<PAGE>
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SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
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FORM 10-K
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ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934
FOR THE FISCAL YEAR ENDED OCTOBER 31, 1994
Commission file number 1-6458
JOHN DEERE CAPITAL CORPORATION
(Exact name of registrant as specified in its charter)
DELAWARE 36-2386361
(State of incorporation) (IRS employer identification number)
SUITE 600, FIRST INTERSTATE BANK BUILDING
1 EAST FIRST STREET, RENO, NEVADA 89501 (702) 786-5527
(Address of principal executive offices) (Zip Code) (Telephone number)
SECURITIES REGISTERED PURSUANT TO SECTION 12(B) OF THE ACT
TITLE OF EACH CLASS NAME OF EACH EXCHANGE ON WHICH REGISTERED
6% Notes Due 1995 New York Stock Exchange
7.20% Notes Due 1997 New York Stock Exchange
9-5/8% Subordinated Notes Due 1998 New York Stock Exchange
8-5/8% Subordinated Debentures Due 2019 New York Stock Exchange
5% Notes Due 1995 New York Stock Exchange
4-5/8% Notes Due 1996 New York Stock Exchange
SECURITIES REGISTERED PURSUANT
TO SECTION 12(G) OF THE ACT: NONE
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
--- ---
Indicate by check mark if disclosure of delinquent filers pursuant to Item 405
of Regulation S-K is not contained herein, and will not be contained, to the
best of registrant's knowledge, in definitive proxy or information statements
incorporated by reference in Part III of this Form 10-K or any amendment to this
Form 10-K. [X]
At January 1, 1995, 2,500 shares of common stock, without par value, of the
registrant were outstanding, all of which were owned by John Deere Credit
Company.
The registrant meets the conditions set forth in General Instruction J(1)(a) and
(b) of Form 10-K and is therefore filing this Form with certain reduced
disclosures as permitted by Instruction J(2).
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<PAGE>
PART I
ITEM 1. BUSINESS.
THE COMPANY
The John Deere Capital Corporation (Capital Corporation) and its
subsidiaries: Deere Credit, Inc., Farm Plan Corporation, Deere Credit Services,
Inc. and John Deere Receivables, Inc., are collectively called the Company. John
Deere Credit Company, a wholly-owned finance holding subsidiary of Deere &
Company, is the parent of the Capital Corporation.
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 retail notes unrelated to John Deere,
representing primarily 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 John Deere 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 and
John Deere engines 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."
The Capital Corporation was incorporated under the laws of Delaware and
commenced operations in 1958. At January 1, 1995, the Company had 789 full- and
part-time employees.
BUSINESS OF JOHN DEERE
John Deere's operations are categorized into five business segments:
John Deere's worldwide AGRICULTURAL EQUIPMENT segment manufactures and
distributes a full range of equipment used in commercial farming --
including tractors; tillage, soil preparation, planting and harvesting
machinery; and crop handling equipment.
John Deere's worldwide INDUSTRIAL EQUIPMENT segment manufactures and
distributes a broad range of machines used in construction, earthmoving and
forestry -- including backhoe loaders; crawler dozers and loaders; four-
wheel-drive loaders; scrapers; motor graders; excavators; and log skidders.
This segment also
1
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includes the manufacture and distribution of engines and drivetrain
components for the original equipment manufacturer (OEM) market.
John Deere's worldwide LAWN AND GROUNDS CARE EQUIPMENT segment manufactures
and distributes equipment for commercial and residential uses - including
small tractors for lawn, garden and utility purposes; riding and walk-
behind mowers; golf course equipment; utility transport vehicles;
snowblowers; hand held products such as chain saws, string trimmers and
leaf blowers; and other outdoor power products.
The products produced by the equipment segments are marketed primarily
through independent retail dealer networks.
The CREDIT segment includes the operations of the Company (described
herein), John Deere Credit Company and John Deere Finance Limited, which
primarily purchases and finances retail notes from John Deere's equipment
sales branches in Canada.
The INSURANCE AND HEALTH CARE segment issues policies in the United States
and Canada primarily for: a general line of property and casualty
insurance to John Deere and non-Deere dealers and to the general public;
group life and group accident and health insurance for employees of
participating John Deere dealers and employees of John Deere; and life and
annuity products to the general public. This segment also provides health
management programs and related administrative services in the United
States to corporate customers and employees of John Deere.
John Deere's total worldwide net sales and revenues in 1994 and 1993, which
include net sales of agricultural equipment, industrial equipment and lawn and
grounds care equipment and revenues from credit, insurance and health care
operations, were as follows: total net sales and revenues, $9.0 billion and $7.8
billion; total sales of equipment, $7.6 billion and $6.5 billion; agricultural
equipment sales, $4.7 billion and $4.1 billion; industrial equipment sales, $1.6
billion and $1.3 billion; and lawn and grounds care equipment sales, $1.3
billion and $1.1 billion, respectively. John Deere believes that its worldwide
sales of agricultural equipment during recent years have been greater than those
of any other business enterprise. It also believes that it is an important
provider of most of the types of industrial equipment that it markets and a
leader in some size ranges. John Deere also believes that it is the largest
manufacturer of lawn and garden tractors and provides the broadest line of
grounds care equipment in North America.
John Deere's worldwide net income for 1994 was a record, totaling $604
million compared with last year's income of $248 million before the effects of
special items (accounting changes, restructuring charges and the new United
States tax law.) Additional information concerning the special items is
presented in the Deere & Company Annual Report on Form 10-K for the fiscal year
ended October 31, 1994. John Deere's strongly improved 1994 results reflect
substantially higher North American production and sales volumes, improved
operating efficiencies and significantly better overseas results. Additionally,
John Deere's exports from the United States set a new record, totaling $1.1
billion. John Deere's results also continued to benefit from the strong
performance of its
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Financial Services subsidiaries. Income in 1993 was $184 million after the
effects of the restructuring charges and the tax rate change. However, John
Deere incurred a worldwide loss of $921 million in 1993 after the cumulative
effect of accounting changes.
North American agricultural economic conditions improved in 1994 compared
with 1993. John Deere believes that the resulting improvement in farmers'
confidence was a primary contributor to higher agricultural equipment demand in
nearly all market areas in North America during 1994. Although direct government
payments to farmers declined in 1994, net farm cash income is forecasted to be
near record levels. Additionally, farm real estate values increased by nearly
four percent during the year, further improving overall farm balance sheets.
Overseas retail sales also showed improvement during 1994. Although
European industry retail sales of agricultural equipment are expected to
continue their long-term downward trend, reduced uncertainty over the General
Agreement on Tariffs and Trade (GATT) and a better understanding of the new GATT
regulations have increased European farmers' confidence. Consequently, many
farmers who had delayed making purchases are now buying new equipment.
Therefore, European industry sales for fiscal 1994 are expected to be higher
than 1993 levels.
The North American general economy continued to improve during 1994. Strong
employment growth, coupled with related gains in income, stimulated consumer
spending on durable goods in 1994. Housing starts and real nonresidential
construction in the United States also increased by 11 percent and three
percent, respectively, compared with a year ago. These improvements provided a
solid base for increases in both John Deere's industrial and lawn and grounds
care equipment sales during 1994.
RELATIONSHIPS OF THE COMPANY WITH JOHN DEERE
The operations and results of the Company are affected by its relationships
with John Deere, including among other things, the terms on which the Company
acquires Receivables and Leases and borrows funds from John Deere, the
reimbursement for waiver and low-rate finance programs from John Deere and the
payment to John Deere for various expenses applicable to the Company's
operations. In addition, the Capital Corporation and John Deere have joint
access to all of the Capital Corporation's bank lines of credit.
The Company's acquisition of Receivables and Leases is largely dependent
upon the level of retail sales and leases of John Deere products. The level of
John Deere retail sales and leases is responsive to a variety of economic,
financial, climatic and other factors which influence demand for its products.
Since 1986, the Company has also been providing retail sales financing through
dealers of certain unrelated manufacturers of recreational vehicles and
recreational marine products. The net balance of recreational product retail
notes outstanding under these arrangements at October 31,1994 totaled $800
million.
The Company bears all of the credit risk (net of recovery from withholdings
from certain John Deere dealers and Farm Plan merchants) associated with its
holding of
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Receivables and Leases, and performs all servicing and collection functions. The
Company compensates John Deere for originating retail notes and leases on John
Deere products or through John Deere dealers. John Deere is also reimbursed for
staff and other administrative services at estimated cost, and for credit lines
provided to the Company based on utilization of those lines.
The terms of retail notes and the basis on which the Company acquires
retail notes from John Deere are governed by agreements with John Deere,
terminable by either John Deere or the Company on 30 days notice. As provided in
these agreements, the Company sets its terms and conditions for purchasing the
retail notes from John Deere. Under these agreements, John Deere is not
obligated to sell retail notes to the Company, and the Company is obligated to
purchase retail notes from John Deere only if the notes comply with the terms
and conditions set by the Company.
The terms of retail notes and the basis on which John Deere acquires retail
notes from the dealers are governed by agreements with the independent John
Deere dealers, terminable at will by either the dealers or John Deere. In
acquiring the retail notes from dealers, the terms and conditions, as set forth
in agreements with the dealers, conform with the terms and conditions adopted by
the Company in determining the acceptability of retail notes to be purchased
from John Deere. The dealers are not obligated to send retail notes to John
Deere, and John Deere is not obligated to accept retail notes from the dealers.
In practice, retail notes are acquired from dealers only if the terms of the
retail notes and the creditworthiness of the customers are acceptable to the
Company for purchase of the retail notes from John Deere. The Company acts on
behalf of both itself and John Deere in determining the acceptability of the
notes and acquiring acceptable notes from dealers.
The terms of leases, and the basis on which the Company enters into such
leases with retail customers through John Deere dealers, are governed by
agreements between dealers and the Company. Leases are accepted based on the
lessees' creditworthiness, the anticipated residual values of the equipment and
the intended uses of the equipment.
Deere & Company has expressed an intention of conducting its business with
the Company on such terms that the Company's consolidated ratio of earnings to
fixed charges will not be less than 1.05 to 1 for any fiscal quarter. For 1994,
the Company's ratio was 1.96 to 1 and for 1993, it was 1.99 to 1 (excluding the
effects of accounting changes). For additional information concerning these
accounting changes, see note 1 to the consolidated financial statements. This
arrangement is not intended to make Deere & Company responsible for the payment
of obligations of the Company.
DESCRIPTION OF RECEIVABLES AND LEASES
Receivables and Leases arise mainly from the retail sales or lease
(including the sale to John Deere dealers for rental to users) of John Deere
products, used equipment accepted in trade for them, and equipment of unrelated
manufacturers, and also include revolving charge accounts receivable and
wholesale notes receivable. The great majority derive from retail sales and
leases of agricultural equipment, industrial equipment and lawn and grounds care
equipment sold by John Deere dealers. The Company also offers
4
<PAGE>
financing to recreational product customers through the secured financing of
recreational vehicles and recreational marine products. The Company also offers
Farm Plan revolving charge accounts which are used primarily by agri-businesses
to finance customer purchases, as well as credit cards which are used primarily
by retail customers to finance purchases of John Deere lawn and grounds care
equipment and marine equipment. Retail notes provide for retention by John Deere
or the Company of security interests under certain statutes, including the
Uniform Commercial Code or comparable state statutes, certain Federal statutes,
and state motor vehicle laws. See notes 1 and 2 to the consolidated financial
statements.
Recreational product retail notes conform to industry standards different
from those for John Deere retail notes and often have smaller down payments and
longer repayment terms. In addition, the volumes, margins, and collectibility of
recreational product retail notes are affected by different economic, marketing
and competitive factors and cycles, such as fluctuations in fuel prices and
recreational spending patterns, than those affecting retail notes arising from
the sale of John Deere equipment. Recreational product retail notes are acquired
from more than 1,500 recreational vehicle dealers and from approximately 1,100
marine product dealers.
Receivables and Leases are eligible for acceptance if they conform to
prescribed finance and lease plan terms. Guidelines relating to down-payments
and contract terms on retail notes and leases are described in note 2 to the
consolidated financial statements.
The John Deere Credit Revolving Plan is used primarily by retail customers
of John Deere dealers to finance purchases of John Deere lawn and grounds care
equipment. John Deere Credit Revolving Plan is also used by some of the
Company's marine customers to finance the purchase of marine-related products.
Additionally, through its Farm Plan product, the Company finances revolving
charge accounts offered by approximately 2,700 participating agri-businesses to
their retail customers for the purchase of goods and services. Farm Plan account
holders consist mainly of farmers purchasing equipment parts and service at
implement dealerships. Farm Plan revolving charge accounts are also used by
customers patronizing other agri-businesses, including farm supply, feed and
seed, parts supply, bulk fuel, building supply merchants and veterinarians. See
notes 1 and 2 to the consolidated financial statements under "Revolving Charge
Accounts Receivable."
The Company finances wholesale inventories of recreational vehicles,
manufactured housing units, yachts and John Deere engines owned by approximately
300 dealers. A portion of the wholesale financing provided by the Company is
with dealers from whom it also purchases recreational product and yacht retail
notes. See notes 1 and 2 to the consolidated financial statements under
"Wholesale Receivables."
The Company requires theft and physical damage insurance be carried on all
goods leased or securing retail notes. In most cases, the customer may, at his
expense, have the Company or the seller of the goods purchase this insurance or
obtain it from other sources. Theft and physical damage insurance is also
required on wholesale notes and can be purchased through the Company or from
other sources. If the customer elects to purchase theft and physical damage
insurance through the Company, the Company
5
<PAGE>
purchases it from insurance subsidiaries of Deere & Company. Insurance is not
required for revolving charge accounts.
In some circumstances, Receivables and Leases may be accepted and acquired
even though they do not conform in all respects to the established guidelines.
Acceptability and servicing of retail notes, wholesale notes and leases,
according to the finance plans and retail terms, including any waiver of
conformity with such plans and terms, is determined by Company personnel.
Officers of the Company are responsible for reviewing the performance of the
Company in accepting and collecting retail notes, wholesale notes and leases.
The Company normally makes all routine collections, compromises, settlements and
repossessions on Receivables and Leases.
FINANCE RATES ON RETAIL NOTES
As of October 31, 1994, approximately 56 percent of the retail notes held
by the Company bore a variable finance rate. Recreational product retail notes
are primarily fixed finance rate notes.
A portion of the finance income earned by the Company arises from retail
sales of John Deere equipment sold in advance of the season of use or in other
sales promotions by John Deere on which finance charges are waived by John Deere
for a period from the date of sale to a specified subsequent date. Some low-
rate financing programs are also offered by John Deere. The Company receives
compensation from John Deere equal to a competitive interest rate for periods
during which finance charges have been waived or reduced on retail notes and
leases. The portion of the Company's finance income earned on retail notes that
was received from John Deere containing waiver of finance charges or reduced
rates was 14 percent in 1994 and 19 percent in 1993.
RECEIVABLES AND LEASES ACQUIRED AND HELD
Receivable and Lease acquisitions during the fiscal years ended and amounts
held at October 31, 1994 and 1993 were as follows in millions of dollars:
<TABLE>
<CAPTION>
- - ---------------------------------------------------------------------------------
Fiscal Year Balance at
Acquisitions October 31
- - ---------------------------------------------------------------------------------
1994 1993 1994 1993
- - ---------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Retail Notes: (1)
- - ---------------------------------------------------------------------------------
Agricultural Equipment $1,741.5 $1,526.8 $1,917.8 $1,546.8
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Industrial Equipment 394.7 317.8 414.4 271.2
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Lawn and Grounds Care 89.4 89.7 157.0 169.5
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Recreational Products 262.3 201.8 800.0 804.2
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Total 2,487.9 2,136.1 3,289.2 2,791.7
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Revolving Charge Accounts (1) 945.3 763.5 437.3 331.1
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Financing and Operating 144.9 145.0 242.9 204.2
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Wholesale Notes (1) 363.8 296.0 142.2 109.6
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Total Receivables and Leases $3,941.9 $3,340.6 $4,111.6 $3,436.6
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<FN>
(1) "Amount" as used here means the approximate principal value financed.
(2) "Amount" as used here represents the cost of equipment financed on both
financing and operating leases.
</TABLE>
6
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John Deere equipment note acquisitions increased by approximately $291
million in 1994 compared with the same period last year. Acceptance increases
were consistent with increases in retail sales activities. Acquisitions of
recreational product retail notes were 30 percent higher in the current year due
to more competitive financing programs offered by the Company in both the
recreational vehicle and recreational marine product markets.
The Company's business is somewhat seasonal, with overall acquisitions of
credit receivables traditionally higher in the second half of the fiscal year
than in the first half, and overall collections of credit receivables
traditionally somewhat higher in the first six months than in the last half of
the fiscal year.
From time to time, the Capital Corporation sells retail notes to other
financial institutions and in the public market. The Capital Corporation
received proceeds from sales of John Deere retail notes of $560 million in 1994
and $1.143 billion in 1993. The unpaid balance of all retail notes previously
sold was $1.175 billion at October 31, 1994 and $1.394 billion at October 31,
1993. For additional information on the terms, conditions, recourse and
accounting for such sales, see note 2 to the consolidated financial statements.
AVERAGE ORIGINAL TERM AND AVERAGE LIFE OF RETAIL NOTES AND LEASES
The following table shows the estimated average original term in months
(based on dollar amounts) for retail notes and leases acquired by the Company
during 1994 and 1993:
<TABLE>
<CAPTION>
Average Original Term
1994 1993
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<S> <C> <C>
Retail Notes 70 67
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New Equipment:
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Agricultural Equipment 57 55
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Industrial Equipment 44 43
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Lawn and Grounds Care Equipment 45 44
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Recreational Products 161 152
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Used Equipment:
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Agricultural Equipment 54 52
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Industrial Equipment 37 37
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Lawn and Grounds Care 47 45
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Recreational Products 202 161
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Leases 44 42
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</TABLE>
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The average original term for recreational products is longer than John
Deere equipment notes because of competitive pressures. Because of prepayments,
the average actual life of retail notes is considerably shorter than the average
original term. The following table shows the estimated average life in months
(based on dollar amounts) for John Deere retail notes and leases liquidated in
1994 and 1993:
<TABLE>
<CAPTION>
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Average Life in Months
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1994 1993
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<S> <C> <C>
Retail Notes (1) 30 28
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Agricultural Equipment 26 25
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Industrial Equipment 27 29
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Lawn and Grounds Care Equipment 33 31
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Recreational Products (2) 46 46
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Leases (3) 41 47
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<FN>
(1) Includes new and used equipment.
