SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-Q
QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(D) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended January 31, 1995
Commission file no: 1-6458
_________________________
JOHN DEERE CAPITAL CORPORATION
Delaware
(State of incorporation)
36-2386361
(IRS employer identification no.)
Suite 600
First Interstate Bank Building
1 East First Street
Reno, Nevada 89501
(Address of principal executive offices)
Telephone Number: (702) 786-5527
________________________________
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 x No
At January 31, 1995, 2,500 shares of common stock, without par value, o
f the registrant were
outstanding, all of which were owned by John Deere Credit Company, 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.
Page 1 of 16 Pages
Index to Exhibits: Page 14
PART I. FINANCIAL INFORMATION
Item 1. Financial Statements.
JOHN DEERE CAPITAL CORPORATION AND SUBSIDIARIES
Condensed Statement of Consolidated Income
(UNAUDITED)
(In millions of dollars)
Three Months Ended
January 31
1995 1994
Revenues:
Finance income earned on retail notes $ 79.2 $ 65.9
Revolving charge account income 18.7 13.3
Lease revenues 10.9 10.1
Finance income earned on wholesale notes 4.0 2.5
Net gain on retail notes sold .3 1.1
Interest income from short-term investments 2.8 1.4
Securitization and servicing fee income 9.5 9.7
Other income .8 .7
Total revenues 126.2 104.7
Expenses:
Interest expense 55.1 35.9
Administrative and operating expenses 17.4 17.7
Provision for credit losses 5.0 9.2
Fees paid to Deere & Company 1.3 1.5
Depreciation of equipment on
operating leases 5.2 5.1
Total expenses 84.0 69.4
Income before Income Taxes 42.2 35.3
Provision for Income Taxes 14.8 12.3
Net Income $ 27.4 $ 23.0
----
See Notes to Interim Financial Statements
JOHN DEERE CAPITAL CORPORATION AND SUBSIDIARIES
Condensed Consolidated Balance Sheet
(UNAUDITED)
(In millions of dollars)
Jan 31 Oct 31 Jan 31
1995 1994 1994
ASSETS
Cash and Cash Equivalents $242.3 $ 42.9 $ 58.7
Receivables and Leases:
Retail notes 3,484.3 3,289.2 2,942.8
Revolving charge accounts 381.4 437.3 281.8
Financing leases 125.7 117.7 87.5
Wholesale notes 176.0 142.2 121.7
Total receivables 4,167.4 3,986.4 3,433.8
Equipment on operating leases 120.6 125.2 121.9
Total receivables and leases 4,288.0 4,111.6 3,555.7
Allowance for credit losses (79.8) (80.1) (78.4)
Total receivables and
leases - net 4,208.2 4,031.5 3,477.3
Other Receivables 158.3 155.1 190.1
Other Assets 61.8 60.1 45.2
TOTAL $4,670.6 $4,289.6 $3,771.3
LIABILITIES AND STOCKHOLDER'S EQUITY
Short-Term Borrowings:
Commercial paper $2,101.0 $1,580.7 $1,096.3
Deere & Company 64.9 102.7 13.8
Current maturities of
long-term borrowings 456.8 632.8 469.2
Total short-term borrowings 2,622.7 2,316.2 1,579.3
Accounts Payable and Accrued
Liabilities 197.0 180.2 208.2
Deposits Withheld from Dealers and
Merchants 109.7 111.4 97.6
Long-Term Borrowings:
Notes and debentures 783.6 734.5 961.3
Subordinated debt 300.0 300.0 300.0
Total long-term borrowings 1,083.6 1,034.5 1,261.3
Retirement Benefit Accruals &
Other Liabilities 11.2 13.3 12.8
Stockholder's Equity:
Common stock, without par value
(issued and outstanding - 2,500
shares owned by
John Deere Credit Company) 112.8 112.8 112.8
Retained earnings 533.6 521.2 499.3
Total stockholder's equity 646.4 634.0 612.1
TOTAL $4,670.6 $4,289.6 $3,771.3
See Notes to Interim Financial Statements
JOHN DEERE CAPITAL CORPORATION AND SUBSIDIARIES
Condensed Statement of Consolidated Cash Flows
(UNAUDITED)
(In millions of dollars)
Three Months Ended
January 31
1995 1994
Cash Flows from Operating Activities:
Net income $ 27.4 $ 23.0
Adjustments to reconcile net income
to net cash provided by
operating activities (8.4) .4
Net cash provided by operating
activities 19.0 23.4
Cash Flows from Investing Activities:
Cost of receivables and leases
acquired (996.8) ( 828.7)
Collections of receivables 804.7 686.7
Proceeds from sales of
receivables 4.9
Other 32.0 93.5
Net cash used for investing
activities (160.1) (43.6)
Cash Flows from Financing Activities:
Increase in notes payable
to others 520.2 642.3
Change in receivable/payable with
Deere & Company (37.7) (425.6)
Proceeds from long-term borrowings 90.0
Principal payment on long-term
borrowings (217.0) (153.0)
Dividend paid (15.0) (150.0)
