-----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, N8aTUg3bz9mymyY44pdbeJuVOkYt4ZzWUA2nMw4hhb3W5/tRinlc9sNp4i59/TIj DAiNGmbe6LnT3wqB+EwCzQ== 0000027673-97-000044.txt : 19970912 0000027673-97-000044.hdr.sgml : 19970912 ACCESSION NUMBER: 0000027673-97-000044 CONFORMED SUBMISSION TYPE: 10-Q PUBLIC DOCUMENT COUNT: 3 CONFORMED PERIOD OF REPORT: 19970731 FILED AS OF DATE: 19970904 SROS: NYSE FILER: COMPANY DATA: COMPANY CONFORMED NAME: DEERE JOHN CAPITAL CORP CENTRAL INDEX KEY: 0000027673 STANDARD INDUSTRIAL CLASSIFICATION: SHORT-TERM BUSINESS CREDIT INSTITUTIONS [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: 97675425 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 ================================================================= 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, 1997 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: (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 July 31, 1997, 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 General Instructions H(2). ================================================================= Page 1 of 16 Pages Index to Exhibits: Page 14 PART I. FINANCIAL INFORMATION Item 1. Financial Statements John Deere Capital Corporation and Subsidiaries Statements of Consolidated Income (Unaudited) (in millions) Three Months Nine Months Ended Ended July 31 July 31 ------------------------------ 1997 1996 1997 1996 Revenues ------ ------ ------ ------ Finance income earned on retail notes $111.1 $ 89.4 $306.7 $277.1 Revolving charge account income 26.6 24.9 71.2 67.6 Lease revenues 32.4 18.1 82.8 45.9 Finance income earned on wholesale notes 12.3 9.8 36.0 26.0 Net gain on retail notes sold 7.4 .5 9.2 10.6 Interest income from short-term investments 2.6 3.1 7.6 8.7 Securitization and servicing fee income 5.9 11.0 23.5 31.9 Other income 2.0 1.9 5.9 9.2 - ---------------------------------------------------------------- Total revenues 200.3 158.7 542.9 477.0 - ---------------------------------------------------------------- Expenses Interest expense: On obligations to others 86.4 66.7 235.2 199.2 On notes payable to Deere & Company .2 .1 1.5 1.5 - ---------------------------------------------------------------- Total interest expense 86.6 66.8 236.7 200.7 - ---------------------------------------------------------------- Operating expenses: Administrative and operating expenses 25.9 22.8 74.6 66.0 Provision for credit losses 8.8 8.5 25.0 24.4 Fees paid to Deere & Company 1.9 1.5 6.3 4.7 Depreciation of equipment on operating leases 18.8 9.4 50.6 23.6 - ---------------------------------------------------------------- Total operating expenses 55.4 42.2 156.5 118.7 - ---------------------------------------------------------------- Total expenses 142.0 109.0 393.2 319.4 - ---------------------------------------------------------------- Income of consolidated group before income taxes 58.3 49.7 149.7 157.6 Provision for income taxes 20.3 17.4 52.1 55.1 - ---------------------------------------------------------------- Income of consolidated group 38.0 32.3 97.6 102.5 Equity in loss of unconsolidated affiliate (.2) --- (1.1) --- - ---------------------------------------------------------------- Net income $ 37.8 $ 32.3 $ 96.5 $102.5 ================================================================ See Notes to Interim Financial Statements. Page 2 John Deere Capital Corporation and Subsidiaries Consolidated Balance Sheets (Unaudited) (dollars in millions) July 31, October 31, July 31, 1997 1996 1996 Assets -------- -------- -------- Cash and cash equivalents $ 187.0 $ 171.0 $ 168.1 Receivables and leases: Retail notes 4,499.0 4,069.6 3,982.7 Revolving charge accounts 613.2 571.1 552.0 Financing leases 208.2 181.5 162.7 Wholesale notes 522.7 524.5 443.0 - ----------------------------------------------------------------- Total receivables 5,843.1 5,346.7 5,140.4 Equipment on operating leases -- net 459.8 276.8 240.8 - ----------------------------------------------------------------- Total receivables and leases 6,302.9 5,623.5 5,381.2 Allowance for credit losses (89.3) (87.4) (84.1) - ----------------------------------------------------------------- Total receivables and leases -- net 6,213.6 5,536.1 5,297.1 - ----------------------------------------------------------------- Other receivables 144.4 189.9 172.3 Investment in unconsolidated affiliate 8.4 6.3 --- Other assets 72.1 67.8 66.3 - ----------------------------------------------------------------- Total Assets $6,625.5 $5,971.1 $5,703.8 ================================================================= Liabilities and Stockholder's Equity Short-term borrowings: Commercial paper $2,382.8 $1,689.9 $2,229.7 Deere & Company 123.6 544.8 192.5 Current maturities of long-term borrowings 