John Deere 2010 Annual Report Download - page 41

41
The components of consolidated restricted assets related to
secured borrowings in securitization transactions at October 31
were as follows in millions of dollars:
2010 2009
Restricted fi nancing receivables (retail notes)................. $ 2,265 $ 3,133
Allowance for credit losses ............................................ (27) (25)
Other assets ................................................................. 90 108
Total restricted securitized assets .......................... $ 2,328 $ 3,216
The components of consolidated secured borrowings and
other liabilities related to securitizations at October 31 were as
follows in millions of dollars:
2010 2009
Shor t-term borrowings .................................................. $ 2,20 9 $ 3,132
Accrued interest on borrowings ..................................... 2 5
Total liabilities related to restricted
securitized assets ................................................ $ 2,211 $ 3,137
The secured borrowings related to these restricted
securitized retail notes are obligations that are payable as the
retail notes are liquidated. Repayment of the secured borrowings
depends primarily on cash fl ows generated by the restricted
assets. Due to the company’s short-term credit rating, cash
collections from these restricted assets are not required to be
placed into a segregated collection account until immediately
prior to the time payment is required to the secured creditors.
At October 31, 2010, the maximum remaining term of all
restricted receivables was approximately six years.
14. EQUIPMENT ON OPERATING LEASES
Operating leases arise primarily from the leasing of John Deere
equipment to retail customers. Initial lease terms generally range
from four to 60 months. Net equipment on operating leases
totaled $1,936 million and $1,733 million at October 31, 2010
and 2009, respectively. The equipment is depreciated on a
straight-line basis over the terms of the lease. The accumulated
depreciation on this equipment was $462 million and
$484 million at October 31, 2010 and 2009, respectively.
The corresponding depreciation expense was $288 million in
2010, $288 million in 2009 and $308 million in 2008.
Future payments to be received on operating leases totaled
$884 million at October 31, 2010 and are scheduled as follows
in millions of dollars: 2011 – $375, 2012 – $244, 2013 – $156,
2014 – $90 and 2015 – $19.
15. INVENTORIES
Most inventories owned by Deere & Company and its
U.S. equipment subsidiaries are valued at cost, on the “last-in,
fi rst-out” (LIFO) basis. Remaining inventories are generally
valued at the lower of cost, on the “fi rst-in, fi rst-out” (FIFO)
basis, or market. The value of gross inventories on the LIFO
basis represented 59 percent of worldwide gross inventories at
FIFO value on October 31, 2010 and 2009. The pretax
favorable income effect from the liquidation of LIFO inventory
during 2009 was approximately $37 million. If all inventories
had been valued on a FIFO basis, estimated inventories by
major classifi cation at October 31 in millions of dollars would
have been as follows:
2010 2009
Raw materials and supplies ........................................... $ 1,201 $ 940
Work-in-proc ess ........................................................... 4 8 3 387
Finished goods and parts .............................................. 2,777 2,437
Total FIFO value ........................................................ 4,461 3,764
Less adjustment to LIFO value ....................................... 1,398 1,367
Inventories ................................................................. $ 3,06 3 $ 2,397
16. PROPERTY AND DEPRECIATION
A summary of property and equipment at October 31 in millions
of dollars follows:
Useful Lives*
(Years) 2010 2009
Equipment Operations
Land .................................................. $ 113 $ 116
Buildings and building equipment ........ 23 2,226 2,144
Machinery and equipment ................... 11 3,972 3,826
Dies, patterns, tools, etc ..................... 7 1,105 1,081
All other ............................................. 5 685 672
Construction in progress ..................... 478 362
Total at cost ................................... 8,579 8,201
Less accumulated depreciation ........... 4,856 4,744
Total .............................................. 3,723 3,457
Financial Services
Land .................................................. 4 4
Buildings and building equipment ........ 27 70 70
Machinery and equipment** ................ 12 1,064
All other** .......................................... 6 38 40
Construction in progress** .................. 37
Total at cost ................................... 112 1,215
Less accumulated depreciation ........... 44 140
Total .............................................. 68 1,075
Property and equipment-net .......... $ 3,791 $ 4,532
* Weighted-averages
** Classifi ed as held for sale at October 31, 2010 (see below).
In the fourth quarter of 2010, the company signed an
agreement to sell its wind energy business and reclassifi ed the
related net property and equipment of $908 million to assets
held for sale. The property and equipment included in Financial
Services that was reclassifi ed consisted of costs of machinery
and equipment of $1,058 million, construction in progress
of $5 million and all other of $1 million, less accumulated
depreciation of $156 million (see Note 4).
Property and equipment is stated at cost less accumulated
depreciation. Total property and equipment additions in 2010,
2009 and 2008 were $802 million, $798 million and $1,147
million and depreciation was $540 million, $513 million and
$467 million, respectively. Capitalized interest was $6 million,
$15 million and $26 million in the same periods, respectively.
The cost of leased property and equipment under capital leases
amounting to $43 million and $47 million at October 31, 2010
and 2009, respectively, is included in property and equipment.