Net cash provided by (used for)
financing activities 340.5 (86.3)
Net increase (decrease) in cash and
cash equivalents 199.4 (106.5)
Cash and cash equivalents at beginning
of period 42.9 165.2
Cash and cash equivalents at end
of period $ 242.3 $ 58.7
See Notes to Interim Financial Statements
Notes to Interim Financial Statements
(1) The consolidated financial statements of John Deere Capital
Corporation (Capital Corporation) and its wholly owned
subsidiaries, Deere Credit, Inc. (DCI), Deere Credit Services,
Inc. (DCS), Farm Plan Corporation (FPC) and John Deere
Receivables, Inc. (JDRI), (collectively referred to as the
Company) have been prepared by the Company, without audit,
pursuant to the rules and regulations of the Securities and
Exchange Commission. Certain information and footnote
disclosures normally included in annual financial statements
prepared in accordance with generally accepted accounting
principles have been condensed or omitted as permitted by such
rules and regulations. All adjustments, consisting of normal
recurring adjustments, have been included. Management believes
that the disclosures are adequate to present fairly the
financial position, results of operations and cash flows at the
dates and for the periods presented. It is suggested that these
interim financial statements be read in conjunction with the
financial statements and the notes thereto included 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.
(2) The principal business of the Company is providing and
administering financing for retail purchases of new and used
John Deere agricultural, industrial and lawn and grounds care
equipment. The Company purchases retail installment sales and
loan contracts (retail notes) from Deere & Company and its
wholly-owned subsidiaries (collectively called John Deere).
These retail notes are acquired by John Deere through John
Deere retail dealers in the United States. The Company also
purchases and finances retail notes unrelated to John Deere,
representing primarily recreational vehicle and recreational
marine product notes acquired from independent dealers of
those products and from marine product mortgage service
companies (recreational product retail notes). The Company
also leases John Deere equipment to retail customers, finances
and services unsecured revolving charge accounts acquired from
and offered through merchants in the agricultural, lawn and
grounds care and marine retail markets (revolving charge
accounts), and provides financing for wholesale inventories of
recreational vehicles, manufactured housing units, yachts and
John Deere engines owned by dealers of those products
(wholesale notes). Retail notes, revolving charge accounts,
financing leases and wholesale notes receivable are
collectively called Receivables. Receivables and operating
leases are collectively called Receivables and Leases."
(3) The consolidated ratio of earnings to fixed charges was 1.76
to 1 during the first three months this year compared with
1.97 to 1 in the comparable period of 1994. Earnings
consist of income before income taxes and changes in
accounting to which are added fixed charges. Fixed charges
consist of interest on indebtedness, amortization of debt
discount and expense, an estimated amount of rental expense
under capitalized leases which is deemed to be representative
of the interest factor and rental expense under operating
leases.
(4) 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 state and federal regulations
concerning retail credit. Although it is not possible to
predict with certainty the outcome of these unresolved legal
actions or the range of possible loss, the Company believes
these unresolved legal actions will not have a material effect
on its financial position or results of operations. On
February 6, 1995 the 281st District Court for Harris County,
Texas approved a settlement of Deere Credit, Inc. v. Shirley
Y. Morgan et al. (see Note 12 to the financial statements
included in the Company's latest annual report on Form 10-K).
The estimated cost of this settlement has been fully accrued
and is not material.
(5) Certain amounts for 1994 have been reclassified to conform
with 1995 financial statement presentations.
Item 2. Management s Discussion and Analysis of Financial
Condition andResults of Operations.
