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, 1996
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, 1996, 2,500 shares of common stock, without par
value, of 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
1996 1995
Revenues:
Finance income earned on retail notes $ 92.1 $ 79.2
Revolving charge account income 21.5 18.7
Lease revenues 12.7 10.9
Finance income earned on wholesale notes 7.6 4.0
Net gain on retail notes sold .3 .3
Interest income from short-term investments 2.8 2.8
Securitization and servicing fee income 11.4 9.5
Other income 2.3 .8
Total revenues 150.7 126.2
Expenses:
Interest expense 66.3 55.1
Administrative and operating expenses 20.3 17.4
Provision for credit losses 5.9 5.0
Fees paid to Deere & Company 1.9 1.3
Depreciation of equipment on operating leases 6.6 5.2
Total expenses 101.0 84.0
Income before Income Taxes 49.7 42.2
Provision for Income Taxes 17.4 14.8
Net Income $ 32.3 $ 27.4
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
1996 1995 1995
ASSETS
Cash and Cash Equivalents $ 128.4 $164.3 $ 242.3
Receivables and Leases:
Retail notes 4023.5 3,824.9 3,484.3
Revolving charge accounts 443.8 510.2 381.4
Financing leases 149.3 149.3 125.7
Wholesale notes 321.5 298.1 176.0
Total receivables 4,938.1 4,782.5 4,167.4
Equipment on operating leases 151.3 139.5 120.6
Total receivables and leases 5089.4 4,922.0 4,288.0
Allowance for credit losses (84.3) (84.2) (79.8)
Total receivables and leases
- net 5005.1 4,837.8 4,208.2
Other Receivables 180.3 183.4 158.3
Other Assets 66.9 65.3 61.8
TOTAL $5,380.7 $5,250.8 $4,670.6
LIABILITIES AND STOCKHOLDER S EQUITY
Short-Term Borrowings:
Commercial paper $2,423.3 $1,986.7 $2,101.0
Deere & Company 118.9 460.1 64.9
Current maturities of
long-term borrowings 296.0 343.9 456.8
Total short-term borrowings 2,838.2 2,790.7 2,622.7
Accounts Payable and Accrued
Liabilities 178.0 154.4 197.0
Deposits Withheld from Dealers
and Merchants 122.3 126.6 109.7
Long-Term Borrowings:
Notes and debentures 1,223.0 1,172.9 783.6
Subordinated debt 300.0 300.0 300.0
Total long-term borrowings 1,523.0 1,472.9 1,083.6
Retirement Benefit Accruals
and Other Liabilities 13.8 13.1 11.2
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 592.6 580.3 533.6
Total stockholder's equity 705.4 693.1 646.4
TOTAL $5,380.7 $5,250.8 $4,670.6
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
1996 1995
Cash Flows from Operating Activities:
Net income $ 32.3 $ 27.4
Adjustments to reconcile net income
to net cash provided by
operating activities (2.1) (8.4)
Net cash provided by operating
activities 30.2 19.0
Cash Flows from Investing Activities:
Cost of receivables and leases
acquired (1,241.7) (996.8)
Collections of receivables 1047.9 804.7
Proceeds from sales of receivables 2.9
Other 47.5 32.0
Net cash used for investing activities (143.4) (160.1)
Cash Flows from Financing Activities:
Increase in notes payable to others 436.6 520.2
Change in receivable/payable with
Deere & Company (341.3) (37.7)
Proceeds from long-term borrowings 50.0 90.0
Principal payment on long-term
borrowings (48.0) (217.0)
Dividend paid (20.0) (15.0)
Net cash provided by financing
activities 77.3 340.5
Net increase (decrease)
in cash and cash equivalents (35.9) 199.4
Cash and cash equivalents at
beginning of period 164.3 42.9
Cash and cash equivalents at end
of period $128.4 $242.3
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 certain agricultural
and industrial
retail notes unrelated to John Deere. In addition, the Company
purchases and
finances 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
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 wholesale financing for wholesale
inventories of
recreational vehicles, manufactured housing units, yachts, John
Deere engines
and John Deere industrial equipment 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
1.74 to 1 during the
first three months this year compared with 1.76 to 1 in the
comparable period
of 1995. 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.
Item 2. Management s Discussion and Analysis of Financial
Condition and Results of Operations.
Results of Operations
Acquisitions of Receivables and Leases by the Company during the
first quarter of
1996, totaled $1.242 billion, an increase of 25 percent, compared
with acquisitions
of $997 million during the first quarter of 1995. Acquisitions
in all categories were
higher in the first quarter of 1996 compared to the same period
last year.