(2) Estimate based on industry averages due to limited experience with the
recreational product portfolio.
(3) The average lives of leases liquidated in 1993 were longer than the
average original terms of leases acquired during 1993 due to longer
average original terms during prior years.
</TABLE>
DEPOSITS WITHHELD ON RECEIVABLES AND LEASES
Generally, the Company has limited recourse against certain John Deere
dealers on retail notes and leases and against certain Farm Plan merchants on
revolving charge account balances acquired from or through those dealers and
merchants. For these John Deere dealers and Farm Plan merchants, separate
withholding accounts are maintained by the Company. The total amount of deposits
withheld from John Deere dealers and Farm Plan merchants totaled $111.4 million
and $104.9 million at October 31, 1994 and 1993, respectively. Of this amount,
deposits withheld from Farm Plan merchants totaled $.5 million at October 31,
1994 and $.4 million at October 31, 1993. Credit losses are charged against
deposits withheld from the originating dealer or merchant. To the extent that a
loss cannot be absorbed by the deposit withheld from the dealer or merchant from
which the retail note, lease or Farm Plan account was acquired, it is charged
against the Company's allowance for credit losses. See note 1 to the
consolidated financial statements.
The Company does not withhold deposits on recreational product retail
notes, revolving plan receivables, or wholesale notes acquired. However, an
allowance for credit losses has been established by the Company in an amount
considered to be appropriate in relation to the total Receivables and Leases
outstanding. In addition, for wholesale notes relating to recreational vehicles,
manufactured housing units and yachts, there are agreements with the
manufacturers for the repurchase of new inventories held by dealers. For
additional information on credit losses and deposits withheld on Receivables and
Leases, see note 3 to the consolidated financial statements.
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DELINQUENCIES AND LOSSES
RETAIL NOTES. The following table shows unpaid installments 60 days or
more past due on retail notes held by the Company and the balance (principal
plus earned interest) of retail notes outstanding with any such delinquencies,
on the basis of retail note terms in effect at the indicated dates, in millions
of dollars and as a percentage of the unpaid balance of retail notes held by the
Company at such dates:
<TABLE>
<CAPTION>
- - --------------------------------------------------------------------------------------------------
Installments Past Due Balances on Which Any Installment is
60 Days or More Past Due 60 Days or More
- - --------------------------------------------------------------------------------------------------
Percent of Unpaid Percent of Unpaid
Balance of Retail Notes Balance of Retail
October 31 Amount Outstanding Amount Notes Outstanding
- - --------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
1994 $ 5.5 0.17% $ 23.9 0.73%
- - --------------------------------------------------------------------------------------------------
1993 $ 6.8 0.24% $ 33.0 1.18%
- - --------------------------------------------------------------------------------------------------
1992 $ 7.0 0.20% $ 42.6 1.21%
- - --------------------------------------------------------------------------------------------------
</TABLE>
The following table shows losses on retail notes in millions of dollars
(after charges to withheld dealer deposits) and as a percentage of the average
retail note portfolio financed:
<TABLE>
<CAPTION>
- - -------------------------------------------------------------------------------
Percent of Average Retail Note
Year Ended October 31 Amount Portfolio Financed
- - -------------------------------------------------------------------------------
<S> <C> <C>
- - -------------------------------------------------------------------------------
1994 $ 15.0 0.47%
- - -------------------------------------------------------------------------------
1993 $ 19.3 0.59%
- - -------------------------------------------------------------------------------
1992 $ 33.8 0.93%
- - -------------------------------------------------------------------------------
</TABLE>
The decrease in losses in 1994 and 1993 related mainly to lower write-offs
of recreational product retail notes, primarily as a result of the development
and use of more selective credit criteria over the past few years, improved
collection activities, and lower write-offs of John Deere lawn and grounds care
equipment retail notes. Write-offs of recreational product retail notes totaled
$12.9 million in 1994 compared with $16.9 million in 1993 and $24.2 million in
1992. The decrease in losses from 1992 to 1993 resulted primarily from lower
write-offs of recreational product retail notes and of John Deere industrial
equipment retail notes.
REVOLVING CHARGE ACCOUNTS. The following table shows revolving charge
account payments 60 days or more past due in millions of dollars and as a
percentage of total revolving charge accounts receivable:
<TABLE>
<CAPTION>
- - -------------------------------------------------------------------------------
Percent of Total Revolving
October 31 Amount Charge Accounts Receivable
- - -------------------------------------------------------------------------------
<S> <C> <C>
1994 $ 5.6 1.28%
- - -------------------------------------------------------------------------------
1993 $ 5.3 1.62%
- - -------------------------------------------------------------------------------
1992 $ 6.4 2.38%
- - -------------------------------------------------------------------------------
</TABLE>
9
<PAGE>
The following table shows losses on revolving charge accounts in millions
of dollars and as a percentage of the average revolving charge amounts financed:
<TABLE>
<CAPTION>
- - -------------------------------------------------------------------------------
Percent of Average Revolving
Year Ended October 31 Amount Charge Amounts Financed
- - -------------------------------------------------------------------------------
<S> <C> <C>
1994 $ 4.8 1.38%
- - -------------------------------------------------------------------------------
1993 $ 3.3 1.22%
- - -------------------------------------------------------------------------------
1992 $ 6.0 2.58%
- - -------------------------------------------------------------------------------
</TABLE>
Losses increased in 1994 for both Farm Plan and the John Deere Credit
Revolving Plan. The increase was due primarily to growth in the overall
revolving charge account portfolio of 32 percent since 1993.
LEASES. The following table shows the total balance of financing and
operating lease payments 60 days or more past due in millions of dollars and as
a percent of the investment in financing and operating leases at those
respective dates.
<TABLE>
<CAPTION>
- - -------------------------------------------------------------------------------
Percent of the Investment in
October 31 Amount Financing and Operating Leases
- - -------------------------------------------------------------------------------
<S> <C> <C>
1994 $ .6 0.24%
- - -------------------------------------------------------------------------------
1993 $ .5 0.25%
- - -------------------------------------------------------------------------------
1992 $ 1.2 0.69%
- - -------------------------------------------------------------------------------
</TABLE>
The following table shows losses absorbed by the Company, in millions of
dollars and as a percent of the average investment in financing and operating
leases, on terminated financing and operating leases (after charges to withheld
dealer deposits).
<TABLE>
<CAPTION>
- - -------------------------------------------------------------------------------
Percent of Average Investment
Year Ended October 31 Amount in Financing and Operating Leases
- - -------------------------------------------------------------------------------
<S> <C> <C>
1994 $ .5 0.25%
- - -------------------------------------------------------------------------------
1993 $ 1.2 0.65%
- - -------------------------------------------------------------------------------
1992 $ 2.7 1.43%
- - -------------------------------------------------------------------------------
</TABLE>
The decline in 1994 losses resulted from improvements in the Company's
overall collection procedures and improved economic conditions.
WHOLESALE NOTES. The total balance of wholesale notes receivable 60 days
or more past due was negligible at October 31, 1994 and October 31, 1992, and
$.1 million at October 31, 1993, which represented 0.11 percent of the wholesale
notes receivable held at that date.
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<PAGE>
The following table shows wholesale note losses in millions of dollars and
as a percentage of the average wholesale notes receivable:
<TABLE>
<CAPTION>
Percent of Average Wholesale
Year Ended October 31 Amount Notes Receivable
- - -------------------------------------------------------------------------------
<S> <C> <C>
1994 $ .5 0.41%
- - -------------------------------------------------------------------------------
1993 $ 2.3 1.92%
- - -------------------------------------------------------------------------------
1992 $ 1.2 1.17%
- - -------------------------------------------------------------------------------
</TABLE>
The losses in 1993 resulted primarily from a relatively large loss incurred
with one recreational vehicle dealer.
COMPETITION
The businesses in which the Company is engaged are highly competitive. The
Company competes for customers based upon its customer service and finance rates
(or time-price differentials) charged. The proportion of John Deere equipment
retail sales and leases financed by the Company is influenced by conditions
prevailing in the agricultural equipment, industrial equipment and lawn and
grounds care equipment industries, in the financial markets, and in business
generally. A significant portion of such retail sales during 1994 was financed
by the Company. A substantial part of the retail sales and leases eligible for
financing by the Company is financed by others, including banks and other
finance and leasing companies.
The Company emphasizes convenient service to retail customers and offers
terms desired in its specialized markets such as seasonal schedules of repayment
and rentals. The Company's sales and loan finance rates or time-price
differentials and lease rental rates are believed to be in the range of those of
sales finance and leasing companies generally, although not as low as those of
some banks and other lenders and lessors.
REGULATION
In a number of states, the maximum finance rate or time-price differential
on retail notes is limited by state law. The present state limitations have
not, thus far, significantly limited the Company's variable-rate finance charges
nor the fixed-rate finance charges established by the Company. However, if
interest rate levels should increase, maximum state rates or time-price
differentials could affect the Company by preventing the variable rates on
outstanding variable-rate retail notes from increasing above the maximum state
rate or time-price differential, and by limiting the fixed rates or time-price
differentials on new notes. In some states, the Company may be able to qualify
new retail notes for a higher maximum limit by using retail installment sales
contracts (rather than loan contracts) or by using fixed-rate rather than
variable-rate contracts.
In addition to rate regulation, various state and federal laws and
regulations apply to some Receivables and Leases, principally retail notes for
goods sold for personal, family or household use and Farm Plan and John Deere
Credit Revolving Plan accounts receivable for such goods. To date, such laws
and regulations have not had a significant adverse effect on the Company.
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ITEM 2. PROPERTIES.
The Company's properties principally consist of office equipment and leased
office space in Reno, Nevada; West Des Moines, Iowa; Moline, Illinois; Madison,
Wisconsin; and Ft. Lauderdale, Florida.
ITEM 3. LEGAL PROCEEDINGS.
The Company is subject to various unresolved legal actions which arise in
the normal course of its business. The most prevalent of such actions relates
to state and federal regulations concerning retail credit. There are various
claims and pending actions against the Company with respect to commercial and
consumer financing matters. These matters include lawsuits pending in federal
and state courts in Texas alleging that certain of the Company's retail finance
contracts for recreational vehicles and boats violate certain technical
provisions of Texas consumer credit statutes dealing with maximum rates,
licensing and disclosures. The plaintiffs in Texas claim they are entitled to
common law and statutory damages and penalties. The Company obtained
certification of a mandatory class in the 281st District Court for Harris
County, Texas, in a case named DEERE CREDIT, INC. V. SHIRLEY Y. MORGAN, ET AL.,
filed February 20, 1992. The Company believes that it has substantial defenses
and intends to defend the Morgan and other pending actions vigorously. Although
it is not possible to predict with certainty the outcome of these unresolved
legal actions, or reasonably estimate the range of possible loss and the amounts
of claimed damages and penalties are unspecified, the Company believes that
these unresolved legal actions will not be material.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS.
Omitted pursuant to instruction J(2).
PART II
ITEM 5. MARKET FOR REGISTRANT'S COMMON EQUITY AND RELATED STOCKHOLDER MATTERS.
All of the Capital Corporation's common stock is owned by John Deere Credit
Company, a finance holding company that is wholly-owned by Deere & Company.
The Capital Corporation paid cash dividends to John Deere Credit Company of
$210 million in 1994 and $82 million in 1993. In each case, John Deere Credit
Company paid a comparable dividend to Deere & Company. During the first quarter
of 1995, the Capital Corporation declared and paid a dividend of $15 million to
John Deere Credit Company which, in turn, declared and paid a dividend of $15
million to Deere & Company.
ITEM 6. SELECTED FINANCIAL DATA.
Omitted pursuant to instruction J(2).
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ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS.
RESULTS OF OPERATIONS
1994 COMPARED WITH 1993
Total acquisitions of Receivables and Leases by the Company increased 18
percent during 1994 compared with acquisitions in 1993. The higher acquisitions
this year resulted mainly from an increased volume of John Deere agricultural
and industrial equipment retail notes, revolving charge accounts and wholesale
receivables. Receivables and Leases held by the Company at October 31, 1994
totaled $4.112 billion compared with $3.437 billion one year ago. Receivables
and Leases administered, which include retail notes previously sold but still
administered, amounted to $5.326 billion at the end of 1994 compared with $4.873
billion at October 31, 1993.
During 1994, retail notes (principal value financed) acquired by the
Company increased 16 percent compared with 1993. Retail note acquisitions
totaled $2.488 billion during 1994 compared with 1993 acquisitions of $2.136
billion. The increase was primarily due to increased retail sales of John Deere
equipment. Acquisitions of recreational product retail notes accounted for 11
percent of total retail note acquisitions in 1994 and nine percent in 1993.
Retail note acquisitions from John Deere increased by $291 million in 1994,
a 15 percent increase over last year. Acquisitions of agricultural equipment
retail notes increased 14 percent over last year. Industrial equipment retail
note activity was significantly higher, increasing 24 percent over the prior
year. Acquisitions of lawn and grounds care equipment notes were flat compared
to last year; however, corresponding financings under the John Deere Credit
Revolving Plan, under which lawn and grounds care equipment is also financed,
increased significantly. Retail note acquisitions in 1994 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, representing primarily
recreational vehicle and recreational marine product notes acquired from
independent dealers of several unrelated manufacturers, were $262 million in
1994 compared with $202 million in 1993. This increase resulted primarily from
more competitive financing programs in both the recreational vehicle and
recreational marine product markets.
At October 31, 1994, the amount of retail notes held by the Company was
$3.289 billion compared to $2.792 billion last year. Included in these amounts
were recreational product retail notes of $800 million in 1994 and $804 million
in 1993. The balance of John Deere retail notes held increased from $1.988
billion at October 31, 1993 to $2.489 billion at the end of 1994. This increase
resulted from John Deere retail note acquisitions exceeding collections during
1994. However, the Company also securitized and sold retail notes, receiving
proceeds of $560 million during 1994 compared to $1.143 billion during 1993.
Additional information is presented in note 1 on page 34. The balance of retail
notes administered by the Company, which includes retail notes previously sold,
amounted
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to $4.464 billion at October 31, 1994, compared with $4.185 billion at
October 31, 1993. The balance of retail notes previously sold was $1.175
billion at October 31, 1994 compared with $1.394 billion at October 31, 1993.
Additional sales of retail notes are expected to be made in the future. The
Company's maximum exposure under all retail note recourse provisions at October
31, 1994 and 1993 was $140 and $175 million, respectively.
Retail notes bearing variable finance rates totaled 56 percent of the total
retail note portfolio at October 31, 1994 compared with 57 percent one year
earlier. The Company actively manages interest rate risk through the issuance
of fixed-rate and variable-rate borrowings and the use of financial instruments
such as interest rate swaps and interest rate caps. See "Capital Resources and
Liquidity" on pages 20 through 22.
At the end of fiscal 1994, revolving charge accounts receivable totaled
$437 million, an increase of 32 percent compared with $331 million at October
31, 1993. The balance at October 31, 1994 included $210 million of John Deere
Credit Revolving Plan receivables (including a small balance of marine finance
receivables) and $227 million of Farm Plan receivables compared with $147
million and $184 million, respectively, at October 31, 1993. Revolving charge
account acquisitions increased 24 percent in 1994 compared with 1993,
reflecting the increased retail sales of John Deere lawn and grounds care
equipment, as well as an increased volume of Farm Plan receivable acquisitions.
The portfolio of financing leases totaled $118 million at October 31, 1994
and $85 million at October 31, 1993. The investment in operating leases was
$125 million and $119 million at the end of 1994 and 1993, respectively.
Overall, 1994 lease acquisitions were flat compared to 1993. The Company also
administers municipal leases owned by Deere & Company, which totaled $39 million
at October 31, 1994 compared with $43 million at October 31, 1993. During 1994,
$20 million of municipal leases were sold to Deere & Company compared with $19
million sold in 1993.
Wholesale notes receivable totaled $142 million at October 31, 1994
compared with $110 million at October 31, 1993. Wholesale note acquisitions
increased 23 percent during the year primarily due to acquisitions related to
recreational vehicle inventories. Wholesale activity was also favorably
impacted by the financing of $24 million in inventory held by dealers of
manufactured housing units, a new business for the Company in 1994.
Total Receivable and Lease amounts 60 days or more past due were $11.7
million at October 31, 1994 compared with $12.7 million at October 31, 1993.
These past-due amounts represent 0.28 percent and 0.37 percent of the total
Receivables and Leases held at those respective dates. The balance (principal
plus earned interest) of retail notes outstanding with any installments 60 days
or more past due was $23.9 million at October 31, 1994 compared with $33.0
million one year earlier. The amount of retail note installments 60 days or
more past due was $5.5 million at October 31, 1994 and $6.8 million at October
31, 1993. These past-due installments represented 0.17 percent of the unpaid
balance of retail notes at October 31, 1994 and 0.24 percent at October 31,
1993.
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The total balance of revolving charge accounts receivable 60 days or more
past due was $5.6 million at October 31, 1994 compared with $5.3 million at
October 31, 1993. These past-due amounts represented 1.28 percent and 1.61
percent of the revolving charge accounts receivable held at each of those
respective dates.
The total balance of financing and operating lease payments 60 days or more
past due was $.6 million at October 31, 1994 compared with $.5 million at
October 31, 1993. These past-due installments represented 0.24 percent and 0.25
percent of the investment in financing and operating leases at those respective
dates.
At October 31, 1994, the Company's allowance for credit losses on
all Receivables and Leases financed, totaled $80 million and represented 1.9
percent of the total Receivables and Leases financed compared with $77 million
and 2.3 percent, respectively, one year earlier. Deposits withheld from dealers
and merchants, representing mainly the aggregate retail note and lease
withholding accounts from individual John Deere dealers to which losses from
retail notes and lease originating from the respective dealers can be charged,
amounted to $111 million at October 31, 1994 compared to $105 million at October
31, 1993.
