===============================================================
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 July 31, 2000
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: (775) 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 July 31, 2000, 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.
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Index to Exhibits: Page 15
<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 Nine Months Ended
July 31, July 31,
2000 1999 2000 1999
------------------------------------
Revenues
Finance income earned
on retail notes $ 109.4 $ 100.7 $ 294.7 $ 304.4
Lease revenues 98.5 69.7 282.1 192.6
Revolving charge account
income 36.9 31.8 100.3 85.5
Finance income earned on
wholesale notes 24.4 18.0 68.6 52.4
Securitization and
servicing fee income 6.7 7.6 21.9 23.2
Net gain on retail notes
sold 10.0 22.4 17.0 37.7
Interest income from
short-term investments 1.7 1.4 6.4 6.0
Other income 4.9 9.8 13.9 17.4
--------------------------------------------------------------
Total revenues 292.5 261.4 804.9 719.2
--------------------------------------------------------------
Expenses
Interest expense 116.7 91.2 319.2 269.6
Operating expenses:
Administrative and
operating expenses 37.0 33.4 106.2 94.5
Provision for credit
losses 14.9 15.3 40.7 41.2
Fees paid to John Deere 3.6 1.8 9.5 7.9
Depreciation of equipment
on operating leases 58.2 43.2 162.6 117.0
--------------------------------------------------------------
Total operating
expenses 113.7 93.7 319.0 260.6
--------------------------------------------------------------
Total expenses 230.4 184.9 638.2 530.2
--------------------------------------------------------------
Income of consolidated group
before income taxes 62.1 76.5 166.7 189.0
Provision for income taxes 21.8 26.0 58.0 65.2
--------------------------------------------------------------
Income of consolidated group 40.3 50.5 108.7 123.8
Equity in income (loss) of
unconsolidated affiliates .2 (.3) .4 .3
--------------------------------------------------------------
Net income 40.5 50.2 109.1 124.1
Cash dividends declared (5.0) (5.0) (15.0) (15.0)
Retained earnings at
beginning of period 943.3 870.3 884.7 806.4
--------------------------------------------------------------
Retained earnings at
end of period $ 978.8 $ 915.5 $ 978.8 $ 915.5
==============================================================
See Notes to Interim Financial Statements.
Page 2
<PAGE>
John Deere Capital Corporation and Subsidiaries
Consolidated Balance Sheets
(Unaudited)
(in millions)
July 31, October 31, July 31,
2000 1999 1999
------------------------------
Assets
Cash and cash equivalents $ 161.7 $ 149.4 $ 167.9
Receivables and leases:
Retail notes 3,989.3 3,716.2 4,116.3
Revolving charge accounts 1,055.5 900.6 842.5
Wholesale notes 973.1 957.2 891.3
Financing leases 438.1 402.2 263.8
--------------------------------------------------------------
Total receivables 6,456.0 5,976.2 6,113.9
Equipment on operating
leases - net 1,422.0 1,254.8 1,136.4
--------------------------------------------------------------
Total receivables
and leases 7,878.0 7,231.0 7,250.3
Allowance for credit losses (94.9) (83.6) (80.6)
--------------------------------------------------------------
Total receivables and
leases - net 7,783.1 7,147.4 7,169.7
--------------------------------------------------------------
Notes receivable -
unconsolidated affiliates 106.5
Other receivables 89.0 83.0 95.1
Investment in unconsolidated
affiliates 11.7 9.5 9.5
Other assets 136.0 116.0 117.8
Total Assets $ 8,288.0 $ 7,505.3 $ 7,560.0
==============================================================
Liabilities and Stockholder's Equity
Short-term borrowings:
Commercial paper $ 2,120.2 $ 1,264.7 $1,465.8
Extendible commercial notes
and other notes payable 2.3 6.4
John Deere 96.8 117.7 69.7
Current maturities of
long-term borrowings 1,567.7 2,137.6 2,084.7
--------------------------------------------------------------
Total short-term
Borrowings 3,787.0 3,526.4 3,620.2
--------------------------------------------------------------
Accounts payable and accrued
liabilities:
Accrued interest on debt 65.0 33.1 60.7
Other payables 367.6 324.2 285.1
--------------------------------------------------------------
Total accounts payable and
accrued liabilities 432.6 357.3 345.8
--------------------------------------------------------------
Deposits withheld from dealers
and merchants 125.3 122.8 121.2
--------------------------------------------------------------
Long-term borrowings:
Senior debt 2,705.1 2,351.1 2,295.3
Subordinated debt 150.0 150.0 150.0
--------------------------------------------------------------
Total long-term borrowings 2,855.1 2,501.1 2,445.3
--------------------------------------------------------------
Total liabilities 7,200.0 6,507.6 6,532.5
--------------------------------------------------------------
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 978.8 884.7 915.5
Accumulated other comprehensive
income (loss)- cumulative
translation adjustment (3.6) .2 (.8)
--------------------------------------------------------------
Total stockholder's equity 1,088.0 997.7 1,027.5
--------------------------------------------------------------
Total Liabilities and
Stockholder's Equity $ 8,288.0 $ 7,505.3 $ 7,560.0
==============================================================
See Notes to Interim Financial Statements.
