SECURITIES AND EXCHANGE COMMISSION
Washington, D. C. 20549
___________________
FORM 10-Q
___________________
Quarterly Report Pursuant to Section 13 or 15(d) of the
Securities Exchange Act of 1934
For the quarterly period ended April 30, 1994
______________________________
Commission file no: 1-4121
______________________________
DEERE & COMPANY
Delaware 36-2382580
(State of incorporation) (IRS employer identification no.)
John Deere Road
Moline, Illinois 61265
(Address of principal executive offices)
Telephone Number: (309) 765-8000
______________________________
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
At April 30, 1994, 86,315,934 shares of common stock, $1 par
value, of the
registrant were outstanding.
Page 1 of 24 Pages.
Index to Exhibits: Page 22.
<PAGE>
PART I. FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
DEERE & COMPANY STATEMENT OF CONSOLIDATED INCOME
CONSOLIDATED
(Deere & Company
and Consolidated Subsidiaries)
THREE MONTHS ENDED APRIL 30
Three Months Ended
April 30
Millions of dollars
(Unaudited) 1994 1993
Net Sales and Revenues
Net sales of equipment $2,128.0 $ 1,788.2
Finance and interest income 127.8 141.5
Insurance and health care premiums 167.0 139.9
Investment income 23.7 23.7
Other income 13.7 12.0
Total 2,460.2 2,105.3
Costs and Expenses
Cost of goods sold 1,646.2 1,449.0
Research and development expenses 68.7 67.8
Selling, administrative and
general expenses 225.5 208.5
Interest expense 71.3 97.1
Insurance and health care
claims and benefits 144.2 121.5
Other operating expenses 9.2 13.0
Restructuring costs 107.2
Total 2,165.1 2,064.1
Income (Loss) of Consolidated
Group Before Income Taxes 295.1 41.2
Provision for income taxes 108.0 22.4
Income (Loss) of Consolidated
Group 187.1 18.8
Equity in Income of Unconsolidated
Subsidiaries and Affiliates
Credit
Insurance and health care .8 .7
Other 1.4 1.5
Total 2.2 2.2
Net Income $189.3 $21.0
Return on average assets 1.6% .2%
Per share data
Primary and fully diluted net
income $ 2.20 $ .27
<PAGE>
PART I. FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
DEERE & COMPANY STATEMENT OF CONSOLIDATED INCOME
EQUIPMENT OPERATIONS
(Deere & Company with Financial
Services on the Equity Basis)
Three Months Ended
April 30
Millions of dollars(Unaudited)
1994 1993
Net Sales and Revenues
Net sales of equipment $2,128.0 $ 1,788.2
Finance and interest income 18.9 21.0
Insurance and health care premiums
Investment income
Other income 5.7 3.4
Total 2,152.6 1,812.6
Costs and Expenses
Cost of goods sold 1,650.0 1,452.5
Research and development expenses 68.7 67.8
Selling, administrative and
general expenses 162.5 146.2
Interest expense 30.2 48.3
Insurance and health care
claims and benefits
Other operating expenses 4.0 8.2
Restructuring costs 107.2
Total 1,915.4 1,830.2
Income (Loss) of Consolidated
Group Before Income Taxes 237.2 (17.6)
Provision for income taxes 89.7 2.7
Income (Loss) of Consolidated
Group 147.5 (20.3)
Equity in Income of Unconsolidated
Subsidiaries and Affiliates
Credit 28.4 29.1
Insurance and health care 12.0 10.7
Other 1.4 1.5
Total 41.8 41.3
Net Income $189.3 $ 21.0
<PAGE>
PART I. FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
DEERE & COMPANY STATEMENT OF CONSOLIDATED INCOME
FINANCIAL SERVICES
Three Months Ended
April 30
Millions of dollars (Unaudited)
1994 1993
Net Sales and Revenues
Net sales of equipment
Finance and interest income $109.8 $121.2
Insurance and health care premiums 201.9 176.1
Investment income 23.7 23.7
Other income 9.2 10.0
Total 344.6 31.0
Costs and Expenses
Cost of goods sold
Research and development expenses
Selling, administrative and
general expenses 66.3 65.4
Interest expense 42.0 49.5
Insurance and health care
claims and benefits 173.0 152.5
Other operating expenses 5.3 4.9
Restructuring costs
Total 286.6 272.3
Income (Loss) of Consolidated
Group Before Income Taxes 58.0 58.7
Provision for income taxes 18.4 19.6
Income (Loss) of Consolidated
Group 39.6 39.1
Equity in Income of Unconsolidated
Subsidiaries and Affiliates
Credit
Insurance and health care .8 .7
Other
Total .8 .7
Net Income $ 40.4 $ 39.8
See Notes to Interim Financial Statements. Supplemental
consolidating data are shown for the "Equipment Operations" and
"Financial Services". Transactions between the "Equipment
Operations" and "Financial Services" have been eliminated to
arrive at the "Consolidated" data. <PAGE>
DEERE & COMPANY STATEMENT OF CONSOLIDATED INCOME
CONSOLIDATED
(Deere & Company
and Consolidated Subsidiaries)
SIX MONTHS ENDED APRIL 30
Six Months Ended
April 30
Millions of dollars (Unaudited) 1994 1993
Net Sales and Revenues
Net sales of equipment $3,534.8 $ 2,903.3
Finance and interest income 252.7 287.4
Insurance and health care premiums 324.5 266.8
Investment income 45.9 46.7
Other income 29.1 24.7
Total 4,187.0 3,528.9
Costs and Expenses
Cost of goods sold 2,767.9 2,458.9
Research and development expenses 129.1 131.7
Selling, administrative and
general expenses 423.1 405.2
Interest expense 142.5 192.1
Insurance and health care
claims and benefits 279.6 228.6
Other operating expenses 16.3 19.5
Restructuring costs 107.2
Total 3,758.5 3,543.2
Income (Loss) of Consolidated
Group Before Income Taxes and
Changes in Accounting 428.5 (14.3)
Provision (credit) for income taxes 156.1 4.1
Income (Loss) of Consolidated
Group before Changes in Accounting 272.4 (18.4)
Equity in Income of Unconsolidated
Subsidiaries and Affiliates before
Changes in Accounting
Credit
Insurance and health care 2.1 .8
Other 1.8 1.7
Total 3.9 2.5
Income (Loss) before Changes
in Accounting 276.3 (15.9)
Changes in accounting (1,105.3)
Net Income (Loss) $ 276.3 $(1,121.2)
Return on average assets:
Before changes in accounting 2.3% (.1)%
Total 2.3% (9.4)%
Per share data
Primary and fully diluted:
Income (loss) before changes
in accounting $ 3.22 $ (.21)
Changes in accounting (14.30)
Net income (loss) $ 3.22 $ (14.51)
<PAGE>
DEERE & COMPANY STATEMENT OF CONSOLIDATED INCOME
EQUIPMENT OPERATIONS
(Deere & Company with Financial
Services on the Equity Basis)
Six Months Ended
April 30
Millions of dollars (Unaudited) 1994 1993
Net Sales and Revenues
Net sales of equipment $3,534.8 $ 2,903.3
Finance and interest income 38.6 42.2
Insurance and health care premiums
Investment income
Other income 10.1 11.4
Total 3,583.5 2,956.9
Costs and Expenses
Cost of goods sold 2,775.1 2,464.8
Research and development expenses 129.1 131.7
Selling, administrative and
general expenses 297.3 283.4
Interest expense 60.9 93.4
Insurance and health care
claims and benefits
Other operating expenses 5.9 10.6
Restructuring costs 107.2
Total 3,268.3 3,091.1
Income (Loss) of Consolidated
Group Before Income Taxes and
Changes in Accounting 315.2 (134.2)
Provision (credit) for income taxes 119.7 (35.8)
Income (Loss) of Consolidated Group
before Changes in Accounting 195.5 (98.4)
Equity in Income of Unconsolidated
Subsidiaries and Affiliates
before Changes in Accounting
Credit 54.0 59.9
Insurance and health care 25.0 20.9
Other 1.8 1.7
Total 80.8 82.5
Income (Loss) before Changes
in Accounting 276.3 (15.9)
Changes in accounting (1,105.3)
Net Income (Loss) $ 276.3 $(1,121.2)
<PAGE>
DEERE & COMPANY STATEMENT OF CONSOLIDATED INCOME
FINANCIAL SERVICES
Six Months Ended
April 30
Millions of dollars (Unaudited) 1994 1993
Net Sales and Revenues
Net sales of equipment
Finance and interest income $215.8
$246.5
Insurance and health care premiums 386.0 338.3
Investment income 45.9
46.7
Other income 21.2 16.3
Total 668.9 647.8
Costs and Expenses
Cost of goods sold
Research and development expenses
Selling, administrative and
general expenses 131.6 127.9
Interest expense 83.4
100.1
Insurance and health care
claims and benefits 330.2 290.9
Other operating expenses 10.4 8.9
Restructuring costs
Total 555.6 527.8
Income (Loss) of Consolidated
Group Before Income Taxes and
Changes in Accounting 113.3 120.0
Provision (credit) for income taxes 36.4 40.0
Income (Loss) of Consolidated Group
before Changes in Accounting 76.9 80.0
Equity in Income of Unconsolidated
Subsidiaries and Affiliates
before Changes in Accounting
Credit
Insurance and health care 2.1 .8
Other
Total 2.1 .8
Income (Loss) before Changes
in Accounting 79.0 80.8
Changes in accounting (6.9)
Net Income (Loss) $ 79.0 $ 73.9
See Notes to Interim Financial Statements. Supplemental
consolidating data are shown for the "Equipment Operations" and
"Financial Services". Transactions between the "Equipment
Operations" and "Financial Services" have been eliminated to
arrive at the "Consolidated" data.
