UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, D.C. 20549

FORM 10-K

ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d)

OF THE SECURITIES EXCHANGE ACT OF 1934

FOR THE FISCAL YEAR ENDED OCTOBER 31, 2009

Commission file number 1-6458

JOHN DEERE CAPITAL CORPORATION

(Exact name of registrant as specified in its charter)

SECURITIES REGISTERED PURSUANT TO SECTION 12(b) OF THE ACT:

SECURITIES REGISTERED PURSUANT TO SECTION 12(g) OF THE ACT: NONE

Indicate by check mark if the registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities Act. 

Yes o  No x

Indicate by check mark if the registrant is not required to file reports pursuant to Section 13 or Section 15(d) of the Act. 

Yes o  No x

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 o

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 o  No o

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.

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Act). 

Yes o  No x

At November 30, 2009, 2,500 shares of common stock, without par value, of the registrant were outstanding, all of which were owned by John Deere Credit Company.

The registrant meets the conditions set forth in General Instruction I(1)(a) and (b) of Form 10-K and is therefore filing this Form with certain reduced disclosures as permitted by Instruction I(2).

PART I

Item 1.  Business.

The Company

John Deere Capital Corporation (Capital Corporation) and its subsidiaries are collectively called the Company.  John Deere Credit Company, a wholly-owned finance holding subsidiary of Deere & Company, owns all of the outstanding common stock of the Capital Corporation. See “Relationships of the Company with John Deere” for additional information regarding agreements between the Company and Deere & Company. The Company conducts business in Australia, New Zealand, the U.S., and in several countries in Asia, Europe and Latin America.

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. John Deere’s agricultural equipment operations and the commercial and consumer equipment operations were combined into the agriculture and turf segment at the beginning of the third quarter of 2009. Information about Deere & Company’s business segments has been revised to conform to the current organization. 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 and offers certain crop risk mitigation products in the U.S. In addition, the Company makes loans to certain affiliated companies that directly invest in wind energy projects. 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.”

The Capital Corporation was incorporated under the laws of Delaware and commenced operations in 1958. At November 30, 2009, the Company had 1,616 full-time and part-time employees.

Business of John Deere

John Deere’s operations are categorized into three major business segments:

The agriculture and turf segment, created by combining the former agricultural equipment and commercial and consumer equipment segments, manufactures and distributes a full line of farm  and turf care equipment and related service parts — including large, medium and utility tractors; loaders; combines, cotton and sugarcane harvesters and related front-end equipment and sugarcane loaders; tillage, seeding and application equipment, including sprayers, nutrient management and soil preparation machinery; hay and forage equipment, including self-propelled forage harvesters and attachments, balers and mowers; turf and utility equipment, including riding lawn equipment and walk-behind mowers, golf course equipment, utility vehicles, and commercial mowing equipment, along with a broad line of associated implements; integrated agricultural management systems technology; precision agricultural irrigation equipment and supplies; landscape and nursery products; and other outdoor power products.

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The construction and forestry segment manufactures, distributes to dealers and sells at retail a broad range of machines and service parts used in construction, earthmoving, material handling and timber harvesting — including backhoe loaders; crawler dozers and loaders; four-wheel-drive loaders; excavators; motor graders; articulated dump trucks; landscape loaders; skid-steer loaders; and log skidders, feller bunchers, log loaders, log forwarders, log harvesters and related attachments.

John Deere’s worldwide agriculture and turf and construction and forestry operations are sometimes referred to as the Equipment Operations. The products and services produced by the segments above are marketed primarily through independent retail dealer networks and major retail outlets.

The credit segment includes the operations of the Company (described herein), John Deere Credit Company, John Deere Credit Inc. (Canada), Banco John Deere, S.A. (Brazil), John Deere Credit Oy (Finland) and John Deere Renewables, LLC, and primarily finances sales and leases by John Deere dealers of new and used agriculture and turf, and construction and forestry equipment. In addition, it provides wholesale financing to dealers of the foregoing equipment, provides operating loans, finances retail revolving charge accounts, offers certain crop risk mitigation products and invests in wind energy generation.

John Deere had net income of $873 million, or $2.06 per share diluted ($2.07 basic), in 2009, compared with $2,053 million, or $4.70 per share diluted ($4.76 basic), in 2008.  Included in net income for 2009 were charges of $381 million pretax ($332 million after-tax), or $.78 per share diluted and basic, related to impairment of goodwill and voluntary employee separation expenses.

John Deere’s net sales and revenues from continuing operations decreased 19 percent to $23,112 million in 2009, compared with $28,438 million in 2008. Net sales of the Equipment Operations decreased 20 percent in 2009 to $20,756 million from $25,803 million last year. The sales decrease was primarily due to lower shipment volumes. The decrease also included an unfavorable effect for currency translation of 4 percent, more than offset by price realization of 5 percent.  Net sales in the U.S. and Canada decreased 14 percent in 2009. Net sales outside the U.S. and Canada decreased by 28 percent, which included an unfavorable effect of 8 percent for currency translation.