Page 3
<PAGE>
John Deere Capital Corporation and Subsidiaries
Statements of Consolidated Cash Flows
(Unaudited)
(in millions)
Nine Months Ended July 31,
2000 1999
-----------------------
Cash Flows from Operating Activities:
Net income $ 109.1 $ 124.1
Adjustments to reconcile net
income to net cash provided
by operating activities:
Provision for credit losses 40.7 41.2
Provision for depreciation
and amortization 164.5 119.1
Equity in income of
unconsolidated affiliates (.4) (.3)
Other 93.0 (13.7)
------------------------------------------------------------
Net cash provided by
operating activities 406.9 270.4
------------------------------------------------------------
Cash Flows from Investing Activities:
Cost of receivables and leases
acquired (6,398.4) (6,008.2)
Collections of receivables 4,487.6 4,181.2
Change in notes receivable -
unconsolidated affiliates (101.7) (5.1)
Proceeds from sales of receivables 878.9 1,344.5
Other 139.4 68.4
------------------------------------------------------------
Net cash used for
investing activities (994.2) (419.2)
------------------------------------------------------------
Cash Flows from Financing Activities:
Change in commercial paper 855.5 (259.1)
Change in extendible commercial
notes and other notes payable (4.2) (6.8)
Change in receivable/payable
with John Deere (20.6) 10.2
Proceeds from issuance of long-term
borrowings 1,445.0 1,750.0
Principal payments on long-term
borrowings (1,661.1) (1,353.7)
Dividends paid (15.0) (15.0)
------------------------------------------------------------
Net cash provided by
financing activities 599.6 125.6
------------------------------------------------------------
Net increase (decrease) in cash and
cash equivalents 12.3 (23.2)
Cash and cash equivalents at
beginning of period 149.4 191.1
------------------------------------------------------------
Cash and cash equivalents at
end of period $ 161.7 $ 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
(collectively called 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.
Based on the way the Company's operations are managed and
evaluated by management, the Company is viewed as having one
operating segment.
(2) During the third quarter of fiscal 2000, the Company
received approval from the Office of Thrift Supervision to
charter a new thrift, to be known as FPC Financial, f.s.b.
Headquartered in Madison, Wisconsin, although not yet
operational, FPC Financial, f.s.b. will offer credit cards,
such as Farm Plan, PowerPlan, and the John Deere Credit
Revolving Plan, on a nationwide basis, and provide financing
for manufactured housing. The customers of the thrift are
expected to be the purchasers of agricultural, consumer and
commercial goods and services.
(3) During the second quarter of fiscal 2000, the Company
expanded its operations by forming two additional entities,
John Deere Bank S.A. (JDB) and John Deere Credit Compania
Financiera S.A. (JDCCF). JDB, a wholly-owned subsidiary of the
Capital Corporation located in Luxembourg, will act as the
European Regional Headquarters for the Company, as operations
are expanded in that area. JDCCF is an indirect wholly-owned
subsidiary of the Capital Corporation. The principal business
of JDCCF is to support Deere & Company and John Deere retail
dealers by offering financing products specific to the market
in Argentina. Both entities are fully consolidated into the
Company's results.
