**UNITED STATES**

**SECURITIES AND EXCHANGE COMMISSION**

WASHINGTON, D.C.  20549

 

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**FORM 10-Q**

 

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QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE

SECURITIES EXCHANGE ACT OF 1934

 

**For the quarterly period ended January 31, 2011**

 

Commission file no: 1-6458

** **

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**JOHN DEERE CAPITAL CORPORATION**

 

| **Delaware**(State of Incorporation) | ** ** | **36-2386361**(IRS Employer Identification No.) |
|--------------------------------------|------------|-------------------------------------------------|

 

**1 East First Street, Suite 600 Reno, Nevada  89501**(Address of principal executive offices)

 

Telephone Number:  **(775) 786-5527**

 

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Indicate by check mark whether the registrant: (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.
| Yes | X | No  |   |   |
|-----|---|----------|--------|--------|

 

Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files).
| Yes |   | No  |   |   |
|-----|--------|----------|--------|--------|

 

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or a smaller reporting company. See the definitions of “large accelerated filer,” “accelerated filer” and “smaller reporting company” in Rule 12b-2 of the Exchange Act.

 
| Large   accelerated filer                       |   |   | Accelerated   filer         |   |   |
|-------------------------------------------------|--------|--------|-----------------------------|--------|--------|
| Non-accelerated   filer                         | X      |   | Smaller   reporting company |   |   |
| (Do not check if a smaller   reporting company) |

 

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).
| Yes |   | No  | X |   |
|-----|--------|----------|---|--------|

 

At January 31, 2011, 2,500 shares of common stock, without par value, of the registrant were outstanding, all of which were owned by John Deere Financial Services, Inc., a wholly-owned subsidiary of Deere & Company.

 

The registrant meets the conditions set forth in General Instruction H(1)(a) and (b) of Form 10-Q and is therefore filing this Form with certain reduced disclosures as permitted by those instructions.

 

 

 

Index to Exhibits: Page 27

 

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PART I. FINANCIAL INFORMATION

 

Item 1.     Financial Statements.

 

**John Deere Capital Corporation and Subsidiaries**

**Statements of Consolidated Income**

**For the Three Months Ended January 31, 2011 and 2010**

**(Unaudited)**

(in millions)

 
|                                                        | ** ** | **2011** | ** ** | ** ** | ** ** | **2010** | ** ** |
|-------------------------------------------------------------|------------|----------|------------|------------|------------|----------|------------|
| **Revenues**                                                |       |     |       |       |       |     |       |
| Finance income earned on retail notes                       | $          | 174.5    |       |       | $          | 179.8    |       |
| Lease revenues                                              |       | 74.0     |       |       |       | 71.2     |       |
| Revolving charge account income                             |       | 57.4     |       |       |       | 61.8     |       |
| Finance income earned on wholesale receivables              |       | 67.1     |       |       |       | 56.7     |       |
| Operating loan income                                       |       | 2.6      |       |       |       | 3.6      |       |
| Crop insurance commissions                                  |       |     |       |       |       | 16.8     |       |
| Other income - net                                          |       | 18.7     |       |       |       | 24.5     |       |
| Total revenues                                              |       | 394.3    |       |       |       | 414.4    |       |
| **Expenses**                                                |       |     |       |       |       |     |       |
| Interest expense                                            |       | 132.4    |       |       |       | 150.0    |       |
| Operating expenses:                                         |       |     |       |       |       |     |       |
| Administrative and operating expenses                       |       | 73.2     |       |       |       | 94.4     |       |
| Provision for credit losses                                 |       | 3.8      |       |       |       | 23.0     |       |
| Fees paid to John Deere                                     |       | 9.1      |       |       |       | 9.1      |       |
| Depreciation of equipment on operating leases               |       | 48.1     |       |       |       | 45.9     |       |
| Total operating expenses                                    |       | 134.2    |       |       |       | 172.4    |       |
| Total expenses                                              |       | 266.6    |       |       |       | 322.4    |       |
| **Income of consolidated group   before income taxes**      |       | 127.7    |       |       |       | 92.0     |       |
| Provision for income taxes                                  |       | 44.2     |       |       |       | 28.4     |       |
| **Income of consolidated group**                            |       | 83.5     |       |       |       | 63.6     |       |
| Equity in income of unconsolidated affiliates               |       | .3       |       |       |       | .3       |       |
| **Net income**                                              |       | 83.8     |       |       |       | 63.9     |       |
| Less: Net income attributable to noncontrolling   interests |       |     |       |       |       |     |       |
| **Net income attributable to the   Company**                | $          | 83.8     |       |       | $          | 63.9     |       |

 

 

See Condensed Notes to Interim Consolidated Financial Statements.

 

2

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**John Deere Capital Corporation and Subsidiaries**

**Consolidated Balance Sheets**

**(Unaudited)**

(in millions)

 
|                                                                                                                               | ** ** | **January 31,** | ** ** | **October 31,** | ** ** | **January 31,** |
|------------------------------------------------------------------------------------------------------------------------------------|------------|----------------------|------------|----------------------|------------|----------------------|
|                                                                                                                               | ** ** | **2011**             | ** ** | **2010**             | ** ** | **2010**             |
| **Assets**                                                                                                                         |       |                 |       |                 |       |                 |   |   |   |   |   |   |
| Cash   and cash equivalents                                                                                                        |       | $                    | 430.7      |                 |       | $                    | 355.7 |   |   | $ | 1,558.7 |   |
| Receivables:                                                                                                                       |       |                 |       |                 |       |                 |   |   |   |   |   |   |
| Retail   notes                                                                                                                     |       |                 | 10,468.8   |                 |       |                 | 9,989.3 |   |   |   | 8,448.1 |   |
| Restricted   securitized retail notes                                                                                              |       |                 | 1,788.1    |                 |       |                 | 2,264.9 |   |   |   | 2,611.2 |   |
| Revolving   charge accounts                                                                                                        |       |                 | 1,813.1    |                 |       |                 | 2,287.9 |   |   |   | 1,791.5 |   |
| Wholesale   receivables                                                                                                            |       |                 | 5,136.7    |                 |       |                 | 4,658.7 |   |   |   | 4,259.3 |   |
| Financing   leases                                                                                                                 |       |                 | 414.4      |                 |       |                 | 420.4 |   |   |   | 375.5 |   |
| Operating   loans                                                                                                                  |       |                 | 223.6      |                 |       |                 | 239.1 |   |   |   | 232.1 |   |
| Total   receivables                                                                                                                |       |                 | 19,844.7   |                 |       |                 | 19,860.3 |   |   |   | 17,717.7 |   |
| Allowance   for credit losses                                                                                                      |       |                 | (145.4     | )                    |       |                 | (148.6 | ) |   |   | (144.9 | ) |
| Total   receivables – net                                                                                                     |       |                 | 19,699.3   |                 |       |                 | 19,711.7 |   |   |   | 17,572.8 |   |
| Other   receivables                                                                                                                |       |                 | 28.2       |                 |       |                 | 22.3 |   |   |   | 43.8 |   |
| Receivable   from John Deere                                                                                                       |       |                 | 2.6        |                 |       |                 |   |   |   |   | 30.9 |   |
| Equipment   on operating leases – net                                                                                         |       |                 | 1,049.8    |                 |       |                 | 1,141.8 |   |   |   | 937.4 |   |
| Notes   receivable from John Deere                                                                                                 |       |                 |       |                 |       |                 | 575.5 |   |   |   | 738.1 |   |
| Investment   in unconsolidated affiliates                                                                                          |       |                 | 7.2        |                 |       |                 | 7.0 |   |   |   | 6.4 |   |
| Other   assets                                                                                                                     |       |                 | 698.2      |                 |       |                 | 810.5 |   |   |   | 960.8 |   |
| **Total Assets**                                                                                                                   |       | $                    | 21,916.0   |                 |       | $                    | 22,624.5 |   |   | $ | 21,848.9 |   |
| **Liabilities and Stockholder’s Equity**                                                                                      |       |                 |       |                 |       |                 |   |   |   |   |   |   |
| Short-term   borrowings:                                                                                                           |       |                 |       |                 |       |                 |   |   |   |   |   |   |
| Commercial   paper                                                                                                                 |       | $                    | 1,717.9    |                 |       | $                    | 1,349.3 |   |   | $ | 1,064.9 |   |
| Other   notes payable                                                                                                              |       |                 | 1,764.8    |                 |       |                 | 2,209.0 |   |   |   | 2,656.4 |   |
| John   Deere                                                                                                                       |       |                 | 1,220.2    |                 |       |                 | 1,255.6 |   |   |   |   |   |
| Current   maturities of long-term borrowings                                                                                       |       |                 | 2,740.9    |                 |       |                 | 2,888.8 |   |   |   | 2,704.1 |   |
| Total   short-term borrowings                                                                                                      |       |                 | 7,443.8    |                 |       |                 | 7,702.7 |   |   |   | 6,425.4 |   |
| Other   payables to John Deere                                                                                                     |       |                 | 11.2       |                 |       |                 |   |   |   |   |   |   |
| Accounts   payable and accrued expenses                                                                                            |       |                 | 635.1      |                 |       |                 | 694.2 |   |   |   | 682.6 |   |
| Deposits   withheld from dealers and merchants                                                                                     |       |                 | 160.9      |                 |       |                 | 164.8 |   |   |   | 158.5 |   |
| Deferred   income taxes                                                                                                            |       |                 | 184.3      |                 |       |                 | 161.7 |   |   |   | 74.6 |   |
| Long-term   borrowings                                                                                                             |       |                 | 11,022.9   |                 |       |                 | 11,452.0 |   |   |   | 12,207.3 |   |
| Total   liabilities                                                                                                                |       |                 | 19,458.2   |                 |       |                 | 20,175.4 |   |   |   | 19,548.4 |   |
| Commitments   and contingencies (Note 7)                                                                                           |       |                 |       |                 |       |                 |   |   |   |   |   |   |
| Stockholder’s   equity:                                                                                                       |       |                 |       |                 |       |                 |   |   |   |   |   |   |
| Common   stock, without par value (issued and outstanding – 2,500 shares owned by John   Deere Financial Services, Inc.) |       |                 | 1,272.8    |                 |       |                 | 1,272.8 |   |   |   | 1,272.8 |   |
| Retained   earnings                                                                                                                |       |                 | 1,161.3    |                 |       |                 | 1,156.5 |   |   |   | 1,026.0 |   |
| Accumulated   other comprehensive income (loss):                                                                                   |       |                 |       |                 |       |                 |   |   |   |   |   |   |
| Cumulative   translation adjustment                                                                                                |       |                 | 47.4       |                 |       |                 | 48.6 |   |   |   | 39.0 |   |
| Unrealized   loss on derivatives                                                                                                   |       |                 | (24.1      | )                    |       |                 | (29.2 | ) |   |   | (37.7 | ) |
| Total   accumulated other comprehensive income (loss)                                                                              |       |                 | 23.3       |                 |       |                 | 19.4 |   |   |   | 1.3 |   |
| Total   Company stockholder’s equity                                                                                          |       |                 | 2,457.4    |                 |       |                 | 2,448.7 |   |   |   | 2,300.1 |   |
| Noncontrolling   interests                                                                                                         |       |                 | .4         |                 |       |                 | .4 |   |   |   | .4 |   |
| Total   stockholder’s equity                                                                                                  |       |                 | 2,457.8    |                 |       |                 | 2,449.1 |   |   |   | 2,300.5 |   |
| **Total Liabilities and Stockholder’s Equity**                                                                                |       | $                    | 21,916.0   |                 |       | $                    | 22,624.5 |   |   | $ | 21,848.9 |   |

 

 

See Condensed Notes to Interim Consolidated Financial Statements.