The Capital Corporation's consolidated net income for the fiscal year ended
October 31, 1994 was $104.9 million compared with income before the cumulative
effect of accounting changes of $111.0 million in 1993 ($107.2 million after the
accounting changes). The decrease reflects the impact of increased borrowings
resulting from higher dividend payouts during the year, lower gains from the
sale of retail notes and higher operating expenses, partially offset by
securitization and servicing fee income from retail notes previously sold but
still administered. The ratio of earnings to fixed charges was 1.96 to 1 for
1994 compared with 1.99 to 1 (excluding the effects of accounting changes) in
1993.
Total revenues of $463 million in 1994 were down slightly from $466 million
in 1993. Revenues were affected by lower gains from the sale of retail notes
and lower average interest rates resulting in lower finance charges earned in
1994. These decreases in revenues were partially offset by the previously
mentioned increase in securitization and servicing income. Lower average
borrowing rates this year resulted in a slight decrease in interest expense,
which totaled $167 million in 1994 compared with $168 million in 1993. Average
borrowings were $3.235 billion in 1994 compared with $3.127 billion in 1993.
The weighted average annual interest rate incurred on all interest-bearing
borrowings this year declined to 4.9 percent from 5.1 percent in 1993.
Finance income earned on retail notes was $293 million this year compared
with $314 million in 1993, a decrease of seven percent. The average balance of
the retail note portfolio financed during 1994 was three percent lower than the
comparable 1993 average balance.
Revenues earned on revolving charge accounts amounted to $67 million in
1994, a 24 percent increase over revenues of $54 million earned during 1993.
This increase was primarily due to a 24 percent increase in the average balance
of Farm Plan receivables financed and a 32 percent increase in the average
balance of John Deere Credit Revolving Plan receivables financed in 1994
compared with 1993.
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The average net investment in financing and operating leases increased by
19 percent in 1994 compared with 1993. Correspondingly, total lease revenues
increased to $43.6 million in 1994 compared with $39.6 million in 1993.
The net gain on retail notes sold totaled $10.3 million during 1994
compared with $15.6 million for 1993. The Company received proceeds from the
sale of retail notes in the amount of $560 million during 1994 and $1.143
billion in 1993. Securitization and servicing fee income totaled $28.6 million
in 1994 compared with $22.3 million during 1993. Securitization and servicing
fee income relates to retail notes sold to limited-purpose business trusts and
primarily includes the amortization of present value receivable amounts from the
trusts established at the time of sale, adjustments related to those sales and
reimbursed administrative expenses received from the trusts. Additional sales
of retail notes are expected to be made in the future.
Administrative and operating expenses increased seven percent to $80
million in 1994 compared with $75 million in 1993. These expenses increased
primarily due to the costs of employee reductions.
The provision for credit losses was $28 million in both 1994 and 1993.
Total write-offs of Receivables and Leases financed were $20.8 million during
1994 compared with $26.1 million in 1993. The decline in write-offs from 1993
related to a decrease in the amount of recreational product write-offs. The
provision amount in 1994 exceeded the cost of write-offs due primarily to the
overall growth of Receivables and Leases financed.
1993 COMPARED WITH 1992
Total acquisitions of Receivables and Leases by the Company increased five
percent during 1993 compared with acquisitions in 1992. The higher acquisitions
in 1993 resulted from an increased volume of John Deere leases, revolving charge
accounts and wholesale receivables, which more than offset lower acquisitions of
retail notes. Receivables and Leases held by the Company at October 31, 1993
totaled $3.437 billion compared with $4.060 billion at October 31, 1992. This
decrease resulted from sales of retail notes during 1993. Receivables and
Leases administered, which include retail notes previously sold but still
administered, amounted to $4.873 billion at the end of 1993 compared with $4.796
billion at October 31, 1992.
During 1993, retail notes (principal value financed) acquired by the
Company decreased three percent compared with 1992. Retail note acquisitions
totaled $2.136 billion during 1993 compared with 1992 acquisitions of $2.207
billion. Acquisitions of recreational product retail notes accounted for nine
percent of total note acquisitions in 1993 and 11 percent in 1992.
Retail note acquisitions from John Deere decreased by $22 million in 1993,
due primarily to a larger volume of cash purchases by John Deere customers and a
more competitive agricultural financing environment. Lower acquisitions of
agricultural and lawn and grounds care equipment notes were partially offset by
higher acquisitions of industrial equipment notes. Note acquisitions in 1993
from John Deere continued to represent a significant proportion of the total
United States retail sales of John Deere equipment.
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Acquisitions of recreational product retail notes, representing primarily
recreational vehicle and recreational marine product notes acquired from
independent dealers of several unrelated manufacturers, were $202 million in
1993 compared with $251 million in 1992. This decline was due mainly to a more
competitive market for recreational product financing and more selective
acquisition criteria.
At October 31, 1993, the amount of retail notes held by the Company was
$2.792 billion compared to $3.509 billion at October 31, 1992. Included in
these amounts were recreational product notes of $804 million in 1993 and $870
million in 1992. The balance of John Deere retail notes decreased from $2.639
billion at October 31, 1992 to $1.988 billion at the end of 1993, even though
retail notes acquired exceeded collections. This decrease resulted primarily
from the sale of retail notes during 1993. The Company periodically sells
retail notes as one of several funding techniques. In 1993 and in 1992, the
Company received proceeds of $1.143 billion and $455 million, respectively, from
the sale of retail notes to limited-purpose business trusts which utilized the
notes as collateral for the issuance of asset backed securities to the public.
During 1992, the Company also sold retail notes to other financial institutions
receiving proceeds of $228 million. The balance of retail notes administered by
the Company, which include retail notes previously sold, amounted to $4.185
billion at October 31, 1993, compared with $4.197 billion at October 31, 1992.
The balance of retail notes previously sold was $1,394 billion at October 31,
1993 compared with $688 million at October 31, 1992. On October 31, 1993, the
Company's maximum exposure under all retail note recourse provisions was $175
million.
Retail notes bearing variable finance rates totaled 57 percent of the total
retail note portfolio at October 31, 1993 compared with 54 percent at October
31, 1992. The Company actively manages interest rate risk through the issuance
of fixed-rate and variable-rate borrowings and the use of financial instruments
such as interest rate swaps and interest rate caps.
At the end of fiscal 1993, revolving charge accounts receivable totaled
$331 million, an increase of 24 percent compared with $268 million at October
31, 1992. The balance at October 31, 1993 included $147 million of John Deere
Credit Revolving Plan receivables (including a small balance of marine finance
receivables) and $184 million of Farm Plan receivables compared with $114
million and $154 million, respectively, at October 31, 1992. The John Deere
Credit Revolving Plan, which was introduced in 1993, contains terms that
increase the maximum amount financed, offer more attractive financing conditions
and provide more flexible payment terms. Revolving charge account acquisitions
increased 23 percent in 1993 compared with 1992.
The portfolio of financing leases totaled $85 million at both October 31,
1993 and October 31, 1992. The net investment in operating leases was $119
million and $85 million at the end of 1993 and 1992, respectively. Overall,
lease acquisitions increased 84 percent in 1993 primarily due to a new lease
program applicable to some models of John Deere tractors. In addition, $19
million of municipal leases were sold to Deere & Company during 1993 compared
with $21 million sold in 1992. At October 31, 1993, the unpaid balance of
leases sold to John Deere was $43 million compared with $48 million at
October 31, 1992.
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Wholesale notes on recreational vehicle and John Deere engine inventories
totaled $110 million at October 31, 1993 compared with $112 million at October
31, 1992.
Total Receivable and Lease amounts 60 days or more past due were $12.7
million at October 31, 1993 compared with $14.6 million at October 31, 1992.
These past-due amounts represented .37 percent of the total Receivables and
Leases held at October 31, 1993 and .36 percent at October 31, 1992. The
balance (principal plus earned interest) of retail notes outstanding with any
installment 60 days or more past due was $33.0 million at October 31, 1993
compared with $42.6 million one year earlier. The amount of retail note
installments 60 days or more past due was $6.8 million at October 31, 1993 and
$7.0 million at October 31, 1992. These past-due installments represented 0.24
percent of the unpaid balance of retail notes at October 31, 1993 and 0.20
percent at October 31, 1992.
The total balance of revolving charge accounts receivable 60 days or more
past due was $5.3 million at October 31, 1993 compared with $6.4 million at
October 31, 1992. These past due amounts represented 1.61 percent and 2.38
percent of the revolving charge accounts receivable held at each of those
respective dates.
The total balance of financing and operating lease payments 60 days or more
past due was $.5 million at October 31, 1993 compared with $1.2 million at
October 31, 1992. These past-due installments represented 0.25 percent and 0.69
percent of the investment in financing and operating leases at those respective
dates.
At October 31, 1993, the Company's allowance for credit losses, totaled $77
million and represented 2.3 percent of the total Receivables and Leases financed
compared with $83 million and 2.0 percent, respectively, one year earlier.
Deposits withheld from dealers and merchants, which are available for potential
credit losses, totaled $105 million at October 31, 1993 compared with $101
million one year earlier.
The Capital Corporation's consolidated income for the fiscal year ended
October 31, 1993, before the cumulative effect of adopting new accounting
standards related to postretirement and postemployment benefits, was $111.0
million compared with 1992 net income of $95.0 million. The ratio of earnings
before fixed charges to fixed charges was 1.99 to 1 (excluding the effects of
accounting changes) for 1993 compared with 1.74 to 1 in 1992. The improvement
in net income resulted primarily from higher securitization and servicing fee
income from retail notes previously sold, lower credit losses, higher financing
margins, and increased gains from the sale of retail notes, which more than
offset the effects of a lower balance of Receivables and Leases financed. Net
income totaled $107.2 million in 1993, including the cumulative effect of
adopting Financial Accounting Standards Board (FASB) Statement No. 106,
Employers' Accounting for Postretirement Benefits Other Than Pensions, and FASB
Statement No. 112, Employers' Accounting for Postemployment Benefits.
Total revenues decreased one percent during 1993 to $466 million compared
with $471 million in 1992. The average balance of total Receivables and Leases
financed was seven percent lower in 1993 compared with 1992 due primarily to the
sale of receivables during 1993. Revenues were also affected by the lower level
of interest rates and the corresponding lower finance charges earned in 1993
compared with 1992. These
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decreases in revenues were partially offset by higher securitization and
servicing fee income from retail notes previously sold. However, borrowing
rates were also lower in 1993 resulting in the slightly improved financing
margins. The lower borrowing rates and decrease in average borrowings in 1993
resulted in an 11 percent decrease in interest expense, which totaled $168
million in 1993 compared with $189 million in 1992. Average borrowings were
$3.127 billion in 1993, a seven percent decline from 1992 average borrowings of
$3.379 billion. The weighted average annual interest rate incurred on all
interest-bearing borrowings in 1993 declined to 5.1 percent from 5.4 percent in
1992.
Finance income earned on retail notes was $314 million in 1993 compared
with $356 million in 1992, a decrease of 12 percent. The average balance of the
retail note portfolio financed during 1993 was 10 percent lower than during
1992.
Revenues earned on revolving charge accounts amounted to $54 million in
1993, a 14 percent increase over revenues of $47 million earned during 1992.
This increase was primarily due to a 20 percent increase in the average balance
of Farm Plan receivables financed and a 15 percent increase in the average
balance of John Deere Credit Revolving Plan receivables financed in 1993
compared with 1992.
The average investment in financing and operating leases decreased by two
percent in 1993 compared with 1992. However, total lease revenues increased
eight percent to $39.6 million in 1993 compared with $36.8 million in 1992.
Lease revenues were favorably affected in 1993 by a significant increase in
rentals earned on operating leases.
The net gain on retail notes sold totaled $15.6 million during 1993
compared with $8.5 million for 1992. The Company received proceeds from the sale
of retail notes in the amount of $1.143 billion during 1993 and $683 million in
1992. Securitization and servicing fee income totaled $22.3 million in 1993
compared with $1.1 million during 1992. Securitization and servicing fee income
relates to retail notes sold to limited-purpose business trusts and includes the
amortization of present value receivable amounts from the trusts established at
the time of sale and reimbursed administrative expenses received from the
trusts. The amount of securitization and servicing fee income was small in 1992
because the first retail note sale to a trust occurred near the end of that
year.
Administrative and operating expenses increased 13 percent to $75 million
in 1993 compared with $66 million in 1992. These expenses increased primarily
due to higher employment costs and legal expenses. The Company incurred
additional costs associated with efforts relating to future growth and improving
the quality of the portfolio.
The provision for credit losses declined to $28 million in 1993 from $48
million in 1992 mainly as a result of improved credit experience resulting in
lower Receivable and Lease write-offs. The decline in write-offs related
particularly to recreational product retail notes and John Deere industrial
equipment retail notes.
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ACCOUNTING CHANGES
In the fourth quarter of 1993, the Company adopted FASB Statement No. 106,
Employers' Accounting for Postretirement Benefits Other Than Pensions, effective
November 1, 1992. Prior quarters of 1993 were restated as required by this
Statement. The Company elected to recognize the pretax transition obligation of
$5.4 million ($3.6 million net of deferred income taxes) as a one-time charge to
earnings in 1993. For years prior to 1993, postretirement benefits were
generally included in costs as covered expenses were actually incurred. The
adoption of FASB Statement No. 106 resulted in an incremental pretax expense of
$.2 million compared with the expense determined under the previous accounting
principle.
In the fourth quarter of 1993, the Company also adopted FASB Statement No.
112, Employers' Accounting for Postemployment Benefits, effective November 1,
1992. The Company previously accrued certain disability related benefits when
the disability occurred. Results for the first quarter of 1993 were restated
for the cumulative pretax charge resulting from this change in accounting as of
November 1, 1992, which totaled $.3 million ($.2 million net of deferred income
taxes). The adoption of FASB Statement No. 112 had an immaterial effect on 1993
expenses.
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 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.
Cash provided from the Company's operating activities was $160 million in
1994. Financing activities provided $363 million in 1994, resulting from a $910
million increase in outside borrowings which was partially offset by a $337
million decrease in payables to Deere & Company and dividend payments totaling
$210 million. The aggregate cash provided by operating activities, financing
activities and a $122 million decrease in cash
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and cash equivalents was used to increase credit receivables. Cash used for
investing activities totaled $646 million in 1994, primarily due to the cost of
Receivables and Leases acquired exceeding collections by $1.285 billion, which
was partially offset by the proceeds of $560 million from the securitization and
sale of receivables to the public. Other cash flows from investing activities
increased in 1994 mainly due to the collection activity on receivables
previously sold that were being held for payment to the trusts. See "Statement
of Consolidated Cash Flows" on page 30.
Over the past three years, operating activities have provided $473 million
in cash. Proceeds from the sale of receivables provided $2.446 billion. Cash
and cash equivalents decreased $76.5 million. These amounts were used mainly
to fund Receivable and Lease acquisitions which exceeded collections by $2.456
billion, a payment of $362 million in dividends and a decrease of $262 million
in net outside borrowings.
In common with other large finance and credit companies, the Company
actively manages the relationship of the types and amounts of its funding
sources to its Receivable and Lease portfolios in an effort to diminish risk due
to interest rate and currency fluctuations, while responding to favorable
competitive and financing opportunities. Accordingly, from time to time, the
Company enters into interest rate swap and interest rate cap agreements to hedge
its interest rate exposure in amounts corresponding to a portion of its
borrowings. See notes 4 and 5 to the consolidated financial statements for
further details. The credit and market risks under these agreements are not
considered to be significant.
Total interest-bearing indebtedness amounted to $3.350 billion at October
31, 1994 compared with $2.777 billion at October 31, 1993. Total borrowing
levels increased during 1994, generally corresponding with the level of
Receivables and Leases financed and dividends paid. Total short-term
indebtedness amounted to $2.316 billion at October 31, 1994 compared with $1.299
billion at October 31, 1993. See note 4 to the consolidated financial
statements. Total long-term indebtedness amounted to $1.034 billion at October
31, 1994 and $1.478 billion at October 31, 1993. See note 5 to the consolidated
financial statements. The ratio of total interest-bearing debt to stockholder's
equity was 5.3 to 1 and 3.8 to 1 at October 31, 1994 and October 31, 1993,
respectively.
In January 1994, the Company redeemed the $40 million balance of its
outstanding 9.35% subordinated debentures due 2003.
During 1994, the Capital Corporation issued $189 million and retired $355
million of medium-term notes. At October 31, 1994, $571 million of medium-term
notes were outstanding having original maturity dates of between one and six
years and interest rates that ranged from 4.5 percent to 8.9 percent.
At October 31, 1994, the Capital Corporation and Deere & Company, jointly,
had unsecured lines of credit with various banks in North America and overseas
totaling $2.508 billion which included a long-term credit agreement totaling
$1.675 billion. In addition, the Capital Corporation, Deere & Company, John
Deere Limited (Canada) and John Deere Finance Limited (Canada), jointly, had a
long-term credit agreement with various banks in North America and overseas
totaling $759 million. In total, the Capital Corporation had
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$3.267 billion in aggregate lines of credit available at October 31, 1994 of
which $1.301 billion were unused. For the purpose of computing unused credit
lines, the aggregate of 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. Annual facility fees on the credit
agreements are paid by Deere & Company and a portion is charged to the Capital
Corporation based on utilization.
The Capital Corporation paid cash dividends to John Deere Credit Company of
$210 million in 1994 and $82 million in 1993. In each case, John Deere Credit
Company paid a comparable dividend to Deere & Company. During the first quarter
of 1995, the Capital Corporation declared and paid a dividend of $15 million to
John Deere Credit Company which, in turn, declared and paid a dividend of $15
million to Deere & Company.
ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA.
See accompanying table of contents of financial statements.
ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND
FINANCIAL DISCLOSURE.
None.
PART III
ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT.
Omitted pursuant to instruction J(2).
ITEM 11. EXECUTIVE COMPENSATION.
Omitted pursuant to instruction J(2).
ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT.
Omitted pursuant to instruction J(2).
ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS.
Omitted pursuant to instruction J(2).
22
<PAGE>
PART IV
ITEM 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES, AND REPORTS ON FORM 8-K.
(a) (1) Financial Statements
(2) Financial Statement Schedules
See the table of contents to financial statements and schedules
immediately preceding the financial statements and schedules to
consolidated financial statements.
(3) Exhibits
See the index to exhibits immediately preceding the exhibits filed
with this report.
(b) Reports on Form 8-K
Current Report on Form 8-K dated August 23, 1994 (Items 5 and 7).
Current Report on Form 8-K dated October 12, 1994 (Item 5).