(4) During the second quarter of fiscal 2000, the Company
discontinued offering wholesale note financing for manufactured
housing dealer inventory. The Company will continue to
administer and service the existing portfolio until it is fully
liquidated. Acquisition volumes for this product totaled $103
million for the first nine months of fiscal 2000 and the
wholesale notes outstanding were $68 million at July 31, 2000.
(5) 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
Page 5
<PAGE>
subsidiaries (collectively called John Deere). John Deere
acquires these retail notes through John Deere equipment 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 dealers (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, and lawn and grounds care markets as well as
insured international export financing products (revolving
charge accounts), and provides wholesale financing for
inventories of recreational vehicles, 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."
(6) The Company's ratio of earnings before fixed charges to
fixed charges was 1.53 to 1 for the third quarter of 2000
compared with 1.63 to 1 for the third quarter of 1999. The
ratio of earnings before fixed charges to fixed charges was
1.51 to 1 for the first nine months of 2000 and 1.69 to 1 for
the first nine months of 1999. "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.
(7) Comprehensive income for the first nine months of 2000 and
1999 consisted of the following in millions of dollars:
July 31, July 31,
2000 1999 2000 1999
--------------------------------------
Net income $ 40.5 $ 50.2 $ 109.1 $ 124.1
Change in cumulative
translation adjustment (1.3) (.9) (3.8)
--------------------------------------
Comprehensive income $ 39.2 $ 49.3 $ 105.3 $ 124.1
======================================
(8) In December 1999, the Securities and Exchange Commission
(SEC) issued Staff Accounting Bulletin (SAB) No. 101, Revenue
Recognition in Financial Statements. The SAB summarizes the
SEC staff's views on applying generally accepted accounting
principles to revenue recognition in financial statements. The
Company has reviewed its revenue recognition policies and has
determined that they comply with the principles as set forth in
SAB No. 101. Accordingly, the issuance of the SAB will have no
effect on the Company's financial position or results of
operations.
Item 2. Management's Discussion and Analysis of Financial
Condition and Results of Operations.
Results of Operations
Net income was $40.5 million for the third quarter and $109.1
million for the first nine months of 2000, compared with $50.2
million and $124.1 million, respectively, last year. These
decreases were primarily due to lower income from the sale of
retail notes and higher operating expenses, partially offset by
higher income on a larger average receivable and lease
portfolio.
Page 6
<PAGE>
Revenues totaled $292.5 million and $804.9 million for the
third quarter and for the first nine months, respectively of
2000, compared to $261.4 million and $719.2 million for the
same periods a year ago. Revenues increased primarily due to
an 8 percent increase in the average balance of Receivables and
Leases financed for the first nine months of 2000 compared to
the same period last year. Finance income earned on retail
notes totaled $294.7 million for the first nine months of 2000,
compared to $304.4 million for the same period in 1999. This
decrease was primarily due to significant sales of recreational
product installment notes during 1999 and an 8 percent decrease
in the average balance of agricultural equipment notes
financed. This decrease was partially offset by an increase in
the yield on variable rate contracts. Lease revenues increased
$89.5 million, to $282.1 million in the first nine months of
2000, from $192.6 million in the first nine months of 1999, due
to a 44 percent increase in the average balance of financing
leases and equipment on operating leases. Finance income
earned on wholesale notes increased $16.2 million, to $68.6
million for the first nine months of 2000, from $52.4 million
in the first nine months of 1999. This increase was primarily
the result of continued growth in the financing for dealer
inventories of John Deere construction equipment and John Deere
agricultural equipment, partially offset by the decrease in
manufactured housing inventories. Revolving charge account
income increased $14.8 million, to $100.3 million for the first
nine months of 2000. This increase was primarily due to
growth in the agricultural operating loan portfolio.
Net gains on the sales of retail notes, including adjustments
to prior sales, totaled $10.0 million and $17.0 million for the
third quarter and for the first nine months of 2000,
respectively, compared to $22.4 million and $37.7 million for
the same periods a year ago. The lower net gain on retail
notes sold for the first nine months of 2000 was primarily the
result of lower recreational product retail note sales compared
to the same period last year. Additional sales of retail notes
are expected to be made in the future.