Results of Operations
During the first three months of 1995, the volume of retail notes
(principal value financed) acquired by the Company totaled $703
million, an increase of 19 percent, compared with acquisitions of
$592 million during the same period last year. Retail note
acquisitions from John Deere increased by approximately $116
million, or 21 percent, for the three months ended January 31, 1995
compared with the same period last year primarily due to higher
retail sales of John Deere equipment and an increase in the
Company s share of that market. Note acquisitions from John Deere
continued to represent a significant proportion of the total United
States retail sales of John Deere equipment. Acquisitions of
recreational product retail notes were $5 million lower in the
first quarter of 1995 as compared to the first quarter of 1994.
The primary reason for this decrease was a general decline in the
marine financing business compared with the same period last year.
At January 31, 1995, the amount of retail notes held by the Company
was $3.484 billion compared with $3.289 billion at October 31, 1994
and $2.943 billion at January 31, 1994. Within this category,
recreational product notes totaled $790 million, $800 million and
$780 million at January 31, 1995, October 31, 1994 and January 31,
1994, respectively. Retail notes increased during the first
quarter of 1995 as the cost of retail notes acquired exceeded
collections by $198 million.
The amount of retail notes administered by the Company, which
includes retail notes previously sold, totaled $4.437 billion at
January 31, 1995, $4.464 billion at October 31, 1994, and $4.080
billion at January 31, 1994. At January 31, 1995, the amount of
retail notes previously sold was $952 million compared with $1.175
billion at October 31, 1994 and $1.137 billion at January 31, 1994.
The Company s maximum exposure under all retail note recourse
provisions at January 31, 1995 was $143 million. Although no
retail note sales took place during the first quarter of 1995,
additional sales of retail notes are expected to be made in the
future.
Revolving charge accounts receivable totaled $381 million at
January 31, 1995 compared with $437 million at October 31, 1994 and
$282 million at January 31, 1994. Acquisitions increased 18
percent in the first quarter of 1995 compared with the same period
last year, reflecting the increased retail sales of John Deere lawn
and grounds care equipment, as well as an increased volume of Farm
Plan receivable acquisitions. The balance of revolving charge
accounts receivable increased in the first three months of 1995 due
to the growth in both Farm Plan and John Deere Credit Revolving
Plan volumes. The balance of revolving charge accounts receivable
at January 31, 1995 included $180 million of Farm Plan receivables
and $201 million of John Deere Credit Revolving Plan receivables.
This balance compared with $143 million and $139 million,
respectively, at January 31, 1994.
The portfolio of financing leases totaled $126 million at January
31, 1995 compared with $118 million at October 31, 1994 and $88
million at January 31, 1994. The investment in operating leases
was $121 million, $125 million and $122 million at January 31,
1995, October 31, 1994 and January 31, 1994, respectively. The
Company also administers municipal leases owned by Deere & Company
which totaled $34 million at January 31, 1995, $39 million at
October 31, 1994, and $42 million at January 31, 1994. The Company
sold $5 million of municipal leases to Deere & Company in the first
quarter of 1994. During the first quarter of 1995, the Company did
not sell municipal leases to Deere & Company.
Wholesale notes receivable on recreational vehicle, manufactured
housing, yacht and John Deere engine inventories totaled $176
million at January 31, 1995, $142 million at October 31, 1994 and
$122 million at January 31, 1994. Wholesale note acquisitions
continue to be favorably impacted by the Company s growth in both
the manufactured housing and yacht markets.
Receivables and Leases acquired totaled $997 million during the
first quarter of 1995, a 20 percent increase compared with
acquisitions of $829 million during the same period of 1994.
Receivables and Leases financed by the Company were $4.288 billion
at January 31, 1995, $4.112 billion at October 31, 1994 and $3.556
billion at January 31, 1994. Total Receivables and Leases
administered by the Company on those same dates were $5.275
billion, $5.326 billion and $4.735 billion, respectively.
The balance (principal plus accrued interest) of retail notes held
with any installment 60 days or more past due was $36 million at
January 31, 1995 compared with $24 million at October 31, 1994 and
$35 million at January 31, 1994. The amount of retail note
installments 60 days or more past due was $7.4 million at January
31, 1995, $5.5 million at October 31, 1994 and $8.3 million at
January 31, 1994. These past-due installments represented .21
percent of the unpaid balance of retail notes held at January 31,
1995, .17 percent at October 31, 1994 and .28 percent at January
31, 1994.
The balance of revolving charge accounts past due 60 days or more
was $7.7 million, $5.6 million and $6.6 million at January 31,
1995, October 31, 1994 and January 31, 1994, respectively. These
past-due amounts represented 2.0 percent, 1.3 percent and 2.3
percent of the revolving charge accounts receivable held at those
respective dates.
