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 July 31, 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 July 31, 1994, 86,396,514 shares of common stock, $1 par
value, of the
registrant were outstanding.
_________________________________________________________________
_______
Page 1 of 25 Pages.
Index to Exhibits: Page 22.
<PAGE>
PART I. FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
DEERE & COMPANY CONSOLIDATED
STATEMENT OF CONSOLIDATED INCOME (Deere & Company and
Three Months Ended July 31 Consolidated Subsidiaries)
Three Months Ended July 31
Millions of dollars (Unaudited) 1994 1993
Net Sales and Revenues
Net sales of equipment $1,979.0 $1,726.5
Finance and interest income 139.2 139.8
Insurance and health care premiums 173.8 143.5
Investment income 22.7 25.6
Other income 11.9 14.0
Total 2326.6 2049.4
Costs and Expenses
Cost of goods sold 1,565.3 1,413.2
Research and development expenses 66.8 68.3
Selling, administrative and general expenses 214.3 207.3
Interest expense 77.6 90.5
Insurance and health care claims and
benefits 153.2 127.4
Other operating expenses 8.7 7.5
Total 2085.9 1914.2
Income of Consolidated Group Before
Income Taxes 240.7 135.2
Provision for income taxes 87.8 47.9
Income of Consolidated Group 152.9 87.3
Equity in Income of Unconsolidated
Subsidiaries and Affiliates
Credit
Insurance and health care 1.4 .6
Other 3.4 2.9
Total 4.8 3.5
Net Income $157.7 $90.8
Return on average assets 1.3 % .8%
Per Share Data
Primary and fully diluted net income $1.82 $1.19
<PAGE>
PART I. FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
DEERE & COMPANY EQUIPMENT OPERATIONS
STATEMENT OF CONSOLIDATED INCOME (Deere & Company with Financial
Three Months Ended July 31 Services on the Equity Basis)
Three Months Ended July 31
Millions of dollars (Unaudited) 1994 1993
Net Sales and Revenues
Net sales of equipment $1979.0 $1726.5
Finance and interest income 19.5 21.3
Insurance and health care premiums
Investment income
Other income 6.6 6.3
Total 2005.1 1754.1
Costs and Expenses
Cost of goods sold 1,568.5 1,414.1
Research and development expenses 66.8 68.3
Selling, administrative and general
expenses 155.5 151.1
Interest expense 28.8 45.4
Insurance and health care claims and
benefits
Other operating expenses 3.5 2.4
Total 1823.1 1681.3
Income of Consolidated Group Before
Income Taxes 182.0 72.8
Provision for income taxes 68.1 26.2
Income of Consolidated Group 113.9 46.6
Equity in Income of Unconsolidated
Subsidiaries and Affiliates
Credit 28.1 31.4
Insurance and health care 12.3 9.9
Other 3.4 2.9
Total 43.8 44.2
Net Income $157.7 $90.8
<PAGE>
PART I. FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
DEERE & COMPANY FINANCIAL SERVICES
STATEMENT OF CONSOLIDATED INCOME
Three Months Ended July 31
Three Months Ended July 31
Millions of dollars (Unaudited) 1994 1993
Net Sales and Revenues
Net sales of equipment
Finance and interest income $121.3 $119.5
Insurance and health care premiums 208.6 179.6
Investment income 22.7 25.7
Other income 6.5 9.1
Total 359.1 333.9
Costs and Expenses
Cost of goods sold
Research and development expenses
Selling, administrative and general
expenses 61.5 59.7
Interest expense 50.4 46.2
Insurance and health care claims
and benefits 183.3 160.4
Other operating expenses 5.2 5.2
Total 300.4 271.5
Income of Consolidated Group Before
Income Taxes 58.7 62.4
Provision for income taxes 19.7 21.7
Income of Consolidated Group 39.0 40.7
Equity in Income of Unconsolidated
Subsidiaries and Affiliates
Credit
Insurance and health care 1.4 .6
Other
Total 1.4 .6
Net Income $40.4 $41.3
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 CONSOLIDATED
STATEMENT OF CONSOLIDATED INCOME (Deere & Company and
Nine Months Ended July 31 Consolidated Subsidiaries)
Nine Months Ended July 31
Millions of dollars (Unaudited) 1994 1993
Net Sales and Revenues
Net sales of equipment $5,513.8 $4,629.8
Finance and interest income 391.8 427.2
Insurance and health care premiums 498.3 410.3
Investment income 68.7 72.3
Other income 41.0 38.7
Total 6513.6 5578.3
Costs and Expenses
Cost of goods sold 4,333.2 3,872.0
Research and development expenses 195.8 199.9
Selling, administrative and general
expenses 637.3 612.5
Interest expense 220.1 282.6
Insurance and health care claims and
benefits 432.9 356.1
Other operating expenses 25.1 27.0
Restructuring costs 0.0 107.2
Total 5844.4 5457.3
Income (Loss) of Consolidated Group Before
Income Taxes and Changes in Accounting 669.2 121.0
Provision (credit) for income taxes 243.9 52.1
Income (Loss) of Consolidated Group Before
Changes in Accounting 425.3 68.9
Equity in Income of Unconsolidated
Subsidiaries and Affiliates Before
Changes in Accounting
Credit
Insurance and health care 3.5 1.4
Other 5.2 4.6
Total 8.7 6.0
Income Before Changes in Accounting 434.0 74.9
Changes in accounting (1,105.3)
Net Income (Loss) $434.0 $(1030.4)
Return on average assets:
Before changes in accounting 3.6 % .6%
Total 3.6% (8.6)%
Per Share Data
Primary and fully diluted:
Income before changes in accounting $5.04 $.98
Changes in accounting 0.00 (14.30)
Net income (loss) $5.04 $(13.32)
<PAGE>
DEERE & COMPANY EQUIPMENT OPERATIONS
STATEMENT OF CONSOLIDATED INCOME (Deere & Company with Financial