<PAGE>
DEERE & COMPANY
CONDENSED CONSOLIDATED BALANCE SHEET
CONSOLIDATED
(Deere & Company and
Consolidated Subsidiaries)
Apr 30 Oct 31 Apr 30
Millions of dollars (Unaudited) 1994 1993 1993
Assets
Cash and cash equivalents $ 280.0 $ 338.2 $450.7
Marketable securities carried
at cost 1,061.7 994.8 976.9
Receivables from unconsolidated
subsidiaries and affiliates 4.0 4.0 16.5
Dealer accounts and notes
receivable - net 3,153.0 2,793.7 3,123.4
Credit receivables - net 4,163.8 3,754.8 3,851.7
Other receivables 357.2 393.5 325.1
Equipment on operating
leases - net 200.5 195.4 193.5
Inventories (Note 5) 745.5 464.4 729.3
Property and equipment - net 1,200.0 1,240.3 1,261.6
Investments in unconsolidated
subsidiaries and affiliates 144.9 140.6 119.8
Intangible assets - net 295.3 296.8 332.3
Deferred income taxes 683.7 681.7 635.4
Other assets and deferred charges 202.9 169.0 169.9
Total $12,492.5 $11,467.2 $12,186.1
Liabilities and Stockholders' Equity
Short-term borrowings $ 2,953.0 $ 1,601.4 $ 3,139.6
Payables to unconsolidated
subsidiaries and affiliates 26.4 32.8 24.8
Accounts payable and accrued
expenses 2,077.0 2,085.9 1,918.3
Insurance and health care
claims and reserves 712.1 672.5 655.0
Accrued taxes 86.8 71.0 49.9
Deferred income taxes 8.2 8.6 6.8
Long-term borrowings 1,974.7 2,547.5 2,603.9
Retirement benefit accruals
and other liabilities 2,345.3 2,362.1 2,336.0
Total liabilities 10,183.5 9,381.8 10,734.3
Common stock, $1 par value
(issued shares at April 30,
1994 - 86,593,068) 1,473.8 1,436.8 847.9
Retained earnings (Note 3) 1,117.1 926.5 807.0
Minimum pension liability
adjustment (215.5) (215.5) (156.4)
Cumulative translation
adjustment (Note 4) (45.0) (41.5) (27.5)
Unamortized restricted
stock compensation (6.2) (8.2) (5.7)
Common stock in treasury, at cost (15.2) (12.7) (13.5)
Total stockholders' equity 2,309.0 2,085.4 1,451.8
Total $12,492.5 $11,467.2 $12,186.1
<PAGE>
DEERE & COMPANY
CONDENSED CONSOLIDATED BALANCE SHEET
EQUIPMENT OPERATIONS
(Deere & Company with Financial
Services on the Equity Basis)
Apr 30 Oct 31 Apr 30
Millions of dollars (Unaudited) 1994 1993 1993
Assets
Cash and cash equivalents $28.2 $71.7 $ 109.6
Marketable securities carried at
cost
Receivables from unconsolidated
subsidiaries and affiliates 174.1 511.9 160.3
Dealer accounts and notes
receivable - net 3,153.0 2,793.7 3,123.4
Credit receivables - net 151.9 115.8 140.2
Other receivables 14.3
Equipment on operating
leases - net 70.4 76.2 75.8
Inventories (Note 5) 745.5 464.4 729.3
Property and equipment - net 1,172.0 1,215.5 1,238.2
Investments in unconsolidated
subsidiaries and affiliates 1,236.8 1,341.7 1,340.9
Intangible assets - net 277.4 277.8 311.5
Deferred income taxes 629.3 628.9 581.2
Other assets and deferred charges 117.1 106.3 105.1
Total $7,755.7 $7,618.2 $7,915.5
Liabilities and Stockholders' Equity
Short-term borrowings $ 493.9 $ 476.3 $1,519.7
Payables to unconsolidated
subsidiaries and affiliates 41.8 32.8 29.8
Accounts payable and
accrued expenses 1,460.5 1,533.4 1,344.6
Insurance and health care
claims and reserves
Accrued taxes 83.0 66.1 49.1
Deferred income taxes 8.1 8.4 6.4
Long-term borrowings 1,029.5 1,069.3 1,192.5
Retirement benefit accruals
and other liabilities 2,329.9 2,346.5 2,321.6
Total liabilities 5,446.7 5,532.8 6,463.7
Common stock, $1 par value
(issued shares at April 30,
1994 - 86,593,068) 1,473.8 1,436.8 847.9
Retained earnings (Note 3) 1,117.1 926.5 807.0
Minimum pension liability
adjustment ( 215.5) (215.5) (156.4)
Cumulative translation
adjustment (Note 4) (45.0) (41.5) (27.5)
Unamortized restricted
stock compensation (6.2) (8.2) (5.7)
Common stock in treasury, at cost (15.2) (12.7) (13.5)
Total stockholders' equity 2,309.0 2,085.4 1,451.8
Total $ 7,755.7 $7,618.2 $7,915.5
<PAGE>
DEERE & COMPANY
CONDENSED CONSOLIDATED BALANCE SHEET
FINANCIAL SERVICES
Apr 30 Oct 31 Apr 30
Millions of dollars (Unaudited) 1994 1993 1993
Assets
Cash and cash equivalents $ 251.8 $ 266.5 $ 341.1
Marketable securities carried
at cost 1,061.7 994.8 976.9
Receivables from unconsolidated
subsidiaries and affiliates 15.4 15.0
Dealer accounts and notes
receivable - net
Credit receivables - net 4,011.9 3,639.0 3,711.5
Other receivables 358.2 380.2 326.2
Equipment on operating
leases - net 130.1 119.2 117.7
Inventories (Note 5)
Property and equipment - net 28.0 24.8 23.4
Investments in unconsolidated
subsidiaries and affiliates 54.7 52.1 35.7
Intangible assets - net 18.0 19.0 20.7
Deferred income taxes 54.4 52.8 54.2
Other assets and deferred charges 85.7 62.8 64.8
Total $6,069.9 $5,611.2 $5,687.2
Liabilities and Stockholders' Equity
Short-term borrowings $2,459.1 $1,125.1 $1,619.9
Payables to unconsolidated
subsidiaries and affiliates 170.1 507.9 153.7
Accounts payable and accrued
expenses 617.5 553.6 574.8
Insurance and health care
claims and reserves 712.1 672.5 655.0
Accrued taxes 3.8 4.9 .8
Deferred income taxes .2 .4
Long-term borrowings 945.2 1,478.2 1,411.4
Retirement benefit accruals
and other liabilities 15.4 15.6 14.4
Total liabilities 4,923.2 4,358.0 4,430.4
Common stock, $1 par value
(issued shares at April 30,
1994 - 86,593,068) 209.0 208.2 206.6
Retained earnings (Note 3) 942.5 1,046.5 1,048.8
Minimum pension liability
adjustment
Cumulative translation
adjustment (Note 4) (4.8) (1.5) 1.4
Unamortized restricted
stock compensation
Common stock in treasury, at cost
Total stockholders' equity 1,146.7 1,253.2 1,256.8
Total $6,069.9 $5,611.2 $5,687.2
See Notes to Interim Financial Statements. Supplemental
consolidating data are shown for the "Equipment Operations" and
"Financial Services". Transactions between the "Equipment
Operations" and "Financial Services" have been eliminated to
arrive at the "Consolidated" data.
