===============================================================
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 January 31, 1999
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 January 31, 1999, 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.
===============================================================
<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 Ended January 31,
------------------------------
1999 1998
---- ----
Revenues
Finance income earned on retail notes $95.7 $104.4
Lease revenues 58.9 39.7
Revolving charge account income 27.2 25.3
Finance income earned on wholesale notes 18.9 13.9
Securitization and servicing fee income 8.8 7.8
Net gain on retail notes sold 5.8 2.1
Interest income from short-term
Investments 2.6 2.6
Other income 3.3 2.4
- --------------------------------------------------------
Total revenues 221.2 198.2
- --------------------------------------------------------
Expenses
Interest expense 86.0 88.3
Operating expenses:
Administrative and operating expenses 28.4 26.5
Provision for credit losses 11.3 9.3
Fees paid to John Deere 3.1 3.2
Depreciation of equipment on operating
leases 35.2 23.4
- --------------------------------------------------------
Total operating expenses 78.0 62.4
- --------------------------------------------------------
Total expenses 164.0 150.7
- --------------------------------------------------------
Income of consolidated group before income
taxes 57.2 47.5
Provision for income taxes 20.2 16.7
- --------------------------------------------------------
Income of consolidated group 37.0 30.8
Equity in income (loss) of unconsolidated
affiliates .4 (.2)
- --------------------------------------------------------
Net income 37.4 30.6
Cash dividends declared (5.0) (12.5)
Retained earnings at beginning of period 806.4 705.2
- --------------------------------------------------------
Retained earnings at end of period $838.8 $723.3
=======================================================
See Notes to Interim Financial Statements.
Page 2
<PAGE>
John Deere Capital Corporation and Subsidiaries
Consolidated Balance Sheets
(Unaudited)
(in millions)
January 31, October 31, January 31,
1999 1998 1998
----------- ----------- -----------
Assets
Cash and cash
equivalents $ 182.8 $ 191.1 $ 197.5
Receivables and
leases:
Retail notes 4,272.5 3,839.4 4,662.3
Revolving charge
accounts 609.4 751.1 504.5
Wholesale notes 831.2 803.9 600.0
Financing leases 242.5 241.8 212.0
- --------------------------------------------------------
Total receivables 5,955.6 5,636.2 5,978.8
Equipment on
operating
leases - net 923.6 891.5 577.1
- --------------------------------------------------------
Total receivables
and leases 6,879.2 6,527.7 6,555.9
Allowance for
credit losses (83.0) (81.3) (88.0)
- --------------------------------------------------------
Total receivables
and leases -
net 6,796.2 6,446.4 6,467.9
- --------------------------------------------------------
Other receivables 146.1 154.8 143.4
Investment in
unconsolidated
affiliates 20.5 20.0 12.6
Other assets 155.2 54.1 65.1
- ---------------------------------------------------------
Total Assets $7,300.8 $6,866.4 $6,886.5
=========================================================
Liabilities and
Stockholder's Equity
Short-term borrowings:
Commercial paper $1,540.0 $1,672.0 $2,098.6
John Deere 93.2 59.9 181.5
Current maturities
of long-term
borrowings 1,673.0 1,678.5 1,248.5
Other notes
payable 7.2 6.8 3.7
- ---------------------------------------------------------
Total short-term
borrowings 3,313.4 3,417.2 3,532.3
- ---------------------------------------------------------
Accounts payable and
accrued liabilities:
Accrued interest on
debt 64.4 45.5 58.7
Other payables 285.7 229.7 227.8
- ---------------------------------------------------------
Total accounts
payable and
accrued
liabilities 350.1 275.2 286.5
- ---------------------------------------------------------
Deposits withheld from
dealers and merchants 154.2 156.4 141.5
- ---------------------------------------------------------
Long-term borrowings:
Senior debt 2,382.3 1,949.2 1,940.4
Subordinated debt 150.0 150.0 150.0
- ---------------------------------------------------------
Total long-term
borrowings 2,532.3 2,099.2 2,090.4
- ---------------------------------------------------------
Total liabilities 6,350.0 5,948.0 6,050.7
- ---------------------------------------------------------
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 838.8 806.4 723.3
Cumulative translation
adjustment (.8) (.8) (.3)
- ---------------------------------------------------------
Total stockholder's
equity 950.8 918.4 835.8
- ---------------------------------------------------------
Total Liabilities and
Stockholder's Equity $7,300.8 $6,866.4 $6,886.5
=========================================================
See Notes to Interim Financial Statements.