Nine Months Ended July 31 Services on the Equity Basis)
Nine Months Ended July 31
Millions of dollars (Unaudited) 1994 1993
Net Sales and Revenues
Net sales of equipment $5513.8 $4629.8
Finance and interest income 58.1 63.5
Insurance and health care premiums
Investment income
Other income 16.8 17.6
Total 5588.7 4710.9
Costs and Expenses
Cost of goods sold 4,343.6 3,878.9
Research and development expenses 195.8 199.9
Selling, administrative and general
expenses 452.9 434.6
Interest expense 89.7 138.7
Insurance and health care claims and
benefits
Other operating expenses 9.5 13.0
Restructuring costs 0.0 107.2
Total 5091.5 4772.3
Income (Loss) of Consolidated Group Before
Income Taxes and Changes
in Accounting 497.2 (61.4)
Provision (credit) for income taxes 187.8 (9.7)
Income (Loss) of Consolidated Group
Before Changes in Accounting 309.4 (51.7)
Equity in Income of Unconsolidated
Subsidiaries and Affiliates Before
Changes in Accounting
Credit 82.1 91.2
Insurance and health care 37.3 30.8
Other 5.2 4.6
Total 124.6 126.6
Income Before Changes in Accounting 434.0 74.9
Changes in accounting 0.0 (1,105.3)
Net Income (Loss) $434.0 $(1030.4)
<PAGE>
DEERE & COMPANY FINANCIAL SERVICES
STATEMENT OF CONSOLIDATED INCOME
Nine Months Ended July 31
Nine Months Ended July 31
Millions of dollars (Unaudited) 1994 1993
Net Sales and Revenues
Net sales of equipment
Finance and interest income $337.0 $366.1
Insurance and health care premiums 594.6 517.9
Investment income 68.7 72.4
Other income 27.7 25.4
Total 1028.0 981.8
Costs and Expenses
Cost of goods sold
Research and development expenses
Selling, administrative and
general expenses 193.0 187.6
Interest expense 133.8 146.3
Insurance and health care claims and
benefits 513.6 451.4
Other operating expenses 15.6 14.1
Restructuring costs 0 0
Total 856.0 799.4
Income (Loss) of Consolidated Group
Before Income Taxes and Changes
in Accounting 172.0 182.4
Provision (credit) for income
taxes 56.1 61.8
Income (Loss) of Consolidated Group
Before Changes in Accounting 115.9 120.6
Equity in Income of Unconsolidated
Subsidiaries and Affiliates Before
Changes in Accounting
Credit
Insurance and health care 3.5 1.4
Other
Total 3.5 1.4
Income Before Changes in Accounting 119.4 122.0
Changes in accounting 0.0 (6.9)
Net Income (Loss) $119.4 $115.1
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>
DEERE & COMPANY CONSOLIDATED
CONDENSED CONSOLIDATED (Deere & Company and
BALANCE SHEET Consolidated Subsidiaries)
July 31 Oct 31 Jul 31
Millions of dollars (Unaudited) 1994 1993 1993
Assets
Cash and cash equivalents $295.7 $338.2 $477.9
Marketable securities carried at cost 1,108.1 994.8 967.2
Receivables from unconsolidated
subsidiaries and affiliates 5.3 4.0 1.3
Dealer accounts and notes receivable -
net 2,981.9 2,793.7 2,847.5
Credit receivables - net 4,577.8 3,754.8 4,099.5
Other receivables 381.8 393.5 325.5
Equipment on operating leases - net 205.7 195.4 192.0
Inventories (Note 5) 735.8 464.4 609.7
Property and equipment - net 1,201.2 1,240.3 1,207.7
Investments in unconsolidated subsidiaries
and affiliates 148.1 140.6 137.6
Intangible assets - net 296.9 296.8 330.2
Deferred income taxes 685.5 681.7 632.0
Other assets and deferred charges 193.3 169.0 158.7
Total $12817.1 $11467.2 $11986.8
Liabilities and Stockholders' Equity
Short-term borrowings $3,046.0 $1,601.4 $3,079.9
Payables to unconsolidated subsidiaries
and affiliates 31.3 32.8 25.3
Accounts payable and accrued expenses 2,157.6 2,085.9 1,810.8
Insurance and health care claims and
reserves 732.4 672.5 669.3
Accrued taxes 97.1 71.0 58.5
Deferred income taxes 8.3 8.6 13.3
Long-term borrowings 1,964.9 2,547.5 2,506.6
Retirement benefit accruals and
other liabilities 2,345.5 2,362.1 2,305.6
Total liabilities 10383.1 9381.8 10469.3
Common stock, $1 par value
(issued shares at July 31,
1994 - 86,611,915) 1475.8 1436.8 868.1
Retained earnings (Note 3) 1231.7 926.5 859.5
Minimum pension liability adjustment (215.4) (215.5) 156.5)
Cumulative translation adjustment
(Note 4) (36.2) (41.5) (33.5)
Unamortized restricted stock
compensation (9.7) (8.2) (9.0)
Common stock in treasury, at cost (12.2) (12.7) (11.1)
Total stockholders' equity 2,434.0 2,085.4 1,517.5
Total $12817.1 $11467.2 $11986.8
<PAGE>
DEERE & COMPANY EQUIPMENT OPERATIONS
CONDENSED CONSOLIDATED (Deere & Company with Financial
BALANCE SHEET Services on the Equity Basis)
July 31 Oct 31 July 31
Millions of dollars (Unaudited) 1994 1993 1993
Assets
Cash and cash equivalents $48.1 $71.7 $112.1
Marketable securities carried at
cost
Receivables from unconsolidated
subsidiaries and affiliates 256.7 511.9 77.5
Dealer accounts and notes
receivable - net 2981.9 2793.7 2847.5
Credit receivables - net 144.5 115.8 137.3
Other receivables 0.0 14.3 0.0
Equipment on operating leases -
net 77.2 76.2 73.1
Inventories (Note 5) 735.8 464.4 609.7
Property and equipment - net 1,169.5 1,215.5 1,184.3
Investments in unconsolidated
subsidiaries and affiliates 1,261.2 1,341.7 1,384.0
Intangible assets - net 279.4 277.8 310.7
Deferred income taxes 629.9 628.9 577.6
Other assets and deferred charges 104.9 106.3 95.5
Total $7689.1 $7618.2 $7409.3
Liabilities and Stockholders' Equity