618.8 863.7 778.5 Other notes payable 1.8 --- --- - ----------------------------------------------------------------- Total short-term borrowings 3,127.0 3,098.4 3,200.7 - ----------------------------------------------------------------- Accounts payable and accrued liabilities: Accrued interest on senior debt 51.4 35.9 41.4 Other payables 165.8 144.8 126.4 - ----------------------------------------------------------------- Total accounts payable and accrued liabilities 217.2 180.7 167.8 - ----------------------------------------------------------------- Deposits withheld from dealers and merchants 134.0 135.4 129.0 - ----------------------------------------------------------------- Long-term borrowings: Senior debt 2,203.7 1,649.5 1,145.7 Subordinated debt 150.0 150.0 300.0 - ----------------------------------------------------------------- Total long-term borrowings 2,353.7 1,799.5 1,445.7 - ----------------------------------------------------------------- Total liabilities 5,831.9 5,214.0 4,943.2 - ----------------------------------------------------------------- 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 680.9 644.4 647.8 Cumulative translation adjustment (.1) (.1) --- - ----------------------------------------------------------------- Total stockholder's equity 793.6 757.1 760.6 - ----------------------------------------------------------------- Total Liabilities and Stockholder's Equity $6,625.5 $5,971.1 $5,703.8 ================================================================= 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 ------------------------- 1997 1996 ------------------------- Cash Flows from Operating Activities: Net income $ 96.5 $ 102.5 Adjustments to reconcile net income to net cash provided by operating activities: Provision for credit losses 25.0 24.4 Provision for depreciation 50.5 25.2 Equity in loss of unconsolidated affiliate 1.1 --- Other 24.4 3.8 - ---------------------------------------------------------------- Net cash provided by operating activities 197.5 155.9 - ---------------------------------------------------------------- Cash Flows from Investing Activities: Cost of receivables and leases acquired (4,734.4) (4,009.6) Collections of receivables 3,562.9 2,862.6 Proceeds from sales of receivables 433.0 622.6 Other 26.7 24.8 - ---------------------------------------------------------------- Net cash used for investing activities (711.8) (499.6) - ---------------------------------------------------------------- Cash Flows from Financing Activities: Increase in commercial paper 692.9 243.0 Change in receivable/payable with Deere & Company (411.9) (267.5) Increase in other notes payable 1.8 --- Proceeds from issuance of long-term borrowings 885.0 550.0 Principal payments on long-term borrowings (577.5) (143.0) Dividends paid (60.0) (35.0) - ---------------------------------------------------------------- Net cash provided by financing activities 530.3 347.5 - ---------------------------------------------------------------- Net increase in cash and cash equivalents 16.0 3.8 Cash and cash equivalents at the beginning of period 171.0 164.3 - ---------------------------------------------------------------- Cash and cash equivalents at the end of period $ 187.0 $ 168.1 ================================================================ 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, Deere Credit, Inc., Deere Credit Services, Inc., Farm Plan Corporation, John Deere Receivables, Inc., John Deere Funding Corporation and Arrendadora John Deere, S.A. de C.V. (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. 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. (2) 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 (formerly known as industrial) and commercial and consumer equipment divisions. 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 independent John Deere retail dealers. The Company also purchases and finances certain agricultural, construction and lawn and grounds care retail notes unrelated to John Deere, primarily used equipment accepted by dealers in trade. In addition, the Company purchases and finances recreational product retail notes acquired from independent dealers and marine product mortgage service companies (recreational product retail notes). The Company also leases equipment to retail customers, finances and services revolving charge accounts acquired from and offered through merchants in the agricultural, lawn and grounds care and recreational product retail markets (revolving charge accounts), and provides wholesale financing for inventories of recreational vehicles, manufactured housing units, yachts, John Deere engines, John Deere construction equipment and the Sabre line of equipment owned by dealers of those