<PAGE>
DEERE & COMPANY
CONDENSED STATEMENT OF CONSOLIDATED CASH FLOWS
CONSOLIDATED
(Deere & Company and Consolidated Subsidiaries)
SIX MONTHS ENDED APRIL 30
Six Months Ended
April 30
Millions of dollars (Unaudited) 1994 1993
Cash Flows From Operating
Activities
Net income (loss) $ 276.3 $(1,121.2)
Adjustments to reconcile net
income (loss) to net cash
provided by (used for)
operating activities (548.4) 862.9
Net cash provided by (used for)
operating activities (272.1) (258.3)
Cash Flows From Investing
Activities
Collections and sales of
credit receivables 1,588.5 2,226.7
Proceeds from sales of
marketable securities 146.7 138.4
Cost of credit
receivables acquired (1,986.5) (1,735.3)
Purchases of marketable
securities (209.3) (158.0)
Purchases of property and
equipment (73.5) (80.6)
Cost of operating leases
acquired (45.4) (59.5)
Other 58.3 22.6
Net cash provided by (used for)
investing activities (521.2) 354.3
Cash Flows From Financing
Activities
Increase (decrease) in
short-term borrowings 1,265.8 (180.5)
Change in intercompany
receivables/payables
Proceeds from issuance of
long-term borrowings 10.0 442.0
Principal payments on
long-term borrowings (486.9) (50.1)
Proceeds from issuance of
common stock 35.5 7.8
Dividends paid (85.5) (76.3)
Other (4.1) (4.7)
Net cash provided by
(used for) financing
activities 734.8 138.2
Effect of Exchange Rate
Changes on Cash .3 (.3)
Net Increase (Decrease)
in Cash and Cash Equivalents (58.2) 233.9
Cash and Cash Equivalents
at Beginning of Period 338.2 216.8
Cash and Cash Equivalents
at End of Period $ 280.0 $450.7
<PAGE>
DEERE & COMPANY CONDENSED STATEMENT OF CONSOLIDATED CASH FLOWS
EQUIPMENT OPERATIONS
(Deere & Company with Financial Services
on the Equity Basis)
Six Months Ended
April 30
Millions of dollars
(Unaudited
1994 1993
Cash Flows From Operating
Activities
Net income (loss) $ 276.3 $(1,121.2)
Adjustments to reconcile net
income (loss) to net cash
provided by (used for)
operating activities (491.4) 760.2
Net cash provided by (used for)
operating activities (215.1) (361.0)
Cash Flows From Investing
Activities
Collections and sales of
credit receivables 32.5 42.5
Proceeds from sales of
marketable securities
Cost of credit
receivables acquired (67.9) (103.2)
Purchases of marketable
securities
Purchases of property and
equipment (68.1) (75.6)
Cost of operating leases
acquired (12.3) (8.7)
Other 13.1 12.7
Net cash provided by (used for)
investing activities (102.7) (132.3)
Cash Flows From Financing
Activities
Increase (decrease) in
short-term borrowings 144.8 666.5
Change in intercompany
receivables/payables 353.2 .2
Proceeds from issuance of
long-term borrowings
Principal payments on
long-term borrowings (169.9) (30.7)
Proceeds from issuance of
common stock 35.5 7.8
Dividends paid (85.5) (76.3)
Other (4.1) (4.7)
Net cash provided by
(used for) financing
activities 274.0 562.8
Effect of Exchange Rate
Changes on Cash .3 (.3)
Net Increase (Decrease)
in Cash and Cash Equivalents (43.5) 69.2
Cash and Cash Equivalents
at Beginning of Period 71.7 40.4
Cash and Cash Equivalents
at End of Period $ 28.2 $ 109.6
<PAGE>
DEERE & COMPANY CONDENSED STATEMENT OF CONSOLIDATED CASH FLOWS
FINANCIAL SERVICES
Six Months Ended
April 30
Millions of dollars
(Unaudited)
1994 1993
Cash Flows From Operating
Activities
Net income (loss) $ 79.0 $ 73.9
Adjustments to reconcile net
income (loss) to net cash
provided by (used for)
operating activities 47.0 28.8
Net cash provided by (used for)
operating activities 126.0 102.7
Cash Flows From Investing
Activities
Collections and sales
of credit receivables 1,566.7 2,192.9
Proceeds from sales of
marketable securities 146.7 138.4
Cost of credit
receivables acquired (1,929.3) (1,640.8)
Purchases of marketable
securities (209.3) (158.0)
Purchases of property and
equipment (5.4) (5.0)
Cost of operating
leases acquired (33.1) (50.8)
Other 45.2 9.9
Net cash provided by (used for)
investing activities (418.5) 486.6
Cash Flows From Financing
Activities
Increase (decrease) in
short-term borrowings 1,121.0 (847.0)
Change in intercompany
receivables/payables (353.2) (.2)
Proceeds from issuance of
long-term borrowings 10.0 442.0
Principal payments on
long-term borrowings (316.9) (19.4)
Proceeds from issuance of
common stock
Dividends paid (183.1)
Other
Net cash provided by
(used for)financing
activities 277.8 (424.6)
Effect of Exchange Rate
Changes on Cash
Net Increase (Decrease)
in Cash and Cash Equivalents (14.7) 164.7
Cash and Cash Equivalents
at Beginning of Period 266.5 176.4
Cash and Cash Equivalents
at End of Period $ 251.8 $ 341.1
See Notes to Interim Financial Statements. Supplemental
consolidating data are shown for the "Equipment Operations" and
"Financial Services". Transactions between the "Equipment
Operations" and "Financial Services" have been eliminated to
arrive at the "Consolidated" data.