The balance of financing and operating lease payments 60 days or
more past due was $1.2 million at January 31, 1995, $.6 million at
October 31, 1994 and $.9 million at January 31, 1994. These past-
due installments represented .49 percent, .24 percent and .45
percent of the investment in financing and operating leases at
those respective dates.
Receivable and Lease amounts 60 days or more past due were $16.3
million at January 31, 1995 compared with $11.7 million at October
31, 1994 and $16.7 million at January 31, 1994. These past-due
amounts represent .38 percent, .28 percent and .47 percent of the
total Receivables and Leases held at those same dates.
Deposits withheld from dealers and merchants, representing mainly
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, amounted to $110 million at January 31, 1995 compared with
$111 million at October 31, 1994 and $98 million at January 31,
1994. The Company s allowance for credit losses on all Receivables
and Leases financed, which totaled $80 million at both January 31,
1995 and October 31, 1994 and $78 million at January 31, 1994, also
provides for potential uncollectibility. As a percent of the
unpaid balance of total Receivables and Leases financed, the
allowance for credit losses represented 1.9 percent, 1.9 percent
and 2.2 percent at January 31, 1995, October 31, 1994 and January
31, 1994, respectively.
Net income for the first quarter of 1995 was $27.4 million compared
with $23.0 million in the same period last year. The earnings were
up from last year reflecting a higher gross margin this year from
a larger average portfolio financed and a decline in the provision
for credit losses due to lower write-offs of retail notes and a
favorable adjustment to the allowance for credit losses relating to
industrial equipment retail notes.
Revenues totaled $126.2 million in the first quarter of 1995, a 21
percent increase compared with revenues of $104.7 million last
year. Revenues increased due to both a higher overall yield on the
receivables held and a larger average portfolio financed. The
average balance of total net Receivables and Leases financed was 20
percent higher in the first three months of this year. The ratio
of earnings to fixed charges was 1.76 to 1 for the first quarter
of 1995 compared with 1.97 to 1 in the same period of 1994.
Revolving charge account income and lease revenues were higher in
the first quarter of 1995 compared with the same period in 1994,
due primarily to the higher average revolving charge and lease
portfolios financed this year.
Interest expense for the first quarter was up from $35.9 million
last year to $55.1 million in 1995. Interest expense increased
during the first quarter of 1995 as a result of increased
borrowings required to finance the higher average Receivable and
Lease portfolios and increased interest rates. Total average
borrowings during the first quarter of 1995 were $3.606 billion, a
27 percent increase from last year s first quarter average
borrowings of $2.843 billion. The weighted average interest rate
incurred on all interest-bearing borrowings for the first quarter
of this year was 6.1 percent compared to 4.8 percent during last
year s first quarter.
During the first quarter of 1995, the provision for credit losses
totaled $5.0 million compared with $9.2 million in the same period
last year. The decrease during the first quarter of 1995 was
favorably affected by a $2.3 million adjustment related to current
and expected losses on industrial equipment retail notes. Total
write-offs of Receivables and Leases financed were $5.3 million
during the first quarter of 1995 compared with $8.4 million last
year. Write-offs of John Deere retail notes totaled $.7 million
during the first quarter of 1995 compared with $1.5 million last
year. Write-offs of recreational product retail notes totaled $2.7
million in the first quarter of 1995 compared with $5.3 million in
last year s first quarter.
Capital Resources and Liquidity
The Company relies on its ability to raise substantial amounts of
funds to finance its Receivable and Lease portfolios. The
Company s primary sources of funds for this purpose are a
combination of borrowings and equity capital. Additionally, the
Company periodically sells substantial amounts of retail notes in
the public market. The Company s ability to obtain funds is
affected by its debt ratings, which are closely related to the
outlook for and the financial condition of Deere & Company, and the
nature and availability of support facilities, such as its lines of
credit. For information regarding Deere & Company and its
business, see Exhibit 99.
The Company s ability to meet its debt obligations is supported in
a number of ways as described below. All commercial paper issued
is backed by bank credit lines. The assets of the Company are
self-liquidating in nature. A strong equity position is available
to absorb unusual losses on these assets. Liquidity is also
provided by the Company s ability to sell or securitize these
assets. Asset-liability risk is also actively managed to minimize
exposure to interest rate fluctuations.
The Company s business is somewhat seasonal, with overall
acquisitions of Receivables and Leases traditionally higher in the
second half of the fiscal year than in the first half, and overall
collections of Receivables and Leases traditionally somewhat higher
in the first six months than in the last half of the fiscal year.