products (wholesale notes). Retail notes, revolving charge accounts, direct 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 1.66 to 1 for the third quarter of 1997 compared with 1.74 to 1 for the third quarter of 1996. The consolidated ratio of earnings to fixed charges was 1.63 to 1 for the first nine months of 1997 and 1.78 to 1 for the first nine months of 1996. "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. Page 5 (4) During the first nine months of 1997, the Company received proceeds from the sale of retail notes of $433.0 million. At July 31, 1997, the net unpaid balance of all retail notes previously sold was $1.040 billion. At July 31, 1997, the Company's maximum exposure under all financing receivable recourse provisions was $142.4 million for all retail notes sold. (5) 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. (6) In the first quarter of 1997, the Company adopted the Financial Accounting Standards Board (FASB) Statement No. 121, Accounting for the Impairment of Long-Lived Assets and for Long- Lived Assets to Be Disposed Of. In the first quarter of 1997, the Company also adopted FASB Statement No. 125, Accounting for Transfers and Servicing of Financial Assets and Extinguishments of Liabilities. The adoption of these Statements had no effect on the Company's financial position or results of operations. Page 6 Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations. Results of Operations Net income was $37.8 million in the third quarter of 1997 and $96.5 million for the first nine months of 1997 compared with $32.3 million and $102.5 million for the same periods last year. Third quarter earnings reflect higher income from a larger average balance of receivables and leases financed and gains from the sale of retail notes. Year-to-date results decreased primarily due to narrower financing spreads, higher expenditures associated with several growth initiatives and lower securitization and servicing fee income, which were partially offset by higher income from a 19 percent increase in the average balance of Receivables and Leases financed during the first nine months. Revenues totaled $200.3 million and $542.9 million for the third quarter and for the first nine months of 1997, respectively, compared to $158.7 million and $477.0 million for the same periods a year ago. Revenues increased due to a larger average portfolio financed, particularly related to growth in retail notes, operating leases and wholesale notes. Finance income earned on retail notes totaled $111.1 million and $306.7 million for the third quarter and for the first nine months of 1997, respectively, compared to $89.4 million and $277.1 million for the same periods in 1996. Lease revenues increased $36.9 million, to $82.8 million in the first nine months of 1997, from $45.9 million in the first nine months of 1996, largely due to low-rate leasing initiatives related to John Deere agricultural equipment. Finance income earned on wholesale notes increased $10.0 million to $36.0 million for the first nine months of 1997 from $26.0 million earned in the first nine months of 1996. The higher finance income earned on wholesale notes was primarily a result of the continued growth in the construction floor planning, manufactured housing and yacht markets. In July 1997, the Company securitized and sold approximately $400 million in retail notes, resulting in an initial gain on notes sold of $5.7 million. Securitization and servicing fee income declined $8.4 million, from $31.9 million during the first nine months of 1996 to $23.5 million during the first nine months of 1997. The decrease in securitization and servicing fee income was primarily the result of a 15 percent decrease in the average balance of retail notes previously sold. Total interest expense for the third quarter increased from $66.8 million in 1996 to $86.6 million in 1997. Interest expense increased from $200.7 million for the first nine months of 1996 to $236.7 million for the first nine months of 1997. These increases in interest expense were primarily the result of increased borrowings required to finance the higher average portfolio of Receivables and Leases. Total average borrowings during the first nine months of 1997 were $5.310 billion, compared to $4.427 billion in the first nine months of 1996. The weighted average interest rate on total borrowings for the nine months ended July 31, 1997 and 1996 were 6.03 percent and 5.96 percent, respectively. Administrative and operating expenses were $25.9 million in the third quarter of 1997 and $74.6 million for the first nine months of 1997, compared with $22.8 million and $66.0 million for the same periods in 1996. These increases were the result of higher employment costs associated