SECURITIES
AND EXCHANGE COMMISSION
Washington, D. C. 20549
_____________________
FORM 10-Q
QUARTERLY REPORT
UNDER SECTION 13 OR 15(d)
OF THE
SECURITIES EXCHANGE ACT OF 1934
_____________________
For Quarter Ended
Commission File Number
1-4121
January 31, 1994
DEERE & COMPANY
Incorporated in Delaware I.R.S. Employer Identification
Number 36-2382580
Principal Executive Office: John Deere Road
Moline, Illinois 61265
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 January 31, 1994, 85,800,703 shares of common stock, $1 par
value, of the registrant were outstanding.
Page 1 of 22 pages
Index to exhibits is on page 20.<PAGE>
PART I. FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
DEERE & COMPANY
STATEMENT OF CONSOLIDATED INCOME
CONSOLIDATED
(Deere & Company
and Consolidated Subsidiaries)
Three Months Ended
January 31
Millions of dollars
(Unaduited) 1994 1993
Net Sales and Revenues
Net sales of equipment $1,406.8 $ 1,115.1
Finance and interest income 124.8 145.8
Insurance and health care
premiums 157.5 126.9
Investment income 22.3 23.0
Other income 15.4 12.7
Total 1,726.8 1,423.5
Costs and Expenses
Cost of goods sold 1,121.7 1,009.8
Research and development
expenses 60.4 63.9
Selling, administrative and
general expenses 197.6 196.7
Interest expense 71.2 95.0
Insurance and health care
claims
and benefits 135.4 107.2
Other operating expenses 7.1 6.4
Total 1,593.4 1,479.0
Income (Loss) of Consolidated
Group Before Income Taxes and
Changes in Accounting 133.4 (55.5)
Provision (credit) for income
taxes 48.1 (18.2)
Income (Loss) of Consolidated
Group
before Changes in Accounting 85.3 (37.3)
Equity in Income of
Unconsolidated
Subsidiaries and Affiliates
before Changes in Accounting
Credit Insurance and health
care 1.3 .2
Other .4 .2
Total 1.7 .4
Income (Loss) before Changes
in Accounting 87.0 (36.9)
Changes in accounting (1,105.3)
Net Income (Loss) $ 87.0 $(1,142.2)
Return on average assets:
Before changes in
accounting .7% (.3)%
Total .7% (9.7)%
Per share data
Primary and fully diluted:
Income (loss) before changes
in accounting $ 1.02 $ (.48)
Changes in accounting (14.30)
Net income (loss) $ 1.02 $ (14.78)
<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
January 31
Millions of dollars
(Unaudited) 1994 1993
Net Sales and Revenues
Net sales of equipment $1,406.8 $ 1,115.1
Finance and interest income 19.7 21.2
Insurance and health care premiums
Investment income
Other income 4.5 8.0
Total 1,431.0 1,144.3
Costs and Expenses
Cost of goods sold 1,125.1 1,012.3
Research and development expenses 60.4 63.9
Selling, administrative and general
expenses 134.8 137.3
Interest expense 30.7 45.1
Insurance and health care claims
and benefits
Other operating expenses 2.0 2.4
Total 1,353.0 1,261.0
Income (Loss) of Consolidated
Group Before
Income Taxes and Changes
in Accounting 78.0 (116.7)
Provision (credit) for income taxes 30.0 (38.7)
Income (Loss) of Consolidated Group
before Changes in Accounting48.0 (78.0)
Equity in Income of Unconsolidated
Subsidiaries and Affiliates before
Changes in Accounting
Credit 25.6 30.8
Insurance and health care 13.0 10.1
Other .4 .2
Total 39.0 41.1
Income (Loss) before Changes
in Accounting 87.0 (36.9)
Changes in accounting (1,105.3)
Net Income (Loss) $ 87.0 $(1,142.2)
<PAGE>
PART I. FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
DEERE & COMPANY STATEMENT OF CONSOLIDATED INCOME
FINANCIAL SERVICES
Three Months Ended January 31
1994 1993
Millions of dollars
(Unaudited)
Net Sales and Revenues
Net sales of equipment
Finance and interest income$ 106.0 $ 125.3
Insurance and health care
premiums 184.1 162.2
Investment income 22.3 23.0
Other income 12.0 6.3
Total 324.4 316.8
Costs and Expenses
Cost of goods sold
Research and development
expenses
Selling, administrative
and general expenses 65.2 62.5
Interest expense 41.4 50.6
Insurance and health care
claims and benefits 157.3 138.5
Other operating expenses 5.1 4.0
Total 269.0 255.6
Income (Loss) of
Consolidated Group Before
Income Taxes and
Changes in Accounting 55.4 61.2
Provision (credit) for income
taxes 18.1 20.5
Income (Loss) of Consolidated
Group
before Changes in Accounting 37.3 40.7
Equity in Income of
Unconsolidated
Subsidiaries and Affiliates
before Changes in Accounting
Credit
Insurance and health care 1.3 .2
Other
Total 1.3 .2
Income (Loss) before
Changes in Accounting 38.6 40.9
Changes in accounting (6.9)
Net Income (Loss) $ 38.6 $ 34.0
