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SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
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FORM 10-K
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ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934
FOR THE FISCAL YEAR ENDED OCTOBER 31, 1994
Commission file number 1-4121
DEERE & COMPANY
(Exact name of registrant as specified in its charter)
DELAWARE 36-2382580
(State of incorporation) (IRS Employer Identification No.)
JOHN DEERE ROAD, MOLINE, ILLINOIS 61265 (309) 765-8000
(Address of principal executive offices) (Zip Code) (Telephone Number)
SECURITIES REGISTERED PURSUANT
TO SECTION 12(b) OF THE ACT
TITLE OF EACH CLASS NAME OF EACH EXCHANGE ON WHICH REGISTERED
Common stock, $1 par value New York Stock Exchange
Chicago Stock Exchange
Frankfurt, Germany Stock Exchange
5-1/2% Convertible Subordinated
Debentures Due 2001 New York Stock Exchange
8-1/4% Notes Due 1996 New York Stock Exchange
9-1/8% Notes Due 1996 New York Stock Exchange
8.95% Debentures Due 2019 New York Stock Exchange
8-1/2% Debentures Due 2022 New York Stock Exchange
SECURITIES REGISTERED PURSUANT TO SECTION 12(g) OF THE ACT: NONE
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
--- ---
Indicate by check mark if disclosure of delinquent filers pursuant to Item 405
of Regulation S-K is not contained herein, and will not be contained, to the
best of registrant's knowledge, in definitive proxy or information statements
incorporated by reference in Part III of this Form 10-K or any amendment to this
Form 10-K. [X]
The aggregate quoted market price of voting stock of registrant held by
nonaffiliates at December 31, 1994 was $5,717,820,664. At December 31, 1994,
86,496,272 shares of common stock, $1 par value, of the registrant were
outstanding. DOCUMENTS INCORPORATED BY REFERENCE. Portions of the proxy
statement for the annual meeting of stockholders to be held on February 22, 1995
are incorporated by reference in Part III.
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Page 1 of 73 pages.
Index to exhibits is on pages 52-54.
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PART I
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ITEM 1. BUSINESS.
PRODUCTS
Deere & Company (Company) and its subsidiaries (collectively called John Deere)
have operations which are categorized into five business segments.
The Company's worldwide AGRICULTURAL EQUIPMENT segment manufactures and
distributes a full range of equipment used in commercial farming --
including tractors; tillage, soil preparation, planting and harvesting
machinery; and crop handling equipment.
The Company's worldwide INDUSTRIAL EQUIPMENT segment manufactures and
distributes a broad range of machines used in construction, earthmoving and
forestry -- including backhoe loaders; crawler dozers and loaders;
four-wheel-drive loaders; scrapers; motor graders; excavators; and log
skidders. This segment also includes the manufacture and distribution of
engines and drivetrain components for the original equipment manufacturer
(OEM) market.
The Company's worldwide LAWN AND GROUNDS CARE EQUIPMENT segment
manufactures and distributes equipment for commercial and residential uses
-- including small tractors for lawn, garden and utility purposes; riding
and walk-behind mowers; golf course equipment; utility transport vehicles;
snowblowers; hand held products such as chain saws, string trimmers and
leaf blowers and other outdoor power products.
The products produced by the equipment segments are marketed primarily
through independent retail dealer networks.
The Company's CREDIT segment, which operates in the United States and
Canada, primarily finances and services: retail notes related to sales by
John Deere dealers of new and used equipment; retail notes related to sales
by non-Deere dealers of recreational vehicle and recreational marine
products; leases of John Deere equipment to retail customers; unsecured
revolving charge accounts acquired from merchants; and wholesale notes for
certain inventories held by recreational vehicle and engine dealers.
The Company's INSURANCE AND HEALTH CARE segment issues policies in the
United States and Canada primarily for: a general line of property and
casualty insurance to John Deere and non-Deere dealers and to the general
public; group life and group accident and health insurance for employees of
participating John Deere dealers and employees of John Deere; and life and
annuity products to the general public. This segment also provides health
management programs and related administrative services in the United
States to corporate customers and employees of John Deere.
The Company's worldwide agricultural, industrial and lawn and grounds care
equipment operations and subsidiaries are sometimes referred to as the
"Equipment Operations." The Company's credit, insurance and health care
subsidiaries are sometimes referred to as "Financial Services."
The Company believes that its worldwide sales of agricultural equipment during
recent years have been greater than those of any other business enterprise. It
also believes that John Deere is an important provider of most of the types of
industrial equipment that it markets, and a leader in some size ranges. The
Company also believes it is the largest manufacturer of lawn and garden tractors
and provides the broadest line of grounds care
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equipment in North America. The John Deere enterprise has manufactured
agricultural machinery since 1837. The present Company was incorporated under
the laws of Delaware in 1958.
MARKET CONDITIONS AND OPERATING RESULTS
North American agricultural economic conditions improved in 1994 compared with
1993. The Company believes that the resulting improvement in farmers'
confidence was a primary contributor to higher agricultural equipment demand in
nearly all market areas in North America during 1994. Although direct
government payments to farmers declined in 1994, net farm cash income is
forecasted to be near record levels. Additionally, farm real estate values
increased by nearly four percent during the year, further improving overall farm
balance sheets.
Overseas retail sales also showed improvement during 1994. Although European
industry retail sales of agricultural equipment are expected to continue their
long-term downward trend, reduced uncertainty over the General Agreement on
Tariffs and Trade (GATT) and a better understanding of these new regulations
have increased European farmers' confidence. Consequently, many farmers who had
delayed making purchases are now buying new equipment. Therefore, European
industry retail sales for fiscal 1994 are expected to be higher than 1993
levels.
The North American general economy has continued to improve during 1994. Strong
employment growth, coupled with related gains in income, stimulated consumer
spending on durable goods in 1994. Housing starts and nonresidential
construction in the United States also increased by 11 percent and three
percent, respectively, compared with a year ago. These improvements provided a
solid base for increases in both the Company's industrial and lawn and grounds
care equipment sales during 1994.
Acquisitions of receivables and leases by the Company's credit subsidiaries were
also higher in 1994 compared with last year due primarily to improvements in the
general economy, increased retail sales of John Deere equipment as well as
recreational products, and a higher revolving charge account and wholesale note
volume. Insurance and health care premium volumes also increased, benefiting
primarily from the strengthening economy and the growth strategy of the
Company's health care business.
OUTLOOK
Near record United States net farm cash income in 1994 should provide a solid
base for 1995 farm expenditures. Higher exports of farm commodities should
continue to result from implementation of the North American Free Trade
Agreement (NAFTA), which further expands tariff-free quotas into Mexico during
1995. Higher incomes in developing countries such as China and India also
should promote better export markets for United States grains and oil seeds.
Ratification of the GATT treaty should further aid United States exports by
lowering European Union export subsidies.
In 1995, a new United States farm bill should be enacted which may create some
uncertainty in the farm economy. However, farmers have maintained tight control
of farm expenses in recent years, resulting in significant improvements in their
balance sheets, which should enable them to support more timely modernization of
their equipment. The Company's recently introduced innovative models of medium
and large row-crop tractors have been well received by customers throughout the
world. The Company believes, on balance, these factors should support farmers'
confidence, and as a result, worldwide demand for agricultural equipment should
remain at current levels.
The North American general economy is widely expected to show moderate growth in
1995. Recent inflationary concerns coupled with increases in interest rates
could adversely affect housing starts, as well as consumer confidence. However,
consumer spending and housing construction currently remain strong.
Additionally, demand for certain manufactured goods may generate the
construction or modernization of factories in certain
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manufacturing sectors. Public construction is also expected to increase, led by
highway, street, water and sewer projects. Based on these factors, the Company
expects retail sales of industrial and lawn and grounds care equipment in 1995
to continue at strong levels. The markets served by the Company's Financial
Services operations are also expected to continue to grow in conjunction with
the strong continued demand for new equipment and the projected growth in the
general economy.
In response to these market conditions, initial North American production
tonnage schedules have been increased approximately four percent compared to
1994. Overseas production tonnage schedules will be approximately six percent
lower than in 1994, reflecting the re-sourcing of a portion of the 50-series
tractors in accordance with the ongoing restructuring of the Company's European
tractor manufacturing operations. Despite this lower initial level of
production, overseas operations are expected to show continued improvement.
Additionally, worldwide first quarter production tonnage is forecasted to
increase 10 percent compared with last year, reflecting continued strong retail
demand and the initial production and shipment of the new high horsepower 8000-
series tractors. However, certain vehicle tires remained in tight supply during
the fourth quarter of 1994 due to a work stoppage at one of the company's key
suppliers, and future product availability could be adversely affected by a
prolonged continuation of this work stoppage.
Worldwide net income for 1994 was a record, totaling $604 million or $7.01 per
share compared with last year's income of $248 million or $3.21 per share before
the effects of the special items as shown in the table on page 22 and described
on pages 25 and 26. The Company's strongly improved 1994 results reflect
substantially higher North American production and sales volumes, improved
operating efficiencies and significantly better overseas results. Additionally,
the Company's exports from the United States set a new record, totaling $1,144
million. The Company's results also continued to benefit from the strong
performance of its Financial Services subsidiaries. Income in 1993 was $184
million or $2.39 per share after the effects of the restructuring charges and
the tax rate change as shown in the table on page 22. However, the Company
incurred a worldwide net loss of $921 million or $11.91 per share in 1993 after
the cumulative effect of accounting changes.
The Company's worldwide Equipment Operations, which exclude income from the
credit, insurance and health care operations, had income of $433 million in 1994
compared with income of $77 million in 1993 before the effects of the
restructuring charges and the tax rate change. Including these two special
items, the Equipment Operations' income was $13 million in 1993. The Equipment
Operations incurred a net loss of $1,085 million in 1993 after all of the
special items including the cumulative effect of the accounting changes. Net
income of the Company's credit subsidiaries totaled $114 million in 1994
compared with income before accounting changes of $122 million in 1993 ($118
million after accounting changes). Net income from insurance and health care
operations was $47 million in 1994 compared with income before accounting
changes of $42 million last year ($39 million after accounting changes).
The improved operating results of the Equipment Operations in 1994 were
primarily due to higher North American production and sales volumes, and
continued improvements in operating efficiencies. North American production
tonnage in 1994 increased 21 percent and sales were 19 percent higher than last
year. The overseas equipment operations had significantly higher income this
year, primarily due to lower operating costs generated by the ongoing
restructuring of the Company's European operations, coupled with higher sales
and production volumes.
Worldwide net sales and revenues, which include net sales of equipment and
revenues from the credit, insurance and health care operations, increased 16
percent to $9,030 million in 1994 compared with $7,754 million in 1993.
Worldwide net sales were $7,663 million in 1994, an increase of 18 percent from
sales of $6,479 million last year. The physical volume of the Company's
worldwide sales increased approximately 14 percent in 1994. Worldwide
production tonnage of John Deere products in 1994 was 18 percent higher than
last year. For further discussion of results of operations, see the information
under the caption "Management's Discussion and Analysis" on pages 22-31.
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EQUIPMENT OPERATIONS
AGRICULTURAL EQUIPMENT
Sales of agricultural equipment, particularly in the United States and Canada,
are affected by total farm cash receipts, which reflect levels of farm commodity
prices, acreage planted, crop yields and government payments. Sales are also
influenced by general economic conditions, levels of interest rates,
agricultural trends and the levels of costs associated with farming. Weather
and climatic conditions can also affect buying decisions of equipment
purchasers.
A substantial part of new agricultural equipment sales is for replacement of
equipment that is old or is less efficient than newer equipment, or both. When
the farm economy is depressed, farmers tend to postpone the replacement of their
existing equipment. When conditions improve, sales are stimulated by demand for
replacement equipment. During the 1990's, there has been a continuation of the
trend toward minimum tillage agriculture. Minimum tillage agriculture reduces
soil erosion but increases the use of chemical herbicides and pesticides.
Since the early 1980s, farmers have experienced cost/price pressures which have
caused them to be more concerned with cost control and maximum productivity.
The John Deere agricultural equipment sold in this environment is high-powered,
versatile and technologically sophisticated. The entire row-crop tractor line
has been redesigned and replaced in the last four years.
Large, cost-efficient, highly-mechanized agricultural operations account for an
important share of total United States farm output. The large-size agricultural
equipment used on such farms has been particularly important to John Deere. A
large proportion of the Equipment Operations' total agricultural equipment sales
in the United States is comprised of tractors over 100 horsepower and
self-propelled combines.
Seasonal patterns in retail demand for agricultural equipment result in
substantial variations in the volume and mix of products sold to retail
customers during various times of the year. Seasonal demand must be estimated
months in advance, and equipment must be manufactured in anticipation of such
demand in order to achieve efficient utilization of manpower and facilities
throughout the year. The Equipment Operations incur substantial seasonal
indebtedness with related interest expense to finance production and inventory
of equipment, and to finance sales to dealers in advance of seasonal demand.
The Equipment Operations often encourage retail sales by waiving retail finance
charges during off-season periods or in other sales promotions.
An important part of the competition within the agricultural equipment industry
during the past decade has come from a diverse variety of short-line and
specialty manufacturers with differing manufacturing and marketing methods.
Because of industry conditions, especially consolidation among large integrated
competitors, the competitive environment is undergoing important changes, and
the importance of short-line and specialty manufacturers, as well as foreign
suppliers, may continue to increase in the future.
In addition to the agricultural equipment manufactured by the Equipment
Operations, a number of products are purchased from other manufacturers for
resale by John Deere, including eight models of tractors sourced from a Czech
manufacturer.
INDUSTRIAL EQUIPMENT
The industrial equipment industry is broadly defined as including construction,
earthmoving and forestry equipment, as well as some materials handling
equipment, cranes, off-highway trucks and a variety of machines for specialized
industrial applications, including uses in the mining industry. The Equipment
Operations provide types and sizes of equipment that compete for approximately
two-thirds of the estimated total United States
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market for all types and sizes of industrial equipment (other than the market
for cranes and specialized mining equipment). Retail sales of John Deere
industrial equipment are influenced by prevailing levels of residential,
industrial and public construction and the condition of the forest products
industry. Sales are also influenced by general economic conditions and the
level of interest rates.
John Deere industrial equipment falls into three broad categories: utility
tractors and smaller earthmoving equipment, medium capacity construction and
earthmoving equipment, and forestry machines. The Equipment Operations'
industrial equipment business began in the late 1940s with wheel and crawler
tractors of a size and horsepower range similar to agricultural tractors,
utilizing common components. Through the years, the Equipment Operations
substantially increased production capacity for industrial equipment, adding to
the line larger machines such as crawler loaders and dozers, log skidders, motor
graders, hydraulic excavators and four-wheel-drive loaders. These products
incorporate technology and many major components similar to those used in
agricultural equipment, including diesel engines, transmissions and
sophisticated hydraulics and electronics.
The Company and Hitachi Construction Machinery Co., Inc. of Japan have a joint
venture for the manufacture of hydraulic excavators in the United States and for
the distribution of excavators primarily in North, Central and South America.
The Company also has supply agreements with Hitachi under which a broad range of
industrial products manufactured by the Company in the United States, including
four-wheel-drive loaders, are distributed by Hitachi in Japan and other Far East
markets. In addition, Hitachi is manufacturing certain models of
four-wheel-drive loaders for distribution by John Deere primarily in North,
Central and South America.
The Equipment Operations manufacture and distribute diesel engines and
drivetrain components both for use in John Deere products and for sale to other
original equipment manufacturers (OEM).
LAWN AND GROUNDS CARE EQUIPMENT
The line of John Deere lawn and grounds care equipment includes rear-engine
riding mowers, front-engine lawn tractors, lawn and garden tractors, small
diesel tractors, compact utility tractors, front mowers, small utility transport
vehicles, hand held products such as chain saws, string trimmers and leaf
blowers, and a broad line of associated implements for mowing, tilling, snow and
debris handling, aerating, and many other residential, commercial, golf and
sports turf care applications. The product line also includes walk-behind
mowers, snow throwers and other outdoor power products. Retail sales of lawn
and grounds care products are influenced by weather conditions, consumer
spending patterns and general economic conditions.
In August 1994, Deere & Company purchased the Homelite division of Textron, Inc.
for approximately $120 million. 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 did
not have a material effect on the Company's operating results.
In addition to the lawn and grounds care equipment manufactured by the lawn and
grounds care division, certain products are purchased from other manufacturers
for resale by John Deere, including five models of compact utility tractors
sourced from a Japanese manufacturer.
ENGINEERING AND RESEARCH
John Deere makes large expenditures for engineering and research to improve the
quality and performance of its products, and to develop new products. Such
expenditures were $276 million, or 3.6 percent of net sales of equipment in
1994, and $270 million in 1993.
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MANUFACTURING
MANUFACTURING PLANTS. In the United States and Canada, the Equipment Operations
own and operate 18 factory locations, which contain approximately 29.9 million
square feet of floor space. Six of the factories are devoted primarily to the
manufacture of agricultural equipment, two to industrial equipment, one to
engines, one to hydraulics and power train components, one to gray iron and
nodular castings, six to lawn and grounds care equipment, and one to power train
components manufactured mostly for OEM markets. The Equipment Operations own
and operate tractor factories in Germany, Spain and Argentina; agricultural
equipment factories in France, Germany and South Africa; an engine factory in
France; and two lawn and grounds care facilities in Germany and the Netherlands.
These overseas factories contain approximately 6.1 million square feet of floor
space. The Equipment Operations also have financial interests in a combine
manufacturer in Brazil, in a tractor and implement manufacturer in Mexico and in
a joint venture to build industrial excavators in the United States.
John Deere's facilities are well maintained, in good operating condition and are
suitable for their present purposes. These facilities together with planned
capital expenditures are expected to meet John Deere's needs in the foreseeable
future.
The Equipment Operations manufacture many of the components included in their
products. The principal raw materials required for the manufacture of products
are purchased from numerous suppliers. Although certain vehicle tires remained
in tight supply during the fourth quarter due to a work stoppage at one of the
Company's key suppliers, the Company believes that available sources of supply
will generally be sufficient for its needs for the foreseeable future. Although
the Equipment Operations depend upon outside sources of supply for a substantial
number of components, manufacturing operations are extensively integrated.
Similar or common manufacturing facilities and techniques are employed in the
production of components for industrial, agricultural and lawn and grounds care
equipment.
Although production tonnage in 1994 was 18 percent higher than in 1993,
production continues to be well below overall capacity levels, except for
certain models which have been affected by capacity constraints. The Equipment
Operations' manufacturing strategy involves the implementation of appropriate
levels of technology and automation, so that manufacturing processes can remain
viable at relatively low production levels and can be flexible enough to
accommodate many of the product design changes required to meet market
requirements.
In order to utilize manufacturing facilities and technology more effectively,
the Equipment Operations continue to pursue improvements in manufacturing
processes. Manufacturing activities judged not competitively advantageous for
the Equipment Operations on a long-term basis are being shifted to outside
suppliers, while many of those manufacturing activities that do offer long-term
competitive advantages are being restructured. Improvements include the
creation of flow-through manufacturing cells which reduce costs and inventories,
increase quality and require less space, and the establishment of flexible
assembly lines which can handle a wider range of product mix and deliver
products at the times when dealers and customers demand them. Additionally,
considerable effort is being directed to manufacturing cost reduction through
product design, the introduction of advanced manufacturing technology and
improvements in compensation and organizational structure. The Equipment
Operations are also pursuing the sale to other companies of selected parts and
components which can be manufactured and supplied to third parties on a
competitive basis.
CAPITAL EXPENDITURES. The Equipment Operations' capital expenditures were $217
million in 1994 compared with $196 million in 1993 and $269 million in 1992.
Provisions for depreciation applicable to the Equipment Operations' property,
plant and equipment during these years were $226 million, $222 million and $213
million, respectively. The Equipment Operations' capital expenditures for 1995
are currently estimated to approximate $230 million. As in recent years, the
1995 expenditures will be primarily associated with new product and operations
improvement programs. The future level of capital expenditures will depend on
business conditions.
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PATENTS AND TRADEMARKS
John Deere owns a significant number of patents, licenses and trademarks which
have been obtained over a period of years. The Company believes that, in the
aggregate, the rights under these patents, licenses and trademarks are generally
important to its operations, but does not consider that any patent, license,
trademark or group of them (other than its house trademarks) is of material
importance in relation to John Deere's business.
MARKETING
In the United States and Canada, the Equipment Operations, excluding Homelite,
distribute equipment and service parts through six agricultural equipment sales
branches, one industrial equipment sales and administration office and two lawn
and grounds care equipment sales and administration offices (collectively called
sales branches). In addition, the Equipment Operations operate a centralized
parts distribution warehouse in coordination with several regional parts depots
in the United States and Canada.
The sales branches in the United States and Canada market John Deere products to
approximately 3,200 retail dealers, all of which are independently owned except
for one retail store owned and operated by the Company. Of these dealers,
approximately 1,460 sell agricultural equipment, 380 sell industrial equipment,
and 20 sell both agricultural and industrial equipment. Smaller industrial
equipment is sold by nearly all of the industrial equipment dealers. Larger
industrial equipment, forestry equipment and a line of light industrial
equipment are sold by most of these dealers. Lawn and grounds care equipment is
sold by most John Deere agricultural equipment dealers, a few industrial
equipment dealers, and about 1,340 lawn and grounds care equipment dealers, many
of whom also handle competitive brands and dissimilar lines of products. The
recently acquired Homelite product line is sold through independent dealers and
various general and mass merchandisers.
Outside North America, John Deere agricultural equipment is sold to distributors
and dealers for resale in over 110 countries by sales branches located in five
European countries, South Africa, Argentina and Australia, by export sales
branches in Europe and the United States, and by associated companies in Mexico
and Brazil. Lawn and grounds care equipment sales overseas occur primarily in
Europe and Australia. Outside North America, industrial equipment is sold
primarily by an export sales branch located in the United States.
WHOLESALE FINANCING
The Equipment Operations provide wholesale financing to dealers in the United
States for extended periods, to enable dealers to carry representative
inventories of equipment and to encourage the purchase of goods by dealers in
advance of seasonal retail demand. Down payments are not required, and interest
is not charged for a substantial part of the period for which the inventories
are financed. A security interest is retained in dealers' inventories, and
periodic physical checks are made of dealers' inventories. Generally, terms to
dealers require payments as the equipment which secures the indebtedness is sold
to retail customers. Variable market rates of interest are charged on balances
outstanding after certain interest-free periods, which currently are 6 to 9
months for agricultural tractors, 6 months for industrial equipment, and from 5
to 24 months for most other equipment. Financing is also provided to dealers on
used equipment accepted in trade, on repossessed equipment, and on approved
equipment from other manufacturers. A security interest is obtained in such
equipment. Equipment dealer defaults incurred in recent years by John Deere
have not been significant.
In Canada, John Deere products (other than service parts and lawn and grounds
care equipment) in the possession of dealers are inventories of the Equipment
Operations that are consigned to the dealers. Dealers are required to make
deposits on consigned equipment remaining unsold after specified periods.
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Sales to overseas dealers are made by the Equipment Operations' overseas and
export sales branches and are, for the most part, financed by John Deere in a
manner similar to that provided for sales to dealers in the United States and
Canada, although maturities tend to be shorter and a security interest is not
always retained in the equipment sold.
Receivables from dealers, which largely represent dealer inventories, were $2.9
billion at October 31, 1994 compared with $2.8 billion at October 31, 1993 and
$2.9 billion at October 31, 1992. At those dates, the ratios of worldwide net
dealer receivables to fiscal year net sales, excluding Homelite, were 38
percent, 43 percent and 51 percent, respectively. The highest month-end balance
of such receivables during each of the past two fiscal years was $3.2 billion at
April 30, 1994 and $3.1 billion at April 30, 1993.
FINANCIAL SERVICES
CREDIT OPERATIONS
UNITED STATES AND CANADA. In the United States and Canada, the Company's credit
subsidiaries provide and administer financing for retail purchases of new and
used John Deere agricultural, industrial and lawn and grounds care equipment.
The Company's credit subsidiaries in the United States and Canada include John
Deere Capital Corporation (Capital Corporation) and its subsidiaries (Deere
Credit, Inc., Farm Plan Corporation, Deere Credit Services, Inc. and John Deere
Receivables, Inc.) and John Deere Finance Limited (collectively referred to as
the Credit Companies). Deere & Company and John Deere Industrial Equipment
Company are referred to as the "sales companies." The Capital Corporation
purchases retail installment sales and loan contracts (retail notes) from the
sales companies. These retail notes are acquired by the sales companies through
John Deere retail dealers in the United States. John Deere Finance Limited
purchases and finances retail notes through John Deere's equipment sales
branches in Canada. The terms of retail notes and the basis on which the credit
subsidiaries acquire retail notes from the sales companies are governed by
agreements with the sales companies. A subsidiary of the Capital Corporation
leases John Deere agricultural, industrial and lawn and grounds care equipment
to United States retail customers.
The credit subsidiaries also purchase and finance retail notes unrelated to John
Deere, representing primarily recreational vehicle and recreational marine
product notes acquired from independent dealers of those products and from
marine product mortgage service companies. The United States credit
subsidiaries also finance and service unsecured revolving charge accounts
through retail merchants in the agricultural, lawn and grounds care and marine
retail markets and, additionally, provides wholesale financing for recreational
vehicles, manufactured housing units, yachts and John Deere engine inventories
owned by dealers of those products. The credit subsidiaries intend to continue
to seek additional volumes and types of non-Deere financing with the objective
of broadening their base of business.
All of the retail notes acquired by the sales companies have been immediately
sold to the Credit Companies. The Equipment Operations have been the Credit
Companies' major source of business, and the Credit Companies have been the sole
vehicles for retail financing by the Equipment Operations. In many cases,
retail purchasers of John Deere products finance their purchases outside the
John Deere organization.