The agriculture and turf segment had net sales of $18,122 million in 2009, compared with $20,985 million in 2008. The construction and forestry segment had net sales of $2,634 million in 2009, compared with $4,818 million in 2008. The credit segment had revenues of $1,930 million in 2009, compared with $2,190 million in 2008.

Outlook for John Deere

Deere & Company’s equipment sales are projected to be down about 1 percent for fiscal year 2010 and decline about 10 percent for the first quarter, compared with the same periods in 2009. This includes a favorable currency translation impact of about 1 percent for the year and about 3 percent for the quarter. Deere & Company’s net income is anticipated to be approximately $900 million for 2010. Mainly due to lower discount rates, Deere & Company expects postretirement benefit costs to be about $400 million higher on a pretax basis in 2010 than in 2009.

Agriculture and Turf.  Worldwide sales of Deere & Company’s agriculture and turf segment are forecast to decrease by about 4 percent for fiscal year 2010, including a favorable currency translation impact of about 2 percent.

On an industry basis, farm-machinery sales in the U.S. and Canada are forecast to be down about 10 percent for the year. Cash receipts and commodity prices, while below their prior peaks, are anticipated to remain at healthy levels. However, farmers are expected to be cautious in their purchasing decisions as a result of negative overall economic conditions and near term profitability issues in the livestock and dairy sectors.

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In other parts of the world, industry farm machinery sales in Western Europe are forecast to decline 10 to 15 percent for the year mainly due to weakness in the livestock, dairy and grain sectors. Sales in Central Europe and the Commonwealth of Independent States are expected to remain under pressure partly as a result of weak general economic conditions, including low levels of available credit. In South America, industry sales are projected to increase by 10 to 15 percent in 2010. Among other positive factors, parts of South America are benefiting from a return to more normal weather patterns after last year’s severe drought. The Brazilian market is expected to receive support from good incomes for soybean and sugarcane producers and the continued availability of attractive government supported financing. The forecast assumes that the Brazilian currency does not strengthen further against the U.S. dollar. Industry sales of turf equipment and compact utility tractors in the U.S. and Canada are expected to be flat for the year as a result of negative U.S. economic conditions.

Construction and Forestry.  Deere & Company’s worldwide sales of construction and forestry equipment are forecast to increase by about 18 percent in 2010. Sales are expected to be helped by aggressive inventory reductions in the previous year that position Deere & Company to align production with retail demand. Despite an increase in housing starts from historically low levels, U.S. construction equipment markets are forecast to be down for the year resulting from a decline in non-residential construction activity and lower used equipment values. Global forestry markets are expected to experience some recovery based on higher demand for pulp and paper, driven by higher worldwide economic output, as well as the increase in U.S. housing starts.

Credit.  Net income for 2010 for the credit operations, which includes the Company, is forecast to be approximately $240 million. The forecast increase from 2009 is primarily due to higher commissions from crop insurance and increased revenue from wind energy projects. The Company’s net income for 2010, which does not include the credit operations in Canada, Brazil and Finland or the wind energy operations in the U.S., is projected to be approximately $175 million for 2010. The forecast increase from 2009 is primarily due to higher commissions from crop insurance.

Relationships of the Company with John Deere

The results of operations of the Company are affected by its relationships with John Deere, including among other items, the terms on which the Company acquires Receivables and Leases and borrows funds from John Deere, the reimbursement for interest waiver and low-rate finance programs from John Deere, the compensation paid by John Deere in connection with the Company’s purchase of trade receivables from John Deere and the payment to John Deere for various expenses applicable to the Company’s operations. The Company also makes loans to certain affiliated companies that directly invest in wind energy projects. In addition, the Company and John Deere have joint access to certain lines of credit of the Company.

The Company’s acquisition volume of Receivables and Leases is largely dependent upon the level of retail sales and leases of John Deere products. The level of John Deere retail sales and leases is responsive to a variety of economic, financial, climatic, legislative and other factors that influence demand for its products. The majority of the Company’s businesses are affected by changes in interest rates, demand for credit and competition.

The Company bears substantially all of the credit risk (net of recovery from withholdings from certain John Deere dealers, and Farm Planä and PowerPlanâ merchants) associated with its holding of Receivables and Leases. A small portion of the Receivables and Leases held (less than 5 percent) is guaranteed by certain subsidiaries of Deere & Company. The Company also performs substantially all servicing and collection functions. Servicing and collection functions for a small portion of the Receivables and Leases held (less than 5 percent) are provided by John Deere. John Deere is reimbursed for staff and other administrative services at estimated cost and for credit lines provided to the Company based on utilization of those lines.