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)
Jan 31 Oct 31 Jan 31
Millions of dollars (Unaudited) 1994 1993 1993
Assets
Cash and cash equivalents $ 344.1 $ 338.2 $ 338.4
Marketable securities carried
at cost 988.3 994.8 920.6
Receivables from unconsolidated
subsidiaries and affiliates 2.6 4.0 13.6
Dealer accounts and notes
receivable
- net 2,727.8 2,793.7 2,759.3
Credit receivables - net 3,907.0 3,754.8 4,389.2
Other receivables 412.3 413.2 321.4
Equipment on operating leases -
net 197.0 195.4 169.7
Inventories (Note 5) 687.6 464.4 718.6
Property and equipment - net 1,208.4 1,240.3 1,270.3
Investments in unconsolidated
subsidiaries and affiliates 146.3 140.6 117.8
Intangible assets - net 297.0 296.8 336.1
Deferred income taxes 681.8 681.7 631.7
Other assets and deferred
charges 180.2 169.0 174.1
Total $11,780.4 $11,486.9 $12,160.8
Liabilities and Stockholders'
Equity
Short-term borrowings $ 2,219.0 $ 1,601.4 $ 3,111.0
Payables to unconsolidated
subsidiaries and affiliates 21.5 32.8 22.4
Accounts payable and accrued
expenses 1,959.5 2,085.9 1,683.0
Insurance and health care
claims
and reserves 691.5 692.2 685.6
Accrued taxes 99.9 71.0 41.4
Deferred income taxes 8.7 8.6 3.7
Long-term borrowings 2,292.4 2,547.5 2,802.4
Retirement benefit accruals and
other liabilities 2,343.8 2,362.1 2,342.7
Total liabilities 9,636.3 9,401.5 10,692.2
Common stock, $1 par value
(issued shares at January
31, 1994 - 86,069,637) 1,450.8 1,436.8 840.4
Retained earnings (Note 3) 970.8 926.5 824.0
Minimum pension liability
adjustment (215.5) (215.5) (156.4)
Cumulative translation
adjustment
(Note 4) (40.4) (41.5) (21.4)
Unamortized restricted stock
compensation (7.1) (8.2) (6.3)
Common stock in treasury,
at cost (14.5) (12.7) (11.7)
Total stockholders' equity 2,144.1 2,085.4 1,468.6
Total $11,780.4 $11,486.9 $12,160.8 <PAGE>
DEERE & COMPANY
CONDENSED CONSOLIDATED BALANCE SHEET
EQUIPMENT OPERATIONS
(Deere & Company with
Financial
Services on the Equity Basis)
Jan 31 Jan 31 Jan 31
Millions of dollars (Unaudited) 1994 1993 1993
Assets
Cash and cash equivalents $ 144.1 $ 71.7 $ 51.9
Marketable securities carried at
cost
Receivables from unconsolidated
subsidiaries and affiliates 71.5 511.9 91.9
Dealer accounts and notes
receivable - net 2,727.8 2,793.7 2,759.3
Credit receivables - net 152.2 115.8 160.5
Other receivables 14.3
Equipment on operating
leases - net 75.0 76.2 79.3
Inventories (Note 5) 687.6 464.4 718.6
Property and equipment - net 1,182.3 1,215.5 1,248.6
Investments in unconsolidated
subsidiaries and affiliates 1,218.1 1,341.7 1,299.0
Intangible assets - net 278.6 277.8 314.7
Deferred income taxes 628.2 628.9 577.7
Other assets and deferred charges 110.0 106.3 107.8
Total $7,275.4 $ 7,618.2 $ 7,409.3
Liabilities and
Stockholders' Equity
Short-term borrowings $ 352.7 $ 476.3 $1,220.5
Payables to unconsolidated
subsidiaries and affiliates 21.5 32.8 23.8
Accounts payable and
accrued expenses 1,295.9 1,533.4 1,106.0
Insurance and health care
claims and reserves
Accrued taxes 93.0 66.1 39.5
Deferred income taxes 8.7 8.4 2.8
Long-term borrowings 1,031.0 1,069.3 1,219.6
Retirement benefit
accruals and other
liabilities 2,328.5 2,346.5 2,328.5
Total liabilities 5,131.3 5,532.8 5,940.7
Common stock, $1 par value
(issued shares at January 31,
1994 - 86,069,637) 1,450.8 1,436.8 840.4
Retained earnings (Note 3) 970.8 926.5 824.0
Minimum pension liability
adjustment (215.5) (215.5) (156.4)
Cumulative translation
adjustment (Note 4) (40.4) (41.5) (21.4)
Unamortized restricted
stock compensation (7.1) (8.2) (6.3)
Common stock in treasury,
at cost (14.5) (12.7) (11.7)
Total stockholders' equity 2,144.1 2,085.4 1,468.6
Total $ 7,275.4 $ 7,618.2 $7,409.3
<PAGE>
DEERE & COMPANY
CONDENSED CONSOLIDATED BALANCE SHEET
FINANCIAL SERVICES
Jan 31 Oct 31 Jan 31
Millions of dollars (Unaudited) 1994 1993 1993
Assets
Cash and cash equivalents $ 200.0 $ 266.5 $ 286.5
Marketable securities carried at
cost 988.3 994.8 920.6
Receivables from unconsolidated
subsidiaries and affiliates 11.4
Dealer accounts and notes receivable -
net
Credit receivables - net. 3,754.8 3,639.0 4,228.7
Other receivables 413.4 399.9 322.5
Equipment on operating leases -
net 121.9 119.2 90.4
Inventories (Note 5)
Property and equipment - net 26.2 24.8 21.7
Investments in unconsolidated
subsidiaries
and affiliates 57.4 52.1 35.2
Intangible assets - net 18.5 19.0 21.4
Deferred income taxes 53.6 52.8 54.1
Other assets and deferred