The Credit Companies' terms for financing equipment retail sales (other than
smaller items purchased through unsecured revolving charge accounts) provide for
retention of a security interest in the equipment financed. The Credit
Companies' guidelines for minimum down payments, which vary with the types of
equipment and repayment provisions, are generally not less than 20 percent on
agricultural and industrial equipment, 10 percent on lawn and grounds care
equipment used for personal use and 20 percent for recreational vehicles and
marine products. Finance charges are sometimes waived for specified periods or
reduced on certain products sold or leased in advance of the season of use or in
other sales promotions. The Credit Companies receive compensation from the
Equipment Operations equal to a competitive interest rate for periods during
which
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finance charges are waived or reduced on the retail notes or leases. The cost
is accounted for as a deduction in arriving at net sales by the Equipment
Operations.
Retail leases are offered to equipment users in the United States by Deere
Credit, Inc. A small number of leases are executed between Deere Credit, Inc.
and units of local government. Leases are usually written for periods of one to
six years, and in some cases contain an option permitting the customer to
purchase the equipment at the end of the lease term. Retail leases are also
offered in a generally similar manner to customers in Canada through a Canadian
subsidiary.
The Company has expressed an intention of conducting its business with the
Capital Corporation on such terms that the Capital Corporation's consolidated
ratio of earnings to fixed charges for each fiscal quarter will not be less than
1.05 to 1. For 1994, the consolidated ratio of the Capital Corporation was 1.96
to 1. This arrangement is not intended to make the Company responsible for
payment of the obligations of the Capital Corporation. Additional information
on the Credit Companies appears under the caption "Credit Operations" on pages
27-29.
OVERSEAS. Retail sales financing outside of the United States and Canada is
affected by a diversity of customs and regulations. The Equipment Operations
retain only a minor part of the obligations arising from retail sales of their
products overseas.
INSURANCE AND HEALTH CARE
The Company's insurance subsidiaries consist of John Deere Insurance Group, Inc.
and its subsidiaries in the United States and John Deere Insurance Company of
Canada. The insurance group is made up of a property/casualty division and a
life division. The property/casualty division insures over 4,300 dealership
organizations in the United States. This program provides commercial insurance
for agricultural/ industrial equipment, auto, recreational vehicle and boat
dealerships. In addition, the property/casualty division insures long haul
trucking operations and currently insures approximately 16,000 trucks. Other
specialty insurance programs include insurance on equipment utilized in
forestry, construction and agricultural operations. The Group's involvement in
reinsurance took the form of a business relationship with Re Capital Reinsurance
Corporation as well as the ownership of approximately 44% of the outstanding
shares of Re Capital Corporation, its parent company. On January 11, 1995, Re
Capital Corporation agreed to merge with Zurich Reinsurance Centre Holdings Inc.
(ZRC"). In connection with the execution of the merger agreement, John Deere
Insurance Group separately agreed to sell its shares of Re Capital Corporation
to ZRC. The pre-tax gain from the sale of these shares is not expected to be
material. The life division had nearly $6 billion of life insurance in force at
October 31, 1994. Marketing efforts are focused on providing life and health
insurance coverages to various commercial markets and to individuals nationally.
In 1985, the Company formed John Deere Health Care, Inc. to more fully utilize
the Company's expertise in the field of health care, which was developed from
efforts to control its own health care costs. John Deere Health Care, Inc.
currently provides health management programs and related administrative
services, either directly or through its health maintenance organization
subsidiaries, Heritage National Healthplan and John Deere Family Healthplan, for
companies located in Illinois, Iowa, Wisconsin, Tennessee and Virginia. At
October 31, 1994, approximately 294,900 individuals were enrolled in these
programs, of which approximately 66,600 were John Deere employees, retirees and
their dependents.
For additional financial information on insurance and health care operations,
see the material under the caption "Insurance and Health Care Operations" on
page 29.
9
<PAGE>
ENVIRONMENTAL MATTERS
The Environmental Protection Agency (the "EPA") and the State of California have
issued regulations concerning permissible emissions from off-road engines. The
Company does not anticipate that the cost of complying with the regulations will
be material.
The Company has been designated a potentially responsible party (PRP), in
conjunction with other parties, in certain government actions associated with
hazardous waste sites. As a PRP, the Company has been and will be required to
pay a portion of the costs of evaluation and cleanup of these sites. Management
does not expect that these matters will have a material adverse effect on the
consolidated financial position or operating results of the Company.
EMPLOYEES
At October 31, 1994, John Deere had approximately 34,300 employees, including
26,600 employees in the United States and Canada. Unions are certified as
bargaining agents for approximately 42 percent of John Deere's United States
employees. On September 30, 1994, the Company's collective bargaining agreement
with the United Auto Workers (UAW), the union representing most production
employees in the United States, expired. Through the date of this report, the
Company and the UAW have been unable to reach an agreement as to the terms of a
new contract. Employees are continuing to work under the terms in existence at
the expiration of the former contract, and factory operations remained normal.
The majority of employees at John Deere facilities overseas are also represented
by unions.
EXECUTIVE OFFICERS OF THE REGISTRANT
Following are the names and ages of the executive officers of the Company, their
positions with the Company and summaries of their backgrounds and business
experience. All executive officers are elected or appointed by the Board of
Directors and hold office until the annual meeting of the Board of Directors
following the annual meeting of stockholders in each year.
<TABLE>
<CAPTION>
NAME, AGE AND OFFICE (AT DECEMBER 31, PRINCIPAL OCCUPATION DURING LAST FIVE
1994), AND YEAR ELECTED TO OFFICE YEARS OTHER THAN OFFICE OF THE COMPANY CURRENTLY HELD
<S> <C>
Hans W. Becherer, 59, Chairman, 1990 1990 and prior, President
David H. Stowe, Jr., 58, President, 1990 1990 and prior, Executive Vice President
Eugene L. Schotanus, 57, Executive Vice President, 1990 1990 and prior, Senior Vice President
Bernard L. Hardiek, 54 Executive Vice President, 1994 1994 and prior, Senior Vice President
Joseph W. England, 54, Senior Vice President, 1981 -
Michael S. Plunkett, 57, Senior Vice President, 1983 -
J. Michael Frank, 56, Senior Vice President, 1989 -
John K. Lawson, 54, Senior Vice President, 1992 1992 and prior, Vice President
Pierre E. Leroy, 46, Senior Vice President, 1994 1994 and prior, Vice President and Treasurer
Ferdinand F. Korndorf, 45, Senior Vice President, 1994 1991-1994 Vice President,
1990 President of Deere-Hitachi
Frank S. Cottrell, 52, Vice President, Secretary and 1991-1993, Secretary and General Counsel
General Counsel, 1993 1991 and prior Secretary and Associate
General Counsel
</TABLE>
10
<PAGE>
ITEM 2. PROPERTIES.
See "Manufacturing" in Item 1.
The Equipment Operations also own and operate buildings housing seven sales
branches, one centralized parts depot, five regional parts depots and several
transfer houses and warehouses throughout the United States and Canada. These
facilities contain approximately 4.9 million square feet of floor space. The
Equipment Operations also own and operate buildings housing three sales
branches, one centralized parts depot and three regional parts depots in Europe.
These facilities contain approximately 850,000 square feet of floor space.
Deere & Company administrative offices, offices for insurance and credit,
research facilities and certain facilities for health care activities, all of
which are owned by John Deere together contain about 2.0 million square feet of
floor space. John Deere also leases space in various locations totaling about
500,000 square feet. John Deere's obligations on these leases are not material.
ITEM 3. LEGAL PROCEEDINGS.
The Company is subject to various unresolved legal actions which arise in the
normal course of its business, the most prevalent of which relate to 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. The Company and the
Capital Corporation subsidiaries believe that they have substantial defenses and
intend to defend the 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.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS.
None.
PART II
- - --------------------------------------------------------------------------------
ITEM 5. MARKET FOR REGISTRANT'S COMMON EQUITY AND RELATED STOCKHOLDER MATTERS.
The Company's common stock is listed on the New York Stock Exchange, the Chicago
Stock Exchange and the Frankfurt, Germany Stock Exchange. See the information
concerning quoted prices of the Company's common stock and the number of
stockholders in the second table and the third paragraph, and the data on
dividends declared and paid per share in the first table, under the caption
"Supplemental 1994 and 1993 Quarterly Information (Unaudited)" on page 45.
11
<PAGE>
ITEM 6. SELECTED FINANCIAL DATA
Financial Summary
<TABLE>
<CAPTION>
- - ------------------------------------------------------------------------------------------
- - ------------------------------------------------------------------------------------------
(Millions of dollars except per share amounts)
1994 1993 1992 1991 1990
- - ------------------------------------------------------------------------------------------
For the Year Ended October 31:
<S> <C> <C> <C> <C> <C>
Total net sales and revenues $ 9,030 $ 7,754 $ 6,961 $ 7,055 $ 7,875
Income (loss) before changes in
accounting * $ 604 $ 184 $ 37 $ (20) $ 411
Net income (loss) $ 604 $ (921) $ 37 $ (20) $ 411
Income (loss) per share before
changes in accounting -
primary and fully diluted* $ 7.01 $ 2.39 $ .49 $ (.27) $ 5.42
Net income (loss) per share -
primary and fully diluted $ 7.01 $(11.91) $ .49 $ (.27) $ 5.42
Dividends declared per share $ 2.05 $ 2.00 $ 2.00 $ 2.00 $ 2.00
At October 31:
Total assets $12,781 $11,467 $11,446 $11,649 $10,664
Long-term borrowings $ 2,054 $ 2,548 $ 2,473 $ 2,206 $ 1,786
<FN>
*See description of accounting changes on pages 32 and 33.
</TABLE>
ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS.
See the information under the caption "Management's Discussion and Analysis" on
pages 22-31.
ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA.
See the consolidated financial statements and notes thereto and supplementary
data on pages 16-45 .
ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND
FINANCIAL DISCLOSURE.
None.
PART III
- - --------------------------------------------------------------------------------
ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT.
The information regarding directors in the proxy statement dated January 13,
1995 (the "proxy statement"), under the captions "Election of Directors" and
"Directors Continuing in Office" is incorporated herein by reference.
Information regarding executive officers is presented in Item 1 of this report
under the caption "Executive officers of the registrant".
12
<PAGE>
ITEM 11. EXECUTIVE COMPENSATION.
The information in the proxy statement under the captions "Option/SAR Grants in
Last Fiscal Year", "Summary Compensation Table" and "Aggregate Option/SAR
Exercises in Last Fiscal Year and Fiscal Year-End Option/SAR Values" is
incorporated herein by reference.
ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT.
(a) SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS.
The information on the security ownership of a certain beneficial owner
contained in the proxy statement under the caption "Principal Holders of
Voting Securities" is incorporated by reference.
(b) SECURITY OWNERSHIP OF MANAGEMENT.
The information on shares of common stock of the Company beneficially owned
by, and under option to (i) each director and (ii) the directors and
officers as a group, contained in the proxy statement under the captions
"Election of Directors", "Directors Continuing in Office" and "Aggregate
Option/SAR Exercises in Last Fiscal Year and Fiscal Year-End Option/SAR
Values" is incorporated herein by reference.
(c) CHANGE IN CONTROL.
None.
ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS.
The information on certain relationships and related transactions contained in
the proxy statement under "Certain Business Relationships" is incorporated
herein by reference.
13
<PAGE>
PART IV
- - --------------------------------------------------------------------------------
ITEM 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES, AND REPORTS ON FORM 8-K.
(a)(1) FINANCIAL STATEMENTS PAGE
Statement of Consolidated Income for the years ended
October 31, 1994, 1993 and 1992 16
Consolidated Balance Sheet, October 31, 1994 and 1993 18
Statement of Consolidated Cash Flows for the years ended
October 31, 1994, 1993 and 1992 20
Notes to Consolidated Financial Statements 32
(a)(2) SCHEDULE TO CONSOLIDATED FINANCIAL STATEMENTS
Schedule II - Valuation and Qualifying Accounts, for the years
ended October 31, 1994, 1993 and 1992 50
(a)(3) EXHIBITS
SEE THE "INDEX TO EXHIBITS" ON PAGES 52-54 OF THIS REPORT.
Certain instruments relating to long-term borrowings constituting less than 10%
of registrant's total assets, are not filed as exhibits herewith pursuant to
Item 601(b)4(iii)(A) of Regulation S-K. Registrant agrees to file copies of
such instruments upon request of the Commission.
(b) REPORTS ON FORM 8-K.
Current report on Form 8-K dated August 23, 1994 (Item 7).
Current report on Form 8-K dated October 12, 1994 (Item 5).
FINANCIAL STATEMENT SCHEDULES OMITTED
The following schedules for the Company and consolidated subsidiaries are
omitted because of the absence of the conditions under which they are required:
I, III, IV and V.
14
<PAGE>
(THIS PAGE INTENTIONALLY LEFT BLANK.)
15
<PAGE>
<TABLE>
<CAPTION>
DEERE & COMPANY
STATEMENT OF CONSOLIDATED INCOME
- - ------------------------------------------------------------------------------------------
- - ------------------------------------------------------------------------------------------
CONSOLIDATED
(DEERE & COMPANY AND
CONSOLIDATED SUBSIDIARIES)
- - ------------------------------------------------------------------------------------------
YEAR ENDED OCTOBER 31
(IN MILLIONS OF DOLLARS EXCEPT PER SHARE AMOUNTS) 1994 1993 1992
- - ------------------------------------------------------------------------------------------
<S> <C> <C> <C>
NET SALES AND REVENUES
Net sales of equipment . . . . . . . . . . . . . . . $7,663.1 $6,479.3 $5,723.4
Finance and interest income . . . . . . . . . . . . . 547.8 562.8 615.4
Insurance and health care premiums. . . . . . . . . . 662.1 554.2 495.5
Investment income . . . . . . . . . . . . . . . . . . 93.9 97.5 96.4
Other income . . . . . . . . . . . . . . . . . . . . 62.9 59.7 30.0
-------- -------- --------
Total . . . . . . . . . . . . . . . . . . . . . . 9,029.8 7,753.5 6,960.7
-------- -------- --------
- - ------------------------------------------------------------------------------------------
COSTS AND EXPENSES
Cost of goods sold . . . . . . . . . . . . . . . . . . 6,007.6 5,374.6 4,891.8
Research and development expenses . . . . . . . . . . 275.7 269.8 288.4
Selling, administrative and general expenses . . . . . 906.5 845.0 842.8
Interest expense . . . . . . . . . . . . . . . . . . . 303.0 369.1 413.4
Insurance and health care claims and benefits . . . . 578.3 478.4 440.4
Other operating expenses . . . . . . . . . . . . . . . 37.8 37.1 40.4
Restructuring costs. . . . . . . . . . . . . . . . . . 107.2
-------- -------- --------
Total. . . . . . . . . . . . . . . . . . . . . . . 8,108.9 7,481.2 6,917.2
-------- -------- --------
- - ------------------------------------------------------------------------------------------
INCOME (LOSS) OF CONSOLIDATED GROUP BEFORE INCOME
TAXES AND CHANGES IN ACCOUNTING . . . . . . . . . . 920.9 272.3 43.5
Provision (credit) for income taxes . . . . . . . . . 332.2 97.2 14.7
-------- -------- --------
INCOME (LOSS) OF CONSOLIDATED GROUP
BEFORE CHANGES IN ACCOUNTING . . . . . . . . . . . . 588.7 175.1 28.8
-------- -------- --------
- - ------------------------------------------------------------------------------------------
EQUITY IN INCOME OF UNCONSOLIDATED SUBSIDIARIES AND
AFFILIATES BEFORE CHANGES IN ACCOUNTING
Credit . . . . . . . . . . . . . . . . . . . . . . .
Insurance and health care . . . . . . . . . . . . . 4.9 2.2 2.2
Other . . . . . . . . . . . . . . . . . . . . . . . 10.0 7.1 6.4
-------- -------- --------
Total. . . . . . . . . . . . . . . . . . . . . . . 14.9 9.3 8.6
-------- -------- --------
- - ------------------------------------------------------------------------------------------
INCOME BEFORE CHANGES IN ACCOUNTING . . . . . . . . . 603.6 184.4 37.4
Changes in accounting . . . . . . . . . . . . . . . . (1,105.3)
-------- -------- --------
NET INCOME (LOSS). . . . . . . . . . . . . . . . . . . $ 603.6 $ (920.9) $ 37.4
-------- -------- --------
-------- -------- --------
- - ------------------------------------------------------------------------------------------
PER SHARE DATA
Primary and fully diluted:
Income before changes in accounting. . . . . . . . . $ 7.01 $ 2.39 $ .49
Changes in accounting . . . . . . . . . . . . . . . (14.30)
-------- -------- --------
Net income (loss). . . . . . . . . . . . . . . . . . $ 7.01 $ (11.91) $ .49
-------- -------- --------
-------- -------- --------
Dividends declared . . . . . . . . . . . . . . . . . . $2.05 $2.00 $2.00
- - ------------------------------------------------------------------------------------------
- - ------------------------------------------------------------------------------------------
<FN>
The "Consolidated" (Deere & Company and Consolidated Subsidiaries) data in this
statement conform with the requirements of FASB Statement No. 94. In the
supplemental consolidating data in this statement, "Equipment Operations" (Deere
& Company with Financial Services on the Equity Basis) reflect the basis of
consolidation described on page 32 of the notes to the consolidated financial
statements. The consolidated group data in the "Equipment Operations" income
statement reflect the results of the agricultural equipment, industrial
equipment and lawn and grounds care equipment operations. The supplemental
"Financial Services" consolidating data in this statement include Deere &
Company's credit, insurance and health care subsidiaries. Transactions between
the "Equipment Operations" and "Financial Services" have been eliminated to
arrive at the "Consolidated" data.
The information on pages 22 through 45 is an integral part of this statement.
</TABLE>
16
<PAGE>
<TABLE>
<CAPTION>
- - ---------------------------------------------------------------------------------------------------------------------------
- - ---------------------------------------------------------------------------------------------------------------------------
EQUIPMENT OPERATIONS FINANCIAL SERVICES
(DEERE & COMPANY WITH
FINANCIAL SERVICES ON THE
EQUITY BASIS)
- - ---------------------------------------------------------------------------------------------------------------------------
YEAR ENDED OCTOBER 31 YEAR ENDED OCTOBER 31
(IN MILLIONS OF DOLLARS EXCEPT PER SHARE AMOUNTS) 1994 1993 1992 1994 1993 1992
- - ---------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
NET SALES AND REVENUES
Net sales of equipment . . . . . . . . . . . . . . . $7,663.1 $6,479.3 $5,723.4
Finance and interest income . . . . . . . . . . . . . 81.3 84.0 98.5 $ 471.9 $ 482.4 $ 519.1
Insurance and health care premiums. . . . . . . . . . 810.5 695.3 632.4
Investment income . . . . . . . . . . . . . . . . . . 93.9 97.6 96.6
Other income . . . . . . . . . . . . . . . . . . . . 24.0 23.3 22.8 43.7 42.0 13.8
-------- -------- -------- -------- -------- -------
Total . . . . . . . . . . . . . . . . . . . . . . 7,768.4 6,586.6 5,844.7 1,420.0 1,317.3 1,261.9
-------- -------- -------- -------- -------- -------
- - ---------------------------------------------------------------------------------------------------------------------------
COSTS AND EXPENSES
Cost of goods sold . . . . . . . . . . . . . . . . . 6,032.6 5,381.1 4,902.2
Research and development expenses . . . . . . . . . 275.7 269.8 288.4
Selling, administrative and general expenses . . . . 638.3 602.8 588.2 282.7 255.7 268.9
Interest expense . . . . . . . . . . . . . . . . . . 117.1 180.3 197.5 191.3 192.5 218.2
Insurance and health care claims and benefits . . . 692.0 605.0 559.1
Other operating expenses . . . . . . . . . . . . . . 17.0 18.0 24.6 20.8 19.2 16.0
Restructuring costs. . . . . . . . . . . . . . . . . 107.2
-------- -------- -------- -------- -------- -------
Total. . . . . . . . . . . . . . . . . . . . . . 7,080.7 6,559.2 6,000.9 1,186.8 1,072.4 1,062.2
-------- -------- -------- -------- -------- -------
- - ---------------------------------------------------------------------------------------------------------------------------
INCOME (LOSS) OF CONSOLIDATED GROUP BEFORE INCOME
TAXES AND CHANGES IN ACCOUNTING . . . . . . . . . 687.7 27.4 (156.2) 233.2 244.9 199.7
Provision (credit) for income taxes . . . . . . . . 254.7 14.4 (48.9) 77.5 82.8 63.6
-------- -------- -------- -------- -------- -------
INCOME (LOSS) OF CONSOLIDATED GROUP
BEFORE CHANGES IN ACCOUNTING . . . . . . . . . . . 433.0 13.0 (107.3) 155.7 162.1 136.1
-------- -------- -------- -------- -------- -------
- - ---------------------------------------------------------------------------------------------------------------------------
EQUITY IN INCOME OF UNCONSOLIDATED SUBSIDIARIES AND
AFFILIATES BEFORE CHANGES IN ACCOUNTING
Credit . . . . . . . . . . . . . . . . . . . . . . 113.7 122.2 106.0
Insurance and health care . . . . . . . . . . . . 46.9 42.1 32.3 4.9 2.2 2.2
Other . . . . . . . . . . . . . . . . . . . . . . 10.0 7.1 6.4
-------- -------- -------- -------- -------- -------
Total. . . . . . . . . . . . . . . . . . . . . . 170.6 171.4 144.7 4.9 2.2 2.2
-------- -------- -------- -------- -------- -------
- - ---------------------------------------------------------------------------------------------------------------------------
INCOME BEFORE CHANGES IN ACCOUNTING . . . . . . . . 603.6 184.4 37.4 160.6 164.3 138.3
Changes in accounting . . . . . . . . . . . . . . . (1,105.3) (6.9)
-------- -------- -------- -------- -------- -------
NET INCOME (LOSS). . . . . . . . . . . . . . . . . . $ 603.6 $ (920.9) $ 37.4 $ 160.6 $ 157.4 $ 138.3
-------- -------- -------- -------- -------- -------
-------- -------- -------- -------- -------- -------
- - ---------------------------------------------------------------------------------------------------------------------------
- - ---------------------------------------------------------------------------------------------------------------------------
- - ---------------------------------------------------------------------------------------------------------------------------
</TABLE>
17
<PAGE>
<TABLE>
<CAPTION>
DEERE & COMPANY
CONSOLIDATED BALANCE SHEET
- - ----------------------------------------------------------------------------------
- - ----------------------------------------------------------------------------------
CONSOLIDATED
(DEERE & COMPANY AND
CONSOLIDATED SUBSIDIARIES)
(IN MILLIONS OF DOLLARS EXCEPT PER SHARE AMOUNTS) OCTOBER 31
1994 1993
- - ---------------------------------------------------------------------------------
<S> <C> <C>
ASSETS
Cash and cash equivalents. . . . . . . . . . . . . $ 245.4 $ 338.2
Marketable securities carried at cost. . . . . . . 1,126.3 994.8
Receivables from unconsolidated subsidiaries and
affiliates . . . . . . . . . . . . . . . . . . . 8.9 4.0
Dealer accounts and notes receivable - net . . . . 2,939.4 2,793.7
Credit receivables - net . . . . . . . . . . . . . 4,501.7 3,754.8
Other receivables. . . . . . . . . . . . . . . . . 429.7 393.5
Equipment on operating leases - net. . . . . . . . 219.5 195.4
Inventories. . . . . . . . . . . . . . . . . . . . 698.0 464.4
Property and equipment - net . . . . . . . . . . . 1,314.1 1,240.3
Investments in unconsolidated subsidiaries and
affiliates . . . . . . . . . . . . . . . . . . . 154.3 140.6
Intangible assets - net. . . . . . . . . . . . . . 283.7 296.8
Other assets . . . . . . . . . . . . . . . . . . . 61.8 42.8
Deferred income taxes. . . . . . . . . . . . . . . 679.8 681.7
Deferred charges . . . . . . . . . . . . . . . . . 118.6 126.2
--------- ---------
- - ---------------------------------------------------------------------------------
Total. . . . . . . . . . . . . . . . . . . . . . . $12,781.2 $11,467.2
--------- ---------
--------- ---------
- - ---------------------------------------------------------------------------------
LIABILITIES AND STOCKHOLDERS' EQUITY
- - ---------------------------------------------------------------------------------
LIABILITIES
Short-term borrowings. . . . . . . . . . . . . . . $ 2,637.4 $ 1,601.4
Payables to unconsolidated subsidiaries and
affiliates . . . . . . . . . . . . . . . . . . . 34.0 32.8
Accounts payable and accrued expenses. . . . . . . 2,285.2 2,085.9
Insurance and health care claims and reserves. . . 761.3 672.5
Accrued taxes. . . . . . . . . . . . . . . . . . . 80.2 71.0
Deferred income taxes. . . . . . . . . . . . . . . 13.5 8.6
Long-term borrowings . . . . . . . . . . . . . . . 2,053.9 2,547.5
Retirement benefit accruals and other liabilities. 2,357.8 2,362.1
--------- ---------
Total liabilities . . . . . . . . . . . . . . 10,223.3 9,381.8
--------- ---------
- - ---------------------------------------------------------------------------------
STOCKHOLDERS' EQUITY
Common stock, $1 par value (authorized -
200,000,000 shares; issued - 86,638,528 shares
in 1994 and 85,747,035 shares in 1993) at
stated value . . . . . . . . . . . . . . . . . . 1,491.4 1,436.8
Retained earnings. . . . . . . . . . . . . . . . . 1,353.9 926.5
Minimum pension liability adjustment . . . . . . . (248.4) (215.5)
Cumulative translation adjustment. . . . . . . . . (17.9) (41.5)
Unamortized restricted stock compensation. . . . . (8.8) (8.2)
Common stock in treasury, 217,601 shares in 1994
and 244,934 shares in 1993, at cost. . . . . . . (12.3) (12.7)
--------- ---------
Total stockholders' equity. . . . . . . . . . 2,557.9 2,085.4
--------- ---------
- - ---------------------------------------------------------------------------------
Total. . . . . . . . . . . . . . . . . . . . . . . $12,781.2 $11,467.2
--------- ---------
--------- ---------
- - ---------------------------------------------------------------------------------
- - ---------------------------------------------------------------------------------
<FN>
The "Consolidated" (Deere & Company and Consolidated Subsidiaries) data in this
statement conform with the requirements of FASB Statement No. 94. In the
supplemental consolidating data in this statement, "Equipment Operations" (Deere
& Company with Financial Services on the Equity Basis) reflect the basis of
consolidation described on page 32 of the notes to the consolidated financial
statements. The supplemental "Financial Services" consolidating data in this
statement include Deere & Company's credit, insurance and health care
subsidiaries. Transactions between the "Equipment Operations" and "Financial
Services" have been eliminated to arrive at the "Consolidated" data.