Page 3
<PAGE>
John Deere Capital Corporation and Subsidiaries
Statements of Consolidated Cash Flows
(Unaudited)
(in millions)
Three Months Ended January 31,
------------------------------
1999 1998
---- ----
Cash Flows from Operating Activities:
Net income $ 37.4 $ 30.6
Adjustments to reconcile net
income to net cash provided
by operating activities:
Provision for credit losses 11.3 9.3
Provision for depreciation 35.8 24.2
Equity in loss (income) of
unconsolidated affiliates (.4) .2
Other 8.8 14.4
- ------------------------------------------------------
Net cash provided by
operating activities 92.9 78.7
- ------------------------------------------------------
Cash Flows from Investing Activities:
Cost of receivables and
leases acquired (1,977.2)(1,675.4)
Collections of receivables 1,478.4 1,375.5
Proceeds from sales of receivables 102.2 12.1
Other 82.6 69.3
- ------------------------------------------------------
Net cash used for investing
activities (314.0) (218.5)
- ------------------------------------------------------
Cash Flows from Financing Activities:
Change in commercial paper (132.0) 106.7
Change in receivable/payable
with John Deere 21.9 (177.1)
Increase in other notes payable .4 1.3
Proceeds from issuance of
long-term borrowings 625.0 306.0
Principal payments on
long-term borrowings (297.5) (91.5)
Dividends paid (5.0) (12.5)
- ------------------------------------------------------
Net cash provided by
financing activities 212.8 132.9
- ------------------------------------------------------
Net decrease in cash and
cash equivalents (8.3) (6.9)
Cash and cash equivalents
at the beginning of period 191.1 204.4
- ------------------------------------------------------
Cash and cash equivalents
at the end of period $ 182.8 $ 197.5
======================================================
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) In January 1999, the Company expanded its operations by
forming two additional entities, John Deere Credit Group Plc
(JDCG) and John Deere Credit S.A.S. (JDC S.A.S.). JDCG, a
wholly-owned subsidiary of the Capital Corporation, is a
limited-purpose organization to be used in certain financing
transactions for the Company's international operations. JDC
S.A.S. is a 50 percent joint venture formed with Caisse
Nationale de Credit Agricole. The principal business of JDC
S.A.S. is to support John Deere and independent John Deere
retail dealers by offering financing products specific to the
market in France. This investment is accounted for under the
equity method of accounting.
At January 31, 1999, the Company owned 50 percent of John Deere
Credit Limited (JDCL), a joint venture located in Gloucester,
England. During the quarter, the Company and Lombard North
Central Plc (Lombard), the finance house subsidiary of NatWest
Group, reached an agreement whereby the Company acquired in
February 1999 the 50 percent share in JDCL held by Lombard's
subsidiary, Farming and Agricultural Finance (FAF). The joint
venture's total assets, stockholders' equity and net income for
its year ended September 30, 1998 were $315 million, $32
million and $1 million, respectively. The Company also
purchased an additional receivable portfolio of approximately
$251 million from FAF in February 1999.
(3) 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 or farm input providers 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, financing leases and wholesale notes receivable are
collectively called "Receivables". Receivables and operating
leases are collectively called "Receivables and Leases".
Page 5
<PAGE>
(4) The Company's ratio of earnings before fixed charges to
fixed charges was 1.66 to 1 for the first quarter of 1999
compared with 1.53 to 1 for the first quarter of 1998.
"Earnings before fixed charges" 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.
(5) In the first quarter of 1999, the Company adopted FASB
Statement No. 130, Reporting Comprehensive Income.
Comprehensive income includes all changes in the Company's
equity during the period, except transactions with stockholders
of the Company. Comprehensive income for the first quarter of
1999 and 1998 consisted of the following in millions of
dollars:
Three Months Ended
January 31,
------------------
1999 1998
------------------
Net Income $37.4 $30.6
Change in cumulative
translation adjustment -- (.1)
------------------
Comprehensive income $37.4 $30.5
==================
Item 2. Management's Discussion and Analysis of
Financial Condition and Results of Operations.