charges 70.1 62.8 66.2
Total $5,704.2 $5,630.9 $6,058.7
Liabilities and Stockholders' Equity
Short-term borrowings $1,866.3 $1,125.1 $1,890.5
Payables to unconsolidated
subsidiaries
and affiliates 69.0 507.9 88.3
Accounts payable and accrued expenses 664.7 553.6 578.1
Insurance and health care claims
and reserves 691.5 692.2 685.6
Accrued taxes 6.8 4.9 1.9
Deferred income taxes .2 .9
Long-term borrowings 1,261.3 1,478.2 1,582.7
Retirement benefit accruals and
other liabilities 15.4 15.6 14.3
Total liabilities 4,575.0 4,377.7 4,842.3
Common stock, $1 par value
(issued shares at January 31, 1994
- 86,069,637) 208.7 208.2 205.8
Retained earnings (Note 3) 922.1 1,046.5 1,009.0
Minimum pension liability
adjustment
Cumulative translation adjustment
(Note 4) (1.6) (1.5) 1.6
Unamortized restricted stock
compensation
Common stock in treasury, at cost
Total stockholders' equity 1,129.2 1,253.2 1,216.4
Total $5,704.2 $5,630.9 $6,058.7
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
Millions of dollars (Unaudited)
Three Months Ended January 31
1994 1993
Cash Flows From Operating
Activities
Net income (loss) $ 87.0 $(1,142.2)
Adjustments to reconcile net
income
(loss) to net
cash provided by (used for)
operating
activities (307.3) 904.6
Net cash provided by (used for)
operating
activities (220.3) (237.6)
Cash Flows From Investing
Activities
Collections and sales of
credit
receivables 773.9 893.7
Proceeds from sales of
marketable
securities 86.2 77.0
Cost of credit
receivables
acquired (935.3) (875.1)
Purchases of marketable
securities (80.4) (41.6)
Purchases of property and
equipment (31.9) (37.1)
Cost of operating leases
acquired (18.3) (18.0)
Other 93.2 9.9
Net cash provided by
(used for) investing
activities (112.6) 8.8
Cash Flows From Financing
Activities
Increase (decrease) in
short-term
borrowings 630.3 60.0
Change in intercompany
receivables/payables
Proceeds from issuance of
long-term borrowings 344.0
Principal payments on
long-term
borrowings (259.1) (13.9)
Proceeds from issuance of
common stock 13.9 .4
Dividends paid (42.7) (38.1)
Other (2.5) (1.4)
Net cash provided by
(used for) financing
activities 339.9 351.0
Effect of Exchange Rate
Changes on Cash (1.1) (.6)
Net Increase (Decrease)
in Cash and Cash
Equivalents 5.9 121.6
Cash and Cash Equivalents
at Beginning
of Period 338.2 216.8
Cash and Cash Equivalents
at End
of Period $344.1 $338.4
<PAGE>
DEERE & COMPANY
CONDENSED STATEMENT OF CONSOLIDATED CASH FLOWS
EQUIPMENT OPERATIONS
(Deere & Company with Financial Services
on the Equity Basis)
Three Months Ended January 31
1994 1993
Millions of dollars (Unaudited
Cash Flows From Operating
Activities
Net income (loss) $ 87.0 $(1,142.2)
Adjustments to reconcile
net income
(loss) to net
cash provided by (used for)
operating
activities (197.0) 873.3
Net cash provided by (
used for)
operating
activities (110.0) (268.9)
Cash Flows From Investing
Activities
Collections and sales
of credit
receivables 19.0 27.6
Proceeds from sales of
marketable
securities
Cost of credit
receivables acquired (55.5) (108.3)
Purchases of marketable securities
Purchases of property and
equipment (29.2) (34.7)
Cost of operating leases
acquired (6.1) (5.0)
Other .4 5.2
Net cash provided by
(used for)investing
activities (71.4) (115.2)
Cash Flows From
Financing Activities
Increase (decrease)
in short-term
borrowings (47.5) 387.2
Change in intercompany
receivables/payables 439.0 62.0
Proceeds from issuance
of long-term
borrowings
Principal payments on
long-term
borrowings (106.1) (13.9)
Proceeds from issuance
of common stock 13.9 .4
Dividends paid (42.7) (38.1)
Other (2.5) (1.4)
Net cash provided by
(used for)
financing activities 254.1 396.2
Effect of Exchange Rate
Changes on Cash (.3) (.6)
Net Increase
(Decrease) in Cash
and Cash Equivalents 72.4 11.5
Cash and Cash Equivalents
at Beginning of Period 71.7 40.4
Cash and Cash Equivalents
at End of Period $ 144.1 $ 51.9
<PAGE>
DEERE & COMPANY
CONDENSED STATEMENT OF CONSOLIDATED CASH FLOWS
FINANCIAL SERVICES
Three Months Ended
January 31
1994 1993
Millions of dollars (Unaudited)
Cash Flows From Operating
Activities
Net income (loss) $ 38.6 $ 34.0
Adjustments to reconcile
net income
(loss) to net cash
provided by
(used for) operating
activities 14.2 (2.8)
Net cash provided by
(used for)
operating
activities 52.8 31.2
Cash Flows From
Investing
Activities
Collections and
sales of credit
receivables 759.9 870.0
Proceeds from sales of