 

3

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**John Deere Capital Corporation and Subsidiaries**

**Statements of Consolidated Cash Flows**

**For the Three Months Ended January 31, 2011 and 2010**

**(Unaudited)**

(in millions)

 
|                                                                                | ** ** | **2011** | ** ** | ** ** | ** ** | **2010** | ** ** |
|-------------------------------------------------------------------------------------|------------|----------|------------|------------|------------|----------|------------|
| **Cash Flows from Operating   Activities:**                                         |       |     |       |       |       |     |       |
| Net income                                                                          | $          | 83.8     |       |       | $          | 63.9     |       |
| Adjustments to reconcile net income to net cash   provided by operating activities: |       |     |       |       |       |     |       |
| Provision for credit losses                                                         |       | 3.8      |       |       |       | 23.0     |       |
| Provision for depreciation and amortization                                         |       | 52.2     |       |       |       | 50.3     |       |
| Provision for deferred income taxes                                                 |       | 19.9     |       |       |       | 4.2      |       |
| Undistributed earnings of unconsolidated   affiliates                               |       | (.3      | )          |       |       | (.3      | )          |
| Change in accounts payable and accrued expenses                                     |       | (18.5    | )          |       |       | (56.1    | )          |
| Change in accrued income taxes payable/receivable                                   |       | 7.7      |       |       |       | 12.2     |       |
| Other                                                                               |       | 15.4     |       |       |       | 83.7     |       |
| Net cash provided by operating activities                                           |       | 164.0    |       |       |       | 180.9    |       |
|                                                                                |       |     |       |       |       |     |       |
| **Cash Flows from Investing   Activities:**                                         |       |     |       |       |       |     |       |
| Cost of receivables acquired                                                        |       | (9,774.5 | )          |       |       | (6,700.3 | )          |
| Collections of receivables                                                          |       | 9,758.3  |       |       |       | 6,931.1  |       |
| Cost of equipment on operating leases acquired                                      |       | (101.4   | )          |       |       | (67.2    | )          |
| Proceeds from sales of equipment on operating   leases                              |       | 147.9    |       |       |       | 101.7    |       |
| Cost of notes receivable with John Deere                                            |       | (24.5    | )          |       |       | (35.9    | )          |
| Collection of notes receivable with John Deere                                      |       | 600.0    |       |       |       | 37.0     |       |
| Proceeds from sales of receivables                                                  |       |     |       |       |       | 9.4      |       |
| Change in restricted cash                                                           |       | (24.2    | )          |       |       | (28.6    | )          |
| Other                                                                               |       | (61.0    | )          |       |       | (6.3     | )          |
| Net cash provided by investing activities                                           |       | 520.6    |       |       |       | 240.9    |       |
|                                                                                |       |     |       |       |       |     |       |
| **Cash Flows from Financing   Activities:**                                         |       |     |       |       |       |     |       |
| Increase in commercial paper - net                                                  |       | 355.9    |       |       |       | 1,061.3  |       |
| Decrease in other notes payable - net                                               |       | (444.2   | )          |       |       | (456.6   | )          |
| Decrease in payable to John Deere - net                                             |       | (32.8    | )          |       |       | (46.5    | )          |
| Proceeds from issuance of long-term borrowings                                      |       | 22.4     |       |       |       | 60.4     |       |
| Payments of long-term borrowings                                                    |       | (427.6   | )          |       |       | (278.7   | )          |
| Dividends paid                                                                      |       | (79.0    | )          |       |       | (70.0    | )          |
| Debt issuance costs                                                                 |       | (4.1     | )          |       |       | (2.3     | )          |
| Net cash provided by (used for) financing   activities                              |       | (609.4   | )          |       |       | 267.6    |       |
|                                                                                |       |     |       |       |       |     |       |
| **Effect of exchange rate changes   on cash and cash equivalents**                  |       | (.2      | )          |       |       | (1.3     | )          |
| **Net increase in cash and cash   equivalents**                                     |       | 75.0     |       |       |       | 688.1    |       |
| **Cash and cash equivalents at   beginning of period**                              |       | 355.7    |       |       |       | 870.6    |       |
| **Cash and cash equivalents at end   of period**                                    | $          | 430.7    |       |       | $          | 1,558.7  |       |

 

 

See Condensed Notes to Interim Consolidated Financial Statements.

 

4

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**John Deere Capital Corporation and Subsidiaries**

**Statements of Changes in Consolidated Stockholder’s Equity**

**For the Three Months Ended January 31, 2010 and 2011**

**(Unaudited)**

(in millions)

 
| ** **                              | ** ** | ** **                              | ** ** | **Company Stockholder** | ** **                 | ** **              | ** ** |
|-----------------------------------------|------------|-----------------------------------------|------------|-------------------------|----------------------------|-------------------------|------------|
| ** **                              | ** ** | **Total   Stockholder’s   Equity** | ** ** | **Common   Stock**      | ** **                 | **Retained   Earnings** | ** ** | **Total   Accumulated   Other   Comprehensive   Income (Loss)** | ** ** | **Noncontrolling   Interests** | ** ** |
|                                    |       |                                    |       |                    |                       |                    |       |   |   |   |   |
| **Balance October 31, 2009**            |       | $    2,317.0        |       |                    | $   1,272.8 |                    |       | $    1,032.1 |   |   | $  11.7 |   |   | $  .4 |   |   |
| ** **                              |       |                                    |       |                    |                       |                    |       |   |   |   |   |   |   |   |   |   |
| Net income                              |       | 63.9                                    |       |                    |                       |                    |       | 63.9 |   |   |   |   |   |   |   |   |
| Other comprehensive income (loss)       |       |                                    |       |                    |                       |                    |       |   |   |   |   |   |   |   |   |   |
| Cumulative   translation adjustment     |       | (16.8                                   | )          |                    |                       |                    |       |   |   |   | (16.8 | ) |   |   |   |   |
| Unrealized   gain on derivatives        |       | 6.4                                     |       |                    |                       |                    |       |   |   |   | 6.4 |   |   |   |   |   |
|                                    |       |                                    |       |                    |                       |                    |       |   |   |   |   |   |   |   |   |   |
| **Total** **comprehensive income** |       | 53.5                                    |       |                    |                       |                    |       |   |   |   |   |   |   |   |   |   |
|                                    |       |                                    |       |                    |                       |                    |       |   |   |   |   |   |   |   |   |   |
| Dividends paid                          |       | (70.0                                   | )          |                    |                       |                    |       | (70.0 | ) |   |   |   |   |   |   |   |
|                                    |       |                                    |       |                    |                       |                    |       |   |   |   |   |   |   |   |   |   |
| **Balance January 31, 2010**            |       | $    2,300.5        |       |                    | $   1,272.8 |                    |       | $  1,026.0 |   |   | $  1.3 |   |   | $  .4 |   |   |
| ** **                              |       |                                    |       |                    |                       |                    |       |   |   |   |   |   |   |   |   |   |
|                                    |       |                                    |       |                    |                       |                    |       |   |   |   |   |   |   |   |   |   |
|                                    |       |                                    |       |                    |                       |                    |       |   |   |   |   |   |   |   |   |   |
| **Balance October 31, 2010**            |       | $    2,449.1        |       |                    | $  1,272.8       |                    |       | $  1,156.5 |   |   | $    19.4 |   |   | $  .4 |   |   |
|                                    |       |                                    |       |                    |                       |                    |       |   |   |   |   |   |   |   |   |   |
| Net income                              |       | 83.8                                    |       |                    |                       |                    |       | 83.8 |   |   |   |   |   |   |   |   |
| Other comprehensive income (loss)       |       |                                    |       |                    |                       |                    |       |   |   |   |   |   |   |   |   |   |
| Cumulative   translation adjustment     |       | (1.2                                    | )          |                    |                       |                    |       |   |   |   | (1.2 | ) |   |   |   |   |
| Unrealized   gain on derivatives        |       | 5.1                                     |       |                    |                       |                    |       |   |   |   | 5.1 |   |   |   |   |   |
|                                    |       |                                    |       |                    |                       |                    |       |   |   |   |   |   |   |   |   |   |
| **Total** **comprehensive income** |       | 87.7                                    |       |                    |                       |                    |       |   |   |   |   |   |   |   |   |   |
|                                    |       |                                    |       |                    |                       |                    |       |   |   |   |   |   |   |   |   |   |
| Dividends paid                          |       | (79.0                                   | )          |                    |                       |                    |       | (79.0 | ) |   |   |   |   |   |   |   |
|                                    |       |                                    |       |                    |                       |                    |       |   |   |   |   |   |   |   |   |   |
| **Balance January 31, 2011**            |       | $    2,457.8        |       |                    | $   1,272.8 |                    |       | $  1,161.3 |   |   | $  23.3 |   |   | $  .4 |   |   |
|                                    |       |                                    |       |                    |                       |                    |       |   |   |   |   |   |   |   |   |   |

 

 

See Condensed Notes to Interim Consolidated Financial Statements.

 

5

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**John Deere Capital Corporation and Subsidiaries**

**Condensed Notes to Interim Consolidated Financial Statements**

**(Unaudited)**

 
| (1)    | John Deere Capital Corporation and its   subsidiaries (Capital Corporation), and its other consolidated entities are   collectively called the Company. The consolidated financial statements have   been prepared by the Company, without audit, pursuant to the rules and   regulations of the U.S. Securities and Exchange Commission (SEC). Certain   information and footnote disclosures normally included in annual financial   statements prepared in accordance with accounting principles generally   accepted in the U.S. have been condensed or omitted as permitted by such   rules and regulations. All adjustments, consisting of normal recurring   adjustments, have been included. Management believes that the disclosures are   adequate to present fairly the financial position, results of operations and   cash flows at the dates and for the periods presented. It is suggested that   these interim financial statements be read in conjunction with the   consolidated financial statements and the notes thereto appearing in the   Company’s latest annual report on Form 10-K. Results for interim periods   are not necessarily indicative of those to be expected for the fiscal year.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                |
|--------|------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|
|   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                       |
|   | The preparation of financial statements in   conformity with accounting principles generally accepted in the U.S. requires   management to make estimates and assumptions that affect the reported amounts   and related disclosures. Actual results could differ from those estimates.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                    |
|   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                       |
|   | During the first quarter of 2011, the variable   interest entity (VIE) created by the Capital Corporation’s parent, John Deere   Financial Services, Inc. (JDFS), that serves as a centralized hedging   center, was merged into JDFS. As a result, the VIE was deconsolidated with no   gains or losses recognized. All of the Capital Corporation’s derivative   agreements and transactions outstanding with the VIE at the time of the   merger were assumed by JDFS. In conjunction with this merger, the Capital Corporation   began utilizing JDFS as a centralized hedging center to execute certain   derivative transactions. Further detail regarding the structure of this   centralized hedging center can be found in Note 10.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                           |
|   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                       |
| (2)    | The Company provides and administers financing for   retail purchases of new equipment manufactured by Deere & Company’s   agriculture and turf and construction and forestry divisions and used   equipment taken in trade for this equipment. The Company generally purchases   retail installment sales and loan contracts (retail notes) from   Deere & Company and its wholly-owned subsidiaries (collectively   called John Deere). John Deere generally acquires these retail notes through   John Deere retail dealers. The Company also purchases and finances a limited   amount of non-Deere retail notes and continues to service a small portfolio   of recreational products and other retail notes. In addition, the Company   leases John Deere equipment and a limited amount of non-Deere equipment to   retail customers (financing and operating leases). The Company also finances   and services revolving charge accounts, in most cases acquired from and   offered through merchants in the agriculture and turf and construction and   forestry markets (revolving charge accounts). Further, the Company finances   and services operating loans, in most cases offered through and acquired from   farm input providers or through direct relationships with agricultural   producers or agribusinesses (operating loans). The Company also provides   wholesale financing for inventories of John Deere agriculture and turf and   construction and forestry equipment owned by dealers of those products   (wholesale receivables). The Company also offers credit enhanced   international export financing to select customers and dealers which generally   involves John Deere products. Retail notes, revolving charge accounts,   operating loans, financing leases and wholesale receivables are collectively   called “Receivables.” Receivables and operating leases are collectively   called “Receivables and Leases.” |
|   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                       |
| (3)    | New   accounting standards adopted in the first three months of 2011 were as   follows:                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                    |
|   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                       |
|   | In the first quarter of 2011, the Company adopted   Financial Accounting Standards Board (FASB) Accounting Standards Update (ASU)   No. 2009-16, Accounting for Transfers of Financial Assets, which amends   Accounting Standards Codification (ASC) 860, Transfers and Servicing (FASB   Statement No. 166, Accounting for Transfers of Financial Assets an   amendment of FASB Statement No. 140). This ASU eliminates the qualifying   special purpose entities from the consolidation guidance and clarifies the   requirements for isolation and limitations on portions of financial assets   that are eligible for sale accounting. It requires additional disclosures   about the risks from continuing involvement in transferred financial assets   accounted for as sales. The adoption did not have a material effect on the   Company’s consolidated financial statements.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                               |

 