<PAGE>
Notes to Interim Financial Statements
(1) The consolidated financial statements of Deere & Company and
consolidated subsidiaries have been prepared by the Company,
without audit, pursuant to the rules and regulations of the
Securities and Exchange Commission. Certain information and
footnote disclosures normally included in annual financial
statements prepared in accordance with generally accepted
accounting principles 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 condensed
financial statements be read in conjunction with the
financial statements and the notes thereto included 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.
(2) The Company's consolidated financial statements and some
information in the notes and related commentary are
presented in a format which includes data grouped as
follows:
Equipment Operations - These data include the Company's
agricultural equipment, industrial equipment and lawn and
grounds care equipment operations with Financial Services
reflected on the equity basis. Data relating to the above
equipment operations, including the consolidated group data
in the income statement, are also referred to as "Equipment
Operations" in this report.
Financial Services - These data include the Company's
credit, insurance and health care operations.
Consolidated - These data represent the consolidation of the
Equipment Operations and Financial Services in conformity
with Financial Accounting Standards Board (FASB) Statement
No. 94. References to "Deere & Company" or "the Company"
refer to the entire enterprise.
(3) An analysis of the Company's retained earnings follows in
millions of dollars:
Three Months Six Months
Ended Ended
April 30 April 30
1994 1993 1994 1993
Balance, beginning
of period........ $ 970.8 $824.0 $ 926.5 $2,004.3
Net income (loss).. 189.3 21.0 276.3(1,121.2)
Dividends declared. (43.0) (38.0) (85.7) (76.1)
Balance, end of
period........... $1,117.1 $807.0 $1,117.1 $ 807.0
(4) An analysis of the Cumulative Translation Adjustment in
millions of dollars follows:
Three Months Six Months
Ended Ended
April 30 April 30
1994 1993 1994 1993
Balance, beginning
of period................ $40.4 $21.4 $41.5 $19.4
Translation adjustments.... 5.4 4.5 3.6 8.0
Income taxes applicable to
translation adjustments.. (.8) 1.6 (.1) .1
Balance, end of period..... $45.0 $27.5 $45.0 $27.5
(5) Substantially all inventories owned by Deere & Company and
its United States equipment subsidiaries are valued at cost
on
the last-in, first-out (LIFO) method. Under this method,
cost
of goods sold ordinarily reflects current production costs,
thus providing a matching of current costs and current
revenues
in the income statement. However, when LIFO-valued
inventories
decline, lower costs that prevailed in prior years are
matched
against current year revenues, resulting in higher reported
net
income. In the first six months of 1993, the Company
recognized a proportionate part of the lower, prior-year
costs
relating to the estimated reduction in LIFO inventories.
Consequently, the after-tax results for the second quarter
and
first six months of 1993 benefited by $6.6 million or $.09
per
share and $15.3 million or $.20 per share, respectively. A
LIFO benefit was not recognized in 1994.
If all of the Company's inventories had been valued on a
first-
in, first-out (FIFO) method, estimated inventories by major
classification in millions of dollars would have been as
follows:
April 30 October 31 April 30
1994 1993 1993
Raw materials and
supplies................ $ 196 $ 192 $ 192
Work-in-process........... 374 295 396
Finished machines and
parts................... 1,140 919 1,189
Total FIFO value.......... 1,710 1,406 1,777
Adjustment to LIFO
basis................... 964 942 1,048
Inventories............... $ 746 $ 464 $ 729
(6) During the first six months of 1994, the Financial Services
subsidiaries and the Equipment Operations received proceeds
from
the sale of retail notes in the public market and to other
financial institutions of $39 million. At April 30, 1994,
the
net unpaid balance of all retail notes previously sold by
the
Financial Services subsidiaries and the Equipment Operations
was
$900 million. The Company was contingently liable for
recourse
on credit receivable sales in the maximum amount of $90
million
at April 30, 1994.
Certain foreign subsidiaries have pledged assets with a
balance sheet value of $35 million as collateral for bank
advances of $1 million as of April 30, 1994.
At April 30, 1994, the Company had commitments of
approximately
$73 million for construction and acquisition of property and
equipment.
(7) Dividends declared and paid on a per share basis were as
follows:
Three Months Six Months
Ended Ended
April 30 April 30
1994 1993 1994 1993
Dividends declared $.50 $.50 $1.00 $1.00
Dividends paid $.50 $.50 $1.00 $1.00
(8) The calculation of primary net income per share is based on
the average number of shares outstanding during the six
months ended April 30, 1994 and 1993 of 85,867,000 and
77,291,000, respectively. The calculation of fully diluted
net income per share recognizes the dilutive effect of the
assumed exercise of stock options, stock appreciation rights
and
conversion of convertible debentures. The effect of the
fully
diluted calculation was either immaterial or anti-dilutive.
(9) In the first quarter of 1994, the Company adopted FASB
Statement
No. 113, Accounting and Reporting for Reinsurance of Short-
Duration and Long-Duration Contracts. This Statement
eliminates
the practice of reporting amounts for reinsured contracts
net of
the effects of reinsurance. The consolidated balance sheets
for
prior periods were restated which increased total assets and
liabilities by immaterial amounts. There were no effects on
stockholders' equity or the consolidated income statement.
(10) In the fourth quarter of 1993, the Company adopted FASB
Statement
No. 106, Employers' Accounting for Postretirement Benefits
Other
Than Pensions, and FASB Statement No. 112, Employers'
Accounting
for Postemployment Benefits, effective November 1, 1992.
Previous periods of 1993 were restated as required by these
Statements. As a result, the first six months of 1993 have
been
restated for the cumulative pretax effect of these changes
in
accounting of $1,728 million ($1,105 million or $14.30 per
share
after income taxes). The second quarter and first six
months of
1993 have also been restated to reflect an incremental
pretax
benefits expense of $14.4 million ($9.2 million or $.12 per
share
after income taxes) and $29.0 million ($18.5 million or $.24
per
share after income taxes), respectively.
(11) During the second quarter of 1993, the Company initiated
plans to
downsize and rationalize its European operations. This
resulted
in a second quarter restructuring charge of $107.2 million
($80.0
million or $1.03 per share after income taxes). The charge
mainly represents the cost of employment reductions to be
implemented during 1993 and the next few years.
(12) In February 1994, the Company granted 1,800 shares of stock
under the Company's restricted stock plan for nonemployee
directors. The market value of the restricted stock at the
time of grant totaled $.2 million.
At April 30, 1994, a total of 243,348 restricted shares were
outstanding and 443,007 shares remained available for award
under both the Plans for employees and nonemployee
directors.
(13) The Company is subject to various unresolved legal actions
which arise in the normal course of its business, the most
prevalent of which relate to product liability and retail
credit matters. The Company and certain subsidiaries of the
Capital Corporation are currently involved in legal actions
relating to alleged violations of certain technical
provisions
of Texas consumer credit statutes in connection with John
Deere Company's financing of the retail purchase of
recreational vehicles and boats in that state. On May 23,
1994, the 162nd Judicial District Court, Dallas County,
Texas
approved a settlement of a class action brought by Russell
Durrett individually and on behalf of others against John
Deere Company (remanded on March 22, 1994 from the United
States District Court for the Northern District of Texas,
Dallas Division). The estimated cost of this settlement is
not material. Although this settlement resolved all claims
arising from 95 percent of the contracts at issue, certain
cases related to the remaining five percent of the contracts
are still pending. The Company and the Capital Corporation
subsidiaries believe that they have substantial defenses and
intend to defend the remaining actions vigorously. Although
it is not possible to predict with certainty the outcome of
these unresolved legal actions or the range of possible loss
and the amounts of claimed damages and penalties are
unspecified, the Company believes these unresolved legal
actions will not be material.
(14) Certain amounts for 1993 have been reclassified to conform
with 1994 financial statement presentations.