Interest expense totaled $116.7 million for the third quarter
of 2000 and $319.2 million for the first nine months of 2000,
compared to $91.2 million and $269.6 million for the same
periods in 1999. This increase was primarily due to an
increase in the weighted annual interest rate incurred on all
borrowings from 5.8 percent for the first nine months of 1999
to 6.5 percent for the first nine months of 2000. In addition,
average borrowings increased 7 percent to $6.475 billion in the
first nine months of 2000 from $6.068 billion in the first nine
months of 1999.
Administrative and operating expenses were $37.0 million in the
third quarter of 2000 and $106.2 million for the first nine
months of 2000, compared with $33.4 million and $94.5 million
for the same periods in 1999. These increases were
attributable to the higher costs associated with administering
a larger Receivable and Lease portfolio as well as increased
start up costs related to international growth. Depreciation of
equipment on operating leases increased to $58.2 million in the
third quarter of 2000 and $162.6 million for the first nine
months of 2000, compared to $43.2 million and $117.0 million
for the same periods in 1999, as a result of the increase in
equipment on operating leases financed.
During the third quarter and the first nine months of 2000, the
provision for credit losses totaled $14.9 million and $40.7
million, respectively, compared with $15.3 million and $41.2
million in the same periods last year. The annualized provision
for credit losses, as a percentage of the total average
portfolio outstanding, was .74 percent for the third quarter of
2000 and .71 percent for the first nine months of 2000,
compared with .84 percent and .77 percent for the same periods
last year.
Page 7
<PAGE>
Receivable and Lease acquisition volumes were as follows (in
millions of dollars):
Three Months
Ended July 31,
2000 1999 $ Change % Change
---------------------------------
Retail notes:
Agricultural equipment $ 495 $ 431 $ 64 15%
Construction equipment 190 185 5 3
Lawn and grounds care
Equipment 105 87 18 21
Recreational products 88 77 11 14
--------------------------------
Total 878 780 98 13
--------------------------------
Revolving charge accounts 753 601 152 25
Wholesale notes 395 416 (21) (5)
Financing leases 68 47 21 45
Equipment on operating leases 134 147 (13) (9)
--------------------------------
Total $ 2,228 $ 1,991 $ 237 12
================================
Nine Months
Ended July 31,
2000 1999 $ Change % Change
--------------------------------
Retail notes:
Agricultural equipment $1,804 $1,935 $ (131) (7%)
Construction equipment 508 414 94 23
Lawn and grounds care
Equipment 235 188 47 25
Recreational products 232 256 (24) (9)
--------------------------------
Total 2,779 2,793 (14) (1)
--------------------------------
Revolving charge accounts 1,798 1,414 384 27
Wholesale notes 1,158 1,226 (68) (6)
Financing leases 151 103 48 47
Equipment on operating leases 512 465 47 10
--------------------------------
Total $6,398 $6,001 $ 397 7
================================
Retail note volumes decreased by $14 million for the first nine
months of 2000, compared to the first nine months of 1999, due
to a decrease in United States agricultural equipment and
recreational product retail note volumes. Revolving charge
volumes increased due to the strong demand for the Farm Plan and
operating loans offered to agricultural customers.
Page 8
<PAGE>
Total Receivables and Leases held were as follows (in millions
of dollars):
July 31, October 31, July 31,
2000* 1999* 1999
-------------------------------
Retail notes:
Agricultural equipment $ 2,555 $ 2,602 $ 3,191
Construction equipment 870 611 434
Lawn and grounds care equipment 424 347 333
Recreational products 140 156 158
-------------------------------
Total 3,989 3,716 4,116
-------------------------------
Revolving charge accounts 1,056 901 843
Wholesale notes 973 957 891
Financing leases 438 402 264
Equipment on operating leases 1,422 1,255 1,136
-------------------------------
Total $ 7,878 $ 7,231 $ 7,250
===============================
* Includes the acquisition of Senstar Capital Corporation
(Senstar) installment, lease and revolving charge balances
which were acquired in the fourth quarter of fiscal 1999.
