=================================================================
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-Q
QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(D) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended April 30, 1998
Commission file no: 1-6458
___________________________
JOHN DEERE CAPITAL CORPORATION
Delaware 36-2386361
(State of incorporation) (IRS employer identification no.)
1 East First Street, Suite 600
Reno, Nevada 89501
(Address of principal executive offices)
Telephone Number: (702) 786-5527
_________________________________
Indicate by check mark whether the registrant (1) has filed
all reports required to be filed by Section 13 or 15(d) of the
Securities Exchange Act of 1934 during the preceding 12 months
(or for such shorter period that the registrant was required to
file such reports), and (2) has been subject to such filing
requirements for the past 90 days.
Yes x No
At April 30, 1998, 2,500 shares of common stock, without par
value, of the registrant were outstanding, all of which were
owned by John Deere Credit Company, a wholly-owned subsidiary of
Deere & Company.
The registrant meets the conditions set forth in General
Instruction H(1)(a) and (b) of Form 10-Q and is therefore filing
this Form with certain reduced disclosures as permitted by those
instructions.
=================================================================
Index to Exhibits: Page 13
<PAGE>
PART I. FINANCIAL INFORMATION
Item 1. Financial Statements
John Deere Capital Corporation and Subsidiaries
Statements of Consolidated Income and Retained Earnings
(Unaudited)
(in millions)
Three Months Six Months
Ended Ended
April 30, April 30,
------------------------------
1998 1997 1998 1997
Revenues ------ ------ ------ ------
Finance income earned
on retail notes $107.2 $103.4 $211.6 $195.6
Revolving charge account
income 24.6 22.6 49.9 44.6
Lease revenues 44.8 27.7 84.5 50.4
Finance income earned on
wholesale notes 14.4 11.9 28.3 23.7
Net gain on retail notes sold 10.5 1.1 12.6 1.8
Interest income from
short-term investments 2.4 2.4 5.0 5.0
Securitization and servicing
fee income 6.6 7.2 14.4 17.6
Other income 3.0 2.8 5.4 3.9
- ----------------------------------------------------------------
Total revenues 213.5 179.1 411.7 342.6
- ----------------------------------------------------------------
Expenses
Interest expense 91.1 78.6 179.4 150.1
Operating expenses:
Administrative and
operating expenses 28.5 26.0 55.0 48.7
Provision for credit losses 15.2 9.7 24.5 16.2
Fees paid to Deere & Company 2.7 2.2 5.9 4.4
Depreciation of equipment on
operating leases 25.4 17.5 48.8 31.8
- ----------------------------------------------------------------
Total operating expenses 71.8 55.4 134.2 101.1
- ----------------------------------------------------------------
Total expenses 162.9 134.0 313.6 251.2
- ----------------------------------------------------------------
Income of consolidated group
before income taxes 50.6 45.1 98.1 91.4
Provision for income taxes 17.9 15.8 34.6 31.9
- ----------------------------------------------------------------
Income of consolidated group 32.7 29.3 63.5 59.5
Equity in income (loss) of
unconsolidated affiliates .2 (.3) --- (.8)
- ----------------------------------------------------------------
Net income 32.9 29.0 63.5 58.7
Cash dividends declared (12.5) (20.0) (25.0) (40.0)
Retained earnings at beginning
of period 723.3 654.1 705.2 644.4
- ----------------------------------------------------------------
Retained earnings at end
of period $743.7 $663.1 $743.7 $663.1
================================================================
See Notes to Interim Financial Statements.