The information on pages 22 through 45 is an integral part of this statement.
</TABLE>
18
<PAGE>
<TABLE>
<CAPTION>
- - -----------------------------------------------------------------------------------------------------
- - -----------------------------------------------------------------------------------------------------
EQUIPMENT OPERATIONS FINANCIAL SERVICES
(DEERE & COMPANY WITH
FINANCIAL SERVICES ON
THE EQUITY BASIS)
(IN MILLIONS OF DOLLARS EXCEPT PER SHARE AMOUNTS) OCTOBER 31 OCTOBER 31
1994 1993 1994 1993
- - -----------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
ASSETS
Cash and cash equivalents. . . . . . . . . . . . . $ 104.0 $ 71.7 $ 141.4 $ 266.5
Marketable securities carried at cost. . . . . . . 1,126.3 994.8
Receivables from unconsolidated subsidiaries and
affiliates . . . . . . . . . . . . . . . . . . . 196.9 511.9
Dealer accounts and notes receivable - net . . . . 2,939.4 2,793.7
Credit receivables - net . . . . . . . . . . . . . 115.8 115.8 4,385.9 3,639.0
Other receivables. . . . . . . . . . . . . . . . . 15.2 14.3 415.5 380.2
Equipment on operating leases - net. . . . . . . . 94.3 76.2 125.2 119.2
Inventories. . . . . . . . . . . . . . . . . . . . 698.0 464.4
Property and equipment - net . . . . . . . . . . . 1,281.8 1,215.5 32.3 24.8
Investments in unconsolidated subsidiaries and
affiliates . . . . . . . . . . . . . . . . . . . 1,285.9 1,341.7 55.1 52.1
Intangible assets - net. . . . . . . . . . . . . . 266.8 277.8 16.9 19.0
Other assets . . . . . . . . . . . . . . . . . . . 31.1 24.8 30.7 18.0
Deferred income taxes. . . . . . . . . . . . . . . 620.5 628.9 59.2 52.8
Deferred charges . . . . . . . . . . . . . . . . . 60.7 81.5 57.9 44.8
-------- -------- -------- --------
- - -----------------------------------------------------------------------------------------------------
Total. . . . . . . . . . . . . . . . . . . . . . . $7,710.4 $7,618.2 $6,446.4 $5,611.2
-------- -------- -------- --------
-------- -------- -------- --------
- - -----------------------------------------------------------------------------------------------------
LIABILITIES AND STOCKHOLDERS' EQUITY
- - -----------------------------------------------------------------------------------------------------
LIABILITIES
Short-term borrowings. . . . . . . . . . . . . . . $ 53.8 $ 476.3 $2,583.5 $1,125.1
Payables to unconsolidated subsidiaries and
affiliates . . . . . . . . . . . . . . . . . . . 34.0 32.8 187.9 507.9
Accounts payable and accrued expenses. . . . . . . 1,617.3 1,533.4 668.9 553.6
Insurance and health care claims and reserves. . . 761.3 672.5
Accrued taxes. . . . . . . . . . . . . . . . . . . 79.7 66.1 .5 4.9
Deferred income taxes. . . . . . . . . . . . . . . 13.5 8.4 .2
Long-term borrowings . . . . . . . . . . . . . . . 1,019.4 1,069.3 1,034.5 1,478.2
Retirement benefit accruals and other liabilities. 2,334.8 2,346.5 23.0 15.6
-------- -------- -------- --------
Total liabilities . . . . . . . . . . . . . . 5,152.5 5,532.8 5,259.6 4,358.0
-------- -------- -------- --------
- - -----------------------------------------------------------------------------------------------------
STOCKHOLDERS' EQUITY
Common stock, $1 par value (authorized -
200,000,000 shares; issued - 86,638,528 shares
in 1994 and 85,747,035 shares in 1993) at
stated value . . . . . . . . . . . . . . . . . . 1,491.4 1,436.8 209.5 208.2
Retained earnings. . . . . . . . . . . . . . . . . 1,353.9 926.5 980.3 1,046.5
Minimum pension liability adjustment . . . . . . . (248.4) (215.5)
Cumulative translation adjustment. . . . . . . . . (17.9) (41.5) (3.0) (1.5)
Unamortized restricted stock compensation. . . . . (8.8) (8.2)
Common stock in treasury, 217,601 shares in 1994
and 244,934 shares in 1993, at cost. . . . . . . (12.3) (12.7)
-------- -------- -------- --------
Total stockholders' equity. . . . . . . . . . 2,557.9 2,085.4 1,186.8 1,253.2
-------- -------- -------- --------
- - -----------------------------------------------------------------------------------------------------
Total. . . . . . . . . . . . . . . . . . . . . . . $7,710.4 $7,618.2 $6,446.4 $5,611.2
-------- -------- -------- --------
-------- -------- -------- --------
- - -----------------------------------------------------------------------------------------------------
- - -----------------------------------------------------------------------------------------------------
</TABLE>
19
<PAGE>
<TABLE>
<CAPTION>
DEERE & COMPANY
STATEMENT OF CONSOLIDATED CASH FLOWS
- - -------------------------------------------------------------------------------
- - -------------------------------------------------------------------------------
CONSOLIDATED
(DEERE & COMPANY AND
CONSOLIDATED SUBSIDIARIES)
- - -------------------------------------------------------------------------------
YEAR ENDED OCTOBER 31
(IN MILLIONS OF DOLLARS) 1994 1993 1992
- - -------------------------------------------------------------------------------
<S> <C> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES
Net income (loss). . . . . . . . . . . . . . . $ 603.6 $ (920.9) $ 37.4
Adjustments to reconcile net income (loss) to
net cash provided by operating activities:
Changes in accounting, cumulative net
adjustment . . . . . . . . . . . . . . . 1,105.3
Provision for doubtful receivables . . . . 36.1 32.6 55.3
Provision for depreciation . . . 256.7 257.2 250.4
Provision for restructuring costs. . . . . 78.5
Undistributed earnings of unconsolidated
subsidiaries and affiliates . . . . . . (12.6) (7.7) (7.2)
Provision (credit) for deferred income
taxes . . . . . . . . . . . . . . . . . 26.2 (30.4) (15.9)
Changes in assets and liabilities:
Receivables. . . . . . . . . . . . . . (147.8) 82.4 13.9
Inventories. . . . . . . . . . . . . . (164.5) 35.4 (3.0)
Accounts payable and accrued expenses. (60.4) 93.5 (57.3)
Insurance and health care claims and
reserves . . . . . . . . . . . . . . 98.8 27.5 80.8
Other . . . . . . . . . . . . . . . . 82.7 80.7 3.9
-------- -------- --------
Net cash provided by operating
activities. . . . . . . . . . . . . 718.8 834.1 358.3
-------- -------- --------
- - -------------------------------------------------------------------------------
CASH FLOWS FROM INVESTING ACTIVITIES
Collections of credit receivables. . . . . . . 3,012.5 2,995.5 3,008.9
Proceeds from sales of credit receivables . . 561.9 1,148.3 696.7
Proceeds from sales of marketable securities . 222.9 320.9 278.2
Proceeds from sales of equipment on operating
leases . . . . . . . . . . . . . . . . . . . 49.2 46.5 43.9
Cost of credit receivables acquired . . . . . (4,308.8) (3,635.1) (3,460.6)
Purchases of marketable securities . . . . . . (344.8) (346.5) (372.2)
Purchases of property and equipment. . . . . . (228.1) (206.5) (285.7)
Cost of operating leases acquired . . . . . . (102.5) (106.3) (63.2)
Acquisition of a business . . . . . . . . . . (119.8)
Other. . . . . . . . . . . . . . . . . . . . . 52.2 (1.8) 20.3
-------- -------- --------
Net cash provided by (used for) investing
activities . . . . . . . . . . . . . . . (1,205.3) 215.0 (133.7)
-------- -------- --------
- - -------------------------------------------------------------------------------
CASH FLOWS FROM FINANCING ACTIVITIES
Increase (decrease) in short-term borrowings . 934.2 (1,487.1) (533.9)
Change in intercompany receivables/payables. .
Proceeds from issuance of long-term borrowings. 188.5 687.1 772.0
Principal payments on long-term borrowings . . (590.7) (546.3) (359.8)
Proceeds from issuance of common stock . . . . 36.9 586.0 2.4
Dividends paid . . . . . . . . . . . . . . . . (171.8) (152.9) (152.5)
Other. . . . . . . . . . . . . . . . . . . . . (6.2) (12.9) (13.8)
-------- -------- --------
Net cash provided by (used for) financing
activities . . . . . . . . . . . . . . . 390.9 (926.1) (285.6)
-------- -------- --------
- - -------------------------------------------------------------------------------
EFFECT OF EXCHANGE RATE CHANGES ON CASH. . . . 2.8 (1.6) (.7)
-------- -------- --------
- - -------------------------------------------------------------------------------
NET INCREASE (DECREASE) IN CASH AND CASH
EQUIVALENTS . . . . . . . . . . . . . . . . (92.8) 121.4 (61.7)
CASH AND CASH EQUIVALENTS AT BEGINNING OF YEAR. 338.2 216.8 278.5
-------- -------- --------
CASH AND CASH EQUIVALENTS AT END OF YEAR . . . $245.4 $338.2 $216.8
-------- -------- --------
-------- -------- --------
- - -------------------------------------------------------------------------------
- - -------------------------------------------------------------------------------
<FN>
The "Consolidated" (Deere & Company and Consolidated Subsidiaries) data in this
statement conform with the requirements of FASB Statement No. 94. In the
supplemental consolidating data in this statement, "Equipment Operations" (Deere
& Company with Financial Services on the Equity Basis) reflect the basis of
consolidation described on page 32 of the notes to the consolidated financial
statements. The supplemental "Financial Services" consolidating data in this
statement include Deere & Company's credit, insurance and health care
subsidiaries. Transactions between the "Equipment Operations" and "Financial
Services" have been eliminated to arrive at the "Consolidated" data.
The information on pages 22 through 45 is an integral part of this statement.
</TABLE>
20
<PAGE>
<TABLE>
<CAPTION>
- - -----------------------------------------------------------------------------------------------------------------------------------
- - -----------------------------------------------------------------------------------------------------------------------------------
EQUIPMENT OPERATIONS FINANCIAL SERVICES
(DEERE & COMPANY WITH
FINANCIAL SERVICES ON THE
EQUITY BASIS)
- - -------------------------------------------------------------------------------------------------------------------------
YEAR ENDED OCTOBER 31 YEAR ENDED OCTOBER 31
(IN MILLIONS OF DOLLARS) 1994 1993 1992 1994 1993 1992
- - -------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES
Net income (loss). . . . . . . . . . . . . . . $ 603.6 $ (920.9) $ 37.4 $ 160.6 $ 157.4 $ 138.3
Adjustments to reconcile net income (loss) to
net cash provided by operating activities:
Changes in accounting, cumulative net
adjustment . . . . . . . . . . . . . . . 1,105.3 6.9
Provision for doubtful receivables . . . . 5.6 2.3 3.1 30.5 30.3 52.2
Provision for depreciation . . . 230.6 233.5 230.5 26.1 23.6 19.9
Provision for restructuring costs. . . . . 78.5
Undistributed earnings of unconsolidated
subsidiaries and affiliates . . . . . . 57.3 (84.5) (43.5) (3.6) (1.6) (1.8)
Provision (credit) for deferred income
taxes . . . . . . . . . . . . . . . . . 32.4 (30.7) (4.1) (6.2) .3 (11.8)
Changes in assets and liabilities:
Receivables. . . . . . . . . . . . . . (85.8) 101.6 13.5 (62.0) (19.3) .9
Inventories. . . . . . . . . . . . . . (164.5) 35.4 (3.0)
Accounts payable and accrued expenses. (116.2) 79.7 (90.7) 55.7 14.0 32.9
Insurance and health care claims and
reserves . . . . . . . . . . . . . . 98.8 27.5 80.8
Other . . . . . . . . . . . . . . . . 113.8 101.6 4.8 (31.1) (20.9) (.9)
-------- -------- -------- -------- -------- -------
Net cash provided by operating
activities. . . . . . . . . . . . . 676.8 701.8 148.0 268.8 218.2 310.5
-------- -------- -------- -------- -------- -------
- - ------------------------------------------------------------------------------------------------------------------------
CASH FLOWS FROM INVESTING ACTIVITIES
Collections of credit receivables. . . . . . . 77.1 87.7 78.5 2,935.3 2,907.8 2,930.5
Proceeds from sales of credit receivables . . 1.6 5.7 14.0 580.2 1,161.7 703.6
Proceeds from sales of marketable securities . 222.9 320.9 278.2
Proceeds from sales of equipment on operating
leases . . . . . . . . . . . . . . . . . . . 25.0 25.4 27.1 24.2 21.1 16.8
Cost of credit receivables acquired . . . . . (70.1) (124.1) (82.5) (4,258.6) (3,530.1) (3,399.1)
Purchases of marketable securities . . . . . . (344.8) (346.5) (372.2)
Purchases of property and equipment. . . . . . (215.2) (197.4) (275.7) (12.8) (9.2) (10.1)
Cost of operating leases acquired . . . . . . (52.3) (31.8) (31.6) (50.1) (74.5) (31.5)
Acquisition of a business . . . . . . . . . . (119.8)
Other. . . . . . . . . . . . . . . . . . . . . 14.8 8.4 17.0 37.4 (10.2) (5.6)
-------- -------- -------- -------- -------- -------
Net cash provided by (used for) investing
activities . . . . . . . . . . . . . . . (338.9) (226.1) (253.2) (866.3) 441.0 110.6
-------- -------- -------- -------- -------- -------
- - ------------------------------------------------------------------------------------------------------------------------
CASH FLOWS FROM FINANCING ACTIVITIES
Increase (decrease) in short-term borrowings . (301.8) (464.7) 50.1 1,235.9 (1,022.3) (584.0)
Change in intercompany receivables/payables. . 320.0 (359.1) 43.9 (320.0) 359.1 (43.9)
Proceeds from issuance of long-term borrowings. .1 249.4 188.5 687.0 522.7
Principal payments on long-term borrowings . . (185.5) (39.4) (132.4) (405.2) (506.9) (227.5)
Proceeds from issuance of common stock . . . . 36.9 586.0 2.4
Dividends paid . . . . . . . . . . . . . . . . (171.8) (152.9) (152.5) (226.8) (85.9) (100.2)
Other. . . . . . . . . . . . . . . . . . . . . (6.2) (12.9) (13.8) 8.9
-------- -------- -------- -------- -------- -------
Net cash provided by (used for) financing
activities . . . . . . . . . . . . . . . (308.4) (442.9) 47.1 472.4 (569.0) (424.0)
-------- -------- -------- -------- -------- -------
- - ------------------------------------------------------------------------------------------------------------------------
EFFECT OF EXCHANGE RATE CHANGES ON CASH. . . . 2.8 (1.5) (.6) (.1) (.1)
-------- -------- -------- -------- -------- -------
- - ------------------------------------------------------------------------------------------------------------------------
NET INCREASE (DECREASE) IN CASH AND CASH
EQUIVALENTS . . . . . . . . . . . . . . . . 32.3 31.3 (58.7) (125.1) 90.1 (3.0)
CASH AND CASH EQUIVALENTS AT BEGINNING OF YEAR. 71.7 40.4 99.1 266.5 176.4 179.4
-------- -------- -------- -------- -------- -------
CASH AND CASH EQUIVALENTS AT END OF YEAR . . . $104.0 $71.7 $40.4 $141.4 $266.5 $176.4
-------- -------- -------- -------- -------- -------
-------- -------- -------- -------- -------- -------
- - ------------------------------------------------------------------------------------------------------------------------
- - ------------------------------------------------------------------------------------------------------------------------
</TABLE>
21
<PAGE>
MANAGEMENT'S DISCUSSION AND ANALYSIS
- - --------------------------------------------------------------------------------
RESULTS OF OPERATIONS FOR THE YEARS ENDED
OCTOBER 31, 1994, 1993 AND 1992 (UNAUDITED)
- - --------------------------------------------------------------------------------
Deere & Company and its subsidiaries manufacture, distribute and finance a full
range of agricultural equipment; a broad range of industrial equipment for
construction, forestry and public works; and a variety of lawn and grounds care
equipment. The company also provides credit, health care and insurance products
for businesses and the general public. Additional information on these business
segments is presented on page 33.
1994 COMPARED WITH 1993 (UNAUDITED)
- - --------------------------------------------------------------------------------
MARKET CONDITIONS
North American agricultural economic conditions improved in 1994 compared with
1993. The company believes that the resulting improvement in farmers' confidence
was a primary contributor to higher agricultural equipment demand in nearly all
market areas in North America during 1994. Although direct government payments
to farmers declined in 1994, net farm cash income is forecasted to be near
record levels. Additionally, farm real estate values increased by nearly four
percent during the year, further improving overall farm balance sheets.
Overseas retail sales also showed improvement during 1994. Although
European industry retail sales of agricultural equipment are expected to
continue their long-term downward trend, reduced uncertainty over the General
Agreement on Tariffs and Trade (GATT) and a better understanding of these new
regulations have increased European farmers' confidence. Consequently, many
farmers who had delayed making purchases are now buying new equipment.
Therefore, European industry retail sales for fiscal 1994 are expected to be
higher than 1993 levels.
The North American general economy has continued to improve during 1994.
Strong employment growth, coupled with related gains in income, stimulated
consumer spending on durable goods in 1994. Housing starts and real
nonresidential construction in the United States also increased by 11 percent
and three percent, respectively, compared with a year ago. These improvements
provided a solid base for increases in both the company's industrial and lawn
and grounds care equipment sales during 1994.
Acquisitions of receivables and leases by the company's credit subsidiaries
were also higher in 1994 compared with last year due primarily to improvements
in the general economy, increased retail sales of John Deere equipment as well
as recreational products, and a higher revolving charge account and wholesale
note volume. Insurance and health care premium volumes also increased,
benefiting primarily from the strengthening economy and the growth strategy of
the company's health care business.
OPERATING RESULTS
Deere & Company's worldwide net income for 1994 was a record totaling $604
million or $7.01 per share compared with last year's income of $248 million or
$3.21 per share before the effects of the special items as shown in the
following table and described on pages 25 and 26. The company's strongly
improved 1994 results reflect substantially higher North American production and
sales volumes, improved operating efficiencies and significantly better overseas
results. Additionally, the company's exports from the United States set a new
record, totaling $1,144 million. Company results also continued to benefit from
the strong performance of its Financial Services subsidiaries. Income in 1993
was $184 million or $2.39 per share after the effects of the restructuring
charges and the tax rate change as shown in the table below. However, the
company incurred a worldwide net loss of $921 million or $11.91 per share in
1993 after the cumulative effect of accounting changes.
<TABLE>
<CAPTION>
- - --------------------------------------------------------------------------------
(In millions of dollars PER SHARE
except per share amounts) 1994 1993 1994 1993
- - --------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Income before special items. . . . $604 $ 248 $7.01 $ 3.21
Restructuring charges. . . . . . . (80) (1.03)
Effect of tax rate change. . . . . 16 .21
---- ------- ----- ------
Income before cumulative effect of
changes in accounting standards. 604 184 7.01 2.39
Cumulative effect of changes in
accounting standards . . . . . . (1,105) (14.30)
---- ------- ----- ------
Worldwide net income (loss). . . . $604 $ (921) $7.01 $(11.91)
---- ------- ----- ------
---- ------- ----- ------
- - --------------------------------------------------------------------------------
</TABLE>
The company's total worldwide net sales and revenues increased 16 percent
to $9,030 million in 1994 compared with $7,754 million in 1993. Worldwide net
sales were $7,663 million in 1994, an increase of 18 percent from sales of
$6,479 million last year. The physical volume of the company's worldwide sales
increased approximately 14 percent in 1994. Worldwide production tonnage of John
Deere products in 1994 was 18 percent higher than last year.
Finance and interest income decreased three percent to $548 million in 1994
compared with $563 million last year, while insurance and health care premiums
increased 19 percent to $662 million in the current year compared with $554
million in 1993.
Agricultural equipment net sales increased 16 percent to $4,718 million in
1994 from $4,078 million in 1993. Industrial equipment net sales of $1,640
million increased 22 percent from $1,348 million last year. Lawn and grounds
care equipment net sales totaled $1,305 million in 1994 compared with $1,053
million last year, representing an increase of 24 percent.
Net sales in the United States and Canada increased 19 percent to $5,860
million compared with $4,934 million in 1993. Overseas net sales totaled $1,803
million, an increase of 17 percent compared with last year's net sales of $1,545
million. The physical volume of overseas sales was approximately 11 percent
higher in 1994 than in 1993.
The company's worldwide Equipment Operations, which exclude income from the
credit, insurance and health care operations, had income of $433 million in 1994
compared with income of $77 million in 1993 before the effects of the
restructuring charges and the tax rate change. Including these special items,
the Equipment Operations' income was $13 million in 1993. The Equipment
Operations incurred a net loss of $1,085 million on 1993 after all of the
special items including the cumulative effect of the accounting changes. Net
income of the company's credit subsidiaries totaled $114 million in 1994
compared with income before accounting changes of $122 million
22
<PAGE>
in 1993 ($118 million after accounting changes). Net income from insurance and
health care operations was $47 million in 1994 compared with income before
accounting changes of $42 million last year ($39 million after accounting
changes). Additional information is presented in the discussion of "Credit
Operations" and "Insurance and Health Care Operations" on pages 27 through 29.
The improved operating results of the Equipment Operations in 1994 were
primarily due to higher North American production and sales volumes, and
continued improvements in operating efficiencies. North American production
tonnage in 1994 increased 21 percent and sales were 19 percent higher than last
year. The overseas equipment operations had significantly higher income this
year, primarily due to lower operating costs generated by the ongoing
restructuring of the company's European operations, coupled with higher sales
and production volumes. Reflecting the effects of the improved operations, the
worldwide ratio of cost of goods sold to net sales decreased to 78.7 percent
in 1994 compared with 83.1 percent last year. After-tax results of the Equipment
Operations in 1993 benefited by $33 million or $.43 per share from the reduction
of inventories valued on a last-in, first-out (LIFO) basis. A LIFO benefit was
not recognized in 1994. Additional information is presented on page 40 of the
notes to the consolidated financial statements.
BUSINESS SEGMENT AND GEOGRAPHIC AREA RESULTS
The following discussion of operating results by industry segment and geographic
area relates to information beginning on page 33. 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.
Operating profit of each of the company's Equipment Operations was
favorably affected by higher volumes and improved productivity compared with
last year's results.
[Bar Graph]
WORLDWIDE AGRICULTURAL EQUIPMENT
NET SALES (in billions)
1992 $3.8
1993 $4.1
1994 $4.7
OPERATING PROFIT (before restructuring) (in millions)
1992 $106
1993 $230
1994 $553
Operating profit of the worldwide agricultural equipment segment increased
to $553 million in 1994 compared with $230 million in 1993 before restructuring
charges. This improvement was caused primarily by a 15 percent increase in
worldwide agricultural equipment production tonnage, a 16 percent increase in
sales and improvements in operating efficiencies. There were no benefits from
the reduction of LIFO inventories this year compared with $38 million last year.
After restructuring charges of $107 million, 1993 operating profit was $123
million.
Operating profit of the North American agricultural equipment operations in
the current year was substantially higher than in 1993. This resulted from an 18
percent increase in production tonnage, a 15 percent increase in sales and
improved operating efficiencies.
The overseas agricultural equipment operations reported an operating profit
in 1994 compared to an operating loss in 1993, excluding restructuring charges.
Production was nine percent higher than last year and the physical volume of
overseas agricultural equipment sales increased approximately 13 percent in
1994. Lower cost levels resulting primarily from the restructuring of
the European operations also favorably affected the company's overseas
performance during 1994.
[Bar Graph]
WORLDWIDE INDUSTRIAL EQUIPMENT
NET SALES (in billions)
1992 $1.1
1993 $1.3
1994 $1.6
OPERATING PROFIT (in millions)
1992 $ (71)
1993 $ 20
1994 $ 132
The worldwide industrial equipment operations improved significantly in
1994, generating an operating profit of $132 million in 1994 compared with $20
million in 1993. In 1994, production tonnage increased 26 percent, sales
increased 22 percent and operating costs were lower. There were no LIFO
inventory benefits this year compared with $13 million last year.