Receivables and Leases administered by the Company, which
include retail notes sold, were as follows in (millions of
dollars):
July 31, October 31, July 31,
2000* 1999* 1999
--------------------------------
Receivables and Leases administered:
Receivables and Leases
owned by the Company $ 7,878 $ 7,231 $ 7,250
Retail notes sold and
securitized (with
limited recourse)* 2,051 2,275 1,658
Retail notes sold
(without recourse)** 123 118 511
Receivables serviced
(without recourse)*** 24 46 52
--------------------------------
Total Receivables and
Leases administered $10,076 $ 9,670 $ 9,471
================================
* The Company's maximum exposure under all retail note
recourse provisions at July 31, 2000, October 31, 1999 and July
31, 1999 was $168 million, $161 million and $170 million,
respectively. In addition, the Company has guaranteed letters
of credit on behalf of John Deere Credit Inc., the John Deere
finance subsidiary in Canada, as part of two retail note sales.
At July 31, 2000, the maximum exposure under these agreements
was approximately $9 million.
** On recreational product retail note sales, the Company
continues to administer the portfolio outstanding for a fee
until the servicing rights are assumed by their owner.
*** On February 1, 1999, the Company began servicing a
receivable portfolio on behalf of Farming and Agricultural
Financing Limited. These servicing rights were obtained in
conjunction with the Company's acquisition of the remaining 50
percent interest in John Deere Credit Limited.
Page 9
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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):
July 31, October 31, July 31,
2000 1999 1999
$ % $ % $ %
-----------------------------------
Retail notes:
Agricultural equipment $10.8 .42% 11.7 .45% $11.2 .35%
Construction equipment 3.6 .41 2.1 .34 2.2 .51
Lawn and grounds care
Equipment .9 .21 .8 .23 .8 .24
Recreational products .1 .07 .1 .06 .1 .06
-----------------------------------
Total 15.4 .39 14.7 .40 14.3 .35
-----------------------------------
Revolving charge accounts 11.2 1.06 8.9 .99 8.4 1.00
Wholesale notes 2.3 .24 1.1 .11 1.8 .20
Leases 6.3 .34 5.2 .31 6.4 .46
-----------------------------------
Total $35.2 .45 $29.9 .41 $30.9 .43
===================================
The balance of retail notes held (principal plus accrued
interest) with any installment 60 days or more past due was $71
million, $54 million and $54 million at July 31, 2000, October
31, 1999 and July 31, 1999, respectively. The balance of
retail notes held on which any installment is 60 days or more
past due as a percentage of retail notes held represented 1.78
percent, 1.45 percent and 1.30 percent of the ending retail
notes receivable at July 31, 2000, October 31, 1999 and July
31, 1999, respectively.
During the third quarter and the first nine months of 2000,
write-offs (net of recoveries) of Receivables and Leases
totaled $7.0 million and $23.5 million, respectively, compared
with $11.1 million and $27.0 million in the same periods last
year. Annualized write-offs, as a percentage of the average
total receivables and leases held, were .34 percent for the
third quarter of 2000 and .41 percent for the first nine months
of 2000, compared with .62 percent and .50 percent for the same
periods last year. Write-offs relating to retail notes
decreased 23 percent, or $3.2 million, in the first nine months
of 2000, when compared with the first nine months of 1999,
primarily due to decreased write-offs of agricultural equipment
and recreational product retail notes, partially offset by
increased write-offs of construction equipment retail notes.
Lease write-offs increased $1.7 million in the first nine
months of 2000 when compared to last year primarily due to
higher write-offs on agricultural leases. Revolving charge
account write-offs decreased $2.8 million in the first nine
months of 2000 when compared to the same period last year
primarily due to lower write-offs on agricultural accounts.
Wholesale note write-offs increased $1.0 million in the first
nine months of 2000 when compared to the same period 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 $125 million at July 31,
2000, compared with $123 million at October 31, 1999 and $121
million at July 31, 1999.
The Company's allowance for credit losses on all Receivables
and Leases held totaled $95 million at July 31, 2000, $84
million at October 31, 1999 and $81 million at July 31, 1999.
The allowance for credit losses represented 1.20 percent of the
total Receivables and Leases held at July 31, 2000, 1.16
percent at October 31, 1999 and 1.11 percent at July 31, 1999.
The allowance is subject to an ongoing evaluation based on 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 July 31, 2000 is
sufficient to provide adequate protection against losses.
