-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: webmaster@www.sec.gov Originator-Key-Asymmetric: MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB MIC-Info: RSA-MD5,RSA, LP+cCrKoNcjG7aOWZTpANKA9s7E4hBhroUYAYwbnrB3+S8LEDdr5GAS+pdr/sZvD ms/mMP0crN78sx35S5/Gag== /in/edgar/work/20000906/0000027673-00-500005/0000027673-00-500005.txt : 20000922 0000027673-00-500005.hdr.sgml : 20000922 ACCESSION NUMBER: 0000027673-00-500005 CONFORMED SUBMISSION TYPE: 10-Q PUBLIC DOCUMENT COUNT: 3 CONFORMED PERIOD OF REPORT: 20000731 FILED AS OF DATE: 20000906 FILER: COMPANY DATA: COMPANY CONFORMED NAME: DEERE JOHN CAPITAL CORP CENTRAL INDEX KEY: 0000027673 STANDARD INDUSTRIAL CLASSIFICATION: [6153 ] IRS NUMBER: 362386361 STATE OF INCORPORATION: DE FISCAL YEAR END: 1031 FILING VALUES: FORM TYPE: 10-Q SEC ACT: SEC FILE NUMBER: 001-06458 FILM NUMBER: 717034 BUSINESS ADDRESS: STREET 1: FIRST INTERSTATE BANK BLDG STREET 2: 1 E FIRST ST STE 600 CITY: RENO STATE: NV ZIP: 89501 BUSINESS PHONE: 7027865527 MAIL ADDRESS: STREET 1: JOHN DEERE RD CITY: MOLINE STATE: IL ZIP: 61265 FORMER COMPANY: FORMER CONFORMED NAME: DEERE JOHN CREDIT CO DATE OF NAME CHANGE: 19890130 10-Q 1 jdcc10q73100edg.txt JDCC 10-Q 7/31/2000 =============================================================== UNITED STATES 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 July 31, 2000 Commission file no: 1-6458 _________________________ JOHN DEERE CAPITAL CORPORATION Delaware 36-2386361 (State of incorporation) (IRS employer identification no.) 1 East First Street, Suite 600 Reno, Nevada 89501 (Address of principal executive offices) Telephone Number: (775) 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 July 31, 2000, 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. =============================================================== Index to Exhibits: Page 15 PART I. FINANCIAL INFORMATION Item 1. Financial Statements -------------------- John Deere Capital Corporation and Subsidiaries Statements of Consolidated Income and Retained Earnings (Unaudited) (in millions) Three Months Ended Nine Months Ended July 31, July 31, 2000 1999 2000 1999 ------------------------------------ Revenues Finance income earned on retail notes $ 109.4 $ 100.7 $ 294.7 $ 304.4 Lease revenues 98.5 69.7 282.1 192.6 Revolving charge account income 36.9 31.8 100.3 85.5 Finance income earned on wholesale notes 24.4 18.0 68.6 52.4 Securitization and servicing fee income 6.7 7.6 21.9 23.2 Net gain on retail notes sold 10.0 22.4 17.0 37.7 Interest income from short-term investments 1.7 1.4 6.4 6.0 Other income 4.9 9.8 13.9 17.4 - -------------------------------------------------------------- Total revenues 292.5 261.4 804.9 719.2 - -------------------------------------------------------------- Expenses Interest expense 116.7 91.2 319.2 269.6 Operating expenses: Administrative and operating expenses 37.0 33.4 106.2 94.5 Provision for credit losses 14.9 15.3 40.7 41.2 Fees paid to John Deere 3.6 1.8 9.5 7.9 Depreciation of equipment on operating leases 58.2 43.2 162.6 117.0 - -------------------------------------------------------------- Total operating expenses 113.7 93.7 319.0 260.6 - -------------------------------------------------------------- Total expenses 230.4 184.9 638.2 530.2 - -------------------------------------------------------------- Income of consolidated group before income taxes 62.1 76.5 166.7 189.0 Provision for income taxes 21.8 26.0 58.0 65.2 - -------------------------------------------------------------- Income of consolidated group 40.3 50.5 108.7 123.8 Equity in income (loss) of unconsolidated affiliates .2 (.3) .4 .3 - -------------------------------------------------------------- Net income 40.5 50.2 109.1 124.1 Cash dividends declared (5.0) (5.0) (15.0) (15.0) Retained earnings at beginning of period 943.3 870.3 884.7 806.4 - -------------------------------------------------------------- Retained earnings at end of period $ 978.8 $ 915.5 $ 978.8 $ 915.5 ============================================================== See Notes to Interim Financial Statements. Page 2 John Deere Capital Corporation and Subsidiaries Consolidated Balance Sheets (Unaudited) (in millions) July 31, October 31, July 31, 2000 1999 1999 ------------------------------ Assets Cash and cash equivalents $ 161.7 $ 149.4 $ 167.9 Receivables and leases: Retail notes 3,989.3 3,716.2 