marketable securities 86.2 77.0
Cost of credit
receivables acquired (884.7) (770.7)
Purchases of marketable
securities (80.4) (41.6)
Purchases of property
and equipment (2.7) (2.4)
Cost of operating
leases
acquired (12.2) (12.9)
Other 92.7 4.7
Net cash provided
by
(used for) investing
activities (41.2) 124.1
Cash Flows From
Financing
Activities
Increase (decrease)
in short-term
borrowings 677.8 (327.2)
Change in intercompany
receivables/payables (439.0) (62.0)
Proceeds from issuance
of long-term borrowings 344.0
Principal payments on
long-term borrowings (153.0)
Proceeds from issuance
of common stock
Dividends paid (163.1)
Other
Net cash provided by
used for)
financing activities (77.3) (45.2)
Effect of Exchange
Rate Changes
on Cash (.8)
Net Increase
(Decrease)
in Cash and Cash
Equivalents (66.5) 110.1
Cash and Cash
Equivalents at
Beginning of Period 266.5 176.4
Cash and Cash
Equivalents at
End of Period $ 200.0 $ 286.5
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 Ended
January 31
1994 1993
Balance, beginning of period......... $926.5 $ 2,004.3
Net income (loss).................... 87.0 (1,142.2)
Dividends declared................... (42.7) (38.1)
Balance, end of period............... $970.8 $ 824.0
<PAGE>
(4) An analysis of the cumulative translation adjustment follows
in millions of dollars:
Three Months Ended
January 31
1994 1993
Balance, beginning of period......... $41.5 $19.4
Translation adjustment............... (1.8) 3.5
Income taxes applicable to
translation adjustments .7 (1.5)
Balance, end of period............... $40.4 $21.4
(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 three
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 first three months of 1993 benefited by $8.7
million or $.11 per share. A LIFO benefit was not
recognized in the first quarter of 1994.
If all of the Company's inventories had been valued on an
approximate FIFO value, estimated inventories by major
classification in millions of dollars would have been as
follows:
Jan 31 Oct 31 Jan31
1994 1993 1993
Raw materials and
supplies................ $ 191 $ 192 $ 212
Work-in-process........... 369 295 420
Finished machines and
parts................... 1,075 919 1,135
Total FIFO value.......... 1,635 1,406 1,767
Adjustment to LIFO
basis................... 947 942 1,048
Inventories............... $ 688 $ 464 $ 719
(6) During the first three 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 $1 million. At January 31, 1994,
the
net unpaid balance of all retail notes previously sold by
the
Financial Services subsidiaries and the Equipment Operations
was
$1,142 million. The Company was contingently liable for
recourse
on credit receivable sales in the maximum amount of $111
million
at January 31, 1994.
Certain foreign subsidiaries have pledged assets with a
balance sheet value of $33 million as collateral for bank
advances of $2 million as of January 31, 1994.
At January 31, 1994, the Company had commitments of
approximately
$68 million for construction and acquisition of property and
equipment.
(7) Dividends declared and paid on a per share basis were as
follows:
Three Months Ended
January 31
1994 1993
Dividends declared................... $.50 $.50
Dividends paid....................... $.50 $.50
(8) The calculation of primary net income per share is based on
the average number of shares outstanding during the three
months ended January 31, 1994 and 1993 of 85,592,000 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 fourth quarter of 1993, the Company adopted 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, effective November 1, 1992. Previous quarters of
1993
were restated as required by these Statements. As a result,
the
first quarter of 1993 has been restated to reflect the
cumulative
pretax effect of these changes in accounting of $1,728
million
($1,105 million or $14.30 per share after income taxes) and
an
incremental pretax benefits expense of $14.5 million ($9.3
million or $.12 per share after income taxes).
(10) 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.
(11) In December 1993, the Company granted options to employees
for
the purchase of 595,322 shares of common stock at an
exercise
price of $70.69 per share. At January 31, 1994, options for
2,482,664 shares were outstanding at option prices in a
range of
$23.31 to $70.69 per share. A total of 3,862,580 shares
remain
available for the granting of future options.