Short-term borrowings $236.1 $476.3 $1,057.6
Payables to unconsolidated
subsidiaries and affiliates 31.3 32.8 25.3
Accounts payable and accrued
expenses 1,537.0 1,533.4 1,277.3
Insurance and health care claims
and reserves
Accrued taxes 93.2 66.1 56.3
Deferred income taxes 8.3 8.4 12.7
Long-term borrowings 1,019.5 1,069.3 1,171.6
Retirement benefit accruals and
other liabilities 2,329.7 2,346.5 2,291.0
Total liabilities 5,255.1 5,532.8 5,891.8
Common stock, $1 par value
(issued shares at July 31,
1994 - 86,611,915) 1475.8 1436.8 868.1
Retained earnings (Note 3) 1231.7 926.5 859.5
Minimum pension liability
adjustment (215.4) (215.5) (156.5)
Cumulative translation
adjustment (Note 4) (36.2) (41.5) (33.5)
Unamortized restricted
stock compensation (9.7) (8.2) (9.0)
Common stock in treasury,
at cost (12.2) (12.7) (11.1)
Total stockholders'
equity 2434.0 2085.4 1517.5
Total $7689.1 $7618.2 $7409.3
<PAGE>
DEERE & COMPANY FINANCIAL SERVICES
CONDENSED CONSOLIDATED
BALANCE SHEET
July 31 Oct 31 July 31
Millions of dollars 1994 1993 1993
(Unaudited)
Assets
Cash and cash equivalents $247.6 $266.5 $365.8
Marketable securities carried at cost 1108.1 994.8 967.2
Receivables from unconsolidated
subsidiaries and affiliates 0.0 0.0
Dealer accounts and notes receivable -
net
Credit receivables - net 4,433.3 3,639.0 3,962.2
Other receivables 382.8 380.2 326.6
Equipment on operating leases - net 128.5 119.2 118.9
Inventories (Note 5)
Property and equipment - net 31.7 24.8 23.4
Investments in unconsolidated
subsidiaries and affiliates 54.2 52.1 51.7
Intangible assets - net 17.4 19.0 19.5
Deferred income taxes 55.6 52.8 54.4
Other assets and deferred charges 88.4 62.8 63.2
Total $6547.6 $5611.2 $5952.9
Liabilities and Stockholders' Equity
Short-term borrowings $2,809.9 $1,125.1 $ 2,022.3
Payables to unconsolidated
subsidiaries and affiliates 251.4 507.9 76.2
Accounts payable and accrued
expenses 621.5 553.6 534.7
Insurance and health care claims and
reserves 732.4 672.5 669.3
Accrued taxes 3.9 4.9 2.2
Deferred income taxes 0.0 .2 .5
Long-term borrowings 945.3 1,478.2 1,335.0
Retirement benefit accruals
and other liabilities 15.9 15.6 14.6
Total liabilities 5380.3 4358.0 4654.8
Common stock, $1 par value
(issued shares at July 31,
1994 - 86,611,915) 209.4 208.2 207.5
Retained earnings (Note 3) 962.9 1046.5 1090.0
Minimum pension liability
adjustment Cumulative translation
adjustment (Note 4) (5.0) (1.5) .6
Unamortized restricted stock compensation
Common stock in treasury, at cost
Total stockholders' equity 1,167.3 1,253.2 1,298.1
Total $6547.6 $5611.2 $5952.9
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 CONSOLIDATED
CONDENSED STATEMENT OF (Deere & Company and
CONSOLIDATED CASH FLOWS Consolidated Subsidiaries)
Nine Months Ended July 31
Nine Months Ended July 31
Millions of dollars (Unaudited) 1994 1993
Cash Flows from Operating Activities
Net income (loss) $434.0 $(1030.4)
Adjustments to reconcile net income (loss)
to net cash provided by operating
activities (172.4) 1,254.7
Net cash provided by operating
activities 261.6 224.3
Cash Flows from Investing Activities
Collections and sales of credit receivables 2,239.8 2,865.9
Proceeds from sales of marketable
securities 176.4 229.6
Cost of credit receivables acquired (3,048.2) (2,641.5)
Purchases of marketable securities (282.3) (238.4)
Purchases of property and equipment (120.2) (122.6)
Cost of operating leases acquired (69.1) (80.7)
Other 37.9 13.1
Net cash provided by (used for)
investing activities (1065.7) 25.4
Cash Flows from Financing Activities
Increase (decrease) in short-term
borrowings 1,421.3 (133.2)
Change in intercompany receivables/payables
Proceeds from issuance of long-
term borrowings 10.0 487.2
Principal payments on long-term borrowings (573.8) (246.8)
Proceeds from issuance of common stock 36.3 27.8
Dividends paid (128.6) (114.5)
Other (4.9) (7.8)
Net cash provided by (used for)
financing activities 760.3 12.7
Effect of Exchange Rate Changes on Cash 1.3 (1.3)
Net Increase (Decrease) in Cash and
Cash Equivalents (42.5) 261.1
Cash and Cash Equivalents at Beginning
of Period 338.2 216.8
Cash and Cash Equivalents at End
of Period $295.7 $477.9
<PAGE>
DEERE & COMPANY EQUIPMENT OPERATIONS
CONDENSED STATEMENT OF (Deere & Company with Financial
CONSOLIDATED CASH FLOWS Services on the Equity Basis)
Nine Months Ended July 31
Nine Months Ended July 31
Millions of dollars (Unaudited) 1994 1993
Cash Flows from Operating Activities
Net income (loss) $434.0 $(1030.4)
Adjustments to reconcile net income (loss)
to net cash provided by operating
activities (170.3) 1,090.6
Net cash provided by operating
activities 263.7 60.2
Cash Flows from Investing Activities
Collections and sales of credit
receivables 51.2 57.3
Proceeds from sales of marketable
securities
Cost of credit receivables acquired (75.1) (114.8)
Purchases of marketable securities
Purchases of property and equipment (109.9) (116.1)
Cost of operating leases acquired (27.1) (16.5)
Other 20.6 22.0
Net cash provided by (used for)
investing activities (140.3) (168.1)
Cash Flows from Financing Activities
Increase (decrease) in short-term
borrowings (127.3) 241.9
Change in intercompany