4,116.3 Revolving charge accounts 1,055.5 900.6 842.5 Wholesale notes 973.1 957.2 891.3 Financing leases 438.1 402.2 263.8 - -------------------------------------------------------------- Total receivables 6,456.0 5,976.2 6,113.9 Equipment on operating leases - net 1,422.0 1,254.8 1,136.4 - -------------------------------------------------------------- Total receivables and leases 7,878.0 7,231.0 7,250.3 Allowance for credit losses (94.9) (83.6) (80.6) - -------------------------------------------------------------- Total receivables and leases - net 7,783.1 7,147.4 7,169.7 - -------------------------------------------------------------- Notes receivable - unconsolidated affiliates 106.5 Other receivables 89.0 83.0 95.1 Investment in unconsolidated affiliates 11.7 9.5 9.5 Other assets 136.0 116.0 117.8 Total Assets $ 8,288.0 $ 7,505.3 $ 7,560.0 ============================================================== Liabilities and Stockholder's Equity Short-term borrowings: Commercial paper $ 2,120.2 $ 1,264.7 $1,465.8 Extendible commercial notes and other notes payable 2.3 6.4 John Deere 96.8 117.7 69.7 Current maturities of long-term borrowings 1,567.7 2,137.6 2,084.7 - -------------------------------------------------------------- Total short-term Borrowings 3,787.0 3,526.4 3,620.2 - -------------------------------------------------------------- Accounts payable and accrued liabilities: Accrued interest on debt 65.0 33.1 60.7 Other payables 367.6 324.2 285.1 - -------------------------------------------------------------- Total accounts payable and accrued liabilities 432.6 357.3 345.8 - -------------------------------------------------------------- Deposits withheld from dealers and merchants 125.3 122.8 121.2 - -------------------------------------------------------------- Long-term borrowings: Senior debt 2,705.1 2,351.1 2,295.3 Subordinated debt 150.0 150.0 150.0 - -------------------------------------------------------------- Total long-term borrowings 2,855.1 2,501.1 2,445.3 - -------------------------------------------------------------- Total liabilities 7,200.0 6,507.6 6,532.5 - -------------------------------------------------------------- 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 978.8 884.7 915.5 Accumulated other comprehensive income (loss)- cumulative translation adjustment (3.6) .2 (.8) - -------------------------------------------------------------- Total stockholder's equity 1,088.0 997.7 1,027.5 - -------------------------------------------------------------- Total Liabilities and Stockholder's Equity $ 8,288.0 $ 7,505.3 $ 7,560.0 ============================================================== See Notes to Interim Financial Statements. Page 3 John Deere Capital Corporation and Subsidiaries Statements of Consolidated Cash Flows (Unaudited) (in millions) Nine Months Ended July 31, 2000 1999 ----------------------- Cash Flows from Operating Activities: Net income $ 109.1 $ 124.1 Adjustments to reconcile net income to net cash provided by operating activities: Provision for credit losses 40.7 41.2 Provision for depreciation and amortization 164.5 119.1 Equity in income of unconsolidated affiliates (.4) (.3) Other 93.0 (13.7) - ------------------------------------------------------------ Net cash provided by operating activities 406.9 270.4 - ------------------------------------------------------------ Cash Flows from Investing Activities: Cost of receivables and leases acquired (6,398.4) (6,008.2) Collections of receivables 4,487.6 4,181.2 Change in notes receivable - unconsolidated affiliates (101.7) (5.1) Proceeds from sales of receivables 878.9 1,344.5 Other 139.4 68.4 - ------------------------------------------------------------ Net cash used for investing activities (994.2) (419.2) - ------------------------------------------------------------ Cash Flows from Financing Activities: Change in commercial paper 855.5 (259.1) Change in extendible commercial notes and other notes payable (4.2) (6.8) Change in receivable/payable with John Deere (20.6) 10.2 Proceeds from issuance of long-term borrowings 1,445.0 1,750.0 Principal payments on long-term borrowings (1,661.1) (1,353.7) Dividends paid (15.0) (15.0) - ------------------------------------------------------------ Net cash provided by financing activities 599.6 125.6 - ------------------------------------------------------------ Net increase (decrease) in cash and cash equivalents 12.3 (23.2) Cash and cash equivalents at beginning of period 149.4 191.1 - ------------------------------------------------------------ Cash and cash equivalents at end of period $ 161.7 $ 167.9 ============================================================ See Notes to Interim Financial Statements. Page 4 John Deere Capital Corporation and Subsidiaries Notes to Interim Financial Statements (1) The consolidated financial statements of John Deere Capital Corporation (Capital Corporation) and its subsidiaries (collectively called 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. The preparation of financial statements in conformity with generally accepted accounting principles requires management to make estimates and assumptions that affect the reported amounts and related disclosures. Actual results could differ from those estimates. Based on the way the Company's operations are managed and evaluated by management, the Company is viewed as having one operating segment. (2) During the third quarter of fiscal 2000, the Company received approval from the Office of Thrift Supervision to charter a new thrift, to be known as FPC Financial, f.s.b. Headquartered in Madison, Wisconsin, although not yet operational, FPC Financial, f.s.b. will offer credit cards, such as Farm Plan, PowerPlan, and the John Deere Credit Revolving Plan, on a nationwide basis, and provide financing for manufactured housing. The customers of the thrift are expected to be the purchasers of agricultural, consumer and commercial goods and services. (3) During the second quarter of fiscal 2000, the Company expanded its operations by forming two additional entities, John Deere Bank S.A. (JDB) and John Deere Credit Compania Financiera S.A. (JDCCF). JDB, a wholly-owned subsidiary of the Capital Corporation located in Luxembourg, will act as the European Regional Headquarters for the Company, as operations are expanded in that area. JDCCF is an indirect wholly-owned subsidiary of the Capital Corporation. The principal business of JDCCF is to support Deere & Company and John Deere retail dealers by offering financing products specific to the market in Argentina. Both entities are fully consolidated into the Company's results. (4) During the second quarter of fiscal 2000, the Company discontinued offering wholesale note financing for manufactured housing dealer inventory. The Company will continue to administer and service the existing portfolio until it is fully liquidated. Acquisition volumes for this product totaled $103 million for the first nine months of fiscal 2000 and the wholesale notes outstanding were $68 million at July 31, 2000. (5) The principal business of the Company is providing and administering financing for retail purchases of new and used equipment manufactured by Deere & Company's agricultural, construction and commercial and consumer equipment divisions. The Company purchases retail installment sales and loan contracts (retail notes) from Deere & Company and its wholly- owned Page 5 subsidiaries (collectively called John Deere). John Deere acquires these retail notes through John Deere equipment retail dealers. The Company also purchases and finances certain agricultural, construction and lawn and grounds care retail notes unrelated to John Deere. In addition, the Company purchases and finances recreational product retail notes acquired from dealers (recreational product retail notes). The Company also leases equipment to retail customers, finances and services revolving charge accounts acquired from and offered through merchants or farm input providers in the agricultural, construction, and lawn and grounds care markets as well as insured international export financing products (revolving charge accounts), and provides wholesale financing for inventories of recreational vehicles, yachts, John Deere engines, and John Deere agricultural and John Deere construction 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." (6) The Company's ratio of earnings before fixed charges to fixed charges was 1.53 to 1 for the third quarter of 2000 compared with 1.63 to 1 for the third quarter of 1999. The ratio of earnings before fixed charges to fixed charges was 1.51 to 1 for the first nine months of 2000 and 1.69 to 1 for the first nine months of 1999. "Earnings before fixed