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The terms and the basis on which the Company acquires retail notes and certain wholesale receivables from John Deere are governed by agreements with John Deere, generally terminable by either John Deere or the Company on 30 days notice. As provided in these agreements, the Company agrees to the terms and conditions for purchasing the retail notes and wholesale receivables from John Deere. Under these agreements, John Deere is not obligated to sell notes to the Company, and the Company is obligated to purchase notes from John Deere only if the notes comply with the terms and conditions set by the Company.

The basis on which John Deere acquires retail notes and wholesale receivables from the dealers is governed by agreements with the John Deere dealers, terminable at will by either the dealers or John Deere. In acquiring these notes from dealers, the terms and conditions, as set forth in agreements with the dealers, conform with the terms and conditions adopted by the Company in determining the acceptability of retail and certain wholesale notes to be purchased from John Deere. The dealers are not obligated to sell these notes to John Deere and John Deere is not obligated to accept these notes from the dealers. In practice, retail and wholesale notes are acquired from dealers only if the terms of these notes and the creditworthiness of the customers are acceptable to the Company. The Company acts on behalf of both itself and John Deere in determining the acceptability of the notes and in acquiring acceptable notes from dealers.

The basis on which the Company enters into leases with retail customers through John Deere dealers is governed by agreements between dealers and the Company. Leases are accepted based on the terms and conditions, the lessees’ creditworthiness, the anticipated residual values of the equipment and the intended uses of the equipment.

Deere & Company has an agreement with the Company pursuant to which it has agreed to continue to own at least 51 percent of the voting shares of capital stock of the Company and to maintain the Company’s consolidated tangible net worth at not less than $50 million. This agreement also obligates Deere & Company to make income maintenance payments to the Company such that its consolidated ratio of earnings to fixed charges is not less than 1.05 to 1 for each fiscal quarter. For 2009 and 2008, the Company’s ratios were 1.28 to 1 and 1.52 to 1, respectively, and never less than 1.12 to 1 and 1.43 to 1 for any fiscal quarter of 2009 and 2008, respectively. Deere & Company’s obligations to make payments to the Company under the agreement are independent of whether the Company is in default on its indebtedness, obligations or other liabilities. Further, Deere & Company’s obligations under the agreement are not measured by the amount of the Company’s indebtedness, obligations or other liabilities. Deere & Company’s obligations to make payments under this agreement are expressly stated not to be a guaranty of any specific indebtedness, obligation or liability of the Company and are enforceable only by or in the name of the Company. No payments were required under this agreement during the periods included in the consolidated financial statements.

The Company purchases certain wholesale receivables (trade receivables) from John Deere. These trade receivables arise from John Deere’s sales of goods to dealers. Under the terms of the sales to dealers, interest is charged to dealers on outstanding balances, from the earlier of the date when goods are sold to retail customers by the dealer or the expiration of certain interest-free periods granted to the dealer at the time of the sale, until payment is received by the Company.  Dealers cannot cancel purchases after goods are shipped and are responsible for payment even if the equipment is not sold to retail customers. The interest-free periods are determined based on the type of equipment sold and the time of year of the sale. These periods range from one to twelve months for most equipment. Interest-free periods may not be extended. Interest charged may not be forgiven and the past due interest rates exceed market rates. The Company receives compensation from John Deere at competitive market interest rates for these interest-free periods. The Company computes the compensation from John Deere for interest-free periods based on the Company’s estimated funding costs, administrative and operating expenses, credit losses, and required return on equity. The finance income earned following the interest-free period is not significantly different from the compensation earned from John Deere.

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Description of Receivables and Leases

Receivables and Leases arise mainly from retail and wholesale sales and leases of John Deere products and used equipment accepted in trade for them, and from retail sales of equipment of unrelated manufacturers. Receivables and Leases also include revolving charge accounts receivable and operating loans. At October 31, 2009 and 2008, approximately 90 percent of the Receivables and Leases administered by the Company were for financing John Deere products.

FPC Financial, f.s.b. (Thrift), a wholly-owned subsidiary of the Company, holds a federal charter issued by the Office of Thrift Supervision. The Thrift is headquartered in Madison, Wisconsin and offers revolving charge products such as John Deere Credit Revolving Plan, Farm Planä and PowerPlanâ on a nationwide basis. John Deere Credit Revolving Plan is used primarily by retail customers of John Deere dealers to finance purchases of turf and utility equipment. Through its Farm Planä product, the Thrift finances revolving charge accounts offered by approximately 5,000 participating agribusinesses to their retail customers for the purchase of goods and services. Farm Planä account holders purchase equipment parts and service at implement dealerships and farm inputs such as feed, seed, fertilizer, bulk fuel and building supplies from other agribusinesses. The PowerPlanâ revolving charge account is used by construction and forestry customers to finance the purchase of parts and service work performed at John Deere construction and forestry dealers. See Note 4 to the consolidated financial statements under “Revolving Charge Accounts Receivable.”

