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FAIR VALUE MEASUREMENTS (Tables) | 9 Months Ended
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Jul. 29, 2018
FAIR VALUE MEASUREMENTS |
Fair Value of Financial Instruments | The fair values of financial instruments that do not approximate the carrying values in millions of dollars follow:
|  | July 29, 2018 |  | October 29, 2017 |  | July 30, 2017 |
|  | Carrying Value |  | Fair Value * |  | Carrying Value |  | Fair Value * |  | Carrying Value |  | Fair Value * |
Financing receivables – net: |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
Equipment operations ** |  | $ | 78 |  | $ | 75 |  |  |  |  |  |  |  |  |  |  |  |  |
Financial services |  |  | 25,135 |  |  | 24,911 |  | $ | 25,104 |  | $ | 24,946 |  | $ | 23,722 |  | $ | 23,592 |
Total |  | $ | 25,213 |  | $ | 24,986 |  | $ | 25,104 |  | $ | 24,946 |  | $ | 23,722 |  | $ | 23,592 |
Financing receivables securitized – net: |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
Equipment operations ** |  | $ | 90 |  | $ | 89 |  |  |  |  |  |  |  |  |  |  |  |  |
Financial services |  |  | 4,572 |  |  | 4,517 |  | $ | 4,159 |  | $ | 4,130 |  | $ | 4,923 |  | $ | 4,892 |
Total |  | $ | 4,662 |  | $ | 4,606 |  | $ | 4,159 |  | $ | 4,130 |  | $ | 4,923 |  | $ | 4,892 |
Short-term securitization borrowings: |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
Equipment operations ** |  | $ | 90 |  | $ | 89 |  |  |  |  |  |  |  |  |  |  |  |  |
Financial services |  |  | 4,438 |  |  | 4,426 |  | $ | 4,119 |  | $ | 4,118 |  | $ | 4,781 |  | $ | 4,786 |
Total |  | $ | 4,528 |  | $ | 4,515 |  | $ | 4,119 |  | $ | 4,118 |  | $ | 4,781 |  | $ | 4,786 |
Long-term borrowings due within one year: |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
Equipment operations ** |  | $ | 238 |  | $ | 239 |  | $ | 154 |  | $ | 154 |  | $ | 142 |  | $ | 141 |
Financial services |  |  | 5,955 |  |  | 5,947 |  |  | 6,064 |  |  | 6,079 |  |  | 5,382 |  |  | 5,394 |
Total |  | $ | 6,193 |  | $ | 6,186 |  | $ | 6,218 |  | $ | 6,233 |  | $ | 5,524 |  | $ | 5,535 |
Long-term borrowings: |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
Equipment operations ** |  | $ | 5,526 |  | $ | 5,838 |  | $ | 5,491 |  | $ | 6,026 |  | $ | 4,523 |  | $ | 5,110 |
Financial services |  |  | 21,312 |  |  | 21,388 |  |  | 20,400 |  |  | 20,606 |  |  | 19,151 |  |  | 19,339 |
Total |  | $ | 26,838 |  | $ | 27,226 |  | $ | 25,891 |  | $ | 26,632 |  | $ | 23,674 |  | $ | 24,449 |
* Fair value measurements above were Level 3 for all financing receivables, Level 3 for equipment operations short-term securitization borrowings, and Level 2 for all other borrowings. ** See Note 18.