6

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|   | In the first quarter of 2011, the Company adopted   FASB ASU No. 2009-17, Improvements to Financial Reporting by   Enterprises Involved with Variable Interest Entities, which amends ASC 810,   Consolidation (FASB Statement No. 167, Amendments to FASB Interpretation   No. 46(R)). This ASU requires a qualitative analysis to determine the   primary beneficiary of a VIE. The analysis identifies the primary beneficiary   as the enterprise that has both the power to direct the activities of a VIE   that most significantly impact the VIE’s economic performance and the   obligation to absorb losses or the right to receive benefits that could be   significant to the VIE. The ASU also requires additional disclosures about an   enterprise’s involvement in a VIE. The adoption did not have a material   effect on the Company’s consolidated financial statements. |
|--------|--------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|
|   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                           |
|   | In the first quarter of 2011, the Company adopted   FASB ASU No. 2010-20, Disclosures about the Credit Quality of Financing   Receivables and the Allowance for Credit Losses, which amends ASC 310,   Receivables. This ASU requires disclosures related to receivables and the   allowance for credit losses by portfolio segment. The ASU also requires   disclosures of information regarding the credit quality, aging, nonaccrual   status and impairments by class of receivable. A portfolio segment is the   level at which a creditor develops a systematic methodology for determining   its credit allowance. A receivable class is a subdivision of a portfolio   segment with similar measurement attributes, risk characteristics and common   methods to monitor and assess credit risk. The adoption did not have a   material effect on the Company’s consolidated financial statements.           |
|   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                           |
|   | New   accounting standards to be adopted are as follows:                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                       |
|   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                           |
|   | In January 2010, the FASB issued ASU   No. 2010-06, Improving Disclosures about Fair Value Measurements,   which amends ASC 820, Fair Value Measurements and Disclosures. This ASU   requires disclosures of transfers into and out of Levels 1 and 2, more   detailed roll forward reconciliations of Level 3 recurring fair value measurements   on a gross basis, fair value information by class of assets and liabilities,   and descriptions of valuation techniques and inputs for Level 2 and 3   measurements. The effective date was the second quarter of fiscal year 2010   except for the roll forward reconciliations, which are required in the first   quarter of fiscal year 2012. The adoption in 2010 did not have a material   effect and the future adoption will not have a material effect on the   Company’s consolidated financial statements.                               |
|   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                           |
| (4)    | Comprehensive income, which includes all changes   in the Company’s equity during the period except transactions with the   stockholder, was as follows (in millions of dollars):                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                         |

 
|                                           |   | Three Months Ended January 31, |   |
|------------------------------------------------|--------|----------------------------------------------------|--------|
|                                           |   |                                               |   |
|                                           |   | 2011                                               |   |   | 2010 |   |   |
|                                           |   |                                               |   |   |   |   |   |
| Net Income                                     |   |   $                                      | 83.8   |   |   |  $ | 63.9 |   |   |
|                                           |   |                                               |   |   |   |   |   |
| Other comprehensive income (loss), net of tax: |   |                                               |   |   |   |   |   |
|                                           |   |                                               |   |   |   |   |   |
| Cumulative translation adjustment              |   | (1.2                                               | )      |   | (16.8 | ) |   |
|                                           |   |                                               |   |   |   |   |   |
| Unrealized gain on derivatives                 |   | 5.1                                                |   |   | 6.4 |   |   |
|                                           |   |                                               |   |   |   |   |   |
| Total comprehensive income                     |   |   $                                      | 87.7   |   |   |  $ | 53.5 |   |   |

 
|     (5) | Past due balances of Receivables represent the   total balance held (principal plus accrued interest) with any payment amounts   30 days or more past the contractual payment due date.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                            |
|-----------------------------|----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|
|                        |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                               |
|                        | Generally, when retail notes are approximately 120   days delinquent, accrual of finance income is suspended, the collateral is   repossessed or the account is designated for litigation and the estimated   uncollectible amount, after charging the dealer’s withholding account, if   any, is written off to the allowance for credit losses. Accrual of revolving   charge account income is suspended generally when the account becomes 120   days delinquent. Accounts are deemed to be uncollectible and written off to   the allowance for credit losses when delinquency reaches 120 days for a Farm   Planä, PowerPlanâ or John   Deere Financial Revolving Plan account. When a financing lease account   becomes 120 days delinquent, the accrual of lease revenue is suspended,   the equipment is repossessed or the account is designated for litigation, and   the estimated uncollectible amount, after charging the dealer’s withholding   account, if any, is written off to the allowance for credit losses.   Generally, when a wholesale receivable becomes 60 days delinquent, the   Company determines whether the accrual of finance income on |

 

7

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|   | interest-bearing wholesale receivables should be suspended, the   collateral should be repossessed or the account should be designated for   litigation and the estimated uncollectible amount written off to the   allowance for credit losses. Finance income for non-performing Receivables is   recognized on a cash basis. Accrual of finance income is resumed when the   receivable becomes contractually current and collections are reasonably assured. |
|--------|------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|
|   |                                                                                                                                                                                                                                                                                                                                                                                                                                                             |
|   | The Company monitors the credit quality of   Receivables as either performing or non-performing monthly. Non-performing   Receivables represent loans for which the Company has ceased accruing finance   income.                                                                                                                                                                                                                                                |
|   |                                                                                                                                                                                                                                                                                                                                                                                                                                                             |
|   | An aging of total Receivables and non-performing   Receivables was as follows (in millions of dollars):                                                                                                                                                                                                                                                                                                                                                          |

 
|                                |   |   | January 31, 2011      |   |
|-------------------------------------|--------|--------|---------------------------------|--------|
|                                |   |   | 30-59 Days   Past Due |   | 60-89 Days   Past Due |   | 90 Days or   Greater   Past Due * |   | Total Past   Due |   |
| Retail notes:                       |   |   |                            |   |   |   |   |   |   |   |
| Agriculture and turf equipment      |   |   | $                               | 86.1   |   |    $ | 40.5 |   |   |    $ | 30.4 |   |   |    $ | 157.0 |   |   |
| Construction and forestry equipment |   |   | 48.3                            |   | 28.6 |   |   | 24.6 |   |   | 101.5 |   |   |
| Recreational products               |   |   | .1                              |   | .1 |   |   | .1 |   |   | .3 |   |   |
| Revolving charge accounts:          |   |   |                            |   |   |   |   |   |   |   |   |   |   |
| Agriculture and turf equipment      |   |   | 20.0                            |   | 8.4 |   |   | 4.4 |   |   | 32.8 |   |   |
| Construction and forestry equipment |   |   | 2.4                             |   | 1.0 |   |   | .6 |   |   | 4.0 |   |   |
| Wholesale receivables:              |   |   |                            |   |   |   |   |   |   |   |   |   |   |
| Agriculture and turf equipment      |   |   | 1.4                             |   | .6 |   |   | 2.2 |   |   | 4.2 |   |   |
| Construction and forestry equipment |   |   | .8                              |   |   |   |   | .2 |   |   | 1.0 |   |   |
| Financing leases:                   |   |   |                            |   |   |   |   |   |   |   |   |   |   |
| Agriculture and turf equipment      |   |   | 7.1                             |   | 2.8 |   |   | 11.0 |   |   | 20.9 |   |   |
| Construction and forestry equipment |   |   | 2.3                             |   | 1.9 |   |   | 3.7 |   |   | 7.9 |   |   |
| Operating loans:                    |   |   |                            |   |   |   |   |   |   |   |   |   |   |
| Agriculture and turf equipment      |   |   |                            |   |   |   |   |   |   |   |   |   |   |
| Total Receivables                   |   |   | $                               | 168.5  |   |    $ | 83.9 |   |   |    $ | 77.2 |   |   |    $ | 329.6 |   |   |

 
|   | *                           Receivables   that are 90 days or greater past due and still accruing finance income. |
|--------|-----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

 
|                                |   |   | Total   Past Due |   | Total Non-Performing |                | Current |    | Total   Receivables |                |
|-------------------------------------|--------|--------|-----------------------|--------|---------------------------|---------------------|---------|---------|---------------------|---------------------|
| Retail notes:                       |   |   |                  |   |                      |                |    |    |                |                |
| Agriculture and turf equipment      |   |   | $                     | 157.0  |                      |    $ | 47.6    |    |                |    $ | 10,903.7 |   |   |    $ | 11,108.3 |   |   |
| Construction and forestry equipment |   |   | 101.5                 |   | 25.1                      |                |    | 1,017.7 |                |                | 1,144.3 |   |   |
| Recreational products               |   |   | .3                    |   | .1                        |                |    | 3.9     |                |                | 4.3 |   |   |
| Revolving charge accounts:          |   |   |                  |   |                      |                |    |    |                |                |   |   |   |
| Agriculture and turf equipment      |   |   | 32.8                  |   | 1.9                       |                |    | 1,731.0 |                |                | 1,765.7 |   |   |
| Construction and forestry equipment |   |   | 4.0                   |   |                      |                |    | 43.4    |                |                | 47.4 |   |   |
| Wholesale receivables:              |   |   |                  |   |                      |                |    |    |                |                |   |   |   |
| Agriculture and turf equipment      |   |   | 4.2                   |   | 1.9                       |                |    | 4,525.5 |                |                | 4,531.6 |   |   |
| Construction and forestry equipment |   |   | 1.0                   |   | 6.4                       |                |    | 597.7   |                |                | 605.1 |   |   |
| Financing leases:                   |   |   |                  |   |                      |                |    |    |                |                |   |   |   |
| Agriculture and turf equipment      |   |   | 20.9                  |   | 10.5                      |                |    | 242.5   |                |                | 273.9 |   |   |
| Construction and forestry equipment |   |   | 7.9                   |   | 4.0                       |                |    | 128.6   |                |                | 140.5 |   |   |
| Operating loans:                    |   |   |                  |   |                      |                |    |    |                |                |   |   |   |
| Agriculture and turf equipment      |   |   |                  |   | 2.8                       |                |    | 220.8   |                |                | 223.6 |   |   |
| Total Receivables                   |   |   | $                     | 329.6  |                      |    $ | 100.3   |    |                |    $ | 19,414.8 |   |   |    $ | 19,844.7 |   |   |

 

8

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|   | Allowance for credit losses on Receivables are   maintained in amounts considered to be appropriate in relation to the   Receivables outstanding based on collection experience, economic conditions and   credit risk quality. |
|--------|---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|
|   | ** **                                                                                                                                                                                                                      |
|   | An analysis of the allowance for credit losses on   Receivables was as follows (in millions of dollars):                                                                                                                        |

 
|                             |   |   | Three Months Ended    |
|----------------------------------|--------|--------|-----------------------|
|                             |   |   | January 31, 2011 |
|                             |   |   | Retail   Notes        |   | Revolving   Charge   Accounts |   | Wholesale   Receivables |   | Other |   | Total   Receivables |   |
| Allowance:                       |   |   |                  |   |   |   |   |   |   |   |   |   |
| Balance, beginning of the period |   |   | $                     | 82.1 |   | $ | 43.3 |   |   | $ | 7.4 |   |   | $ | 15.8 |   |   | $ | 148.6 |   |   |
| Provision for credit losses      |   |   | 1.7                   |   | 2.7 |   |   | (1.2 | ) |   | .6 |   |   | 3.8 |   |   |
| Write-offs                       |   |   | (6.5                  | ) | (9.3 | ) |   | (.1 | ) |   | (1.4 | ) |   | (17.3 | ) |   |
| Recoveries                       |   |   | 2.6                   |   | 7.4 |   |   |   |   |   | .1 |   |   | 10.1 |   |   |
| Other changes *                  |   |   | .1                    |   |   |   |   | .2 |   |   | (.1 | ) |   | .2 |   |   |
| Balance, end of the period       |   |   | $                     | 80.0 |   | $ | 44.1 |   |   | $ | 6.3 |   |   | $ | 15.0 |   |   | $ | 145.4 |   |   |
| Balance individually evaluated   |   |   | $                     | 1.2 |   | $ | .8 |   |   | $ | .4 |   |   | $ | 3.8 |   |   | $ | 6.2 |   |   |
| Balance collectively evaluated   |   |   | $                     | 78.8 |   | $ | 43.3 |   |   | $ | 5.9 |   |   | $ | 11.2 |   |   | $ | 139.2 |   |   |
|                             |   |   |                  |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Receivables:                     |   |   |                  |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Balance                          |   |   | $                     | 12,256.9 |   | $ | 1,813.1 |   |   | $ | 5,136.7 |   |   | $ | 638.0 |   |   | $ | 19,844.7 |   |   |
| Balance individually evaluated   |   |   | $                     | 14.2 |   | $ | 2.4 |   |   | $ | .8 |   |   | $ | 9.9 |   |   | $ | 27.3 |   |   |
| Balance collectively evaluated   |   |   | $                     | 12,242.7 |   | $ | 1,810.7 |   |   | $ | 5,135.9 |   |   | $ | 628.1 |   |   | $ | 19,817.4 |   |   |