Page 2
<PAGE>
John Deere Capital Corporation and Subsidiaries
Consolidated Balance Sheets
(Unaudited)
(dollars in millions)
April 30, October 31, April 30,
1998 1997 1997
Assets -------- -------- --------
Cash and cash equivalents $ 188.6 $ 204.4 $ 167.9
Receivables and leases:
Retail notes 4,671.1 4,349.4 4,605.5
Wholesale notes 669.7 593.4 522.3
Revolving charge accounts 627.0 618.5 510.9
Financing leases 218.1 214.6 194.0
-----------------------------------------------------------------
Total receivables 6,185.9 5,775.9 5,832.7
Equipment on operating
leases -- net 712.2 527.2 402.6
- -----------------------------------------------------------------
Total receivables
and leases 6,898.1 6,303.1 6,235.3
Allowance for credit losses (85.7) (85.9) (89.2)
- -----------------------------------------------------------------
Total receivables
and leases -- net 6,812.4 6,217.2 6,146.1
- -----------------------------------------------------------------
Other receivables 133.6 157.9 126.1
Investment in
unconsolidated affiliates 17.5 12.8 5.4
Other assets 73.3 66.8 75.4
- -----------------------------------------------------------------
Total Assets $7,225.4 $6,659.1 $6,520.9
=================================================================
Liabilities and Stockholder's Equity
Short-term borrowings:
Commercial paper $2,131.7 $1,991.9 $2,259.4
Deere & Company 229.5 349.9 57.7
Current maturities of
long-term borrowings 1,632.5 1,042.5 1,143.7
Other notes payable 5.2 2.4 ---
- -----------------------------------------------------------------
Total short-term
borrowings 3,998.9 3,386.7 3,460.8
- -----------------------------------------------------------------
Accounts payable and accrued
liabilities:
Accrued interest on
senior debt 41.0 39.2 36.1
Other payables 220.2 188.3 167.4
- -----------------------------------------------------------------
Total accounts payable
and accrued liabilities 261.2 227.5 203.5
- -----------------------------------------------------------------
Deposits withheld from
dealers and merchants 143.9 144.2 131.2
- -----------------------------------------------------------------
Long-term borrowings:
Senior debt 1,815.2 1,782.9 1,799.6
Subordinated debt 150.0 300.0 150.0
- -----------------------------------------------------------------
Total long-term borrowings 1,965.2 2,082.9 1,949.6
- -----------------------------------------------------------------
Total liabilities 6,369.2 5,841.3 5,745.1
- -----------------------------------------------------------------
Stockholder's equity
Common stock, without par value
(issued and outstanding --
2,500 shares owned by John
Deere Credit Company) 112.8 112.8 112.8
Retained earnings 743.7 705.2 663.1
Cumulative translation
adjustment (.3) (.2) (.1)
- -----------------------------------------------------------------
Total stockholder's equity 856.2 817.8 775.8
- -----------------------------------------------------------------
Total Liabilities and
Stockholder's Equity $7,225.4 $6,659.1 $6,520.9
=================================================================
See Notes to Interim Financial Statements.
Page 3
<PAGE>
John Deere Capital Corporation and Subsidiaries
Statements of Consolidated Cash Flows
(Unaudited)
(in millions)
Six Months Ended April 30,
--------------------------
1998 1997
--------------------------
Cash Flows from Operating Activities:
Net income $ 63.5 $ 58.7
Adjustments to reconcile net
income to net cash provided
by operating activities:
Provision for credit losses 24.5 16.2
Provision for depreciation 50.3 31.7
Equity in loss of unconsolidated
affiliates --- .8
Other 2.1 (.3)
- -----------------------------------------------------------------
Net cash provided by
operating activities 140.4 107.1
- -----------------------------------------------------------------
Cash Flows from Investing Activities:
Cost of receivables and
leases acquired (3,591.0) (3,203.6)
Collections of receivables 2,679.5 2,555.4
Proceeds from sales of receivables 243.4 29.1
Other 45.2 33.4
- -----------------------------------------------------------------
Net cash used for investing
activities (622.9) (585.7)
- -----------------------------------------------------------------
Cash Flows from Financing Activities:
Increase in commercial paper 139.8 569.5
Change in receivable/payable
with Deere & Company (124.4) (481.5)
Change in other notes payable 2.8 ---
Proceeds from issuance of
long-term borrowings 781.0 455.0
Principal payments on
long-term borrowings (307.5) (27.5)
Dividends paid (25.0) (40.0)
- -----------------------------------------------------------------
Net cash provided by
financing activities 466.7 475.5
- -----------------------------------------------------------------
Net decrease in cash and
cash equivalents (15.8) (3.1)
Cash and cash equivalents
at the beginning of period 204.4 171.0
- -----------------------------------------------------------------
Cash and cash equivalents
at the end of period $ 188.6 $ 167.9
=================================================================
See Notes to Interim Financial Statements.