Assets and Liabilities Measured at Fair Value on a Recurring Basis | Assets and liabilities measured at fair value on a recurring basis in millions of dollars follow:
|  | July 29 |  | October 29 |  | July 30 |
|  | 2018* |  | 2017* |  | 2017* |
Marketable securities |  |  |  |  |  |  |  |  |  |
Equity fund |  | $ | 46 |  | $ | 48 |  | $ | 45 |
Fixed income fund |  |  | 9 |  |  | 15 |  |  | 15 |
U.S. government debt securities |  |  | 99 |  |  | 77 |  |  | 77 |
Municipal debt securities |  |  | 47 |  |  | 39 |  |  | 39 |
Corporate debt securities |  |  | 138 |  |  | 135 |  |  | 120 |
International debt securities |  |  | 13 |  |  | 20 |  |  | 22 |
Mortgage-backed securities ** |  |  | 136 |  |  | 118 |  |  | 108 |
Total marketable securities |  |  | 488 |  |  | 452 |  |  | 426 |
Other assets |  |  |  |  |  |  |  |  |  |
Derivatives: |  |  |  |  |  |  |  |  |  |
Interest rate contracts |  |  | 68 |  |  | 116 |  |  | 142 |
Foreign exchange contracts |  |  | 50 |  |  | 108 |  |  | 32 |
Cross-currency interest rate contracts |  |  | 6 |  |  | 11 |  |  | 10 |
Total assets *** |  | $ | 612 |  | $ | 687 |  | $ | 610 |
Accounts payable and accrued expenses |  |  |  |  |  |  |  |  |  |
Derivatives: |  |  |  |  |  |  |  |  |  |
Interest rate contracts |  | $ | 330 |  | $ | 131 |  | $ | 81 |
Foreign exchange contracts |  |  | 52 |  |  | 26 |  |  | 95 |
Cross-currency interest rate contracts |  |  | 2 |  |  | 1 |  |  | 4 |
Total liabilities |  | $ | 384 |  | $ | 158 |  | $ | 180 |
* All measurements above were Level 2 measurements except for Level 1 measurements of the equity fund of $46 million, $48 million, and $45 million at July 29, 2018, October 29, 2017, and July 30, 2017, respectively; the fixed income fund of $9 million, $15 million, and $15 million at July 29, 2018, October 29, 2017, and July 30, 2017, respectively; and U.S. government debt securities of $39 million, $44 million, and $46 million at July 29, 2018, October 29, 2017, and July 30, 2017, respectively. In addition, $10 million, $17 million, and $18 million of the international debt securities were Level 3 measurements at July 29, 2018, October 29, 2017, and July 30, 2017, respectively. There were no transfers between Level 1 and Level 2 during the first nine months of 2018 or 2017. ** Primarily issued by U.S. government sponsored enterprises. *** Excluded from this table were the Company’s cash equivalents, which were carried at cost that approximates fair value. The cash equivalents consist primarily of money market funds and time deposits.
Contractual Maturities of Debt Securities | The contractual maturities of debt securities at July 29, 2018 in millions of dollars are shown below. Actual maturities may differ from those scheduled as a result of prepayments by the issuers. Because of the potential for prepayment on mortgage-backed securities, they are not categorized by contractual maturity.
|  | Amortized |  | Fair |
|  | Cost |  | Value |
Due in one year or less |  | $ | 23 |  | $ | 22 |
Due after one through five years |  |  | 118 |  |  | 116 |
Due after five through 10 years |  |  | 93 |  |  | 91 |
Due after 10 years |  |  | 69 |  |  | 68 |
Mortgage-backed securities |  |  | 142 |  |  | 136 |
Debt securities |  | $ | 445 |  | $ | 433 |
Fair Value, Recurring, Level 3 Measurements | Fair value, recurring Level 3 measurements from available-for-sale marketable securities in millions of dollars follow:
|  | Three Months Ended |  | Nine Months Ended |
|  | July 29 |  | July 30 |  | July 29 |  | July 30 |
|  | 2018 |  | 2017 |  | 2018 |  | 2017 |
Beginning of period balance |  | $ | 14 |  | $ | 23 |  | $ | 17 |  | $ | 28 |
Principal payments |  |  | (4) |  |  | (5) |  |  | (7) |  |  | (12) |
Change in unrealized gain |  |  |  |  |  |  |  |  |  |  |  | 2 |
End of period balance |  | $ | 10 |  | $ | 18 |  | $ | 10 |  | $ | 18 |
Fair Value, Nonrecurring, Level 1 Measurements | Fair value, nonrecurring Level 1 measurements from impairments in millions of dollars follow:
|  | Fair Value * |  | Losses |
|  |  |  |  |  |  |  |  |  |  | Three Months Ended |  | Nine Months Ended |
|  | July 29 |  | October 29 |  | July 30 |  | July 29 |  | July 30 |  | July 29 |  | July 30 |
|  | 2018 |  | 2017 |  | 2017 |  | 2018 |  | 2017 |  | 2018 |  | 2017 |
Investments in unconsolidated affiliates |  |  |  |  | $ | 28 |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
* See financing receivables with specific allowances in Note 10. Losses were not significant.

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