The Company also works with several leading farm input providers to offer crop input production loans for materials such as seeds and fertilizer. Additionally, the Company provides production loans directly to farmers for their total operating needs. Generally, these loans are secured by crops and equipment.

The Company finances wholesale inventories of John Deere agriculture and turf  and construction and forestry equipment. A large portion of the wholesale financing provided by the Company is with dealers from whom it also purchases agriculture and turf and construction and forestry retail notes. See Note 4 to the consolidated financial statements under “Wholesale Receivables.”

The Company requires that theft and physical damage insurance be carried on all goods leased or securing retail notes and wholesale receivables. The customer may, at his own expense, have the Company or the seller of the goods purchase this insurance or obtain it from other sources. Insurance is not required for goods purchased under revolving charge accounts.

Receivables and Leases are eligible for acceptance if they conform to prescribed finance and lease plan terms. Guidelines relating to down payments and contract terms on retail notes and leases are described in Note 4 and Note 7 to the consolidated financial statements.

In limited circumstances, Receivables and Leases may be accepted and acquired even though they do not conform in all respects to the established guidelines. The Company determines whether Receivables and Leases should be accepted and how they should be serviced. Acceptance of these Receivables and Leases is dependent on having one or more risk mitigation enhancements that may include the pledge of additional collateral as security, the assignment of specific earnings to the Company or the acceptance of accelerated payment schedules. Officers of the Company are responsible for establishing policies and reviewing the performance of the Company in accepting and collecting Receivables and Leases. The Company normally makes all of its own routine collections, settlements and repossessions on Receivables and Leases.

John Deere retail notes and wholesale receivables are supported by perfected security interests in goods financed under laws such as the Uniform Commercial Code (UCC), certain federal statutes and state motor vehicle laws. UCC financing statements are also prepared and filed on leases; however, filings for operating leases are made for informational purposes only.

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Finance Rates on Retail Notes

As of October 31, 2009 and 2008, approximately 95 percent and 90 percent, respectively of the retail notes held by the Company bore a fixed finance rate. A portion of the finance income earned by the Company arises from reimbursements from John Deere in connection with financing the retail sales of John Deere equipment on which finance charges are waived or reduced by John Deere for a period from the date of sale to a specified subsequent date. See Note 4 to the consolidated financial statements for additional information.

Average Original Term and Average Actual Life of Retail Notes and Leases

Due to prepayments (often from trade-ins and refinancing), the average actual life of retail notes and financing leases is considerably shorter than the average original term. The following table shows the average original term for retail notes and leases acquired and the average actual life for retail notes and leases liquidated (in months):

Maturities

The following table presents the contractual maturities of net Receivables and Leases owned by the Company at October 31, 2009 (in millions of dollars), and a summary of net Receivables and Leases owned by the Company at the end of the last five years (in millions of dollars):

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Total Receivables and Leases by geographic area are as follows (in millions of dollars):

Delinquencies

Total Receivable amounts 60 days or more past due representing the amount of all customer payments past due 60 days or more are as follows (in millions of dollars):

Total non-performing Receivables, which represent loans the Company has ceased accruing interest for are as follows (in millions of dollars):

The increase in the balance of non-performing Receivables at October 31, 2009 was primarily due to the negative overall economic conditions and the continued weak U.S. construction market.

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Write-offs and Recoveries

Total Receivable write-offs and recoveries, by product, were as follows (in millions of dollars):

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Total Receivable write-offs and recoveries from outside the U.S. were as follows (in millions of dollars):

Allowance for Credit Losses

The total Receivable allowance for credit losses, by product, at October 31, and the Receivable portfolio, by product, as a percent of total portfolio is presented below (in millions of dollars):

The total Receivable allowance for credit losses, by geographic area, at October 31, and the Receivable portfolio, by geographic area, as a percent of total portfolio is presented below (in millions of dollars):

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The allowance for credit losses is an estimate of the losses inherent in the Company’s Receivable portfolio.  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 has an established process to calculate a range of possible outcomes and determine the adequacy of the allowance. No single statistic or measurement determines the adequacy of the allowance. Historical receivable recoveries and charge-offs are considered as part of the loss experience by product category.  The adequacy of the allowance is assessed quarterly. Different assumptions or changes in economic conditions would result in changes to the allowance for credit losses and provision for credit losses.

The allowance is determined at an aggregate level by product category for all Receivables that are performing in accordance with payment terms and are not materially past due. The Company assigns loss factors to each aggregation and loss factors are applied to the applicable Receivable balance to determine the allowance level for each product category. The loss factors are determined based on quantitative and qualitative factors, including historical loss experience by product category, portfolio duration, delinquency trends, economic conditions and credit risk quality.