Page 4
<PAGE>
John Deere Capital Corporation and Subsidiaries
Notes to Interim Financial Statements
(1) The consolidated financial statements of John Deere
Capital Corporation (Capital Corporation) and its subsidiaries
(the Company) have been prepared by the Company, without audit,
pursuant to the rules and regulations of the Securities and
Exchange Commission. Certain information and footnote
disclosures normally included in annual financial statements
prepared in accordance with generally accepted accounting
principles have been condensed or omitted as permitted by such
rules and regulations. All adjustments, consisting of normal
recurring adjustments, have been included. Management believes
that the disclosures are adequate to present fairly the financial
position, results of operations and cash flows at the dates and
for the periods presented. It is suggested that these interim
financial statements be read in conjunction with the financial
statements and the notes thereto included in the Company's latest
annual report on Form 10-K. Results for interim periods are not
necessarily indicative of those to be expected for the fiscal
year.
The preparation of financial statements in conformity with
generally accepted accounting principles requires management to
make estimates and assumptions that affect the reported amounts
and related disclosures. Actual results could differ from those
estimates.
(2) The principal business of the Company is providing and
administering financing for retail purchases of new and used
equipment manufactured by Deere & Company's agricultural,
construction and commercial and consumer equipment divisions. The
Company purchases retail installment sales and loan contracts
(retail notes) from Deere & Company and its wholly-owned
subsidiaries (collectively called John Deere). John Deere
acquires these retail notes through independent John Deere retail
dealers. The Company also purchases and finances certain
agricultural, construction and lawn and grounds care retail notes
unrelated to John Deere. In addition, the Company purchases and
finances recreational product retail notes acquired from
independent dealers and marine product mortgage service companies
(recreational product retail notes). The Company also leases
equipment to retail customers, finances and services revolving
charge accounts acquired from and offered through merchants in the
agricultural, construction, lawn and grounds care and yacht
markets (revolving charge accounts), and provides wholesale
financing for inventories of recreational vehicles, manufactured
housing units, yachts, John Deere engines, and John Deere
agricultural and John Deere construction equipment owned by
dealers of those products (wholesale notes). Retail notes,
revolving charge accounts, direct financing leases and wholesale
notes receivable are collectively called "Receivables."
Receivables and operating leases are collectively called
"Receivables and Leases."
(3) The Company's ratio of earnings to fixed charges was 1.55
to 1 for the second quarter of 1998 compared with 1.57 to 1 for
the second quarter of 1997. The consolidated ratio of earnings
to fixed charges was 1.54 to 1 for the first six months of 1998
and 1.60 to 1 for the first six months of 1997. "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.
(4) Beginning in September 1997, certain notes from dealers
for the financing of "purchase for rental equipment" were
considered wholesale notes. Prior to that time, such notes were
considered retail notes. During the first six months of 1998,
$92 million of these wholesale notes were acquired. Prior period
volumes and ending balances have not been adjusted to reflect
this change in policy.
Page 5
<PAGE>
Item 2. Management's Discussion and Analysis of Financial
Condition and Results of Operations.
Results of Operations
Net income was $32.9 million for the second quarter of 1998 and
$63.5 million for the first six months of 1998 compared with
$29.0 million and $58.7 million for the same periods last year.
The 1998 second quarter and year-to-date results benefited from
gains of $10.3 million on sales of recreational vehicle retail
notes and higher income from a 12 percent increase in the average
balance of receivables and leases financed during the first six
months. These results were partially offset by narrower
financing spreads, higher write-offs of receivables and higher
operating expenses.
Revenues totaled $213.5 million and $411.7 million for the second
quarter and for the first six months of 1998 compared to $179.1
million and $342.6 million for the same periods a year ago. In
addition to gains on sales of receivables, revenues increased due
to continued growth in operating leases, retail notes on John
Deere equipment, wholesale notes and revolving charge accounts.