receivables/payables 256.6 72.7
Proceeds from issuance of long-term
borrowings 0.0 .2
Principal payments on long-term
borrowings (180.4) (39.4)
Proceeds from issuance of common
stock 36.3 27.8
Dividends paid (128.6) (114.5)
Other (4.9) (7.8)
Net cash provided by (used for)
financing activities (148.3) 180.9
Effect of Exchange Rate Changes on Cash 1.3 (1.3)
Net Increase (Decrease) in Cash and
Cash Equivalents (23.6) 71.7
Cash and Cash Equivalents at
Beginning of Period 71.7 40.4
Cash and Cash Equivalents at End of Period $48.1 $112.1
<PAGE>
DEERE & COMPANY FINANCIAL SERVICES
CONDENSED STATEMENT OF
CONSOLIDATED CASH FLOWS
Nine Months Ended July 31
Nine Months Ended July 31
Millions of dollars (Unaudited) 1994 1993
Cash Flows from Operating Activities
Net income (loss) $119.4 $115.1
Adjustments to reconcile net income
(loss) to net
cash provided by operating activities 81.6 49.0
Net cash provided by operating
activities 201.0 164.1
Cash Flows from Investing Activities
Collections and sales of credit
receivables 2,203.6 2,821.9
Proceeds from sales of marketable
securities 176.4 229.6
Cost of credit receivables acquired (2,988.0) (2,540.0)
Purchases of marketable securities (282.3) (238.4)
Purchases of property and equipment (10.3) (6.4)
Cost of operating leases acquired (42.1) (64.2)
Other 17.4 (9.0)
Net cash provided by (used for)
investing activities (925.3) 193.5
Cash Flows from Financing Activities
Increase (decrease) in short-term
borrowings 1,548.5 (375.1)
Change in intercompany
receivables/payables (256.6) (72.7)
Proceeds from issuance of
long-term borrowings 10.0 487.0
Principal payments on long-term borrowings (393.4) (207.4)
Proceeds from issuance of common stock
Dividends paid (203.1)
Other 0.0
Net cash provided by (used for)
financing activities 705.4 (168.2)
Effect of Exchange Rate Changes on Cash 0.0
Net Increase (Decrease) in Cash and Cash
Equivalents (18.9) 189.4
Cash and Cash Equivalents at
Beginning of Period 266.5 176.4
Cash and Cash Equivalents at
End of Period $247.6 $365.8
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>
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 Nine Months
Ended Ended
July 31 July 31
1994 1993 1994 1993
Balance, beginning
of period........ $1,117.1 $807.0 $ 926.5 $2,004.3
Net income (loss).. 157.7 90.8 434.0 (1,030.4)
Dividends declared. (43.1) (38.3) (128.8) (114.4)
Balance, end of
period........... $1,231.7 $859.5 $1,231.7 $ 859.5
(4) An analysis of the cumulative translation adjustment in
millions of dollars follows:
Three Months Nine Months
Ended Ended
July 31 July 31
1994 1993 1994 1993
Balance, beginning
of period................ $45.0 $27.5 $41.5 $19.4
Translation adjustments.... (8.4) (4.0) (4.8) 4.0
Income taxes applicable to
translation adjustments.. (.4) 10.0 (.5) 10.1
Balance, end of period..... $36.2 $33.5 $36.2 $33.5
(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 nine 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 third quarter
and
first nine months of 1993 benefited by $5.9 million or $.08
per
share and $21.2 million or $.28 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:
July 31 Oct 31 July 31
1994 1993 1993
Raw materials and
supplies................ $ 193 $ 192 $ 172
Work-in-process........... 385 295 353
Finished machines and
parts................... 1,123 919 1,121
Total FIFO value.......... 1,701 1,406 1,646
Adjustment to LIFO
basis................... 965 942 1,036
Inventories............... $ 736 $ 464 $ 610
(6) During the first nine 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 $48 million. At July 31, 1994,
the net
unpaid balance of all retail notes previously sold by the
Financial Services subsidiaries and the Equipment Operations
was
$776 million. The Company was contingently liable for
recourse
on credit receivable sales in the maximum amount of $78
million
at July 31, 1994.
Certain foreign subsidiaries have pledged assets with a
balance sheet value of $46 million as collateral for bank
advances of $2 million as of July 31, 1994.
At July 31, 1994, the Company had commitments of
approximately
$89 million for construction and acquisition of property and
equipment.
(7) Dividends declared and paid on a per share basis were as
follows:
Three Months Nine Months
Ended Ended
July 31 July 31
1994 1993 1994 1993
Dividends declared $.50 $.50 $1.50 $1.50
Dividends paid $.50 $.50 $1.50 $1.50
(8) The calculation of primary net income per share is based on
the average number of shares outstanding during the nine
months ended July 31, 1994 and 1993 of 86,068,000 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 nine 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 third quarter and first nine
months of
1993 have also been restated to reflect an incremental
pretax
benefits expense of $14.5 million ($9.3 million or $.12 per
share
after income taxes) and $43.4 million ($27.8 million or $.36
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 and nine-month 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 June 1994, the Company granted 65,083 shares of stock
under
the Company's restricted stock plan for key employees. The
market value of the restricted stock at the time of grant
totaled $4.5 million.