charges" consist of income before income taxes, the cumulative effect of changes in accounting and 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. (7) Comprehensive income for the first nine months of 2000 and 1999 consisted of the following in millions of dollars: July 31, July 31, 2000 1999 2000 1999 -------------------------------------- Net income $ 40.5 $ 50.2 $ 109.1 $ 124.1 Change in cumulative translation adjustment (1.3) (.9) (3.8) -------------------------------------- Comprehensive income $ 39.2 $ 49.3 $ 105.3 $ 124.1 ====================================== (8) In December 1999, the Securities and Exchange Commission (SEC) issued Staff Accounting Bulletin (SAB) No. 101, Revenue Recognition in Financial Statements. The SAB summarizes the SEC staff's views on applying generally accepted accounting principles to revenue recognition in financial statements. The Company has reviewed its revenue recognition policies and has determined that they comply with the principles as set forth in SAB No. 101. Accordingly, the issuance of the SAB will have no effect on the Company's financial position or results of operations. Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations. Results of Operations Net income was $40.5 million for the third quarter and $109.1 million for the first nine months of 2000, compared with $50.2 million and $124.1 million, respectively, last year. These decreases were primarily due to lower income from the sale of retail notes and higher operating expenses, partially offset by higher income on a larger average receivable and lease portfolio. Page 6 Revenues totaled $292.5 million and $804.9 million for the third quarter and for the first nine months, respectively of 2000, compared to $261.4 million and $719.2 million for the same periods a year ago. Revenues increased primarily due to an 8 percent increase in the average balance of Receivables and Leases financed for the first nine months of 2000 compared to the same period last year. Finance income earned on retail notes totaled $294.7 million for the first nine months of 2000, compared to $304.4 million for the same period in 1999. This decrease was primarily due to significant sales of recreational product installment notes during 1999 and an 8 percent decrease in the average balance of agricultural equipment notes financed. This decrease was partially offset by an increase in the yield on variable rate contracts. Lease revenues increased $89.5 million, to $282.1 million in the first nine months of 2000, from $192.6 million in the first nine months of 1999, due to a 44 percent increase in the average balance of financing leases and equipment on operating leases. Finance income earned on wholesale notes increased $16.2 million, to $68.6 million for the first nine months of 2000, from $52.4 million in the first nine months of 1999. This increase was primarily the result of continued growth in the financing for dealer inventories of John Deere construction equipment and John Deere agricultural equipment, partially offset by the decrease in manufactured housing inventories. Revolving charge account income increased $14.8 million, to $100.3 million for the first nine months of 2000. This increase was primarily due to growth in the agricultural operating loan portfolio. Net gains on the sales of retail notes, including adjustments to prior sales, totaled $10.0 million and $17.0 million for the third quarter and for the first nine months of 2000, respectively, compared to $22.4 million and $37.7 million for the same periods a year ago. The lower net gain on retail notes sold for the first nine months of 2000 was primarily the result of lower recreational product retail note sales compared to the same period last year. Additional sales of retail notes are expected to be made in the future. Interest expense totaled $116.7 million for the third quarter of 2000 and $319.2 million for the first nine months of 2000, compared to $91.2 million and $269.6 million for the same periods in 1999. This increase was primarily due to an increase in the weighted annual interest rate incurred on all borrowings from 5.8 percent for the first nine months of 1999 to 6.5 percent for the first nine months of 2000. In addition, average borrowings increased 7 percent to $6.475 billion in the first nine months of 2000 from $6.068 billion in the first