Item 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS
RESULTS OF OPERATIONS
Deere & Company's record worldwide net income for the second
quarter of
the 1994 fiscal year totaled $189.3 million or $2.20 per share
compared
with last year's restated second quarter income of $101.0 million
or
$1.30 per share before restructuring charges. Results for the
quarter
were significantly better than last year primarily due to higher
North
American production and sales volumes, improved operating
efficiencies
and substantially improved results from the overseas operations.
Price
realization continued to improve during the quarter compared with
last
year as sales incentive costs declined. Additionally, net income
from
the Financial Services subsidiaries remained at a very strong
level
during the quarter. The 1993 second quarter restated net income
was
$21.0 million or $.27 per share including overseas restructuring
charges
of $80.0 million or $1.03 per share.
The 1993 second quarter and six-month results were restated as
follows
for accounting changes relating to Financial Accounting Standards
Board
(FASB) Statement No. 106, Employers' Accounting for
Postretirement
Benefits Other Than Pensions, and FASB Statement No. 112,
Employers'
Accounting for Postemployment Benefits, which were adopted in the
fourth
quarter of 1993, effective November 1, 1992.
Three Months Six Months
Ended Ended
April 30 April 30
1994 1993 1994 1993
Net income as originally
reported $189.3 $ 30.2 $276.3 $ 2.6
Restatement of income
for the incremental
effect of changes in
accounting (9.2) (18.5)
Income (loss) before
cumulative effect of
changes in accounting 189.3 21.0 276.3 (15.9)
Cumulative effect of changes
in accounting (1,105.3)
Net income (loss) as restated $189.3 $ 21.0 $276.3 $(1,121.2)
The Company also recorded restructuring charges of $80.0 million
($107.2
million before income taxes) during the second quarter of last
year.
The restructuring charges were mainly in response to the
continuing
long-term decline in agricultural equipment volumes in Western
Europe.
These charges consisted mainly of the cost of employment
reductions
resulting from the downsizing and rationalizing of the Company's
European operations. These actions were to be implemented during
1993
and the next few years. As of April 30, 1994, the expected
employment
reductions from the restructuring in Europe were approximately 53
percent complete and approximately 52 percent of the $107 million
accrual established during the second quarter of 1993 had been
disbursed.
Total worldwide production tonnage for the quarter was up 17
percent
compared with the second quarter of 1993. Worldwide net sales
and
revenues increased 17 percent to $2,460 million in the second
quarter of
1994 from $2,105 million during the same period last year. Net
sales of
equipment were $2,128 million in the quarter, an increase of 19
percent
compared with $1,788 million in the second quarter of 1993. The
physical volume of worldwide net sales to dealers increased
approximately 16 percent in the second quarter. Net sales and
revenues
also include revenues of the Company's credit, insurance and
health care
operations, which totaled $309 million in the second quarter of
1994
compared with $295 million last year.
Worldwide net income for the first six months of 1994 totaled
$276.3
million or $3.22 per share compared with restated income of $64.1
million or $.82 per share before special items during the same
period
last year. The increase was primarily due to higher production
and
sales volumes reflecting higher retail sales and reduced factory
production shutdowns in 1994. Operating efficiencies also
continued to
improve compared to the same period last year. For the first six
months
of 1993, the restated net loss after special items was $1,121
million or
$14.51 per share, which included $1,105 million for the
cumulative
effect of accounting changes and $80.0 million of overseas
restructuring
charges.
Worldwide production tonnage during the first six months of 1994
was 20
percent higher than in the same 1993 period. Worldwide net sales
and
revenues were $4,187 million for the initial six months of 1994,
a 19
percent increase compared to $3,529 million over the same period
last
year. Net sales of equipment increased 22 percent to $3,535
million for
the first six months of 1994 from $2,903 million during the same
period
of 1993. The physical volume of worldwide net sales increased
approximately 18 percent in the first six months of this year.
The
Company's Financial Services revenues totaled $607 million during
the
first six months of 1994, a five percent increase compared with
$576
million during the same period last year.
<PAGE>
Worldwide net sales and revenues in millions of dollars follow:
Three Months
Ended April 30 %
1994 1993 Change
Net sales:
Agricultural equipment $1,332 $1,117 +19
Industrial equipment 432 339 +27
Lawn and grounds care
equipment 364 332 +10
Total net sales 2,128 1,788 +19
Financial Services
revenues 309 295 + 5
Other revenues 23 22 + 5
Total net sales
and revenues $2,460 $2,105 +17
United States and Canada:
Equipment net sales $1,663 $1,340 +24
Financial Services
revenues 309 295 + 5
Total 1,972 1,635 +21
Overseas net sales 465 448 + 4
Other revenues 23 22 + 5
Total net sales
and revenues $2,460 $2,105 +17
<PAGE>
Six Months
Ended April 30 %
1994 1993 Change
Net sales:
Agricultural equipment $2,219 $1,806 +23
Industrial equipment 740 570 +30
Lawn and grounds care
equipment 576 527 + 9
Total net sales 3,535 2,903 +22
Financial Services
revenues 607 576 + 5
Other revenues 45 50 -10
Total net sales
and revenues $4,187 $3,529 +19
United States and Canada:
Equipment net sales $2,783 $2,169 +28
Financial Services
revenues 607 576 + 5
Total 3,390 2,745 +23
Overseas net sales 752 734 + 2
Other revenues 45 50 -10
Total net
sales
and revenues $4,187 $3,529 +19
<PAGE>
North American retail sales of John Deere agricultural equipment
during the second quarter and the first six months were higher
than
last year reflecting strong customer demand. North American lawn
and
grounds care retail sales for both the quarter and the first six
months were substantially higher than last year as a result of
the
continuing strength in the general economy. North American
retail
sales of John Deere industrial equipment were significantly
higher in
both the quarter and first six months compared with a year ago
primarily resulting from increases in residential and public
construction activity. Overseas industry retail demand for
agricultural equipment remained relatively weak.
The Company's worldwide Equipment Operations, which exclude the
Financial Services subsidiaries, had income of $147.5 million for
the
quarter and $195.5 million year-to-date in 1994 compared with
income
before special items of $59.7 million for the quarter and a loss
of
$18.4 million year-to-date last year. Including the
restructuring
charges and the cumulative effect of the accounting changes,
these
operations had a net loss of $20.3 million for the second quarter
last year and incurred a net loss of $1,196.8 million for the
first
half of 1993. Results in the second quarter and first six months
of
1993 benefited by $6.6 million and $15.3 million after income
taxes,
respectively, from the expected reduction of inventories valued
on a
last-in, first-out (LIFO) basis. The income tax provisions
relating
to the Equipment Operations for the second quarter and first half
of
1993 were affected by losses, including restructuring charges,
recorded in taxing jurisdictions having low tax rates or where
the
Company could not record tax benefits, coupled with income
realized
in countries having higher income tax rates.
The ratio of cost of goods sold to net sales of the Equipment
Operations decreased from 81.2 percent in the second quarter of
1993
to 77.5 percent in the same period this year. During the first
six
months of 1994, the ratio of cost of goods sold to net sales was
78.5
percent compared with 84.9 percent in the first half of last
year.
The North American operations' cost ratios were lower due mainly
to
significantly higher production volume and improved productivity
compared with last year. The overseas operations also had lower
cost
ratios this year due mainly to lower operating costs and somewhat
higher production volume.
Operating profit is defined as income before interest expense,
foreign exchange gains and losses, income taxes and certain
corporate
expenses, except for the operating profit of the credit segment
which
includes the effect of interest expense. All of the Company's
equipment businesses reported higher operating profits for both
the
quarter and first six months compared with last year.