The Company also reviews Receivables for impairment based on delinquencies and changes in cash flows or collateral. These Receivables consist of materially past due Receivables, customers that have provided bankruptcy notification and other Receivables requiring significant collection efforts including litigation. The Company identifies these Receivables during reviews of portfolio credit quality. The Company includes the impairment on non-performing Receivables as a separate component included in the allowance unless it has already been recognized as a loss.

In addition to the calculations discussed above, other qualitative factors are taken into account to arrive at the allowance balance. The total allowance reflects management’s estimate of credit losses inherent in the Receivables portfolio at the balance sheet date. See further discussion of the allowance for credit losses in the Critical Accounting Policies.

Competition

The businesses in which the Company is engaged are highly competitive. The Company competes for customers with commercial banks and finance and leasing companies based upon its service, finance rates charged and other finance terms. The proportion of John Deere equipment retail sales and leases financed by the Company is influenced by conditions prevailing in the agriculture and turf equipment and construction and forestry equipment industries, in the financial markets, and in business generally. The Company financed a significant portion of John Deere equipment retail sales and leases in the U.S. during 2009 and 2008.

The Company emphasizes convenient service to customers and endeavors to offer terms desired in its specialized markets such as seasonal schedules of repayment and rentals. The Company’s retail note finance rates and lease rental rates are generally believed to be in the range offered by other sales finance and leasing companies, although not as low as those of some banks and other lenders and lessors.

Regulation

In a number of states, state law limits the maximum finance rate on receivables. The present state limitations have not, thus far, significantly limited variable-rate finance charges or the fixed-rate finance charges established by the Company. However, if interest rate levels should increase significantly, maximum state rates could affect the Company by preventing the variable rates on outstanding variable-rate retail notes from increasing above the maximum state rate, and by limiting the fixed rates on new notes. In some states, the Company may be able to qualify new retail notes for a higher maximum rate limit by using retail installment sales contracts (rather than loan contracts) or by using fixed-rate rather than variable-rate contracts.

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In addition to rate regulation, various state and federal laws and regulations apply to some Receivables and Leases, principally retail notes for goods sold for personal, family or household use and Farm Planä, PowerPlanâ and John Deere Credit Revolving Plan accounts receivable for such goods. To date, these laws and regulations have not had a significant adverse effect on the Company.

The Thrift holds a federal charter issued by the Office of Thrift Supervision (OTS) and is subject to federal regulation and examination by the OTS. The Thrift is headquartered in Madison, Wisconsin and offers revolving charge products such as John Deere Credit Revolving Plan, Farm Planä and PowerPlanâ on a nationwide basis.

Financing outside the U.S. is affected by a variety of laws, customs and regulations.

Item 1A.  Risk Factors.

The Company is a subsidiary of John Deere Credit Company, a wholly-owned finance holding subsidiary of Deere & Company. The results of operations of the Company are affected by its relationships with Deere & Company. See “Relationships of the Company with John Deere” on page 3 for additional information regarding the relationship between the Company and Deere & Company.

Governmental Actions.  With respect to the ongoing global economic downturn, changes in governmental banking, monetary and fiscal policies to restore liquidity and increase the availability of credit may not be effective and could have a material impact on the Company’s customers and markets. To the extent that the Company participates in governmental programs designed to address current conditions, both in the U.S. and in other countries, there is no assurance such programs will remain available for sufficient periods of time or on acceptable terms to benefit the Company, and the expiration of such programs could have unintended adverse effects. In addition, certain competitors may be eligible for certain programs that the Company is ineligible for, which may create a competitive disadvantage. The Company’s operations and results could also be materially impacted by financial regulatory reform. Governmental policies on taxes and spending can also affect the Company, especially John Deere’s construction and forestry business due to the impact of government spending on infrastructure development.

Changing Demand for Farm Outputs.  Changing worldwide demand for food and the demand for different forms of bio-energy could have an affect on prices for farm commodities which could affect the Company and the demand for John Deere’s agricultural equipment. In addition, global economic conditions may have an impact on agricultural commodity prices.

Economic Condition and Outlook.  Conditions in the global financial markets and general economy materially affect the Company’s results of operations. The demand for the Company’s products and services could be adversely affected in an economic environment characterized by higher unemployment, lower consumer spending, lower corporate earnings, and lower business development. Significant changes in market liquidity conditions could impact access to funding and associated funding costs, which could reduce the Company’s earnings and cash flows. The Company’s activities could be adversely impacted by changes in the equity and bond markets, which would negatively affect earnings. General economic conditions can affect the demand for John Deere’s equipment. Current negative economic conditions and outlook have decreased housing starts and other construction and dampened demand for certain construction equipment. John Deere’s construction and forestry business and its turf operations are dependent on construction activity and general economic conditions. Significant or prolonged declines in construction activity and housing starts could have a material adverse effect on John Deere’s results of operations. If continuing negative economic conditions extend to the overall farm economy, there could be a similar effect on John Deere’s agricultural equipment sales.