At July 31, 1994, a total of 268,459 restricted shares was
outstanding and 378,274 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 (see the
Company's most recent report on Form 10-K and the report on
Form 10-Q for the prior quarter). The Company and the John
Deere 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.
(14) In July 1994, Deere & Company announced it was in the
process
of finalizing the purchase of the Homelite division of
Textron, Inc. Homelite is a leading producer of outdoor
power
equipment, including string trimmers, chain saws, leaf
blowers, brushcutters and related equipment for the
homeowner
and commercial markets. The purchase was completed on
August
29, 1994 and will not have a material effect on the
Company's
operating results.
(15) 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 a record for the third
quarter of the fiscal year totaling $157.7 million or $1.82 per
share.
This is the fourth consecutive quarter in which the Company has
reported
record earnings for that quarter. The 1994 third quarter results
increased by 74 percent or approximately $67 million compared
with last
year's restated net income of $90.8 million or $1.19 per share.
Results
for the quarter reflected continued improvement compared with a
year ago
primarily due to higher North American production and sales
volumes, as
well as improved operating efficiencies and better than
previously
anticipated results from the Company's overseas operations. The
efficiency improvements were particularly important to the
Company's
better quarterly results. These continuing efforts to enhance
efficiency should provide the Company with a sound basis for the
future.
Price realization during the quarter also improved compared to
last year
as sales incentive costs continued to decline from last year's
levels.
Additionally, net income from the Company's Financial Services
subsidiaries remained at a strong level during the current
quarter.
The 1993 third quarter and nine-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 Nine Months
Ended Ended
July 31 July 31
1994 1993 1994 1993
Net income as originally
reported $157.7 $100.1 $434.0 $ 102.7
Restatement of income
for the incremental
effect of changes in
accounting (9.3) (27.8)
Income before cumulative
effect of changes in
accounting 157.7 90.8 434.0 74.9
Cumulative effect of changes
in accounting (1,105.3)
Net income (loss) as restated $157.7 $ 90.8 $434.0 $(1,030.4)
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 July 31, 1994, the expected
employment
reductions from the restructuring in Europe were approximately 56
percent complete and approximately 54 percent of the $107 million
accrual established during the second quarter of 1993 had been
disbursed.
Worldwide production tonnage for the third quarter of 1994 was up
17
percent compared with 1993. The third quarter production tonnage
increase would have been even higher if not for the impact of the
initial production start-up of the Company's new large row-crop
tractor
line. These start-up activities are planned to be completed
during
September 1994 when production levels should return to more
normal
levels. Fourth quarter production of certain vehicles may be
affected
by the availability of tires, which remained in tight supply at
the end
of the quarter.
Worldwide net sales and revenues increased 14 percent to $2,327
million
in the third quarter of 1994 from $2,049 million during the same
period
last year. Net sales of equipment were $1,979 million in the
quarter,
an increase of 15 percent compared with $1,727 million in the
third
quarter of 1993. The physical volume of worldwide net sales to
dealers
increased approximately nine percent in the third quarter. Net
sales
and revenues also include revenues of the Company's credit,
insurance
and health care operations, which totaled $324 million in the
third
quarter of 1994 compared with $297 million last year.
Worldwide net income for the first nine months of 1994 totaled
$434.0
million or $5.04 per share compared with restated income of
$154.9
million or $2.01 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
nine
months of 1993, the restated net loss after special items was
$1,030.4
million or $13.32 per share, which included $1,105.3 million for
the
cumulative effect of accounting changes and $80.0 million of
overseas
restructuring charges.
Worldwide production tonnage during the first nine months of 1994
was 19
percent higher than in the same period last year. Worldwide net
sales
and revenues were $6,514 million during the initial nine months
of 1994,
a 17 percent increase compared to $5,578 million in the same
period last
year. Net sales of equipment increased 19 percent to $5,514
million for
the first nine months of 1994 from $4,630 million during the same
period
of 1993. The physical volume of worldwide net sales increased
approximately 15 percent in the first nine months of this year.
The
Company's Financial Services revenues totaled $931 million during
the
first nine months of 1994, a seven percent increase compared with
$873
million during the same period last year.<PAGE>
Worldwide net sales and revenues
in millions of dollars follow:
Three Months Nine Months
Ended July 31 % Ended July 31 %
1994 1993 Change 1994 1993 Change
Net sales:
Agricultural equipment $1,194 $1,091 + 9 $3,413 $2,897 +18
Industrial equipment 453 396 +14 1,193 966 +23
Lawn and grounds care
equipment 332 240 +38 908 767 +18
Total net sales 1,979 1,727 +15 5,514 4,630 +19
Financial Services
revenues 324 297 + 9 931 873 +7
Other revenues 24 25 - 4 69 75 -8
Total net sales
and revenues $2,327 $2,049 +14 $6,514 $5,578 +17
United States and Canada:
Equipment net sales $1,444 $1,291 +12 $4,227 $3,460 +22
Financial Services
revenues 324 297 + 9 931 873 +7
Total 1,768 1,588 +11 5,158 4,333 +19
Overseas net sales 535 436 +23 1,287 1,170 +10
Other revenues 24 25 - 4 69 75 -8
Total net sales
and revenues $2,327 $2,049 +14 $6,514 $5,578 +17
North American retail sales of John Deere agricultural equipment
during
the third quarter and the first nine months of 1994 continued at
levels
higher than last year. North American retail sales of John Deere
industrial equipment were significantly higher in both the
quarter and
the first nine months compared with a year ago, primarily
resulting from
increases in residential and public construction activity. North
American lawn and grounds care equipment retail sales for the
third
quarter and year-to-date were at strong levels compared with last
year,
reflecting continued growth in the general economy. Overseas
industry
retail demand for agricultural equipment in 1994 improved in many
of the
Company's markets compared to last year. However, industry
retail demand
in Western Europe remained at historically low levels.