[Bar Graph]
WORLDWIDE LAWN AND GROUNDS CARE EQUIPMENT
NET SALES (in billions)
1992 $ .9
1993 $1.1
1994 $1.3
OPERATING PROFIT (in millions)
1992 $ 42
1993 $ 99
1994 $162
The worldwide lawn and grounds care equipment operations had a higher
operating profit of $162 million in 1994 compared with $99 million in 1993. Lawn
and grounds care equipment production tonnage increased 22 percent and sales
were up 24 percent in 1994. The Homelite division of Textron, Inc. was purchased
in August 1994 and its results since the acquisition are included in the lawn
and grounds care equipment operations. Additional information is presented on
page 33.
23
<PAGE>
[Bar Graph]
FINANCIAL SERVICES
REVENUES (in billions)
1992 $1.1
1993 $1.2
1994 $1.3
OPERATING PROFIT (in millions)
1992 $202
1993 $247
1994 $238
The combined operating profit of the credit and insurance and health care
business segments was $238 million in 1994 compared to $247 million in 1993.
Additional information on these businesses is presented in the discussion of
"Credit Operations" and "Insurance and Health Care Operations" on pages 27
through 29.
On a geographic basis, the United States and Canadian equipment operations
had significantly higher operating profit of $764 million in 1994 compared with
$372 million last year. Production tonnage increased 21 percent in 1994 and
sales increased 19 percent. Operating efficiency improved in all of the
company's businesses this year. There were no LIFO inventory benefits this year
compared with $13 million last year.
The overseas equipment operations generated an operating profit of $83
million in 1994 compared with an operating loss of $23 million last year,
excluding restructuring charges. Overseas production tonnage increased nine
percent, sales increased 17 percent and the physical volume of overseas sales
increased approximately 11 percent in 1994 compared with 1993. As previously
mentioned, 1994 results were also favorably affected by lower cost levels
resulting primarily from the restructuring of the European operations. However,
there were no benefits from the reduction of LIFO inventories in 1994 compared
with $38 million last year. Including restructuring charges of $107 million, the
operating loss last year was $130 million.
OUTLOOK
Near record United States net farm cash income in 1994 should provide a solid
base for 1995 farm expenditures. Higher exports of farm commodities also should
continue to result from implementation of the North American Free Trade
Agreement (NAFTA), which further expands tariff-free quotas into Mexico during
1995. Higher incomes in developing countries such as China and
India also should promote better export markets for United States grains and oil
seeds. Ratification of the GATT treaty should further aid United States exports
by lowering European Union export subsidies.
In 1995, a new United States farm bill should be enacted which may create
some uncertainty in the farm economy. However, farmers have maintained tight
control of farm expenses in recent years, resulting in significant improvements
in their balance sheets, which should enable them to support more timely
modernization of their equipment. The company's recently introduced innovative
models of medium and large row-crop tractors have been well received by
customers throughout the world. The company believes, on balance, these factors
should support farmers' confidence, and as a result, worldwide demand for
agricultural equipment should remain at current levels.
The North American general economy is widely expected to show moderate
growth in 1995. Recent inflationary concerns coupled with increases in interest
rates could adversely affect housing starts as well as consumer confidence.
However, consumer spending and housing construction currently remain strong.
Additionally, demand for certain manufactured goods may generate the
construction or modernization of factories in certain manufacturing sectors.
Public construction is also expected to increase, led by highway, street, water
and sewer projects. Based on these factors, the company expects retail sales of
industrial and lawn and grounds care equipment in 1995 to continue at strong
levels. The markets served by the company's Financial Services operations are
also expected to continue to grow in conjunction with the strong continued
demand for new equipment and the projected growth in the general economy.
In response to these market conditions, North American production tonnage
schedules have been increased approximately four percent compared to 1994.
Overseas production tonnage schedules will be approximately six percent lower
than in 1994, reflecting the re-sourcing of a portion of the 50-series tractors
in accordance with the ongoing restructuring of the company's European tractor
manufacturing operations. Despite this lower initial level of production,
overseas operations are expected to show continued improvement. Additionally,
worldwide first quarter production tonnage is forecasted to increase 10 percent
compared with last year, reflecting continued strong retail demand and the
initial production and shipment of the new high horsepower 8000-series tractors.
However, certain vehicle tires remained in tight supply during the fourth
quarter of 1994 due to a work stoppage at one of the company's key suppliers,
and future product availability could be adversely affected by a prolonged
continuation of this work stoppage.
On September 30, 1994, the company's collective bargaining agreement with
the United Auto Workers (UAW), the union representing most production employees
in the United States, expired. Through the date of this report, the company and
the UAW have been unable to reach an agreement as to the terms of a new
contract. Employees are continuing to work under the terms in existence at the
expiration of the former contract, and factory operations remain normal.
24
<PAGE>
1993 COMPARED WITH 1992 (UNAUDITED)
- - --------------------------------------------------------------------------------
MARKET CONDITIONS
North American agricultural economic conditions were generally more favorable in
1993 than in 1992. Although flooding and excessively wet conditions in certain
areas of the Midwest and drought conditions in parts of the Southeast resulted
in a 33 percent decrease in corn production and a 15 percent decline in soybean
production in 1993, United States farm cash income achieved a record level in
1993. The lower production caused grain prices to rise above 1992 levels.
Livestock producers enjoyed favorable prices and profit margins during 1993 and
farmers boosted their cash flow by selling inventories accumulated from record
corn and soybean yields in 1992. Additionally, direct government payments to
farmers increased in 1993, aiding farmers most heavily impacted by the flooding
in 1993. Uncertainties over the passage of a new investment tax credit were
resolved in 1993 as the anticipated tax credit was not included in the final tax
legislation. Consequently, many United States farmers who had delayed making
purchases in 1992 bought equipment in 1993. Sales in Canada were boosted by a
special 13-month investment tax credit in effect from December 1992 to December
1993. As a result of these developments, North American retail sales of John
Deere agricultural equipment were considerably higher in 1993 compared with
1992.
The North American general economy continued its slow expansion in 1993. In
the United States, housing starts increased about five percent during the year
with second-half strength overcoming a very sluggish first half. Real public
construction was up slightly from the level in 1992 while nonresidential
construction was flat. However, the cumulative effects of the rebound in
economic activity were felt in 1993, as housing starts were up more than 25
percent from their 1991 level and real public construction was nine percent
larger. Consequently, North American retail sales of industrial and construction
machinery for both the industry and John Deere rose significantly in 1993.
Consumer spending for durable goods rose briskly in 1993, and North
American retail sales of John Deere lawn and grounds care equipment increased
significantly. Sales were also supported by favorable moisture conditions over
most areas throughout the prime selling season. However, dry conditions did
emerge in portions of the Southeast and Northeast, which impeded some late
season buying activity.
Industry retail sales of agricultural equipment in overseas markets in
general remained relatively weak during 1993. However, overseas retail sales of
John Deere agricultural equipment were higher in 1993 than in 1992, reflecting
good acceptance of the company's new tractors and combines. Despite recessionary
conditions prevailing in most European markets and in Japan, overseas retail
sales of John Deere lawn and grounds care equipment continued to expand in 1993.
Overseas industrial and construction equipment markets were relatively flat in
1993 compared with 1992.
Acquisitions of receivables and leases by the company's credit subsidiaries
were somewhat higher in 1993 compared with 1992 due primarily to growth in
revolving charge accounts, leases and wholesale receivables. Although retail
sales of John Deere equipment were higher in 1993, acquisitions of John Deere
retail notes were down slightly compared with 1992 reflecting a higher level of
cash purchases by John Deere customers and a more competitive financing
environment, particularly during the latter part of 1993. Acquisitions of
recreational product retail notes were significantly lower in 1993 due mainly to
a very competitive financing market. Although relatively soft market conditions
continued during 1993 in the property/casualty insurance industry, John Deere's
insurance premium volumes increased in 1993 over 1992. Health care
premium volumes were considerably higher in 1993 reflecting continued growth in
the company's health care operations.
OPERATING RESULTS
Deere & Company's operating results before the effects of special items
(restructuring charges, changes in accounting standards and tax law changes)
improved significantly in 1993 as a result of substantial improvement in the
company's North American equipment operations and continued strong performance
of the Financial Services subsidiaries. Worldwide income in 1993 was $286
million or $3.70 per share before the effects of the special items, compared
with net income of $37 million or $.49 per share in 1992. However, 1993 reported
results were affected by the special items described below. After the effects of
the restructuring charges, the incremental expense from the accounting changes
and the tax rate change, income in 1993 was $184 million or $2.39 per share. The
company incurred a worldwide net loss in 1993 of $921 million or $11.91 per
share after all of the special items including the cumulative effect of the
accounting changes.
<TABLE>
<CAPTION>
- - --------------------------------------------------------------------------------
(In millions of dollars PER SHARE
except per share amounts) 1993 1992 1993 1992
- - --------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Income before special items. . . . $ 286 $37 $ 3.70 $.49
Incremental expense from changes in
accounting standards. . . . . . (38) (.49)
------- --- ------- ----
Income after incremental expense . 248 37 3.21 .49
Restructuring charges. . . . . . . (80) (1.03)
Effect of tax rate change. . . . . 16 .21
------- --- ------- ----
Income before cumulative effect of
changes in accounting standards. 184 37 2.39 .49
Cumulative effect of changes in
accounting standards . . . . . . (1,105) (14.30)
------- --- ------- ----
Worldwide net income (loss). . . . $ (921) $37 $(11.91) $.49
------- --- ------- ----
------- --- ------- ----
</TABLE>
During the second quarter of 1993, the company announced and initiated
plans to downsize and rationalize its European operations. This resulted in a
second quarter provision for restructuring charges of $80 million after income
taxes or $1.03 per share ($107 million before income taxes), representing costs
of employment reductions to be implemented during 1993 and the next few years.
In the fourth quarter of 1993, effective November 1, 1992, 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
25
<PAGE>
Benefits. The aggregate cumulative effect of adopting the new standards as of
November 1, 1992, which relate mainly to retiree health care and life insurance
benefits, was a non-cash charge of $1,105 million after income taxes or $14.30
per share ($1,728 million before income taxes). Additionally, the adoption
of these standards resulted in an incremental non-cash after-tax increase in
1993 postretirement and postemployment benefits expense of $38 million or $.49
per share ($60 million before income taxes). The incremental postretirement and
postemployment benefits expense relating to the Financial Services subsidiaries
was immaterial. Additional information is presented on pages 32, 33 and 45 of
the notes to the consolidated financial statements.
The Omnibus Budget Reconciliation Act of 1993, which enacted an increase in
the United States federal statutory income tax rate from 34 percent to 35
percent effective January 1, 1993, was signed into law during the fourth quarter
of 1993. In accordance with FASB Statement No. 109, Accounting for Income Taxes,
income taxes relating to previously reported United States taxable income were
recalculated and the United States deferred income tax assets and liabilities as
of the enactment date were revalued during the fourth quarter of 1993 using the
new tax rate of 35 percent. This resulted in a credit of $16 million or
$.21 per share to the provision for income taxes. This tax rate change had an
immaterial effect on the Financial Services subsidiaries. Additional information
is presented on page 37 of the notes to the consolidated financial statements.
The company's total worldwide net sales and revenues increased 11 percent
to $7,754 million in 1993 compared with net sales and revenues of $6,961 million
in 1992. Worldwide net sales were $6,479 million in 1993, an increase of 13
percent from sales of $5,723 million in 1992. The physical volume of the
company's worldwide sales to dealers increased approximately nine percent
in 1993. Worldwide production tonnage of all John Deere products in 1993 was 11
percent higher than in 1992.
Finance and interest income decreased nine percent to $563 million in 1993
compared with $615 million in 1992, while insurance and health care premiums
increased 12 percent to $554 million in 1993 compared with $496 million in 1992.
Agricultural equipment net sales increased eight percent to $4,078 million
in 1993 from $3,759 million in 1992. Industrial equipment net sales of $1,348
million increased 26 percent from $1,068 million in 1992. Lawn and grounds care
equipment net sales totaled $1,053 million in 1993 compared with $896 million in
1992, representing an increase of 18 percent.
Net sales in the United States and Canada increased 19 percent to $4,934
million compared with $4,147 million in 1992. Overseas net sales totaled $1,545
million, a decrease of two percent compared with net sales of $1,576 million in
1992. The physical volume of overseas sales was approximately one percent higher
in 1993 than in 1992.
The company's worldwide Equipment Operations, which exclude income from the
credit, insurance and health care operations, had income of $114 million in 1993
before the effects of the previously mentioned special items, compared with a
loss of $107 million in 1992. Including the restructuring charges, the
incremental effect of the accounting changes and the tax rate change, the
Equipment Operations' income was $13 million in 1993. The Equipment Operations
incurred a net loss of $1,085 million in 1993 after all of the special items
including the cumulative effect of the accounting changes. Income of the
company's credit subsidiaries before the cumulative effect of the accounting
changes totaled $122 million in 1993, while net income after the accounting
changes was $118 million compared with net income of $106 million in 1992.
Income from insurance and health care operations before the cumulative effect of
the accounting changes was $42 million in 1993, while net income after the
accounting changes totaled $39 million compared with net income of $32 million
in 1992. Additional information is presented in the discussion of "Credit
Operations" and "Insurance and Health Care Operations" on pages 27 through 29.
The improved operating results of the Equipment Operations in 1993 were
attributable to the company's North American equipment operations. Sales and
production volumes were higher in 1993 in response to increased retail demand,
and price realization improved in all of the company's North American equipment
businesses compared with 1992 as sales incentive cost levels were significantly
lower. Additionally, productivity continued to improve during 1993. North
American sales increased 19 percent and production tonnage was 15 percent higher
in 1993 than in 1992. However, the overseas equipment operations incurred a
substantially higher net loss this year, primarily due to lower production
volumes, higher cost levels and unfavorable changes in European currency
relationships. Reflecting the effects of the improved North American operations,
the worldwide ratio of cost of goods sold to net sales decreased to 83.1 percent
in 1993 compared with 85.7 percent in 1992. The cost ratio of the overseas
operations was significantly higher in 1993. The aggregate of the Equipment
Operations' research and development and selling, administrative and general
expenses was $4 million lower in 1993 compared with 1992, primarily due to lower
employment levels. After-tax results of the Equipment Operations in 1993
benefited by $33 million or $.43 per share from the reduction of inventories
valued on a last-in, first-out (LIFO) basis compared to LIFO inventory benefits
of $43 million or $.56 per share in 1992. Additional information is presented on
page 40 of the notes to the consolidated financial statements. The 1993 income
tax provision relating to the Equipment Operations, excluding the fourth quarter
benefit from the United States tax rate change, was unfavorably affected by
losses, including restructuring charges, recorded in taxing jurisdictions having
low tax rates or where the company cannot currently record tax benefits, coupled
with income realized in countries having higher income tax rates.
26
<PAGE>
BUSINESS SEGMENT AND GEOGRAPHIC AREA RESULTS
The following discussion of operating results by industry segment and geographic
area relates to information beginning on page 33.
Operating profit of each of the company's North American equipment
operations was favorably affected by improved price realization, higher volumes
and improved productivity compared with the results in 1992.
Before the restructuring charges and the incremental expense of the
accounting changes, operating profit of the worldwide agricultural equipment
segment increased to $266 million in 1993 compared with $106 million in 1992.
This improvement was caused primarily by an eight percent increase in worldwide
agricultural equipment sales to dealers, a nine percent increase in production
tonnage and a substantial decline in sales discounts and warranty costs as a
percent of gross sales in 1993. Benefits from the reduction of LIFO inventories
totaled $38 million in 1993 compared with $45 million in 1992. Agricultural
dealer receivables decreased $146 million in 1993. Including restructuring
charges of $107 million and incremental expense of $36 million from the
accounting changes, 1993 operating profit was $123 million.
Operating profit of the North American agricultural equipment operations,
excluding the incremental expense from accounting changes, was substantially
higher in 1993 compared with 1992 results. This resulted from a 14 percent
increase in sales, a 15 percent increase in production tonnage, a significantly
lower level of sales discounts and warranty costs, and improved productivity.
Additionally, North American agricultural dealer receivables decreased by $108
million during 1993 reflecting the strong retail demand for the company's
products.
Excluding the restructuring charges in 1993, the overseas agricultural
equipment operations incurred a substantially larger operating loss in 1993
compared to 1992. Production was two percent lower than in 1992 while the
physical volume of overseas agricultural equipment sales to dealers increased
approximately one percent in 1993. Low volumes, unfavorable changes in
currency relationships and higher cost levels adversely affected the company's
overseas performance during 1993. Overseas agricultural dealer receivables
declined $38 million during 1993, mainly due to exchange rate fluctuations.
The worldwide industrial equipment operations improved significantly in
1993, generating an operating profit of $36 million in 1993 before the
incremental expense from the accounting changes, compared with a $71 million
operating loss in 1992. In 1993, sales increased 26 percent, production tonnage
increased 15 percent, sales discounts and warranty costs declined as a percent
of gross sales and productivity improved. However, LIFO inventory benefits were
$13 million in 1993 compared with $20 million in 1992. Industrial dealer
receivables increased by $41 million during 1993. The operating profit in 1993
was $20 million including the incremental expense of $16 million from the
accounting changes.
The worldwide lawn and grounds care equipment operations had a
substantially higher operating profit of $107 million in 1993 excluding the
incremental expense from the accounting changes, compared with $42 million in
1992. Lawn and grounds care equipment sales to dealers increased 18 percent,
production was up 13 percent, sales discounts and warranty costs were lower as a
percent of gross sales in 1993 and efficiency improved in 1993. Lawn and grounds
care dealer receivables were relatively unchanged from the level in 1992.
Including the incremental expense of $8 million from the accounting changes,
operating profit was $99 million in 1993.
The combined operating profit of the credit and insurance and health care
business segments increased to $247 million in 1993 from $202 million in 1992,
as both segments generated higher earnings in 1993. Additional information on
these businesses is presented in the discussion of "Credit Operations" and
"Insurance and Health Care Operations" on pages 27 through 29
On a geographic basis, the United States and Canadian
equipment operations had significantly higher operating profit of $432 million
in 1993 before the incremental expense from the accounting changes, compared
with $74 million in 1992. Sales increased 19 percent in 1993 and production
tonnage increased 15 percent. Efficiency improved and sales discounts and
warranty costs were relatively lower in all of the company's North American
businesses in 1993. However, LIFO inventory benefits were $13 million in 1993
compared with $65 million in 1992. North American dealer receivables were
reduced by $75 million during 1993. Operating profit in 1993 totaled $372
million including the incremental expense of $60 million from the accounting
changes.
Excluding restructuring charges, the overseas equipment operations incurred
an operating loss of $23 million in 1993 compared with an operating profit of $3
million in 1992. Including restructuring charges of $107 million, the operating
loss in 1993 was $130 million. Sales to dealers and production tonnage were both
two percent lower in 1993 while the physical volume of overseas net sales
increased approximately one percent compared with 1992. As previously mentioned,
1993 results were adversely affected by low volumes, unfavorable changes in
currency relationships and higher cost levels. However, benefits from the
reduction of LIFO inventories totaled $3 million in 1993 compared with no
benefit in 1992. Overseas dealer receivables decreased $33 million during 1993,
mainly due to exchange rate fluctuations.
CREDIT OPERATIONS
- - --------------------------------------------------------------------------------
Deere & Company's credit subsidiaries consist of John Deere Credit Company and
its subsidiaries in the United States and John Deere Finance Limited in Canada.
The credit operations bear all credit risk, net of recovery from withholdings
from dealers, and perform all servicing and collection functions on retail notes
and leases on John Deere products acquired by the credit subsidiaries from the
Equipment Operations. The Equipment Operations receive compensation from the
United States credit operations for originating retail notes and leases. The
Equipment Operations are reimbursed by the credit operations for staff support
and other administrative services at estimated cost, and for credit lines
provided by Deere & Company based on utilization of the lines. The credit
subsidiaries receive compensation from the Equipment Operations equal to a
competitive interest rate for periods during which finance charges have been
waived or reduced on retail notes and leases.
27
<PAGE>
Condensed combined financial information of the credit subsidiaries in millions
of dollars follows:
<TABLE>
<CAPTION>
- - --------------------------------------------------------------------------------
OCTOBER 31
FINANCIAL POSITION 1994 1993
- - --------------------------------------------------------------------------------
<S> <C> <C>
Cash and cash equivalents. . . . . . . . . . $ 43 $ 165
------ ------
Credit receivables and leases:
Deere retail notes . . . . . . . . . . . . 2,901 2,342
Recreational product retail notes. . . . . 873 854
Revolving charge accounts. . . . . . . . . 438 331
Financing leases . . . . . . . . . . . . . 118 85
Wholesale notes. . . . . . . . . . . . . . 142 110
Equipment on operating leases. . . . . . . 125 119
------ ------
Total credit receivables and leases. . . 4,597 3,841
Less allowance for credit losses . . . . . 86 83
------ ------
Total - net. . . . . . . . . . . . . . . 4,511 3,758
------ ------
Other receivables. . . . . . . . . . . . . . 155 183
------ ------
Net property and other assets. . . . . . . . 66 52
------ ------
Total assets . . . . . . . . . . . . . . . $4,775 $4,158
------ ------
------ ------
Short-term borrowings. . . . . . . . . . . . $2,584 $1,125
Payables to Deere & Company. . . . . . . . . 125 487
Deposits withheld from dealers and merchants 127 119
Other liabilities. . . . . . . . . . . . . . 200 144
Long-term borrowings . . . . . . . . . . . . 1,034 1,478
Stockholder's equity . . . . . . . . . . . . 705 805
------ ------
Total liabilities and stockholder's equity $4,775 $4,158
------ ------
------ ------
</TABLE>
<TABLE>
<CAPTION>
- - --------------------------------------------------------------------------------
YEAR ENDED OCTOBER 31
SUMMARY OF OPERATIONS 1994 1993 1992
- - --------------------------------------------------------------------------------
<S> <C> <C> <C>
Revenues . . . . . . . . . . . . . . . . . . $516 $524 $533
---- ---- ----
Expenses:
Interest . . . . . . . . . . . . . . . . . 190 192 218
Selling, administrative and general. . . . 96 93 84
Provision for credit losses. . . . . . . . 31 30 52
Depreciation . . . . . . . . . . . . . . . 21 19 16
---- ---- ----
Total. . . . . . . . . . . . . . . . . . 338 334 370
---- ---- ----
Income before income taxes and changes
in accounting. . . . . . . . . . . . . . . 178 190 163
Provision for income taxes . . . . . . . . . 64 68 57
---- ---- ----
Income before changes in accounting. . . . . 114 122 106
Changes in accounting. . . . . . . . . . . . (4)
---- ---- ----
Net income . . . . . . . . . . . . . . . . . $114 $118 $106
---- ---- ----
---- ---- ----
- - --------------------------------------------------------------------------------
</TABLE>
Total acquisitions of credit receivables and leases by the credit
subsidiaries increased 20 percent during 1994 compared to 1993. The higher
acquisitions this year resulted from an increased volume of retail notes,
revolving charge accounts and wholesale receivables.
During 1994, retail notes acquired by the credit subsidiaries totaled
$2,816 million, a 17 percent increase compared with 1993 acquisitions of $2,401
million. Acquisitions of recreational product retail notes accounted for 11
percent of total note acquisitions in 1994 and 10 percent in 1993. Acquisitions
of John Deere equipment notes were 16 percent higher in the current year due
primarily to improvements in the general economy and increased retail sales of
John Deere equipment.
The balance of revolving charge accounts financed at October 31, 1994
increased by $107 million, financing leases increased by $33 million, wholesale
notes increased by $32 million and operating leases increased by $6 million
compared with one year ago.
The balance of credit receivables and leases financed at October 31, 1994
totaled $4,511 million compared with $3,758 million at the end of 1993. This
increase resulted from the cost of credit receivables acquired exceeding
collections. However, the credit operations also securitized and sold retail
notes, receiving proceeds of $560 million during 1994 compared with $1,143
million last year. Additional information is presented on pages 39 and 40.
Credit receivables and leases administered, which include receivables previously
sold but still administered, amounted to $5,725 million at October 31, 1994
compared with $5,195 million at October 31, 1993. The unpaid balance of retail
notes previously sold was $1,175 million at October 31, 1994 compared with
$1,394 million at October 31, 1993.
Income of the credit operations was $114 million in 1994 compared with $122
million in 1993 before the cumulative effect of adopting FASB Statements No. 106
and 112, and $106 million in 1992. On that same basis, the ratio of earnings to
fixed charges was 1.93 to 1 in 1994, 1.97 to 1 in 1993 and 1.74 to 1 in 1992.
Income in 1994 was lower than in 1993 primarily reflecting the impact of a
higher dividend payout during the year, lower gains from the sale of retail
notes and higher selling, administrative and general expenses. These effects
were partially offset by higher securitization and servicing fee income from
notes previously sold but still administered. Total revenues of the credit
operations decreased two percent in 1994 compared with 1993. Revenues were
affected by lower gains from the sale of retail notes and lower interest rates
resulting in lower finance charges earned in 1994. These decreases in revenues
were partially offset by an increase in securitization and servicing fee income.
Additionally, lower average borrowing rates this year resulted in a one percent
decrease in interest expense in 1994 compared to 1993. The average balance of
credit receivables and leases financed was approximately the same in 1994
compared with last year. Net income of the credit operations totaled $118
million in 1993 including the cumulative effect of the changes in accounting
standards. Additional information on changes in accounting is presented on pages
32, 33 and 45 of the notes to the consolidated financial statements.
Net income in 1993 was significantly higher than in 1992 mainly because of
higher securitization and servicing fee income from retail notes previously
sold, lower credit losses, higher financing margins and increased gains from
the sale of retail notes, which more than offset the effects of a lower volume
of credit receivables and leases financed. Total revenues of the credit
operations decreased two percent in 1993. The average balance of
28
<PAGE>
credit receivables and leases financed was seven percent lower in 1993 compared
with 1992, due primarily to the sale of receivables during 1993. Revenues were
also affected by the lower level of interest rates and correspondingly lower
finance charges earned on the credit receivable and lease portfolio in 1993
compared with 1992. These decreases in revenues were partially offset by
securitization and servicing fee income from retail notes previously sold.