nine months of 1999. Administrative and operating expenses were $37.0 million in the third quarter of 2000 and $106.2 million for the first nine months of 2000, compared with $33.4 million and $94.5 million for the same periods in 1999. These increases were attributable to the higher costs associated with administering a larger Receivable and Lease portfolio as well as increased start up costs related to international growth. Depreciation of equipment on operating leases increased to $58.2 million in the third quarter of 2000 and $162.6 million for the first nine months of 2000, compared to $43.2 million and $117.0 million for the same periods in 1999, as a result of the increase in equipment on operating leases financed. During the third quarter and the first nine months of 2000, the provision for credit losses totaled $14.9 million and $40.7 million, respectively, compared with $15.3 million and $41.2 million in the same periods last year. The annualized provision for credit losses, as a percentage of the total average portfolio outstanding, was .74 percent for the third quarter of 2000 and .71 percent for the first nine months of 2000, compared with .84 percent and .77 percent for the same periods last year. Page 7 Receivable and Lease acquisition volumes were as follows (in millions of dollars): Three Months Ended July 31, 2000 1999 $ Change % Change --------------------------------- Retail notes: Agricultural equipment $ 495 $ 431 $ 64 15% Construction equipment 190 185 5 3 Lawn and grounds care Equipment 105 87 18 21 Recreational products 88 77 11 14 -------------------------------- Total 878 780 98 13 -------------------------------- Revolving charge accounts 753 601 152 25 Wholesale notes 395 416 (21) (5) Financing leases 68 47 21 45 Equipment on operating leases 134 147 (13) (9) -------------------------------- Total $ 2,228 $ 1,991 $ 237 12 ================================ Nine Months Ended July 31, 2000 1999 $ Change % Change -------------------------------- Retail notes: Agricultural equipment $1,804 $1,935 $ (131) (7%) Construction equipment 508 414 94 23 Lawn and grounds care Equipment 235 188 47 25 Recreational products 232 256 (24) (9) -------------------------------- Total 2,779 2,793 (14) (1) -------------------------------- Revolving charge accounts 1,798 1,414 384 27 Wholesale notes 1,158 1,226 (68) (6) Financing leases 151 103 48 47 Equipment on operating leases 512 465 47 10 -------------------------------- Total $6,398 $6,001 $ 397 7 ================================ Retail note volumes decreased by $14 million for the first nine months of 2000, compared to the first nine months of 1999, due to a decrease in United States agricultural equipment and recreational product retail note volumes. Revolving charge volumes increased due to the strong demand for the Farm Plan and operating loans offered to agricultural customers. Page 8 Total Receivables and Leases held were as follows (in millions of dollars): July 31, October 31, July 31, 2000* 1999* 1999 ------------------------------- Retail notes: Agricultural equipment $ 2,555 $ 2,602 $ 3,191 Construction equipment 870 611 434 Lawn and grounds care equipment 424 347 333 Recreational products 140 156 158 ------------------------------- Total 3,989 3,716 4,116 ------------------------------- Revolving charge accounts 1,056 901 843 Wholesale notes 973 957 891 Financing leases 438 402 264 Equipment on operating leases 1,422 1,255 1,136 ------------------------------- Total $ 7,878 $ 7,231 $ 7,250 =============================== * Includes the acquisition of Senstar Capital Corporation (Senstar) installment, lease and revolving charge balances which were acquired in the fourth quarter of fiscal 1999. Receivables and Leases administered by the Company, which include retail notes sold, were as follows in (millions of dollars): July 31, October 31, July 31, 2000* 1999* 1999 -------------------------------- Receivables and Leases administered: Receivables and Leases owned by the Company $ 7,878 $ 7,231 $ 7,250 Retail notes sold and securitized (with limited recourse)* 2,051 2,275 1,658 Retail notes sold (without recourse)** 123 118 511 Receivables serviced (without recourse)*** 24 46 52 -------------------------------- Total Receivables and Leases administered $10,076 $ 9,670 $ 9,471 ================================ * The Company's maximum exposure