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Derivative Instruments (Tables)
 6 Months Ended
Apr. 30, 2014
Derivative Instruments  
Fair Value Hedge Interest Rate Contracts and Underlying Borrowings

The gains (losses) on these contracts and the underlying borrowings recorded in interest expense were as follows (in millions of dollars):

 

 

 

 

Three Months Ended
April 30

 

 

 

Six Months Ended
April 30

 

 

 

 

2014

 

   2013

 

 

 

2014

 

   2013

 

Interest rate contracts *

 

 

$

(10.5

)

$

71.1

 

 

 

$

(81.1

)

$

.2

 

Borrowings **

 

 

11.4

 

(70.7

)

 

 

80.1

 

2.4

 

 

*   Includes changes in fair value of interest rate contracts excluding net accrued interest income of $39.6 million and $38.9 million during the second quarter of 2014 and 2013 and $74.3 million and $75.1 million during the first six months of 2014 and 2013, respectively.

 

**   Includes adjustments for fair values of hedged borrowings excluding accrued interest expense of $60.9 million and $62.3 million during the second quarter of 2014 and 2013 and $115.4 million and $123.6 million during the first six months of 2014 and 2013, respectively.

 
Fair Value of Derivative Instruments in Consolidated Balance Sheet

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

 

 

 

April 30
2014

 

October 31
2013

 

April 30
 2013

 

Receivables from John Deere

 

 

 

 

 

 

 

Designated as hedging instruments:

 

 

 

 

 

 

 

Interest rate contracts

 

$

118.9

 

$

144.3

 

$

329.7

 

 

 

 

 

 

 

 

 

Not designated as hedging instruments:

 

 

 

 

 

 

 

Interest rate contracts

 

34.5

 

31.2

 

39.0

 

Cross-currency interest rate contracts

 

2.1

 

1.1

 

 

 

Total not designated

 

36.6

 

32.3

 

39.0

 

 

 

 

 

 

 

 

 

Other Assets

 

 

 

 

 

 

 

Designated as hedging instruments:

 

 

 

 

 

 

 

Interest rate contracts

 

118.2

 

140.5

 

174.0

 

 

 

 

 

 

 

 

 

Not designated as hedging instruments:

 

 

 

 

 

 

 

Interest rate contracts

 

9.7

 

16.3

 

22.0

 

Foreign exchange contracts

 

2.9

 

1.0

 

5.3

 

Cross-currency interest rate contracts

 

 

 

.1

 

 

 

Total not designated

 

12.6

 

17.4

 

27.3

 

 

 

 

 

 

 

 

 

Total derivatives

 

$

286.3

 

$

334.5

 

$

570.0

 

 

 

 

 

 

 

 

 

Other Payables to John Deere

 

 

 

 

 

 

 

Designated as hedging instruments:

 

 

 

 

 

 

 

Interest rate contracts

 

$

91.9

 

$

71.0

 

$

7.9

 

Cross-currency interest rate contracts

 

 

 

.4

 

1.0

 

Total designated

 

91.9

 

71.4

 

8.9

 

 

 

 

 

 

 

 

 

Not designated as hedging instruments:

 

 

 

 

 

 

 

Interest rate contracts

 

15.1

 

13.8

 

14.0

 

Cross-currency interest rate contracts

 

.3

 

.7

 

4.6

 

Total not designated

 

15.4

 

14.5

 

18.6

 

 

 

 

 

 

 

 

 

Accounts Payable and Accrued Expenses

 

 

 

 

 

 

 

Designated as hedging instruments:

 

 

 

 

 

 

 

Cross-currency interest rate contracts

 

 

 

16.0

 

48.3

 

 

 

 

 

 

 

 

 

Not designated as hedging instruments:

 

 

 

 

 

 

 

Interest rate contracts

 

24.7

 

29.9

 

38.4

 

Foreign exchange contracts

 

7.7

 

15.8

 

10.9

 

Cross-currency interest rate contracts

 

 

 

 

 

.3

 

Total not designated

 

32.4

 

45.7

 

49.6

 

 

 

 

 

 

 

 

 

Total derivatives

 

$

139.7

 

$

147.6

 

$

125.4

 

 
Gains (Losses) Related to Derivative Instruments on Statement of Consolidated Income

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

 

 

 

Expense or OCI

 

Three Months Ended
April 30

 

Six Months Ended
April 30

 

 

 

Classification

 

2014

 