(12) 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. These actions include: a class action brought by
Russell
Durrett individually and on behalf of others against John
Deere
Company (filed in state court on February 19, 1992 and
removed on
February 26, 1992 to the United States District Court for
the
Northern District of Texas, Dallas Division), which case was
certified as a class action by the court on November 6,
1992; and
a class action titled Deere Credit, Inc. v. Shirley Y.
Morgan, et
al., originally filed on February 20, 1992, and certified in
the
281st Judicial District Court of Harris County, Texas, on
October
12, 1993 for all persons who opt out of the federal class
action.
The Company and the Capital Corporation subsidiaries believe
that
they have substantial defenses and intend to defend these
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.
(13) Certain amounts for 1993 have been reclassified to conform
with
1994 financial statement presentations. <PAGE>
Item 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS
RESULTS OF OPERATIONS
Deere & Company's worldwide net income was $87.0 million or $1.02
per
share in the first quarter of the 1994 fiscal year compared with
a
loss before the cumulative effect of changes in accounting of
$36.9
million or $.48 per share in the first quarter of 1993. The 1993
first quarter results were restated 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. After the cumulative effect of these changes,
the
net loss for the first quarter of 1993 was $1,142.2 million or
$14.78
per share.
Three Months
Ended
January 31
1994 1993
Net income (loss) as originally reported $ 87.0 $ (27.6)
Restatement of income (loss) for the
incremental effect of changes
in accounting (9.3)
Income (loss) before cumulative effect
of changes in accounting 87.0 (36.9)
Cumulative effect of changes in accounting (1,105.3)
Net income (loss) as restated $ 87.0 $(1,142.2)
Worldwide income before the cumulative effect of changes in
accounting
improved by $123.9 million compared with the first quarter of
last
year due primarily to significantly higher 1994 production and
sales
volumes. Total worldwide production tonnage was 25 percent
higher
than in last year's first quarter, when several of the Company's
factories scheduled additional production shutdowns along with
the
normal holiday shutdowns. In addition, income this year
benefited
from lower operating expenses and improved productivity in both
the
North American and overseas operations.
Worldwide net sales and revenues increased 21 percent to $1,727
million in the first quarter of 1994 from $1,424 million last
year.
Net sales and revenues include net sales to dealers of
agricultural,
industrial and lawn and grounds care equipment which were $1,407
million in the current quarter, an increase of 26 percent from
sales
of $1,115 million in the first quarter of last year. The
physical
volume of worldwide net sales to dealers increased approximately
23
percent in the first quarter this year. Net sales and revenues
also
include revenues of the Company's credit, insurance and health
care
operations, which totaled $298 million in the first quarter of
1994
compared with $281 million in the same quarter last year.
Worldwide net sales and revenues in millions of dollars follow:
Three Months Ended
January 31 %
1994 1993 Change
Net sales:
Agricultural equipment $ 887 $ 689 +29
Industrial equipment 308 231 +33
Lawn and grounds care equipment 212 195 + 9
Total net sales 1,407 1,115 +26
Financial Services revenues 298 281 + 6
Other revenues 22 28 -21
Total net sales and revenues $1,727 $1,424 +21
United States and Canada:
Equipment net sales $1,120 $ 829 +35
Financial Services revenues 298 281 + 6
Total 1,418 1,110 +28
Overseas net sales 287 286
Other revenues 22 28 -21
Total net sales and revenues $1,727 $1,424 +21
Retail sales of John Deere agricultural equipment in North
America
were higher than first quarter 1993 levels, due to continued
strong retail demand. North American retail sales of the
Company's lawn and grounds care equipment increased significantly
compared with the same period last year, reflecting continued
recovery in the general economy. North American industrial
equipment retail sales were also up substantially for the
quarter,
resulting from continued increases in residential and public
construction activity. Overseas industry retail demand for
agricultural equipment continued to be relatively weak. However,
overseas retail sales of John Deere equipment continued to
outperform the industry.
The Company's worldwide Equipment Operations, which exclude the
Financial Services subsidiaries, had income of $48.0 million in
the first quarter this year compared with a loss of $78.0
million before the cumulative effect of changes in accounting in
1993. The higher production and sales volumes and enhanced
efficiencies explain this improvement. The Equipment Operations
incurred a net loss of $1,176.4 million in the first quarter of
1993 including the cumulative effect of the accounting changes.
First quarter 1993 results benefited by $8.7 million after taxes
from the reduction of inventories which are valued on a last-in,
first-out (LIFO) basis. A LIFO benefit was not recognized in the
first quarter of 1994.
The ratio of cost of goods sold to net sales of the Equipment
Operations decreased from 90.8 percent in the first quarter of
1993 to 80.0 percent in the same period this year. The North
American operations' cost ratio was lower due mainly to
significantly higher production volume and improved productivity
compared with last year. The overseas operations also had a
lower
cost ratio 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 earnings improvements
during the quarter.
The North American agricultural equipment division generated a
strong operating profit in the first quarter of 1994 compared
with
an operating loss incurred in the same period last year,
primarily
as a result of substantially higher production and sales volumes
combined with continued improvements in operating efficiency.
North American agricultural equipment production tonnage
increased
41 percent and sales increased 42 percent in the first quarter
this year.