The Company's worldwide Equipment Operations, which exclude the
Financial Services subsidiaries, had income of $113.9 million for
the
quarter and $309.4 million year-to-date in 1994 compared with
income
before special items of $46.6 million for the quarter and $28.3
million year-to-date last year. Including the restructuring
charges
and the cumulative effect of the accounting changes, these
operations
incurred a net loss of $1,150.1 million for the first nine months
of
1993. Results in the third quarter and first nine months of 1993
benefited by $5.9 million and $21.2 million after income taxes,
respectively, from the expected reduction of inventories valued
on a
last-in, first-out (LIFO) basis. A LIFO benefit was not
recognized
in 1994. The income tax provision relating to the Equipment
Operations for the first nine months of 1993 was unfavorably
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 81.9 percent in the third quarter of
1993
to 79.3 percent in the same period this year. During the first
nine
months of 1994, the ratio of cost of goods sold to net sales was
78.8
percent compared with 83.8 percent in the first nine months of
last
year. The North American operations' cost ratios were lower due
mainly to 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 primarily from the
restructuring of these operations, and 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 nine months compared with last year.
The North American agricultural equipment division generated
larger
operating profits in both the current quarter and the first nine
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 nine percent higher and sales increased three percent
for
the third quarter of 1994 compared with last year. Year-to-date
tonnage and sales were 21 percent higher compared to last year.
The North American lawn and grounds care equipment division
reported
improved operating profits in both the third quarter and the
first
nine months of 1994 due to higher production and sales volumes,
compared with last year's small third quarter operating loss and
year-to-date operating profit. North American lawn and grounds
care
equipment production tonnage was up 38 percent and sales
increased 44
percent in the third quarter of 1994 compared with last year.
Production increased 24 percent and sales were 21 percent higher
in
the first nine months compared with last year.
The North American industrial equipment division showed improved
operating profits in both the third quarter and first nine months
of
1994 compared with last year's small third quarter and
year-to-date
operating profits, mainly as a result of higher production and
sales
volumes, and lower operating costs. North American industrial
equipment production was 26 percent higher in the third quarter
while
sales were up 12 percent compared with last year. For the first
nine
months of 1994, production tonnage increased 24 percent while
sales
were 25 percent higher compared with the same period of 1993.
The overseas equipment division had an operating profit in both
the
third quarter and the first nine months of 1994 compared with
last
year's small operating profit for the quarter and a small
year-to-
date operating loss before restructuring costs. The improved
overseas profitability resulted primarily from lower operating
costs
generated by the restructuring of the Company's European
operations,
as well as higher sales volumes compared with last year. The
continuing restructuring of these operations should improve the
division's position in the future. Including the restructuring
charge, the overseas division incurred a large operating loss in
the
first nine months of 1993. Production tonnage increased 18
percent
in the third quarter and seven percent in the first nine months
of
1994 compared with the same periods last year. The physical
volume
of overseas sales was approximately 16 percent higher in the
current
quarter and seven percent higher in the first nine months of 1994
compared with the same periods last year.
Net income of the Company's credit operations was $28.1 million
in
the third quarter of 1994 compared to $31.4 million in last
year's
third quarter. For the first nine months of 1994, net income of
these subsidiaries was $82.1 million compared to income of $91.2
million last year before the cumulative effect of accounting
changes.
Earnings for the quarter were unfavorably affected by lower gains
from the sale of retail notes and slightly lower financing
margins
due to a competitive marketplace. In the first nine months of
1994,
earnings were unfavorably affected by the impact of a smaller
average
receivable and lease portfolio caused mainly by the sale of
retail
notes in 1993, lower gains related to notes previously sold and
higher administrative and operating expenses due primarily to an
additional provision for a legal settlement. These decreases
were
partially offset by higher securitization and servicing fee
income
from retail notes previously sold but still administered, coupled
with a lower provision for credit losses. Net income of the
credit
operations totaled $87.4 million in the first nine months of
1993,
including the cumulative effect of the accounting changes.
Total revenues of the credit operations were comparable in the
third
quarter of both years, and decreased seven percent in the first
nine
months from $391 million last year to $365 million this year.
Compared to last year, revenues in the first nine months of 1994
were
affected by the smaller average receivable and lease portfolio
caused
mainly by the sale of receivables in 1993, lower gains from the
sale
of retail notes and lower levels of interest rates resulting in
lower
finance charges earned on the receivable and lease portfolio.
The
year-to-date decrease in revenues was partially offset by
securitization and servicing fee income from retail notes
previously
sold, which increased from $14 million in the first nine months
of
1993 to $22 million this year. The average balance of total net
receivables and leases financed was nine percent higher in the
third
quarter and four percent lower in the first nine months of 1994
compared with the same periods last year. The increase in
average
borrowings in the third quarter of this year resulted in an eight
percent increase in interest expense in the current quarter
compared
with the same period of 1993. Lower borrowing rates and a
decrease
in year-to-date average borrowings caused a nine percent decrease
in
interest expense in the first nine months of 1994 compared to
last
year. The credit subsidiaries' consolidated ratio of earnings
before
fixed charges to fixed charges was 1.87 to 1 for the third
quarter
this year compared with 2.05 to 1 in 1993. This ratio was 1.95
to 1
for the first nine months this year compared with 1.96 to 1 in
the
comparable period of 1993.
Net income of the insurance and health care operations was $12.3
million in the third quarter of 1994 compared with $9.9 million
in
the same quarter last year. For the first nine months, net
income of
these operations increased to $37.3 million this year compared
with
income of $30.8 million in 1993 before the cumulative effect of
accounting changes. Insurance and health care results for both
the
third quarter and the first nine months of 1994 have improved,
reflecting the continued profitable growth of these businesses.