Additionally, lower borrowing rates and a decrease in average borrowings in 1993
resulted in a 12 percent decrease in interest expense in 1993 compared to 1992.
Total credit receivable and lease amounts 60 days or more past due were $14
million at October 31, 1994 compared with $16 million at October 31, 1993. These
past-due amounts represented .31 percent of the credit receivables and leases
financed at October 31, 1994 and .42 percent at October 31, 1993. The allowance
for credit losses, which totaled $86 million at the end of 1994 and $83 million
one year ago, represented 1.87 percent and 2.17 percent, respectively, of the
balance of credit receivables and leases financed at October 31, 1994 and 1993.
Deposits withheld from dealers and merchants, which are available for potential
credit losses, amounted to $127 million at October 31, 1994.
John Deere Capital Corporation (Capital Corporation) is a subsidiary of
John Deere Credit Company. Deere & Company has expressed an intention of
conducting business with the Capital Corporation on such terms that its ratio of
earnings before fixed charges to fixed charges will not be less than 1.05 to 1
for each fiscal quarter. These arrangements are not intended to make Deere &
Company responsible for the payment of obligations of this credit subsidiary.
INSURANCE AND HEALTH CARE OPERATIONS
- - --------------------------------------------------------------------------------
Deere & Company's insurance subsidiaries consist of John Deere Insurance Group,
Inc. and its subsidiaries in the United States, which provide life/health and
property/casualty coverages to the general public nationwide, and John Deere
Insurance Company of Canada. John Deere Health Care, Inc., directly or through
its health maintenance organizations, provides administrative services and
managed health care programs for Deere & Company and other companies.
Condensed combined financial information of the insurance and health care
operations in millions of dollars follows:
<TABLE>
<CAPTION>
- - --------------------------------------------------------------------------------
OCTOBER 31
FINANCIAL POSITION 1994 1993
- - --------------------------------------------------------------------------------
<S> <C> <C>
Cash . . . . . . . . . . . . . . . . . . . . . . . $99 $ 101
Marketable securities carried at cost. . . . . . . 1,126 995
Other assets . . . . . . . . . . . . . . . . . . . 446 357
------ ------
Total assets . . . . . . . . . . . . . . . . . . $1,671 $1,453
------ ------
------ ------
Claims and reserves. . . . . . . . . . . . . . . . $ 763 $ 673
Unearned premiums. . . . . . . . . . . . . . . . . 154 128
Other liabilities. . . . . . . . . . . . . . . . . 272 204
Stockholder's equity . . . . . . . . . . . . . . . 482 448
------ ------
Total liabilities and stockholder's equity . . . $1,671 $1,453
------ ------
------ ------
- - --------------------------------------------------------------------------------
</TABLE>
<TABLE>
<CAPTION>
- - --------------------------------------------------------------------------------
YEAR ENDED OCTOBER 31
SUMMARY OF OPERATIONS 1994 1993 1992
- - --------------------------------------------------------------------------------
<S> <C> <C> <C>
Premiums . . . . . . . . . . . . . . . . . . $813 $698 $637
Investment income. . . . . . . . . . . . . . 94 98 97
---- ---- ----
Total revenues . . . . . . . . . . . . . . 907 796 734
---- ---- ----
Expenses:
Claims and benefits. . . . . . . . . . . . 696 609 565
Selling, administrative and general. . . . 156 132 132
---- ---- ----
Total. . . . . . . . . . . . . . . . . . 852 741 697
---- ---- ----
Income of consolidated group before
income taxes and changes in accounting . . 55 55 37
Provision for income taxes . . . . . . . . . 13 15 7
---- ---- ----
Income of consolidated group before
changes in accounting. . . . . . . . . . . 42 40 30
Equity in income of unconsolidated affiliate 5 2 2
---- ---- ----
Income before changes in accounting. . . . . 47 42 32
Changes in accounting. . . . . . . . . . . . (3)
---- ---- ----
Net income . . . . . . . . . . . . . . . . . $ 47 $ 39 $ 32
---- ---- ----
---- ---- ----
- - --------------------------------------------------------------------------------
</TABLE>
Insurance premium revenues of $19 million in 1994, $26 million in 1993 and
$27 million in 1992 and health care premium revenues of $132 million in 1994,
$118 million in 1993 and $114 million in 1992 related to coverages provided to
Deere & Company and its subsidiaries.
Income of the insurance and health care operations totaled $47 million in
1994 compared with $42 million in 1993 before the cumulative effect of adopting
FASB Statements No. 106 and 112, and $32 million in 1992. The increase in 1994
income compared with 1993 resulted mainly from higher volumes and improved
underwriting performance this year from the health care operations. Insurance
and health care premiums increased 16 percent in 1994, while claims, policy
benefits and other expenses increased 15 percent from 1993. Net income of the
insurance and health care operations totaled $39 million in 1993 including the
cumulative effect of the changes in accounting standards. Additional information
on changes in accounting is presented on pages 32, 33 and 45 of the notes to the
consolidated financial statements.
The increase in 1993 net income resulted mainly from improved insurance
underwriting income compared with 1992, which had higher loss experience, and
higher health care income as a result of higher volumes and improved
underwriting performance in 1993. Insurance and health care premiums increased
10 percent in 1993, while claims, policy benefits and other expenses increased
six percent from 1992.
29
<PAGE>
CAPITAL RESOURCES AND LIQUIDITY (UNAUDITED)
- - --------------------------------------------------------------------------------
The discussion of capital resources and liquidity 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 borrowing sources.
[Bar Graph]
EQUIPMENT OPERATIONS (in millions)
Cash Provided by Operations Purchases of Property and Equipment
1992 $148 $276
1993 $702 $197
1994 $677 $215
Cash flows from operating activities were slightly lower in 1994 compared
with 1993, mainly as a result of $200 million of additional contributions to the
pension fund and an increase in dealer receivables and company-owned
inventories, which were mostly offset by significantly higher income and
increased dividends from the Financial Services subsidiaries. Cash flows from
operating activities totaled $677 million in 1994, which included dividends of
$227 million received from the Financial Services subsidiaries. Proceeds from
the reduction in receivables from the Financial Services subsidiaries were $320
million. The aggregate amount of these cash flows was used primarily to fund a
decrease in borrowings of $487 million, purchases of property and equipment of
$215 million, the payment of dividends to stockholders of $172 million and the
acquisition of Homelite for $120 million.
Over the last three years, operating activities have provided an aggregate
of $1,527 million in cash, including dividends received from the Financial
Services subsidiaries of $413 million. Proceeds from the issuance of common
stock were $625 million during this three-year period. The aggregate amount of
these cash flows was used mainly to fund a decrease in borrowings
of $824 million, purchases of property and equipment of $688 million,
stockholders' dividends of $477 million and the acquisition of Homelite for $120
million.
Net dealer accounts and notes receivable result mainly from sales to
dealers of equipment that is being carried in their inventories. Dealer
receivables, excluding the acquired Homelite receivables, increased by only $88
million during 1994, despite the sizeable increase in retail demand for the
company's products. North American agricultural equipment dealer receivables
decreased $44 million, North American industrial equipment dealer receivables
decreased $11 million and North American lawn and grounds care equipment
receivables, excluding Homelite, increased $62 million. Total overseas dealer
receivables were $81 million higher than one year ago due to an increase in
sales and higher foreign currency exchange rates in 1994. The ratios of
worldwide net dealer accounts and notes receivable to fiscal year net sales,
excluding Homelite, at October 31 were 38 percent in 1994, 43 percent in 1993
and 51 percent in 1992.
The collection period for receivables from dealers averages less than 12
months. The percentage of receivables outstanding for a period exceeding 12
months was seven percent at October 31, 1994 compared with 11 percent at both
October 31, 1993 and 1992.
Company-owned inventories, excluding the acquired Homelite inventories,
increased by $175 million in 1994. Since most of these inventories are valued on
the last-in, first-out (LIFO) method, lower prevailing costs from prior years
are assigned to beginning inventories, which magnifies inventory increases that
are valued at higher current costs. Inventories, excluding Homelite, valued on
an approximate current cost basis increased by only 13 percent during 1994
compared to an increase in production tonnage and net sales of 18 percent during
the same period.
Total interest-bearing debt of the Equipment Operations was $1,073 million
at the end of 1994 compared with $1,546 million at the end of 1993 and $2,090
million at the end of 1992. The ratio of total debt to total capital (total
interest-bearing debt and stockholders' equity) at the end of 1994, 1993 and
1992 was 29.6 percent, 42.6 percent and 44.1 percent, respectively.
The average short-term borrowings and the weighted average interest rate
incurred thereon during 1994, excluding the current portion of long-term
borrowings, were $280 million and 5.9 percent, respectively, compared with
$1,050 million and 6.0 percent, respectively, in 1993. During 1992, average
short-term borrowings were $1,030 million with an average interest rate of 7.2
percent.
In January 1994, Deere & Company redeemed the $80 million balance of its
outstanding 8% debentures due 2002 and, in March 1994, redeemed $37 million of
its 8.45% debentures due 2000. During 1994, Deere & Company also retired $21
million of its medium-term notes. Additional information is included in the
discussion of "Long-Term Borrowings" on pages 42 and 43.
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 Capital Corporation 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.
30
<PAGE>
Cash flows from the company's Financial Services operating activities were $269
million in 1994. Cash provided by financing activities totaled $472 million in
1994, representing an increase in outside borrowings of $1,019 million, which
was partially offset by a decrease in payables to the Equipment Operations of
$320 million and $227 million of dividends paid to the Equipment Operations. The
aggregate cash provided by operating activities, financing activities and a $125
million decrease in cash and cash equivalents was used primarily to increase
credit receivables. Cash used for investing activities totaled $866
million in 1994, primarily due to the cost of credit receivables acquired
exceeding collections by $1,323 million, which was partially offset by the net
proceeds of $560 million received from the securitization and sale of
receivables in the public market. Within the Financial Services operations,
the positive cash flows from insurance and health care operations were primarily
invested in marketable securities.
Over the past three years, the Financial Services operating activities have
provided $798 million in cash and proceeds from the sale of receivables have
provided $2,446 million. These amounts have been used mainly to fund credit
receivable acquisitions which exceeded collections by $2,414 million, $413
million of dividends to the Equipment Operations, an increase of $242 million in
marketable securities and a decrease of $112 million in outside borrowings.
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. The $131 million increase in 1994 resulted primarily from the
continuing growth in the insurance and health care operations.
Credit receivables increased by $747 million in 1994 compared with 1993.
The discussion of "Credit Operations" on pages 27 through 29, and pages 39
through 40 of the notes to the consolidated financial statements provides
detailed information on these receivables.
Total interest-bearing debt of the credit subsidiaries was $3,618 million
at the end of 1994 compared with $2,603 million at the end of 1993 and $3,463
million at the end of 1992. The credit subsidiaries' ratio of total
interest-bearing debt to total stockholder's equity was 5.3 to 1 at the end of
1994 compared with 3.8 to 1 at the end of 1993 and 4.6 to 1 at the end of 1992.
The average short-term borrowings of the credit subsidiaries and the
weighted average interest rate incurred thereon during 1994, excluding the
current portion of long-term borrowings, were $1,850 million and 4.6 percent,
respectively, compared with $1,401 million and 4.3 percent, respectively, in
1993. During 1992, average short-term borrowings were $2,150 million with an
average interest rate of 4.9 percent.
In January 1994, the Capital Corporation redeemed the $40 million balance
of its outstanding 9.35% subordinated debentures due 2003. During 1994, the
Capital Corporation also issued $189 million and retired $355 million of its
medium-term notes. Additional information on these borrowings is included in the
discussion of "Long-Term Borrowings" on pages 42 through 43.
In the 1994, 1993 and 1992 fiscal years, the Capital Corporation received
net proceeds of $560 million, $1,143 million and $455 million, respectively,
from the sale of retail notes to limited-purpose business trusts, which utilized
the notes as collateral for the issuance of asset backed securities to the
public. In the 1992 fiscal year, the Capital Corporation also sold retail notes
to a financial institution receiving proceeds of $228 million. Additional sales
of retail notes are expected to be made in the future.
CONSOLIDATED
The 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
$3,370 million at October 31, 1994, $1,378 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 $2,434 million.
Stockholders' equity was $2,558 million at October 31, 1994 compared with
$2,085 million and $2,650 million at October 31, 1993 and 1992, respectively.
The increase in 1994 was caused primarily by net income of $604 million and an
increase in common stock of $55 million, partially offset by dividends declared
of $176 million, an increase of $33 million in the minimum pension liability
adjustment described under "Pension Benefits" on pages 35 and 36 and a $24
million change in the cumulative translation adjustment.
31
<PAGE>
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
- - --------------------------------------------------------------------------------
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
- - --------------------------------------------------------------------------------
Following are significant accounting policies in addition to those included in
other notes to the consolidated financial statements.
The consolidated financial statements represent the consolidation of all
companies in which Deere & Company has a majority ownership. Deere & Company
records its investment in each unconsolidated affiliated company (20 to 50
percent ownership) at its related equity in the net assets of such affiliate.
Other investments (less than 20 percent ownership) are recorded at cost.
Unconsolidated subsidiaries and affiliates at October 31, 1994 consisted
primarily of equipment affiliates in Brazil, Mexico and the United States, and a
United States reinsurance affiliate. Consolidated retained earnings at October
31, 1994 include undistributed earnings of the unconsolidated affiliates of $58
million. Dividends from unconsolidated affiliates were $2 million in 1994, 1993
and 1992.
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.
Sales of equipment and service parts are generally recorded by the company
when they are shipped to independent dealers. Provisions for sales incentives
and product warranty costs are recognized at the time of sale or at the
inception of the incentive programs. There is a time lag, which varies based on
the timing and level of retail demand, between the dates when the company
records sales to dealers and when dealers sell the equipment to retail
customers.
Retail notes receivable include unearned finance income in the face amount
of the notes, which is amortized into income over the lives of the notes on the
effective-yield basis. Unearned finance income on variable-rate notes is
adjusted monthly based on fluctuations in the base rate of a specified bank.
Financing leases receivable include unearned lease income, which is equal to the
excess of the gross lease receivable plus the estimated residual value over the
cost of the equipment, and is recognized as revenue over the lease terms on the
effective-yield basis. Rental payments applicable to equipment on operating
leases are recorded as income on a straight-line method over the lease terms.
Assets on operating leases are recorded at cost and depreciated on a
straight-line method over the terms of the leases. Costs incurred in the
acquisition of retail notes and leases are deferred and amortized into income
over the expected lives of the affected receivables on the effective-yield
basis. Interest charged to revolving charge account customers and on wholesale
receivables is based on the balances outstanding.
During 1994, 1993 and 1992, the credit subsidiaries sold retail notes to
limited-purpose business trusts, which utilized the notes as collateral for the
issuance of asset backed securities to the public. At the time of the sales,
"other receivables" from the trusts were recorded at net present value. The
receivables relate to deposits made pursuant to recourse provisions and other
payments to be received under the sales agreements. The receivables will be
amortized to their value at maturity using the interest method. The credit
subsidiaries are also compensated by the trusts for certain expenses incurred in
the administration of these receivables. Securitization and servicing fee income
includes both the amortization of the above receivables and reimbursed
administrative expenses.
Insurance and health care premiums are generally recognized as earned over
the terms of the related policies. Insurance and health care claims and reserves
include liabilities for unpaid claims and future policy benefits. Policy
acquisition costs, such as commissions, premium taxes and certain other
underwriting expenses, which vary with the production of business, are deferred
and amortized over the terms of the related policies. The liability for unpaid
claims and claims adjustment expenses is based on estimated costs of settling
the claims using past experience adjusted for current trends. The liability for
future policy benefits on traditional life insurance policies is based on the
mortality, interest and withdrawal assumptions prevailing at the time the
policies are issued. The liability for universal life type contracts is the
total of the policyholder accumulated funds. The receivable for amounts
recoverable from reinsurers is estimated based on the corresponding claim
liability associated with the reinsured policies. Interest rates used in
calculating future policyholder benefits and universal life account values range
from four and one-half to 11 percent.
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
sheet for 1993 was restated which increased total assets and liabilities by
immaterial amounts. There were no effects on stockholders' equity or the
consolidated income statement. Additional information is presented in the
discussion of "Reinsurance" on page 35.
In the fourth quarter of 1993, the company adopted FASB Statement No. 106,
Employers' Accounting for Postretirement Benefits Other Than Pensions, effective
November 1, 1992. Prior quarters of 1993 were restated as required by this
Statement. The company elected to recognize the pretax transition obligation of
$1,712 million ($1,095 million or $14.17 per share net of deferred income taxes)
as a one-time charge to earnings in 1993. For years prior to 1993,
postretirement benefits were generally included in costs as covered expenses
were actually incurred. The adoption of FASB Statement No. 106 resulted in an
incremental pretax expense of $58 million ($37 million or $.48 per share net of
deferred income taxes) compared with expense determined under the previous
accounting principle. The incremental postretirement benefits expense relating
to the Financial Services subsidiaries was immaterial. Additional information is
presented in the discussion of "Postretirement Benefits Other Than Pensions" on
pages 36 through 37, and the "Supplemental 1994 and 1993 Quarterly Information
(Unaudited)" on page 45.
In the fourth quarter of 1993, the company adopted FASB Statement No. 112,
Employers' Accounting for Postemployment Benefits, effective November 1, 1992.
The company previously
32
<PAGE>
accrued certain disability-related benefits when the disability occurred.
Results for the first quarter of 1993 were restated for the cumulative pretax
charge resulting from this change in accounting as of November 1, 1992 which
totaled $16 million ($10 million or $.13 per share net of deferred income
taxes). The adoption of FASB Statement No. 112 resulted in incremental 1993
pretax expense of $2 million ($1 million or $.01 per share net of deferred
income taxes) compared with expense determined under the previous accounting
principle. The adoption of FASB Statement No. 112 had an immaterial effect on
the Financial Services subsidiaries. Additional information is presented in the
"Supplemental 1994 and 1993 Quarterly Information (Unaudited)" on page 45.
In May 1993, the FASB issued Statement No. 115, Accounting for Certain
Investments in Debt and Equity Securities. This Statement requires that the
insurance and health care operations' investments in debt and equity securities
be classified in the following three categories: trading, held-to-maturity or
available-for-sale. The company intends to designate all but a small portion of
its debt securities as held-to-maturity and, therefore, retain the current
amortized cost basis of accounting. The new standard must be adopted in 1995 and
is not expected to have a material effect on the company's net income or
financial position.
In August 1994, Deere & Company purchased the Homelite division of Textron,
Inc. for approximately $120 million. 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 cost exceeded the fair value of net assets acquired by $11 million,
which is included in intangible assets and will be amortized to expense over 15
years. The purchase did not have a material effect on the company's operating
results.
Certain amounts for prior years have been reclassified to conform with 1994
financial statement presentations.
INDUSTRY SEGMENT AND GEOGRAPHIC AREA DATA FOR THE YEARS ENDED OCTOBER 31, 1994,
1993 AND 1992
- - --------------------------------------------------------------------------------
The company's operations are categorized into five business segments described
as follows.
The company's worldwide agricultural equipment segment manufactures and
distributes a full range of equipment used in commercial farming - including
tractors; tillage, soil preparation, planting and harvesting machinery; and crop
handling equipment.
The company's worldwide industrial equipment segment manufactures and
distributes a broad range of machines used in construction, earthmoving and
forestry - including backhoe loaders; crawler dozers and loaders;
four-wheel-drive loaders; scrapers; motor graders; excavators; and log skidders.
This segment also includes the manufacture and distribution of engines and
drivetrain components for the original equipment manufacturer (OEM) market.
The company's worldwide lawn and grounds care equipment segment
manufactures and distributes equipment for commercial and residential uses -
including small tractors for lawn, garden and utility purposes; riding and
walk-behind mowers; golf course equipment; utility transport vehicles;
snowblowers; hand held products such as chain saws, string trimmers and leaf
blowers; and other outdoor power products.
The products produced by the equipment segments are marketed primarily
through independent retail dealer networks.
The company's credit segment, which operates in the United States and
Canada, primarily finances and services: retail notes related to sales by John
Deere dealers of new and used equipment; retail notes related to sales by
non-Deere dealers of recreational vehicle and recreational marine products;
leases of John Deere equipment to retail customers; unsecured revolving charge
accounts acquired from merchants; and wholesale notes for certain inventories
held by recreational vehicle and engine dealers.
The company's insurance and health care segment issues policies in the
United States and Canada primarily for: a general line of property and casualty
insurance to John Deere and non-Deere dealers and to the general public; group
life and group accident and health insurance for employees of participating John
Deere dealers and employees of the company; and life and annuity products to the
general public. This segment also provides health management programs and
related administrative services in the United States to corporate customers and
employees of Deere & Company.
Because of integrated manufacturing operations and common administrative
and marketing support, a substantial number of allocations must be made to
determine industry segment and geographic area data. Intersegment sales and
revenues represent sales of components, insurance and health care premiums, and
finance charges. Interarea sales represent sales of complete machines, service
parts and components to units in other geographic areas. Intersegment sales and
revenues and interarea sales are generally priced at market prices. Overseas
operations are defined to include all activities of divisions, subsidiaries and
affiliated companies conducted outside the United States and Canada.
Information relating to operations by industry segment in millions of
dollars follows. Comments relating to these data are included in Management's
Discussion and Analysis.
<TABLE>
<CAPTION>
- - --------------------------------------------------------------------------------
INDUSTRY SEGMENTS 1994 1993 1992
- - --------------------------------------------------------------------------------
<S> <C> <C> <C>
NET SALES AND REVENUES
Unaffiliated customers:
Agricultural equipment net sales . . . . . $4,718 $4,078 $3,759
Industrial equipment net sales . . . . . . 1,640 1,348 1,068
Lawn and grounds care equipment
net sales. . . . . . . . . . . . . . . . 1,305 1,053 896
Credit revenues. . . . . . . . . . . . . . 515 523 532
Insurance and health care revenues . . . . 756 652 592
------ ------ ------
Total. . . . . . . . . . . . . . . . . . 8,934 7,654 6,847
------ ------ ------
Intersegment:
Agricultural equipment net sales . . . . . 119 123 91
Industrial equipment net sales . . . . . . 104 85 66
Credit revenues. . . . . . . . . . . . . . 1 1 1
Insurance and health care revenues . . . . 151 144 142
------ ------ ------
Total. . . . . . . . . . . . . . . . . . 375 353 300
------ ------ ------
Unaffiliated customers and intersegment:
Agricultural equipment net sales . . . . . 4,837 4,201 3,850
Industrial equipment net sales . . . . . . 1,744 1,433 1,134
Lawn and grounds care equipment
net sales. . . . . . . . . . . . . . . . 1,305 1,053 896
Credit revenues. . . . . . . . . . . . . . 516 524 533
Insurance and health care revenues . . . . 907 796 734
Elimination of intersegment. . . . . . . . (375) (353) (300)
------ ------ ------
Total. . . . . . . . . . . . . . . . . . . . 8,934 7,654 6,847
Other revenues . . . . . . . . . . . . . . . 96 100 114
------ ------ ------
CONSOLIDATED NET SALES AND REVENUES. . . . . $9,030 $7,754 $6,961
------ ------ ------
------ ------ ------
- - --------------------------------------------------------------------------------
</TABLE>
(continued)
33
<PAGE>
<TABLE>
<CAPTION>
- - --------------------------------------------------------------------------------
INDUSTRY SEGMENTS 1994 1993 1992
- - --------------------------------------------------------------------------------
<S> <C> <C> <C>
OPERATING PROFIT (LOSS)
Agricultural equipment . . . . . . . . . . . $ 553 $ 123* $ 106
Industrial equipment . . . . . . . . . . . . 132 20* (71)
Lawn and grounds care equipment. . . . . . . 162 99* 42
Credit** . . . . . . . . . . . . . . . . . . 178 190 163
Insurance and health care**. . . . . . . . . 60 57 39
------- ------- -------
Total operating profit . . . . . . . . . . 1,085 489* 279
------- ------- -------
OTHER INCOME AND (EXPENSE)
Interest income-net. . . . . . . . . . . . . 1 1 4
Interest expense-net . . . . . . . . . . . . (114) (177) (195)
Foreign exchange loss. . . . . . . . . . . . (3) (4) (7)
Corporate expenses-net . . . . . . . . . . . (33) (28) (30)
Income taxes . . . . . . . . . . . . . . . . (332) (97) (14)
------- ------- -------
Total. . . . . . . . . . . . . . . . . . . (481) (305) (242)
------- ------- -------
Income before changes in accounting. . . . . 604 184* 37
Changes in accounting. . . . . . . . . . . . (1,105)
------- ------- -------
NET INCOME (LOSS). . . . . . . . . . . . . . $ 604 $ (921)* $ 37
------- ------- -------
------- ------- -------
<FN>
* In 1993, the operating profit of the agricultural equipment business
segment includes restructuring costs of $107 million. In addition, the
company adopted FASB Statements No. 106 and 112 in 1993. The incremental
postretirement and postemployment benefits expense resulting from these
accounting changes reduced the operating profit of the agricultural
equipment, industrial equipment and lawn and grounds care equipment
segments by $36 million, $16 million and $8 million, respectively.
** Operating profit of the credit business segment includes the effect of
interest expense, which is the largest element of its operating costs.
Operating profit of the insurance and health care business segment includes
investment income.