23
<PAGE>
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) 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
By: /s/ Hans W. Becherer
---------------------------------
Hans W. Becherer, Chairman
Date: 24 January 1995
Pursuant to the requirements of the Securities Exchange Act of 1934, this
report has been signed below by the following persons on behalf of the
registrant and in the capacities and on the date indicated.
Signature Title Date
--------- ----- ----
/s/ Hans W. Becherer Director, Chairman and Principal ) 24 January 1995
- - -------------------- Executive Officer )
Hans W. Becherer )
)
/s/ J. W. England Director )
- - -------------------- )
J. W. England )
)
/s/ B. L. Hardiek Director )
- - -------------------- )
B. L. Hardiek )
)
/s/ J. R. Heseman Director )
- - -------------------- )
J. R. Heseman )
)
/s/ D. E. Hoffmann Director )
- - -------------------- )
D. E. Hoffmann )
)
/s/ F. F. Korndorf Director )
- - -------------------- )
F. F. Korndorf )
)
/s/ J. K. Lawson Director )
- - -------------------- )
J. K. Lawson )
)
/s/ Pierre E. Leroy Director, Vice President and )
- - -------------------- Principal Financial Officer )
Pierre E. Leroy )
)
/s/ M. P. Orr Director and President )
- - -------------------- )
M. P. Orr )
24
<PAGE>
/s/ J. S. Robertson Vice President and Principal ) 24 January 1995
- - -------------------- Accounting Officer )
J. S. Robertson )
)
/s/ E. L. Schotanus Director )
- - -------------------- )
E. L. Schotanus )
)
/s/ D. H. Stowe, Jr. Director )
- - -------------------- )
D. H. Stowe, Jr. )
)
/s/ J. D Volkert Director )
- - -------------------- )
J. D. Volkert )
)
/s/ S. E. Warren Director )
- - -------------------- )
S. E. Warren )
25
<PAGE>
[DELOITTE & TOUCHE LLP LETTERHEAD]
INDEPENDENT AUDITORS' REPORT
John Deere Capital Corporation:
We have audited the accompanying consolidated balance sheets of John Deere
Capital Corporation and subsidiaries as of October 31, 1994 and 1993 and the
related statements of consolidated income and retained earnings and of
consolidated cash flows for each of the three years in the period ended
October 31, 1994. Our audits also included the financial statement schedule
listed in the Table of Contents on page 27. These financial statements and the
financial statement schedule are the responsibility of the Company's management.
Our responsibility is to express an opinion on the financial statements and
financial statement schedule based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for our opinion.
In our opinion, such consolidated financial statements present fairly, in all
material respects, the financial position of John Deere Capital Corporation and
subsidiaries at October 31, 1994 and 1993 and the results of their operations
and their cash flows for each of the three years in the period ended October 31,
1994 in conformity with generally accepted accounting principles. Also, in our
opinion, such financial statement schedule, when considered in relation to the
basic consolidated financial statements taken as a whole, presents fairly in all
material respects the information set forth therein.
As discussed in Note 1 to the Consolidated Financial Statements, effective
November 1, 1992 the Company changed its method of accounting for postretirement
benefits other than pensions.
/s/ Deloitte & Touche LLP
DELOITTE & TOUCHE LLP
Chicago, Illinois
December 9, 1994
26
<PAGE>
TABLE OF CONTENTS
PAGE
FINANCIAL STATEMENTS:
John Deere Capital Corporation and Subsidiaries (consolidated):
Statement of Consolidated Income and Retained Earnings
for the Years Ended October 31, 1994, 1993 and 1992 . . . . . . . 28
Consolidated Balance Sheet, October 31, 1994 and 1993 . . . . . . . 29
Statement of Consolidated Cash Flows for the Years Ended
October 31, 1994, 1993 and 1992 . . . . . . . . . . . . . . . . . 30
Notes to Consolidated Financial Statements . . . . . . . . . . . . . 31
FINANCIAL STATEMENT SCHEDULE:
Schedule II - Valuation and Qualifying Accounts for the
Years Ended October 31, 1994, 1993 and 1992 . . . . . . . . . . . 47
SCHEDULES OMITTED
The following schedules are omitted because of the absence of conditions
under which they are required:
I, III, IV, and V.
27
<PAGE>
STATEMENT OF CONSOLIDATED INCOME AND RETAINED EARNINGS
<TABLE>
<CAPTION>
- - -------------------------------------------------------------------------------------------------------
JOHN DEERE CAPITAL CORPORATION AND SUBSIDIARIES FOR THE YEAR ENDED OCTOBER 31
- - -------------------------------------------------------------------------------------------------------
(In millions of dollars) 1994 1993 1992
- - -------------------------------------------------------------------------------------------------------
REVENUES
- - -------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Finance income earned on retail notes $ 292.9 $ 314.2 $ 356.3
- - -------------------------------------------------------------------------------------------------------
Revolving charge account income 66.6 53.8 47.3
- - -------------------------------------------------------------------------------------------------------
Lease revenues 43.6 39.6 36.8
- - -------------------------------------------------------------------------------------------------------
Finance income earned on wholesale notes 11.0 10.3 9.5
- - -------------------------------------------------------------------------------------------------------
Net gain on retail notes sold 10.3 15.6 8.5
- - -------------------------------------------------------------------------------------------------------
Interest income from short-term investments 6.2 6.2 7.2
- - -------------------------------------------------------------------------------------------------------
Securitization and servicing fee income 28.6 22.3 1.1
- - -------------------------------------------------------------------------------------------------------
Interest income from Deere & Company 0.5 0.9 1.0
- - -------------------------------------------------------------------------------------------------------
Other income 3.4 3.1 3.2
- - -------------------------------------------------------------------------------------------------------
Total revenues 463.1 466.0 470.9
- - -------------------------------------------------------------------------------------------------------
EXPENSES
- - -------------------------------------------------------------------------------------------------------
Interest Expense:
- - -------------------------------------------------------------------------------------------------------
On obligations to others 163.3 165.8 189.2
- - -------------------------------------------------------------------------------------------------------
On notes payable to Deere & Company 3.3 2.0 0.1
- - -------------------------------------------------------------------------------------------------------
Total interest expense 166.6 167.8 189.3
- - -------------------------------------------------------------------------------------------------------
Operating Expenses:
- - -------------------------------------------------------------------------------------------------------
Administrative and operating expenses 79.7 74.5 65.9
- - -------------------------------------------------------------------------------------------------------
Provision for credit losses 27.8 28.1 48.5
- - -------------------------------------------------------------------------------------------------------
Fees paid to Deere & Company 6.4 7.1 8.3
- - -------------------------------------------------------------------------------------------------------
Depreciation of equipment on operating leases 20.8 19.2 16.0
- - -------------------------------------------------------------------------------------------------------
Total operating expenses 134.7 128.9 138.7
- - -------------------------------------------------------------------------------------------------------
Total expenses 301.3 296.7 328.0
- - -------------------------------------------------------------------------------------------------------
Income before income taxes and changes in accounting 161.8 169.3 142.9
- - -------------------------------------------------------------------------------------------------------
Provision for income taxes 56.9 58.3 47.9
- - -------------------------------------------------------------------------------------------------------
Income before changes in accounting 104.9 111.0 95.0
- - -------------------------------------------------------------------------------------------------------
Changes in accounting (3.8)
- - -------------------------------------------------------------------------------------------------------
Net income $ 104.9 $ 107.2 $ 95.0
- - -------------------------------------------------------------------------------------------------------
Cash dividends paid (210.0) (82.0) (70.0)
- - -------------------------------------------------------------------------------------------------------
Retained earnings at beginning of the year 626.3 601.1 576.1
- - -------------------------------------------------------------------------------------------------------
Retained earnings at end of the year $ 521.2 $ 626.3 $ 601.1
- - -------------------------------------------------------------------------------------------------------
Ratio of earnings to fixed charges 1.96 1.99* 1.74
- - -------------------------------------------------------------------------------------------------------
<FN>
* Excludes effect of accounting changes.
</TABLE>
The accompanying Notes to Consolidated Financial Statements on pages 31 to 46
are an integral part of this statement
28
<PAGE>
CONSOLIDATED BALANCE SHEET
<TABLE>
<CAPTION>
- - -------------------------------------------------------------------------------------------------------
JOHN DEERE CAPITAL CORPORATION AND
SUBSIDIARIES OCTOBER 31
- - -------------------------------------------------------------------------------------------------------
(In millions of dollars) 1994 1993
<S> <C> <C>
- - -------------------------------------------------------------------------------------------------------
ASSETS
- - -------------------------------------------------------------------------------------------------------
Cash and cash equivalents $ 42.9 $ 165.2
- - -------------------------------------------------------------------------------------------------------
Receivables and leases:
- - -------------------------------------------------------------------------------------------------------
Retail notes 3,289.2 2,791.7
- - -------------------------------------------------------------------------------------------------------
Revolving charge accounts 437.3 331.1
- - -------------------------------------------------------------------------------------------------------
Financing leases 117.7 84.9
- - -------------------------------------------------------------------------------------------------------
Wholesale notes 142.2 109.6
- - -------------------------------------------------------------------------------------------------------
Total receivables 3,986.4 3,317.3
- - -------------------------------------------------------------------------------------------------------
Equipment on operating leases 125.2 119.3
- - -------------------------------------------------------------------------------------------------------
Total receivables and leases 4,111.6 3,436.6
- - -------------------------------------------------------------------------------------------------------
Allowance for credit losses (80.1) (77.5)
- - -------------------------------------------------------------------------------------------------------
Total receivables and leases - net 4,031.5 3,359.1
- - -------------------------------------------------------------------------------------------------------
Other receivables 155.1 182.8
- - -------------------------------------------------------------------------------------------------------
Other assets 60.1 46.4
- - -------------------------------------------------------------------------------------------------------
TOTAL $4,289.6 $3,753.5
- - -------------------------------------------------------------------------------------------------------
- - -------------------------------------------------------------------------------------------------------
LIABILITIES AND STOCKHOLDER'S EQUITY
- - -------------------------------------------------------------------------------------------------------
Short-term borrowings:
- - -------------------------------------------------------------------------------------------------------
Commercial paper $1,580.7 $ 454.0
- - -------------------------------------------------------------------------------------------------------
Deere & Company 102.7 439.5
- - -------------------------------------------------------------------------------------------------------
Current maturities of long-term borrowings 632.8 405.2
- - -------------------------------------------------------------------------------------------------------
Total short-term borrowings 2,316.2 1,298.7
- - -------------------------------------------------------------------------------------------------------
Accounts payable and accrued liabilities:
- - -------------------------------------------------------------------------------------------------------
Accrued interest on notes and debentures 37.4 41.1
- - -------------------------------------------------------------------------------------------------------
Other payables 142.8 79.4
- - -------------------------------------------------------------------------------------------------------
Total accounts payable and accrued liabilities 180.2 120.5
- - -------------------------------------------------------------------------------------------------------
Deposits withheld from dealers and merchants 111.4 104.9
- - -------------------------------------------------------------------------------------------------------
Long-term borrowings:
- - -------------------------------------------------------------------------------------------------------
Notes and debentures 734.5 1,178.2
- - -------------------------------------------------------------------------------------------------------
Subordinated debt 300.0 300.0
- - -------------------------------------------------------------------------------------------------------
Total long-term borrowings 1,034.5 1,478.2
- - -------------------------------------------------------------------------------------------------------
Retirement benefit accruals and other liabilities 13.3 12.1
- - -------------------------------------------------------------------------------------------------------
Stockholder's equity:
- - -------------------------------------------------------------------------------------------------------
Common stock, without par value (issued
- - -------------------------------------------------------------------------------------------------------
and outstanding - 2,500 shares owned
- - -------------------------------------------------------------------------------------------------------
by John Deere Credit Company) 112.8 112.8
- - -------------------------------------------------------------------------------------------------------
Retained earnings 521.2 626.3
- - -------------------------------------------------------------------------------------------------------
Total stockholder's equity 634.0 739.1
- - -------------------------------------------------------------------------------------------------------
TOTAL $4,289.6 $3,753.5
- - -------------------------------------------------------------------------------------------------------
</TABLE>
The accompanying Notes to Consolidated Financial Statements on pages 31 to 46
are an integral part of this statement.
- - --------------------------------------------------------------------------------
29
<PAGE>
STATEMENT OF CONSOLIDATED CASH FLOWS
<TABLE>
<CAPTION>
- - -------------------------------------------------------------------------------------------------------
JOHN DEERE CAPITAL CORPORATION AND SUBSIDIARIES FOR THE YEAR ENDED OCTOBER 31
- - -------------------------------------------------------------------------------------------------------
(In millions of dollars) 1994 1993 1992
<S> <C> <C> <C>
- - -------------------------------------------------------------------------------------------------------
CASH FLOWS FROM OPERATING ACTIVITIES
- - -------------------------------------------------------------------------------------------------------
Net income $ 104.9 $ 107.2 $ 95.0
- - -------------------------------------------------------------------------------------------------------
Adjustments to reconcile net income to net cash
- - -------------------------------------------------------------------------------------------------------
provided by operating activities:
- - -------------------------------------------------------------------------------------------------------
Changes in accounting, cumulative net adjustment 3.8
- - -------------------------------------------------------------------------------------------------------
Provision for credit losses 27.8 28.1 48.5
- - -------------------------------------------------------------------------------------------------------
Provision for depreciation 22.6 21.0 17.9
- - -------------------------------------------------------------------------------------------------------
Deferred income taxes (3.0) 3.8 (4.8)
- - -------------------------------------------------------------------------------------------------------
Other 7.8 (6.6) (1.4)
- - -------------------------------------------------------------------------------------------------------
Net cash provided by operating activities 160.1 157.3 155.2
- - -------------------------------------------------------------------------------------------------------
- - -------------------------------------------------------------------------------------------------------
CASH FLOWS FROM INVESTING ACTIVITIES
- - -------------------------------------------------------------------------------------------------------
Cost of receivables and leases acquired (3,941.9) (3,340.6) (3,180.4)
- - -------------------------------------------------------------------------------------------------------
Collections of receivables 2,656.6 2,642.5 2,708.0
- - -------------------------------------------------------------------------------------------------------
Proceeds from sales of receivables 580.2 1,161.7 703.6
- - -------------------------------------------------------------------------------------------------------
Other 59.5 13.9 14.7
- - -------------------------------------------------------------------------------------------------------
Net cash provided by (used for) investing activities (645.6) 477.5 245.9
- - -------------------------------------------------------------------------------------------------------
- - -------------------------------------------------------------------------------------------------------
CASH FLOWS FROM FINANCING ACTIVITIES
- - -------------------------------------------------------------------------------------------------------
Increase (decrease) in notes payable to others 1,126.8 (1,032.7) (615.1)
- - -------------------------------------------------------------------------------------------------------
Change in receivable/payable with Deere & Company (336.9) 373.9 (39.5)
- - -------------------------------------------------------------------------------------------------------
Proceeds from issuance of long-term borrowings 188.5 687.0 522.7
- - -------------------------------------------------------------------------------------------------------
Principal payments on long-term borrowings (405.2) (506.9) (227.5)
- - -------------------------------------------------------------------------------------------------------
Dividends paid (210.0) (82.0) (70.0)
- - -------------------------------------------------------------------------------------------------------
Net cash provided by (used for) financing activities 363.2 (560.7) (429.4)
- - -------------------------------------------------------------------------------------------------------
- - -------------------------------------------------------------------------------------------------------
Net increase (decrease) in cash and cash equivalents (122.3) 74.1 (28.3)
- - -------------------------------------------------------------------------------------------------------
Cash and cash equivalents at beginning of year 165.2 91.1 119.4
- - -------------------------------------------------------------------------------------------------------
Cash and cash equivalents at end of year $ 42.9 $ 165.2 $ 91.1
- - -------------------------------------------------------------------------------------------------------
- - -------------------------------------------------------------------------------------------------------
</TABLE>
The accompanying Notes to Consolidated Financial Statements on pages 31 to 46
are an integral part of this statement.
30
<PAGE>
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
NOTE 1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES.
CORPORATE ORGANIZATION
John Deere Capital Corporation (Capital Corporation) is a wholly-owned
subsidiary of John Deere Credit Company, a finance holding company which is
wholly-owned by Deere & Company. The Capital Corporation and its subsidiaries,
Deere Credit Services, Inc. (DCS), Farm Plan Corporation (FPC), Deere Credit,
Inc. (DCI), and John Deere Receivables, Inc. (JDRI), are collectively called the
Company. Deere & Company with its other wholly-owned subsidiaries are
collectively called John Deere.
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."
The risk of credit losses applicable to John Deere retail notes and leases,
net of recovery from withholdings from John Deere dealers, is borne by the
Company. During 1994, John Deere was compensated by the Company for originating
retail notes on John Deere products. John Deere is reimbursed by the Company
for staff support and other administrative services at estimated cost, and for
credit lines provided by Deere & Company based on utilization of the lines.
John Deere is compensated for originating leases on John Deere products and is
reimbursed for staff support in a manner similar to the procedures for retail
notes.
PRINCIPLES OF CONSOLIDATION
The consolidated financial statements include the financial statements of
the Capital Corporation and its subsidiaries, all of which are wholly-owned.
ACCOUNTING CHANGES
In the fourth quarter of 1993, the Company adopted FASB Statement No. 106,
Employers' Accounting for Postretirement Benefits Other Than Pensions, effective
November 1, 1992. Prior quarters of 1993 were restated as required by this
Statement. The Company elected to recognize the pretax transition obligation of
$5.4 million ($3.6 million net of deferred income taxes) as a one-time charge to
earnings in 1993. For years prior to 1993, postretirement benefits were
generally included in costs as covered expenses were actually incurred. The
adoption of FASB Statement No. 106 resulted in an incremental pretax expense of
$.2 million compared with the expense determined under the previous accounting
principle.
In the fourth quarter of 1993, the Company adopted FASB Statement No. 112,
Employers' Accounting for Postemployment Benefits, effective November 1, 1992.
The Company previously accrued certain disability related benefits when the
disability occurred. Results for the first quarter of 1993 were restated for
the cumulative pretax charge resulting from this change in accounting as of
November 1, 1992 which totaled $.3 million
31
<PAGE>
($.2 million net of deferred income taxes). The adoption of FASB Statement No.