The North American agricultural equipment division generated
substantially larger operating profits in both the current
quarter
and first six months of 1994 compared with a year ago, reflecting
higher production and sales volumes and continued improvements in
operating efficiencies. North American agricultural equipment
production tonnage was 19 percent higher and sales increased 26
percent for the second quarter of 1994 compared with last year.
Year-to-date tonnage was up 28 percent and sales were 32 percent
higher compared to last year.
The North American lawn and grounds care equipment division
generated
higher operating profits in both the second quarter and first six
months of 1994 compared with last year primarily due to higher
production and sales volumes. North American lawn and grounds
care
equipment production tonnage was up 17 percent and sales
increased 11
percent in the second quarter of 1994 compared with last year.
Production increased 18 percent and sales were 11 percent higher
in
the first six months compared with last year.
The North American industrial equipment division generated
improved
operating profits in both the second quarter and first six months
of
1994 compared with last year's small second quarter operating
profit
and year-to-date operating loss, mainly as a result of higher
production and sales volumes and lower operating costs. North
American industrial equipment production was 24 percent higher in
the
second quarter while sales were up 31 percent compared with last
year. For the first half of 1994, production tonnage increased
23
percent while sales were 34 percent higher compared with the same
period of 1993.
The overseas equipment division had an operating profit in both
the
second quarter and first six months of 1994 compared with an
operating profit before restructuring charges for the quarter
last
year and an operating loss year-to-date. The improvement in
overseas
profitability resulted from lower operating costs due to the
restructuring of these operations, and sales volumes which were
slightly higher than a year ago. Including the restructuring
charge,
the overseas division incurred large operating losses in both the
second quarter and the first six months of 1993. Production
tonnage
increased four percent in the second quarter and two percent in
the
first six months of 1994 compared with the same periods last
year.
The physical volume of overseas sales was approximately two
percent
higher in the current quarter and one percent higher in the first
half of 1994 compared with the same periods last year.
Net income of the Company's credit operations was $28.4 million
in
the second quarter of 1994 compared with $29.1 million in last
year's
second quarter. For the first six months of 1994, net income of
these subsidiaries was $54.0 million compared with income of
$59.9
million last year before the cumulative effect of accounting
changes.
Compared with last year, earnings for both the quarter and the
first
six months were unfavorably affected by lower margins from a
smaller
average receivable and lease portfolio caused mainly by the sale
of
retail notes in 1993. These lower margins were partially offset
by
higher securitization and servicing fee income from retail notes
previously sold but still administered. Administrative and
operating
expenses also increased as a result of an additional provision
related to a legal settlement. Additionally, the provision for
credit losses decreased as a result of a reduction in the credit
loss
provision for agricultural loans based on current and future
expected
credit losses. Net income of the credit operations totaled $56.1
million in the first half of 1993 including the cumulative effect
of
the accounting changes.
Total revenues of the credit operations decreased nine percent
from
$131 million in the second quarter of 1993 to $119 million in the
current quarter and decreased 10 percent in the first half from
$263
million last year to $237 million this year. Revenues were
affected
by the sale of receivables during 1993 and lower levels of
interest
rates in 1994 resulting in lower finance charges earned on the
receivable and lease portfolio compared to last year. These
decreases were partially offset by securitization and servicing
fee
income from retail notes previously sold, which increased from $6
million in the second quarter of 1993 to $7 million in the
current
quarter and from $8 million in the first half of 1993 to $17
million
this year. The average balance of total net receivables and
leases
financed was seven percent lower in the second quarter and 10
percent
lower in the first six months of 1994 compared with the same
periods
last year. Lower borrowing rates and a decrease in average
borrowings this year also resulted in a 16 percent decrease in
interest expense in the current quarter and a 17 percent decrease
in
the first half of 1994 compared with 1993. The credit
subsidiaries'
consolidated ratio of earnings before fixed charges to fixed
charges
was 2.11 to 1 for the second quarter this year compared with 1.91
to
1 in 1993. This ratio was 2.00 to 1 for the first six months
this
year compared with 1.92 to 1 in the comparable period of 1993.
Net income from insurance and health care operations was $12.0
million in the second quarter of 1994 compared with $10.7 million
in
the same quarter last year. For the first six months, net income
from these operations increased to $25.0 million this year
compared
with income of $20.9 million in 1993 before the cumulative effect
of
accounting changes. Insurance and health care results for both
the
second quarter and the first half of 1994 have improved,
reflecting
the continued profitable growth of these businesses. For the
second
quarter, insurance and health care premiums earned increased 14
percent in 1994 compared with the same period last year, while
expenses and the provision for losses increased 13 percent this
year.
For the six-month period, insurance and health care premiums
earned
increased by 13 percent in 1994, while expenses and the provision
for
losses increased 12 percent compared with last year. Net income
of
the insurance and health care operations totaled $17.8 million in
the
first six months of 1993 including the cumulative effect of the
accounting changes.
North American retail sales activity during the first two
quarters of
1994 provides a sound base for operations during the remainder of
the
year. For 1994, the United States Department of Agriculture has
projected substantial increases in planted acreages of corn and
soybeans, and is forecasting that farm net cash income will be at
one
of the highest levels in history. These factors are expected to
result in continued strong retail sales activity for agricultural
equipment throughout 1994, assuming normal weather patterns and
reasonably stable levels in both interest rates and farm
commodity
prices.
The European agricultural industry remains in the midst of
fundamental change due to revisions to government agricultural
policies. Although the long-term downward trend of European
industry
retail sales of agricultural equipment is expected to continue,
the
current outlook for 1994 anticipates the Company's retail sales
being
approximately equal to 1993 levels. The North American economy
in
1994 has continued to strengthen despite recent increases in
interest
rates, providing a solid base for industrial and lawn and grounds
care equipment retail sales during the remainder of the year.
Housing starts are expected to remain strong, which should
further
support increases in retail activity.
In response to strong retail demand, the Company has increased
its
North American production schedules. As a result, 1994 worldwide
production tonnage is now anticipated to be 16 percent higher
than
1993 output, up from the Company's prior estimate of 13 percent.
Worldwide agricultural equipment production tonnage is expected
to be
up approximately 13 percent from last year, when dealer
receivables
were reduced by $146 million. Lawn and grounds care equipment
production is expected to be 19 percent higher than 1993 and
industrial equipment production 23 percent higher than a year
ago.
Worldwide production during the last six months of 1994 is
expected
to be up 13 percent over the same period last year. However, it
is
important to note that production in the last half of 1994 is
expected to be three percent lower than in the first six months
of
the year, reflecting the effects of normal seasonal vacation
shutdown
periods and the start-up of production of a major new tractor
line.
CAPITAL RESOURCES AND LIQUIDITY
The discussion of capital resources and liquidity focuses on the
balance sheet and statement of cash flows. The nature of the
Company's Equipment Operations and Financial Services businesses
are
so different that most of the asset, liability and cash flow
categories do not lend themselves to simple combination.
Additionally, the fundamental differences between these
businesses
are reflected in different financial measurements commonly used
by
investors, rating agencies and financial analysts. In
recognition of
these differences and to provide greater clarity with respect to
the
analyses of the capital resources and liquidity of these
different
businesses, the following discussion has been organized to
discuss
separately, where appropriate, the Company's Equipment
Operations,
Financial Services operations and the consolidated totals.
Equipment Operations
The Company's equipment businesses are capital intensive and are
subject to large seasonal variations in financing requirements
for
receivables from dealers and inventories. Accordingly, to the
extent
necessary, funds provided from operations are supplemented from
external sources.