The North American lawn and grounds care equipment division
generated a comparable operating profit for the current quarter
compared with the first quarter last year. North American lawn
and grounds care equipment production tonnage increased 19
percent
and sales increased 12 percent compared to the same quarter last
year. However, higher operating expenses and a small product
modification program in 1994 offset the earnings improvement
resulting from the higher volumes.
The North American industrial equipment division had an operating
profit for the first quarter of 1994 compared with an operating
loss incurred during the same period last year. Higher
production
and sales volumes combined with lower operating costs were the
major factors contributing to the improvement in operating
profit.
North American industrial equipment production tonnage increased
22 percent and sales increased 40 percent in the current quarter.
The overseas division had a small operating profit during the
first quarter of 1994 compared with a large operating loss last
year, as operating costs were substantially lower due to the
restructuring of these operations while production volume was
slightly higher than last year. As of January 31, 1994, the
expected employment reductions from the restructuring in Europe
were approximately 52% complete and approximately 50% of the $107
million accrual established during the second quarter of 1993 had
been disbursed. The production tonnage and physical volume of
overseas sales were both approximately one percent higher in the
first quarter of 1994 compared with the same period of 1993.
Net income of the Company's credit operations was $25.6 million
for the first quarter of 1994, down from last year's income of
$30.8 million before the cumulative effect of the accounting
changes. The decrease in earnings primarily reflects lower
revenues from a smaller receivable and lease portfolio caused by
the sale of retail notes in 1993. The impact of these lower
revenues was partially offset by higher securitization and
servicing fee income from notes previously sold but still
administered. Net income of the credit operations totaled $27.0
million in the first quarter of 1993 including the cumulative
effect of the accounting changes. Total revenues of the credit
operations decreased 10 percent from $131.6 million in the first
quarter of 1993 to $118.0 million in the first quarter of 1994.
The average balance of total net receivables and leases financed
was 12 percent lower than in the first three months of last year,
due primarily to sale of receivables during 1993. Revenues were
also affected by a lower level of interest rates and
corresponding
lower finance charges earned on the receivable and lease
portfolio
compared with the first quarter last year. These developments
were partially offset by the increase in securitization and
servicing fee income from retail notes previously sold to $9.7
million in the first quarter of 1994 from $2.5 million in the
first quarter of 1993. Additionally, lower borrowing rates and a
decrease in average borrowings this year resulted in a 19 percent
decrease in interest expense compared with the first quarter of
1993. The credit subsidiaries' consolidated ratio of earnings
before fixed charges to fixed charges was 1.90 to 1 during the
first three months this year compared with 1.93 to 1 in the
comparable period of 1993.
Net income from insurance and health care operations was $13.0
million in the first quarter of 1994 compared with income of
$10.1
million before the cumulative effect of accounting changes in the
same quarter of last year. Insurance and health care results in
1994 have improved, reflecting the continued profitable growth of
these businesses. For the three-month period, insurance and
health care premiums earned increased 13 percent in 1994 compared
with the same period last year, while expenses and the provision
for losses increased 11 percent this year. Net income of the
insurance and health care operations totaled $7.0 million in the
first quarter of 1993 including the cumulative effect of the
accounting changes.
First quarter North American retail sales provide a strong base
for operations during the remainder of the year. Despite
weather-
related shortfalls of corn and soybean production, United States
farm net cash income is forecasted to have achieved record levels
in 1993. Due to the lower 1993 production and the resulting
reduction in carryover stocks, a substantial increase in planted
acreage of corn and soybeans should occur in 1994. While farm
income will likely be lower in 1994 due mainly to lower livestock
cash receipts, farm net cash income is still expected to be one
of
the highest in history. Additionally, early customer buying
patterns are showing continued strengthening in demand for the
Company's products. These developments are currently anticipated
to result in an improved outlook for North American industry
retail sales of agricultural equipment in 1994, assuming a return
to more normal weather patterns and continuing lower levels of
interest rates.
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 is that retail sales will
approximate 1993 levels.
The North American economy is expected to continue its recovery
in
1994. While factors including tax increases, government spending
reductions, downsizing of the defense industry and recessionary
conditions prevalent with many of the country's trading partners
may limit general growth prospects, the lowest mortgage interest
rates since the 1970's should continue to stimulate housing
starts
and consumer durable expenditures this year. Public construction
expenditures should also experience moderate real growth,
particularly in street, highway, bridge and sewer projects. Such
developments should favorably affect the demand for industrial
and
construction equipment. Lawn and grounds care equipment is also
expected to benefit from continued general economic growth and
higher housing starts.
In response to strong retail demand, the Company has recently
increased production schedules in each of its North American
equipment operations. As a result, 1994 worldwide production
tonnage is now anticipated to be about 13 percent higher than
1993
output, which would bring the Company's production schedules up
to
the level of expected retail demand. Worldwide agricultural
equipment production tonnage is expected to be up approximately
10
percent from last year, when dealer receivables were reduced by
$146 million. Lawn and grounds care equipment and industrial
equipment production schedules are each anticipated to be up 19
percent compared with a year ago. Worldwide production during
the
final three quarters of 1994 is scheduled to be up about 10
percent from output in the same period last year.
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
is 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 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 borrowing sources.