112 had an immaterial effect on 1993 expenses.
RETAIL NOTES RECEIVABLE
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 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 retail notes unrelated
to John Deere, representing primarily 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).
Finance income included in the face amount of retail notes is amortized
into income over the lives of the notes on the effective-yield basis. Unearned
finance income on variable-rate notes is adjusted monthly based on fluctuations
in the base rate of a specified bank.
Costs incurred in the acquisition of retail notes are deferred and
amortized into income over the expected lives of the notes on the effective-
yield basis.
A portion of the finance income earned by the Company arises from retail
sales of John Deere equipment sold in advance of the season of use or in other
sales promotions by John Deere on which finance charges are waived by John Deere
for a period from the date of sale to a specified subsequent date. Some low-
rate financing programs are also offered by John Deere. The Company receives
compensation from John Deere equal to a competitive interest rate for periods
during which finance charges have been waived or reduced on retail notes and
leases. The portions of the Company's finance income earned that were received
from John Deere on retail notes containing waiver of finance charges or reduced
rates were 14 percent in 1994, 19 percent in 1993 and 17 percent in 1992.
A deposit equal to one percent of the face amount of John Deere
agricultural and lawn and grounds care equipment retail notes originating from
each dealer is withheld from that dealer and recorded by the Company. Any
subsequent retail note losses are charged against the withheld deposits. To the
extent that a loss on a retail note cannot be absorbed by deposits withheld from
the dealer from which the retail note was acquired, it is charged against the
Company's allowance for credit losses. At the end of each calendar year, the
balance of each dealer's withholding account in excess of a specified percent
(currently 3 percent) of the total balance outstanding on retail notes
originating with that dealer is remitted to the dealer, and any negative balance
in the dealer withholding account is written off and absorbed by the Company's
allowance for credit losses.
All John Deere industrial equipment retail notes are currently acquired on
a non-recourse basis and there is no withholding of dealer deposits on those
notes. This procedure originated in January 1992. Industrial notes acquired
prior to January 1992 remain subject to the agricultural and lawn and grounds
care equipment procedures, noted in the above paragraph, until the notes are
paid in full, or the withholding accounts are
32
<PAGE>
depleted. Because of this change, the allowance for credit losses was increased
to compensate for the additional credit risk. The Company does not withhold
deposits on recreational product retail notes.
The Company requires that theft and physical damage insurance be carried on
all goods leased or securing retail notes. In most cases, the customer may, at
his own expense, have the Company or the seller of the goods purchase this
insurance or obtain it from other sources. Theft and physical damage insurance
is also required on wholesale notes and can be purchased through the Company or
from other sources. Insurance is not required on revolving charge accounts.
Generally, when an account becomes 120 days delinquent, accrual of finance
income is suspended, the collateral is repossessed or the account is designated
for litigation, and the estimated uncollectible amount, after charging the
dealer's withholding account, if any, is written off to the allowance for credit
losses.
REVOLVING CHARGE ACCOUNTS RECEIVABLE
Revolving charge account income is generated primarily by two revolving
credit products: Farm Plan and the John Deere Credit Revolving Plan.
Farm Plan is primarily used by agri-businesses to finance customer
purchases, such as parts and service labor, which would otherwise be carried by
the merchants as accounts receivable. Farm Plan income includes a discount paid
by merchants for the purchase of customer accounts and finance charges paid by
customers on their outstanding revolving charge account balances. Merchant
recourse and a merchant reserve are established on some receivables purchased.
The John Deere Credit Revolving Plan is used primarily by retail customers
of John Deere dealers to finance lawn and grounds care equipment. Income
includes a discount paid by dealers on most transactions and finance charges
paid by customers on their outstanding account balances.
Accrual of revolving charge account income is suspended generally when an
account becomes 120 days delinquent. Accounts are deemed to be uncollectible
and written off to the allowance for credit losses when delinquency reaches 180
days for a Farm Plan account and 150 days for John Deere Credit Revolving Plan
accounts.
DIRECT FINANCING LEASES AND EQUIPMENT ON OPERATING LEASES
The Company leases John Deere agricultural equipment, industrial equipment
and lawn and grounds care equipment directly to retail customers.
At the time of accepting a lease that qualifies as a direct financing lease
under FASB Statement No. 13, the Company records the gross amount of lease
payments receivable, estimated residual value of the leased equipment for non-
purchase option leases and unearned lease income. The unearned lease income is
equal to the excess of the gross lease receivable plus the estimated residual
value over the cost of the
33
<PAGE>
equipment. The unearned lease income is recognized as revenue over the lease
term on the effective-yield method.
Leases that do not meet the criteria for direct financing leases as
outlined by FASB Statement No. 13 are accounted for as operating leases. Rental
payments applicable to equipment on operating leases are recorded as income on a
straight-line method over the lease terms. Operating lease assets are recorded
at cost and depreciated on a straight-line method over the terms of the leases.
Lease acquisition costs are accounted for in a manner similar to the
procedures for retail notes.
Deposits withheld from John Deere dealers and related losses on leases are
handled in a manner similar to the procedures for retail notes. In addition, a
lease payment discount program, allowing reduced payments over the term of the
lease, is administered in a manner similar to finance waiver on retail notes.
Equipment returned to the Company upon termination of leases and held for
subsequent sale or lease is recorded at the estimated wholesale market value of
the equipment.
Generally, when an account becomes 120 days delinquent, accrual of lease
revenue is suspended, the equipment is repossessed or the account is designated
for litigation and the estimated uncollectible amount, after charging the
dealer's withholding account, if any, is written off to the allowance for credit
losses.
WHOLESALE RECEIVABLES
The Company finances wholesale inventories of recreational vehicles,
manufactured housing units, yachts and John Deere engines owned by dealers of
those products. Wholesale finance income is recognized monthly based on the
daily balance of wholesale receivables outstanding and the applicable effective
interest rate. Interest rates vary with a prevailing bank base rate, the type
of equipment financed and the balance outstanding. Wholesale receivables are
secured by equipment financed. Although amounts are not withheld from dealers
to cover uncollectible receivables, there are repurchase agreements with
manufacturers for new inventories held by dealers. Generally, when an account
becomes 60 days delinquent, accrual of finance income is suspended, the
collateral is repossessed and the estimated uncollectible amount is written off
to the allowance for credit losses.
OTHER RECEIVABLES
During 1994 and 1993, the Company sold retail notes to limited-purpose
business trusts, which utilized the notes as collateral for the issuance of
asset backed securities to the public. At the time of the sales, "other
receivables" from the trusts were recorded at net present value. The
receivables relate to deposits made pursuant to recourse provisions and other
payments to be received under the sales agreements. The receivables will be
amortized to their value at maturity using the interest method. The
34
<PAGE>
Company is also compensated by the trusts for certain expenses incurred in the
administration of these receivables. Securitization and servicing fee income
includes the amortization of the above receivables, adjustments related to
those sales and reimbursed administrative expenses.
RECLASSIFICATIONS
Certain amounts for prior years have been reclassified to conform with the
1994 financial statement presentations.
NOTE 2. RECEIVABLES AND LEASES.
RETAIL NOTES RECEIVABLE
Retail notes receivable by product category at October 31 in millions of
dollars follow:
<TABLE>
<CAPTION>
- - --------------------------------------------------------------------------------
1994 1993
<S> <C> <C>
- - --------------------------------------------------------------------------------
Agricultural equipment - new $1,325.4 $ 993.1
- - --------------------------------------------------------------------------------
Agricultural equipment - used 999.7 840.0
- - --------------------------------------------------------------------------------
Industrial equipment - new 363.8 233.1
- - --------------------------------------------------------------------------------
Industrial equipment - used 110.3 71.8
- - --------------------------------------------------------------------------------
Lawn and grounds care equipment - new 163.3 175.1
- - --------------------------------------------------------------------------------
Lawn and grounds care equipment - used 19.9 22.2
- - --------------------------------------------------------------------------------
Recreational products 1,275.7 1,303.1
- - --------------------------------------------------------------------------------
Total 4,258.1 3,638.4
- - --------------------------------------------------------------------------------
Unearned finance income:
- - --------------------------------------------------------------------------------
John Deere (493.3) (347.7)
- - --------------------------------------------------------------------------------
Recreational products (475.6) (499.0)
- - --------------------------------------------------------------------------------
Total (968.9) (846.7)
- - --------------------------------------------------------------------------------
Retail notes receivable - net $3,289.2 $2,791.7
- - --------------------------------------------------------------------------------
</TABLE>
Retail note installments at October 31 are scheduled as follows in millions
of dollars:
<TABLE>
<CAPTION>
- - --------------------------------------------------------------------------------
1994 1993
- - --------------------------------------------------------------------------------
Due in:
- - --------------------------------------------------------------------------------
<S> <C> <C>
0-12 months $ 999.9 $ 871.5
- - --------------------------------------------------------------------------------
13-24 months 903.7 750.9
- - --------------------------------------------------------------------------------
25-36 months 745.8 618.2
- - --------------------------------------------------------------------------------
37-48 months 561.1 462.6
- - --------------------------------------------------------------------------------
49-60 months 388.0 308.8
- - --------------------------------------------------------------------------------
61-72 months 191.2 162.6
- - --------------------------------------------------------------------------------
Over 72 months 468.4 463.8
- - --------------------------------------------------------------------------------
Total $4,258.1 $3,638.4
- - --------------------------------------------------------------------------------
</TABLE>
35
<PAGE>
Company guidelines relating to down payment requirements and maximum
contract terms on retail notes are generally as follows:
<TABLE>
<CAPTION>
- - --------------------------------------------------------------------------------
Down Contract Terms
Payment
- - --------------------------------------------------------------------------------
<S> <C> <C>
Agricultural equipment, new and used:
- - --------------------------------------------------------------------------------
Seasonal payments 30% 7 crop years
- - --------------------------------------------------------------------------------
Monthly payments 20% 84 months
- - --------------------------------------------------------------------------------
Industrial equipment:
- - --------------------------------------------------------------------------------
New 20% 48-60 months
- - --------------------------------------------------------------------------------
Used 20% 36 months
- - --------------------------------------------------------------------------------
Lawn and grounds care equipment, new and used:
- - --------------------------------------------------------------------------------
Personal use 10% 72 months
- - --------------------------------------------------------------------------------
Commercial use 20% 72 months
- - --------------------------------------------------------------------------------
Recreational products:
- - --------------------------------------------------------------------------------
New 20% 180 months
- - --------------------------------------------------------------------------------
Used 20% 144 months
- - --------------------------------------------------------------------------------
</TABLE>
During 1994, the average effective yield on retail notes held by the
Company was approximately 9.4 percent compared with 9.8 percent in 1993.
Retail notes acquired by the Company during the year ended October 31, 1994
had an estimated average original term (based on dollar amounts) of 70 months.
During 1993 and 1992, the estimated average original term was 67 and 68 months,
respectively. Historically, because of prepayments, the average actual life of
retail notes has been considerably shorter than the average original term.
During 1994, the Company received proceeds of $560 million from the sale of
retail notes to limited-purpose business trusts, which utilized the notes as
collateral for the issuance of asset backed securities to the public. During
1993, the Company received proceeds of $1.143 billion from the sale of retail
notes.
At October 31, 1994 and 1993, the balance of all retail notes previously
sold by the Company was $1.175 billion and $1.394 billion, respectively.
Additional sales of retail notes are expected to be made in the future.
The Company recognizes any gain or loss at the time of the sale of retail
notes. The Company acts as agent for the buyers in collection and
administration of all the notes it has sold. The Company's maximum exposure
under all retail note recourse provisions at October 31, 1994 and 1993 was $140
million and $175 million, respectively. All retail notes sold are
collateralized by security agreements on the related machinery sold to the
customers.
REVOLVING CHARGE ACCOUNTS RECEIVABLE
Revolving charge accounts receivable at October 31, 1994 totaled $437
million compared with $331 million at October 31, 1993. Account holders may pay
the account balance in full at any time, or make payments over a number of
months according to a
36
<PAGE>
payment schedule. A minimum amount is due each month from customers selecting
the revolving payment option.
FINANCING LEASES RECEIVABLE
Financing leases receivable by product category at October 31 are as
follows in millions of dollars:
<TABLE>
<CAPTION>
- - --------------------------------------------------------------------------------
1994 1993
- - --------------------------------------------------------------------------------
<S> <C> <C>
Agricultural equipment $ 86.5 $ 68.5
- - --------------------------------------------------------------------------------
Industrial equipment 46.0 23.8
- - --------------------------------------------------------------------------------
Lawn and grounds care equipment 4.6 4.9
- - --------------------------------------------------------------------------------
Total 137.1 97.2
- - --------------------------------------------------------------------------------
Estimated residual values 1.7 2.3
- - --------------------------------------------------------------------------------
Unearned finance income (21.1) (14.6)
- - --------------------------------------------------------------------------------
Financing leases receivable $117.7 $ 84.9
- - --------------------------------------------------------------------------------
</TABLE>
Residual values represent the amounts estimated to be recoverable at
maturity from disposition of the leased equipment under non-purchase option
financing leases.
Initial lease terms for financing leases range from 12 months to 72 months.
Payments on financing leases receivable at October 31 are scheduled as follows
in millions of dollars:
<TABLE>
<CAPTION>
- - --------------------------------------------------------------------------------
1994 1993
- - --------------------------------------------------------------------------------
Due in:
- - --------------------------------------------------------------------------------
<S> <C> <C>
0-12 months $ 46.0 $ 35.4
- - --------------------------------------------------------------------------------
13-24 months 35.8 25.9
- - --------------------------------------------------------------------------------
25-36 months 27.8 18.3
- - --------------------------------------------------------------------------------
37-48 months 17.3 11.1
- - --------------------------------------------------------------------------------
Over 48 months 10.2 6.5
- - --------------------------------------------------------------------------------
Total $137.1 $ 97.2
- - --------------------------------------------------------------------------------
</TABLE>
The Company sold $20 million of municipal leases to Deere & Company in 1994
compared with $19 million in 1993. At October 31, 1994, the net balance of
leases sold was $39 million compared with $43 million at October 31, 1993.
WHOLESALE RECEIVABLES
Wholesale receivables at October 31, 1994 totaled $142 million compared
with $110 million at October 31, 1993. Generally, the maximum maturity for
wholesale notes is 12 months.
37
<PAGE>
EQUIPMENT ON OPERATING LEASES
The cost of equipment on operating leases by product category at October 31
follows in millions of dollars:
<TABLE>
<CAPTION>
- - --------------------------------------------------------------------------------
1994 1993
- - --------------------------------------------------------------------------------
<S> <C> <C>
Agricultural equipment $120.3 $102.4
- - --------------------------------------------------------------------------------
Industrial equipment 43.3 49.1
- - --------------------------------------------------------------------------------
Lawn and grounds care equipment 0.5 1.6
- - --------------------------------------------------------------------------------
Total 164.1 153.1
- - --------------------------------------------------------------------------------
Accumulated depreciation (38.9) (33.8)
- - --------------------------------------------------------------------------------
Equipment on operating leases - net $125.2 $119.3
- - --------------------------------------------------------------------------------
</TABLE>
Initial lease terms for equipment on operating leases range from 12 months
to 72 months. Rental payments for equipment on operating leases at October 31
are scheduled as follows in millions of dollars:
<TABLE>
<CAPTION>
- - --------------------------------------------------------------------------------
1994 1993
- - --------------------------------------------------------------------------------
Due in:
- - --------------------------------------------------------------------------------
<S> <C> <C>
0-12 months $ 28.3 $ 27.0
- - --------------------------------------------------------------------------------
13-24 months 11.8 17.7
- - --------------------------------------------------------------------------------
25-36 months 3.8 4.9
- - --------------------------------------------------------------------------------
37-48 months 1.7 1.6
- - --------------------------------------------------------------------------------
Over 48 months 0.4 0.2
- - --------------------------------------------------------------------------------
Total $ 46.0 $ 51.4
- - --------------------------------------------------------------------------------
</TABLE>
CONCENTRATION OF CREDIT RISK
Receivables and Leases have significant concentrations of credit risk in
the agricultural, industrial, lawn and grounds care, and recreational product
business sectors as shown in the previous tables. On a geographic basis, there
is not a disproportionate concentration of credit risk in any area of the United
States. The Company retains as collateral a security interest in the equipment
associated with Receivables and Leases other than revolving charge accounts.
FAIR VALUE
The estimated fair value of total Receivables and Leases was $4.107 billion
and $3.516 billion at October 31, 1994 and October 31, 1993, respectively,
compared with the carrying value of $4.112 billion and $3.436 billion on those
respective dates. The fair values of fixed-rate retail notes and financing
leases were based on the discounted values of their related cash flows at
current market interest rates. The fair values of variable-rate retail notes,
revolving charge accounts and wholesale notes approximate the carrying amounts.
38
<PAGE>
NOTE 3. ALLOWANCE FOR CREDIT LOSSES.
Allowances for credit losses on Receivables and Leases are maintained in
amounts considered to be appropriate in relation to the Receivables and Leases
outstanding based on estimated collectibility and collection experience. A
favorable $4.5 million adjustment was made in 1994 related to current and
expected losses on agricultural loans.
An analysis of the allowance for credit losses on total Receivables and
Leases follows in millions of dollars:
<TABLE>
<CAPTION>
- - --------------------------------------------------------------------------------
1994 1993 1992
- - --------------------------------------------------------------------------------
<S> <C> <C> <C>
Balance, beginning of the year $77.5 $ 83.0 $ 78.2
- - --------------------------------------------------------------------------------
Provision charged to operations 27.8 28.1 48.5
- - --------------------------------------------------------------------------------
Amounts written off (20.8) (26.1) (43.7)
- - --------------------------------------------------------------------------------
Transfers related to retail note sales (4.4) (7.5)
- - --------------------------------------------------------------------------------
Balance, end of the year $80.1 $ 77.5 $ 83.0
- - --------------------------------------------------------------------------------
</TABLE>
The allowance for credit losses represented 1.9 percent, 2.3 percent and
2.0 percent of Receivables and Leases outstanding at October 31, 1994, 1993 and
1992, respectively. In addition, the Company had $111 million, $105 million and
$101 million at October 31, 1994, 1993 and 1992, respectively, of deposits
withheld from John Deere dealers and Farm Plan merchants available for certain
potential credit losses originating from those dealers and merchants. The
provision for credit losses in 1994 reflects the growth in the total
Receivables and Leases portfolio, yet, it also reflects a favorable adjustment
related to current and expected losses on agricultural loans. The lower
provision in 1993, compared to 1992, resulted from a decrease in write-offs of
uncollectible Receivables and Leases, particularly recreational product retail
notes.