Results of Operations
Net income for the first quarter of 1999 was $37.4 million
compared with $30.6 million last year. First quarter results
for 1999 benefited from higher gains on retail note sales,
higher income on a larger average receivable and lease
portfolio, a temporary reduction in leverage position, and
improved financing spreads, partially offset by higher
operating costs.
Revenues totaled $221.2 million for the first quarter of 1999
compared to $198.2 million for the same period a year ago.
Revenues increased primarily due to a 6 percent increase in the
average balance of Receivables and Leases financed. Finance
income earned on retail notes totaled $95.7 million for the
first three months of 1999 compared to $104.4 million for the
same period in 1998. This decrease was primarily the result of
recreational product retail note sales over the last twelve
months. Lease revenues increased $19.2 million, to $58.9
million in the first three months of 1999, from $39.7 million
in the first three months of 1998 due to a 48 percent increase
in the average balance of equipment on operating leases and
financing leases. Finance income earned on wholesale notes
increased $5.0 million, to $18.9 million for the first three
months of 1999, from $13.9 million in the first three months of
1998. This increase was primarily the result of the continued
growth in the financing for inventories of construction
equipment, yachts and recreational vehicles.
Page 6
<PAGE>
Net gains on the sales of retail notes, including adjustments
related to prior sales, totaled $5.8 million for the first
quarter of 1999 compared to $2.1 million for the same period a
year ago. The increase is primarily related to the sale of
recreational vehicle retail notes ($83 million total principal
value) during the first quarter of 1999. There were no similar
sales during the first quarter of 1998. Additional sales of
retail notes are expected to be made in the future.
Interest expense totaled $86.0 million for the first quarter of
1999 compared to $88.3 million for the same period in 1998.
This decrease is primarily due to a reduction in the weighted
average annual interest rate incurred on all interest-bearing
borrowings from 6.2 percent for the first quarter of 1998 to
5.9 percent for the first quarter of 1999. This decrease was
partially offset by higher average borrowings of $5.686 billion
in the first three months of 1999 compared to $5.534 billion in
the first three months of 1998.
Administrative and operating expenses increased 7 percent from
$26.5 million in the first quarter of 1998 to $28.4 million in
the first quarter of 1999. These increases were attributable to
the costs associated with administering a larger Receivable and
Lease portfolio as well as higher employment costs relating to
the increasing level of new acquisition volumes. Depreciation
of equipment on operating leases increased to $35.2 million in
the first quarter of 1999 compared to $23.4 million for the
same period in 1998, as a result of the increase in operating
leases financed.
During the first quarter of 1999, the provision for credit
losses totaled $11.3 million compared with $9.3 million for the
same period last year. The increase in the provision for credit
losses was primarily the result of an increase in the average
portfolio of Receivables and Leases financed. The annualized
provision for credit losses, as a percentage of the total
average portfolio outstanding, was .67 percent for the first
quarter of 1999 compared with .58 percent for the same period
last year.
Receivable and Lease acquisition volumes were as follows (in
millions of dollars):
Three Months
Ended January 31,
-----------------
1999 1998 $ Change % Change
---------------------------------
Retail notes:
Agricultural equipment $906 $838 $ 68 8%
Construction equipment 117 97 20 21
Lawn and grounds care
equipment 38 21 17 81
Recreational products 84 65 19 29
--------------------------------
Total 1,145 1,021 124 12
Revolving charge
Accounts 321 256 65 25
Wholesale notes 394 279 115 41
Financing leases 27 23 4 17
Equipment on operating
leases 90 96 (6) (6)
--------------------------------
Total $1,977 $1,675 $302 18
================================
Page 7
<PAGE>
Total Receivables and Leases held were as follows (in millions
of dollars):
Jan 31, Oct 31, Jan 31,
1999 1998 1998
---------------------------------
Retail notes:
Agricultural equipment $2,751 $2,285 $2,863
Construction equipment 722 703 666
Lawn and grounds care
equipment 273 270 205
Recreational products 526 581 928
--------------------------------
Total 4,272 3,839 4,662
Revolving charge
accounts 609 751 505
Wholesale notes 831 804 600
Financing leases 243 242 212
Equipment on operating
leases 924 892 577
--------------------------------
Total $6,879 $6,528 $6,556
================================
Retail note volumes increased by $124 million for the first
quarter of 1999 compared to the first quarter of 1998, due to
increases in all retail note categories. Wholesale note volumes
increased significantly during the first quarter of 1999
primarily due to higher construction equipment floor planning
notes and the introduction of a used agricultural equipment
floor planning program in April 1998. Revolving charge volumes
increased primarily due to the strong demand for the Farm Plan
product, agricultural production loans and operating loans
offered to select golf & turf commercial customers.