</FN>
<CAPTION>
- - --------------------------------------------------------------------------------
IDENTIFIABLE ASSETS
Agricultural equipment . . . . . . . . . . . $ 3,424 $ 3,233 $ 3,549
Industrial equipment . . . . . . . . . . . . 1,168 1,129 1,110
Lawn and grounds care equipment. . . . . . . 989 767 767
Credit . . . . . . . . . . . . . . . . . . . 4,774 4,158 4,604
Insurance and health care. . . . . . . . . . 1,671 1,452 1,266
Corporate. . . . . . . . . . . . . . . . . . 755 728 150
------- ------- -------
Total. . . . . . . . . . . . . . . . . . . $12,781 $11,467 $11,446
------- ------- -------
------- ------- -------
- - --------------------------------------------------------------------------------
CAPITAL ADDITIONS
Agricultural equipment . . . . . . . . . . . $ 148 $ 134 $ 194
Industrial equipment . . . . . . . . . . . . 43 43 45
Lawn and grounds care equipment. . . . . . . 27 20 32
Credit . . . . . . . . . . . . . . . . . . . 3 1 2
Insurance and health care. . . . . . . . . . 10 7 8
------- ------- -------
Total. . . . . . . . . . . . . . . . . . . $ 231 $ 205 $ 281
------- ------- -------
------- ------- -------
- - --------------------------------------------------------------------------------
DEPRECIATION EXPENSE
Agricultural equipment . . . . . . . . . . . $ 159 $ 156 $ 152
Industrial equipment . . . . . . . . . . . . 37 39 37
Lawn and grounds care equipment. . . . . . . 29 26 23
Credit . . . . . . . . . . . . . . . . . . . 2 2 2
Insurance and health care. . . . . . . . . . 3 2 2
Corporate. . . . . . . . . . . . . . . . . . 1 1 1
------- ------- -------
Total. . . . . . . . . . . . . . . . . . . $ 231 $ 226 $ 217
------- ------- -------
------- ------- -------
- - --------------------------------------------------------------------------------
</TABLE>
The company views and has historically disclosed its operations as consisting
of two geographic areas, the United States and Canada, and overseas, shown below
in millions of dollars. The percentages shown in the captions for net sales and
revenues, operating profit (loss) and identifiable assets indicate the
approximate proportion of each amount that relates to either the United States
only or to the company's Europe, Africa and Middle East division, the only
overseas area deemed to be significant for disclosure purposes. The percentages
are based upon a three-year average for 1994, 1993 and 1992.
<TABLE>
<CAPTION>
- - --------------------------------------------------------------------------------
GEOGRAPHIC AREAS 1994 1993 1992
- - --------------------------------------------------------------------------------
<S> <C> <C> <C>
NET SALES AND REVENUES
Unaffiliated customers:
United States and Canada:
Equipment net sales (90%). . . . . . . . $ 5,860 $ 4,934 $ 4,147
Financial Services revenues (95%). . . . 1,271 1,175 1,124
------- ------- -------
Total. . . . . . . . . . . . . . . . . 7,131 6,109 5,271
Overseas net sales (73%) . . . . . . . . . 1,803 1,545 1,576
------- ------- -------
Total. . . . . . . . . . . . . . . . . 8,934 7,654 6,847
------- ------- -------
Interarea:
United States and Canada equipment
net sales . . . . . . . . . . . . . . . . 640 558 459
Overseas net sales . . . . . . . . . . . . 360 322 317
------- ------- -------
Total. . . . . . . . . . . . . . . . . 1,000 880 776
------- ------- -------
Unaffiliated customers and interarea:
United States and Canada:
Equipment net sales . . . . . . . . . . . 6,500 5,492 4,606
Financial Services revenues . . . . . . . 1,271 1,175 1,124
------- ------- -------
Total. . . . . . . . . . . . . . . . . 7,771 6,667 5,730
Overseas net sales . . . . . . . . . . . . 2,163 1,867 1,893
Elimination of interarea . . . . . . . . . (1,000) (880) (776)
------- ------- -------
Total . . . . . . . . . . . . . . . . . . . 8,934 7,654 6,847
Other revenues . . . . . . . . . . . . . . . 96 100 114
------- ------- -------
CONSOLIDATED NET SALES AND REVENUES. . . . . $ 9,030 $ 7,754 $ 6,961
------- ------- -------
------- ------- -------
- - --------------------------------------------------------------------------------
OPERATING PROFIT (LOSS)
United States and Canada:
Equipment operations (90%) . . . . . . . . $ 764 $ 372* $ 74
Financial Services (92%) . . . . . . . . . 238 247 202
------- ------- -------
Total. . . . . . . . . . . . . . . . . . 1,002 619* 276
Overseas equipment operations (47%). . . . . 83 (130)* 3
------- ------- -------
Total operating profit . . . . . . . . . $ 1,085 $ 489* $ 279
------- ------- -------
------- ------- -------
<FN>
* In 1993, the operating loss of the overseas equipment operations includes
restructuring costs of $107 million. In addition, the company adopted FASB
Statements No. 106 and 112 in 1993. The incremental postretirement and
postemployment benefits expense resulting from these accounting changes
reduced the operating profit of the United States and Canada equipment
operations by $60 million.
</FN>
<CAPTION>
- - --------------------------------------------------------------------------------
IDENTIFIABLE ASSETS
United States and Canada:
Equipment operations (92%) . . . . . . . . $ 4,265 $ 3,951 $ 4,015
Financial Services (92%) . . . . . . . . . 6,445 5,610 5,870
------- ------- -------
Total. . . . . . . . . . . . . . . . . . 10,710 9,561 9,885
Overseas equipment operations (79%). . . . . 1,316 1,178 1,411
Corporate. . . . . . . . . . . . . . . . . . 755 728 150
------- ------- -------
Total. . . . . . . . . . . . . . . . . . $12,781 $11,467 $11,446
------- ------- -------
------- ------- -------
- - --------------------------------------------------------------------------------
</TABLE>
(continued)
34
<PAGE>
<TABLE>
<CAPTION>
- - --------------------------------------------------------------------------------
GEOGRAPHIC AREAS 1994 1993 1992
- - --------------------------------------------------------------------------------
<S> <C> <C> <C>
CAPITAL ADDITIONS
United States and Canada:
Equipment operations . . . . . . . . . . . $ 190 $ 162 $ 193
Financial Services . . . . . . . . . . . . 13 8 10
------- ------- -------
Total. . . . . . . . . . . . . . . . . . 203 170 203
Overseas equipment operations . . . . . . . 28 35 78
------- ------- -------
Total. . . . . . . . . . . . . . . . . . $ 231 $ 205 $ 281
------- ------- -------
------- ------- -------
- - --------------------------------------------------------------------------------
DEPRECIATION EXPENSE
United States and Canada:
Equipment operations . . . . . . . . . . . $ 166 $ 159 $ 151
Financial Services . . . . . . . . . . . . 5 4 4
------- ------- -------
Total. . . . . . . . . . . . . . . . . . 171 163 155
Overseas equipment operations . . . . . . . 59 62 61
Corporate. . . . . . . . . . . . . . . . . . 1 1 1
------- ------- -------
Total. . . . . . . . . . . . . . . . . . . $231 $226 $217
------- ------- -------
------- ------- -------
- - --------------------------------------------------------------------------------
NUMBER OF EMPLOYEES
United States and Canada:
Equipment operations . . . . . . . . . . . 24,200 22,700 23,300
Financial Services . . . . . . . . . . . . 2,400 2,300 2,300
------- ------- -------
Total. . . . . . . . . . . . . . . . . . 26,600 25,000 25,600
Overseas equipment operations . . . . . . . 7,700 8,100 9,300
------- ------- -------
Total. . . . . . . . . . . . . . . . . . 34,300 33,100 34,900
------- ------- -------
------- ------- -------
- - --------------------------------------------------------------------------------
</TABLE>
Total exports from the United States were $1,144 million in 1994, $961
million in 1993 and $778 million in 1992. Exports from the Europe, Africa and
Middle East division were $495 million in 1994, $423 million in 1993 and $442
million in 1992. Most of these exports were to the United States and Canada. Net
sales of service parts and accessories, which are included in total net sales,
amounted to $1,492 million in 1994, $1,352 million in 1993 and $1,260 million in
1992.
REINSURANCE
- - --------------------------------------------------------------------------------
The company's insurance subsidiaries utilize reinsurance to limit their losses
and reduce their exposure to large claims. Although reinsurance contracts permit
recovery of certain claims from reinsurers, the insurance subsidiaries are not
relieved of their primary obligations to the policyholders. The financial
condition of the reinsurers is evaluated to minimize any exposure to losses from
insolvencies.
Insurance and health care premiums earned in 1994 consisted of the
following in millions of dollars:
<TABLE>
<CAPTION>
FINANCIAL INTERCOMPANY
SERVICES ELIMINATIONS CONSOLIDATED
- - --------------------------------------------------------------------------------
<S> <C> <C> <C>
Premiums earned:
Direct from policyholders. . $832 $(149) $683
Reinsurance assumed. . . . . 47 47
Reinsurance ceded. . . . . . (68) (68)
------ ------ ------
Net premiums . . . . . . . . $811 $(149) $662
------ ------ ------
------ ------ ------
- - --------------------------------------------------------------------------------
</TABLE>
The difference between premiums earned and written is not material.
Reinsurance recoveries on ceded reinsurance contracts during 1994 totaled $80
million and are deducted from "Insurance and Health Care Claims and Benefits"
expense. At October 31, 1994, reinsurance receivables of $75 million and prepaid
insurance premiums of $15 million were associated with a single reinsurer.
RESTRUCTURING COSTS
- - --------------------------------------------------------------------------------
During the second quarter of 1993, the company initiated plans
to downsize and rationalize its European operations. This resulted in a
restructuring charge of $80 million after income taxes or $1.03 per share ($107
million before income taxes). The charge mainly represents the cost of
employment reductions to be implemented during 1993 and the next few years. As
of October 31, 1994, the expected employment reductions and the disbursement of
the $107 million accrual were both approximately 60 percent complete.
PENSION BENEFITS
- - --------------------------------------------------------------------------------
The company has several pension plans covering substantially all of its United
States employees and employees in certain foreign countries. The United States
plans and significant foreign plans in Canada, Germany and France are defined
benefit plans in which the benefits are based primarily on years of service and
employee compensation near retirement. It is the company's policy to fund its
United States plans according to the 1974 Employee Retirement Income Security
Act (ERISA) and income tax regulations. In Canada and France, the company's
funding is in accordance with local laws and income tax regulations, while the
German pension plan is unfunded. Plan assets in the United States, Canada and
France consist primarily of common stocks, common trust funds, government
securities and corporate debt securities.
Provisions of FASB Statement No. 87 require the company to record a minimum
pension liability relating to certain unfunded pension obligations, establish an
intangible asset relating thereto and reduce stockholders' equity. At October
31, 1994, this minimum pension liability was remeasured, as required by the
Statement. As a result, the adjustment to recognize the minimum pension
liability was increased from $515 million at October 31, 1993 to $545 million at
October 31, 1994; the related intangible asset was adjusted from $181 million to
$158 million; and the amount by which stockholders' equity had been reduced was
adjusted from $215 million to $248 million (net of applicable deferred income
taxes of $119 million in 1993 and $139 million in 1994).
The expense of all pension plans was $130 million in 1994, $151 million in
1993 and $121 million in 1992. In 1994, pension expense decreased by $46 million
due to favorable investment experience and $26 million from a change in assumed
rates of compensation increases, which were partially offset by $35 million from
the utilization of a lower discount rate and $16 million from other actuarial
experience. In 1993, pension expense increased $44 million from a change in
mortality assumptions and other actuarial experience and by $6 million from
utilization of a lower discount rate, which were partially offset by a reduction
of $20 million resulting from favorable investment experience.
The components of net periodic pension cost and the significant assumptions
for the United States plans consisted of the following in millions of dollars
and in percents:
35
<PAGE>
<TABLE>
<CAPTION>
- - --------------------------------------------------------------------------------
1994 1993 1992
- - --------------------------------------------------------------------------------
<S> <C> <C> <C>
Service cost . . . . . . . . . . . . . . . . $ 79 $ 74 $ 63
Interest cost. . . . . . . . . . . . . . . . 286 283 259
Return on assets:
Actual gain. . . . . . . . . . . . . . . . (86) (590) (157)
Deferred gain (loss) . . . . . . . . . . . (218) 324 (87)
Net amortization . . . . . . . . . . . . . . 43 32 18
----- ----- -----
NET COST . . . . . . . . . . . . . . . . . . $ 104 $ 123 $ 96
----- ----- -----
----- ----- -----
Discount rates for obligations . . . . . . . 8.0% 7.25% 8.0%
Discount rates for expenses. . . . . . . . . 7.25% 8.0% 8.25%
Assumed rates of compensation increases. . . 5.0% 5.0% 5.7%
Expected long-term rate of return. . . . . . 9.7% 9.7% 9.7%
- - --------------------------------------------------------------------------------
</TABLE>
A reconciliation of the funded status of the United States plans at October
31 in millions of dollars follows:
<TABLE>
<CAPTION>
- - -----------------------------------------------------------------------------------------------------------
1994 1993
-------------------------- --------------------------
Assets Accumulated Assets Accumulated
Exceed Benefits Exceed Benefits
Accumulated Exceed Accumulated Exceed
Benefits Assets Benefits Assets
- - -----------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
ACTUARIAL PRESENT VALUE
OF BENEFIT OBLIGATIONS
Vested benefit obligation. . . . . . . . . $(1,522) $(1,693) $(1,555) $(1,689)
Nonvested benefit obligation . . . . . . . (73) (270) (94) (276)
------- ------- ------- -------
Accumulated benefit obligation . . . . . . (1,595) (1,963) (1,649) (1,965)
Excess of projected benefit
obligation over accumulated
benefit obligation . . . . . . . . . . . (340) (20) (378) (21)
------- ------- ------- -------
Projected benefit obligation . . . . . . . . (1,935) (1,983) (2,027) (1,986)
Plan assets at fair value. . . . . . . . . . 1,756 1,767 1,805 1,510
------- ------- ------- -------
Projected benefit obligation
in excess of plan assets . . . . . . . . . (179) (216) (222) (476)
Unrecognized net loss. . . . . . . . . . . . 35 415 114 373
Prior service cost not yet
recognized in net periodic
pension cost . . . . . . . . . . . . . . . 9 154 3 176
Remaining unrecognized
transition net asset
from November 1, 1985. . . . . . . . . . . (73) (10) (83) (13)
Adjustment required to
recognize minimum liability. . . . . . . . (545) (515)
------- ------- ------- -------
PENSION LIABILITY RECOGNIZED
IN THE CONSOLIDATED
BALANCE SHEET. . . . . . . . . . . . . . . $ (208) $ (202) $ (188) $ (455)
------- ------- ------- -------
------- ------- ------- -------
- - -----------------------------------------------------------------------------------------------------------
</TABLE>
The components of net periodic pension cost and the significant assumptions
for the foreign plans consisted of the following in millions of dollars and in
percents:
<TABLE>
<CAPTION>
- - --------------------------------------------------------------------------------
1994 1993 1992
- - --------------------------------------------------------------------------------
<S> <C> <C> <C>
Service cost . . . . . . . . . . . . . . . . $ 9 $ 10 $ 10
Interest cost. . . . . . . . . . . . . . . . 23 23 23
Return on assets:
Actual gain. . . . . . . . . . . . . . . . (14) (18) (10)
Deferred gain . . . . . . . . . . . . . . 6 9
Net amortization . . . . . . . . . . . . . . 2 4 2
----- ----- -----
NET COST . . . . . . . . . . . . . . . . . . $ 26 $ 28 $ 25
----- ----- -----
----- ----- -----
Discount rates for obligations . . . . . . . 7.0-8.3% 6.8-7.0% 7.0-7.5%
Discount rates for expenses. . . . . . . . . 6.8-7.0% 7.0-7.5% 7.0-9.3%
Assumed rates of compensation increases. . . 4.0-7.0% 4.0-7.0% 4.0-7.0%
Expected long-term rates of return . . . . . 6.8-7.0% 7.0-7.5% 7.0-9.3%
- - --------------------------------------------------------------------------------
</TABLE>
A reconciliation of the funded status of the foreign plans at October 31 in
millions of dollars follows:
<TABLE>
<CAPTION>
- - -----------------------------------------------------------------------------------------------------------
1994 1993
-------------------------- --------------------------
Assets Accumulated Assets Accumulated
Exceed Benefits Exceed Benefits
Accumulated Exceed Accumulated Exceed
Benefits Assets Benefits Assets
- - -----------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
ACTUARIAL PRESENT VALUE
OF BENEFIT OBLIGATIONS
Vested benefit obligation. . . . . . . . . $ (68) $ (237) $ (81) $ (202)
Nonvested benefit obligation . . . . . . . (4) (4)
------- ------- ------- -------
Accumulated benefit obligation . . . . . . (68) (241) (81) (206)
Excess of projected benefit
obligation over accumulated
benefit obligation . . . . . . . . . . . (11) (41) (10) (36)
------- ------- ------- -------
Projected benefit obligation . . . . . . . . (79) (282) (91) (242)
Plan assets at fair value. . . . . . . . . . 131 124
------- ------- ------- -------
Projected benefit obligation
(in excess of) or
less than plan assets. . . . . . . . . . . 52 (282) 33 (242)
Unrecognized net (gain) loss . . . . . . . . (16) (4) 4
Prior service cost not yet recognized
in net periodic pension cost . . . . . . . 1 1
Remaining unrecognized
transition net (asset) obligation
from November 1, 1987. . . . . . . . . . . (16) 33 (18) 34
------- ------- ------- -------
PREPAID PENSION ASSET
(PENSION LIABILITY) RECOGNIZED
IN THE CONSOLIDATED
BALANCE SHEET. . . . . . . . . . . . . . . $ 21 $ (253) $ 20 $ (208)
------- ------- ------- -------
------- ------- ------- -------
- - -----------------------------------------------------------------------------------------------------------
</TABLE>
POSTRETIREMENT BENEFITS OTHER THAN PENSIONS
- - --------------------------------------------------------------------------------
The company generally provides defined benefit health care and life insurance
plans for retired employees in the United States and Canada. Provisions of the
benefit plans for hourly employees are, in large part, subject to collective
bargaining. The plans for salaried employees include certain cost-sharing
provisions. It is the company's policy to fund a portion of its obligations for
the United States postretire ment health care benefit plans under provisions of
Internal Revenue Code Section 401(h). Plan assets consist primarily of common
stocks, common trust funds, government securities and corporate debt securities.
During the fourth quarter of 1993, the company adopted FASB Statement No.
106, Employers' Accounting for Postretirement Benefits Other Than Pensions,
effective November 1, 1992. Additional information is presented in the "Summary
of Significant Accounting Policies" on page 32, and the "Supplemental 1994 and
1993 Quarterly Information (Unaudited)" on page 45.
36
<PAGE>
The components of net periodic postretirement benefits cost and the
significant assumptions for the United States and Canadian plans consisted of
the following in millions of dollars and in percents:
<TABLE>
<CAPTION>
- - --------------------------------------------------------------------------------
1994 1993
- - --------------------------------------------------------------------------------
<S> <C> <C>
HEALTH CARE
Service cost . . . . . . . . . . . . . . . . $ 54 $ 28
Interest cost. . . . . . . . . . . . . . . . 117 120
Return on assets:
Actual gain. . . . . . . . . . . . . . . . (4) (21)
Deferred gain (loss) . . . . . . . . . . . (10) 11
Net amortization . . . . . . . . . . . . . . (44) (12)
---- ----
Net cost . . . . . . . . . . . . . . . . . 113 126
---- ----
LIFE INSURANCE
Service cost . . . . . . . . . . . . . . . . 3 3
Interest cost. . . . . . . . . . . . . . . . 15 13
---- ----
Net cost . . . . . . . . . . . . . . . . . 18 16
---- ----
TOTAL NET COST . . . . . . . . . . . . . . . $131 $142
---- ----
---- ----
Discount rates for obligations . . . . . . . 8.25% 7.5%
Discount rates for expense . . . . . . . . . 7.5% 8.25%
Expected long-term rate of return. . . . . . 9.7% 9.7%
<FN>
Postretirement benefits cost was $86 million in 1992 under the previous
accounting principle.
- - --------------------------------------------------------------------------------
</TABLE>
A reconciliation of the funded status of the United States and Canadian
plans in millions of dollars follows:
<TABLE>
<CAPTION>
- - ----------------------------------------------------------------------------------------------------------------------
1994 1993
------------------------ ------------------------
Health Life Health Life
Care Insurance Care Insurance
- - ----------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
ACCUMULATED POSTRETIREMENT
BENEFIT OBLIGATIONS
Retirees . . . . . . . . . . . . . . . . . . . . . . $(1,120) $(112) $(1,042) $(117)
Fully eligible active plan participants. . . . . . . (167) (24) (209) (24)
Other active plan participants . . . . . . . . . . . (302) (46) (279) (52)
------- ----- ------- -----
Total. . . . . . . . . . . . . . . . . . . . . . . . (1,589) (182) (1,530) (193)
Plan assets at fair value. . . . . . . . . . . . . . . 153 129
------- ----- ------- -----
Accumulated postretirement benefit
obligation in excess of plan assets. . . . . . . . . (1,436) (182) (1,401) (193)
Unrecognized net loss. . . . . . . . . . . . . . . . . 106 125 20
Prior service credit not yet recognized
in net periodic postretirement
benefits costs . . . . . . . . . . . . . . . . . . . (175) (222) (1)
------- ----- ------- -----
POSTRETIREMENT BENEFIT LIABILITY
RECOGNIZED IN THE CONSOLIDATED
BALANCE SHEET. . . . . . . . . . . . . . . . . . . . $(1,505) $(182) $(1,498) $(174)
------- ----- ------- -----
------- ----- ------- -----
- - ----------------------------------------------------------------------------------------------------------------------
</TABLE>
The annual rate of increase in the per capita cost of covered health care
benefits (the health care cost trend rate) used to determine 1994 cost was
assumed to be 8.2 percent for 1995 decreasing gradually to 4.5 percent by the
year 2001. The annual rate of increase in the health care cost trend rate used
to determine 1993 cost was assumed to be 1.3 percent for 1994 increasing to 9.0
percent in 1995 and decreasing gradually to 4.3 percent by the year 2001. The
1994 rate was lower than normal due to the effects of plan changes, particularly
the migration of employees to managed care programs and company-operated
clinics. An increase of one percentage point in the assumed health care cost
trend rate would increase the accumulated postretirement benefit obligation as
of October 31, 1994 by $163 million and the aggregate of the service
and interest cost components of net periodic postretirement benefits cost for
the year then ended by $23 million.
INCOME TAXES
- - --------------------------------------------------------------------------------
The provision for income taxes by location of the taxing jurisdiction and by
significant component consisted of the following in millions of dollars:
<TABLE>
<CAPTION>
- - --------------------------------------------------------------------------------
1994 1993 1992
- - --------------------------------------------------------------------------------
<S> <C> <C> <C>
EQUIPMENT OPERATIONS
Current:
United States:
Federal. . . . . . . . . . . . . . . . . $169 $ 12 $(58)
State. . . . . . . . . . . . . . . . . . 11 3 1
Foreign. . . . . . . . . . . . . . . . . . 42 30 12
---- ---- ----
Total current. . . . . . . . . . . . . 222 45 (45)
---- ---- ----
Deferred:
United States:
Federal. . . . . . . . . . . . . . . . . 28 (26) (5)
State. . . . . . . . . . . . . . . . . . 2 (2) (6)
Foreign. . . . . . . . . . . . . . . . . . 3 (3) 7
---- ---- ----
Total deferred . . . . . . . . . . . . 33 (31) (4)
---- ---- ----
Total. . . . . . . . . . . . . . . . 255 14 (49)
---- ---- ----
FINANCIAL SERVICES
Current:
United States:
Federal. . . . . . . . . . . . . . . . . 75 70 67
State. . . . . . . . . . . . . . . . . . 1 1
Foreign. . . . . . . . . . . . . . . . . . 8 10 9
---- ---- ----
Total current. . . . . . . . . . . . . 84 81 76
---- ---- ----
Deferred United States federal . . . . . . . (7) 2 (12)
---- ---- ----
Total. . . . . . . . . . . . . . . . 77 83 64
---- ---- ----
CONSOLIDATED PROVISION FOR INCOME TAXES. . . $332 $ 97 $ 15
---- ---- ----
---- ---- ----
- - --------------------------------------------------------------------------------
</TABLE>
Based upon location of the company's operations, the consolidated income
(loss) before income taxes in the United States in 1994, 1993 and 1992 was $781
million, $353 million and $49 million, respectively, and in foreign countries
was $140 million, $(80) million and $(6) million, respectively. Certain overseas
operations are branches of Deere & Company and are, therefore, subject to United
States as well as foreign income tax regulations. The pretax income (loss) by
location and the preceding analysis of the income tax provision (credit) by
taxing jurisdiction are, therefore, not directly related.
The Omnibus Budget Reconciliation Act of 1993, which enacted an increase in
the United States federal statutory income tax rate effective January 1, 1993,
was signed into law during the fourth quarter of 1993. In accordance with FASB
Statement No. 109, Accounting for Income Taxes, the United States deferred
income tax assets and liabilities as of the enactment date were revalued during
the fourth quarter of 1993 using the new tax rate of 35 percent. This resulted
in a credit of $17 million or $.22 per share to the provision for income taxes.
This tax rate change had an immaterial effect on the Financial Services
subsidiaries.