Negative cash flows from operating activities of $215 million in
the
first six months of 1994 resulted from the normal seasonal
increases
in dealer receivables and Company-owned inventories, annual
volume
discount program payments made to dealers and contributions to
the
pension fund. Partially offsetting these operating cash outflows
were positive cash flows from net income and dividends received
from
the Financial Services operations. The resulting net cash
requirement for operating activities, along with cash required
for
payment of dividends, purchases of property and equipment and a
decrease in borrowings were provided primarily from a decrease in
receivables from the Financial Services operations and a decrease
in
cash and cash equivalents.
In the first half of 1993, the normal seasonal increases in
dealer
receivables and Company-owned inventories, annual volume discount
payments to dealers and contributions to the pension fund
resulted in
negative cash flows from operating activities of $361 million.
Partially offsetting these operating cash outflows was the
positive
cash flow from income, excluding the noncash effects of
accounting
changes and restructuring charges. The resulting net cash
requirement for operating activities, along with cash required
for
purchases of property and equipment, payment of dividends and an
increase in cash and cash equivalents were provided primarily by
an
increase in borrowings.
Net dealer accounts and notes receivable, which largely represent
dealers' inventories financed by the Company, have increased
seasonally since October 31, 1993 and were comparable to a year
ago
despite the sizeable increase in retail demand for the Company's
products. North American agricultural equipment dealer
receivables
increased approximately $100 million, while North American
industrial
equipment dealer receivables and North American lawn and grounds
care
dealer receivables were comparable with the levels 12 months
earlier.
Total overseas dealer receivables were approximately $70 million
lower than a year ago. The ratios of worldwide net dealer
accounts
and notes receivable to the last 12 months' net sales were 44
percent
at April 30, 1994, 43 percent at October 31, 1993 and 53 percent
at
April 30, 1993. The percentage of total worldwide dealer
receivables
outstanding for periods exceeding 12 months was eight percent at
April 30, 1994, 11 percent at October 31, 1993 and 11 percent at
April 30, 1993.
Company-owned inventories at April 30, 1994 have increased
seasonally
by $281 million compared with the end of the previous fiscal year
and
are comparable to the levels one year ago.
Capital expenditures for the first six months of 1994 were $68
million compared with $76 million during the same period last
year.
Capital expenditures were $196 million for the 1993 fiscal year
and
are currently expected to approximate $230 million in 1994.
Total interest-bearing debt of the Equipment Operations was
$1,523
million at April 30, 1994 compared with $1,546 million at the end
of
fiscal year 1993 and $2,712 million at April 30, 1993. The ratio
of
total debt to total capital (total interest-bearing debt and
stockholders' equity) was 40 percent, 43 percent and 51 percent
at
April 30, 1994, October 31, 1993 and April 30, 1993,
respectively.
In January 1994, Deere & Company redeemed $80 million of its 8%
debentures due 2002 and in March 1994 redeemed $37 million of its
8.45% debentures due 2000. During the first six months of 1994,
Deere & Company also retired $16 million of medium-term notes.
Financial Services
The Financial Services' credit subsidiaries rely on their ability
to
raise substantial amounts of funds to finance their receivable
and
lease portfolios. Their primary sources of funds for this
purpose
are a combination of borrowings and equity capital.
Additionally,
the John Deere Capital Corporation (Capital Corporation), the
Company's United States credit subsidiary, periodically sells
substantial amounts of retail notes in the public market. The
insurance and health care operations generate their funds through
internal operations and have no external borrowings.
During the first six months of 1994, the aggregate cash provided
from
operating and financing activities was used primarily to increase
credit receivables. Cash provided from Financial Services
operating
activities was $126 million during the first six months of 1994.
Financing activities provided $278 million during the same
period,
resulting from an $814 million increase in outside borrowings
which
was partially offset by a $353 million decrease in payables to
the
Equipment Operations and payment of a $183 million dividend to
the
Equipment Operations. Cash used for investing activities totaled
$419 million in the first six months, primarily due to the cost
of
credit receivables acquired exceeding collections. Other cash
flows
from investing activities increased in 1994 mainly due to
collections
on receivables previously sold that were being held for payment
to
trusts. Cash and cash equivalents also decreased $15 million in
the
first six months of 1994.
In the first six months of last year, the aggregate cash provided
from operating and investing activities was used primarily to
reduce
outside borrowings and increase cash and cash equivalents. Cash
provided from Financial Services operating activities was $103
million during the first six months of 1993. Investing
activities
provided $487 million of cash in the first six months of 1993,
primarily due to net proceeds of $560 million received from the
sale
of receivables in the public market, which was partially offset
by
the cost of operating leases acquired of $51 million. Cash used
for
financing activities totaled $425 million in the first half of
1993,
representing a net decrease in outside borrowings. Additionally,
there was a $165 million increase in cash and cash equivalents
during
the first six months of 1993.
The positive cash flows from insurance and health care operations
have been primarily invested in marketable securities.
Marketable
securities carried at cost consist primarily of debt securities
held
by the insurance and health care operations in support of their
obligations to policyholders. These investments increased in the
first six months of 1994 and during the past 12 months, resulting
primarily from the continuing growth in the insurance and health
care
operations.
Net credit receivables increased by $373 million in the first six
months of 1994 and by $300 million during the past 12 months.
These
receivables consist of retail notes originating in connection
with
retail sales by dealers of John Deere products, retail notes from
non-Deere-related customers, revolving charge accounts, financing
leases and wholesale notes receivable.
The credit subsidiaries' receivables increased during the first
six
months of 1994 and the past 12 months due to the cost of credit
receivables acquired exceeding collections. Total acquisitions
of
credit receivables were 18 percent higher in the first six months
of
1994 compared with the same period last year. This significant
increase resulted mainly from improvements in the general
economy,
increased retail sales of John Deere equipment and recreational
products, and a higher revolving charge account and wholesale
note
volume. The increase in the credit receivable balance during the
past 12 months was partially offset by the sale of John Deere
retail
notes for which net proceeds of $622 million were received. The
levels of retail notes, revolving charge accounts and financing
lease
receivables were higher than one year ago, while wholesale
receivables decreased slightly. Net credit receivables
administered
by the credit subsidiaries, which include receivables previously
sold, amounted to $4,949 million at April 30, 1994 compared with
$5,076 million at October 31, 1993 and $4,756 million at April
30,
1993. At April 30, 1994, the net unpaid balance of all retail
notes
previously sold was $896 million compared with $1,394 million at
October 31, 1993 and $1,001 million at April 30, 1993.
Additional
sales of retail notes are expected to be made in future periods.
Total interest-bearing debt of the credit subsidiaries was $3,404
million at April 30, 1994 compared with $2,603 million at the end
of
fiscal year 1993 and $3,031 million at April 30, 1993. Total
outside
borrowings increased during the first six months of 1994 and the
past
12 months, generally corresponding with the levels of the net
credit
receivable and lease portfolio financed and the changes in the
amounts of payables owed and dividends paid to the Equipment
Operations. The credit subsidiaries' ratio of total
interest-bearing
debt to stockholder's equity was 5.1 to 1 at April 30, 1994
compared
with 3.8 to 1 at October 31, 1993 and 3.8 to 1 at April 30, 1993.
In January 1994, the Capital Corporation redeemed $40 million of
its
9.35% subordinated debentures due 2003. During the first six
months
of 1994, the Capital Corporation also issued $10 million and
retired
$267 million of medium-term notes.
Consolidated
The parent, Deere & Company, maintains unsecured lines of credit
with
various banks in North America and overseas. Some of the lines
are
available to both the Equipment Operations and certain credit
subsidiaries. Worldwide lines of credit totaled $3,357 million
at
April 30, 1994, $1,054 million of which were unused. For the
purpose
of computing unused credit lines, total short-term borrowings,
excluding the current portion of long-term borrowings, were
considered to constitute utilization. Included in the total
credit lines are two long-term credit agreement commitments
totaling
$2,417 million.