with administering a larger Receivable and Lease portfolio and certain expenses relating to several growth initiatives. The growth initiatives include expansion of international retail financing, a focus on golf and turf financing, and continued efforts related to agricultural- business finance opportunities, such as farmer operating loans. Operating expenses were also affected by higher depreciation of equipment on operating leases, which totaled $18.8 million in the third quarter of 1997 and $50.6 million in the first nine months of 1997, compared to $9.4 million and $23.6 million for the same periods in 1996, a result of the increase in operating leases financed. During the third quarter and the first nine months of 1997, the provision for credit losses totaled $8.8 million and $25.0 million, respectively, compared with $8.5 million and $24.4 million in the same periods last year. The annualized provision for credit losses, as a percentage of the total average portfolio outstanding, was .55 percent for the third quarter of 1997 and .56 percent for the first nine months of 1997, compared with .67 percent and .65 percent for the same periods last year. Page 7 In October 1996, the Capital Corporation entered into a joint venture, John Deere Credit Limited (JDCL), to offer equipment financing products in the United Kingdom. Through July 31, 1997, the Capital Corporation's share of JDCL's losses was $1.1 million, representing primarily fixed administrative and operating expenses associated with this new affiliate. Receivable and Lease acquisition volumes were as follows (dollars in millions): Three Months Ended July 31, ---------------- 1997 1996 $ Chng % Chng ------------------------------------- Retail notes volumes: Agricultural equipment $ 459 $ 425 $ 34 8% Construction equipment 92 110 (18) (16) Lawn and grounds care equipment 53 51 2 4 Recreational products 60 59 1 2 --------------------------- Total retail note volumes 664 645 19 3 Revolving charge accounts 463 392 71 18 Wholesale notes 279 279 -- -- Leases 125 87 38 44 --------------------------- Total Receivable and Lease volumes $1,531 $1,403 $ 128 9 =========================== Nine months Ended July 31, ---------------- 1997 1996 $ Chng % Chng ------------------------------------- Retail notes volumes: Agricultural equipment $1,909 $1,616 $ 293 18% Construction equipment 277 339 (62) (18) Lawn and grounds care equipment 111 86 25 29 Recreational products 270 190 80 42 --------------------------- Total retail note volumes 2,567 2,231 336 15 Revolving charge accounts 1,018 866 152 18 Wholesale notes 791 682 109 16 Leases 359 231 128 55 --------------------------- Total Receivable and Lease volumes $ 4,735 $ 4,010 $ 725 18 ============================ Receivable and Lease volumes increased nine percent for the quarter and 18 percent for the first nine months of 1997 compared to a year ago primarily due to the increased sales of John Deere agricultural equipment. Agricultural retail note volumes increased eight percent in the third quarter and 18 percent in the first nine months of 1997 compared to the same periods in 1996. Construction retail note volumes decreased, while construction leasing volumes increased during the first nine months of 1997, primarily due to the marketing and promotion of the Company's construction equipment leasing programs. Lawn and grounds care retail note volumes also increased as a result of John Deere's promotional efforts, including low-rate incentive programs during the first nine months of 1997. Revolving charge account volumes increased based on continued strong demand for these products. Wholesale note volumes were higher in the nine- month period primarily as a result of increases in construction floor planning and manufactured housing. Page 8 Total Receivables and Leases held were as follows (in millions): July 31, October 31, July 31, 1997 1996 1996 ------------------------------- Retail notes held: Agricultural equipment $ 2,736 $ 2,418 $ 2,359 Construction equipment 637 629 596 Lawn and grounds care equipment 207 183 174 Recreational products 919 840 854 ------------------------------ Total retail notes held 4,499 4,070 3,983 Revolving charge accounts 613 571 552 Wholesale notes 523 524 443 Leases 668 459 403 ------------------------------ Total Receivables and Leases held $ 6,303 $ 5,624 $ 5,381 ============================== Retail notes administered by the Company, which include retail notes previously sold, totaled $5.539 billion at July 31, 1997, $5.253 billion at October 31, 1996, and $5.084 billion at July 31, 1996. At July 31, 1997, the balance of retail notes previously sold was $1.040 billion compared with $1.177 billion at October 31, 1996 and $1.101 billion at July 31, 1996. The Company's