37
<PAGE>
A comparison of the statutory and effective income tax provision and
reasons for related differences in millions of dollars follow:
<TABLE>
<CAPTION>
- - --------------------------------------------------------------------------------
1994 1993 1992
- - --------------------------------------------------------------------------------
<S> <C> <C> <C>
UNITED STATES FEDERAL INCOME TAX PROVISION
AT A STATUTORY RATE OF 35 PERCENT IN 1994,
34.83 PERCENT IN 1993 AND 34 PERCENT IN 1992 $322 $ 95 $ 15
---- ---- ----
EQUIPMENT OPERATIONS
INCREASE (DECREASE) RESULTING FROM:
State and local income taxes, net of
federal income tax benefit . . . . . . . . 8 1 (3)
Taxes on foreign income which differ from
the United States statutory rate . . . . . 7 25 10
Effect of statutory tax rate change on
deferred taxes . . . . . . . . . . . . . . (16)
Realization of benefits of tax loss
and tax credit carryforwards . . . . . . . (4) (4) (1)
Other adjustments - net. . . . . . . . . . . 3 (1) (2)
---- ---- ----
Total. . . . . . . . . . . . . . . . . . . 14 5 4
---- ---- ----
FINANCIAL SERVICES
INCREASE (DECREASE) RESULTING FROM:
Tax exempt investment income . . . . . . . . (5) (6) (6)
Effect of statutory tax rate change
on deferred taxes. . . . . . . . . . . . . (1)
Other adjustments - net. . . . . . . . . . . 1 4 2
---- ---- ----
Total. . . . . . . . . . . . . . . . . . (4) (3) (4)
---- ---- ----
CONSOLIDATED PROVISION FOR INCOME TAXES. . . $332 $ 97 $15
---- ---- ----
---- ---- ----
- - --------------------------------------------------------------------------------
</TABLE>
In 1992, the company adopted FASB Statement No. 109, Accounting for Income
Taxes. There was no cumulative effect of adoption or current effect on
continuing operations mainly because the company had previously adopted FASB
Statement No. 96, Accounting for Income Taxes, in 1988.
Deferred income taxes arise because there are certain items that are
treated differently for financial accounting than for income tax reporting
purposes. An analysis of the deferred income tax assets and liabilities at
October 31 in millions of dollars follows:
<TABLE>
<CAPTION>
- - -----------------------------------------------------------------------------------------------------------------------
1994 1993
------------------------- -------------------------
Deferred Deferred Deferred Deferred
Tax Tax Tax Tax
Assets Liabilities Assets Liabilities
- - -----------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
EQUIPMENT OPERATIONS
Deferred installment sales income. . . . . . . . . . . $265 $249
Tax over book depreciation . . . . . . . . . . . . . . 98 96
Accrual for retirement and
postemployment benefits. . . . . . . . . . . . . . . $ 578 $ 605
Accrual for sales allowances . . . . . . . . . . . . . 144 140
Minimum pension liability
adjustment . . . . . . . . . . . . . . . . . . . . . 142 123
Accrual for vacation pay . . . . . . . . . . . . . . . 39 35
Accrual for restructuring costs. . . . . . . . . . . . 28 32
Tax loss and tax credit carryforwards. . . . . . . . . 24 23
Allowances for doubtful receivables. . . . . . . . . . 6 6
Other items. . . . . . . . . . . . . . . . . . . . . . 50 13 45 15
Less valuation allowance . . . . . . . . . . . . . . . (28) (29)
------ ---- ------ ----
Total . . . . . . . . . . . . . . . . . . . . . . $ 983 $376 $ 980 $360
------ ---- ------ ----
- - -----------------------------------------------------------------------------------------------------------------------
FINANCIAL SERVICES
Allowances for doubtful
receivables and leases . . . . . . . . . . . . . . . $ 33 $ 27
Claims and benefits reserves . . . . . . . . . . . . . 23 25
Unearned premiums. . . . . . . . . . . . . . . . . . . 11 6
Accrual for retirement and
postemployment benefits. . . . . . . . . . . . . . . 3 3
Other items. . . . . . . . . . . . . . . . . . . . . . 12 $ 23 7 $ 15
------ ---- ------ ----
Total. . . . . . . . . . . . . . . . . . . . . . . . 82 23 68 15
------ ---- ------ ----
CONSOLIDATED DEFERRED
INCOME TAX ASSETS
AND LIABILITIES. . . . . . . . . . . . . . . . . . . $1,065 $399 $1,048 $375
------ ---- ------ ----
------ ---- ------ ----
- - -----------------------------------------------------------------------------------------------------------------------
</TABLE>
At October 31, 1994, accumulated earnings in certain overseas subsidiaries
and affiliates totaled $430 million for which no provision for United States
income taxes or foreign withholding taxes has been made, because it is expected
that such earnings will be reinvested overseas indefinitely. Determination of
the amount of unrecognized deferred tax liability on these unremitted earnings
is not practicable.
Deere & Company files a consolidated federal income tax return in the
United States, which includes certain wholly-owned Financial Services
subsidiaries, primarily John Deere Capital Corporation, John Deere Credit, Inc.
and the health care subsidiaries. These subsidiaries account for income taxes
generally as if they filed separate income tax returns. Deere & Company's
insurance subsidiaries file separate federal income tax returns.
During 1994, 1993 and 1992, the company recognized $4 million, $4 million
and $1 million, respectively, of income tax benefits relating to tax loss and
tax credit carryforwards from previous years. At October 31, 1994, certain
foreign tax loss and tax credit carryforwards were available. The expiration
dates and amounts in millions of dollars are as follows: 1996 - $2, 1997 - $5,
1998 - $9, 1999 - $6 and unlimited - $2.
MARKETABLE SECURITIES
- - --------------------------------------------------------------------------------
Marketable securities are held by the insurance and health care subsidiaries.
Fixed maturities, consisting of corporate bonds, government bonds and
certificates of deposit, are carried at amortized cost and generally held to
maturity. Equity securities, consisting of common and preferred stocks, are
carried at cost. Realized gains or losses from the sales of marketable
securities are based on the specific identification method. A discussion of FASB
Statement No. 115, Accounting for Certain Investments in Debt and Equity
Securities, which will be adopted in fiscal year 1995, is found on page 33 of
the "Summary of Significant Accounting Policies".
The value of marketable securities at October 31 in millions of dollars
follows:
<TABLE>
<CAPTION>
- - --------------------------------------------------------------------------------
1994 1993
------------------ ------------------
Carrying Market Carrying Market
Value Value Value Value
- - --------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Fixed maturities . . . . . . . . . $1,083 $1,051 $951 $1,042
Equity securities. . . . . . . . . 34 38 36 37
Other. . . . . . . . . . . . . . . 9 9 8 11
------ ------ ---- ------
Marketable securities. . . . . . $1,126 $1,098 $995 $1,090
------ ------ ---- ------
------ ------ ---- ------
- - --------------------------------------------------------------------------------
</TABLE>
38
<PAGE>
The carrying value and market value of fixed maturities in millions of
dollars follow:
<TABLE>
<CAPTION>
- - --------------------------------------------------------------------------------
Gross Gross
Carrying Unrealized Unrealized Market
Value Gains Losses Value
- - --------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
October 31, 1994:
United States government
and its agencies . . . . . . . $ 426 $ 6 $30 $ 402
States and municipalities. . . . 214 9 5 218
Corporate. . . . . . . . . . . . 442 9 21 430
Other. . . . . . . . . . . . . . 1 1
------ --- --- ------
Fixed maturities . . . . . . . $1,083 $24 $56 $1,051
------ --- --- ------
------ --- --- ------
October 31, 1993:
United States government
and its agencies . . . . . . . $ 342 $31 $ 1 $ 372
States and municipalities. . . . 208 21 229
Corporate. . . . . . . . . . . . 393 40 433
Other. . . . . . . . . . . . . . 8 8
------ --- --- ------
Fixed maturities . . . . . . . $ 951 $ 92 $ 1 $1,042
------ --- --- ------
------ --- --- ------
- - --------------------------------------------------------------------------------
</TABLE>
The contractual maturities of fixed maturities at October 31, 1994 in
millions of dollars follow:
<TABLE>
<CAPTION>
- - --------------------------------------------------------------------------------
Carrying Market
Value Value
- - --------------------------------------------------------------------------------
<S> <C> <C>
Due in one year or less. . . . . . . . . . . $ 40 $ 41
Due after one year through five years. . . . 231 227
Due after five years through 10 years. . . . 282 272
Due after 10 years . . . . . . . . . . . . . 530 511
------ ------
Fixed maturities. . . . . . . . . . . . . $1,083 $1,051
------ ------
------ ------
- - --------------------------------------------------------------------------------
</TABLE>
Actual maturities may differ from contractual maturities because some
borrowers have the right to call or prepay obligations. Proceeds from the sales
of fixed maturities were $8 million in 1994, $23 million in 1993 and $18 million
in 1992. Gross realized gains were none in 1994 and $1 million in both 1993 and
1992. There were no gross realized losses in all three years.
DEALER ACCOUNTS AND NOTES RECEIVABLE
- - --------------------------------------------------------------------------------
Dealer accounts and notes receivable at October 31 consisted of the following in
millions of dollars:
<TABLE>
<CAPTION>
- - --------------------------------------------------------------------------------
1994 1993
- - --------------------------------------------------------------------------------
<S> <C> <C>
Dealer accounts and notes:
Agricultural . . . . . . . . . . . . . . . $1,678 $1,662
Industrial . . . . . . . . . . . . . . . . 551 551
Lawn and grounds care. . . . . . . . . . . 580* 467
------ ------
Total . . . . . . . . . . . . . . . . . 2,809 2,680
Other receivables. . . . . . . . . . . . . . 153 132
------ ------
Total. . . . . . . . . . . . . . . . . . . 2,962 2,812
Less allowance for doubtful receivables. . . 23 18
------ ------
Dealer accounts and notes receivable-net . $2,939* $2,794
------ ------
------ ------
<FN>
* Includes $41 million of Homelite receivables.
- - --------------------------------------------------------------------------------
</TABLE>
At October 31, 1994 and 1993, dealer notes included above were $490 million
and $414 million, respectively.
Dealer accounts and notes receivable arise primarily from sales to dealers
of John Deere agricultural, industrial and lawn and grounds care equipment. The
company retains as collateral a security interest in the equipment associated
with these receivables. Generally, terms to dealers require payments as the
equipment which secures the indebtedness is sold to retail customers. Interest
is charged on balances outstanding after certain interest-free periods, which
range from six to nine months for agricultural tractors, six months for
industrial equipment, and from five to 24 months for most other equipment.
Dealer accounts and notes receivable have significant concentrations of credit
risk in the agricultural, industrial and lawn and grounds care business sectors
as shown in the previous table. On a geographic basis, there is not a
disproportionate concentration of credit risk in any area.
CREDIT RECEIVABLES
- - --------------------------------------------------------------------------------
Credit receivables at October 31 consisted of the following in millions of
dollars:
<TABLE>
<CAPTION>
- - --------------------------------------------------------------------------------
1994 1993
- - --------------------------------------------------------------------------------
<S> <C> <C>
Retail notes:
John Deere equipment:
Agricultural . . . . . . . . . . . . . . $2,798 $2,242
Industrial . . . . . . . . . . . . . . . 535 351
Lawn and grounds care. . . . . . . . . . 204 213
Recreational products. . . . . . . . . . . 1,359 1,361
------ ------
Total. . . . . . . . . . . . . . . . . . 4,896 4,167
Revolving charge accounts. . . . . . . . . . 438 331
Financing leases . . . . . . . . . . . . . . 182 146
Wholesale notes. . . . . . . . . . . . . . . 142 110
------ ------
Total credit receivables . . . . . . . . . 5,658 4,754
------ ------
Less:
Unearned finance income:
Deere notes. . . . . . . . . . . . . . . 559 390
Recreational product notes . . . . . . . 486 507
Financing leases . . . . . . . . . . . . 25 19
------ ------
Total. . . . . . . . . . . . . . . . . 1,070 916
------ ------
Allowance for doubtful receivables . . . . 86 83
------ ------
Credit receivables - net . . . . . . . . $4,502 $3,755
------ ------
------ ------
- - --------------------------------------------------------------------------------
</TABLE>
At October 31, 1994, $116 million of the credit receivables was financed by
the Equipment Operations and $4,386 million by the credit subsidiaries.
Credit receivables have significant concentrations of credit risk in the
agricultural, industrial, lawn and grounds care, and recreational product
business sectors as shown in the previous table. On a geographic basis, there is
not a disproportionate concentration of credit risk in any area. The company
retains as collateral a security interest in the equipment associated with
retail notes and leases.
At October 31, 1994 and 1993, the estimated fair values of total credit
receivables were $4,497 million and $3,844 million, respectively, compared to
the carrying values of $4,502 million and $3,755 million, respectively. The fair
values of fixed-rate retail notes and financing leases were based on the
discounted values of their related cash flows at current market interest rates.
The fair values of variable-rate retail notes, revolving charge accounts and
wholesale notes approximate the carrying amounts.
39
<PAGE>
Credit receivable installments, including unearned finance income, at
October 31 are scheduled as follows in millions of dollars:
<TABLE>
<CAPTION>
- - --------------------------------------------------------------------------------
1994 1993
- - --------------------------------------------------------------------------------
<S> <C> <C>
Due in months:
0 - 12. . . . . . . . . . . . . . . . . $1,722 $1,429
13 - 24 . . . . . . . . . . . . . . . . 1,252 1,017
25 - 36 . . . . . . . . . . . . . . . . 928 762
37 - 48 . . . . . . . . . . . . . . . . 646 550
49 - 60 . . . . . . . . . . . . . . . . 429 358
Thereafter. . . . . . . . . . . . . . . 681 638
------ ------
Total. . . . . . . . . . . . . . . . . . . . $5,658 $4,754
------ ------
------ ------
- - --------------------------------------------------------------------------------
</TABLE>
The maximum maturities for retail notes are generally seven years for
agricultural equipment, five years for industrial equipment, six years for lawn
and grounds care equipment and 15 years for recreational products. The maximum
term for financing leases is six years, while the maximum maturity for wholesale
notes is generally 12 months.
The company's United States credit subsidiary, John Deere Capital
Corporation, received proceeds of $560 million in 1994, $1,143 million in 1993
and $455 million in 1992 from the sale of retail notes to limited-purpose
business trusts, which utilized the notes as collateral for the issuance of
asset backed securities to the public. The Capital Corporation and certain
foreign subsidiaries also sold retail notes to other financial institutions,
receiving proceeds of $2 million in 1994, $5 million in 1993 and $242 million in
1992. At October 31, 1994 and 1993, the unpaid balances of retail notes
previously sold were $1,176 million and $1,399 million, respectively. The
company's maximum exposure under all retail note recourse provisions at October
31, 1994 and 1993 was $142 million and $181 million, respectively. The retail
notes sold are collateralized by security interests in the related machinery
sold to customers. There is a minimal amount of credit and market risk due to
monthly adjustments to the sale price of a small portion of the retail notes.
There is no anticipated credit risk related to nonperformance by the
counterparties. At October 31, 1994 and 1993, credit receivables administered,
which include credit receivables previously sold but still administered, totaled
$5,678 million and $5,154 million, respectively.
The allowance for doubtful credit receivables represented 1.87 percent and
2.17 percent of credit receivables outstanding at October 31, 1994 and 1993,
respectively. In addition, at October 31, 1994 and 1993, the company's credit
subsidiaries had $127 million and $119 million, respectively, of deposits
withheld from dealers and merchants available for potential credit losses. An
analysis of the allowance for doubtful credit receivables follows in millions of
dollars:
<TABLE>
<CAPTION>
- - --------------------------------------------------------------------------------
1994 1993 1992
- - --------------------------------------------------------------------------------
<S> <C> <C> <C>
Balance, beginning of the year . . . . . . . $ 83 $ 89 $ 81
Provision charged to operations. . . . . . . 31 30 52
Amounts written off. . . . . . . . . . . . . (24) (29) (44)
Transfers related to retail note sales . . . (4) (7)
---- ---- ----
Balance, end of the year . . . . . . . . . . $ 86 $ 83 $ 89
---- ---- ----
---- ---- ----
- - --------------------------------------------------------------------------------
</TABLE>
Allowances for doubtful credit receivables are maintained in amounts
considered appropriate in relation to the receivables and leases outstanding
based on estimated collectibility and collection experience. The total
"Provision for doubtful receivables" is included in the "Statement of
Consolidated Cash Flows" on pages 20 and 21.
OTHER RECEIVABLES
- - --------------------------------------------------------------------------------
Other receivables at October 31 consisted of the following in millions of
dollars:
<TABLE>
<CAPTION>
- - --------------------------------------------------------------------------------
1994 1993
- - --------------------------------------------------------------------------------
<S> <C> <C>
Insurance and health care premiums receivable. . . . . $ 81 $ 71
Reinsurance receivables. . . . . . . . . . . . . . . . 151 105
Receivables relating to asset backed securities. . . . 140 169
Other. . . . . . . . . . . . . . . . . . . . . . . . . 58 48
---- ----
Other receivables . . . . . . . . . . . . . . . . . $430 $393
---- ----
---- ----
- - --------------------------------------------------------------------------------
</TABLE>
Other receivables are primarily held by the Financial Services
subsidiaries. The credit subsidiaries have sold retail notes to limited-purpose
business trusts which utilized the notes as collateral for the issuance of asset
backed securities to the public. The balance of the related receivables is equal
to the unamortized present value of deposits made with the trusts pursuant to
recourse provisions, and other payments to be received under the sales
agreements. Additional information is presented in the "Summary of Significant
Accounting Policies" on page 32.
EQUIPMENT ON OPERATING LEASES
- - --------------------------------------------------------------------------------
Operating leases arise from the lease of John Deere equipment to retail
customers in the United States and Canada. Initial lease terms range from 12 to
72 months. The net value of John Deere equipment on operating leases was $219
million and $195 million at October 31, 1994 and 1993, respectively. Of these
leases, at October 31, 1994, $94 million was financed by the Equipment
Operations and $125 million by John Deere Credit Company. The accumulated
depreciation on this equipment was $56 million and $52 million at October 31,
1994 and 1993, respectively. The corresponding depreciation expense was $31
million in 1994, $29 million in 1993 and $29 million in 1992.
Future payments to be received on operating leases totaled $115 million at
October 31, 1994 and are scheduled as follows: 1995 - $52, 1996 - $32, 1997 -
$18, 1998 - $10 and 1999 - $3.
INVENTORIES
- - --------------------------------------------------------------------------------
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. Remaining inventories are generally valued at the lower of cost, on the
"first-in, first-out" (FIFO) basis, or market. The value of gross inventories on
the LIFO basis represented 82 percent and 83 percent of worldwide gross
inventories at FIFO value on October 31, 1994 and 1993, respectively.
Under the LIFO inventory 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,
as they did in 1993 and 1992, lower costs that prevailed in prior years are
matched against current year revenues, resulting in higher reported net income.
Benefits from the reduction of LIFO inventories totaled $51 million ($33
million or $.43 per share after income taxes) in 1993 and $65 million ($43
million or $.56 per share after income taxes) in 1992. A LIFO benefit was not
recognized in 1994.
40
<PAGE>
Raw material, work-in-process and finished goods inventories at October 31,
1994 totaled $698 million on a LIFO-value basis compared with $464 million one
year ago. If all inventories had been valued on a FIFO basis, estimated
inventories by major classification at October 31 in millions of dollars would
have been as follows:
<TABLE>
<CAPTION>
- - --------------------------------------------------------------------------------
1994 1993
- - --------------------------------------------------------------------------------
<S> <C> <C>
Raw materials and supplies . . . . . . . . . . . . . . $ 206 $ 192
Work-in-process. . . . . . . . . . . . . . . . . . . . 357 295
Finished machines and parts. . . . . . . . . . . . . . 1,079 919
------ ------
Total FIFO value. . . . . . . . . . . . . . . . . . 1,642 1,406
Adjustment to LIFO basis . . . . . . . . . . . . . . . 944 942
------ ------
Inventories . . . . . . . . . . . . . . . . . . . . $ 698* $ 464
------ ------
------ ------
<FN>
* Includes $59 million of Homelite inventories.
- - --------------------------------------------------------------------------------
</TABLE>
PROPERTY AND DEPRECIATION
- - --------------------------------------------------------------------------------
A summary of consolidated property and equipment at October 31 in millions of
dollars follows:
<TABLE>
<CAPTION>
- - --------------------------------------------------------------------------------
1994 1993
- - --------------------------------------------------------------------------------
<S> <C> <C>
Land . . . . . . . . . . . . . . . . . . . . . . . . . $ 44 $ 39
Buildings and building equipment . . . . . . . . . . . 869 819
Machinery and equipment. . . . . . . . . . . . . . . . 2,097 1,992
Dies, patterns, tools, etc . . . . . . . . . . . . . . 504 439
All other. . . . . . . . . . . . . . . . . . . . . . . 469 434
Construction in progress . . . . . . . . . . . . . . . 55 48
------ ------
Total at cost . . . . . . . . . . . . . . . . . . . 4,038 3,771
Less accumulated depreciation. . . . . . . . . . . . . 2,724 2,531
------ ------
Property and equipment - net. . . . . . . . . . . . $1,314 $1,240
------ ------
------ ------
- - --------------------------------------------------------------------------------
</TABLE>
Leased property under capital leases amounting to $11 million and $26
million at October 31, 1994 and 1993, respectively, is included primarily in
machinery and equipment and all other.
Property and equipment additions, which exclude the acquisition of the net
assets of Homelite, are reported on pages 34 and 35. Property and equipment
expenditures for new and revised products, increased capacity and the
replacement or major renewal of significant items of property and equipment are
capitalized. Expenditures for maintenance, repairs and minor renewals are
generally charged to expense as incurred.
Depreciation amounted to $231 million in 1994, $226 million in 1993 and
$217 million in 1992. Most of the company's property and equipment is
depreciated using the straight-line method for financial accounting purposes.
Depreciation for United States federal income tax purposes is computed using
accelerated depreciation methods.
It is not expected that the cost of compliance with foreseeable
environmental requirements will have a material effect on the company's
financial position or operating results.
INTANGIBLE ASSETS
- - --------------------------------------------------------------------------------
Consolidated net intangible assets totaled $284 million and $297
million at October 31, 1994 and 1993, respectively. The Equipment Operations'
balance of $267 million at October 31, 1994 consisted primarily of $158 million
related to the minimum pension liability required by FASB Statement No. 87, and
unamortized goodwill which resulted from the purchase cost of assets acquired
exceeding their fair value. Goodwill increased by $11 million from the Homelite
acquisition. The intangible pension asset decreased by $23 million during 1994.
Intangible assets, excluding the intangible pension asset,
are being amortized over 25 years or less, and the accumulated amortization was
$59 million and $53 million at October 31, 1994 and 1993, respectively. The
intangible pension asset is remeasured and adjusted annually.
SHORT-TERM BORROWINGS
- - --------------------------------------------------------------------------------
Short-term borrowings at October 31 consisted of the following in millions of
dollars:
<TABLE>
<CAPTION>
- - --------------------------------------------------------------------------------
1994 1993
- - --------------------------------------------------------------------------------
<S> <C> <C>
EQUIPMENT OPERATIONS
Commercial paper . . . . . . . . . . . . . . . . . . . $ 7 $ 303
Notes payable to banks . . . . . . . . . . . . . . . . 34 25
Long-term borrowings due within one year . . . . . . . 13 148
------ ------
Total . . . . . . . . . . . . . . . . . . . . . . . 54 476
------ ------
FINANCIAL SERVICES
Commercial paper . . . . . . . . . . . . . . . . . . . 1,948 712
Notes payable to banks . . . . . . . . . . . . . . . . 2 8
Long-term borrowings due within one year . . . . . . . 633 405
------ ------
Total . . . . . . . . . . . . . . . . . . . . . . . 2,583 1,125
------ ------
CONSOLIDATED SHORT-TERM BORROWINGS . . . . . . . . . . $2,637 $1,601
------ ------
------ ------
- - --------------------------------------------------------------------------------
</TABLE>
All of the Financial Services' short-term borrowings represent obligations
of the credit subsidiaries.
Unsecured lines of credit available from United States and foreign banks
were $3,370 million at October 31, 1994. Some of these credit lines are
available to both the Equipment Operations and certain credit subsidiaries. At
October 31, 1994, $1,378 million of the worldwide lines of credit were unused.
For the purpose of computing the unused credit lines, total short-term
borrowings, excluding the current portion of long-term borrowings, were
considered to constitute utilization.
Included in the above lines of credit are two long-term committed credit
agreements expiring on various dates through December 1998 in an aggregate
maximum amount of $2,434 million. Each agreement is mutually extendable. Annual
facility fees on the credit agreements range from 0.125 percent to 0.1875
percent.
Certain of these credit agreements have various requirements of John Deere
Capital Corporation, including the maintenance of its consolidated ratio of
earnings before fixed charges to fixed charges at not less than 1.05 to 1 for
each fiscal quarter. In addition, the Capital Corporation's ratio of senior debt
to total stockholder's equity plus subordinated debt may not be more than 8 to 1
at the end of any fiscal quarter. The credit agreements also contain provisions
requiring Deere & Company to maintain consolidated tangible net worth of $1,600
million according to United States generally accepted accounting principles as
of October 31, 1992.
The company's credit subsidiaries have entered into interest rate swap and
interest rate cap agreements to hedge their interest rate exposure in amounts
corresponding to a portion of their short-term borrowings. At October 31, 1994
and 1993, the total notional principal amounts of interest rate swap agreements
were $637 million and $642 million, having rates of 3.6 percent to 10.0 percent,
terminating in up to 16 months and 28 months, respectively. The total notional
principal amounts of interest rate cap
41
<PAGE>
agreements at October 31, 1994 and 1993 were $33 million and $44 million, having
capped rates of 6.3 percent to 9.0 percent, terminating in up to nine months
and 15 months, respectively. The differential to be paid or received on all swap
and cap agreements is accrued as interest rates change and is recognized over
the lives of the agreements. The credit and market risk under these agreements
is not considered to be significant. The estimated fair value and carrying
value of these interest rate swap and cap agreements were not significant at
October 31, 1994 and 1993.