under all retail note recourse provisions at July 31, 2000, October 31, 1999 and July 31, 1999 was $168 million, $161 million and $170 million, respectively. In addition, the Company has guaranteed letters of credit on behalf of John Deere Credit Inc., the John Deere finance subsidiary in Canada, as part of two retail note sales. At July 31, 2000, the maximum exposure under these agreements was approximately $9 million. ** On recreational product retail note sales, the Company continues to administer the portfolio outstanding for a fee until the servicing rights are assumed by their owner. *** On February 1, 1999, the Company began servicing a receivable portfolio on behalf of Farming and Agricultural Financing Limited. These servicing rights were obtained in conjunction with the Company's acquisition of the remaining 50 percent interest in John Deere Credit Limited. Page 9 Total Receivable and Lease amounts 60 days or more past due, by product and as a percentage of total balances held, were as follows (in millions of dollars): July 31, October 31, July 31, 2000 1999 1999 $ % $ % $ % ----------------------------------- Retail notes: Agricultural equipment $10.8 .42% 11.7 .45% $11.2 .35% Construction equipment 3.6 .41 2.1 .34 2.2 .51 Lawn and grounds care Equipment .9 .21 .8 .23 .8 .24 Recreational products .1 .07 .1 .06 .1 .06 ----------------------------------- Total 15.4 .39 14.7 .40 14.3 .35 ----------------------------------- Revolving charge accounts 11.2 1.06 8.9 .99 8.4 1.00 Wholesale notes 2.3 .24 1.1 .11 1.8 .20 Leases 6.3 .34 5.2 .31 6.4 .46 ----------------------------------- Total $35.2 .45 $29.9 .41 $30.9 .43 =================================== The balance of retail notes held (principal plus accrued interest) with any installment 60 days or more past due was $71 million, $54 million and $54 million at July 31, 2000, October 31, 1999 and July 31, 1999, respectively. The balance of retail notes held on which any installment is 60 days or more past due as a percentage of retail notes held represented 1.78 percent, 1.45 percent and 1.30 percent of the ending retail notes receivable at July 31, 2000, October 31, 1999 and July 31, 1999, respectively. During the third quarter and the first nine months of 2000, write-offs (net of recoveries) of Receivables and Leases totaled $7.0 million and $23.5 million, respectively, compared with $11.1 million and $27.0 million in the same periods last year. Annualized write-offs, as a percentage of the average total receivables and leases held, were .34 percent for the third quarter of 2000 and .41 percent for the first nine months of 2000, compared with .62 percent and .50 percent for the same periods last year. Write-offs relating to retail notes decreased 23 percent, or $3.2 million, in the first nine months of 2000, when compared with the first nine months of 1999, primarily due to decreased write-offs of agricultural equipment and recreational product retail notes, partially offset by increased write-offs of construction equipment retail notes. Lease write-offs increased $1.7 million in the first nine months of 2000 when compared to last year primarily due to higher write-offs on agricultural leases. Revolving charge account write-offs decreased $2.8 million in the first nine months of 2000 when compared to the same period last year primarily due to lower write-offs on agricultural accounts. Wholesale note write-offs increased $1.0 million in the first nine months of 2000 when compared to the same period last year. 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 $125 million at July 31, 2000, compared with $123 million at October 31, 1999 and $121 million at July 31, 1999. The Company's allowance for credit losses on all Receivables and Leases held totaled $95 million at July 31, 2000, $84 million at October 31, 1999 and $81 million at July 31, 1999. The allowance for credit losses represented 1.20 percent of the total Receivables and Leases held at July 31, 2000, 1.16 percent at October 31, 1999 and 1.11 percent at July 31, 1999. The allowance is subject to an ongoing evaluation based on loss experience and related estimates to ensure the allowance for credit losses is maintained at an adequate level. Management believes the allowance for credit losses at July 31, 2000 is sufficient to provide adequate protection against losses. Page 10 Safe