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Current negative economic conditions have adversely affected the financial industry in which the Company operates. The Company’s liquidity and ongoing profitability depend 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. Additionally, continued negative market conditions could further reduce customer confidence levels, resulting in declines in credit applications and increases in delinquencies and default rates, which could materially impact the Company’s write-offs, provisions for credit losses and recoverability of residual values.

Currency Fluctuations.  The reporting currency for the Company’s consolidated financial statements is the U.S. dollar.  Certain of the Company’s assets, liabilities, expenses and revenues are denominated in other countries’ currencies. Those assets, liabilities, expenses and revenues are translated into U.S. dollars at the applicable exchange rates to prepare our consolidated financial statements. Therefore, increases or decreases in exchange rates between the U.S. dollar and those other currencies affect the value of those items as reflected in the Company’s consolidated financial statements, even if their value remains unchanged in their original currency. Substantial fluctuations in the value of the U.S. dollar could have a continuing and significant impact on the Company’s results.

Consumer Attitudes.  The confidence John Deere’s customers have in the general economic outlook can have a significant effect on their propensity to purchase equipment and, consequently, on Deere & Company’s sales. Continuing negative economic conditions could significantly impair customer confidence. John Deere’s ability to match its new product offerings to its customers’ anticipated preferences for enhanced technologies and different types and sizes of equipment is important as well.

Interest Rates and Credit Ratings.  Rising interest rates could have a dampening effect on overall economic activity and could affect the demand for John Deere’s equipment. In addition, credit market dislocations could have an impact on funding costs which are very important to the Company. Decisions and actions by credit rating agencies can affect the availability and cost of funding for the Company.  Credit rating downgrades or negative changes to ratings outlooks can increase the Company’s cost of capital and hurt its competitive position. Guidance from rating agencies as to acceptable leverage can affect the Company’s returns as well.

The risks identified above should be considered in conjunction with “Management’s Discussion and Analysis” beginning on page 13, and, specifically, the other risks described in the “Safe Harbor Statement” on page 21. The Company’s results of operations may be affected by these identified risks and/or by risks not currently contemplated.

Item 1B.  Unresolved Staff Comments.

None.

Item 2.  Properties.

The Company’s properties principally consist of office equipment, Company-owned office buildings in Johnston, Iowa and Madison, Wisconsin; and leased office space in Reno, Nevada; Rosario, Argentina; Brisbane, Australia; Gloucester, England; Langar, England; Bruchsal, Germany; Vignate, Italy; Luxembourg City, Luxembourg; Monterrey, Mexico; and Parla, Spain.

Item 3.  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.

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Item 4.  Submission of Matters to a Vote of Security Holders.

Omitted pursuant to instruction I(2).

PART II

Item 5.  Market for Registrant’s Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities.

(a)          All of the Company’s common stock is owned by John Deere Credit Company, a finance holding company that is wholly-owned by Deere & Company. In 2009 and 2008, Deere & Company increased its investment in John Deere Credit Company by $60 million and $400 million, respectively. In each case, John Deere Credit Company increased its investment in the Company by the same amount. The Company did not declare or pay cash dividends to John Deere Credit Company in 2009. This compares to $465 million in dividends declared and paid to John Deere Credit Company in 2008. In 2008, John Deere Credit Company paid comparable dividends to Deere & Company.

(b)         Not applicable.

(c)          Not applicable.

Item 6.  Selected Financial Data.

Omitted pursuant to instruction I(2).

Item 7.  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 also provides wholesale financing to dealers of the foregoing equipment, provides operating loans, finances retail revolving charge accounts, offers certain crop risk mitigation products and makes loans to certain affiliated companies that directly invest in wind energy projects.

Trends and Economic Conditions

The Company’s business is currently affected by the following key trends and economic conditions. The Company’s business is closely related to John Deere’s business. Industry farm machinery sales in the U.S. and Canada in 2010 are forecast to be down about 10 percent. Industry sales in Western Europe are forecast to decline 10 to 15 percent and South America industry sales are projected to increase by 10 to 15 percent for the year. John Deere’s agriculture and turf equipment sales declined 14 percent in 2009 and are forecast to decrease by about 4 percent in 2010, including a favorable currency translation impact of about 2 percent. U.S. construction equipment markets are forecast to be down in 2010 resulting from a decline in non-residential construction activity and lower used equipment values. Global forestry markets are expected to experience some recovery in 2010 based on higher demand for pulp and paper. John Deere’s construction and forestry sales declined 45 percent in 2009 and are forecast to increase by approximately 18 percent in 2010. Net income for the Company in 2010 is expected to increase to approximately $175 million. The forecast increase from 2009 is primarily due to higher commissions from crop insurance.