Page 10
<PAGE>
Safe Harbor Statement
Statements herein that relate to future operating periods are
subject to important risks and uncertainties that could cause
actual results to differ materially. Interest rate changes by
the Federal Reserve Board may affect the cost of financing the
Company and the rates it is able to offer. 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-Q and other John Deere and Capital Corporation filings with
the Securities and Exchange Commission
Capital Resources and Liquidity
The Company relies on its ability to raise substantial amounts
of funds to finance its Receivables and Leases. 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 nine months of 2000, 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 $407 million in the first nine months
of 2000. Financing activities provided $600 million during the
same period, resulting from a $615 million net increase in
total borrowings, which was partially offset by a $15 million
dividend payment to John Deere Credit Company. Net cash used
for investing activities totaled $994 million in the first nine
months of 2000, primarily due to Receivable and Lease
acquisitions exceeding collections by $1,911 million, which was
partially offset by the $879 million in proceeds from the sale
of receivables. Cash and cash equivalents increased $12
million during the first nine months of 2000.
During the first nine 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 $270 million in the first nine months
of 1999. Financing activities provided $126 million during the
same period, resulting from a $141 million net increase in
total borrowings, which was partially offset by $15 million in
dividend payments to John Deere Credit Company. Net cash used
for investing activities totaled $419 million in the first nine
months of 1999, primarily due to Receivable and Lease
acquisitions exceeding collections by $1,827 million, which was
partially offset by the $1,345 million in proceeds from the
sale of receivables. Cash and cash equivalents decreased $23
million during the first nine months of 1999.
Total interest-bearing indebtedness amounted to $6.642 billion
at July 31, 2000, compared with $6.028 billion at October 31,
1999 and $6.065 billion at July 31, 1999, generally
corresponding with the level of
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Receivables and Leases financed and the level of cash and cash
equivalents. Total short-term indebtedness amounted to $3.787
billion at July 31, 2000, compared with $3.526 billion at
October 31, 1999 and $3.620 billion at July 31, 1999,while
total long-term indebtedness amounted to $2.855 billion, $2.501
billion and $2.445 billion at those dates. The ratio of total
interest-bearing debt to stockholder's equity was 6.1 to 1, 6.0
to 1 and 5.9 to 1 at July 31, 2000, October 31, 1999 and July
31, 1999, respectively.
During the first nine months of 2000 the Capital Corporation's
subsidiary, John Deere Credit Limited in Gloucester, England,
retired $137 million of long-term debt due in 2000. The
Capital Corporation issued $1,445 million and retired $1,524
million of medium-term notes during the first nine months of
2000.
At July 31, 2000, the Capital Corporation and Deere & Company
jointly maintained $4.711 billion of unsecured lines of credit
with various banks in North America and overseas, $1.262
billion of which was unused. For the purpose of computing
unused credit lines, commercial paper and short-term bank
borrowings, excluding the current portion of long-term
borrowings, of the Capital Corporation and Deere & Company,
were considered to constitute utilization. These agreements
include a $2.338 billion long-term commitment of the banks
expiring on February 22, 2005. The facility fees payable under
these credit agreements are divided between Deere & Company and
the Capital Corporation based on the proportion of their
respective commercial paper outstanding.
The Capital Corporation declared and paid cash dividends of $15
million to John Deere Credit Company during the first nine
months of 2000. John Deere Credit Company paid a comparable
dividend to Deere & Company. On September 1, 2000, 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 September 12,
2000.
Item 3. Quantitative and Qualitative Disclosures About Market
Risk.
See the information under "Management's Discussion and
Analysis," Note 13 "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.
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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.
As part of a planned leadership transition, Hans W. Becherer,
former Chairman and CEO, retired from the Company and the Board
of Directors on August 30, 2000.
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 May 16, 2000(Items
5 and 7).
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SIGNATURE
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: September 6, 2000 By: /s/ Nathan J. Jones
--------------------------------
Nathan J. Jones
Senior Vice President and
Principal Financial Officer
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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 July 31, 2000 ---(Securities and Exchange
Commission file number 1-4121*).
__________________________
*Incorporated by reference. Copies of these exhibits are
available from the Company upon request.
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