Receivables and Leases administered by the Company, which
include retail notes sold, were as follows (in millions of
dollars):
Jan 31, Oct 31, Jan 31,
1999 1998 1998
-------------------------------
Receivables and Leases
administered:
Receivables and Leases
owned by the Company $6,879 $6,528 $6,556
Retail notes sold and
securitized (with
limited recourse)* 1,348 1,812 1,014
Retail notes sold
(without recourse)** 429 376
---------------------------------
Total Receivables
and Leases
administered $8,656 $8,716 $7,570
=================================
* The Company's maximum exposure under all retail note recourse
provisions at January 31, 1999, October 31, 1998 and January
31, 1998 was $174 million, $181 million and $163 million,
respectively. In addition, the Company has guaranteed a letter
of credit on behalf of John Deere Credit Inc., the John Deere
finance subsidiary in Canada, as part of a retail note sale. At
January 31, 1999, the maximum exposure under this agreement was
approximately $3 million.
** On February 12, 1999, servicing rights on a majority of
recreational vehicle retail notes previously sold and
administered by the Company were assumed by their owner.
Approximately $269 million principal value was removed from the
portfolio, reducing the amount of Receivables and Leases
administered accordingly. The Company continues to administer
the remaining portfolio outstanding.
Page 8
<PAGE>
Total Receivable and Lease amounts 60 days or more past due, by
product and as a percentage of total balances held were as
follows (in millions of dollars):
January 31, October 31, January 31,
1999 1998 1998
-------------------------------------
Dollars % Dollars % Dollars %
-------------------------------------
Retail notes:
Agricultural
equipment $10.8 .39% $9.5 .42% $8.3 .29%
Construction
equipment 2.8 .39 2.0 .28 2.7 .40
Lawn and grounds
care equipment .8 .29 .7 .26 .7 .32
Recreational
products .2 .04 .2 .03 .2 .03
----- ----- -----
Total retail
notes 14.6 .34 12.4 .32 11.9 .26
Revolving charge
accounts 9.7 1.59 8.4 1.12 10.6 2.11
Wholesale notes 1.0 .12 .6 .07 2.2 .37
Leases 5.9 .51 3.8 .34 3.2 .40
----- ----- -----
Total Receivables
and Leases $31.2 .45 $25.2 .39 $27.9 .43
===== ===== =====
The balance of retail notes held (principal plus accrued
interest) with any installment 60 days or more past due was $63
million, $54 million and $56 million at January 31, 1999,
October 31, 1998 and January 31, 1998, 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 1.47 percent, 1.42 percent and 1.20 percent at
January 31, 1999, October 31, 1998 and January 31, 1998,
respectively.
During the first quarter of 1999, write-offs (net of
recoveries) of Receivables and Leases totaled $7.2 million
compared with $7.2 million in the same period last year.
Annualized write-offs, as a percentage of the total average
portfolio outstanding, were .43 percent for the first quarter
of 1999 compared with .44 percent during the same period last
year. Write-offs relating to retail notes increased 26 percent,
or $0.8 million, in the first three months of 1999, when
compared with the first three months of 1998, primarily due to
increased write-offs of agricultural equipment and recreational
product retail notes. Wholesale note write-offs decreased $0.8
million in the first quarter of 1999 when compared to the same
period last year. Lease and revolving charge account write-offs
in the first quarter of 1999 remained relatively stable when
compared to last year.
Deposits withheld from dealers and merchants, representing
mainly the aggregate dealer retail note and lease withholding
accounts from individual John Deere dealers to which losses
from retail notes and leases originating from the respective
dealers can be charged, amounted to $154 million at January 31,
1999, compared with $156 million at October 31, 1998 and $142
million at January 31, 1998. The Company's allowance for credit
losses on all Receivables and Leases financed totaled $83
million at January 31, 1999, $81 million at October 31, 1998
and $88 million at January 31, 1998. The allowance for credit
losses represented 1.21 percent of the total Receivables and
Leases financed at January 31, 1999, 1.25 percent at October
31, 1998 and 1.34 percent at January 31, 1998. 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 evaluation of loss experience and
related estimates to ensure the allowance for credit losses is
maintained at an adequate level. Management believes the
allowance for credit losses at January 31, 1999 is sufficient
to provide adequate protection against losses.