Stockholders' equity was $2,309 million at April 30, 1994
compared
with $2,085 million at October 31, 1993 and $1,452 million at
April
30, 1993. The increase of $224 million in the first six months
of
1994 resulted primarily from net income of $276 million and an
increase in common stock of $37 million, partially offset by
dividends declared of $86 million.
The Board of Directors at its meeting on May 25, 1994 declared a
quarterly dividend of 50 cents per share payable August 1, 1994
to
stockholders of record on June 30, 1994.<PAGE>
PART II. OTHER INFORMATION
Item 1. Legal Proceedings
See Note (13) to the Interim Financial Statements.
Item 2. Changes in Securities
On March 1, 1994, Deere & Company redeemed all of
its
outstanding 8.45% debentures due 2000.
Item 3. Defaults upon Senior Securities
None
Item 4. Submission of Matters to a Vote of Security Holders
(a,c) At the annual meeting of stockholders held February
23,
1994 the following directors were elected:
Votes For Votes Withheld
Samuel C. Johnson 72,288,699 233,683
Arthur L. Kelly 72,306,215 216,167
William A. Schreyer 72,277,309 245,073
Hans W. Becherer, Agustin Santamarina, David H. Stowe,
Jr.
and John R. Walter continue to serve as directors of
the
Company for terms expiring at the annual meeting in
1995.
John R. Block and Regina E. Herzlinger continue to
serve
as directors of the Company for terms expiring at the
annual meeting in 1996. Owen B. Butler resigned from
the
Board of Directors, effective May 25, 1994.
Item 5. Other Information
None
Item 6. Exhibits and Reports on Form 8-K
(a) 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) of Regulation S-K. The registrant will
file copies of such instruments upon request of the
Commission.
(b) Reports on Form 8-K
Current Report on Form 8-K dated February 22, 1994
(item 7).
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.
DEERE & COMPANY
Date: June 9, 1994 By s/ P. E. Leroy
P. E. Leroy
Senior Vice President
(Chief Financial Officer)
<PAGE>
INDEX TO EXHIBITS
Number Page
2 Not applicable -
4 Not applicable -
10 Not applicable -
11 Computation of per share earnings 23
12 Computation of ratio of earnings to
fixed charges 24
15 Not applicable -
18 Not applicable -
19 Not applicable -
22 Not applicable -
23 Not applicable -
24 Not applicable -
27 Not applicable -
99 Not applicable -
<PAGE>
Exhibit 11
DEERE & COMPANY AND CONSOLIDATED SUBSIDIARIES
COMPUTATION OF NET INCOME PER SHARE
(Shares
and dollars in thousands except per share amounts)
For the Six Months Ended
April 30
1994 1993
1. Net income (loss) $276,265 $(1,121,201)
2. Adjustment - Interest expense,
after tax benefit, applicable
to convertible debentures
outstanding 22 31
3. Net income (loss) applicable to
common stock - before interest
applicable to convertible debentures $276,287 $(1,121,170)
PRIMARY NET INCOME PER COMMON SHARE:
Shares:
4. Weighted average number of common
shares outstanding 85,867 77,291
5. Incremental shares:
Dilutive common stock options 916 917
Dilutive stock appreciation rights 57 12
Total incremental shares 973 929
6. Primary net income (loss) per common
share (1 divided by 4) $ 3.22* $(14.51)*
FULLY DILUTED NET INCOME PER COMMON SHARE:
Shares:
7. Weighted average number of common
shares outstanding 85,867 77,291
8. Incremental shares:
Dilutive common stock options 916 917
Dilutive stock appreciation rights 57 26
9. Common equivalent shares from assumed
conversion of convertible debentures:
5-1/2% debentures due 2001 28 53
10. Total 86,868 78,287
11. Fully diluted net income (loss) per
common share (3 divided by 10) $ 3.22* $(14.51)*
____________
* Net income per common share outstanding was used in the
designated
calculations since the dilutive effect of common stock
options,
stock appreciation rights and assumed conversion of
convertible
debentures was immaterial or anti-dilutive.
<PAGE>
EXHIBIT 12
DEERE & COMPANY AND CONSOLIDATED SUBSIDIARIES
COMPUTATION OF RATIO OF EARNINGS TO FIXED CHARGES
Six Months Ended
April 30
1994 1993
Earnings:
Pretax income (loss) of
consolidated group............ $428,527 $(14,311)
Dividends received from
less-than-fifty-percent
owned affiliates.............. 782 286
Fixed charges net of
capitalized interest.......... 145,586 195,467
Total earnings...................... $574,895 $181,442
Fixed charges:
Interest expense of con-
solidated group (includes
capitalized interest)......... $142,522 $192,229
Portion of rental charges
deemed to be interest......... 3,064 3,360
Total fixed charges........... $145,586 $195,589
Ratio of earnings to
fixed charges **................. 3.95 *
<PAGE>
EXHIBIT 12
DEERE & COMPANY AND CONSOLIDATED SUBSIDIARIES
COMPUTATION OF RATIO OF EARNINGS TO FIXED CHARGES
Year Ended October 31
1993 1992 1991
(In thousands of dollars)
Earnings:
Pretax income
(loss) of
consolidated group $272,345 $ 43,488 $(26,176)
Dividends received from
less-than-fifty-percent
owned affiliates 1,706 2,325 6,229
Fixed charges net of
capitalized interest 375,238 420,133 454,092
Total earnings $649,289 $465,946 $434,145
Fixed charges:
Interest expense
of consolidated
group (includes
capitalized
interest) $369,325 $415,205 $451,936
Portion of rental
charges deemed to
be interest 6,127 6,720 4,088
Total fixed charges $375,452 $421,925 $456,024
Ratio of earnings to
fixed charges ** 1.73 1.10 *
<PAGE>
EXHIBIT 12
DEERE & COMPANY AND CONSOLIDATED SUBSIDIARIES
COMPUTATION OF RATIO OF EARNINGS TO FIXED CHARGES
Year Ended October 31
1990 1989
(In thousands of dollars)
Earnings:
Pretax income
(loss) of
consolidated group $ 587,528 $539,126
Dividends received from
less-than-fifty-percent
owned affiliates 7,775 1,200
Fixed charges net of
capitalized interest 439,200 412,041
Total earnings $1,034,503 $952,367
Fixed charges:
Interest expense
of consolidated
group (includes
capitalized
interest) $ 435,217 $406,583
Portion of rental
charges deemed to
be interest 3,983 5,468
Total fixed charges $ 439,200 $412,051
Ratio of earnings to
fixed charges ** 2.36 2.31
<PAGE>
The computation of the ratio of earnings to fixed charges is
based on
applicable amounts of the Company and its consolidated
subsidiaries plus
dividends received from less-than fifty percent owned
affiliates.
"Earnings" consist of income before income taxes, the
cumulative effect of
accounting changes and fixed charges excluding capitalized
interest.
"Fixed charges" consist of interest on indebtedness,
amortization of debt
discount and expense, an estimated amount of rental expense
which is deemed
to be representative of the interest factor, and capitalized
interest.
* For the six months ended April 30, 1993 and the year ended
October 31,
1991, earnings available for fixed charges coverage were $14
million less
and $22 million less, respectively, than the amount required
for a ratio of
earnings to fixed charges of 1.0.
** The Company has not issued preferred stock. Therefore, the
ratios of
earnings to combined fixed charges and preferred stock
dividends are the
same as the ratios presented above.
