John Deere 2015 Annual Report Download - page 24

CAPITAL RESOURCES AND LIQUIDITY of the total cash and cash equivalents and marketable securities
held by foreign subsidiaries, in which earnings are considered
The discussion of capital resources and liquidity has been indefinitely reinvested, was $1,588 million and $1,025 million at
organized to review separately, where appropriate, the October 31, 2015 and 2014, respectively.
company’s consolidated totals, equipment operations and
financial services operations. Lines of Credit. The company also has access to bank lines
of credit with various banks throughout the world. Worldwide
CONSOLIDATED lines of credit totaled $7,205 million at October 31, 2015,
Positive cash flows from consolidated operating activities in $4,031 million of which were unused. For the purpose of
2015 were $3,740 million. This resulted primarily from net computing unused credit lines, commercial paper and short-term
income adjusted for non-cash provisions, a decrease in bank borrowings, excluding secured borrowings and the current
receivables related to sales, a change in the retirement benefits portion of long-term borrowings, were primarily considered to
adjustment and a decrease in insurance receivables prior to the constitute utilization. Included in the total credit lines at
Crop Insurance operations sale, which were partially offset by an October 31, 2015 were long-term credit facility agreements of
increase in inventories, primarily related to equipment $2,900 million, expiring in April 2019, and $2,900 million,
transferred to operating leases (see Note 6), a decrease in expiring in April 2020. These credit agreements require John
accounts payable and accrued expenses, and a change in Deere Capital Corporation (Capital Corporation) to maintain its
accrued income taxes payable/receivable. Cash outflows from consolidated ratio of earnings to fixed charges at not less than
investing activities were $1,059 million in 2015, due primarily to 1.05 to 1 for each fiscal quarter and the ratio of senior debt,
the cost of receivables (excluding receivables related to sales) excluding securitization indebtedness, to capital base (total
and cost of equipment on operating leases exceeding the subordinated debt and stockholder’s equity excluding
collections of receivables and the proceeds from sales of accumulated other comprehensive income (loss)) at not more
equipment on operating leases by $1,160 million, purchases of than 11 to 1 at the end of any fiscal quarter. The credit
property and equipment of $694 million, partially offset by agreements also require the equipment operations to maintain a
proceeds from maturities and sales exceeding purchases of ratio of total debt to total capital (total debt and stockholders’
marketable securities by $706 million and proceeds from sales of equity excluding accumulated other comprehensive income
businesses, net of cash sold, of $149 million. Cash outflows from (loss)) of 65 percent or less at the end of each fiscal quarter.
financing activities were $2,119 million in 2015 due primarily to Under this provision, the company’s excess equity capacity and
repurchases of common stock of $2,771 million and dividends retained earnings balance free of restriction at October 31, 2015
paid of $816 million, partially offset by an increase in borrowings was $8,835 million. Alternatively under this provision, the
of $1,349 million. Cash and cash equivalents increased equipment operations had the capacity to incur additional debt
$375 million during 2015. of $16,408 million at October 31, 2015. All of these
Over the last three years, operating activities have provided requirements of the credit agreements have been met during the
an aggregate of $10,521 million in cash. In addition, increases in periods included in the consolidated financial statements.
borrowings were $6,986 million, proceeds from maturities and Debt Ratings. To access public debt capital markets, the
sales exceeded purchases of marketable securities by $931 million, company relies on credit rating agencies to assign short-term
proceeds from sales of businesses were $517 million and proceeds and long-term credit ratings to the company’s securities as an
from issuance of common stock (resulting from the exercise of indicator of credit quality for fixed income investors. A security
stock options) were $496 million. The aggregate amount of these rating is not a recommendation by the rating agency to buy, sell
cash flows was used mainly to repurchase common stock of or hold company securities. A credit rating agency may change
$7,033 million, acquire receivables (excluding receivables related or withdraw company ratings based on its assessment of the
to sales) and equipment on operating leases that exceeded company’s current and future ability to meet interest and
collections of receivables and the proceeds from sales of principal repayment obligations. Each agency’s rating should be
equipment on operating leases by $6,804 million, purchase evaluated independently of any other rating. Lower credit ratings
property and equipment of $2,901 million and pay dividends of generally result in higher borrowing costs, including costs of
$2,355 million. Cash and cash equivalents decreased $490 million derivative transactions, and reduced access to debt capital
over the three-year period. markets. The senior long-term and short-term debt ratings and
The company has access to most global markets at outlook currently assigned to unsecured company securities by
reasonable costs and expects to have sufficient sources of global the rating agencies engaged by the company are as follows:
funding and liquidity to meet its funding needs. The company’s
exposures to receivables from customers in European countries Senior
experiencing economic strains are not significant. Sources of Long-Term Short-Term Outlook
liquidity for the company include cash and cash equivalents, Moody’s Investors Service, Inc. ....... A2 Prime-1 Stable
marketable securities, funds from operations, the issuance of Standard & Poor’s ........................ A A-1 Stable
commercial paper and term debt, the securitization of retail
notes (both public and private markets) and committed and Trade accounts and notes receivable primarily arise from
uncommitted bank lines of credit. The company’s commercial sales of goods to independent dealers. Trade receivables
paper outstanding at October 31, 2015 and 2014 was decreased by $227 million in 2015 due primarily to foreign
$2,968 million and $2,633 million, respectively, while the total currency translation and lower agriculture and turf shipment
cash and cash equivalents and marketable securities position volumes. The ratio of trade accounts and notes receivable at
was $4,600 million and $5,002 million, respectively. The amount
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