Page 9
<PAGE>
Year 2000
The Company has established a global program (the "Year 2000
Program") to address the inability of certain computer and
infrastructure systems to process dates in the Year 2000 and
later. The major assessment areas include business information
systems, mainframe and personal computers, software, the
distributed network, facilities systems, the Company's products,
and the readiness of the Company's suppliers and distribution
network. The program includes the following phases:
identification and assessment, business criticality analysis,
project work prioritization, compliance plan development,
remediation and testing, production implementation, and
contingency plan development for mission critical systems.
The Company is on schedule to become Year 2000 ready with its
mission critical activities and systems, allowing substantial
time for further testing, verification and the final conversion
of less important systems. Over 95 percent of the Company's
systems identified as being mission critical have been tested
and verified as being Year 2000 compliant. The Company's goal
has been to have all remaining mission critical and non-mission
critical systems compliant by October 31, 1999, and the progress
to date makes this goal realistic. The Company has initiated
information and infrastructure systems modifications in its
effort to ensure that both information technology (IT) and non-
IT systems are compliant. The Company is requiring suppliers of
new software or equipment and third parties who develop or
modify software to provide written certification that their
products are Year 2000 compliant and have been tested
accordingly. In some instances, the Company is independently
testing this software. The Company is working with suppliers to
confirm embedded systems are compliant and perform the necessary
testing.
The Company is assessing the Year 2000 readiness of its critical
suppliers and merchants. The Company is surveying its major
suppliers and is surveying the largest volume generating
merchants; following up as appropriate with prioritization based
on mission criticality.
The total cost of the modifications and upgrades to date has not
been material and the future costs to become Year 2000 ready are
not expected to be material. These costs are expensed as
incurred and do not include the cost of scheduled replacement
software. Other major systems projects have not been deferred
due to the Year 2000 compliance projects.
Although no assurances can be given as to the Company's
readiness, particularly as it relates to third parties, based
upon the progress to date, the Company does not expect
consequences of any of the Company's unanticipated or
unsuccessful modifications to have a material adverse effect on
the Company's financial position or results of operations.
However, the failure to correct a material Year 2000 problem
could result in the interruption of certain normal business
activities and operations. The Company's most reasonably likely
worst case scenario is that the Year 2000 noncompliance of a
critical third-party could result in lost revenues or profits.
The Company is developing contingency plans, which will be an
ongoing activity for the first three calendar quarters of 1999,
should any Year 2000 failures occur in any of the assessment
areas noted above.
Safe Harbor Statement
Statements under the "Year 2000" heading and other statements
herein that relate to future operating periods are subject to
important risks and uncertainties that could cause actual
results to differ materially. Further information, including
factors that potentially could materially affect the Company's
and John Deere's financial results, is included in the most
recent Deere & Company Form 10-K and other John Deere and
Company filings with the Securities and Exchange Commission.
Page 10
<PAGE>
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. 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.
The Company's business is somewhat seasonal, with overall
acquisition volumes 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 six months of the fiscal year.
During the first three months of 1999, 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 $93 million in the first three months
of 1999. Financing activities provided $213 million during the
same period, resulting from a $218 million net increase in
total borrowings, which was partially offset by a $5 million
dividend payment to John Deere Credit Company. Net cash used
for investing activities totaled $314 million in the first
three months of 1999, primarily due to Receivable and Lease
acquisitions exceeding collections by $499 million, which was
partially offset by the $102 million of proceeds from the sale
of receivables. Cash and cash equivalents decreased $8 million
during the first three months of 1999.
During the first three 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 $79 million in the first three months
of 1998. Financing activities provided $133 million during the
same period, resulting from $145 million of proceeds from total
borrowings, which was partially offset by a $12.5 million
dividend payment to John Deere Credit Company. Net cash used
for investing activities totaled $219 million in the first
three months of 1998, primarily due to Receivable and Lease
acquisitions exceeding collections by $300 million. Cash and
cash equivalents decreased $7 million during the first three
months of 1998.