During the first quarter of 1995, the aggregate cash provided by
operating and financing activities was used to increase Receivables
and Leases and cash and cash equivalents. Cash provided from
operating activities was $19 million in the current quarter.
Financing activities provided $340 million during the first quarter
of 1995, resulting from a $393 million increase in outside
borrowings, which was partially offset by a $38 million decrease in
payables to Deere & Company and a $15 million dividend payment.
Cash used for investing activities totaled $160 million in the
current quarter, primarily because the cost of Receivables and
Leases acquired exceeded the collections. Cash and cash
equivalents increased $199 million during the quarter.
During the first quarter of 1994, $23 million in cash was provided
from operating activities and $106 million of cash and cash
equivalents were used for financing and investing activities. Cash
outlays for financing activities totaled $86 million during the
first quarter of 1994, resulting from a $426 million decrease in
payables to Deere & Company and payment of a $150 million dividend
which were partially offset by a $490 million increase in outside
borrowings. Cash used for investing activities totaled $44 million
in the first quarter of 1994, primarily because the cost of
Receivables and Leases acquired exceeded the collections of
receivables. Other cash flows from investing activities increased
in 1994 mainly due to collections on receivables previously sold
that were being held for payment to the trusts.
Total interest-bearing indebtedness amounted to $3.706 billion at
January 31, 1995 compared with $3.350 billion at October 31, 1994
and $2.841 billion at January 31, 1994, generally corresponding
with the level of Receivables and Leases financed and the level of
cash and cash equivalents. The ratio of total interest-bearing
debt to stockholder s equity was 5.7 to 1, 5.3 to 1 and 4.6 to 1 at
January 31, 1995, October 31, 1994 and January 31, 1994,
respectively.
In the first quarter of 1995, the Company retired the $150 million
5% debenture due in 1995. During the first three months of this
year, the Company issued $90 million and retired $67 million of
medium-term notes.
At January 31, 1995, the Capital Corporation and Deere & Company,
jointly, had unsecured lines of credit with various banks in North
America and overseas totaling $2.508 billion which included a long-
term credit agreement totaling $1.675 billion. In addition, the
Capital Corporation, Deere & Company, John Deere Limited (Canada)
and John Deere Finance Limited (Canada), jointly, have a long-term
credit agreement with various banks in North America and overseas
totaling $724 million. In total, the Capital Corporation had
$3.232 billion aggregate lines of credit available at January 31,
1995 of which $384 million were unused. For the purpose of
computing unused credit lines, the aggregate of total short-term
borrowings, excluding the current portion of long-term borrowings,
of the Capital Corporation, Deere & Company, John Deere Limited
(Canada) and John Deere Finance Limited (Canada) were considered to
constitute utilization. Annual facility fees on the credit
agreements are charged to the Capital Corporation based on
utilization.
The Company paid a cash dividend to John Deere Credit Company of
$15 million in the first quarter of 1995. John Deere Credit
Company paid a comparable dividend to Deere & Company.
PART II. OTHER INFORMATION
Item 1. Legal Proceedings.
See Note (4) to the Interim Financial Statements.
Item 2. Changes in Securities.
Omitted pursuant to instruction H(2).
Item 3. Defaults upon Senior Securities.
Omitted pursuant to instruction H(2).
Item 4. Submission of Matters to a Vote of Security Holders.
Omitted pursuant to instruction H(2).
Item 5. Other Information.
None.
Item 6. Exhibits and Reports on Form 8-K.
(a) Exhibits.
See the index to exhibits immediately preceding the
exhibits filed with this report.
Certain instruments relating to long-term debt,
constituting less than 10% of the registrant s total
assets, are not filed as exhibits herewith pursuant to
Item 601(b)(4)(iii)(A) of Regulation S-K. The
registrant will file copies of such instruments upon
request of the Commission.
(b) Reports on Form 8-K.
Current report on Form 8-K dated December 6, 1994
(items 5 and 7).
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: 13 March 1995
By:/s/ Pierre E. Leroy
Vice President
(Principal Financial Officer)
INDEX TO EXHIBITS
Exhibit Page No.
(12) Computation of ratio of earnings to fixed charges. 15
(27) Financial data schedule 16
(99) Part I of Deere & Company Form 10-Q
for the quarter ended January 31, 1995.*
*Incorporated by reference. Copies of these exhibits are available
from the Company upon request.