John Deere 2014 Annual Report Download - page 54

2014 2013
Financial Services
Notes and debentures:
Medium-term notes due 2015 – 2024:
(principal $
17,939 - 2014, $15,055 - 2013)
Average interest rates of 1.2% – 2014
and 2013 ............................................................ $ 18,141* $ 15,316*
2.75% senior note due 2022: ($500 principal)
Swapped $500 to variable interest rate
of .9% – 2014 and 2013 ..................................... 498* 491*
Other notes ............................................................. 1,099 900
Total ................................................................... 19,738 16,707
Long-term borrowings** ......................................... $ 24,381 $ 21,578
* Includes unamortized fair value adjustments related to interest rate swaps.
** All interest rates are as of year end.
The approximate principal amounts of the equipment
operations’ long-term borrowings maturing in each of the
next five years in millions of dollars are as follows: 2015 – $243,
2016 – $197, 2017 – $73, 2018 – $24 and 2019 – $751.
The approximate principal amounts of the financial services’
long-term borrowings maturing in each of the next five years in
millions of dollars are as follows: 2015 – $4,724, 2016 – $5,220,
2017 – $4,279, 2018 – $3,432 and 2019 – $2,949.
21. LEASES
At October 31, 2014, future minimum lease payments under
capital leases amounted to $87 million as follows: 2015 – $39,
2016 – $32, 2017 – $10, 2018 – $3, 2019 – $1, and later
years $2. Total rental expense for operating leases was $205
million in 2014, $237 million in 2013 and $215 million in
2012. At October 31, 2014, future minimum lease payments
under operating leases amounted to $371 million as follows:
2015 – $121, 2016 – $79, 2017 – $55, 2018 – $38, 2019 – $32,
and later years $46.
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 five-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 unamor-
tized extended warranty premiums (deferred revenue) included
in the following table totaled $425 million and $342 million at
October 31, 2014 and 2013, respectively.
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A reconciliation of the changes in the warranty liability
and unearned premiums in millions of dollars follows:
Warranty Liability/
Unearned Premiums
_______________
2014 2013
Beginning of year balance ........................................ $ 1,164 $ 1,025
Payments ..................................................................... (792) (736)
Amortization of premiums received ................................ (142) (120)
Accruals for warranties ................................................. 797 821
Premiums received ....................................................... 228 170
Foreign exchange ......................................................... (21) 4
End of year balance .................................................. $ 1,234 $ 1,164
At October 31, 2014, the company had approximately
$210 million of guarantees issued primarily to banks outside the
U.S. related to third-party receivables for the retail financing
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, 2014, the company had accrued losses of
approximately $7 million under these agreements. The maximum
remaining term of the receivables guaranteed at October 31, 2014
was approximately six years.
At October 31, 2014, the company had commitments of
approximately $237 million for the construction and acquisition
of property and equipment. At October 31, 2014, the company
also had pledged or restricted assets of $102 million, primarily as
collateral for borrowings and restricted other assets. In addition,
see Note 13 for restricted assets associated with borrowings
related to securitizations.
The company also had other miscellaneous contingencies
totaling approximately $70 million at October 31, 2014, for
which it believes the probability for payment is substantially
remote. The accrued liability for these contingencies was not
material at October 31, 2014.
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,
trademark and environmental matters. The company believes
the reasonably possible range of losses for these unresolved legal
actions in addition to the amounts accrued would not have a
material effect on its financial statements.
23. CAPITAL STOCK
Changes in the common stock account in millions were
as follows:
Number of
Shares Issued Amount
Balance at October 31, 2011 .............................. 536.4 $ 3,252
Stock options and other ...................................... 100
Balance at October 31, 2012 .............................. 536.4 3,352
Stock options and other ...................................... 172
Balance at October 31, 2013 .............................. 536.4 3,524
Stock options and other ...................................... 151
Balance at October 31, 2014 ........................... 536.4 $ 3,675