For
the third quarter, insurance and health care premiums earned
increased 16 percent in 1994 compared with the same period last
year,
while expenses and the provision for losses increased 13 percent
this
year. For the nine-month period, insurance and health care
premiums
earned increased by 14 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
$27.7
million in the first nine months of 1993, including the
cumulative
effect of the accounting changes.
North American agricultural retail sales during the first three
quarters of 1994 provide a sound base for operations during the
remainder of the year. The United States Department of
Agriculture
continues to forecast farm net cash income for 1994 to be at one
of
the highest levels in history, and crop yields are expected to
attain
near record levels. Although commodity prices have softened in
response to the expected bumper crops, North American
agricultural
equipment demand is expected to continue at a strong level
throughout
1994.
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 industry
retail
sales being slightly higher than 1993 levels.
The North American economy has continued to expand in 1994
despite
recent increases in interest rates. This expansion should
continue
to provide a solid base for industrial and lawn and grounds care
equipment retail sales during the remainder of the year.
In response to retail demand, the Company has again increased its
North American production schedules. As a result, 1994 worldwide
production tonnage is now anticipated to be 17 percent higher
than
1993 output, up from the Company's prior estimate of 16 percent.
Worldwide agricultural equipment production tonnage is expected
to be
up approximately 15 percent from last year, when dealer
receivables
were reduced by $146 million. Lawn and grounds care equipment
production tonnage is expected to be 19 percent higher than 1993
and
industrial equipment production tonnage 23 percent higher than a
year
ago. Worldwide production tonnage during the last quarter of
1994 is
expected to be up 11 percent over the same period last year,
despite
the planned production changeover associated with the
introduction of
the Company's new large row-crop tractor line.
CAPITAL RESOURCES AND LIQUIDITY
The discussion of capital resources and liquidity focuses on the
balance sheet and statement of cash flows, and it has been
organized
to review 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.
Positive cash flows from operating activities of $264 million in
the
first nine months of 1994 resulted mainly from net income and
dividends received from the Financial Services operations, which
were
partially offset by the normal seasonal increases in dealer
receivables and Company-owned inventories, and contributions to
the
pension fund. Cash required for the payment of borrowings,
payment
of dividends and purchases of property and equipment was provided
primarily from the cash flow from operations, a decrease in
receivables from the Financial Services operations and a decrease
in
cash and cash equivalents.
In the first nine months of 1993, the positive cash flow from
operations of $60 million resulted mainly from income earned,
excluding the noncash effects of accounting changes and
restructuring
charges, and a decrease in dealer receivables. These positive
cash
flows from operations were partially offset by the normal
seasonal
increase in Company-owned inventories, annual volume discount
payments to dealers and contributions to the pension fund. Cash
required for purchases of property and equipment, payment of
dividends and an increase in cash and cash equivalents last year
was
provided primarily by an increase in borrowings, a decrease in
receivables from the Financial Services operations and the cash
flow
from operations.
Net dealer accounts and notes receivable, which largely represent
dealers' inventories financed by the Company, have increased
seasonally by $188 million since October 31, 1993. However,
dealer
receivables have only increased $134 million compared to last
year
despite a sizeable increase in retail demand for the Company's
products. Compared with the levels 12 months earlier, North
American
agricultural equipment dealer receivables increased approximately
$45
million and North American lawn and grounds care dealer
receivables
increased approximately $55 million, while North American
industrial
equipment dealer receivables decreased approximately $5 million.
Total overseas dealer receivables were approximately $40 million
higher 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 July 31, 1994, 43 percent at October 31, 1993 and 46 percent
at
July 31, 1993. The percentage of total worldwide dealer
receivables
outstanding for periods exceeding 12 months was eight percent at
July
31, 1994, 11 percent at October 31, 1993 and 10 percent at July
31,
1993.
Company-owned inventories at July 31, 1994 have increased
seasonally
by $271 million compared with the end of the previous fiscal year
and
have increased $126 million compared to the levels one year ago
due
to higher production volumes.
Capital expenditures for the first nine months of 1994 were $110
million compared with $115 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
$1,256
million at July 31, 1994 compared with $1,546 million at the end
of
fiscal year 1993 and $2,229 million at July 31, 1993. The ratio
of
total debt to total capital (total interest-bearing debt and
stockholders' equity) was 34 percent, 43 percent and 59 percent
at
July 31, 1994, October 31, 1993 and July 31, 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 nine 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,
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 nine 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 $201 million during the first nine
months of
1994. Financing activities provided $705 million during the same
period, resulting from a $1,165 million increase in outside
borrowings which was partially offset by a $257 million decrease
in
payables to the Equipment Operations and payment of a $203
million
dividend to the Equipment Operations. Cash used for investing
activities totaled $925 million in the first nine months,
primarily
due to the cost of credit receivables acquired exceeding
collections.
Cash and cash equivalents also decreased $19 million in the first
nine months of 1994.
In the first nine months of last year, the aggregate cash
provided
from operating and investing activities was used primarily to
reduce
outside borrowings and payables to the Equipment Operations, and
to
increase cash and cash equivalents. Cash provided from Financial
Services operating activities was $164 million during the first
nine
months of 1993. Investing activities provided $194 million of
cash
in the first nine months of 1993, primarily due to net proceeds
of
$577 million received from the sale of receivables in the public
market, which was partially offset by funds used for credit
receivable and lease acquisitions which exceeded collections by
$373
million. Cash used for financing activities totaled $168 million
in
the first nine months of 1993, representing a net decrease in
outside
borrowings of $96 million and a $73 million decrease in payables
to
the Equipment Operations. Additionally, there was a $189 million
increase in cash and cash equivalents during the first nine
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 nine 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 $794 million in the first
nine
months of 1994 and by $471 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
nine
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 nine
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 $612 million were received. The
levels of retail notes, revolving charge accounts and financing
lease
receivables were higher than one year ago, while wholesale
receivables were comparable to a year ago. Net credit
receivables
administered by the credit subsidiaries, which include
receivables
previously sold, amounted to $5,247 million at July 31, 1994
compared
with $5,076 million at October 31, 1993 and $4,922 million at
July
31, 1993. At July 31, 1994, the net unpaid balance of all retail
notes previously sold was $773 million compared with $1,394
million
at October 31, 1993 and $918 million at July 31, 1993.