 
|   | *                                         Primarily   translation adjustments |
|--------|---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|
|   |                                                                                                                                                                                                                                                                                  |
|   | Receivables are considered impaired when it is   probable the Company will be unable to collect all amounts due according to   the contractual terms.                                                                                                                                 |
|   |                                                                                                                                                                                                                                                                                  |
|   | An   analysis of  impaired Receivables was   as follows (in millions of dollars):                                                                                                                                                                                                |

 
|                                    |   |   | January 31, 2011 |   |
|-----------------------------------------|--------|--------|----------------------------|--------|
|                                    |   |   | Recorded   Investment      |   | Unpaid   Principal   Balance |   | Specific   Allowance |   | Average   Recorded   Investment |   |
| Receivables with specific allowance: *  |   |   |                       |   |   |   |   |   |   |   |
| Retail notes                            |   |   | $                          | 1.6    |   | $ | 1.5 |   | $ | 1.2 |   | $ | 3.3 |   |
| Revolving charge accounts               |   |   | .8                         |   | .8 |   | .8 |   | .4 |   |
| Wholesale receivables                   |   |   | .8                         |   | .8 |   | .4 |   | 9.8 |   |
| Financing leases                        |   |   | .6                         |   | .6 |   | .5 |   | .8 |   |
| Operating loans                         |   |   | 4.3                        |   | 4.3 |   | 3.3 |   | 4.6 |   |
| Total                                   |   |   | 8.1                        |   | 8.0 |   | 6.2 |   | 18.9 |   |
|                                    |   |   |                       |   |   |   |   |   |   |   |
| Receivables without specific allowance: |   |   |                       |   |   |   |   |   |   |   |
| Retail notes                            |   |   | 9.3                        |   | 9.1 |   |   |   | 9.0 |   |
| Total                                   |   |   | $                          | 17.4   |   | $ | 17.1 |   | $ | 6.2 |   | $ | 27.9 |   |
|                                    |   |   |                       |   |   |   |   |   |   |   |
| Agriculture and turf                    |   |   | $                          | 12.4   |   | $ | 12.3 |   | $ | 5.5 |   | $ | 13.0 |   |
| Construction and forestry               |   |   | $                          | 5.0    |   | $ | 4.8 |   | $ | .7 |   | $ | 14.9 |   |

 
|   | *                                         Finance   income recognized was not material. |
|--------|-------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

 

9

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| (6)    | Securitization   of receivables:                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                            |
|--------|-----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|
|   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                        |
|   | The Company, as a part of its overall funding   strategy, periodically transfers certain receivables (retail notes) into VIEs   that are special purpose entities (SPEs), or a non-VIE banking operation, as   part of its asset-backed securities programs (securitizations). The structure   of these transactions is such that the transfer of the retail notes did not   meet the criteria of sales of receivables, and is, therefore, accounted for   as a secured borrowing. SPEs utilized in securitizations of retail notes   differ from other entities included in the Company’s consolidated statements   because the assets they hold are legally isolated. Use of the assets held by   the SPEs or the non-VIE is restricted by terms of the documents governing the   securitization transactions.                                                                                                                                                                                                                                                                                                                                                                                                       |
|   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                        |
|   | In securitizations of retail notes related to   secured borrowings, the retail notes are transferred to certain SPEs or to a   non-VIE banking operation, which in turn issue debt to investors. The   resulting secured borrowings are included in short-term borrowings on the   balance sheet. The securitized retail notes are recorded as “Restricted   securitized retail notes” on the balance sheet. The total restricted assets   on the balance sheet related to these securitizations include the restricted   securitized retail notes less an allowance for credit losses, and other   assets primarily representing restricted cash. For those securitizations in   which retail notes are transferred into SPEs, the SPEs supporting the secured   borrowings are consolidated unless the Company does not have both the power   to direct the activities that most significantly impact the SPEs’ economic   performance and the obligation to absorb losses or the right to receive   benefits that could potentially be significant to the SPEs. No additional   support to these SPEs beyond what was previously contractually required has   been provided during the reporting periods. |
|   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                        |
|   | In certain securitizations, the Company   consolidates the SPEs since it has both the power to direct the activities   that most significantly impact the SPEs’ economic performance, through its   role as servicer of all the Receivables held by the SPEs, and the obligation,   through variable interests in the SPEs, to absorb losses or receive benefits   that could potentially be significant to the SPEs. The restricted assets   (retail notes, allowance for credit losses and other assets) of the   consolidated SPEs totaled $1,133 million, $1,739 million and   $1,842 million at January 31, 2011, October 31, 2010 and   January 31, 2010, respectively. The liabilities (other notes payable and   accounts payable and accrued expenses) of these SPEs totaled $1,073 million,   $1,654 million and $1,827 million at January 31, 2011, October 31,   2010 and January 31, 2010, respectively. The credit holders of these   SPEs do not have legal recourse to the Company’s general credit.                                                                                                                                                      |
|   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                        |
|   | In certain securitizations, the Company transfers   retail notes to a non-VIE bank operation, which is not consolidated since the   Company does not have a controlling interest in the entity. The Company’s   carrying values and interests related to these securitizations with the   unconsolidated non-VIE were restricted assets (retail notes, allowance for   credit losses and other assets) of $177 million and liabilities (other notes   payable and accounts payable and accrued expenses) of $173 million at   January 31, 2011.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                   |
|   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                        |
|   | In certain securitizations, the Company transfers   retail notes into bank-sponsored, multi-seller, commercial paper conduits,   which are SPEs that are not consolidated. The Company does not service a   significant portion of the conduits’ receivables, and, therefore, does not   have the power to direct the activities that most significantly impact the   conduits’ economic performance. These conduits provide a funding source to   the Company (as well as other transferors into the conduit) as they fund the   retail notes through the issuance of commercial paper. The Company’s carrying   values and variable interests related to these conduits were restricted   assets (retail notes, allowance for credit losses and other assets) of $531   million, $589 million and $849 million at January 31, 2011,   October 31, 2010 and January 31, 2010, respectively. The liabilities   (other notes payable and accounts payable and accrued expenses) related to   these conduits were $520 million, $557 million and $831 million at   January 31, 2011, October 31, 2010 and January 31, 2010,   respectively.                  |
|   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                        |
|   | The Company’s carrying amount of the liabilities   to the unconsolidated conduits, compared to the maximum exposure to loss   related to these conduits, which would only be incurred in the event of a   complete loss on the restricted assets was as follows (in millions of   dollars):                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                            |
|   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                        |
|   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                        | January 31, |   |   |
|   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                        |   | 2011  |   |   |
|   | Carrying value of liabilities                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                               |   $ | 519.6  |   |   |
|   | Maximum exposure to loss                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                    |   | 531.4  |   |   |

 

10

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|   | The assets of unconsolidated conduits related to   securitizations in which the Company’s variable interests were considered   significant were approximately $22 billion at January 31, 2011. |
|--------|---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|
|   |                                                                                                                                                                                                          |
|   | The components of consolidated restricted assets   related to secured borrowings in securitization transactions were as follows   (in millions of dollars):                                                   |

 

|                                |   |   | January 31,   2011 |    | October 31,   2010 |   | January 31,   2010 |   |
|-------------------------------------|--------|--------|-------------------------|---------|-------------------------|--------|-------------------------|--------|
| Restricted securitized retail notes |   |   | $                       | 1,788.1 |                    | $      | 2,264.9                 |   | $ | 2,611.2 |   |
| Allowance for credit losses         |   |   | (19.9                   | )       | (26.6                   | )      | (25.5                   | )      |
| Other assets                        |   |   | 72.9                    |    | 90.0                    |   | 104.8                   |   |
| Total restricted securitized assets |   |   | $                       | 1,841.1 |                    | $      | 2,328.3                 |   | $ | 2,690.5 |   |

 
|   | The components of consolidated secured borrowings   and other liabilities related to securitizations were as follows (in millions   of dollars): |
|--------|--------------------------------------------------------------------------------------------------------------------------------------------------|

 

|                                                       |   |   | January 31,   2011 |    | October 31,   2010 |   | January 31,   2010 |   |
|------------------------------------------------------------|--------|--------|-------------------------|---------|-------------------------|--------|-------------------------|--------|
| Other notes payable                                        |   |   | $                       | 1,764.8 |                    | $      | 2,208.8                 |   | $ | 2,655.3 |   |
| Accounts payable and accrued expenses                      |   |   | 1.3                     |    | 1.8                     |   | 2.4                     |   |
| Total liabilities related to restricted securitized assets |   |   | $                       | 1,766.1 |                    | $      | 2,210.6                 |   | $ | 2,657.7 |   |

 
|   | 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   flows 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 restricted collection account until immediately prior to the time payment   is required to the secured creditors. At January 31, 2011, the maximum remaining   term of all restricted receivables was approximately six years.                                                                                                                                                                                                                                                                                                                                                                                                                                                                            |
|--------|---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|
|   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                |
| (7)    | Commitments   and contingencies:                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                    |
|   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                |
|   | At January 31, 2011, John Deere Credit Inc.,   the John Deere finance subsidiary in Canada, had $453 million of   commercial paper, $1,636 million of medium-term notes outstanding, and a fair   value liability of $5 million for derivatives with a notional amount of $708   million that were guaranteed by the Company.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                             |
|   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                |
|   | The Company has commitments to extend credit to   customers and John Deere dealers through lines of credit and other   pre-approved credit arrangements. The Company applies the same credit   policies and approval process for these commitments to extend credit as it   does for its Receivables. Collateral is not required for these commitments,   but if credit is extended, collateral may be required upon funding. The   amount of unused commitments to extend credit to John Deere dealers was $3.5   billion at January 31, 2011. The amount of unused commitments to extend   credit to customers was $34.5 billion at January 31, 2011. A   significant portion of these commitments is not expected to be fully drawn   upon; therefore, the total commitment amounts likely do not represent a   future cash requirement. The Company generally has the right to   unconditionally cancel, alter or amend the terms of these commitments at any   time. Over 95 percent of these unused commitments to extend credit to   customers relate to revolving charge accounts. |
|   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                |
|   | At January 31, 2011, the Company had   restricted other assets of $54 million. See Note 6 for additional restricted   assets associated with borrowings related to securitizations.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                            |
|   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                |
|   | The Company also had other miscellaneous   contingent liabilities totaling approximately $1 million at January 31,   2011, for which it believes the probability for payment is substantially   remote. The accrued liability for these contingencies was not material at   January 31, 2011.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                             |

 

11

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| (8) | The fair values of financial instruments that do   not approximate the carrying values were as follows (in millions of dollars): |
|-----|----------------------------------------------------------------------------------------------------------------------------------|

 

|                                           |   | January 31, 2011 |   |   October 31, 2010 |   |   January 31, 2010 |   |
|------------------------------------------------|--------|----------------------------|--------|----------------------------------------|--------|----------------------------------------|--------|
|                                           |   | Carrying   Value           |   | Fair   Value                           |   | Carrying   Value                       |   | Fair   Value |   | Carrying   Value |   | Fair   Value |   |
| Receivables financed – net                |   | $ 17,931              |   | $ 17,915                          |   | $ 17,474                          |   | $ 17,509 |   | $ 14,987 |   | $ 15,067 |   |
| Restricted securitized retail notes – net |   | 1,768                      |   | 1,777                                  |   | 2,238                                  |   | 2,257 |   | 2,586 |   | 2,631 |   |
| Short-term secured borrowings                  |   | 1,765                      |   | 1,778                                  |   | 2,209                                  |   | 2,229 |   | 2,655 |   | 2,660 |   |
| Long-term borrowings due within one year       |   | 2,741                      |   | 2,777                                  |   | 2,889                                  |   | 2,922 |   | 2,704 |   | 2,718 |   |
| Long-term borrowings                           |   | 11,023                     |   | 11,419                                 |   | 11,452                                 |   | 11,952 |   | 12,207 |   | 12,694 |   |

 
|   | Fair values of the long-term Receivables were   based on the discounted values of their related cash flows at current market   interest rates. The fair values of the remaining Receivables approximated the   carrying amounts.                                                                                                                                                                                                                        |
|--------|---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|
|   |                                                                                                                                                                                                                                                                                                                                                                                                                                                    |
|   | Fair values of long-term borrowings and short-term   secured borrowings were based on current market quotes for identical or   similar borrowings and credit risk, or the discounted values of their related   cash flows at current market interest rates. Certain long-term borrowings   have been swapped to current variable interest rates. The carrying values of   these long-term borrowings included adjustments related to fair value hedges. |
|   |                                                                                                                                                                                                                                                                                                                                                                                                                                                    |
| (9)    | Assets and liabilities measured at fair value as   Level 2 measurements on a recurring basis were as follows (in millions of   dollars):                                                                                                                                                                                                                                                                                                                |