2013

 

2014

 

2013

 

Fair Value Hedges:

 

 

 

 

 

 

 

 

 

 

 

Interest rate contracts

 

Interest expense

 

$

29.1

 

$

110.0

 

$

(6.8)

 

$

75.3

 

 

 

 

 

 

 

 

 

 

 

 

 

Cash Flow Hedges:

 

 

 

 

 

 

 

 

 

 

 

Recognized in OCI

 

 

 

 

 

 

 

 

 

 

 

(Effective Portion):

 

 

 

 

 

 

 

 

 

 

 

Interest rate contracts

 

OCI (pretax) *

 

(1.8)

 

(4.9)

 

(3.6)

 

(7.7)

 

Foreign exchange contracts

 

OCI (pretax) *

 

 

 

(11.0)

 

(4.1)

 

10.4

 

 

 

 

 

 

 

 

 

 

 

 

 

Reclassified from OCI

 

 

 

 

 

 

 

 

 

 

 

(Effective Portion):

 

 

 

 

 

 

 

 

 

 

 

Interest rate contracts

 

Interest expense *

 

(2.3)

 

(4.7)

 

(5.9)

 

(9.1)

 

Foreign exchange contracts

 

Administrative and operating expenses *

 

 

 

(13.3)

 

(5.5)

 

5.8

 

 

 

 

 

 

 

 

 

 

 

 

 

Recognized Directly in Income

 

 

 

 

 

 

 

 

 

 

 

(Ineffective Portion)

 

 

 

**  

 

** 

 

**

 

**  

 

 

 

 

 

 

 

 

 

 

 

 

 

Not Designated as Hedges:

 

 

 

 

 

 

 

 

 

 

 

Interest rate contracts

 

Interest expense *

 

$

2.2

 

$

(4.7)

 

$

4.9

 

$

(4.1)

 

Foreign exchange contracts

 

Administrative and operating expenses *

 

(62.1)

 

19.9

 

(8.6)

 

(4.8)

 

Total not designated

 

 

 

$

(59.9)

 

$

15.2

 

$

(3.7)

 

$

(8.9)

 

 

*                 Includes interest and foreign exchange gains (losses) from cross-currency interest rate contracts.

**          The amount is not significant.

 
Impact on Derivative Assets and Liabilities for External Derivatives and those with John Deere Related to Netting Arrangements and Collateral

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

 

April 30, 2014

 

 

 

 

 

 

 

 

 

Derivatives:

 

Gross Amounts
Recognized

 

 

Netting
Arrangements

 

 

Collateral
Received

 

 

Net Amount

 

 

Assets

 

 

 

 

 

 

 

 

 

External

 

$

130.8

 

$

(25.9

)

 

 

$

104.9

 

John Deere

 

155.5

 

(105.4

)

 

 

50.1

 

Liabilities

 

 

 

 

 

 

 

 

 

External

 

32.4

 

(25.9

)

 

 

6.5

 

John Deere

 

107.3

 

(105.4

)

 

 

1.9

 

 

 

 

 

 

 

 

 

 

 

October 31, 2013

 

 

 

 

 

 

 

 

 

Derivatives:

 

Gross Amounts
Recognized

 

 

Netting
Arrangements

 

 

Collateral
Received

 

 

Net Amount

 

 

Assets

 

 

 

 

 

 

 

 

 

External

 

$

157.9

 

$

(42.6

)

$

(2.4

)

$

112.9

 

John Deere

 

176.6

 

(82.9

)

 

 

93.7

 

Liabilities

 

 

 

 

 

 

 

 

 

External

 

61.7

 

(42.6

)

 

 

19.1

 

John Deere

 

85.9

 

(82.9

)

 

 

3.0

 

 

 

 

 

 

 

 

 

 

 

April 30, 2013

 

 

 

 

 

 

 

 

 

Derivatives:

 

Gross Amounts
Recognized

 

 

Netting
Arrangements

 

 

Collateral
Received

 

 

Net Amount

 

 

Assets

 

 

 

 

 

 

 

 

 

External

 

$

201.3

 

$

(55.8

)

$

(16.4

)

$

129.1

 

John Deere

 

368.7

 

(22.8

)

 

 

345.9

 

Liabilities

 

 

 

 

 

 

 

 

 

External

 

97.9

 

(55.8

)

 

 

42.1

 

John Deere

 

27.5

 

(22.8

)

 

 

4.7