John Deere 2010 Annual Report Download - page 19

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of $783 million and fund purchases of property and equipment
of $484 million. Cash and cash equivalents also increased
$183 million over the three-year period.
Receivables and equipment on operating leases
increased by $2,391 million in 2010, compared with 2009.
Acquisition volumes of receivables and equipment on operating
leases increased 13 percent in 2010, compared with 2009.
The volumes of fi nancing leases, operating leases, retail notes,
wholesale notes, trade receivables and revolving charge accounts
increased approximately 41 percent, 31 percent, 30 percent,
27 percent, 9 percent and 4 percent, respectively. The volume
of operating loans decreased approximately 67 percent.
At October 31, 2010 and 2009, net receivables and leases
administered, which include receivables administered but not
owned, were $25,029 million and $22,729 million, respectively.
Total external interest-bearing debt of the credit operations
was $20,935 million at the end of 2010, compared with $20,988
million at the end of 2009 and $20,210 million at the end of
2008. Included in this debt are secured borrowings of $2,209
million at the end of 2010, $3,132 million at the end of 2009
and $1,682 million at the end of 2008. Total external borrowings
have changed generally corresponding with the level of the
receivable and lease portfolio, the level of cash and cash equiva-
lents and the change in payables owed to Deere & Company.
The credit operations’ ratio of total interest-bearing debt to
total stockholder’s equity was 7.3 to 1 at the end of 2010,
7.4 to 1 at the end of 2009 and 8.3 to 1 at the end of 2008.
In November 2009, Capital Corporation renewed
a revolving credit agreement to utilize bank conduit facilities
to securitize retail notes (see Note 13). At October 31, 2010,
this facility had a total capacity, or “fi nancing limit,” of up to
$1,500 million of secured fi nancings at any time. After a 364-day
revolving period, unless the banks and Capital Corporation
agree to renew, Capital Corporation would liquidate the
secured borrowings over time as payments on the retail notes
are collected. At October 31, 2010, $835 million of secured
short-term borrowings was outstanding under the agreement.
In November 2010, Capital Corporation increased the capacity
under this revolving credit agreement to $2,000 million and
renewed it for an additional three years.
In April 2010, the credit operations completed a $708
million retail note securitization transaction, which is included
in short-term secured borrowings.
During 2010, the credit operations also issued $2,316
million and retired $3,364 million of long-term borrowings,
which were primarily medium-term notes.
Property and equipment cash expenditures for Financial
Services in 2010 were $26 million, compared with $119 million
in 2009, primarily related to investments in wind energy
generation in both years. Government grant receipts related to
property and equipment were $92 million in 2010 associated
with the wind energy entities. Capital expenditures in 2011
are not expected to be signifi cant. The company sold the wind
energy business for approximately $900 million after year end
(see Notes 4 and 30).
OFF-BALANCE-SHEET ARRANGEMENTS
The company’s credit operations offer crop insurance products
through managing general agency agreements (Agreements)
with insurance companies (Insurance Carriers) rated “Excellent”
by A.M. Best Company. 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, 2010, the maximum exposure for
uncollected premiums was approximately $56 million.
Substantially all of the crop insurance risk under the Agreements
have been mitigated by a syndicate of private reinsurance
companies. In the event of a widespread catastrophic crop
failure throughout the U.S. and the default of all the reinsurance
companies on their obligations, the company would be required
to reimburse the Insurance Carriers approximately $1,029 million
at October 31, 2010. The company believes the likelihood of
this event is substantially remote.
At October 31, 2010, the company had approximately
$190 million of guarantees issued primarily to banks outside the
U.S. 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.
The maximum remaining term of the receivables guaranteed at
October 31, 2010 was approximately fi ve years.
AGGREGATE CONTRACTUAL OBLIGATIONS
The payment schedule for the company’s contractual obligations
at October 31, 2010 in millions of dollars is as follows:
Less More
than 2&3 4&5 than
Total 1 year years years 5 years
On-balance-sheet
Debt*
Equipment Operations .... $ 3,357 $ 85 $ 403 $ 763 $ 2,106
Financial Services** ....... 20,426 6,543 9,412 2,286 2,185
Total ......................... 23,783 6,628 9,815 3,049 4,291
Interest on debt ................. 4,011 781 1,024 590 1,616
Accounts payable .............. 2,510 2,393 79 33 5
Capital leases .................... 36 16 5 3 12
Off-balance-sheet
Purchase obligations .......... 2,991 2,956 18 12 5
Operating leases ................ 542 141 189 102 110
Total ................................ $ 33,873 $ 12,915 $ 11,130 $ 3,789 $ 6,039
* Principal payments.
** Notes payable of $2,209 million classifi ed as short-term on the balance sheet
related to the securitization of retail notes are included in this table based on the
expected payment schedule (see Note 18).
The previous table does not include unrecognized tax
benefi t liabilities of approximately $218 million at October 31,
2010 since the timing of future payments is not reasonably
estimable at this time (see Note 8). For additional information
regarding pension and other postretirement employee benefi t
obligations, short-term borrowings, long-term borrowings and
lease obligations, see Notes 7, 18, 20 and 21, respectively.