 

|                                   |   |   | January 31, |   | October 31, |   | January 31, |   |
|----------------------------------------|--------|--------|------------------|--------|------------------|--------|------------------|--------|
|                                   |   |   | 2011             |   | 2010             |   | 2010             |   |
| Receivables from John Deere            |   |   |             |   |             |   |             |   |
| Derivatives:                           |   |   |             |   |             |   |             |   |
| Interest rate contracts                |   |   | $                | 2.6    |             |   |             |   |   |
| Other assets                           |   |   |             |   |             |   |             |   |
| Derivatives:                           |   |   |             |   |             |   |             |   |
| Interest rate contracts                |   |   | 335.3            |   | $                | 454.3  |             | $      | 463.9 |   |
| Foreign exchange contracts             |   |   | 1.6              |   | 4.0              |   | 17.5             |   |
| Cross-currency interest rate contracts |   |   | 2.2              |   | 2.9              |   | 7.0              |   |
| Total assets                           |   |   | $                | 341.7  |             | $      | 461.2            |   | $ | 488.4 |   |
|                                   |   |   |             |   |             |   |             |   |
| Other payables to John Deere           |   |   |             |   |             |   |             |   |
| Derivatives:                           |   |   |             |   |             |   |             |   |
| Interest rate contracts                |   |   | $                | 11.2   |             |   |             |   |   |
| Accounts payable and accrued expenses  |   |   |             |   |             |   |             |   |
| Derivatives:                           |   |   |             |   |             |   |             |   |
| Interest rate contracts                |   |   | 20.7             |   | $                | 31.2   |             | $      | 93.3 |   |
| Foreign exchange contracts             |   |   | 5.5              |   | 4.5              |   | .8               |   |
| Cross-currency interest rate contracts |   |   | 64.0             |   | 48.2             |   | 23.2             |   |
| Total liabilities                      |   |   | $                | 101.4  |             | $      | 83.9             |   | $ | 117.3 |   |

 
|   | *                 Excluded from this table   are the Company’s cash and cash equivalents, which are carried at par value   or amortized cost approximating fair value. The cash and cash equivalents   consist primarily of money market funds. |
|--------|--------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

 

12

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|   | Fair value, nonrecurring, Level 3 measurements were as follows (in   millions of dollars): |
|--------|--------------------------------------------------------------------------------------------|

 

|                      |   | Fair Value *            |   | Losses           |                   |
|---------------------------|--------|-----------------------------------|--------|------------------|------------------------|
|                      |   |                              |   |             |                   |   |   | Three Months Ended |   |
|                      |   | January 31,                  |   | October 31, |                   | January 31, |   | January 31, |   |
|                      |   | 2011                              |   | 2010             |                   | 2010 |   | 2011 |   | 2010 |   |
| Receivables:              |   |                              |   |             |                   |   |   |   |   |   |   |   |   |   |   |   |
| Retail notes              |   | $     .4 |   |             | $   1.7 |   |   | $   1.7 |   |   |   |   |   | $   .1 |   |   |
| Revolving charge accounts |   |                              |   |             |                   |   |   |   |   |   | $  .8 |   |   |   |   |   |
| Wholesale receivables     |   | .4                                |   |             | 16.9                   |   |   | 4.6 |   |   |   |   |   |   |   |   |
| Financing leases          |   | .1                                |   |             | .2                     |   |   | .6 |   |   |   |   |   |   |   |   |
| Operating loans           |   | 1.0                               |   |             | 1.1                    |   |   | 3.1 |   |   |   |   |   |   |   |   |
| Total Receivables         |   | $   1.9            |   |             | $  19.9      |   |   | $ 10.0 |   |   | $  .8 |   |   | $   .1 |   |   |

 
|   | *                 Does not include cost of   sale.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                    |
|--------|-----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|
|   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                  |
|   | Level 1 measurements consist of quoted prices in   active markets for identical assets or liabilities. Level 2 measurements   include significant other observable inputs such as quoted prices for similar   assets or liabilities in active markets; identical assets or liabilities in   inactive markets; observable inputs such as interest rates and yield curves;   and other market-corroborated inputs. Level 3 measurements include   significant unobservable inputs. There were no assets or liabilities valued   using Level 1 measurements at January 31, 2011.                                                                                                                                                                                                                                                                                                                                    |
|   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                  |
|   | Fair value is defined as the price that would be   received to sell an asset or paid to transfer a liability in an orderly   transaction between market participants at the measurement date. In   determining fair value, the Company uses various methods including market and   income approaches. The Company utilizes valuation models and techniques that   maximize the use of observable inputs. The models are industry-standard   models that consider various assumptions including time values and yield   curves as well as other economic measures. These valuation techniques are   consistently applied.                                                                                                                                                                                                                                                                                              |
|   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                  |
|   | The following is a description of the valuation   methodologies the Company uses to measure financial instruments at fair   value:                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                    |
|   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                  |
|   | *Derivatives –*The Company’s derivative   financial instruments consist of interest rate swaps and caps, foreign   currency forwards and swaps and cross-currency interest rate swaps. The   portfolio is valued based on an income approach (discounted cash flow) using   market observable inputs, including swap curves and both forward and spot   exchange rates for currencies.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                      |
|   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                  |
|   | *Receivables –*Specific reserve   impairments are based on the fair value of the collateral, which is measured   using an income approach (discounted cash flow) or a market approach   (appraisal values or realizable values). Inputs include interest rates and   selection of realizable values.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                             |
|   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                  |
| (10)   | It is the Company’s policy that derivative   transactions are executed only to manage exposures arising in the normal   course of business and not for the purpose of creating speculative positions   or trading. The Company manages the relationship of the types and amounts of   its funding sources to its receivable and lease portfolio in an effort to   diminish risk due to interest rate and foreign currency fluctuations, while   responding to favorable financing opportunities. The Company also has foreign   currency exposures at some of its foreign and domestic operations related to   financing in currencies other than the functional currencies.                                                                                                                                                                                                                                     |
|   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                  |
|   | All derivatives are recorded at fair value on the   balance sheet. Each derivative is designated as a cash flow hedge, a fair   value hedge, or remains undesignated. All designated hedges are formally   documented as to the relationship with the hedged item as well as the   risk-management strategy. Both at inception and on an ongoing basis the   hedging instrument is assessed as to its effectiveness, when applicable. If   and when a derivative is determined not to be highly effective as a hedge, or   the underlying hedged transaction is no longer likely to occur, or the hedge   designation is removed, or the derivative is terminated, hedge accounting is   discontinued. Any past or future changes in the derivative’s fair value,   which will not be effective as an offset to the income effects of the item   being hedged, are recognized currently in the income statement. |

 

13

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|   | The majority of the Company’s outstanding derivatives   have been transacted directly between the Company and unrelated external   counterparties. However, beginning in the first quarter of 2011, for certain   derivatives the Company began utilizing a centralized hedging center   structure in which John Deere enters into a derivative transaction with an   unrelated external counterparty and simultaneously enters into a derivative   transaction with the Company. Except for collateral provisions, the terms of   the transaction between the Company and John Deere are identical to the terms   of the transaction between John Deere and its unrelated external   counterparty.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                   |
|--------|----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|
|   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                       |
|   | Certain of the Company’s derivative agreements   executed directly with unrelated external counterparties contain credit   support provisions that require the Company to post collateral based on   reductions in credit ratings. The aggregate fair value of all derivatives   with credit-risk-related contingent features that were in a liability   position at January 31, 2011, October 31, 2010 and January 31,   2010 was $21 million, $16 million and $17 million, respectively. The Company,   due to its credit rating, has not posted any collateral. If the   credit-risk-related contingent features were triggered, the Company would be   required to post full collateral for this liability position, prior to   considering applicable netting provisions.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                         |
|   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                       |
|   | Derivative instruments are subject to significant   concentrations of credit risk to the banking sector. The Company manages   individual unrelated external counterparties by setting limits that consider   the credit rating of the unrelated external counterparty and the size of   other financial commitments and exposures between the Company and the   unrelated external counterparty banks. All interest rate derivatives are   transacted under International Swaps and Derivatives Association (ISDA)   documentation. Some of these agreements executed with unrelated external   counterparties include collateral support arrangements. Each master agreement   executed with an unrelated external counterparty permits the net settlement   of amounts owed in the event of early termination. The maximum amount of loss   that the Company would incur on derivatives transacted directly with   unrelated external counterparties, if the counterparties to those derivative   transactions fail to meet their obligations, not considering collateral   received or netting arrangements, was $339 million, $461 million and   $488 million as of January 31, 2011, October 31, 2010 and   January 31, 2010, respectively. The amount of collateral received from unrelated   external counterparties at January 31, 2011, October 31, 2010 and   January 31, 2010 to offset this potential maximum loss was $60 million,   $85 million and $50 million, respectively. The netting provisions of the   agreements would reduce the maximum amount of loss the Company would incur if   the unrelated external counterparties to derivative instruments fail to meet   their obligations by an additional $56 million, $52 million and $67   million as of January 31, 2011, October 31, 2010 and   January 31, 2010, respectively. None of the concentrations of risk with   any individual unrelated external counterparty was considered significant in   any periods presented. |
|   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                       |
|   | The Company also has ISDA agreements with John   Deere that permit the net settlement of amounts owed between counterparties   in the event of early termination. In addition, the Company has agreed to   absorb any losses and expenses John Deere incurs if an unrelated external   counterparty fails to meet its obligations on a derivative transaction that   John Deere entered into to manage exposures of the Company. The maximum   amount of loss that the Company would incur on derivatives transacted with   John Deere if the unrelated external counterparty would fail to meet its   obligations, considering both the netting arrangements as well as the loss   sharing agreement, was $2 million as of January 31, 2011.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                         |
|   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                       |
|   | Cash   flow hedges                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                         |
|   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                       |
|   | Certain interest rate and cross-currency interest   rate contracts (swaps) were designated as hedges of future cash flows from   borrowings. The total notional amounts of the receive-variable/pay-fixed   interest rate contracts at January 31, 2011, October 31, 2010 and   January 31, 2010 were $634 million, $1,060 million and $2,448   million, respectively. The notional amount of cross-currency interest rate   contracts at January 31, 2011, October 31, 2010 and   January 31, 2010 was $849 million. The effective portions of the   fair value gains or losses on these cash flow hedges were recorded in other   comprehensive income (OCI) and subsequently reclassified into interest   expense or administrative and operating expenses (foreign exchange) in the   same periods during which the hedged transactions affect earnings. These   amounts offset the effects of interest rate or foreign currency exchange rate   changes on the related borrowings. Any ineffective portions of the gains or   losses on all interest rate contracts designated as cash flow hedges were   recognized currently in interest expense or administrative and operating   expenses (foreign exchange) and were not material during any periods   presented. The cash flows from these contracts were recorded in operating   activities in the statements of consolidated cash flows.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                              |

 