Retail notes acquired by the Company, during the first three
months of 1996, totaled
$834 million, an increase of 19 percent, compared with
acquisitions of $703 million
during the same period last year. Retail note acquisitions from
John Deere increased
by approximately $97 million, or 15 percent, for the three months
ended January 31,
1996 compared with the same period last year, primarily due to
higher retail sales of
John Deere agricultural and industrial equipment. 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 increased
$20 million in the first quarter of 1996 as compared to the first
quarter of 1995. The
increase in recreational product retail notes was primarily due
to a $19 million increase
in recreational vehicle and yacht acceptances.
At January 31, 1996, the amount of retail notes held by the
Company was $4.024
billion compared with $3.825 billion at October 31, 1995 and
$3.484 billion at
January 31, 1995. Within this category, recreational product
notes totaled $863
million, $865 million and $790 million at January 31, 1996,
October 31, 1995 and
January 31, 1995, respectively. Retail notes increased during
the first quarter of
1996 as the cost of retail notes acquired exceeded collections by
$203 million.
The amount of retail notes administered by the Company, which
includes retail notes
previously sold, totaled $4.970 billion at January 31, 1996,
$4.987 billion at
October 31, 1995, and $4.437 billion at January 31, 1995. At
January 31, 1996,
the unpaid balance of retail notes previously sold was $947
million compared with $1.162 billion at October 31, 1995 and $952
billion at January 31, 1995. The Company's maximum exposure
under all retail note recourse provisions at January 31, 1996 was
$177 million.
Revolving charge accounts receivable totaled $444 million at
January 31, 1996
compared with $510 million at October 31, 1995 and $381 million
at January 31,
1995. This balance at January 31, 1996 included $222 million of
Farm Plan
receivables and $217 million of John Deere Credit Revolving Plan
receivables
compared with $180 million and $201 million, respectively, at
January 31, 1995.
Acquisitions increased 21 percent in the first quarter of 1996
compared with the same
period last year, due primarily to increased volumes of Farm Plan
receivable
acquisitions. The decline in revolving charge accounts
receivable from October 31,
1995 was due to normal seasonal factors associated with the
business.
The portfolio of financing leases totaled $149 million at January
31, 1996 and at
October 31, 1995 and $126 million at January 31, 1995. The
investment in operating
leases was $151 million, $140 million and $121 million at January
31, 1996, October
31, 1995 and January 31, 1995, respectively. The Company also
administers
municipal leases owned by Deere & Company which totaled $18
million at January
31, 1996, $21 million at October 31, 1995, and $34 million at
January 31, 1995.
The Company discontinued selling municipal leases to Deere &
Company as of
November, 1, 1994.
Wholesale notes receivable totaled $322 million at January 31,
1996, $298 million at
October 31, 1995 and $176 million at January 31, 1995. Wholesale
note acquisitions
increased 57 percent, reflecting growth in acquisitions of
manufacturing housing,
industrial wholesale and yacht notes.
Total Receivables and Leases financed by the Company were $5.089
billion at January
31, 1996, $4.922 billion at October 31, 1995 and $4.288 billion
at January 31,
1995. Comparable Receivables and Leases administered by the
Company were
$6.054 billion, $6.105 billion and $5.275 billion, respectively.
The balance (principal plus accrued interest) of retail notes
held with any installment
60 days or more past due remained low with $49 million past due
at January 31,
1996 compared with $33 million at October 31, 1995 and $36
million at January 31,
1995. The amount of retail note installments 60 days or more
past due was $8.3
million at January 31, 1996, $6.1 million at October 31, 1995 and
$7.4 million at
January 31, 1995. These past-due installments represented .21
percent of the unpaid
balance of retail notes held at both January 31, 1996 and at
January 31, 1995 and
.16 percent at October 31, 1995.
The balance of revolving charge accounts past due 60 days or more
was $11.0
million, $7.1 million and $7.7 million at January 31, 1996,
October 31, 1995 and
January 31, 1995, respectively. These past-due amounts
represented 2.47 percent,
1.40 percent and 2.03 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
$1.4 million at January 31, 1996, $.8 million at October 31, 1995
and $1.2 million
at January 31, 1995. These past-due installments represented .47
percent, .28
percent and .49 percent of the investment in financing and
operating leases at those
respective dates.
Receivable and Lease amounts 60 days or more past due were $20.8
million at
January 31, 1996 compared with $14.1 million at October 31, 1995
and $16.3
million at January 31, 1995. These past-due amounts represent
.41 percent, .29
percent and .38 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 $122 million at January 31, 1996 compared
with $127
million at October 31, 1995 and $110 million at January 31, 1995.