Negative cash flows from operating activities of $110 million in
the first quarter of 1994 resulted from the normal seasonal
increases in Company-owned inventories, annual volume discount
program payments made to dealers and contributions to the pension
fund. Partially offsetting these operating cash outflows were
dividends received from the Financial Services operations and
positive cash flows from net income and the decline in dealer
receivables. The resulting net cash requirement for operating
activities, along with cash required for the payment of
borrowings, increases in cash and cash equivalents, payment of
dividends and purchases of property and equipment were provided
primarily from a decrease in receivables from the Financial
Services operations.
In the first quarter of 1993, the normal seasonal increases in
Company inventories, annual volume discount payments to dealers,
contributions to the pension fund and the net loss resulted in
negative cash flows from operating activities of $269 million.
As
a result of planned lower production last year, dealer
receivables
declined, partially offsetting the negative first quarter 1993
operating cash flows. The resulting net cash requirement for
operating activities, along with cash required for purchases of
property and equipment, payment of dividends and increases in
cash
and cash equivalents were provided primarily by increases in
borrowings and a decrease in receivables from the Financial
Services operations.
Net dealer accounts and notes receivable, which largely represent
dealers' inventories financed by the Company, decreased $66
million during the first quarter and were $31 million lower than
one year ago when receivables had been substantially reduced to
facilitate improved asset utilization. North American
agricultural equipment and lawn and grounds care equipment dealer
receivables were both approximately $5 million lower than one
year
ago. North American industrial equipment dealer receivables
increased approximately $45 million compared with the level 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 40 percent at January 31, 1994, 43 percent
at October 31, 1993 and 48 percent at January 31, 1993. The
percentage of total worldwide dealer receivables outstanding for
periods exceeding 12 months was 10 percent at January 31, 1994,
11 percent at October 31, 1993 and 13 percent at January 31,
1993.
Company-owned inventories at January 31, 1994 have increased
seasonally by $223 million compared with the end of the previous
fiscal year and are $31 million lower than year ago levels.
Capital expenditures for the first three months of 1994 were $29
million compared with $35 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
$1,384
million at January 31, 1994 compared with $1,546 million at the
end of fiscal year 1993 and $2,440 million at January 31, 1993.
The ratio of total debt to total capital (total interest-
bearing debt and stockholders' equity) was 39 percent, 43 percent
and 49 percent at January 31, 1994, October 31, 1993 and
January 31, 1993, respectively.
In January 1994, Deere & Company redeemed $80 million of its 8%
debentures due 2002 and announced that on March 1, 1994, it will
redeem the $37 million balance of outstanding 8.45% debentures
due
2000.
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 quarter of 1994, $53 million of cash provided
from operating activities and $67 million of cash and cash
equivalents were used for financing and investing activities.
Cash outlays for financing activities totaled $86 million during
the first quarter of 1994, resulting from a $439 million decrease
in payables to the Equipment Operations and payment of a $163
million dividend to the Equipment Operations, which were
partially
offset by proceeds from a $525 million net increase in outside
borrowings. Cash used for investing activities totaled $41
million in the current quarter, 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 the trusts.
In the first quarter of last year, the aggregate cash provided
from operating and investing activities was used to increase cash
and cash equivalents and reduce obligations to the Equipment
Operations. Cash provided from Financial Services operating
activities was $31 million during the first three months of 1993.
Investing activities provided $124 million of cash in the first
quarter of 1993, primarily because seasonally high collections of
credit receivables exceeded the cost of credit receivables
acquired by $99 million. Cash used for financing activities
totaled $45 million in the first quarter of last year,
representing a $62 million decrease in payables to the Equipment
Operations, which was partially offset by a $17 million net
increase in outside borrowings.
The positive cash flows from insurance and health care operations
have been primarily invested in marketable securities during the
past 12 months. However, during the first quarter of 1994, these
investments decreased due to payment of a dividend to the
Equipment Operations. 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. During the past 12 months, marketable securities
have increased resulting primarily from the continuing growth in
the insurance and health care operations.
Net credit receivables increased by $116 million in the first
quarter of 1994 and decreased by $474 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
quarter of 1994 due to the cost of credit receivables acquired
exceeding collections. Total acquisitions of credit receivables
were 15 percent higher in the first quarter 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 a higher revolving charge
account volume. Although the cost of credit receivables acquired
exceeded collections by $848 million during the past 12 months,
the balance of credit receivables decreased during the same
period
mainly due to proceeds of $1,143 million received from the sales
of John Deere retail notes. The levels of 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 $4,934 million at
January
31, 1994 compared with $5,076 million at October 31, 1993 and
$4,816 million at January 31, 1993. At January 31, 1994, the net
unpaid balance of all retail notes previously sold was $1,137
million compared with $1,394 million at October 31, 1993 and $541
million at January 31, 1993. Additional sales of retail notes
are
expected to be made in future periods.
Total interest-bearing debt of the credit subsidiaries was $3,128
million at January 31, 1994 compared with $2,603 million at
the end of fiscal year 1993 and $3,473 million at January 31,
1993.