Harbor Statement Statements herein that relate to future operating periods are subject to important risks and uncertainties that could cause actual results to differ materially. Interest rate changes by the Federal Reserve Board may affect the cost of financing the Company and the rates it is able to offer. Further information, including factors that potentially could materially affect the Company's and John Deere's financial results, is included in the most recent Deere & Company Form 10-Q and other John Deere and Capital Corporation filings with the Securities and Exchange Commission Capital Resources and Liquidity The Company relies on its ability to raise substantial amounts of funds to finance its Receivables and Leases. 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 and in private sales. 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. 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 these assets. The Company's business is somewhat seasonal, with overall acquisition volumes 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 six months of the fiscal year. During the first nine months of 2000, the aggregate net cash provided by operating and financing activities was primarily used to increase Receivables and Leases. Net cash provided by operating activities was $407 million in the first nine months of 2000. Financing activities provided $600 million during the same period, resulting from a $615 million net increase in total borrowings, which was partially offset by a $15 million dividend payment to John Deere Credit Company. Net cash used for investing activities totaled $994 million in the first nine months of 2000, primarily due to Receivable and Lease acquisitions exceeding collections by $1,911 million, which was partially offset by the $879 million in proceeds from the sale of receivables. Cash and cash equivalents increased $12 million during the first nine months of 2000. During the first nine months of 1999, the aggregate net cash provided by operating and financing activities was primarily used to increase Receivables and Leases. Net cash provided by operating activities was $270 million in the first nine months of 1999. Financing activities provided $126 million during the same period, resulting from a $141 million net increase in total borrowings, which was partially offset by $15 million in dividend payments to John Deere Credit Company. Net cash used for investing activities totaled $419 million in the first nine months of 1999, primarily due to Receivable and Lease acquisitions exceeding collections by $1,827 million, which was partially offset by the $1,345 million in proceeds from the sale of receivables. Cash and cash equivalents decreased $23 million during the first nine months of 1999. Total interest-bearing indebtedness amounted to $6.642 billion at July 31, 2000, compared with $6.028 billion at October 31, 1999 and $6.065 billion at July 31, 1999, generally corresponding with the level of Page 11 Receivables and Leases financed and the level of cash and cash equivalents. Total short-term indebtedness amounted to $3.787 billion at July 31, 2000, compared with $3.526 billion at October 31, 1999 and $3.620 billion at July 31, 1999,while total long-term indebtedness amounted to $2.855 billion, $2.501 billion and $2.445 billion at those dates. The ratio of total interest-bearing debt to stockholder's equity was 6.1 to 1, 6.0 to 1 and 5.9 to 1 at July 31, 2000, October 31, 1999 and July 31, 1999, respectively. During the first nine months of 2000 the Capital Corporation's subsidiary, John Deere Credit Limited in Gloucester, England, retired $137 million of long-term debt due in 2000. The Capital Corporation issued $1,445 million and retired $1,524 million of medium-term notes during the first nine months of 2000. At July 31, 2000, the Capital Corporation and Deere & Company jointly maintained $4.711 billion of unsecured lines of credit with various banks in North America and overseas, $1.262 billion of which was unused. For the purpose of computing unused credit lines, commercial paper and short-term bank borrowings, excluding the current portion of long-term borrowings, of the Capital Corporation and Deere & Company, were considered to constitute utilization. These agreements include a $2.338 billion long-term commitment of the banks expiring on February 22, 