The Company's
allowance for credit losses on all Receivables and Leases
financed totaled $84 million
at both January 31, 1996 and October 31, 1995 and $80 million at
January 31,
1995. This allowance for credit losses represented 1.7 percent
of the unpaid balance
of Receivables and Leases financed at both January 31, 1996 and
October 31, 1995
and 1.9 percent at January 31, 1995.
Net income for the first quarter of 1996 was $32.3 million
compared with $27.4
million in the same period last year. Net income for the quarter
was favorably affected
by a larger average portfolio financed slightly offset by lower
financing spreads
compared with a year ago. The average balance of Receivables and
Leases financed
was 19 percent higher in the first quarter of 1996 compared with
the same period last
year.
Revenues totaled $150.7 million in the first quarter of 1996, a
19 percent increase
compared with revenues of $126.2 million last year. Revenues
increased in all product
categories primarily due to larger average portfolios financed.
Revenues on variable
rate retail installment contracts and Farm Plan receivables are
also affected by
changes in a certain bank's base rate. The average balance of
Receivables and Leases
financed was 19 percent higher in the first three months of this
year. The ratio of
earnings to fixed charges was 1.74 to 1 for the first quarter of
1996 compared with
1.76 to 1 in the same period of 1995.
Interest expense for the first quarter increased from $55.1
million last year to $66.3
million in 1996, primarily as a result
of higher borrowings required to finance the average Receivable
and Lease portfolios.
Total average
borrowings, during the first
quarter of 1996, were $4.359 billion, a 21 percent increase from
last year's first
quarter average borrowings of $3.606 billion.
Sales, administration
and general expenses increased $3.4 million during the quarter,
primarily as a result
of higher costs associated with the larger portfolio
administered.
During the first quarter of 1996, the provision for credit losses
totaled $5.9 million
compared with $5.0 million in the same period last year. The
increase during the first
quarter of 1996 was primarily due to continued growth in the
portfolio coupled with
slightly higher levels of receivable write-offs. Write-offs of
Receivables and Leases
financed were $5.7 million during the first quarter of 1996
compared with $5.3 million
last year.
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 1996, the aggregate cash provided by
operating and
financing activities was used to increase Receivables and Leases.
Cash provided from
operating activities was $30 million in the current quarter.
Financing activities
provided $77 million during the first quarter of 1996, resulting
from a $97 million
increase in total borrowings, which was partially offset by a $20
million dividend
payment. Cash used for investing activities totaled $143 million
in the current
quarter, primarily because the cost of Receivables and Leases
acquired exceeded the
collections. Cash and cash equivalents also decreased $36
million during the quarter.
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 first
quarter of 1995. Financing activities provided $340 million
during the first quarter of
1995, resulting from a $355 million increase in total borrowings,
which was partially
offset by a $15 million dividend payment. Cash used for
investing activities totaled
$160 million in the first quarter of 1995, primarily because the
cost of Receivables and
Leases acquired exceeded the collections. Cash and cash
equivalents increased $199
million during the first quarter of 1995.
Total interest-bearing indebtedness amounted to $4.361 billion at
January 31, 1996
compared with $4.264 billion at October 31, 1995 and $3.706
billion at January 31,
1995, generally corresponding with the level of Receivables and
Leases financed.
Total short-term indebtedness amounted to $2.838 billion at
January 31, 1996
compared with $2.791 billion at October 31, 1995 and $2.623
billion at January 31,
1995. Total long-term indebtedness amounted to $1.523 billion,
$1.473 billion and
$1.083 billion at January 31 1996, October 31, 1995 and January
31, 1995,
respectively. The ratio of total interest-bearing debt to
stockholder s equity was 6.2
to 1, 6.2 to 1 and 5.7 to 1 at January 31, 1996, October 31, 1995
and January 31,
1995, respectively.
In the first quarter of 1995, the Company issued $50 million and
retired $48 million
of medium-term notes. There were no issuances or retirements of
long-term debt
during the current quarter.
At January 31, 1996, the Capital Corporation, Deere & Company,
John Deere Limited
(Canada) and John Deere Finance Limited (Canada), jointly,
maintained $4.008 billion
of unsecured lines of credit with various banks in North America
and overseas, $911
million of which was unused. For the purpose of computing unused
credit lines, the
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. Included in
the total credit lines is a long-term credit agreement commitment
for $3.500 billion.
An annual facility fee on the credit agreement is charged to the
Capital Corporation
based on utilization.
The Company paid a cash dividend to John Deere Credit Company of
$20 million in
the first quarter of 1996. 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 November 30, 1995 (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: 6 March 1996 By: /s/ R. W. Lane
R. W. Lane
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, 1996 (Securities and Exchange Commission
file no. 1-4121).*
__________________________
*Incorporated by reference. Copies of these exhibits are
available from the Company upon request.