NOTE 4. SHORT-TERM BORROWINGS.
On October 31, 1994, short-term borrowings were $2.316 billion, $1.581
billion of which was commercial paper. Short-term borrowings were $1.299
billion one year ago, $454 million of which was commercial paper. Original
maturities of commercial paper outstanding on October 31, 1994 ranged up to 270
days. The weighted average remaining term of commercial paper outstanding on
October 31, 1994 was approximately 44 days. The Capital Corporation's short-
term debt also includes amounts borrowed from Deere & Company, which totaled
$103 million at October 31, 1994. The Capital Corporation pays a market rate of
interest to Deere & Company based on the average outstanding borrowings each
month. The weighted average interest rates on all short-term borrowings,
excluding current maturities of long-term borrowings, at October 31, 1994 and
1993 were 4.9 percent and 3.3 percent, respectively.
At October 31, 1994, the Capital Corporation and Deere & Company, jointly,
had unsecured lines of credit with various banks in North America and overseas
totaling $2.508 billion which included a long-term credit agreement totaling
$1.675 billion. In addition, the Capital Corporation, Deere & Company, John
Deere Limited (Canada) and John Deere Finance Limited (Canada), jointly, had a
long-term credit agreement with various banks in North America and overseas
totaling $759 million. In total, the Capital Corporation had
39
<PAGE>
$3.267 billion in aggregate lines of credit available at October 31, 1994 of
which $1.301 billion were unused. For the purpose of computing unused credit
lines, the aggregate of 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. Annual facility fees on the credit
agreements are paid by Deere & Company and a portion is charged to the Capital
Corporation based on utilization.
At October 31, 1994, the Capital Corporation had no borrowings outstanding
under the credit agreements. These agreements require the Capital Corporation to
maintain its consolidated ratio of earnings to fixed charges at no less than
1.05 to 1 for each fiscal quarter. In addition, the Capital Corporation's ratio
of senior debt to total stockholder's equity plus subordinated debt may not be
more than 8 to 1 at the end of any fiscal quarter. For purposes of these
calculations, "earnings" consist of income before income taxes 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. "Senior debt" consists of the
Company's total interest-bearing obligations, excluding subordinated debt, but
including borrowings from Deere & Company. The Company's ratio of earnings to
fixed charges was 1.96 to 1, 1.99 to 1 (excluding the effect of the accounting
changes), and 1.74 to 1 in 1994, 1993 and 1992, respectively. The Company's
ratio of senior debt to total stockholder's equity plus subordinated debt was
3.3 to 1 at October 31, 1994 compared with 2.2 to 1 at October 31, 1993.
In common with other large finance and credit companies, the Company
actively manages the relationship of the types and amounts of its funding
sources to its receivable and lease portfolios in an effort to hedge risks due
to interest rate and currency fluctuations, while responding to favorable
competitive and financing opportunities. Accordingly, from time to time, the
Company has entered into interest rate swap and interest rate cap agreements to
hedge its interest rate exposure in amounts corresponding to a portion of its
short-term borrowings. At October 31, 1994 and 1993, the total notional
principal amounts of interest rate swap agreements were $563 million and $510
million having rates of 3.6 to 9.6 percent terminating in up to 16 months and 28
months, respectively. The total notional principal amounts of interest rate cap
agreements at October 31, 1994 and 1993 were $33 million and $44 million having
capped rates of 6.3 percent to 9.0 percent terminating in up to 9 months and 15
months, respectively. The differential to be paid or received on all swap and
cap agreements is accrued as interest rates change and is recognized over the
lives of the agreements. The credit and market risk under these agreements is
not considered to be significant. The estimated fair value and carrying value
of these interest rate swap and cap agreements were not significant at October
31, 1994 and October 31, 1993.
40
<PAGE>
NOTE 5. LONG-TERM BORROWINGS.
Long-term borrowings of the Capital Corporation at October 31 consisted of
the following in millions of dollars:
<TABLE>
<CAPTION>
- - ------------------------------------------------------------------------------------------------------
1994 1993
- - ------------------------------------------------------------------------------------------------------
<S> <C> <C>
Senior Debt:
- - ------------------------------------------------------------------------------------------------------
Medium-term notes due 1995-2000 (average interest rate of $ 337.7 $ 382.0
- - ------------------------------------------------------------------------------------------------------
7.0% as of year end 1994 and 5.9% as of year end 1993)
- - ------------------------------------------------------------------------------------------------------
5% Debenture due 1995 150.0
- - ------------------------------------------------------------------------------------------------------
4-5/8% Debenture due 1996 200.0 200.0
- - ------------------------------------------------------------------------------------------------------
6.0% Notes due 1995 (swapped to variable interest rate of 100.0
- - ------------------------------------------------------------------------------------------------------
3.1% as of year end 1993)
- - ------------------------------------------------------------------------------------------------------
11-5/8% Notes due 1995 (swapped to variable interest rate of 150.0
- - ------------------------------------------------------------------------------------------------------
3.2% as of year end 1993)
- - ------------------------------------------------------------------------------------------------------
7.2% Debenture due 1997 100.0 100.0
- - ------------------------------------------------------------------------------------------------------
- - ------------------------------------------------------------------------------------------------------
5% Swiss Franc Bonds due 1999 (swapped to variable interest rate) 97.5 97.5
- - ------------------------------------------------------------------------------------------------------
of 5.8% as of year end 1994 and 3.7% as of year end 1993)
- - ------------------------------------------------------------------------------------------------------
Total 735.2 1,179.5
- - ------------------------------------------------------------------------------------------------------
Less unamortized debt discount 0.7 1.3
- - ------------------------------------------------------------------------------------------------------
Net Senior Debt 734.5 1,178.2
- - ------------------------------------------------------------------------------------------------------
- - ------------------------------------------------------------------------------------------------------
Subordinated Debt:
- - ------------------------------------------------------------------------------------------------------
9-5/8% Subordinated Notes due 1998 (swapped to variable interest 150.0 150.0
- - ------------------------------------------------------------------------------------------------------
rate of 5.9% as of year end 1994 and 3.8% as of year end 1993)
- - ------------------------------------------------------------------------------------------------------
8-5/8% Subordinated Debentures due 2019 (swapped to 150.0 150.0
- - ------------------------------------------------------------------------------------------------------
variable interest rate of 5.3% as of year end 1994 and
- - ------------------------------------------------------------------------------------------------------
3.2% as of year end 1993)
- - ------------------------------------------------------------------------------------------------------
Total Subordinated Debt 300.0 300.0
- - ------------------------------------------------------------------------------------------------------
- - ------------------------------------------------------------------------------------------------------
Total $1,034.5 $1,478.2
- - ------------------------------------------------------------------------------------------------------
</TABLE>
In 1994, the Capital Corporation issued $189 million and retired $355
million of medium-term notes. In January 1994, the Company redeemed the $40
million balance of its outstanding 9.35% subordinated debentures due 2003.
The Capital Corporation has entered into interest rate swap agreements with
independent parties that change the effective rate of interest on certain long-
term borrowings to a variable rate based on specified United States commercial
paper rate indices. The table reflects the effective year-end variable interest
rates relating to these swap agreements. The notional principal amounts and
maturity dates of these swap agreements are the same as the principal amounts
and maturities of the related borrowings. In addition, the Capital Corporation
has interest rate swap agreements corresponding to a portion of its fixed rate
long-term borrowings. The total notional principal amount of these interest
rate swap agreements was $302 and $347 million at October 31,1994 and October
31, 1993, respectively, having variable rates of 3.4 percent to 5.7 percent,
terminating in up to 28 months and 40 months, respectively. The Capital
41
<PAGE>
Corporation also has interest rate swap and cap agreements associated with
medium-term notes. The table reflects the interest rates relating to these swap
and cap agreements. At October 31, 1994 and 1993, the total notional principal
amounts of these swap agreements were $40 million and $138 million, terminating
in up to 45 months and 42 months, respectively. At October 31, 1993, the total
notional principal amount of these cap agreements was $25 million, terminating
in up to 22 months. A Swiss franc to United States dollar currency swap
agreement is also associated with the Swiss franc bonds in the table. The
credit and market risk under these agreements is not considered to be
significant.
The total estimated fair values of the Company's total long-term borrowings
were $1.028 billion and $1.496 billion at October 31, 1994 and October 31, 1993,
respectively. The corresponding carrying amounts of total long-term borrowings
were $1.035 billion and $1.478 billion on those respective dates. Fair values
of long-term borrowings with fixed rates were based on a discounted cash flow
model. Fair values of long-term borrowings, which have been swapped to current
variable interest rates, approximate their carrying amounts. The estimated fair
value and carrying value of the Company's interest rate swap and cap agreements
associated with medium-term notes were not significant at October 31, 1994 and
October 31, 1993.
The approximate amounts of long-term borrowings maturing and sinking fund
payments required in each of the next five years, in millions of dollars, are as
follows: 1995 - $633, 1996 - $262, 1997 - $309, 1998 - $193, 1999 - $248.
NOTE 6. FIXED CHARGE COVERAGE.
Deere & Company has expressed an intention of conducting its business with
the Company on such terms that the Company's consolidated ratio of earnings to
fixed charges will not be less than 1.05 to 1 for each fiscal quarter.
Financial support was not provided in 1994, 1993, or 1992, as the ratios were
1.96 to 1, 1.99 to 1 (excluding the effect of the accounting changes), and 1.74
to 1, respectively. This arrangement is not intended to make Deere & Company
responsible for the payment of obligations of the Company.
NOTE 7. COMMON STOCK.
All of the Company's common stock is owned by John Deere Credit Company, a
wholly-owned finance holding subsidiary of Deere & Company. No shares of common
stock of the Company were reserved for officers or employees or for options,
warrants, conversions or other rights at October 31, 1994 or 1993. At October
31, 1994, the Company had authorized, but not issued, 10,000 shares of $1 par
value preferred stock.
NOTE 8. DIVIDENDS.
The Capital Corporation paid cash dividends to John Deere Credit Company of
$210 million in 1994 and $82 million in 1993. In each case, John Deere Credit
Company paid a comparable dividend to Deere & Company. During the first quarter
of 1995, the
42
<PAGE>
Capital Corporation declared and paid a dividend of $15 million to
John Deere Credit Company which, in turn, declared and paid a dividend of $15
million to Deere & Company.
NOTE 9. PENSION AND OTHER RETIREMENT BENEFITS.
The Company participates in the Deere & Company salaried pension plan,
which is a defined benefit plan in which benefits are based primarily on years
of service and employees' compensation near retirement. This plan is funded
according to the 1974 Employee Retirement Income Security Act (ERISA) and income
tax regulations. Plan assets consist primarily of common stocks, common trust
funds, government securities and corporate debt securities. Pension expense is
actuarially determined based on the Company's employees included in the plan.
The Company's pension expense amounted to $1.5 million in both 1994 and 1993.
Further disclosure for the plan is included in the Deere & Company 1994 annual
report pension note.
During the fourth quarter of 1993, the Company adopted FASB Statement No.
106, Employers' Accounting for Postretirement Benefits Other Than Pensions,
effective November 1, 1992. Additional information is presented in the "Summary
of Significant Accounting Policies" on page 31, and the "Quarterly Data
(unaudited)" on page 46.
The Company generally provides defined benefit health care and life
insurance plans for retired employees. Health care and life insurance benefits
expense is actuarially determined based on the Company's employees included in
the plans and amounted to $.7 million in 1994 and $.6 million in 1993. The 1992
expenses were negligible as determined under the previous accounting principle.
NOTE 10. INCOME TAXES.
TAXES ON INCOME AND INCOME TAX CREDITS
The taxable income of the Company is included in the consolidated United
States income tax return of Deere & Company. Provisions for income taxes are
made generally as if the Capital Corporation and each of its subsidiaries filed
separate income tax returns.
43
<PAGE>
DEFERRED INCOME TAXES
Deferred income taxes arise because there are certain items that are
treated differently for financial accounting than for income tax reporting
purposes. An analysis of deferred income tax assets and liabilities at October
31 in millions of dollars follows:
<TABLE>
<CAPTION>
- - --------------------------------------------------------------------------------------------------------------------
1994 1993
- - --------------------------------------------------------------------------------------------------------------------
Deferred Deferred Deferred Deferred
Tax Tax Tax Tax
Assets Liabilities Assets Liabilities
- - --------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Allowance for credit losses $32.2 $27.1
- - --------------------------------------------------------------------------------------------------------------------
Deferred lease income $ 7.0 $ 4.1
- - --------------------------------------------------------------------------------------------------------------------
Deferred retail note finance income 4.6 1.5
- - --------------------------------------------------------------------------------------------------------------------
Accrual for retirement and postemployment benefits 2.2 2.1
- - --------------------------------------------------------------------------------------------------------------------
Partnership income 3.8
- - --------------------------------------------------------------------------------------------------------------------
Miscellaneous accruals and other .3 .4
- - --------------------------------------------------------------------------------------------------------------------
Total deferred income tax assets and liabilities $38.2 $11.9 $29.2 $ 6.0
- - --------------------------------------------------------------------------------------------------------------------
</TABLE>
The provision for income taxes consisted of the following in millions of
dollars:
<TABLE>
<CAPTION>
- - --------------------------------------------------------------------------------------------------
1994 1993 1992
- - --------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Current $ 59.9 $ 54.5 $ 52.7
- - --------------------------------------------------------------------------------------------------
Deferred (3.0) 3.8 (4.8)
- - --------------------------------------------------------------------------------------------------
Total provision for income taxes $ 56.9 $ 58.3 $ 47.9
- - --------------------------------------------------------------------------------------------------
</TABLE>
The Omnibus Budget Reconciliation Act of 1993, which enacted an increase in
the United States federal statutory income tax rate effective January 1, 1993,
was signed into law during the fourth quarter of 1993. In accordance with FASB
Statement No. 109, Accounting for Income Taxes, deferred tax assets and
liabilities as of the enactment date were revalued during the fourth quarter of
1993 using the new rate of 35 percent. This resulted in a credit of $.7 million
to the provision for income taxes.
EFFECTIVE INCOME TAX PROVISION
A comparison of the statutory and effective income tax provisions of the
Company and reasons for related differences follow in millions of dollars:
<TABLE>
<CAPTION>
- - -------------------------------------------------------------------------------------------------------
1994 1993 1992
- - -------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
United States federal income tax provision at a statutory rate of $56.6 $59.0 $48.6
- - -------------------------------------------------------------------------------------------------------
35 percent in 1994, 34.83 percent in 1993
- - -------------------------------------------------------------------------------------------------------
and 34 percent in 1992
- - --------------------------------------------------------------------------------------------------------
Municipal lease income not taxable (0.1) (0.3) (0.2)
- - -------------------------------------------------------------------------------------------------------
Effect of statutory tax rate change on deferred taxes (0.7)
- - -------------------------------------------------------------------------------------------------------
Other adjustments - net 0.4 0.3 (0.5)
- - -------------------------------------------------------------------------------------------------------
Total provision for income taxes $56.9 $58.3 $47.9
- - -------------------------------------------------------------------------------------------------------
</TABLE>
44
<PAGE>
NOTE 11. CASH FLOW INFORMATION.
For purposes of the statement of consolidated cash flows, the Company
considers investments with original maturities of three months or less to be
cash equivalents. Substantially all of the Company's short-term borrowings
mature within three months or less.
Cash payments by the Company for interest incurred on borrowings in 1994,
1993 and 1992 were $173.7 million, $134.8 million and $172.6 million,
respectively. Cash payments for income taxes during these same periods were
$59.7 million, $54.9 million and $53.0 million, respectively.
NOTE 12. LEGAL PROCEEDINGS.
The Company is subject to various unresolved legal actions which arise in
the normal course of its business. The most prevalent of such actions relates
to state and federal regulations concerning retail credit. There are various
claims and pending actions against the Company with respect to commercial and
consumer financing matters. These matters include lawsuits pending in federal
and state courts in Texas alleging that certain of the Company's retail finance
contracts for recreational vehicles and boats violate certain technical
provisions of Texas consumer credit statutes dealing with maximum rates,
licensing and disclosures. The plaintiffs in Texas claim they are entitled to
common law and statutory damages and penalties. The Company obtained
certification of a mandatory class in the 281st District Court for Harris
County, Texas, in a case named DEERE CREDIT, INC. V. SHIRLEY Y. MORGAN, ET AL.,
filed February 20, 1992. The Company believes that it has substantial defenses
and intends to defend the Morgan and other pending actions vigorously. Although
it is not possible to predict with certainty the outcome of these unresolved
legal actions, or reasonably estimate the range of possible loss and the amounts
of claimed damages and penalties are unspecified, the Company believes that
these unresolved legal actions will not be material.
45
<PAGE>
NOTE 13. QUARTERLY DATA (UNAUDITED).
Supplemental consolidated quarterly information for the Company follows in
millions of dollars:
<TABLE>
<CAPTION>
- - ----------------------------------------------------------------------------------------------------------------
First Second Third Fourth Fiscal
Quarter Quarter Quarter Quarter Year
- - ----------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
1994:
- - ----------------------------------------------------------------------------------------------------------------
Revenues $104.7 $107.2 $115.3 $135.9 $463.1
- - ----------------------------------------------------------------------------------------------------------------
Interest expense 35.9 36.3 43.7 50.7 166.6
- - ----------------------------------------------------------------------------------------------------------------
Operating expenses 33.5 31.0 32.0 38.2 134.7
- - ----------------------------------------------------------------------------------------------------------------
Income taxes 12.3 14.0 13.8 16.8 56.9
- - ----------------------------------------------------------------------------------------------------------------
Net income 23.0 25.9 25.8 30.2 104.9
- - ----------------------------------------------------------------------------------------------------------------
1993:
- - ----------------------------------------------------------------------------------------------------------------
Revenues $115.1 $116.7 $114.4 $119.8 $466.0
- - ----------------------------------------------------------------------------------------------------------------
Interest expense 43.6 42.8 40.7 40.7 167.8
- - ----------------------------------------------------------------------------------------------------------------
Operating expenses (1) 30.1 33.3 30.4 35.1 128.9
- - ----------------------------------------------------------------------------------------------------------------
Income taxes 14.0 13.8 14.7 15.8 58.3
- - ----------------------------------------------------------------------------------------------------------------
Income before changes in accounting (1) 27.4 26.8 28.6 28.2 111.0
- - ----------------------------------------------------------------------------------------------------------------
Changes in accounting (1) 3.8 3.8
- - ----------------------------------------------------------------------------------------------------------------
Net income 23.6 26.8 28.6 28.2 107.2
- - ----------------------------------------------------------------------------------------------------------------
<FN>
(1) In the fourth quarter of 1993, the Company adopted FASB Statements No.
106 and 112 relating to postretirement and postemployment benefits, effective
November 1, 1992. Accordingly, results for the first quarter of 1993 were
restated for the cumulative after-tax effect of these changes in accounting as
of November 1, 1992, which totaled $3.8 million. Previously reported income
before changes in accounting for the first three quarters of 1993 were also
restated to reflect incremental pretax postretirement benefits expense of $.2
million ($.1 million after income taxes) compared with expense under the
previous accounting principles. The fourth quarter of 1993 also included an
incremental pretax increase in the postretirement and postemployment benefits
expense of $.1 million compared with expense under the previous accounting
principles. Additional information relating to the adoption of FASB Statements
No. 106 and 112 is presented in the "Summary of Significant Accounting Policies"
on page 31.
</TABLE>
46
<PAGE>
SCHEDULE II
JOHN DEERE CAPITAL CORPORATION AND SUBSIDIARIES
VALUATION AND QUALIFYING ACCOUNTS
FOR THE YEARS ENDED OCTOBER 31, 1994, 1993 AND 1992
(IN THOUSANDS OF DOLLARS)
<TABLE>
<CAPTION>
- - ----------------------------------------------------------------------------------------------------------------------------------
- - ----------------------------------------------------------------------------------------------------------------------------------
COLUMN A COLUMN B COLUMN C COLUMN D COLUMN E
-------- -------- -------- -------- --------
Additions Deductions
Balance at ------------------------------------ ---------------------------------
Beginning Charged to Costs Charged to Other Balance at
Description of Year and Expenses Accounts-Explain Description Amount End of Year
- - ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Year Ended October 31, 1994:
Reserve deducted from the asset
to which it applies-
Credit losses Transfers related
to retail note sales $4,390
Uncollectible receivables $20,805 $80,122
--------- ---------
Total $77,486 $27,831 Total Deductions $25,195 $80,122
--------- --------- --------- ---------
--------- --------- --------- ---------
Year Ended October 31, 1993:
Reserve deducted from the asset
to which it applies-
Credit losses Transfers related
to retail note sales $7,511
Uncollectible receivables $26,094 $77,486
--------- ---------
Total $83,002 $28,089 Total Deductions $33,605 $77,486
--------- --------- --------- ---------
--------- --------- --------- ---------
Year ended October 31, 1992:
Reserve deducted from the asset
to which it applies-
Credit losses
Total $78,159 $48,497 Uncollectible receivables $43,654 $83,002
--------- --------- --------- ---------
--------- --------- --------- ---------
- - ------------------------------------------------------------------------------------------------------------------------------------
- - ------------------------------------------------------------------------------------------------------------------------------------
</TABLE>
47
<PAGE>
INDEX TO EXHIBITS
3.1 Certificate of Incorporation, as amended.
3.2 Bylaws, as amended.
4.1 Credit agreements among registrant, Deere & Company, various financial
institutions, and Chemical Bank and Deutsche Bank, as Managing Agents,
dated as of December 15, 1993 (Exhibit 4.1 to Form 10-K of the registrant
for the year ended October 31, 1993*).
4.2 Revolving evergreen facility linked credit agreement among registrant,
Deere & Company and a number of banks dated as of March 26, 1993 (Exhibit
4.2 to Form 10-Q of the registrant for the quarter ended April 30, 1993*).
4.3 Form of certificate for common stock (Exhibit 4.3 to Form 10-Q of the
registrant for the quarter ended April 30, 1993*).
4.4 Indenture dated as of February 15, 1991 between registrant and Citibank,
N.A., as Trustee (Exhibit 4.5 to Form 10-Q of the registrant for the
quarter ended April 30, 1993*).
9. Not applicable.
10.1 Agreement dated May 11, 1993 between registrant and Deere & Company
concerning agricultural retail notes (Exhibit 10.1 to Form 10-Q of
registrant for the quarter ended April 30, 1993*).
10.2 Agreement dated May 11, 1993 between registrant and Deere & Company
concerning lawn and grounds care retail notes (Exhibit 10.2 to Form 10-Q of
the registrant for the quarter ended April 30, 1993*).
10.3 Agreement dated May 11, 1993 between registrant and John Deere Industrial
Equipment Company concerning industrial retail notes (Exhibit 10.3 to Form
10-Q of the registrant for the quarter ended April 30, 1993*).
10.4 Agreement dated January 26, 1983 between registrant and Deere & Company
relating to agreements with United States sales branches on retail notes
(Exhibit 10.4 to Form 10-Q of the registrant for the quarter ended April
30, 1993*).
10.5 Insurance policy no. CL-001 of Sierra General Life Insurance Company
providing insurance on lives of purchasers of certain equipment financed
with receivables (Exhibit 10.5 to Form 10-Q of the registrant for the
quarter ended April 30, 1993*).
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11. Not applicable.
12. Statement of computation of the ratio of earnings before fixed charges to
fixed charges for each of the five years in the period ended October 31,
1994.
13. Not applicable.
16. Not applicable.
18. Not applicable.
21. Omitted pursuant to instruction J(2).
22. Not applicable.
23. Consent of Deloitte & Touche.
24. Not applicable.
27. Financial Data Schedule.
28. Not applicable.
99. Parts I and II of the Deere & Company Form 10-K for the fiscal year ended
October 31, 1994.*
__________________________
* Incorporated by reference. Copies of these exhibits are available from
the Company upon request.
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EXHIBIT 3.1
CERTIFICATE OF INCORPORATION
OF
JOHN DEERE CAPITAL CORPORATION
(As Adopted July 18, 1958)
(As Amended effective September 2, 1994)
FIRST. The name of the corporation is
JOHN DEERE CAPITAL CORPORATION
SECOND. Its principal office in the State of Delaware is located at
No. 100 West Tenth Street, in the City of Wilmington, County of New Castle. The
name and address of its resident agent is The Corporation Trust Company, No. 100
West Tenth Street, Wilmington 99, Delaware.
THIRD. The nature of the business, or objects or purposes to be
transacted, promoted or carried on are:
(a) To carry on the business of a finance company, and to
perform any acts and engage in any activities or functions generally
performed or engaged in by finance companies, and nothing in
subsequent paragraphs of this Certificate of Incorporation shall limit
the generality of this statement.
(b) To purchase or otherwise acquire, sell, hypothecate or
otherwise dispose of, and generally to trade and deal in:
(i) Obligations and contracts of all kinds, however arising,
whether of persons, partnerships, associations, corporations
or other entities, whether secured or unsecured, whether or
not evidenced by a written instrument, whether payable in
installments or otherwise, and whether fixed or determined
in amount or otherwise;
(ii) Bills of lading, warehouse receipts and other documents
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representing goods or any interest in goods;
(iii) Mortgages, liens, trust receipts and any other interests in
property, real or personal, tangible or intangible.
(c) To make loans to any person, partnership,
association, corporation or other enterprise, either with or without
security.
(d) To acquire, and pay for in cash, property, stock, bonds or
other securities of the corporation or otherwise, the good will,
rights, assets and property, and to undertake or assume the whole or
any part of the obligations or liabilities, of any person,
partnership, association, corporation or other enterprise.
(e) To acquire, hold, guarantee, sell, mortgage,
pledge or otherwise dispose of or deal in any of the shares or other
interests in, or obligations of, any person, partnership, association,
corporation or other enterprise, public or private, regardless of the
nature of the business in which such person, partnership, association,
corporation or other enterprise is or may be engaged.
(f) To borrow or raise moneys for any of the objects or purposes
of the corporation and, from time to time without limit as to amount,
to issue, sell, pledge or otherwise dispose of appropriate instruments
to evidence such indebtedness, and to secure the payment thereof by
mortgage or other lien upon the whole or any part of the property of
the corporation, whether at the time owned or thereafter acquired.
(g) To issue stock, bonds, debentures, or other
securities convertible into stock of any class or other securities of
any kind of the corporation or bearing warrants or other evidence of
optional rights to purchase or subscribe to stock of any class or
other securities of any kind of the corporation.
(h) To purchase, hold, sell and transfer the shares of its own
capital stock; provided it shall not use its funds or property for the
purchase of its own shares of capital stock when such use would cause
any impairment of its capital except as otherwise permitted by law,
and provided further that shares of its own capital stock belonging to
it shall not be voted upon directly or indirectly.
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(i) To make any guaranty respecting stocks, dividends,
securities, indebtedness, interest, contracts, or other obligations of
any person, partnership, association, corporation or other enterprise.
(j) To hold, purchase, mortgage, sell and convey real and
personal property, both tangible and intangible, either within or
without the State of Delaware.
(k) To carry on any business whatsoever which the corporation
may deem proper or convenient in connection with any of the foregoing
purposes or otherwise, or which may be calculated, directly or
indirectly, to promote the interests of the corporation or to enhance
the value of its property; to conduct its business in the State of
Delaware, in other states, in the District of Columbia, in the
territories and colonies of the United States, and in foreign
countries; and to have and to exercise all the powers conferred by the
laws of Delaware upon corporations formed under the act pursuant to
and under which the corporation is formed.
The objects and purposes specified in the foregoing clauses shall,
except where otherwise expressed, be in nowise limited or restricted by
reference to, or inference from, the terms of any other clause in this
Certificate of Incorporation, but the objects and purposes specified in each of
the foregoing clauses of this article shall be regarded as independent objects
and purposes.
FOURTH. The total number of shares of all classes of stock which the
Corporation shall have authority to issue is 12,500 shares, consisting of 2,500
shares of Common Stock without par value ("Common Stock") and 10,000 shares of
Preferred Stock, par value $1.00 per share ("Preferred Stock").
FIFTH. The Board of Directors (or a Committee delegated by the Board)
shall have authority be resolution to issue the shares of Preferred Stock from
time to time on such terms as it may determine and to divide the Preferred Stock
into one or more series and, in connection with the creation of any such series,
to determine and fix by the resolution or resolutions providing for the issuance
of shares thereof:
(a) the distinctive designation of such series, the number of
shares which shall constitute such series, which number may be
increased or decreased (but not below the number of shares then
outstanding) from time to time by action of the Board of Directors,
and the stated value thereof, if different from the par value thereof;
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(b) the dividend rate, the times of payment of dividends on the
shares of such series, whether dividends shall be cumulative, and, if
so, from what date or dates, and the preference or relation which such
dividends will bear to the dividends payable on any shares of stock of
any other class or any other series of this class;
(c) the price or prices at which, and the terms and conditions
on which, the shares of such series may be redeemed;
(d) whether or not the shares of such series shall be entitled
to the benefit of a retirement or sinking fund to be applied to the
purchase or redemption of such shares and, if so entitled, the amount
of such fund and the terms and provisions relative to the operation
thereof;
(e) whether or not the shares of such series shall be
convertible into, or exchangeable for, any other shares of stock of
the corporation or any other securities and, if so convertible or
exchangeable, the conversion price or prices, or the rates of
exchange, and any adjustments thereof, at which such conversion or
exchange may be made, and any other terms and conditions of such
conversion or exchange;
(f) the rights of the shares of such series in the event of
voluntary or involuntary liquidation, dissolution or winding up, or
upon any distribution of the assets, of the corporation;
(g) whether or not the shares of such series shall have priority
over or parity with or be junior to the shares of any other class or
series in any respect, or shall be entitled to the benefit of
limitations restricting (i) the creation of indebtedness of the
corporation, (ii) the issuance of shares of any other class or series
having priority over or being on a parity with the shares of such
series in any respect, or (iii) the payment of dividends on, the
making of other distributions in respect of, or the purchase or
redemption of shares of any other class or series on a parity with or
ranking junior to the shares of such series as to dividends or assets,
and the terms of any such restrictions, or any other restriction with
respect to shares of any other class or series on a parity with or
ranking junior to the shares of such series in any respect;
(h) whether such series shall have voting rights, in addition to
any voting rights provided by law and, if so, the terms of such voting
rights, which may be general or limited; and
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(i) any other powers, designations, preferences and relative,
participating, optional, or other special rights of such series, and
the qualifications, limitations or restrictions thereof, to the full
extent now or hereafter permitted by law.
The powers, designations, preferences and relative, participating,
optional and other special rights of each series of Preferred Stock, and
the qualifications, limitations or restrictions thereof, if any, may differ
from those of any and all other series at any time outstanding. All shares
of any one series of Preferred Stock shall be identical in all respects
with all other shares of such series, except that shares of any one series
issued at different times may differ as to the dates from which dividends
thereon shall be cumulative.
SIXTH. The minimum amount of capital with which the corporation will
commence business is one thousand dollars ($1,000).
SEVENTH. The names and places of residence of the incorporators are
as follows:
Name Residence
---- ---------
H. K. Webb Wilmington, Delaware
H. C. Broadt Wilmington, Delaware
L. H. Herman Wilmington, Delaware
EIGHTH. The corporation is to have perpetual existence.
NINTH. The private property of the stockholders shall not be subject
to the payment of corporate debts to any extent whatever.
TENTH. In furtherance and not in limitation of the powers conferred
by statute, the board of directors is expressly authorized:
To make, alter or repeal the bylaws of the corporation;
To authorize and cause to be executed mortgages and other liens
upon the real and personal property of the corporation;
To set apart out of any of the funds of the corporation available
for dividends a reserve or reserves for any proper purpose and to
abolish any such reserve in the manner in which it was created;
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By resolution passed by a majority of the whole board, to
designate one or more committees, each committee to consist of two or
more of the directors of the corporation, which, to the extent
provided in the resolution or in the bylaws of the corporation, shall
have and may exercise the powers of the board of directors in the
management of the business and affairs of the corporation, and may
authorize the seal of the corporation to be affixed to all papers
which may require it. Such committee or committees shall have such
name or names as may be stated in the bylaws of the corporation or as
may be determined from time to time by resolution adopted by the board
of directors;
When and as authorized by the affirmative vote of the holders of
a majority of the stock issued and outstanding having voting power
given at a stockholders' meeting duly called for that purpose, or when
authorized by the written consent of the holders of a majority of the
voting stock issued and outstanding, to sell, lease, or exchange all
of the property and assets of the corporation, including its good will
and its corporate franchises, upon such terms and conditions and for
such consideration, which may be in whole or in part shares of stock
in or other securities of any other corporation or corporations, or
both, as the board of directors shall deem expedient and for the best
interests of the corporation.
ELEVENTH. No contract or other transaction between this corporation
and any other entity or person (including directors, officers and stockholders
of this corporation) and no act of this corporation shall be invalidated or
rendered voidable solely by reason of the fact that any of the directors,
officers or stockholders of this corporation are pecuniarily or otherwise
interested in such contract, transaction or act of the corporation, individually
or as directors, trustees, partners, officers, or holders of equivalent
positions in such entity or person, or by reason of a pecuniary or other
interest in such entity or person; and any director of this corporation who is
so interested may be counted in determining the existence of a quorum at any
meeting of the board of directors of this corporation which shall authorize any
such contract, transaction or act and may vote at any such meeting to authorize
any such contract, transaction or act.
TWELFTH. The board of directors, by the affirmative vote of a
majority of the whole board, and irrespective of any personal interest of its
members, shall have authority to provide reasonable compensation of all
directors for services, ordinary or extraordinary, to the corporation as
directors, officers or otherwise.
THIRTEENTH. Any person made a party to any action, suit or
proceeding, whether civil, criminal, administrative or other, by reason of the
fact that he, or his testator
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or intestate, is or was a director, officer or employee of the corporation or of
any other enterprise which he, or his testator or intestate, served as such at
the request of the corporation, shall be indemnified by the corporation against
the reasonable expenses actually and necessarily incurred by him in connection
with the defense of such action, suit or proceeding, and against amounts paid by
him (other than to the corporation or such other enterprise) in reasonable
settlement of any such action, suit or proceeding, where it is in the interest
of the corporation that such settlement be made, except in relation to matters
as to which it shall be adjudged in such action, suit or proceeding that such
director, officer or employee is liable for negligence or misconduct in the
performance of duty, or in the event of settlement, where it shall appear that
such person is guilty of negligence or misconduct in the performance of duty.
The foregoing right of indemnification shall not be deemed exclusive of any
other right to which those indemnified may be entitled, under any bylaw,
agreement, vote of stockholders, or otherwise.
FOURTEENTH. Meetings of stockholders and directors may be held
outside the State of Delaware, if the bylaws so provide. The books and records
of the corporation may be kept (subject to any provision contained in the
statutes) outside the State of Delaware. Elections of directors need not be by
ballot unless the bylaws of the corporation shall so provide.
FIFTEENTH. The corporation reserves the right to amend, alter, change
or repeal any provision contained in this Certificate of Incorporation, in the
manner now or hereafter prescribed by statute, and all rights conferred upon
stockholders herein are granted subject to this reservation.
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EXHIBIT 3.2
BYLAWS
OF
JOHN DEERE CAPITAL CORPORATION
(As Amended December 9, 1994)
ARTICLE I - IDENTIFICATION
SECTION 1. NAME. The name of the Company is John Deere Capital Corporation
(hereinafter referred to as the "Company").
SECTION 2. OFFICES. The principal office of the Company in Delaware shall be
at 1209 Orange Street, in the City of Wilmington, County of New Castle, State of
Delaware. The Company may maintain, change or discontinue its other offices,
including its principal business office in the City of Reno, State of Nevada,
and may have such other offices both within and without the State of Delaware as
its business may require.
SECTION 3. SEAL. The seal of the Company shall be circular in form and mounted
upon a metal die, suitable for impressing the same upon paper. It shall have
inscribed thereon the name of the Company, the words "Corporate Seal" and the
word "Delaware."
SECTION 4. FISCAL YEAR. The fiscal year of the Company shall begin on the
first day of November in each calendar year and end on the last day of October
in the following calendar year.