Additional
sales of retail notes are expected to be made in future periods.
Total interest-bearing debt of the credit subsidiaries was $3,755
million at July 31, 1994 compared with $2,603 million at the end
of
fiscal year 1993 and $3,357 million at July 31, 1993. Total
outside
borrowings increased during the first nine 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 5.7 to 1 at July 31, 1994
compared
with 3.8 to 1 at October 31, 1993 and 4.0 to 1 at July 31, 1993.
In January 1994, the Capital Corporation redeemed $40 million of
its
9.35% subordinated debentures due 2003. During the first nine
months
of 1994, the Capital Corporation also issued $10 million and
retired
$343 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 $3,361 million
at
July 31, 1994, $888 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 $2,416 million.
Stockholders' equity was $2,434 million at July 31, 1994 compared
with $2,085 million at October 31, 1993 and $1,518 million at
July
31, 1993. The increase of $349 million in the first nine months
of
1994 resulted primarily from net income of $434 million and an
increase in common stock of $39 million, partially offset by
dividends declared of $129 million.
The Board of Directors at its meeting on August 31, 1994 declared
a
quarterly dividend of 55 cents per share payable November 1, 1994
to
stockholders of record on September 30, 1994.<PAGE>
PART II. OTHER INFORMATION
Item 1. Legal Proceedings
See Note (13) to the Interim Financial Statements.
Item 2. Changes in Securities
None
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
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 percent 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 May 24, 1994
(Item 7) and July 21, 1994 (Item 7). <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: September 13, 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 net income per share 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 Financial data schedule 25
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 Nine Months Ended
July 31
1994 1993
1. Net income (loss) $434,003 $(1,030,367)
2. Adjustment - interest expense,
after tax benefit, applicable
to convertible debentures
outstanding 30 46
3. Net income (loss) applicable to
common stock - before interest
applicable to convertible
debentures $434,033 $(1,030,321)
PRIMARY NET INCOME PER COMMON SHARE:
Shares:
4. Weighted average number of common
shares outstanding 86,068 77,291
5. Incremental shares:
Dilutive common stock options 466 964
Dilutive stock appreciation
rights 51 16
Total incremental shares 517 980
6. Primary net income (loss) per common
share (1 divided by 4) $5.04 * $(13.32)*
FULLY DILUTED NET INCOME PER COMMON SHARE:
Shares:
7. Weighted average number of common
shares outstanding 86,068 77,291
8. Incremental shares:
Dilutive common stock
options 466 979
Dilutive stock appreciation
rights 52 30
9. Common equivalent shares from assumed
conversion of convertible
debentures:
5-1/2% debentures due 2001 28 52
10. Total 86,614 78,352
11. Fully diluted net income (loss) per
common share (3 divided by 10) $ 5.04 * $ (13.32)*
____________
* 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.
EXHIBIT 12
DEERE & COMPANY AND CONSOLIDATED SUBSIDIARIES
COMPUTATION OF RATIO OF EARNINGS TO FIXED CHARGES
Nine Months Ended
July 31
1994 1993
(In thousands of dollars)
Earnings:
Pretax income (loss) of
consolidated group $669,202 $120,965
Dividends received from
less-than-fifty-
percent owned affiliates 2,062 1,516
Fixed charges net of
capitalized interest 224,708 287,645
Total earnings $895,972 $410,126
Fixed charges:
Interest expense of
consolidated group
(includes capitalized
interest) $220,113 $282,764
Portion of rental charges
deemed to be interest 4,595 5,040
Total fixed charges $224,708 $287,804
Ratio of earnings to fixed
charges ** 3.99 1.43
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 year ended October 31, 1991, earnings available for
fixed charges coverage were $22 million less 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.
<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 31 October
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
WARNING: THE EDGAR SYSTEM ENCOUNTERED ERROR(S) WHILE PROCESSING THIS SCHEDULE.
<TABLE> <S> <C>
EXHIBIT 27
DEERE & COMPANY AND CONSOLIDATED SUBSIDIARIES
FINANCIAL DATA SCHEDULE
(In millions of dollars except per share amounts)
<ARTICLE> 5
<LEGEND>
This schedule contains summary financial information extracted
from form 10-Q and is qualified in its entirety by reference to
such financial statements.
</LEGEND>
<RESTATED>
<CIK> 0000315189
<NAME> DEERE&COMPANY
<MULTIPLIER> 1,000,000
<CURRENCY> U.S. DOLLARS
<S> <C>
<PERIOD-TYPE> 9-MOS
<FISCAL-YEAR-END> OCT-31-1994
<PERIOD-START> NOV-1-1993
<PERIOD-END> JUL-31-1994
<EXCHANGE-RATE> 1
<CASH> 296
<SECURITIES> 1,108
<RECEIVABLES> 8,053
<ALLOWANCES> 106
<INVENTORY> 736
<CURRENT-ASSETS> 0
<PP&E> 3,886
<DEPRECIATION> 2,685
<TOTAL-ASSETS> 12,817
<CURRENT-LIABILITIES> 0
<BONDS> 1,965
<COMMON> 1,476
0
0
<OTHER-SE> 958
<TOTAL-LIABILITY-AND-EQUITY> 12,817
<SALES> 5,514
<TOTAL-REVENUES> 6,514
<CGS> 4,333
<TOTAL-COSTS> 4,987
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 24
<INTEREST-EXPENSE> 220
<INCOME-PRETAX> 669
<INCOME-TAX> 244
<INCOME-CONTINUING> 434
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 434
<EPS-PRIMARY> 5.04
<EPS-DILUTED> 5.04
</TABLE>
