Leases

6 Months Ended

May 01, 2022

Leases

Leases

(6)  Leases

The Company leases John Deere equipment and a limited amount of non-John Deere equipment to retail customers through sales-type, direct financing, and operating leases. Sales-type and direct financing leases are reported in financing leases on the consolidated balance sheets. Operating leases are reported in equipment on operating leases – net on the consolidated balance sheets.

Lease revenues earned by the Company were as follows (in millions of dollars):

	Three Months Ended				Six Months Ended
	May 1		May 2		May 1		May 2
	2022		2021		2022		2021
Sales-type and direct financing lease revenues	$	12.5	$	11.3	$	25.5	$	23.1
Operating lease revenues		218.8		239.8		441.9		486.4
Variable lease revenues		5.8		6.5		12.0		13.8
Total lease revenues	$	237.1	$	257.6	$	479.4	$	523.3

Variable lease revenues reported above primarily relate to separately invoiced property taxes on leased equipment in certain markets, late fees, and excess use and damage fees. Excess use and damage fees are reported in other income on the statements of consolidated income. Excess use and damage fees were $.6 million and $1.4 million for the second quarter and first six months ended May 1, 2022, respectively, compared with $1.4 million and $3.5 million for the same periods last year, respectively.

The cost of equipment on operating leases by market was as follows (in millions of dollars):

	May 1		October 31		May 2
	2022		2021		2021
Agriculture and turf	$	4,846.7	$	5,053.4	$	5,017.0
Construction and forestry		1,222.9		1,323.6		1,490.4
Total		6,069.6		6,377.0		6,507.4
Accumulated depreciation		(1,360.9)		(1,429.4)		(1,498.5)
Equipment on operating leases - net	$	4,708.7	$	4,947.6	$	5,008.9

Total operating lease residual values at May 1, 2022, October 31, 2021, and May 2, 2021 were $3,335.0 million, $3,547.6 million, and $3,651.2 million, respectively. Certain operating leases are subject to residual value guarantees. The total residual value guarantees were $348.4 million, $295.8 million, and $201.9 million at May 1, 2022, October 31, 2021, and May 2, 2021, respectively. The increase in residual value guarantees is primarily due to guarantees provided by John Deere dealers, which generally provide a first-loss residual value guarantee on operating lease originations effective after January 2020.

The Company discusses with lessees and dealers options to purchase the equipment or extend the lease prior to operating lease maturity. Equipment returned to the Company upon termination of leases is remarketed by the Company. The matured operating lease inventory balances at May 1, 2022, October 31, 2021, and May 2, 2021 were $9.1 million, $25.4 million, and $39.5 million, respectively. Matured operating lease inventory is reported in other assets on the consolidated balance sheets.