maximum exposure under all retail note recourse provisions at July 31, 1997 was $142.4 million. Total Receivable and Lease amounts 60 days or more past due, by product and as a percentage of total balances held were as follows (dollars in millions): July 31, October 31, July 31, 1997 1996 1996 ----------------------------------------- Dollars % Dollars % Dollars % ----------------------------------------- Retail notes: Agricultural equipment $ 7.2 .26% $ 4.4 .18% $ 5.8 .24% Construction equipment 2.4 .38 2.5 .39 2.3 .39 Lawn and grounds care equipment .7 .33 .7 .38 .7 .40 Recreational products .1 .01 .3 .03 .3 .03 ----- ----- ----- Total retail notes 10.4 .23 7.9 .19 9.1 .23 Revolving charge accounts 9.4 1.54 8.9 1.58 8.3 1.52 Wholesale notes 1.2 .23 1.0 .17 .4 .09 Leases 2.3 .35 1.7 .38 2.0 .50 ----- ----- ----- Total Receivables and Leases $23.3 .37 $19.5 .35 $19.8 .37 ===== ===== ===== The balance of retail notes held (principal plus accrued interest) with any installment 60 days or more past due was $54.3 million, $47.2 million and $49.8 million at July 31, 1997, October 31, 1996 and July 31, 1996, respectively. The balance of retail notes held on which any installment is 60 days or more past due as a percentage of ending retail notes receivable was 1.21 percent, 1.16 percent and 1.25 percent at July 31, 1997, October 31, 1996 and July 31, 1996, respectively. During the third quarter and the first nine months of 1997, write- offs (net of recoveries) of Receivables and Leases totaled $6.2 million and $20.6 million, respectively, compared with $6.5 million and $19.9 million in the same periods last year. Annualized write-offs, as a percentage of the total average portfolio outstanding, were .39 percent for the third quarter of 1997 and .46 percent for the first nine months of 1997, compared with .51 percent and .53 percent, respectively, during the same periods last year. Write-offs relating to retail notes declined 19 percent in the first nine months of 1997, when compared with the first nine months of 1996, primarily due to lower write-offs of recreational product retail notes and construction retail notes. Revolving charge account, commercial wholesale and leasing write-offs increased during the first nine months of 1997, compared to the first nine months of 1996, primarily due to volume increases. Page 9 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 $134.0 million at July 31, 1997, compared with $135.4 million at October 31, 1996 and $129.0 million at July 31, 1996. The Company's allowance for credit losses on all Receivables and Leases financed totaled $89.3 million at July 31, 1997, $87.4 million at October 31, 1996 and $84.1 million at July 31, 1996. Allowance for credit losses represented 1.42 percent of the balance of Receivables and Leases financed at July 31, 1997, 1.55 percent at October 31, 1996, and 1.56 percent at July 31, 1996. The Company's allowance for credit losses, as a percentage of total Receivables and Leases, has declined during the last twelve months due to an ongoing reevaluation of loss experience and related adjustments to ensure that the allowance for credit losses is maintained at an adequate level. Management believes the allowance for credit losses at July 31, 1997 is sufficient to provide adequate protection against losses. 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 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 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 and securitize these assets. Asset-liability risk is also actively managed to minimize exposure to interest rate fluctuations. Total interest-bearing indebtedness amounted to $5.481 billion at July 31, 1997, compared with $4.898 billion at October 31, 1996 and $4.646 billion at July 31, 1996, generally corresponding with the level of Receivables and Leases financed. Total short-term indebtedness amounted to $3.127 billion at July 31, 1997, compared with $3.098 billion at October 31, 1996 and $3.201 billion at July 31, 1996. Total long-term indebtedness amounted to $2.354 billion, $1.800 billion and $1.445 billion at July 31 1997, October 31, 1996 and July 31, 1996, respectively. The ratio of total interest-bearing debt to stockholder's equity was 6.9 to 1, 6.5 to 1 and 6.1 to 1 at July 31, 1997, October 31, 1996 and July 31, 1996, respectively. During the first nine months of 1997, the Capital Corporation issued $200 million of 6% notes and $200 million of 6.30% notes, both due in 1999, and retired $100 million of 7.20% notes due in 1997. Additionally, the Capital Corporation issued $485 million and retired $478 million of medium-term notes during the first nine months of 1997. At July 31, 1997, the Capital Corporation, Deere & Company, John Deere Limited (Canada) and