Total outside borrowings increased during the first quarter of
1994
but decreased over the past 12 months, generally corresponding
with
the level of the net credit receivable and lease portfolio
financed
and the change in payables owed to the Equipment Operations. The
credit subsidiaries' ratio of total interest-bearing debt to
stockholder's equity was 4.6 to 1 at January 31, 1994 compared
with
3.8 to 1 at October 31, 1993 and 4.4 to 1 at January 31, 1993.
In January 1994, the Capital Corporation redeemed $40 million of
its
9.35% subordinated debentures due 2003. During the first quarter
of
1994, the Capital Corporation also retired $103 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 $3,439 million
at
January 31, 1994, $1,770 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
$2,449 million.
Stockholders' equity was $2,144 million at January 31, 1994
compared
with $2,085 million at October 31, 1993 and $1,469 million at
January 31, 1993. The increase of $59 million in the first three
months of 1994 resulted primarily from net income of $87 million
and
an increase in common stock of $14 million, partially offset by
dividends declared of $43 million.
The Board of Directors at its meeting on February 23, 1994
declared
a quarterly dividend of 50 cents per share payable May 2, 1994 to
stockholders of record on March 31, 1994.
<PAGE>
PART II. OTHER
INFORMATION
Item 1. Legal Proceedings
See Note (12) to the Interim Financial Statements.
Item 2. Changes in Securities
On January 4, 1994, Deere & Company redeemed all of its
outstanding 8% debentures due 2002.
Item 3. Defaults upon Senior Securities
None
Item 4. Submission of Matters to a Vote of Security Holders
(a,c) None
Item 5. Other Information
None
<PAGE>
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 Reports on Form 8-K dated November 17, 1993
(item 5), December 7, 1993 (items 5 and 7)
and January 13,
1994 (item 5).
<PAGE>
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: March 8, 1994 By s/ P. E. Leroy
P. E. Leroy
Senior Vice President
(Chief Financial Officer)
<PAGE>
INDEX TO EXHIBITS
Number Page
Not applicable -
4 Not applicable -
10 Not applicable -
11 Computation of per share earnings 21
12 Computation of ratio of earnings to 22
fixed charges
15 Not applicable -
18 Not applicable -
19 Not applicable -
22 Not applicable -
23 Not applicable -
24 Not applicable -
27 Not applicable -
99 Not applicable -
Exhibit 11
DEERE & COMPANY AND CONSOLIDATED SUBSIDIARIES
COMPUTATION OF NET INCOME PER SHARE
(Shares and dollars in thousands except per share amounts)
For the Three Months Ended
January 31
1994 1993
1. Net income (loss) $87,015 $(1,142,201)
2. Adjustment - Interest expense,
after tax benefit, applicable to
convertible
debentures outstanding 15 15
3.Net income (loss) applicable to common
stock - before interest applicable to
convertible debentures $87,030 $(1,142,186)
PRIMARY NET INCOME PER COMMON SHARE:
Shares:
4.Weighted average number of common
shares outstanding 85,592 77,291
5. Incremental shares:
Dilutive common stock options 864 89
Dilutive stock appreciation rights 66 4
Total incremental shares 930 93
6. Primary net income (loss) per common
share (1 divided by 4) $ 1.02 * $ (14.78)*
FULLY DILUTED NET INCOME PER COMMON SHARE:
Shares:
7. Weighted average number of common
shares outstanding 85,592 77,291
8. Incremental shares:
Dilutive common stock options 935 201
Dilutive stock appreciation rights 66 9
9. Common equivalent shares from assumed
conversion of convertible debentures:
5-1/2% debentures due 2001 47 53
10. Total 86,640 77,554
11. Fully diluted net income (loss)
per common share (3 divided by 10) $ 1.02 * $ (14.78)*
* 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 either immaterial or anti-dilutive.
EXHIBIT 12
DEERE & COMPANY AND CONSOLIDATED SUBSIDIARIES
COMPUTATION OF RATIO OF EARNINGS TO FIXED CHARGES
Three Months Ended
January31
(unaudited)
1994 1993
Earnings:
Income (loss) of
consolidated group before
income taxes and accounting
changes $133,422 $(55,508)
Dividends received from
less-than-fifty-percent
owned affiliates 514 144
Fixed charges net of
capitalized interest 72,722 96,668
Total earnings $206,658 $ 41,304
Fixed charges:
Interest expense of consolidated
group (includes capitalized
interest) $ 71,190 $ 95,461
Portion of rental charges
deemed to be interest 1,532 1,680
Total fixed charges 72,722 $ 97,141
Ratio of earnings to
fixed charges 2.84 *
<PAGE>
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:
Income (loss) of
consolidated group before
income taxes and accounting
changes $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 con-
solidated 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>
DEERE & COMPANY AND CONSOLIDATED SUBSIDIARIES
COMPUTATION OF RATIO OF EARNINGS TO FIXED CHARGES
Year Ended October 31
1990 1989
(In thousands of dollars)
Earnings:
Income (loss) of
consolidated group before
income taxes and accounting
changes $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 con-
solidated 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
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, 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 three months ended January 31, 1993 and the year
ended October 31, 1991, earnings available for fixed charges
coverage were $56 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.