14

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|   | The amount of loss recorded in OCI at   January 31, 2011 that is expected to be reclassified to interest expense   or administrative and operating expenses in the next twelve months if   interest rates or exchange rates remain unchanged is approximately $6 million   after-tax. These contracts mature in up to 36 months. There were no gains or   losses reclassified from OCI to earnings based on the probability that the   original forecasted transaction would not occur.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                       |
|--------|--------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|
|   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                               |
|   | Fair   value hedges                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                |
|   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                               |
|   | Certain interest rate contracts (swaps) were   designated as fair value hedges of borrowings. The total notional amounts of   these receive-fixed/pay-variable interest rate contracts at January 31,   2011, October 31, 2010 and January 31, 2010 were $6,325 million,   $5,979 million and $6,379 million, respectively. The effective portions   of the fair value gains or losses on these contracts were offset by fair   value gains or losses on the hedged items (fixed-rate borrowings). Any   ineffective portions of the gains or losses were recognized currently in   interest expense. The ineffective portions totaled a $3 million loss during   the first three months of 2011 and were not material during the first three   months of 2010. The cash flows from these contracts were recorded in   operating activities in the consolidated statements of cash flows.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                      |
|   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                               |
|   | The gains (losses) on these contracts and the   underlying borrowings recorded in interest expense were as follows (in   millions of dollars):                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                     |
|   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                               |
|   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                               |   | Three Months Ended   January 31, |   |
|   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                               |   |   | 2011 |   | 2010 |   |   |
|   | Interest rate contracts *                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                          |   |   | $    (119.8 |  ) |   | $        (.5 | ) |   |   |
|   | Borrowings **                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                      |   |   | 116.6 |   |   | (.4 | ) |   |   |
|   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                               |
|   | *                 Includes changes in fair value of interest   rate contracts excluding net accrued interest income of $42.9 million   and $55.2 million during the first three months of 2011 and 2010,   respectively.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                      |
|   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                               |
|   | **          Includes adjustments for fair values of hedged   borrowings excluding accrued interest expense of $62.9 million and $77.8   million during the first three months of 2011 and 2010, respectively.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                         |
|   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                               |
|   | Derivatives   not designated as hedging instruments                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                |
|   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                               |
|   | The Company has certain interest rate contracts   (swaps and caps), foreign exchange contracts (forwards and swaps) and   cross-currency interest rate contracts (swaps), which were not formally   designated as hedges. These derivatives were held as economic hedges for   underlying interest rate or foreign currency exposures primarily for certain   borrowings. The total notional amounts of these interest rate swaps at   January 31, 2011, October 31, 2010 and January 31, 2010 were   $2,075 million, $2,009 million and $2,439 million, the foreign exchange   contracts were $975 million, $1,000 million and $1,075 million and the   cross-currency interest rate contracts were $52 million, $60 million and   $60 million, respectively. At January 31, 2011, October 31,   2010 and January 31, 2010 there were also $946 million, $1,055 million   and $1,447 million, respectively, of interest rate caps purchased and the   same amounts sold at the same capped interest rate to facilitate borrowings   through securitization of retail notes. The fair value gains or losses from   the interest rate contracts were recognized currently in interest expense and   the gains or losses from foreign exchange contracts in administrative and   operating expenses, generally offsetting over time the expenses on the   exposures being hedged. The cash flows from these non-designated contracts   were recorded in operating activities in the consolidated statements of cash   flows. |

 

15

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Fair values of derivative instruments in the consolidated balance sheets were as follows (in millions of dollars):

 
|                                   |   | January 31,   2011 |   | October 31,   2010 |   | January 31,   2010 |   |
|----------------------------------------|--------|-------------------------|--------|-------------------------|--------|-------------------------|--------|
| Receivables from John Deere            |   |                    |   |                    |   |                    |   |
| Designated as hedging instruments:     |   |                    |   |                    |   |                    |   |
| Interest rate contracts                |   | $                       | 2.6    |                    |   |                    |   |   |
|                                   |   |                    |   |                    |   |                    |   |
| Other Assets                           |   |                    |   |                    |   |                    |   |
| Designated as hedging instruments:     |   |                    |   |                    |   |                    |   |
| Interest rate contracts                |   | 302.7                   |   | $                       | 418.0  |                    | $      | 418.7 |   |
|                                   |   |                    |   |                    |   |                    |   |
| Not designated as hedging instruments: |   |                    |   |                    |   |                    |   |
| Interest rate contracts                |   | 32.6                    |   | 36.3                    |   | 45.2                    |   |
| Foreign exchange contracts             |   | 1.6                     |   | 4.0                     |   | 17.5                    |   |
| Cross-currency interest rate contracts |   | 2.2                     |   | 2.9                     |   | 7.0                     |   |
| Total not designated                   |   | 36.4                    |   | 43.2                    |   | 69.7                    |   |
|                                   |   |                    |   |                    |   |                    |   |
| Total derivatives                      |   | $                       | 341.7  |                    | $      | 461.2                   |   | $ | 488.4 |   |
|                                   |   |                    |   |                    |   |                    |   |
| Other Payables to John Deere           |   |                    |   |                    |   |                    |   |
| Designated as hedging instruments:     |   |                    |   |                    |   |                    |   |
| Interest rate contracts                |   | $                       | 11.2   |                    |   |                    |   |   |
|                                   |   |                    |   |                    |   |                    |   |
| Accounts Payable and Accrued Expenses  |   |                    |   |                    |   |                    |   |
| Designated as hedging instruments:     |   |                    |   |                    |   |                    |   |
| Interest rate contracts                |   | 9.4                     |   | $                       | 17.5   |                    | $      | 61.3 |   |
| Cross-currency interest rate contracts |   | 62.3                    |   | 46.9                    |   | 22.6                    |   |
| Total designated                       |   | 71.7                    |   | 64.4                    |   | 83.9                    |   |
|                                   |   |                    |   |                    |   |                    |   |
| Not designated as hedging instruments: |   |                    |   |                    |   |                    |   |
| Interest rate contracts                |   | 11.3                    |   | 13.7                    |   | 32.0                    |   |
| Foreign exchange contracts             |   | 5.5                     |   | 4.5                     |   | .8                      |   |
| Cross-currency interest rate contracts |   | 1.7                     |   | 1.3                     |   | .6                      |   |
| Total not designated                   |   | 18.5                    |   | 19.5                    |   | 33.4                    |   |
|                                   |   |                    |   |                    |   |                    |   |
| Total derivatives                      |   | $                       | 101.4  |                    | $      | 83.9                    |   | $ | 117.3 |   |

 

16

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The classification and gains (losses) including accrued interest expense related to derivative instruments on the statements of consolidated income consisted of the following (in millions of dollars):

 
|                          |   | Expense   or OCI                          |   | Three Months Ended January 31 |
|-------------------------------|--------|-------------------------------------------|--------|------------------------------------|
|                          |   | Classification                            |   | 2011                               |   | 2010 |
| Fair Value Hedges:            |   |                                      |   |                               |   |   |
| Interest rate contracts       |   | Interest   expense                        |   | $                                  | (76.9 | ) |   | $ | 54.7 |   |
|                          |   |                                      |   |                               |   |   |   |   |
| Cash Flow Hedges:             |   |                                      |   |                               |   |   |   |   |
| Recognized in OCI             |   |                                      |   |                               |   |   |   |   |
| (Effective Portion):          |   |                                      |   |                               |   |   |   |   |
| Interest rate contracts       |   | OCI   (pretax) *                          |   | (1.4                               | ) |   | (5.5 | ) |
| Foreign exchange contracts    |   | OCI   (pretax) *                          |   | (18.9                              | ) |   | (22.7 | ) |
|                          |   |                                      |   |                               |   |   |   |   |
| Reclassified from OCI         |   |                                      |   |                               |   |   |   |   |
| (Effective Portion):          |   |                                      |   |                               |   |   |   |   |
| Interest rate contracts       |   | Interest   expense *                      |   | (8.9                               | ) |   | (21.0 | ) |
| Foreign exchange contracts    |   | Administrative   and operating expenses * |   | (19.1                              | ) |   | (16.9 | ) |
|                          |   |                                      |   |                               |   |   |   |   |
| Recognized Directly in Income |   |                                      |   |                               |   |   |   |   |
| (Ineffective Portion):        |   |                                      |   |                               |   |   |   |   |
| Interest rate contracts       |   | Interest   expense                        |   | **                       |   |   | **   |   |
| Foreign exchange contracts    |   | Administrative   and operating expenses   |   | **                       |   |   | **   |   |
|                          |   |                                      |   |                               |   |   |   |   |
| Not Designated as Hedges:     |   |                                      |   |                               |   |   |   |   |
| Interest rate contracts       |   | Interest   expense *                      |   | $                                  | (5.3 | ) |   | $ | 10.2 |   |
| Foreign exchange contracts    |   | Administrative   and operating expenses * |   | (19.2                              | ) |   | (19.2 | ) |
| Total                         |   |                                      |   | $                                  | (24.5 | ) |   | $ | (9.0 | ) |

 
| *  | Includes   interest and foreign exchange gains (losses) from cross-currency interest   rate contracts. |
|----|--------------------------------------------------------------------------------------------------------|
| ** | The   amount is not material.                                                                          |

 

Included in the above table are interest expense amounts the Company incurred on derivatives transacted with John Deere. The amount of gain the Company recognized on these affiliate party transactions for the three months ended January 31, 2011 was $7 million. As referenced in the VIE section of Note 1, during the first quarter of 2011 the centralized hedging center VIE that was previously consolidated into the Company’s financial statements was merged into JDFS and thus deconsolidated from the Company. Due to this merger having occurred in January 2011, the affiliate party interest expense amounts referenced above relate only to activity that took place between the merger date and January 31, 2011.

 

(11)                                                                            The Company is a participating employer in certain Deere & Company sponsored defined benefit pension plans for employees in the U.S. and certain defined benefit pension plans outside the U.S. These pension plans provide for benefits that are based primarily on years of service and employee compensation. Pension expense is actuarially determined based on the Company’s employees included in the plan. The Company’s pension expense amounted to $1.2 million in the first three months of 2011. The accumulated benefit obligation and plan net assets for the employees of the Company are not determined separately from Deere & Company. The Company generally provides defined benefit health care and life insurance plans for retired employees in the U.S. as a participating employer in Deere & Company’s sponsored plans. Health care and life insurance benefits expense is actuarially determined based on the Company’s employees included in the plans and amounted to $2.0 million during the first three months of 2011. Further disclosure for these plans is included in Deere & Company’s Form 10-Q for the quarter ended January 31, 2011.

 

17

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Item 2.                                     Management’s Discussion and Analysis of Financial Condition and Results of Operations.

 

Results of Operations

 

Overview

 

Organization

 

The Company primarily generates revenues and cash by financing John Deere dealers’ sales and leases of new and used agriculture, turf, construction and forestry equipment. In addition, the Company provides wholesale financing to dealers of the foregoing equipment, finances retail revolving charge accounts and provides operating loans.

 

Trends and Economic Conditions

 

The Company’s business is closely related to John Deere’s business. Industry sales of farm machinery in the U.S. and Canada are forecast to be up about 5 percent for 2011. Industry sales in the EU 27 nations of Western and Central Europe are expected to increase about 10 percent, while sales in the Commonwealth of Independent States are expected to see moderate gains in relation to the prior year’s depressed level. Industry sales in Asia are forecast to grow moderately after last year’s robust improvement, and South American sales are projected to be comparable with the strong levels of 2010. Industry sales of turf and utility equipment in the U.S. and Canada are expected to be approximately the same as 2010. John Deere’s agriculture and turf equipment sales increased 21 percent for the first quarter of 2011 and are forecast to increase by about 16 percent for the fiscal year.  Construction equipment markets are forecast to be somewhat improved in relation to the prior year’s low level, while forestry markets are expected to experience further improvement for the year. John Deere’s construction and forestry sales increased 81 percent in the first quarter of 2011 and are forecast to rise by about 35 percent for 2011.

 

Net income attributable to the Company in fiscal year 2011 is forecast to decrease to approximately $300 million, compared to $319 million in fiscal year 2010. The forecast decrease from 2010 is primarily due to lower financing spreads and higher administrative and operating expenses, partially offset by growth in the portfolio.

 

Items of concern for the Company include the uncertainty of the global economic recovery, the impact of sovereign and state debt, capital market disruptions, the availability of credit for John Deere’s and the Company’s customers, the effectiveness of governmental actions in respect to monetary policies, general economic conditions and financial regulatory reform. Significant volatility in the price of many commodities could also impact John Deere’s and the Company’s results.

 

2011 Compared with 2010

 

Net income attributable to the Company was $83.8 million for the first quarter of 2011, compared with $63.9 million for the same period last year. Results were higher for the quarter primarily due to growth in the portfolio and a lower provision for credit losses.

 

Revenues totaled $394.3 million for the first quarter of 2011, compared with $414.4 million for the same period last year. The decrease was primarily due to lower crop insurance commissions and lower financing rates. In August 2010, the Company sold John Deere Risk Protection, the crop insurance managing general agency, to JDFS. Finance income earned on retail notes totaled $174.5 million for the first quarter of 2011, compared with $179.8 million for the same period in 2010. This decrease was primarily due to lower financing rates, partially offset by a 9 percent increase in the average balance of retail notes. Lease revenues totaled $74.0 million in the first quarter of 2011, compared with $71.2 million in the first quarter of 2010. This increase was primarily due to an 11 percent increase in the average balance of leases, partially offset by lower financing rates. Revenues earned on revolving charge accounts amounted to $57.4 million in the first quarter of 2011, compared with $61.8 million during the same period last year. The decrease was primarily due to lower financing rates. Finance income earned on wholesale receivables totaled $67.1 million for the first quarter of 2011, compared to $56.7 million for the same period in 2010. The increase was primarily due to a 24 percent increase in the average balance of wholesale receivables. Revenues earned from John Deere totaled $99.4 million for the first quarter of 2011, compared to $107.9 million for the same period last year.