Lease revenues increased $34.1 million, to $84.5 million in the
first six months of 1998, from $50.4 million in the first six
months of 1997, largely due to a number of leasing incentives
related to John Deere agricultural and construction equipment.
Finance income earned on retail notes increased $16 million to
$211.6 million for the first six months of 1998 from $195.6
million earned in the first six months of 1997. This increase was
primarily due to a larger average retail installment portfolio
financed. Increases in wholesale note revenues were the result
of increased activity for John Deere agricultural, construction,
and lawn and grounds care equipment owned by dealers as well as a
larger yacht wholesale portfolio (see note 4 to the consolidated
financial statements for additional information). Revolving
charge accounts continue to benefit from strong demand for
agricultural operating loans and Farm Plan financing.
In March 1998, the Company sold approximately $210 million in
recreational vehicle retail notes, without recourse, to unrelated
third parties. These transactions resulted in gains on notes
sold of $10.3 million. The Company continues to offer retail
installment financing on recreational vehicles.
Total interest expense for the second quarter increased from
$78.6 million in 1997 to $91.1 million in 1998. Interest expense
increased from $150.1 million for the first six months of 1997 to
$179.4 million for the first six months of 1998. The increase in
interest expense was the result of higher average borrowing costs
and increased borrowings required to finance the larger average
portfolio of Receivables and Leases. Total average borrowings
during the first six months of 1998 were $5.667 billion, compared
to $5.150 billion in the first six months of 1997.
Administrative and operating expenses were $28.5 million in the
second quarter of 1998 and $55.0 million for the first six months
of 1998, compared with $26.0 million and $48.7 million for the
same periods in 1997. This increase was the result of higher
employment costs associated with administering a larger
Receivable and Lease portfolio. Depreciation of equipment on
operating leases increased to $25.4 million in the second quarter
of 1998 and $48.8 million for the first six months of 1998,
compared to $17.5 million in the second quarter of 1997 and $31.8
million for the first six months of 1997.
During the second quarter and the first six months of 1998, the
provision for credit losses totaled $15.2 million and $24.5
million, respectively, compared with $9.7 million and $16.2
million in the same periods last year. The increase in the
provision for credit losses was primarily the result of increases
in agricultural and construction retail note write-offs in 1998.
The annualized provision for credit losses, as a percentage of
the total average portfolio outstanding, was .90 percent for the
second quarter of 1998 and .74 percent for the first six months
of 1998, compared with .65 percent and .57 percent for the same
periods last year.
Page 6
<PAGE>
Receivable and Lease acquisition volumes were as follows (dollars
in millions):
Three Months
Ended April 30,
----------------
1998 1997 $ Chng % Chng
-------------------------------------
Retail note volumes:
Agricultural equipment $ 607 $ 610 $ (3) --%
Construction equipment 109 85 24 28
Lawn and grounds care
equipment 46 35 11 31
Recreational products 100 146 (46) (32)
---------------------------
Total retail note
volumes 862 876 (14) (2)
Wholesale notes 395 260 135 52
Revolving charge accounts 441 324 117 36
Financing Leases 29 30 (1) (3)
Equipment on operating
leases 188 109 79 72
---------------------------
Total Receivable and
Lease volumes $1,915 $1,599 $ 316 20
===========================
Six Months
Ended April 30,
----------------
1998 1997 $ Chng % Chng
-------------------------------------
Retail note volumes:
Agricultural equipment $1,445 $1,449 $ (4) --%
Construction equipment 206 185 21 11
Lawn and grounds care
equipment 67 58 9 16
Recreational products 165 210 (45) (21)
---------------------------
Total retail note
volumes 1,883 1,902 (19) (1)
Wholesale notes 674 512 162 32
Revolving charge accounts 697 556 141 25
Financing Leases 52 53 (1) (1)
Equipment on operating
leases 284 181 103 57
---------------------------
Total Receivable and
Lease volumes $ 3,590 $ 3,204 $ 386 12
============================
Total Receivables and Leases owned were as follows (in millions):
April 30, October 31, April 30,
1998 1997 1997
-------------------------------
Retail notes owned:
Agricultural equipment $ 3,039 $ 2,556 $ 2,870
Construction equipment 677 660 639
Lawn and grounds care
equipment 220 216 185
Recreational products 735 917 911
------------------------------
Total retail notes
held 4,671 4,349 4,605
Wholesale notes 670 593 522
Revolving charge accounts 627 619 511
Financing leases 218 215 194
Equipment on operating
leases 712 527 403
------------------------------
Total Receivables and
Leases owned $ 6,898 $ 6,303 $ 6,235
==============================
Page 7
<PAGE>
For the second quarter and first six months of 1998, agricultural
retail note volumes remained relatively stable when compared to
the same periods in 1997. Construction and lawn and grounds care
retail notes increased in both periods in 1998 over 1997.