2005. The facility fees payable under these credit agreements are divided between Deere & Company and the Capital Corporation based on the proportion of their respective commercial paper outstanding. The Capital Corporation declared and paid cash dividends of $15 million to John Deere Credit Company during the first nine months of 2000. John Deere Credit Company paid a comparable dividend to Deere & Company. On September 1, 2000, the Capital Corporation declared a cash dividend of $5 million to John Deere Credit Company, which in turn declared a cash dividend of $5 million to Deere & Company, each payable on September 12, 2000. Item 3. Quantitative and Qualitative Disclosures About Market Risk. See the information under "Management's Discussion and Analysis," Note 13 "Financial Instruments" and "Supplemental Information (Unaudited)" in the Company's most recent annual report filed on Form 10-K. There has been no material change in this information. Page 12 PART II. OTHER INFORMATION Item 1. Legal Proceedings. 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 laws and 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. Changes in Securities and Use of Proceeds. 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. As part of a planned leadership transition, Hans W. Becherer, former Chairman and CEO, retired from the Company and the Board of Directors on August 30, 2000. 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 May 16, 2000(Items 5 and 7). Page 13 SIGNATURE 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 6, 2000 By: /s/ Nathan J. Jones -------------------------------- Nathan J. Jones Senior Vice President and Principal Financial Officer Page 14 INDEX TO EXHIBITS Exhibit (12) Computation of ratio of earnings to fixed charges (27) Financial data schedule (99) Part I of Deere & Company Form 10-Q for the quarter ended July 31, 2000 ---(Securities and Exchange Commission file number 1-4121*). __________________________ *Incorporated by reference. Copies of these exhibits are available from the Company upon request. Page 15 EX-12 2 jdcc10qexh12edg.txt JDCC 10-Q EXHIBIT 12 Exhibit 12 John Deere Capital Corporation and Subsidiaries Computation of Ratio of Earnings to Fixed Charges (thousands of dollars) Nine Months Ended July 31, ------------------------------ 2000 1999 ----------- ----------- Earnings: Income before income taxes and changes in accounting $166,665 $189,047 Fixed charges 324,333 273,500 ----------- ----------- Total Earnings $490,998 $462,547 Fixed charges: Interest expense $319,246 $269,626 Rent Expense 5,087 3,874 ----------- ----------- Total fixed Charges $324,333 $273,500 =========== =========== Ratio of earnings to Fixed charges* 1.51 1.69 =========== =========== For the Years Ended October 31, -------------------------------------------- 1999 1998 1997 1996 1995 -------- -------- -------- -------- -------- Earnings: Income before income taxes and changes in accounting $235,760 $233,534 $211,251 $206,588 $175,360 Fixed charges 366,102 373,237 330,648 276,726 240,913 -------- -------- -------- -------- -------- Total Earnings $601,862 $606,771 $541,899 $483,314 $416,273 ======== ======== ======== ======== ======== Fixed charges: Interest expense $360,925 $368,381 $326,867 $273,748 $238,445 Rent Expense 5,177 4,856 3,782 2,978 2,468 -------- -------- -------- -------- -------- Total fixed charges $366,102 $373,237 $330,649 $276,726 $240,913 ======== ======== ======== ======== ======== Ratio of earnings to fixed charges* 1.64 1.63 1.64 1.75 1.73 ======== ======== ======== ======== ======== - -------------------------- "Earnings" consist of income before income taxes, the cumulative effect of changes in accounting and 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. * The Company has not issued preferred stock. Therefore, the ratios of earnings to combined fixed charges and preferred stock dividends are the same as the ratios presented above. EX-27 3 jdcc10qexh27fds.frm JDCC 10-Q EXHIBIT 27 FDS
5 This schedule contains summary financial information extracted from Form 10-Q and is qualified in its entirety by reference to such financial information. 1,000,000 U.S.DOLLARS 9-MOS Nov-01-1999 Oct-31-2000 Jul-31-2000 1 162 0 6,652 95 0 0 44 18 8,288 0 2,855 0 0 113 975 8,288 0 805 0 163 0 41 319 167 58 109 0 0 0 109 0 0
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