ACCOUNTS PAYABLE AND ACCRUED EXPENSES
- - --------------------------------------------------------------------------------
Accounts payable and accrued expenses at October 31 consisted of the following
in millions of dollars:
<TABLE>
<CAPTION>
- - --------------------------------------------------------------------------------
1994 1993
- - --------------------------------------------------------------------------------
<S> <C> <C>
EQUIPMENT OPERATIONS
Accounts payable:
Trade. . . . . . . . . . . . . . . . . . . . . . . . $ 597 $ 685
Dividends payable. . . . . . . . . . . . . . . . . . 48 43
Other. . . . . . . . . . . . . . . . . . . . . . . . 19 34
Accrued expenses:
Employee benefits. . . . . . . . . . . . . . . . . . 161 148
Dealer commissions . . . . . . . . . . . . . . . . . 147 124
Other. . . . . . . . . . . . . . . . . . . . . . . . 645 499
------ ------
Total. . . . . . . . . . . . . . . . . . . . . . . 1,617 1,533
------ ------
FINANCIAL SERVICES
Accounts payable:
Deposits withheld from dealers and merchants . . . . 127 119
Other. . . . . . . . . . . . . . . . . . . . . . . . 139 77
Accrued expenses:
Unearned premiums. . . . . . . . . . . . . . . . . . 142 120
Unpaid loss adjustment expenses. . . . . . . . . . . 95 72
Interest payable . . . . . . . . . . . . . . . . . . 45 51
Other. . . . . . . . . . . . . . . . . . . . . . . . 121 115
------ ------
Total. . . . . . . . . . . . . . . . . . . . . . . 669 554
------ ------
Intercompany eliminations. . . . . . . . . . . . . . . (1) (1)
------ ------
CONSOLIDATED ACCOUNTS PAYABLE
AND ACCRUED EXPENSES . . . . . . . . . . . . . . . . $2,285 $2,086
------ ------
------ ------
- - --------------------------------------------------------------------------------
</TABLE>
LONG-TERM BORROWINGS
- - --------------------------------------------------------------------------------
Long-term borrowings at October 31 consisted of the following in millions of
dollars:
<TABLE>
<CAPTION>
- - --------------------------------------------------------------------------------
1994 1993
- - --------------------------------------------------------------------------------
<S> <C> <C>
EQUIPMENT OPERATIONS
Notes and debentures:
Medium-term notes due 1996 - 2006:
Average interest rate of 8.8%
as of year end 1994 and 1993 . . . . . . . . . . . $296 $296
8-1/4% notes due 1996. . . . . . . . . . . . . . . . 150 150
9-1/8% notes due 1996. . . . . . . . . . . . . . . . 100 100
8.45% debentures due 2000. . . . . . . . . . . . . . 37
Adjustable Rate Senior Notes due 2002:
Interest rate of 8.5% as of year end
1994 and 6.1% as of year end 1993. . . . . . . . . 70 80
8.95% debentures due 2019. . . . . . . . . . . . . . 200 200
8-1/2% debentures due 2022 . . . . . . . . . . . . . 200 200
Other. . . . . . . . . . . . . . . . . . . . . . . . 3 6
------ ------
Total. . . . . . . . . . . . . . . . . . . . . . $1,019 $1,069
------ ------
------ ------
- - --------------------------------------------------------------------------------
- - --------------------------------------------------------------------------------
1994 1993
- - --------------------------------------------------------------------------------
FINANCIAL SERVICES
Notes and debentures:
Medium-term notes due 1995 - 2000:
Average interest rate of 7.0% as of year
end 1994 and 5.9% as of year end 1993. . . . . . . $338 $382
6% notes due 1995: Swapped to variable
interest rate of 3.1% as of year end 1993. . . . . 100
11-5/8% notes due 1995: Swapped to variable
interest rate of 3.2% as of year end 1993. . . . . 150
5% notes due 1995. . . . . . . . . . . . . . . . . . 150
4-5/8% notes due 1996. . . . . . . . . . . . . . . . 200 200
7.20% notes due 1997 . . . . . . . . . . . . . . . . 100 100
5% Swiss franc bonds due 1999: Swapped to
variable interest rate of 5.8% as of year
end 1994 and 3.7% as of year end 1993. . . . . . . 97 97
------ ------
Total notes and debentures . . . . . . . . . . . 735 1,179
------ ------
Subordinated debt:
9-5/8% subordinated notes due 1998: Swapped
to variable interest rate of 5.9% as of
year end 1994 and 3.8% as of year end 1993 . . . . 150 150
8-5/8% subordinated debentures due 2019:
Swapped to variable interest rate of 5.3%
as of year end 1994 and 3.2% as of year end 1993 . 150 150
------ ------
Total subordinated debt. . . . . . . . . . . . . 300 300
------ ------
Total. . . . . . . . . . . . . . . . . . . . . 1,035 1,479
------ ------
CONSOLIDATED LONG-TERM BORROWINGS. . . . . . . . . . . $2,054 $2,548
------ ------
------ ------
- - --------------------------------------------------------------------------------
</TABLE>
All of the Financial Services' long-term borrowings represent obligations
of John Deere Capital Corporation.
The Capital Corporation has entered into interest rate swap agreements with
independent parties that change the effective rate of interest on certain
long-term borrowings to a variable rate based on specified United States
commercial paper rate indices. The above table reflects the effective year-end
variable interest rates relating to these swap agreements. The notional
principal amounts and maturity dates of these swap agreements are the same as
the principal amounts and maturities of the related borrowings. In addition, the
Capital Corporation has interest rate swap agreements corresponding to a portion
of its fixed rate long-term borrowings. At October 31, 1994 and 1993, the total
notional principal amount of these interest rate swap agreements was $302
million and $347 million, having variable interest rates of 3.4 percent to 5.7
percent, terminating in up to 28 months and 40 months, respectively. The Capital
Corporation also has interest rate swap and cap agreements associated with
medium-term notes. The above table reflects the interest rates relating to these
swap and cap agreements. At October 31, 1994 and 1993, the total notional
principal amounts of these swap agreements were $40 million and $13 million,
terminating in up to 45 months and 42 months, respectively. At October 31, 1993,
the total notional principal amount of these cap agreements was $25 million,
terminating in up to 22 months. A Swiss franc to United States dollar currency
swap agreement is also associated with the Swiss franc bonds in the table. The
credit and market risk under these agreements is not considered to be
significant.
At October 31, 1994 and 1993, the total estimated fair values of the
company's total long-term borrowings were $2,092 million and $2,658 million,
comprised of $1,064 million
42
<PAGE>
and $1,162 million for the Equipment Operations and $1,028 million and $1,496
million for Financial Services, respectively. The corresponding carrying amounts
of total long-term borrowings were $2,054 million and $2,548 million, comprised
of $1,019 million and $1,069 million for the Equipment Operations and $1,035
million and $1,479 million for Financial Services, respectively. Fair values of
long-term borrowings with fixed rates were based on a discounted cash flow
model. Fair values of long-term borrowings that have been swapped to current
variable interest rates approximate their carrying amounts. The estimated fair
value and carrying value of the Capital Corporation's interest rate swap and cap
agreements associated with medium-term notes were not significant at October 31,
1994 and 1993.
The approximate amounts of the Equipment Operations' long-term borrowings
maturing and sinking fund payments required in each of the next five years in
millions of dollars are as follows: 1995 - $13, 1996 - $319, 1997 - $79, 1998 -
$49 and 1999 - $210. The approximate amounts of John Deere Capital Corporation's
long-term borrowings maturing and sinking fund payments required in each of the
next five years in millions of dollars are as follows: 1995 - $633, 1996 - $262,
1997 - $309, 1998 - $193 and 1999 - $248.
Certain of the company's credit agreements contain provisions requiring the
maintenance of a minimum consolidated tangible net worth according to United
States generally accepted accounting principles as of October 31, 1992. Under
these provisions, the total consolidated retained earnings balance at October
31, 1994 was free of restrictions as to payment of dividends or acquisition of
the company's common stock.
LEASES
- - --------------------------------------------------------------------------------
The company leases certain computer equipment, lift trucks and other property.
The present values of future minimum lease payments relating to leased assets
deemed to be capital leases as determined from the lease contract provisions are
capitalized. Capitalized amounts are amortized over either the lives of the
leases or the normal depreciable lives of the leased assets. All other leases
are defined as operating leases. Lease expenses relating to operating leases are
charged to rental expense as incurred.
At October 31, 1994, future minimum lease payments under capital leases
totaled $2 million as follows: 1995 - $1, 1996 - $1. Total rental expense for
operating leases during 1994 was $49 million compared with $48 million in 1993
and $53 million in 1992. At October 31, 1994, future minimum lease payments
under operating leases amounted to $65 million as follows: 1995 - $31, 1996 -
$19, 1997 - $7, 1998 - $4, 1999 - $2, later years - $2.
COMMITMENTS AND CONTINGENT LIABILITIES
- - --------------------------------------------------------------------------------
On October 31, 1994, the company's maximum exposure under all credit receivable
recourse provisions was $142 million for retail notes sold to limited-purpose
business trusts or financial institutions by both the Financial Services
subsidiaries and the Equipment Operations. In addition, certain foreign
subsidiaries have pledged assets with a balance sheet value of $51 million as
collateral for bank advances of $2 million. Also, at October 31, 1994, the
company had commitments of approximately $47 million for construction and
acquisition of property and equipment.
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. 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.
CAPITAL STOCK
- - --------------------------------------------------------------------------------
Changes in the common stock account in 1992, 1993 and 1994 were as follows:
<TABLE>
<CAPTION>
- - --------------------------------------------------------------------------------
Number of Amount
Shares Issued (in millions)
- - --------------------------------------------------------------------------------
<S> <C> <C>
Balance at October 31, 1991. . . . . . . . . 76,443,138 $ 839
Stock options exercised. . . . . . . . . . . 76,490 3
Debenture conversions. . . . . . . . . . . . 4,486
Other. . . . . . . . . . . . . . . . . . . . (2)
---------- ------
Balance at October 31,1992 . . . . . . . . . 76,524,114 840
Stock issued . . . . . . . . . . . . . . . . 8,050,000 535
Stock options exercised. . . . . . . . . . . 1,168,833 51
Debenture conversions. . . . . . . . . . . . 4,088
Other. . . . . . . . . . . . . . . . . . . . 11
---------- ------
Balance at October 31, 1993. . . . . . . . . 85,747,035 1,437
Stock options exercised. . . . . . . . . . . 860,901 37
Debenture conversions. . . . . . . . . . . . 30,592 1
Other. . . . . . . . . . . . . . . . . . . . 16
---------- ------
Balance at October 31, 1994. . . . . . . . . 86,638,528 $1,491
---------- ------
---------- ------
- - --------------------------------------------------------------------------------
</TABLE>
In September 1993, the company issued 8,050,000 shares of common stock in a
public offering. The net proceeds of $535 million were used for working capital
and other general corporate purposes, including the reduction of indebtedness of
the Equipment Operations and the credit subsidiaries.
The calculation of net income per share is based on the average number of
shares outstanding during the year. The calculation of net income per share,
assuming full dilution, recognizes the dilutive effect of the assumed exercise
of stock appreciation rights and stock options, and conversion of convertible
debentures. The calculation also reflects adjustment for interest expense
relating to the convertible debentures, net of applicable income taxes.
The company is authorized to issue 3,000,000 shares of preferred stock,
none of which has been issued.
The major changes during 1994 affecting common stock in treasury included
the acquisition of 40,000 shares of treasury stock at a total cost of $3
million. In addition, 67,333 shares of treasury stock at original cost of $3
million were issued under the restricted stock plan.
RESTRICTED STOCK
- - --------------------------------------------------------------------------------
In 1989, stockholders approved a restricted stock plan for key employees of the
company. Under this plan, 750,000 shares may be granted as restricted stock. The
company will establish the period of restriction for each award and hold the
restricted stock during the restriction period, while the employee will receive
any dividends and vote the restricted stock. No award may be made under the plan
providing for restrictions that lapse after
October 31, 1999.
43
<PAGE>
In February 1993, stockholders approved a restricted stock plan for
nonemployee directors. Under this plan, 30,000 shares may be granted as
restricted stock. The restrictions lapse when a director retires from the Board.
Under both plans, the market value of the restricted stock at the time of
grant is recorded as unamortized restricted stock compensation in a separate
component of stockholders' equity. This compensation is amortized to expense
evenly over the minimum periods of restriction, which is currently four years
for both plans. At October 31, 1994, 377,474 shares remained available for award
under both plans.
Changes in the unamortized restricted stock compensation account in 1992,
1993 and 1994 were as follows:
<TABLE>
<CAPTION>
- - --------------------------------------------------------------------------------
Number of Amount
Shares Granted (in millions)
- - --------------------------------------------------------------------------------
<S> <C> <C>
Outstanding at October 31, 1991. . . . . 155,094 $6
Granted. . . . . . . . . . . . . . . . . 94,408 4
Amortized and vested . . . . . . . . . . (23,002) (3)
------- --
Outstanding at October 31, 1992. . . . . 226,500 7
Granted. . . . . . . . . . . . . . . . . 70,628 4
Amortized and vested . . . . . . . . . . (46,107) (3)
------- --
Outstanding at October 31, 1993. . . . . 251,021 8
Granted. . . . . . . . . . . . . . . . . 67,333 5
Amortized and vested . . . . . . . . . . (49,095) (4)
------- --
Outstanding at October 31, 1994. . . . . 269,259 $9
------- --
------- --
- - --------------------------------------------------------------------------------
</TABLE>
STOCK OPTIONS
- - --------------------------------------------------------------------------------
Options for the purchase of the company's common stock are issued to officers
and other key employees under stock option plans as approved by stockholders.
Options outstanding at October 31, 1994 generally become exercisable one year
after the date of grant and are exercisable up to 10 years after the date of
grant.
The stock option plan includes authority to grant stock appreciation
rights, either concurrently with the grant of options or subsequently, and to
accept stock of the company in payment for shares under the options. At October
31, 1994, 3,866,286 shares remained available for the granting of options.
During the last three fiscal years, changes in shares under option were as
follows:
<TABLE>
<CAPTION>
- - --------------------------------------------------------------------------------
Shares Option Price Per Share
- - --------------------------------------------------------------------------------
<S> <C> <C>
Outstanding at October 31, 1991. . . . 1,676,628 $23.31 - $60.06
Granted. . . . . . . . . . . . . . . . 1,026,474 $42.31
Exercised. . . . . . . . . . . . . . . (76,490) $23.31 - $46.81
Expired or cancelled . . . . . . . . . (23,585) $26.38 - $60.06
---------
Outstanding at October 31, 1992. . . . 2,603,027 $23.31 - $60.06
Granted. . . . . . . . . . . . . . . . 1,036,819 $40.88
Exercised. . . . . . . . . . . . . . . (1,168,833) $23.31 - $60.06
Expired or cancelled . . . . . . . . . (159,684) $23.31 - $60.06
---------
Outstanding at October 31, 1993. . . . 2,311,329 $23.31 - $60.06
Granted. . . . . . . . . . . . . . . . 595,322 $70.69
Exercised. . . . . . . . . . . . . . . (860,901) $23.31 - $60.06
Expired or cancelled . . . . . . . . . (254,069) $23.31 - $70.69
---------
Outstanding at October 31, 1994. . . . 1,791,681 $23.31 - $70.69
---------
---------
- - --------------------------------------------------------------------------------
</TABLE>
For options outstanding at October 31, 1994, the average exercise price was
$52.41 per share and expiration dates ranged from December 1994 to December
2003. Of the outstanding options, 136,896 may be exercised in the form of stock
appreciation rights.
EMPLOYEE STOCK PURCHASE AND SAVINGS PLANS
- - --------------------------------------------------------------------------------
The company maintains the following significant plans for eligible employees:
John Deere Savings and Investment Plan, for salaried employees
John Deere Stock Purchase Plan, for salaried employees
John Deere Tax Deferred Savings Plan, for hourly and incentive paid
employees
Company contributions under these plans were $12 million in 1994,
$9 million in 1993 and $11 million in 1992.
RETAINED EARNINGS
- - --------------------------------------------------------------------------------
An analysis of the company's retained earnings follows in millions
of dollars:
<TABLE>
<CAPTION>
- - --------------------------------------------------------------------------------
1994 1993 1992
- - --------------------------------------------------------------------------------
<S> <C> <C> <C>
Balance, beginning of the year . . . . . . . $ 926 $2,004 $2,119
Net income (loss). . . . . . . . . . . . . . 604 (921) 37
Dividends declared . . . . . . . . . . . . . (176) (157) (152)
------ ------ ------
Balance, end of the year . . . . . . . . . . $1,354 $ 926 $2,004
------ ------ ------
------ ------ ------
- - --------------------------------------------------------------------------------
</TABLE>
CUMULATIVE TRANSLATION ADJUSTMENT
- - --------------------------------------------------------------------------------
An analysis of the company's cumulative translation adjustment follows in
millions of dollars:
<TABLE>
<CAPTION>
- - --------------------------------------------------------------------------------
1994 1993 1992
- - --------------------------------------------------------------------------------
<S> <C> <C> <C>
Balance, beginning of the year . . . . . . . . . . . $42 $19 $16
Translation adjustments for the year.. . . . . . . . (25) 16 (1)
Income taxes applicable to translation adjustments . 1 7 4
--- --- ---
Balance, end of the year . . . . . . . . . . . . . . $18 $42 $19
--- --- ---
--- --- ---
- - --------------------------------------------------------------------------------
</TABLE>
The company has entered into foreign exchange forward contracts and options
in order to hedge the currency exposure of certain assets, liabilities and
expected inventory purchases. Depending on the item being hedged, the foreign
exchange forward contract gains or losses are either accrued as foreign exchange
rates change or deferred until expiration of the contract, and the contract
premiums are amortized over the terms of the contracts. The option premiums and
any gains are deferred and recorded as part of the cost of future inventory
purchases. At October 31, 1994 and 1993, the company had foreign exchange
forward contracts maturing in up to six months and three months for $331 million
and $409 million, respectively. At October 31, 1994 and 1993, the company had
options maturing in up to 12 months and 24 months for $23 million and $72
million, respectively. The credit and market risk under these agreements is not
considered to be significant. At October 31, 1994 and 1993, the estimated fair
value and carrying value of the foreign exchange forward contracts and options
were not significant.
CASH FLOW INFORMATION
- - --------------------------------------------------------------------------------
For purposes of the statement of consolidated cash flows, the
company considers investments with original maturities of three months or less
to be cash equivalents. Substantially all of the company's short-term borrowings
mature within three months or less.
44
<PAGE>
Cash payments for interest and income taxes consisted of the following in
millions of dollars:
<TABLE>
<CAPTION>
- - --------------------------------------------------------------------------------
1994 1993 1992
- - --------------------------------------------------------------------------------
<S> <C> <C> <C>
Interest:
Equipment Operations . . . . . . . . . . . $123 $178 $195
Financial Services . . . . . . . . . . . . 202 162 201
Intercompany eliminations. . . . . . . . . (6) (4) (2)
---- ---- ----
Consolidated . . . . . . . . . . . . . . $319 $336 $394
---- ---- ----
---- ---- ----
Income taxes:
Equipment Operations . . . . . . . . . . . $259 $98 $37
Financial Services . . . . . . . . . . . . 88 79 73
Intercompany eliminations. . . . . . . . . (66) (60) (57)
---- ---- ----
Consolidated . . . . . . . . . . . . . . $281 $117 $53
---- ---- ----
---- ---- ----
- - --------------------------------------------------------------------------------
</TABLE>
SUPPLEMENTAL 1994 AND 1993 QUARTERLY INFORMATION (UNAUDITED)
- - --------------------------------------------------------------------------------
Quarterly information with respect to net sales and revenues and earnings is
shown in the following schedule. Such information is shown in millions of
dollars except for per share amounts.
<TABLE>
<CAPTION>
- - -------------------------------------------------------------------------------------------------------------------------
FIRST SECOND THIRD FOURTH
QUARTER QUARTER QUARTER QUARTER
- - -------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
1994
Net sales and revenues . . . . . . . . . . . . . . . . . . . $1,727 $2,460 $2,327 $2,516
Income before income taxes . . . . . . . . . . . . . . . . . 133 295 241 252
Net income . . . . . . . . . . . . . . . . . . . . . . . . . 87 189 158 170
Net income per share . . . . . . . . . . . . . . . . . . . . 1.02 2.20 1.82 1.97
Dividends declared per share . . . . . . . . . . . . . . . . .50 .50 .50 .55
Dividends paid per share . . . . . . . . . . . . . . . . . . .50 .50 .50 .50
1993
Net sales and revenues . . . . . . . . . . . . . . . . . . . $1,424 $2,105 $2,049 $2,176
Income (loss) before income taxes
and changes in accounting (1). . . . . . . . . . . . . . . (56) 41 (2) 135 152
Income (loss) before changes
in accounting (1). . . . . . . . . . . . . . . . . . . . . (37) 21 (2) 91 109
Changes in accounting(1) . . . . . . . . . . . . . . . . . . (1,105)
Net income (loss)(1) . . . . . . . . . . . . . . . . . . . . (1,142) 21 (2) 91 109
Per share:
Income (loss) before changes
in accounting (1). . . . . . . . . . . . . . . . . . . . (.48) .27 (2) 1.19 1.41
Changes in accounting (1). . . . . . . . . . . . . . . . . (14.30)
Net income (loss) (1). . . . . . . . . . . . . . . . . . . (14.78) .27 (2) 1.19 1.41
Dividends declared per share . . . . . . . . . . . . . . . . .50 .50 .50 .50
Dividends paid per share . . . . . . . . . . . . . . . . . . .50 .50 .50 .50
<FN>
(1) In the fourth quarter of 1993, the company adopted FASB Statements No. 106
and 112 relating to postretirement and postemployment benefits, effective
November 1, 1992. Accordingly, results for the first quarter of 1993 were
restated for the cumulative after-tax effect of these changes in accounting
as of November 1, 1992, which totaled $1,105 million or $14.30 per share.
Previously reported income (loss) before changes in accounting for the
first three quarters of 1993 were also restated to reflect incremental
pretax postretirement benefits expense of $14.5 million ($9.3 million or
$.12 per share after income taxes) in each quarter compared with expense
under the previous accounting principle. The fourth quarter of 1993 also
included an incremental pretax increase in the postretirement and
postemployment benefits expense of $16.6 million ($10.4 million or $.13 per
share after income taxes) compared with expense under the previous
accounting principles. Additional information relating to the adoption of
FASB Statements No. 106 and 112 is presented in the "Summary of Significant
Accounting Policies" on pages 32 through 33 and the discussion of
"Postretirement Benefits Other Than Pensions" on pages 36 through 37.
(2) Includes pretax restructuring costs of $107.2 million ($80.0 million or
$1.03 per share after income taxes) recorded in the second quarter of 1993.
Additional information is presented on page 25 of "Management's Discussion
and Analysis".
- - --------------------------------------------------------------------------------
</TABLE>
Common stock per share sales prices from New York Stock Exchange composite
transactions quotations follow:
<TABLE>
<CAPTION>
- - -------------------------------------------------------------------------------------------------------------------------
FIRST SECOND THIRD FOURTH
QUARTER QUARTER QUARTER QUARTER
- - -------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
1994 MARKET PRICE
High . . . . . . . . . . . . . . . . . . . . . . . . . . . . $80.25 $90.88 $78.38 $75.25
Low . . . . . . . . . . . . . . . . . . . . . . . . . . . . 67.25 74.63 67.50 64.50
1993 MARKET PRICE
High . . . . . . . . . . . . . . . . . . . . . . . . . . . . $48.00 $60.88 $67.50 $78.38
Low . . . . . . . . . . . . . . . . . . . . . . . . . . . . 36.75 45.00 55.38 62.75
- - -------------------------------------------------------------------------------------------------------------------------
</TABLE>
At October 31, 1994, there were 23,380 holders of record of the company's
$1 par value common stock and 30 holders of record of the company's 5-1/2%
convertible subordinated debentures due 2001.
DIVIDEND
- - --------------------------------------------------------------------------------
A quarterly dividend of $.55 per share was declared at the Board of Directors'
meeting held on December 7, 1994, payable on February 1, 1995.
45
<PAGE>
(THIS PAGE INTENTIONALLY LEFT BLANK.)
46
<PAGE>
INDEPENDENT AUDITORS' REPORT
Deere & Company:
We have audited the accompanying consolidated balance sheets of Deere & Company
and subsidiaries as of October 31, 1994 and 1993 and the related statements of
consolidated income and of consolidated cash flows for each of the three years
in the period ended October 31, 1994. Our audits also included the financial
statement schedule listed in the Index under Part IV, Item 14(a)(2). These
financial statements and the financial statement schedule are the responsibility
of the Company's management. Our responsibility is to express an opinion on the
financial statements and financial statement schedule based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for our opinion.
In our opinion, such consolidated financial statements present fairly, in all
material respects, the financial position of Deere & Company and subsidiaries at
October 31, 1994 and 1993 and the results of their operations and their cash
flows for each of the three years in the period ended October 31, 1994 in
conformity with generally accepted accounting principles. Also, in our opinion,
such financial statement schedule, when considered in relation to the basic
consolidated financial statements taken as a whole, presents fairly in all
material respects the information set forth therein.
As discussed in the Notes to the Consolidated Financial Statements, effective
November 1, 1992 the Company changed its method of accounting for postretirement
benefits other than pensions.
DELOITTE & TOUCHE LLP
Chicago, Illinois
December 7, 1994
47
<PAGE>
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) 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
By: /s/ Hans W. Becherer
--------------------
Hans W. Becherer
Chairman and Chief Executive Officer
Date: January 24, 1995
Pursuant to the requirements of Section 13 or 15(d) 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.
Signature Title Date
- - --------- ----- ----
/s/ Hans W. Becherer Chairman, