2	$	41,647.0

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


	July 31			October 31			August 1
	2022			2021			2021
	Dollars		Percent	Dollars		Percent	Dollars		Percent
Receivables 30 days or more past due	$	409.6	1.01	$	340.8	.93	$	359.3	.98
Non-performing Receivables		271.4	.67		280.1	.76		272.8	.74
Allowance for credit losses		127.3	.31		129.0	.35		139.0	.38

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 held from dealers and merchants amounted to $128.6 million at July 31, 2022, compared with $131.8 million at October 31, 2021 and $125.5 million at August 1, 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. Recoveries from dealer deposits are recognized in other income when the dealer’s withholding account is charged. Recoveries from dealer deposits and other freestanding credit enhancements recorded in other income were $2.4 million for the third quarter and $5.4 million for the first nine months of 2022, compared with $3.2 million and $9.8 million for the same periods last year, respectively.

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


	Three Months Ended
	July 31, 2022			August 1, 2021
	Dollars		Percent	Dollars		Percent
Write-offs:
Retail notes and financing leases:
Agriculture and turf	$	(5.3)	(.09)	$	(3.2)	(.06)
Construction and forestry		(.8)	(.06)		(5.3)	(.48)
Total retail notes and financing leases		(6.1)	(.09)		(8.5)	(.14)
Revolving charge accounts		(10.5)	(1.11)		(8.4)	(.95)
Wholesale receivables					(.2)	(.01)
Total write-offs		(16.6)	(.17)		(17.1)	(.19)
Recoveries:
Retail notes and financing leases:
Agriculture and turf		2.9	.05		2.8	.06
Construction and forestry		1.2	.10		.4	.04
Total retail notes and financing leases		4.1	.06		3.2	.05
Revolving charge accounts		7.3	.77		7.6	.86
Total recoveries		11.4	.12		10.8	.12
Total net write-offs	$	(5.2)	(.05)	$	(6.3)	(.07)


	Nine Months Ended
	July 31, 2022			August 1, 2021
	Dollars		Percent	Dollars		Percent
Write-offs:
Retail notes and financing leases:
Agriculture and turf	$	(16.7)	(.10)	$	(10.4)	(.07)
Construction and forestry		(15.2)	(.42)		(9.3)	(.30)
Total retail notes and financing leases		(31.9)	(.16)		(19.7)	(.11)
Revolving charge accounts		(22.0)	(.90)		(22.7)	(.97)
Wholesale receivables		(.2)			(.3)	(.01)
Total write-offs		(54.1)	(.20)		(42.7)	(.17)
Recoveries:
Retail notes and financing leases:
Agriculture and turf		7.6	.05		6.8	.05
Construction and forestry		3.1	.09		1.3	.04
Total retail notes and financing leases		10.7	.05		8.1	.05
Revolving charge accounts		22.2	.91		26.6	1.13
Total recoveries		32.9	.12		34.7	.14
Total net write-offs	$	(21.2)	(.08)	$	(8.0)	(.03)

Critical Accounting Estimates

See the Company’s critical accounting estimates discussed in Management’s Discussion and Analysis of Financial Condition and Results of Operations of the most recently filed Annual Report on Form 10-K. There have been no material changes to these estimates.

Capital Resources and Liquidity

For additional information on the Company’s dependence on, and relationship with, Deere & Company, see the Company’s most recently filed Annual Report on Form 10-K.

Sources of Liquidity, including Key Metrics and Balance Sheet Data

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 reasonable costs and expects to have sufficient sources of global funding and liquidity to meet its funding needs in the short term and long term. The Company’s ability to meet its debt obligations is supported in 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 (both public and private markets). Additionally, liquidity may be provided through loans from John Deere.

Key metrics and certain balance sheet data are provided in the following table, in millions of dollars:


	July 31		October 31		August 1
	2022		2021		2021
Cash, cash equivalents, and marketable securities	$	658.4	$	679.1	$	684.8
Receivables and Leases - net		45,185.1		41,488.2		41,508.0
Interest-bearing debt		40,381.4		37,319.9		37,513.5
Unused credit lines		1,956.5		5,770.3		6,131.1
Ratio of interest-bearing debt to stockholder’s equity		8.6 to 1		8.2 to 1		8.2 to 1

The reduction in unused credit lines compared to both prior periods relates to an increase in commercial paper outstanding, by both the Company and John Deere, to fund growth in the Receivable portfolio.

There have been no material changes to the contractual and other cash requirements identified in the Company’s most recently issued Annual Report on Form 10-K.

Cash Flows


	Nine Months Ended
	July 31		August 1
	2022		2021
Net cash provided by operating activities	$	898.1	$	1,043.4
Net cash used for investing activities		(4,756.4)		(3,273.9)
Net cash provided by financing activities		3,856.6		2,246.8
Effect of exchange rate changes on cash, cash equivalents, and restricted cash		(13.3)		3.9
Net increase (decrease) in cash, cash equivalents, and restricted cash	$	(15.0)	$	20.2

Net cash was used by investing activities during the first nine months of 2022 primarily due to growth in the Receivable portfolio, which was funded primarily through external borrowings and cash provided by operating activities, partially offset by a reduction in borrowings from John Deere.

Cash, Cash Equivalents, and Marketable Securities Held by Foreign Subsidiaries

The amount of cash, cash equivalents, and marketable securities held by foreign subsidiaries was $148.6 million, $158.0 million, and $184.3 million at July 31, 2022, October 31, 2021, and August 1, 2021, respectively.

Borrowings

Total borrowings have changed generally corresponding with the level of the Receivable and Lease portfolios, as well as the level of cash and cash equivalents.

During the first nine months of 2022, the Company issued $5,371.5 million and retired $4,197.5 million of long-term external borrowings, which primarily consisted of medium-term notes. During the first nine months of 2022, the Company also issued $2,668.6 million and retired $2,342.9 million of retail note securitization borrowings and maintained an average commercial paper balance of $1,835.3 million. 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. In April 2022, the Company issued $600.0 million of sustainability-linked medium-term notes with an initial interest rate of 3.35 percent, which are due in 2029. This transaction supports John Deere’s commitment to environmental sustainability by linking financing to the achievement of its ambitious and comprehensive environmental, social, and governance targets. Failure to meet the stated sustainability performance target will result in a 25-basis point increase to the interest rate payable on the 2029 notes from and including April 2026.

The Company has a revolving warehouse facility to utilize bank conduit facilities to securitize retail notes (see Note 5). The facility was renewed in November 2021 with an expiration in November 2022 and a reduction of the total capacity or “financing limit” from $2,000.0 million to $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 related to payments collected on the retail notes. At July 31, 2022, $891.2 million of securitization borrowings were outstanding under the facility. 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.

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 $8,086.3 million at July 31, 2022, $1,956.5 million of which were unused. For the purpose of computing the unused credit lines, commercial paper and short-term bank borrowings of the Company and John Deere, excluding secured

borrowings and the current portion of long-term external borrowings, were considered to constitute utilization. Included in the total credit lines at July 31, 2022 was a 364-day credit facility agreement of $3,000.0 million, expiring in the second quarter of 2023. In addition, total credit lines included long-term credit facility agreements of $2,500.0 million, expiring in the second quarter of 2026, and $2,500.0 million, expiring in the second quarter of 2027. 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 the Company’s 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 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 and Other Events

Capital Corporation declared and paid cash dividends to John Deere Financial Services, Inc. (JDFS) of $310.0 million and $230.0 million in the first nine months of 2022 and 2021, respectively. In each case, JDFS paid comparable dividends to Deere & Company.

On September 1, 2022, Capital Corporation declared a $60.0 million dividend to be paid to JDFS on September 15, 2022. JDFS, in turn, declared a $60.0 million dividend to Deere & Company, also payable on September 15, 2022.

On August 16, 2022, the U.S. federal government enacted the Inflation Reduction Act of 2022. The bill contains numerous tax provisions, including a 15 percent corporate minimum tax. The Company has not yet completed its analysis of the newly enacted tax legislation. At this point, however, this legislation is not expected to have a material impact on the Company’s financial statements.

Forward-Looking Statements

Certain statements contained herein, including in the section entitled “Overview” relating to future events, expectations, and trends constitute “forward-looking statements” as defined in the Private Securities Litigation Reform Act of 1995 and involve factors that are subject to change, assumptions, risks, and uncertainties that could cause actual results to differ materially.

Forward-looking statements are based on currently available information and current assumptions, expectations, and projections about future events and should not be relied upon. Except as required by law, the

Company expressly disclaims any obligation to update or revise its forward-looking statements. Further information concerning the Company and its business, including factors that could materially affect the Company’s financial results, is included in the Company’s other filings with the SEC (including, but not limited to, the factors discussed in Item 1A. “Risk Factors” of the Company’s most recent Annual Report on Form 10-K and subsequent Quarterly Reports on Form 10-Q).

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 subsequent 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 subsequent Quarterly Reports on Form 10-Q) and other Deere & Company filings with the SEC.

In addition, the Company’s business and its results are affected by general global macroeconomic conditions, including but not limited to inflation, slower growth or recession, higher interest rates, and currency fluctuations, which could adversely affect the U.S. dollar and customer confidence, customer access to capital and overall demand for John Deere products, credit application volumes, financing and repayment practices, and the number of and size of customer delinquencies and defaults, which could materially impact the Company’s write-offs and provision for credit losses; government spending and taxing; actions of banks, financing and leasing companies, and other lenders that compete with the Company for customers; changes in weather and climate patterns; the political and social stability of the markets in which the Company operates; the effects of, or response to, wars and other conflicts, including the current military conflict between Russia and Ukraine; natural disasters; and the spread of major epidemics or pandemics (including the COVID-19 pandemic). The sustainability of economic recovery from COVID-19 remains unclear and significant volatility could continue for a prolonged period.

The liquidity and ongoing profitability of the Company depend on timely access to capital to meet future cash flow requirements, and to fund operations, costs, and finance customer purchases of John Deere products. If general economic conditions deteriorate or capital markets become more volatile, funding could be unavailable or insufficient. 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 also impact the Company’s access to or terms of future funding, which could reduce the Company’s earnings and cash flows. A debt crisis in Europe, Latin America, or elsewhere could negatively impact currencies, global financial markets, funding sources and costs, asset and obligation values, customers, demand for John Deere equipment, 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.

Additional factors that could materially affect the Company’s operations, financial condition, and results include changes in governmental trade, banking, monetary, and fiscal policies, including financial regulatory reform and its effects on the consumer finance industry, derivatives, funding costs, governmental programs, and policies and tariffs for the benefit of certain industries or sectors; actions by central banks and by financial and securities regulators, which may affect the costs and expenses of financing the Company and the financing rates it is able to offer; actions by environmental, health, and safety regulatory agencies, including those related to the effects of climate change; changes to accounting standards; changes to and compliance with privacy, banking, and other regulations; changes to and compliance with economic sanctions and export controls laws and regulations (including those in place for Russia); and compliance with evolving U.S. and foreign laws when expanding to new markets and otherwise.

Other factors that could materially affect the Company’s results and operations include security breaches, cybersecurity attacks, technology failures, and other disruptions to the information technology infrastructure of the Company and John Deere dealers; events that damage the Company’s reputation or brand; significant investigations, claims, lawsuits, or other legal proceedings; the success or failure of new product initiatives or business strategies; changes in product preferences and take rates of products; oil and energy prices, supplies, and volatility; actions of competitors; changes in demand and pricing for used equipment and resulting impacts on lease residual values; labor relations and contracts, including work stoppages and other disruptions; and changes in the ability to attract, develop, engage, and retain qualified personnel.

Item 3. Quantitative and Qualitative Disclosures About Market Risk.

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 (the Exchange Act)) were effective as of July 31, 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 quarter, there were no changes that have materially affected or are reasonably likely to materially affect the Company’s internal control over financial reporting.

PART II. OTHER INFORMATION

Item 1. Legal Proceedings.

Item 1A. Risk Factors.

See the Company’s most 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 on Form 10-K, and the “Forward-Looking Statements” 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 General Instruction H.

Item 3. Defaults Upon Senior Securities.

Omitted pursuant to General Instruction H.

Item 4. Mine Safety Disclosures.

Not applicable.

Item 5. Other Information.

None.

Item 6. Exhibits.

Certain instruments relating to long-term 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.

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:	September 1, 2022	By:	/s/ Rajesh Kalathur

			Rajesh Kalathur
			President and Principal Financial Officer

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Deere John Capital (DE22B) 10-Q2022 Q3 Quarterly report

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