 

Interest expense totaled $132.4 million for the first quarter of 2011, compared with $150.0 million for the same period in 2010. The decrease was due to lower average interest rates, partially offset by higher average borrowings.

 

18

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Administrative and operating expenses were $73.2 million in the first quarter of 2011, compared with $94.4 million for the same period in 2010. The decrease was primarily due to lower crop insurance commission expense and lower foreign exchange losses.

 

During the first quarter of 2011, the provision for credit losses totaled $3.8 million, compared with $23.0 million for the same period in 2010. The decrease was primarily due to lower write-offs of construction and forestry equipment retail notes and revolving charge accounts. The annualized provision for credit losses, as a percentage of the average balance of total Receivables financed, was .08 percent for the first quarter of 2011, compared with .52 percent for the same periods in 2010. See the Company’s most recently filed annual report on Form 10-K for further information regarding the Company’s allowance for credit losses policies.

 

The Company’s ratio of earnings to fixed charges was 1.96 to 1 for the first quarter of 2011, compared with 1.61 to 1 for the first quarter of 2010. “Earnings” consist of income before income taxes, the cumulative effect of changes in accounting and fixed charges excluding unamortized capitalized interest. “Fixed charges” consist of interest on indebtedness, amortization of debt discount and expense, interest related to uncertain tax positions, an estimated amount of rental expense that is deemed to be representative of the interest factor, and capitalized interest.

 

Receivable and Lease acquisition volumes were as follows (in millions of dollars):

 
|                                |   | Three Months           |    |    |   |                |
|-------------------------------------|--------|------------------------|---------|---------|--------|---------------------|
|                                |   | Ended January 31, |    |    |   |                |
|                                |   | 2011                   |    | 2010    |   |  $ Change |   | % Change |
| Retail notes:                       |   |                   |    |    |   |                |   |   |
| Agriculture and turf equipment      |   | $                      | 1,637.6 |    | $      | 1,314.0             |   | $ | 323.6 |   | 25 | % |
| Construction and forestry equipment |   | 186.7                  |    | 120.5   |   | 66.2                |   | 55 |   |
| Total retail notes                  |   | 1,824.3                |    | 1,434.5 |   | 389.8               |   | 27 |   |
| Revolving charge accounts           |   | 1,267.3                |    | 1,038.8 |   | 228.5               |   | 22 |   |
| Wholesale receivables               |   | 6,466.7                |    | 4,105.5 |   | 2,361.2             |   | 58 |   |
| Financing leases                    |   | 45.2                   |    | 36.5    |   | 8.7                 |   | 24 |   |
| Operating loans                     |   | 171.0                  |    | 85.0    |   | 86.0                |   | 101 |   |
| Equipment on operating leases       |   | 101.4                  |    | 67.2    |   | 34.2                |   | 51 |   |
| Total Receivables and Leases        |   | $                      | 9,875.9 |    | $      | 6,767.5             |   | $ | 3,108.4 |   | 46 | % |

 

Retail note volumes increased in the first quarter of 2011, when compared to last year, primarily due to increases in retail sales of John Deere equipment. Revolving charge account volumes increased during the first quarter of 2011, when compared to last year, primarily due to increased market share. Wholesale receivable volumes increased during the first quarter of 2011, when compared to last year, due to increased shipments of John Deere equipment as a result of increased retail sales activity. Operating loan volumes increased during the first quarter of 2011, when compared to last year, primarily due to increased borrowings by farm input providers as a result of higher commodity prices.

 

Total Receivables and Leases held were as follows (in millions of dollars):

 
|                                |   | January 31, |     | October 31, |   | January 31, |   |
|-------------------------------------|--------|------------------|----------|------------------|--------|------------------|--------|
|                                |   | 2011             |     | 2010             |   | 2010             |   |
| Retail notes:                       |   |             |     |             |   |             |   |
| Agriculture and turf equipment      |   | $                | 11,108.3 |             | $      | 11,111.3         |   | $ | 9,772.4 |   |
| Construction and forestry equipment |   | 1,144.3          |     | 1,138.3          |   | 1,281.0          |   |
| Recreational products               |   | 4.3              |     | 4.6              |   | 5.9              |   |
| Total retail notes                  |   | 12,256.9         |     | 12,254.2         |   | 11,059.3         |   |
| Revolving charge accounts           |   | 1,813.1          |     | 2,287.9          |   | 1,791.5          |   |
| Wholesale receivables               |   | 5,136.7          |     | 4,658.7          |   | 4,259.3          |   |
| Financing leases                    |   | 414.4            |     | 420.4            |   | 375.5            |   |
| Operating loans                     |   | 223.6            |     | 239.1            |   | 232.1            |   |
| Equipment on operating leases       |   | 1,049.8          |     | 1,141.8          |   | 937.4            |   |
| Total Receivables and Leases        |   | $                | 20,894.5 |             | $      | 21,002.1         |   | $ | 18,655.1 |   |

 

19

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Receivables and Leases administered by the Company were as follows (in millions of dollars):

 
|                                                           |   | January 31, |     | October 31, |   | January 31, |   |
|----------------------------------------------------------------|--------|------------------|----------|------------------|--------|------------------|--------|
|                                                           |   | 2011             |     | 2010             |   | 2010             |   |
| Receivables and Leases administered:                           |   |             |     |             |   |             |   |
| Owned by the Company                                           |   | $                | 19,106.4 |             | $      | 18,737.2         |   | $ | 16,043.9 |   |
| Owned by the Company – restricted due to   securitization |   | 1,788.1          |     | 2,264.9          |   | 2,611.2          |   |
| Total Receivables and Leases owned by the Company              |   | 20,894.5         |     | 21,002.1         |   | 18,655.1         |   |
| Administered – with limited recourse*                     |   | 51.8             |     | 59.6             |   | 87.2             |   |
| Administered – without recourse**                         |   | 17.0             |     | 20.6             |   | 28.6             |   |
| Total Receivables and Leases administered                      |   | $                | 20,963.3 |             | $      | 21,082.3         |   | $ | 18,770.9 |   |

 

*                      The Company’s maximum exposure under all Receivable and Lease recourse provisions at January 31, 2011, October 31, 2010 and January 31, 2010 was $5 million, $5 million, and $7 million, respectively. The Company does not record the recourse obligations as liabilities as they are contingent liabilities that are remote at this time. However, the probable loss on Receivables and Leases that have been sold was accrued at the time of sale, and any subsequent necessary adjustments are made as part of ongoing reviews.

 

**                   Represents Receivables and Leases that the Company has sold but continues to administer for a fee.

 

Total Receivables balance 30 days or more past due, which continue to accrue finance income, were $330 million, $327 million and $451 million at January 31, 2011, October 31, 2010 and January 31, 2010, respectively. The total Receivables balance 30 days or more past due as a percentage of the ending Receivables balance was 1.66 percent, 1.65 percent and 2.55 percent at January 31, 2011, October 31, 2010 and January 31, 2010, respectively. Total non-performing Receivables, which represent loans for which the Company has ceased accruing finance income, were $100 million, $120 million and $118 million at January 31, 2011, October 31, 2010 and January 31, 2010, respectively. The total non-performing Receivable as a percentage of the ending Receivables balance was .51 percent, .61 percent and .66 percent at January 31, 2011, October 31, 2010 and January 31, 2010, respectively. See Note 5 to the consolidated financial statements for additional information.

 

Total Receivable write-off amounts, net of recoveries, by product, and as an annualized percentage of average balances held during the period, were as follows (in millions of dollars):

 
|                                |   | Three Months Ended    January 31,    2011 |   | Three Months Ended    January 31,    2010 |   |
|-------------------------------------|--------|------------------------------------------------|--------|------------------------------------------------|--------|
|                                |   | Dollars                                        |   |                                           | Perce  | nt |   | Dollars |   |   | Perce | nt |   |
| Retail notes:                       |   |                                           |   |                                           |   |   |   |   |   |   |   |   |   |
| Agriculture and turf equipment      |   | $                                              | (.2    | )                                              |   | (.01 | )% |   | $ | 1.3 |   |   | .05 | % |   |
| Construction and forestry equipment |   | 4.0                                            |   |                                           | 1.41   |   |   | 13.2 |   |   | 3.97 |   |   |
| Recreational products               |   | .1                                             |   |                                           | 8.96   |   |   |   |   |   |   |   |   |
| Total retail notes                  |   | 3.9                                            |   |                                           | .13    |   |   | 14.5 |   |   | .51 |   |   |
| Revolving charge accounts           |   | 1.9                                            |   |                                           | .38    |   |   | 9.1 |   |   | 1.85 |   |   |
| Wholesale receivables               |   | .1                                             |   |                                           | .01    |   |   | (1.4 | ) |   | (.14 | ) |   |
| Financing leases                    |   | .7                                             |   |                                           | .68    |   |   | .6 |   |   | .62 |   |   |
| Operating loans                     |   | .6                                             |   |                                           | 1.02   |   |   | 13.0 |   |   | 19.74 |   |   |
| Total Receivables                   |   | $                                              | 7.2    |                                           |   | .15 | % |   | $ | 35.8 |   |   | .80 | % |   |

 

Deposits withheld from dealers and merchants, representing mainly the aggregate dealer retail note and lease withholding accounts from individual John Deere dealers to which losses from retail notes and leases originating from the respective dealers can be charged, amounted to $161 million at January 31, 2011, compared with $165 million at October 31, 2010 and $159 million at January 31, 2010.

 

20

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The Company’s allowance for credit losses on all Receivables financed totaled $145 million at January 31, 2011, $149 million at October 31, 2010 and $145 million at January 31, 2010. The allowance for credit losses represented .73 percent of the total Receivables financed at January 31, 2011, .75 percent at October 31, 2010 and .82 percent at January 31, 2010. The level of the allowance is based on many quantitative and qualitative factors, including historical loss experience by product category, portfolio duration, delinquency trends, economic conditions and credit risk quality. The Company believes its allowance is sufficient to provide for losses in its existing receivable portfolio.

 

Safe Harbor Statement

 

*Safe Harbor Statement under the Private Securities Litigation Reform Act of 1995:*Statements under “Overview” and other forward-looking statements herein that relate to future events, expectations, trends and operating periods involve certain factors that are subject to change, and important risks and uncertainties that could cause actual results to differ materially.

 

Factors that could materially affect the Company’s operations, access to capital and results include changing worldwide economic conditions, and changes in and the impact of governmental trade, banking, monetary and fiscal policies, including financial regulatory reform. Actions by the U.S. Federal Reserve Board and other central banks and regulators may affect the costs and expenses of financing the Company and the financing rates it is able to offer. The Company’s business is affected by general economic conditions in and the political stability of the global markets in which the Company operates because deteriorating economic conditions and political instability can result in decreased customer confidence, lower demand for equipment, higher credit losses and greater currency risk. The Company’s business is also affected by actions of banks, financing and leasing companies and other lenders that compete with the Company for customers; capital market disruptions; significant changes in capital market liquidity and associated funding costs; interest rates; and foreign currency exchange rates and their volatility.

 

Significant changes in market liquidity conditions and any failure to comply with financial covenants in credit agreements could impact access to funding and funding costs, which could reduce the Company’s earnings and cash flows. Market conditions could also negatively impact customer access to capital for purchases of John Deere’s products; borrowings and repayment practices; and the number and size of customer loan delinquencies and defaults. A sovereign debt crisis, in Europe or elsewhere, could continue to negatively impact currencies, global financial markets, social and political stability, funding sources and costs, customers, and Company operations and results. State debt crises also could negatively impact customers, demand for equipment, and Company operations and results. The Company’s operations could be impaired by changes in the equity and bond markets, which would negatively affect earnings.

 

The liquidity and ongoing profitability of the Company depends largely on timely access to capital to meet future cash flow requirements and fund operations and the costs associated with engaging in diversified funding activities. If market uncertainty increases and general economic conditions worsen, funding could be unavailable or insufficient. Additionally, customer confidence levels may result in declines in credit applications and increases in delinquencies and default rates, which could materially impact the Company’s write-offs and provision for credit losses.

 

In addition, the Company’s business is closely related to John Deere’s business. Further information, including factors that potentially could materially affect the Company’s and John Deere’s financial results, is included in the most recent Deere & Company Form 10-K and Form 10-Q (including, but not limited to, the factors discussed in Item 1A. Risk Factors of the Form 10-K and quarterly report on Form 10-Q) and other Deere & Company and Capital Corporation filings with the U.S. Securities and Exchange Commission.

 

Critical Accounting Policies

 

See the Company’s critical accounting policies discussed in the Management’s Discussion and Analysis of the most recent annual report filed on Form 10-K. There have been no material changes to these policies.

 

Capital Resources and Liquidity

 

For additional information on the Company’s dependence on and relationships with Deere & Company, see the Company’s most recently filed annual report on Form 10-K.

 

21

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During the first three months of 2011, the aggregate net cash provided by investing and operating activities was used primarily to decrease borrowings and pay dividends. Net cash provided by operating activities was $164 million in the first three months of 2011. Net cash provided by investing activities totaled $521 million in the first three months of 2011, primarily due to the collections of notes receivable with John Deere exceeding the cost of notes receivable with John Deere. In December 2010, John Deere sold its wind energy business and, as a result, John Deere Renewables, LLC repaid all outstanding loans to the Company. Net cash used for financing activities totaled $609 million in the first three months of 2011, resulting primarily from a net decrease in total external borrowings and dividends paid to JDFS, which in turn paid comparable dividends to Deere & Company. Cash and cash equivalents increased $75 million during the first three months of 2011.

 

During the first three months of 2010, the aggregate net cash provided by operating, investing and financing activities was used primarily to increase cash and cash equivalents. Net cash provided by operating activities was $181 million in the first three months of 2010. Net cash provided by investing activities totaled $241 million in the first three months of 2010, primarily due to the collection of Receivables and proceeds from sales of equipment on operating leases exceeding the cost of Receivables and Leases acquired. Net cash provided by financing activities totaled $268 million in the first three months of 2010, resulting primarily from a net increase in total external borrowings, partially offset by a dividend paid to JDFS, which in turn paid a comparable dividend to Deere & Company. Cash and cash equivalents increased $688 million during the first three months of 2010.

 

The Company relies on its ability to raise substantial amounts of funds to finance its Receivable and Lease portfolios. Given the continued uncertainty in the global economy, there has been a reduction in liquidity in some global markets that continues to affect the funding activities of the Company. However, the Company has access to most global markets at a reasonable cost and expects to have sufficient sources of global funding and liquidity to meet its funding needs. The Company’s ability to meet its debt obligations is supported in a number of ways. The assets of the Company are self-liquidating in nature. A solid equity position is available to absorb unusual losses on these assets and all commercial paper is backed by unsecured, committed borrowing lines from various banks. Liquidity is also provided by the Company’s ability to securitize these assets and through the issuance of term debt. Additionally, liquidity may be provided through loans from John Deere. The Company’s commercial paper outstanding at January 31, 2011, October 31, 2010 and January 31, 2010 was approximately $1,718 million, $1,349 million and $1,065 million, respectively, while the total cash and cash equivalents position was approximately $431 million, $356 million and $1,559 million, respectively.

 

During November 2010, the Capital Corporation renewed a revolving credit agreement to utilize bank conduit facilities to securitize retail notes (see Note 6). At January 31, 2011, this facility had a total capacity, or “financing limit,” of up to $2,000 million of secured financings at any time. After a three-year 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 January 31, 2011, $692 million of secured short-term borrowings was outstanding under the agreement.

 

During the first three months of 2011, the Company issued $11 million of medium-term notes and maintained an average commercial paper balance of $1,569 million. At January 31, 2011, the Company’s funding profile included $1,718 million of commercial paper, $1,765 million of notes payable related to on-balance sheet securitization funding, $1,220 million of intercompany loans from John Deere, $13,764 million of unsecured term debt, and $2,458 million of equity capital. The Company’s funding profile may be altered to reflect such factors as relative costs of funding sources, assets available for securitizations and capital market accessibility.

 

During the first three months of 2011, the Company issued $22 million and retired $428 million of long-term borrowings, which were primarily medium-term notes.

 

Total interest-bearing indebtedness amounted to $18,467 million at January 31, 2011, compared with $19,155 million at October 31, 2010, and $18,633 million at January 31, 2010. Total short-term indebtedness amounted to $7,444 million at January 31, 2011, compared with $7,703 million at October 31, 2010, and $6,425 million at January 31, 2010. Included in short-term indebtedness are secured borrowings of $1,765 million, $2,209 million and $2,655 million for the same periods (see Note 6). Total long-term indebtedness amounted to $11,023 million at January 31, 2011, compared with $11,452 million at October 31, 2010, and $12,207 million at January 31, 2010. The ratio of total interest-bearing debt, including securitization indebtedness, to stockholder’s equity was 7.5 to 1 at January 31, 2011, compared with 7.8 to 1 at October 31, 2010 and 8.1 to 1 at January 31, 2010.

 

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Stockholder’s equity was $2,458 million at January 31, 2011, compared with $2,449 million at October 31, 2010 and $2,301 million at January 31, 2010. The increase in the first three months of 2011 resulted primarily from net income attributable to the Company of $84 million and a $5 million unrealized gain on derivatives, partially offset by dividend payments of $79 million.

 

*Lines of Credit*

 

John Deere Capital Corporation also has access to bank lines of credit with various banks throughout the world. Some of the lines are available to both John Deere Capital Corporation and Deere & Company. Worldwide lines of credit totaled $5,272 million at January 31, 2011, $2,996 million of which was unused. For the purpose of computing unused credit lines, commercial paper and short-term bank borrowings, excluding secured borrowings and the current portion of long-term borrowings, of the Capital Corporation and Deere & Company were considered to constitute utilization. Included in the total credit lines at January 31, 2011 was the long-term credit facility agreement of $3,750 million, expiring in February 2012 and a long-term credit facility agreement of $1,500 million, expiring in April 2013. These credit agreements require the Capital Corporation to maintain its consolidated ratio of earnings to fixed charges at not less than 1.05 to 1 for each fiscal quarter and its ratio of senior debt, excluding securitization indebtedness, to capital base (total subordinated debt and total Capital Corporation stockholder’s equity excluding accumulated other comprehensive income (loss)) at not more than 11 to 1 at the end of any fiscal quarter. All of these requirements of the credit agreements have been met during the periods included in the consolidated financial statements.

 

*Debt Ratings*

 

The Company’s ability to obtain funding is affected by its debt ratings, which are closely related to the outlook for and the financial condition of John Deere, and the nature and availability of support facilities, such as its lines of credit and the support agreement from Deere & Company.

 

To access public debt capital markets, the Company relies on credit rating agencies to assign short-term and long-term credit ratings to the Company’s securities as an indicator of credit quality for fixed income investors. A credit rating agency may change or withdraw Company ratings based on its assessment of the Company’s current and future ability to meet interest and principal repayment obligations. Each agency’s rating should be evaluated independently of any other rating. Lower credit ratings generally result in higher borrowing costs and reduced access to debt capital markets. Credit ratings also affect the costs of derivative transactions, including interest rate and foreign currency derivative transactions. As a result, negative changes in the Company’s credit ratings could adversely impact the Company’s cost of funding.

 

The senior long-term and short-term debt ratings and outlook currently assigned to unsecured Company securities by the rating agencies engaged by the Company are the same as those for John Deere. Those ratings are as follows:

 
|                                        |   | Senior Long-Term |   | Short-Term |   | Outlook |   |
|---------------------------------------------|--------|------------------|--------|------------|--------|---------|--------|
| Moody’s Investors   Service, Inc. |   | A2               |   | Prime-1    |   | Stable  |   |
| Standard & Poor’s             |   | A                |   | A-1        |   | Stable  |   |

 

*Dividends*

 

The Capital Corporation declared and paid cash dividends to JDFS of $79 million in the first three months of fiscal 2011. In turn, JDFS paid comparable dividends to Deere & Company.  On February 24, 2011, the Capital Corporation declared an $80 million dividend, to be paid to JDFS on March 16, 2011. JDFS, in turn, declared an $80 million dividend to Deere & Company, also payable on March 16, 2011.

 

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Item 3.                                     Quantitative and Qualitative Disclosures About Market Risk.

 

See the Company’s most recent annual report filed on Form 10-K (Part II, Item 7A). There has been no material change in this information.

 

Item 4.                                     Controls and Procedures.

 

The Company’s principal executive officer and its principal financial officer have concluded that the Company’s disclosure controls and procedures (as defined in Rules 13a-15(e) and 15d-15(e) of the Securities Exchange Act of 1934, as amended (1934 Act)) were effective as of January 31, 2011, based on the evaluation of these controls and procedures required by Rule 13a-15(b) or 15d-15(b) of the 1934 Act. During the first quarter, there were no changes that have materially affected or are reasonably likely to materially affect the Company’s internal control over financial reporting.

 

PART II.  OTHER INFORMATION

 

Item 1.                                     Legal Proceedings.

 

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 state and federal laws and regulations concerning retail credit. 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 consolidated financial statements.

 

Item 1A.                           Risk Factors.

 

See the Company's most recent annual report on Form 10-K (Part I, Item 1A). There has been no material change in this information, except for the addition of the risk factor set forth below. The risks described in the annual report on Form 10-K, and in Item 1A and the “Safe Harbor Statement” in this report, are not the only risks faced by the Company. Additional risks and uncertainties not currently known or that are currently judged to be immaterial may also materially affect the Company’s business, financial condition or operating results.

 

**The Dodd-Frank Wall Street Reform and Consumer Protection Act (Act), and the rules and regulations implementing the Act, could impose additional costs on the Company and could therefore adversely affect the Company.**

 

The Act was enacted on July 21, 2010 to broadly reform practices in the financial services industries, including equipment financing and securitizations. The Act directs federal agencies, including a newly created Consumer Financial Protection Bureau, the Federal Deposit Insurance Corporation, and others, to adopt rules to regulate the consumer finance industry and the capital markets, including certain commercial transactions such as derivatives contracts. The effects of the Act on the capital markets and the consumer finance industry are uncertain and may not be known until such regulations have been finalized and implemented. The Act and its implementing rules and regulations could impose additional costs on the Company and consequently could adversely affect the Company’s funding activities.

 

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Item 2.                                   Unregistered Sales of Equity Securities and Use of Proceeds.

 

Omitted pursuant to instruction H.

 

Item 3.                                   Defaults Upon Senior Securities.

 

Omitted pursuant to instruction H.

 

Item 5.                                   Other Information.

 

None.

 

Item 6.                                   Exhibits.

 

See the index to exhibits immediately preceding the exhibits filed with this report.

 

Certain instruments relating to long-term debt, constituting less than 10% of the registrant’s total assets, are not filed as exhibits herewith pursuant to Item 601(b)(4)(iii)(A) of Regulation S-K.  The registrant will file copies of such instruments upon request of the Commission.

 

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SIGNATURES

 

Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.

 

 

 
|   |                     | JOHN   DEERE CAPITAL CORPORATION |
|--------|--------------------------|----------------------------------|
|   |                     |                             |
|   |                     |                             |
|   |                     |                             |
|   |                     |                             |
| Date:  | February 25,   2011 |                             | By: | */s/   J. M. Field* |
|   |                     |                             | J.   M. Field    Senior Vice President,    Principal Financial Officer |
|        |                          |                                  |  |  |

 

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INDEX TO EXHIBITS

 
| Exhibit |   |                                                                                                                                                                                                   |   |
|---------|--------|--------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|--------|
|    |   |                                                                                                                                                                                                   |   |
| 3.1     |   | Certificate   of Incorporation, as amended (Exhibit 3.1 to Form 10-K of the   registrant for the year ended October 31, 1999, Securities and Exchange   Commission file number 1-6458*) |   |
|    |   |                                                                                                                                                                                                   |   |
| 3.2     |   | Bylaws,   as amended (Exhibit 3.2 to Form 10-K of the registrant for the year   ended October 31, 1999, Securities and Exchange Commission file number   1-6458*)                       |   |
|    |   |                                                                                                                                                                                                   |   |
| 12      |   | Computation of Ratio of Earnings to   Fixed Charges                                                                                                                                                    |   |
|    |   |                                                                                                                                                                                                   |   |
| 31.1    |   | Rule 13a-14(a)/15d-14(a) Certification                                                                                                                                                       |   |
|    |   |                                                                                                                                                                                                   |   |
| 31.2    |   | Rule 13a-14(a)/15d-14(a) Certification                                                                                                                                                       |   |
|    |   |                                                                                                                                                                                                   |   |
| 32      |   | Section 1350 Certifications                                                                                                                                                                       |   |
|    |   |                                                                                                                                                                                                   |   |
| 99      |   | Part I   of Deere & Company Form 10-Q for the quarter ended   January 31, 2011                                                                                            |   |
|    |   | (Securities   and Exchange Commission file number 1-4121*)                                                                                                                                             |   |

 

 
| * | Incorporated by reference.    Copies of these exhibits are available from the Company upon request. |
|---|----------------------------------------------------------------------------------------------------------|

 

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