John Deere Credit Inc. (Canada), jointly, maintained $4.008 billion of unsecured lines of credit with various banks in North America and overseas, $917 million of which was unused. For the purpose of computing unused credit lines, 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 Credit Inc. (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. Page 10 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 half of the fiscal year. During the first nine months of 1997, 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 $198 million in the first nine months of 1997. Financing activities provided $530 million during the same period, resulting from a $590 million net increase in total borrowings, which was offset by $60 million in dividend payments to John Deere Credit Company. Net cash used for investing activities totaled $712 million in 1997, primarily due to Receivable and Lease acquisitions exceeding collections by $1.172 billion, partially offset by the $433 million in proceeds from the sale of receivables. Cash and cash equivalents increased $16 million during the first nine months of 1997. During the first nine months of 1996, 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 $156 million in the first nine months of 1996. Financing activities provided $348 million during the same period, resulting from a $383 million net increase in total borrowings, which was offset by $35 million in dividend payments to John Deere Credit Company. Net cash used for investing activities totaled $500 million in 1996, primarily due to Receivable and Lease acquisitions exceeding collections by $1.147 billion, partially offset by the $623 million in proceeds from the sale of receivables. Cash and cash equivalents increased $4 million during the first nine months of 1997. The Capital Corporation paid a cash dividend to John Deere Credit Company of $20 million in each of the first three quarters of 1997. John Deere Credit Company paid comparable dividends to Deere & Company. On August 29, 1997, the Capital Corporation declared a cash dividend of $15 million to John Deere Credit Company, which in turn declared a cash dividend of $15 million to Deere & Company, each payable on September 9, 1997. Page 11 PART II. OTHER INFORMATION Item 1. Legal Proceedings. See Note (5) 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 May 13, 1997 (items 5 and 7). Page 12 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 4, 1997 By: /s/ R. W. Lane -------------------------- R. W. Lane Vice President (Principal Financial Officer) Page 13 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 July 31, 1997 (Securities and Exchange Commission file number 1-4121*). - ------------------------------ * Incorporated by reference. Copies of these exhibits are available from the Company upon request. Page 14 EX-12 2 Exhibit 12 John Deere Capital Corporation and Subsidiaries Computation of Ratio of Earnings to Fixed Charges (dollars in thousands) Nine Months Ended 31 July ------------------------- 1997 1996 ----------- ------------ Earnings: Income before income taxes and changes in accounting $149,742 $157,567 Fixed charges 239,501 202,866 -------- -------- Total earnings $389,243 $360,433 ======== ======== Fixed charges: Interest expense $236,734 $200,728 Rent expense 2,767 2,138 -------- -------- Total fixed charges $239,501 $202,866 ======== ======== Ratio of earnings to fixed charges * 1.63 1.78 ======== ======== For the Years Ended October 31 -------------------------------------------- 1996 1995 1994 1993 1992 -------- -------- -------- -------- -------- Earnings: Income before income taxes and changes in accounting $206,588 $175,360 $161,809 $169,339 $142,920 Fixed charges 276,726 240,913 168,507 170,226 191,930 -------- -------- -------- -------- -------- Total earnings $483,314 $416,273 $330,316 $339,565 $334,850 ======== ======== ======== ======== ======== Fixed charges: Interest expense $273,748 $238,445 $166,591 $167,787 $189,288 Rent expense 2,978 2,468 1,916 2,439 2,642 -------- -------- -------- -------- -------- Total fixed charges $276,726 $240,913 $168,507 $170,226 $191,930 ======== ======== ======== ======== ======== Ratio of earnings to fixed charges * 1.75 1.73 1.96 1.99 1.74 ======== ======== ======== ======== ======== - --------- "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. Page 15 EX-27 3
5 This schedule contains summary financial information extracted from Form 10-Q and is qualified in its entirety by reference to such financial information. 0000027673 JOHNDEERECAPITALCORP 1000000 U.S. DOLLARS 9-MOS OCT-31-1997 NOV-01-1996 JUL-31-1997 1 187 0 5988 89 0 0 21 14 6626 0 2354 0 0 113 681 6626 0 543 0 51 0 25 237 150 52 97 0 0 0 97 0 0
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