John Deere 2009 Annual Report Download - page 42

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The approximate principal amounts of the credit subsidiaries’
long-term borrowings maturing in each of the next fi ve years in
millions of dollars are as follows: 2010 – $3,350, 2011 – $3,152,
2012 – $5,014, 2013 – $2,725 and 2014 – $977.
21. LEASES
At October 31, 2009, future minimum lease payments under
capital leases amounted to $56 million as follows: 2010 – $19,
2011 – $16, 2012 – $3, 2013 – $2, 2014 – $2 and later years
$14. Total rental expense for operating leases was $187 million
in 2009, $165 million in 2008 and $126 million in 2007.
At October 31, 2009, future minimum lease payments under
operating leases amounted to $544 million as follows:
2010 – $128, 2011 – $101, 2012 – $79, 2013 – $55, 2014 –
$40 and later years $141.
22. COMMITMENTS AND CONTINGENCIES
The company generally determines its warranty liability by
applying historical claims rate experience to the estimated amount
of equipment that has been sold and is still under warranty based
on dealer inventories and retail sales. The historical claims rate
is primarily determined by a review of fi ve-year claims costs and
current quality developments.
The premiums for the company’s extended warranties are
primarily recognized in income in proportion to the costs expected
to be incurred over the contract period. The unamortized
extended warranty premiums (deferred revenue) included in
the following table totaled $214 million and $228 million at
October 31, 2009 and 2008, respectively.
A reconciliation of the changes in the warranty liability
and unearned premiums in millions of dollars follows:
Warranty Liability/
Unearned Premiums
_______________
2009 2008
Beginning of year balance ........................................ $ 814 $ 7 74
Payments ..................................................................... ( 549 ) ( 548)
Amortization of premiums received ................................ (103) (98)
Accruals for warranties ................................................. 458 612
Premiums received ....................................................... 87 112
Foreign exchange ......................................................... 20 (38)
End of year balance .................................................. $ 727 $ 814
At October 31, 2009, the company had approximately
$170 million of guarantees issued primarily to banks outside the
U.S. and Canada related to third-party receivables for the retail
fi nancing of John Deere equipment. The company may recover
a portion of any required payments incurred under these
agreements from repossession of the equipment collateralizing
the receivables. At October 31, 2009, the company had accrued
losses of approximately $7 million under these agreements.
The maximum remaining term of the receivables guaranteed
at October 31, 2009 was approximately six years.
The credit operations’ subsidiary, John Deere Risk
Protection, Inc., offers crop insurance products through
managing general agency agreements (Agreements) with
insurance companies (Insurance Carriers) rated “Excellent” by
A.M. Best Company. As a managing general agent, John Deere
Risk Protection, Inc. will receive commissions from the
Insurance Carriers for selling crop insurance to producers.
The credit operations have guaranteed certain obligations under
the Agreements, including the obligation to pay the Insurance
Carriers for any uncollected premiums. At October 31, 2009,
the maximum exposure for uncollected premiums was approxi-
mately $60 million. Substantially all of the credit operations’
crop insurance risk under the Agreements has been mitigated by
a syndicate of private reinsurance companies. The reinsurance
companies are rated “Excellent” or higher by A.M. Best
Company. In the event of a widespread catastrophic crop
failure throughout the U.S. and the default of these highly rated
private reinsurance companies on their reinsurance obligations,
the credit operations would be required to reimburse the
Insurance Carriers for exposure under the Agreements of
approximately $981 million at October 31, 2009. The credit
operations believe that the likelihood of the occurrence of
events that give rise to the exposures under these Agreements
is substantially remote and as a result, at October 31, 2009,
the credit operation’s accrued liability under the Agreements
was not material.
At October 31, 2009, the company had commitments of
approximately $178 million for the construction and acquisition
of property and equipment. At October 31, 2009, the company
also had pledged or restricted assets of $167 million, primarily
as collateral for borrowings outside the U.S. and Canada.
In addition, see Note 13 for restricted assets associated with
borrowings related to securitizations.
The company also had other miscellaneous contingent
liabilities totaling approximately $50 million at October 31, 2009,
for which it believes the probability for payment is substantially
remote. The accrued liability for these contingencies was not
material at October 31, 2009.
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 product liability (including asbestos
related liability), retail credit, software licensing, patent and
trademark matters. 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 fi nancial statements.
23. CAPITAL STOCK
Changes in the common stock account in millions were
as follows:
Number of
Shares Issued Amount
Balance at October 31, 2006 .............................. 536.4 $ 2,204
Transfer from retained earnings for
two-for-one stock split .................................... 268
Stock options and other ...................................... 305
______ ______
Balance at October 31, 2007 .............................. 536.4 2,777
Stock options and other ...................................... 157
______ ______
Balance at October 31, 2008 .............................. 536.4 2,934
Stock options and other ...................................... 62
______ ______
Balance at October 31, 2009 .......................... 536.4 $ 2,996
______ ______
______ ______