Total interest-bearing indebtedness amounted to $5.846 billion
at January 31, 1999, compared with $5.516 billion at October
31, 1998 and $5.623 billion at January 31, 1998, generally
corresponding with the level of Receivables and Leases financed
and the level of cash and cash equivalents. Total short-term
indebtedness amounted to $3.313 billion at January 31, 1999,
compared with $3.417 billion at October 31, 1998 and $3.532
billion at January 31, 1998. Total long-term indebtedness
amounted to $2.532 billion, $2.099 billion and $2.090 billion
at January 31, 1999, October 31, 1998 and January 31, 1998,
respectively. The ratio of total interest-bearing debt to
stockholder's equity was 6.1 to 1, 6.0 to 1 and 6.7 to 1 at
January 31, 1999, October 31, 1998 and January 31, 1998,
respectively.
Page 11
<PAGE>
During the first quarter of 1999, the Capital Corporation
retired $150 million of 9-5/8% subordinated notes, $97 million
of Swiss franc bonds and $50 million of medium-term notes all
due in the first quarter. The Capital Corporation also received
proceeds of $625 million from the issuance of medium-term notes
during the first three months of 1999.
At January 31, 1999, the Capital Corporation, Deere & Company,
John Deere Limited (Canada) and John Deere Credit Inc.
(Canada), jointly, maintained $5.026 billion of unsecured lines
of credit with various banks in North America and overseas,
$1.072 billion of which was unused. For the purpose of
computing unused credit lines, total short-term borrowings,
excluding the current portion of long-term borrowings, of the
Capital Corporation, Deere & Company, John Deere Limited
(Canada) and John Deere Credit Inc. (Canada) were considered to
constitute utilization. Included in the total credit lines is a
long-term credit agreement commitment for $3.500 billion
expiring on February 24, 2003. An annual facility fee on the
credit agreement is charged to the Capital Corporation based on
utilization.
The Capital Corporation declared and paid a cash dividend of $5
million to John Deere Credit Company on December 15, 1998. John
Deere Credit Company paid a comparable dividend to Deere &
Company. On February 26, 1999, the Capital Corporation declared
a cash dividend of $5 million to John Deere Credit Company,
which in turn declared a cash dividend of $5 million to Deere &
Company, each payable on March 9, 1999.
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 12
<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 November 24, 1998
(Items 5 and 7).
Current Report on Form 8-K dated December 16, 1998
(Items 5 and 7).
Page 13
<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: March 9, 1999
By: s/ Nathan J. Jones
------------------------------
Nathan J. Jones
Senior Vice President and
Principal Financial Officer
Page 14
<PAGE>
INDEX TO EXHIBITS
Exhibit
- -------
(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 January 31, 1999 (Securities and Exchange
Commission file number 1-4121*).
__________________________
* Incorporated by reference. Copies of these exhibits
are available from the Company upon request.
Page 15
Exhibit 12
John Deere Capital Corporation and Subsidiaries
Computation of Ratio of Earnings to Fixed Charges
(thousands of dollars)
Three Months Ended January 31,
------------------------------
1999 1998
----------- -----------
Earnings:
Income before income
taxes and changes
in accounting $57,129 $47,530
Fixed charges 87,120 89,278
----------- ----------
Total earnings $144,249 $136,808
=========== ==========
Fixed charges:
Interest expense $85,983 $88,258
Rent expense 1,137 1,020
----------- ----------
Total fixed
charges $87,120 $89,278
=========== ==========
Ratio of earnings to
fixed charges * 1.66 1.53
=========== ==========
For the Years Ended October 31,
-------------------------------------------
1998 1997 1996 1995 1994
-------- -------- -------- -------- --------
Earnings:
Income before income
taxes and changes
in accounting $233,534 $211,251 $206,588 $175,360 $161,809
Fixed charges 373,236 330,648 276,726 240,913 168,507
-------- -------- -------- -------- --------
Total earnings $606,771 $541,899 $483,314 $416,273 $330,316
======== ======== ======== ======== ========
Fixed charges:
Interest expense $368,381 $326,866 $273,748 $238,445 $166,591
Rent expense 4,856 3,782 2,978 2,468 1,916
-------- -------- -------- -------- --------
Total fixed
charges $373,236 $330,648 $276,726 $240,913 $168,507
======== ======== ======== ======== ========
Ratio of earnings to
fixed charges * 1.63 1.64 1.75 1.73 1.96
======== ======== ======== ======== ========
_______
"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.
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This schedule contains summary financial information extracted from
Form 10-Q and is qualified in its entirety by reference to such
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