Recreational product retail note volumes declined in both the
second quarter and the first six months of 1998, due to a
decrease in yacht retail note volumes when compared to last year.
During the second quarter of 1997, the Company purchased $17
million of yacht retail notes from a third party.
Revolving charge accounts increased significantly in the second
quarter and first six months of 1998 primarily due to increases
in agricultural operating loans and Farm Plan volumes, when
compared to 1997. Wholesale notes also increased due to higher
agricultural dealer purchase-for-rental volumes and yacht
wholesale activity. Operating lease volumes continued to
increase significantly over last year due to agricultural low-
rate and guaranteed residual value leasing programs sponsored by
the Company or John Deere.
Receivables and Leases administered by the Company, which include
retail notes previously sold, were as follows (in millions):
April 30, October 31, April 30,
1998 1997 1997
---------------------------------
Receivables and Leases
administered:
Receivables and Leases
owned by the Company $ 6,898 $ 6,303 $ 6,235
Retail notes sold and
securitized (with
recourse)* 782 1,314 720
Retail notes sold
(without recourse) 196 --- ---
---------------------------------
Total Receivables and
Leases administered $ 7,876 $ 7,617 $ 6,955
=================================
* The Company's estimated maximum exposure under all retail note
recourse provisions at April 30, 1998 was $150 million.
Additional sales of retail notes are expected in the future.
Total Receivable and Lease amounts 60 days or more past due, by
product and as a percentage of total balances held were as
follows (dollars in millions):
April 30, October 31, April 30,
1998 1997 1997
-----------------------------------------
Dollars % Dollars % Dollars %
-----------------------------------------
Retail notes:
Agricultural
equipment $ 10.0 .33% $ 6.8 .27% $ 9.6 .33%
Construction
equipment 2.4 .36 2.0 .31 2.1 .33
Lawn and grounds
care equipment .7 .31 .6 .28 .8 .41
Recreational products .1 .02 .3 .03 .1 .02
----- ----- -----
Total retail notes 13.2 .28 9.7 .22 12.6 .27
Wholesale notes 2.3 .34 2.0 .33 1.6 .31
Revolving charge
accounts 8.8 1.41 8.3 1.34 9.9 1.98
Leases 4.1 .44 2.0 .27 3.2 .53
----- ----- -----
Total Receivables
and Leases $28.4 .41 $22.0 .35 $27.3 .44
===== ===== =====
Page 8
<PAGE>
The balance of retail notes owned (principal plus accrued
interest) with any installment 60 days or more past due was $57.2
million, $44.4 million and $57.6 million at April 30, 1998,
October 31, 1997 and April 30, 1997, respectively. The balance
of retail notes held on which any installment is 60 days or more
past due as a percentage of ending retail notes receivable was
1.23 percent, 1.02 percent and 1.25 percent at April 30, 1998,
October 31, 1997 and April 30, 1997, respectively.
During the second quarter and the first six months of 1998,
write-offs (net of recoveries) of Receivables and Leases totaled
$11.6 million and $18.8 million, respectively, compared with $8.9
million and $14.4 million in the same periods last year.