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Items of concern for the Company include the decline in global economic activity and expected slow recovery, capital market disruptions, the effectiveness of governmental policies to promote economic recovery, the availability of credit for the Company’s customers and financial regulatory reform. Significant fluctuations in foreign currency exchange rates and volatility in the price of many commodities could also impact the Company’s results.

In an environment of intense global economic pressure, Deere & Company has completed a solidly profitable year and maintained its strong financial condition. Deere & Company’s plans for meeting the world’s growing need for food and infrastructure are continuing to move forward.

2009 Compared with 2008

Consolidated net income was $149.2 million for the year, compared with $282.4 million last year. The lower results for the year were primarily due to a higher provision for credit losses, narrower financing spreads, lower commissions from crop insurance and higher losses from construction equipment operating lease residual values, partially offset by lower administrative and operating expenses. The ratio of earnings to fixed charges was 1.28 to 1 for 2009, compared with 1.52 to 1 for 2008.

Revenues totaled $1,756 million in 2009, compared with $1,967 million in 2008. The decrease was primarily due to lower financing rates and lower commissions from crop insurance. Finance income earned on retail notes totaled $744 million in 2009, compared with $861 million in 2008. The decrease was primarily due to lower financing rates and a 5 percent decrease in the average retail note portfolio balances. Lease revenues decreased $19 million to $313 million in 2009, primarily due to lower financing rates and a 2 percent decrease in the average balance of leases. Revenues earned on revolving charge accounts amounted to $242 million in 2009, a 7 percent increase over revenues of $227 million earned during 2008. The increase was primarily due to an increase in the average balance of revolving charge accounts, partially offset by lower financing rates. Finance income earned on wholesale receivables decreased $5 million, to $298 million in 2009, from $303 million in 2008. The decrease was primarily due to lower financing rates, partially offset by a 13 percent increase in the average balance of wholesale receivables. Revenues earned on operating loans amounted to $14 million in 2009, compared with $23 million in 2008. The decrease was primarily due to lower financing rates and an 11 percent decrease in the average balance of operating loans. Revenues earned from Deere & Company totaled $507 million in 2009, compared with $542 million a year ago.

Crop insurance commissions totaled $83 million in 2009, compared with $139 million in 2008. The decrease was primarily due to less favorable underwriting experience that resulted in lower commissions in the first and second quarters of 2009, compared to the same periods in 2008.

Other income totaled $60 million in 2009, compared with $77 million in 2008. The decrease was primarily due to higher losses from construction equipment operating lease residual values.

Interest expense totaled $789 million in 2009, compared with $839 million in 2008. The decrease was primarily due to a decrease in the weighted-average annual interest rate incurred on all borrowings from 4.7 percent in 2008 to 4.0 percent in 2009, partially offset by higher average borrowings.

Administrative and operating expenses totaled $333 million in 2009, compared with $373 million in 2008. The decrease was primarily due to lower compensation costs and foreign exchange gains.

The provision for credit losses was $178 million in 2009, compared with $67 million in 2008. The increase was primarily due to higher write-offs of construction and forestry retail notes and revolving charge accounts and an increase in the allowance for credit losses. Total net write-offs of Receivables financed were $126 million during 2009, compared with $60 million in 2008. The provision for credit losses, as a percentage of the total average balance of Receivables financed, was .99 percent for 2009 and .37 percent for 2008.

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Receivables and Leases Acquired and Held

Receivables and Leases acquired by the Company during 2009 totaled $31,254 million, compared with volumes of $33,404 million during 2008. Receivables and Leases held by the Company at October 31, 2009 totaled $19,123 million, compared with $18,954 million at October 31, 2008. For the 2009 and 2008 fiscal years, Receivable and Lease acquisition volumes and balances held were as follows (in millions of dollars):

Retail note volumes decreased primarily due to decreases in  retail sales of John Deere agriculture and turf equipment and construction and forestry equipment. Revolving charge account volumes increased primarily as a result of increased market coverage. Operating loan volumes decreased primarily due to decreased borrowings by farm input providers.

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

*                                       The Company’s maximum exposure under all Receivable and Lease recourse provisions at October 31, 2009 and 2008 was $7 million and $8 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.

Retail notes bearing fixed finance rates totaled 95 percent of the total retail note portfolio at October 31, 2009, compared with 90 percent at October 31, 2008.

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Total Receivable amounts 60 days or more past due represent the amount of all customer payments past due 60 days or more. These amounts were $65 million at October 31, 2009, compared with $45 million at October 31, 2008. In addition, these past due amounts represented .36 percent and .25 percent of the total Receivables held at those respective dates. The balance of retail notes held (principal plus accrued interest) with any installment 60 days or more past due represents the total retail note balance for a customer that has any portion of his note 60 days or more past due. These amounts were $301 million and $163 million at October 31, 2009 and 2008, respectively. The balances of retail notes held on which any installment was 60 days or more past due as a percentage of the ending retail notes receivable was 2.66 percent at October 31, 2009 and 1.39 percent at October 31, 2008. See Note 5 to the consolidated financial statements for additional past due information.

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 $165 million at October 31, 2009 compared with $174 million at October 31, 2008. The Company’s allowance for credit losses on all Receivables financed at October 31, 2009 totaled $158 million and represented .87 percent of the total Receivables financed, compared with $105 million and .59 percent, respectively, one year earlier. The allowance is subject to an ongoing evaluation 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.

2008 Compared with 2007

Consolidated net income was $282.4 million for the fiscal year ended October 31, 2008, compared with $311.2 million in 2007. The lower results for 2008 were primarily due to an increase in average leverage, higher administrative and operating expenses, foreign exchange losses and an increase in the provision for credit losses, partially offset by growth in the portfolio and increased commissions from crop insurance. The ratio of earnings to fixed charges was 1.52 to 1 for 2008, compared with 1.54 to 1 for 2007.

Revenues totaled $1,967 million in 2008 and 2007. Finance income earned on retail notes totaled $861 million in 2008, compared with $852 million in 2007. The increase was primarily due to a 6 percent increase in the average retail note portfolio balances, partially offset by lower financing rates. Lease revenues increased $13 million to $332 million in 2008, primarily due to a 4 percent increase in the average balance of leases. Revenues earned on revolving charge accounts amounted to $227 million in 2008, a 2 percent increase over revenues of $222 million earned during 2007. The increase was primarily due to an increase in the average balance of revolving charge accounts, partially offset by lower financing rates. Finance income earned on wholesale receivables decreased $62 million, to $303 million in 2008, from $365 million in 2007. The decrease was primarily due to lower financing rates and a 3 percent decrease in the average balance of wholesale receivables. Revenues earned on operating loans amounted to $23 million in 2008, compared with $27 million in 2007. The decrease was primarily due to lower financing rates. Revenues earned from Deere & Company totaled $542 million in 2008, compared with $555 million in 2007.

Income on receivables sold totaled $6 million in 2008, compared with $22 million in 2007. Income on receivables sold relates to Receivables sold to other financial institutions or limited-purpose business trusts and primarily includes the interest earned on interests that continue to be held by the Company, reimbursed administrative expenses received and the net gain on Receivables sold, including adjustments to prior sales related to cleanup calls and revaluations of interests that continue to be held and the related permanent impairments.

Crop insurance commissions totaled $139 million in 2008, compared with $76 million in 2007. The increase was primarily due to increased crop insurance sales to producers as a result of expanded market coverage and increased commodity prices causing higher insurance premiums.

Interest expense totaled $839 million in 2008, compared with $878 million in 2007. The decrease was primarily due to a decrease in the weighted-average annual interest rate incurred on all borrowings from 5.4 percent in 2007 to 4.7 percent in 2008, partially offset by higher average borrowings.

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Administrative and operating expenses totaled $373 million in 2008, compared with $308 million in 2007. The increase was primarily due to higher crop insurance commission expenses and higher employment costs associated with administering a larger Receivable and Lease portfolio.

The provision for credit losses was $67 million in 2008, compared with $54 million in 2007. The Company has experienced higher write-offs of construction and forestry retail notes and revolving charge accounts. Total net write-offs of Receivables financed were $60 million during 2008, compared with $49 million in 2007. The provision for credit losses, as a percentage of the total average balance of Receivables financed, was .37 percent for 2008 and .31 percent for 2007.

Depreciation of equipment on operating leases totaled $216 million in 2008, compared with $212 million in 2007. The increase was primarily the result of higher average amounts of equipment on operating leases.

Receivables and Leases Acquired and Held

Receivables and Leases acquired by the Company during 2008 totaled $33,404 million, compared with volumes of $29,548 million during 2007. Excluding the trade receivables acquired from John Deere, acquisitions of Receivables and Leases were 13 percent higher in 2008 compared to 2007. Receivables and Leases held by the Company at October 31, 2008 totaled $18,954 million, compared with $18,747 million at October 31, 2007. For the 2008 and 2007 fiscal years, Receivable and Lease acquisition volumes and balances held were as follows (in millions of dollars):

Retail note volumes for agriculture and turf equipment increased primarily due to increases in retail sales of John Deere agricultural equipment. Retail note volumes for construction and forestry equipment decreased primarily due to decreases in retail sales of John Deere construction and forestry equipment. Revolving charge account volumes increased primarily as a result of increased market coverage and increased farm input costs. Operating loan volumes increased primarily due to increased borrowings by farm input providers as a result of higher commodity prices. Wholesale receivable volumes increased primarily due to increased shipments of John Deere equipment as a result of increased retail sales activity in the agricultural markets.

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