ARTICLE II - THE STOCKHOLDERS
SECTION 1. PLACE OF MEETINGS. Annual meetings of the stockholders for the
election of directors and meetings of the stockholders for any other purpose may
be held at such place within the State of Delaware or elsewhere as may be
specified by the Chairman, the President or the Board of Directors.
SECTION 2. ANNUAL MEETING. The annual meeting of the stockholders, at which
they shall elect directors by voice vote or otherwise and by plurality vote and
may transact such other business as may properly be brought before the meeting,
shall be held at three forty-five o'clock in the afternoon, local time, on the
Tuesday before the last Wednesday in February of each year, if such day is not a
legal holiday, and if a legal holiday, then on the first following day that it
not a legal holiday. The time and place of such meeting shall not be changed
within sixty days before such meeting.
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SECTION 3. SPECIAL MEETINGS. Special meetings of the stockholders may be
called by the Chairman, the President or the Board of Directors, and shall be
called by the Chairman, the President or the Secretary at the request in writing
of stockholders owning not less than twenty percent of the shares entitled to
vote at a meeting. Such request shall state the purpose or purposes of the
proposed meeting.
SECTION 4. NOTICE OF MEETINGS. Notice of each meeting of stockholders, stating
the place, day and hour of the meeting and, in case of a special meeting, the
purpose or purposes for which the meeting is called, shall be delivered at least
ten days before the date of the meeting, either personally or by mail, by or at
the direction of the President or the Secretary to each stockholder of record
entitled to vote at such meeting. If mailed, such notice shall be deemed to be
delivered when deposited in the United States mail addressed to the stockholder
at his address as it appears on the stock transfer books of the Company, with
postage thereon prepaid. Notice of any meeting of stockholders may be waived in
writing signed by the stockholder entitled to such notice, whether before or
after the time of such meeting, and shall be equivalent to the giving of such
notice.
SECTION 5. QUORUM. The holders of a majority of the shares entitled to vote at
any meeting of stockholders, present in person or by proxy, shall constitute a
quorum at such meeting except as otherwise provided by statute. If, however,
such quorum shall not be present at a meeting of the stockholders, the holders
of a majority of the shares entitled to vote, present in person or by proxy, may
adjourn the meeting from time to time without notice other than announcement at
the meeting until a quorum shall be present. At any such adjourned meeting at
which a quorum shall be present, any business may be transacted which might have
been transacted at the meeting as originally called. Whenever a quorum shall be
present at any meeting, all matters shall be decided by vote of the holders of a
majority of the shares present, unless otherwise provided by statute or, in the
case of election of directors, by these Bylaws.
SECTION 6. ORGANIZATION. The Chairman of the Company or, in the event of his
absence or inability to act, the President or in the event of the absence or
inability to act of both, a Director present, acting in such order of priority
as shall be designated by the Chairman, shall preside as chairman at each
meeting of the stockholders. The Secretary of the Company shall act as
secretary of each meeting of the stockholders. In the event of his absence or
inability to act, the chairman of the meeting shall appoint a person who need
not be a stockholder to act as secretary of the meeting.
SECTION 7. ACTION WITHOUT A MEETING. Whenever the vote of stockholders at a
meeting thereof is required or permitted to be taken in connection with any
corporate action by any provisions of the statutes or of the certificate of
incorporation, the meeting and vote of stockholders may be dispensed with, if
all the stockholders who would have been entitled to vote upon the action if
such meeting were held, shall consent in writing to such corporate action being
taken.
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ARTICLE III - THE BOARD OF DIRECTORS
SECTION 1. NUMBER AND QUALIFICATIONS. The business and affairs of the Company
shall be managed by a Board of not less than eight nor more than fifteen
directors who need not be residents of the State of Delaware or stockholders of
the Company. The number of directors may be increased or decreased from time to
time by amendment of the Bylaws, provided no decrease shall have the effect of
shortening the term of any incumbent director.
SECTION 2. ELECTION. Directors shall be elected at the annual meeting of the
stockholders, except as provided in Section 3 of this Article, and each director
elected shall hold office during the term for which he is elected and until his
successor is elected and qualified.
SECTION 3. VACANCIES. Any vacancies occurring in the Board of Directors and
newly created directorships resulting from any increase in the authorized number
of directors may be filled by a majority of the remaining directors though less
than a quorum of the Board of Directors, and the directors so chosen shall hold
office until the next annual election of directors and until their successors
are elected by the stockholders and are qualified.
SECTION 4. REGULAR MEETINGS. Regular meetings of the Board of Directors may be
held without notice at such time and at such place either within or without the
State of Delaware as shall from time to time be determined by the Board.
SECTION 5. SPECIAL MEETINGS. Special meetings of the Board of Directors may be
held upon notice by letter, telegram, cable or radiogram, delivered for
transmission not later than during the day immediately preceding the day for
such meeting, or by word of mouth, telephone or radiophone received not later
than during the second day immediately preceding the day for such meeting, upon
call of the Chairman, the President, or upon call by the Chairman, the President
or the Secretary at the request in writing of one-third of the directors then in
office, at the principal business office of the Company, or at any other place
either within or without the State of Delaware approved by the Board of
Directors, the Chairman or the President. Notice of any special meeting of the
Board of Directors may be waived in writing signed by the person or persons
entitled to such notice, whether before or after the time of such meeting, and
shall be equivalent to the giving of such notice. Attendance of a director at
such meeting shall constitute a waiver of notice thereof, except where a
director attends a meeting for the express purpose of objecting to the
transaction of any business because such meeting is not lawfully convened.
Neither the business to be transacted at, nor the purpose of, any special
meeting of the Board of Directors need be specified in the notice, or waiver of
notice, of such meeting.
SECTION 6. QUORUM. One-third of the number of directors fixed by the Bylaws
(but in no event less than two) shall constitute a quorum for the transaction of
business. The act of a majority of the directors present at a meeting at which
a quorum is present shall be the
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act of the Board of Directors except as otherwise provided by statute or these
Bylaws. During an emergency period following a national catastrophe, due to
enemy attack, a majority of the surviving members of the Board of Directors who
have not been rendered incapable of acting as the result of physical or mental
incapacity or the difficulty of transportation to the place of the meeting shall
constitute a quorum for the purpose of filling vacancies in the Board of
Directors and among the elected officers of the Company.
SECTION 7. ORGANIZATION. The Chairman or, in the event of his absence or
inability to act, the President or, in the event of the absence or inability to
act of both the Chairman and the President, another director present, acting in
such order of priority as shall be designated by the Chairman, shall act as
chairman of each meeting of the Board of Directors.
SECTION 8. ACTIONS BY WRITTEN CONSENT. Any action required or permitted to be
taken at any meeting of the Board of Directors or of any committee thereof may
be taken without a meeting, if prior to such action a written consent thereto is
signed by all members of the Board or of such committee as the case may be, and
such written consent is filed with the minutes of proceedings of the Board or
such committee.
SECTION 9. INTEREST OF DIRECTORS IN TRANSACTIONS. No contract or other
transaction between this Company and any other entity or person (including
directors, officers and stockholders of this Company) and no act of this Company
shall be invalidated or rendered voidable solely by reason of the fact that any
of the directors, officers or stockholders of this Company are pecuniarily or
otherwise interested in such contract, transaction or act of the Company,
individually or as directors, trustees, partners, officers or holders of
equivalent positions in such entity or person, or by reason of a pecuniary or
other interest in such entity or person; and any director of this Company who is
so interested may be counted in determining the existence of a quorum at any
meeting of the Board of Directors which shall authorize any such contract,
transaction or act and may vote at any such meeting to authorize any such
contract, transaction or act.
SECTION 10. COMMITTEES OF DIRECTORS. The Board of Directors may, by resolution
passed by a majority of the whole Board, designate one or more committees, each
committee to consist of two or more of the directors of the Company, which, to
the extent provided in the resolution, shall have any may exercise the powers of
the Board of Directors in the management of the business and affairs of the
Company and may authorize the seal of the Company to be affixed to all papers
which may require it. Such committee or committees shall have such name or
names as may be determined from time to time by resolution adopted by the Board
of Directors. The committees shall keep regular minutes of their proceedings
and report the same to the Board of Directors when required.
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ARTICLE IV - THE OFFICERS
SECTION 1. NUMBER AND QUALIFICATIONS. The principal officers of the Company
shall consist of a Chairman, a President, one or more Vice Presidents, a
Secretary and a Treasurer; and the Company may have such other officers and
assistant officers as may be deemed necessary by the Board of Directors. Any
number of offices may be held by the same person.
SECTION 2. GENERAL DUTIES. All officers of the Company shall have such
authority and perform such duties in the management of the Company as may be
provided by or delegated in accordance with these Bylaws, or as may be
determined by resolution of the Board of Directors not inconsistent with these
Bylaws. All agents and employees of the Company not appointed by the Board of
Directors may be appointed by THE CHAIRMAN, the President or by persons
authorized by either of them to do so, to serve for such time and to have such
duties as the appointing authority may determine from time to time.
SECTION 3. ELECTION AND TERM OF OFFICE. The officers shall be elected annually
by the Board of Directors at its regular meeting held on the Friday following
the last Wednesday in February of each year. Each officer shall hold office for
one year and until his successor is elected and qualified, or until he shall
have resigned or shall have been removed in the manner provided in Section 4.
SECTION 4. REMOVAL. Any officer may be removed by the Board of Directors
whenever in its judgment the interests of the Company will be served thereby,
but such removal shall be without prejudice to the contract rights, if any, of
the person removed. Election of an officer shall not of itself create contract
rights.
SECTION 5. RESIGNATIONS. Any officer may resign at any time by giving written
notice to the Board of Directors, the Chairman or to the President. Such
resignation shall take effect at the time specified therein and, unless
specified therein, the acceptance of such resignation shall not be necessary to
make it effective.
SECTION 6. VACANCIES. A vacancy in any office shall be filled by the Board of
Directors.
SECTION 7. CHAIRMAN. The Chairman shall be the chief executive officer of the
Company. He shall have power to execute in the name of the Company all bonds,
contracts, other obligations and property conveyances which are duly authorized,
and he shall have all the powers and perform all duties devolving upon him by
law and as head of the Company. He may call special meetings of the
stockholders and of the Board of Directors. From time to time he shall bring to
the attention of the Board of Directors such information or recommendations
concerning the business and affairs of the Company as he may deem necessary or
appropriate. When present, he shall preside at all meetings of the stockholders
and the Board of Directors.
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SECTION 8. PRESIDENT. The President shall have such powers and perform such
duties as the Board of Directors may from time to time prescribe or as the chief
executive officer may from time to time delegate to him. In the absence or
inability to act of the Chairman, the President shall perform the duties of the
Chairman.
SECTION 9. VICE PRESIDENTS. Each Vice President shall have such powers and
perform such duties as the Board of Directors may from time to time prescribe or
as the Chairman or the President may from time to time delegate to him. In the
absence or inability to act of the President, his duties shall be performed by a
Vice President designated by the Chairman of the Board of Directors.
SECTION 10. SECRETARY. The Secretary shall act as Secretary of all meetings of
the stockholders and the Board of Directors, and of committees of the Board of
Directors. He shall prepare and keep, or cause to be kept in books provided for
the purpose, minutes of all meetings of the stockholders and the Board of
Directors; shall see that all notices are fully given in accordance with the
provisions of these Bylaws and as required by law; shall be custodian of the
records and of the seal of the Company and see that the seal is affixed to all
documents the execution of which on behalf of the Company under its seal is duly
authorized; and in general, he shall perform all duties incident to the office
of Secretary and as required by law and such other duties as may be assigned to
him from time to time by the Board of Directors, the Chairman or by the
President.
Each Assistant Secretary (if one or more Assistant Secretaries be elected) shall
assist the Secretary in his duties and shall perform such other duties as the
Board of Directors may prescribe from time to time, or the Chairman, the
President or the Secretary may delegate to him from time to time. In the event
of the absence or inability to act of the Secretary, his duties shall be
performed by an Assistant Secretary.
SECTION 11. TREASURER. The Treasurer shall have charge and custody of, and be
responsible for, all moneys, notes and securities in the possession of the
Company, and deposit all funds in the name of the Company in such banks, trust
companies or other depositories as he may select; shall receive, and give
receipts for, moneys due and payable to the Company from any source whatsoever;
and in general, he shall perform all the duties incident to the office of
Treasurer and as required by law and such other duties as may be assigned to him
from time to time by the Board of Directors, the Chairman or by the President.
Each Assistant Treasurer (if one or more Assistant Treasurers be elected) shall
assist the Treasurer in his duties and shall perform such other duties as the
Board of Directors may prescribe from time to time, or the Chairman, the
President or the Treasurer may delegate to him from time to time. In the event
of the absence or inability to act of the Treasurer, his duties shall be
performed by an Assistant Treasurer.
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ARTICLE V - ACTS WITH RESPECT TO SECURITIES OWNED
SECTION 1. ENDORSEMENT OF SECURITIES. Subject always to the specific
directions of the Board of Directors, any security or securities owned by the
Company (including re-acquired shares of capital stock of the Company) may, for
sale or transfer, be endorsed in the name of the Company by the Chairman, the
President or a Vice President, and may be attested by the Secretary or an
Assistant Secretary either with or without affixing thereto the corporate seal.
SECTION 2. VOTING OF SHARES OWNED. Subject always to the specific directions
of the Board of Directors, any share or shares of stock issued by any other
corporation and owned or controlled by the Company may be voted at any
stockholders' meeting of such other corporation by the Chairman, the President
of the Company if either be present at such meeting, or in his absence by any
Vice President of the Company who may be present at such meeting. Whenever, in
the judgment of the Chairman, the President or a Vice President, it is desirable
for the Company to execute a proxy or give a stockholder's consent in respect to
any share or shares of stock issued by any other corporation and owned or
controlled by the Company, such proxy or consent shall be executed in the name
of the Company by the Chairman, the President or a Vice President of the Company
and shall be attested by the Secretary or an Assistant Secretary of the Company
under the corporate seal without necessity of any further authorization of the
Board of Directors. Any person or persons designated in the manner above stated
as the proxy or proxies of the Company shall have full right, power and
authority to vote the share or shares of stock issued by such other corporation
and owned or controlled by the Company.
ARTICLE VI - OTHER PROVISIONS
SECTION 1. CERTIFICATES OF STOCK. Certificates to evidence ownership of stock
of the Company shall be issued in such form as the Board of Directors shall from
time to time approve.
SECTION 2. LOANS. No loan shall be made to any director or officer of the
Company, and no loan shall be made to anyone secured by shares of the Company's
capital stock.
SECTION 3. AMENDMENTS. These Bylaws may be altered or repealed either by the
Board of Directors or by the holders of the issued and outstanding voting stock
of the Company.
63
*****
<PAGE>
EXHIBIT 12
JOHN DEERE CAPITAL CORPORATION AND SUBSIDIARIES
COMPUTATION OF RATIO OF EARNINGS TO FIXED CHARGES
(IN THOUSANDS OF DOLLARS)
<TABLE>
<CAPTION>
Year Ended October 31
------------------------------------------------
1994 1993 1992 1991 1990
-------- -------- -------- -------- --------
<S> <C> <C> <C> <C> <C>
Earnings:
Income before income
taxes and changes
in accounting $161,809 $169,339 $142,920 $110,820 $ 99,366
Fixed charges 168,507 170,226 191,930 230,901 216,985
-------- -------- -------- -------- --------
Total earnings $330,316 $339,565 $334,850 $341,721 $316,351
-------- -------- -------- -------- --------
-------- -------- -------- -------- --------
Fixed charges:
Interest expense $166,591 $167,787 $189,288 $228,308 $214,707
Rent expense 1,916 2,439 2,642 2,593 2,278
-------- -------- -------- -------- --------
Total fixed charges $168,507 $170,226 $191,930 $230,901 $216,985
-------- -------- -------- -------- --------
-------- -------- -------- -------- --------
Ratio of earnings to
fixed charges * 1.96 1.99 1.74 1.48 1.46
-------- -------- -------- -------- --------
-------- -------- -------- -------- --------
<FN>
- - ---------------
"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.
</TABLE>
<PAGE>
EXHIBIT 23
DELOITTE & TOUCHE LLP
Two Prudential Plaza
180 North Stetson Avenue
Chicago, IL 60601-6779
INDEPENDENT AUDITORS' CONSENT
- - -----------------------------
We consent to the incorporation by reference in Registration Statements No. 33-
48123, 33-66082, 33-46514, and 33-65088 of John Deere Capital Corporation on
Form S-3 of our report dated December 9, 1994, appearing in the Annual Report on
Form 10-K of John Deere Capital Corporation for the year ended October 31, 1994
and to the reference to us under the heading "Experts" in the Prospectuses,
which are a part of such Registration Statements.
DELOITTE & TOUCHE LLP
Chicago, Illinois
January 23, 1995
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 5
<LEGEND>
This schedule contains summary financial information extracted from
Form 10-K and is qualified in its entirety by reference to such
financial statements.
</LEGEND>
<CIK> 0000027673
<NAME> JOHN DEERE CAPITAL CORP
<MULTIPLIER> 1,000,000
<CURRENCY> U.S. DOLLARS
<S> <C>
<PERIOD-TYPE> 12-MOS
<FISCAL-YEAR-END> OCT-31-1994
<PERIOD-START> NOV-01-1993
<PERIOD-END> OCT-31-1994
<EXCHANGE-RATE> 1
<CASH> 43
<SECURITIES> 0
<RECEIVABLES> 4,142
<ALLOWANCES> 80
<INVENTORY> 0
<CURRENT-ASSETS> 0
<PP&E> 15
<DEPRECIATION> 9
<TOTAL-ASSETS> 4,290
<CURRENT-LIABILITIES> 0
<BONDS> 1,034
<COMMON> 113
0
0
<OTHER-SE> 521
<TOTAL-LIABILITY-AND-EQUITY> 4,290
<SALES> 0
<TOTAL-REVENUES> 463
<CGS> 0
<TOTAL-COSTS> 21
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 28
<INTEREST-EXPENSE> 167
<INCOME-PRETAX> 162
<INCOME-TAX> 57
<INCOME-CONTINUING> 105
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 105
<EPS-PRIMARY> 0
<EPS-DILUTED> 0
</TABLE>