Annualized write-offs, as a percentage of the total average
portfolio outstanding, were .69 percent for the second quarter of
1998 and .57 percent for the first six months of 1998, compared
with .60 percent and .50 percent for the same periods last year.
Write-offs relating to retail notes increased 30 percent, or $2.3
million, in the first six months of 1998, when compared with the
first six months of 1997, primarily due to increased write-offs
of agricultural and construction equipment retail notes.
Revolving charge account write-offs in 1998 remain relatively
stable when compared to last year, while recreational product
retail note write-offs declined.
Deposits withheld from dealers and merchants, representing mainly
withholding accounts from individual John Deere dealers to which
losses from retail notes and leases can be charged, amounted to
$143.9 million at April 30, 1998, compared with $144.2 million at
October 31, 1997 and $131.2 million at April 30, 1997. The
Company's allowance for credit losses on all Receivables and
Leases totaled $85.7 million at April 30, 1998, $85.9 million at
October 31, 1997 and $89.2 million at April 30, 1997. Allowance
for credit losses represented 1.24 percent of the unpaid balance
of Receivables and Leases financed at April 30, 1998, 1.36
percent at October 31, 1997, and 1.43 percent at April 30, 1997.
The Company's allowance for credit losses, as a percentage of
total Receivables and Leases, has declined during the last twelve
months due to an ongoing reevaluation of loss experience and
related adjustments to ensure that the allowance is maintained at
an adequate level.
Capital Resources and Liquidity
The Company relies on its ability to raise substantial amounts of
funds to finance its Receivable and Lease portfolios. The
Company's primary sources of funds for this purpose are a
combination of borrowings and equity capital. Additionally, the
Company periodically sells substantial amounts of retail notes in
the public market and in private sales. The Company's ability to
obtain funds is affected by its debt ratings, which are closely
related to the outlook for and the financial condition of Deere &
Company, and the nature and availability of support facilities,
such as its lines of credit. For information regarding Deere &
Company and its business, see Exhibit 99.
The Company's ability to meet its debt obligations is supported
in a number of ways as described below. All commercial paper
issued is backed by bank credit lines. The assets of the Company
are self-liquidating in nature. A strong equity position is
available to absorb unusual losses on these assets. Liquidity is
also provided by the Company's ability to sell these assets.
Asset-liability risk is also actively managed to minimize
exposure to interest rate fluctuations.
Total interest-bearing indebtedness amounted to $5.963 billion at
April 30, 1998, compared with $5.470 billion at October 31, 1997
and $5.411 billion at April 30, 1997, generally corresponding
with the level of Receivables and Leases financed. Total short-
term indebtedness amounted to $3.998 billion at April 30, 1998,
compared with $3.387 billion at October 31, 1997 and $3.461
billion at April 30, 1997. Total long-term indebtedness amounted
to $1.965 billion, $2.083 billion and $1.950 billion at April 30
1998, October 31, 1997 and April 30, 1997, respectively. The
ratio of total interest-bearing debt to stockholder's equity was
7.0 to 1, 6.7 to 1 and 7.0 to 1 at April 30, 1998, October 31,
1997 and April 30, 1997, respectively. During the first six
months of 1998, the Capital Corporation issued $200 million of
5.85% Notes due in 2001, and retired $150 million of floating-
rate notes due in 1998. The Capital Corporation also issued $581
million and retired $157.5 million of medium-term notes during
the same period.
At April 30, 1998, the Capital Corporation, Deere & Company, John
Deere Limited (Canada) and John Deere Credit Inc. (Canada),
jointly, maintained $5.015 billion of unsecured lines of credit
with various banks in North America and overseas, $717 million of
which was unused. For the purpose of computing unused credit
lines, total short-term borrowings, excluding the current portion
of long-term borrowings, of the Capital Corporation, Deere &
Company, John Deere Limited (Canada) and John Deere Credit Inc.
(Canada) were considered to constitute utilization. Included in
the total credit lines is a long-term credit agreement for $3.500
billion. An annual facility fee on the credit agreement is
charged to the Capital Corporation based on utilization.
Page 9
<PAGE>
The Company's business is somewhat seasonal, with overall
acquisitions of Receivables and Leases traditionally higher in
the second half of the fiscal year than in the first half and
overall collections of Receivables and Leases traditionally
somewhat higher in the first half of the fiscal year.
During the first six months of 1998, the aggregate net cash
provided by operating and financing activities was primarily used
to increase Receivables and Leases. Net cash provided by
operating activities was $140 million in the first six months of
1998. Financing activities provided $467 million during the same
period, resulting from a $492 million net increase in total
borrowings, which was offset by $25 million in dividend payments
to John Deere Credit Company. Net cash used for investing
activities totaled $623 million in 1998, primarily due to
Receivable and Lease acquisitions exceeding collections and sales
of receivables by $668 million. Cash and cash equivalents
decreased $16 million during the first six months of 1998.
During the first six months of 1997, the aggregate net cash
provided by operating and financing activities was primarily used
to increase Receivables and Leases. Net cash provided by
operating activities was $107 million in the first six months of
1997. Financing activities provided $476 million during the same
period, resulting from a $516 million net increase in total
borrowings, which was offset by $40 million in dividend payments
to John Deere Credit Company. Net cash used for investing
activities totaled $586 million in 1997, primarily due to
Receivable and Lease acquisitions exceeding collections by $648
million. Cash and cash equivalents decreased $3 million during
the first six months of 1997.
The Capital Corporation paid a cash dividend to John Deere Credit
Company of $12.5 million in each of the first two quarters of
1998. John Deere Credit Company paid comparable dividends to
Deere & Company. On May 29, 1998, the Capital Corporation
declared a cash dividend of $12.5 million to John Deere Credit
Company, which, in turn, declared a cash dividend of $12.5
million to Deere & Company, each payable on June 9, 1998.
Item 3. Quantitative and Qualitative Disclosures About Market
Risk.
See the information under "Management's Discussion and Analysis,"
Note 12 "Financial Instruments" and "Supplemental Information
(Unaudited)" in the Company's most recent annual report filed on
Form 10-K. There has been no material change in this
information.
Page 10
<PAGE>
PART II. OTHER INFORMATION
Item 1. Legal Proceedings.
The Company is subject to various unresolved legal
actions which arise in the normal course of its
business, the most prevalent of which relate to state
and federal laws and regulations concerning retail
credit. Although it is not possible to predict with
certainty the outcome of these unresolved legal
actions or the range of possible loss, the Company
believes these unresolved legal actions will not have
a material effect on its financial position or results
of operations.
Item 2. Changes in Securities and Use of Proceeds.
Omitted pursuant to instruction H(2).
Item 3. Defaults Upon Senior Securities.
Omitted pursuant to instruction H(2).
Item 4. Submission of Matters to a Vote of Security Holders.
Omitted pursuant to instruction H(2).
Item 5. Other Information.
None.
Item 6. Exhibits and Reports on Form 8-K.
(a) Exhibits.
See the index to exhibits immediately preceding
the exhibits filed with this report.
Certain instruments relating to long-term debt,
constituting less than 10% of the registrant's
total assets, are not filed as exhibits
herewith pursuant to Item 601(b)(4)(iii)(A) of
Regulation S-K. The registrant will file
copies of such instruments upon request of the
Commission.
(b) Reports on Form 8-K.
Current report on Form 8-K dated February 17,
1998 (items 5 and 7).
Page 11
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of
1934, the registrant has duly caused this report to be signed on
its behalf by the undersigned thereunto duly authorized.
JOHN DEERE CAPITAL CORPORATION
Date: June 8, 1998 By: /s/ N. J. Jones
--------------------------
N. J. Jones
Senior Vice President
(Principal Financial Officer)
Page 12
<PAGE>
INDEX TO EXHIBITS
Exhibit
- -------
(4.1) Amended and restated credit agreements among
Deere & Company, the registrant, various
financial institutions and The Chase Manhattan
Bank, Bank of America National Trust and Savings
Association, Deutsche Bank AG New York Branch,
The Toronto-Dominion Bank, Morgan Guaranty Trust
Company of New York, Nationsbank, N.A. and The
First National Bank of Chicago as Managing Agents,
dated as of February 24, 1998 (Exhibit 4.1 to
Form 10-Q of Deere & Company for the quarter ended
April 30, 1998, Securities and Exchange Commission
file number 1-4121*).
(4.2) Third Amending Agreements to Loan Agreements
among John Deere Limited, John Deere Credit Inc.,
various financial institutions and The Toronto-
Dominion Bank as agent, dated as of
February 24, 1998 (Exhibit 4.2 to Form 10-Q of
Deere & Company for the quarter ended April 30,
1998, Securities and Exchange Commission file
number 1-4121*).
(12) Computation of ratio of earnings to fixed charges
(27) Financial data schedule
(99) Part I of Deere & Company Form 10-Q for the
quarter ended April 30, 1998 (Securities and
Exchange Commission file number 1-4121*).
- ------------------------------
* Incorporated by reference. Copies of these exhibits are
available from the Company upon request.
Page 13
Exhibit 12
John Deere Capital Corporation and Subsidiaries
Computation of Ratio of Earnings to Fixed Charges
(thousands of dollars)
Six Months Ended April 30,
-----------------------------
1998 1997
------------- -------------
Earnings:
Income before income
taxes and changes
in accounting $ 98,064 $ 91,472
Fixed charges 181,540 151,854
-------- --------
Total earnings $279,604 $243,326
======== ========
Fixed charges:
Interest expense $179,408 $150,046
Rent expense 2,132 1,808
-------- --------
Total fixed
charges $181,540 $151,854
======== ========
Ratio of earnings to
fixed charges * 1.54 1.60
======== ========
For the Years Ended October 31,
--------------------------------------------
1997 1996 1995 1994 1993
-------- -------- -------- -------- --------
Earnings:
Income before income
taxes and changes
in accounting $211,252 $206,588 $175,360 $161,809 $169,339
Fixed charges 330,649 276,726 240,913 168,507 170,226
-------- -------- -------- -------- --------
Total earnings $541,901 $483,314 $416,273 $330,316 $339,565
======== ======== ======== ======== ========
Fixed charges:
Interest expense $326,867 $273,748 $238,445 $166,591 $167,787
Rent expense 3,782 2,978 2,468 1,916 2,439
-------- -------- -------- -------- --------
Total fixed
charges $330,649 $276,726 $240,913 $168,507 $170,226
======== ======== ======== ======== ========
Ratio of earnings to
fixed charges * 1.64 1.75 1.73 1.96 1.99
======== ======== ======== ======== ========
- ---------
"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> <S> <C>
<ARTICLE> 5
<LEGEND>
This schedule contains summary financial information extracted from
Form 10-Q and is qualified in its entirety by reference to such
financial information.
</LEGEND>
<CIK> 0000027673
<NAME> JOHNDEERECAPITALCORP
<MULTIPLIER> 1,000,000
<CURRENCY> U.S. DOLLARS
<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> OCT-31-1998
<PERIOD-START> NOV-01-1997
<PERIOD-END> APR-30-1998
<EXCHANGE-RATE> 1
<CASH> 189
<SECURITIES> 0
<RECEIVABLES> 6,320
<ALLOWANCES> 86
<INVENTORY> 0
<CURRENT-ASSETS> 0
<PP&E> 25
<DEPRECIATION> 14
<TOTAL-ASSETS> 7,225
<CURRENT-LIABILITIES> 0
<BONDS> 1,965
0
0
<COMMON> 113
<OTHER-SE> 743
<TOTAL-LIABILITY-AND-EQUITY> 7,225
<SALES> 0
<TOTAL-REVENUES> 412
<CGS> 0
<TOTAL-COSTS> 49
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 25
<INTEREST-EXPENSE> 179
<INCOME-PRETAX> 98
<INCOME-TAX> 35
<INCOME-CONTINUING> 64
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 64
<EPS-PRIMARY> 0
<EPS-DILUTED> 0
</TABLE>
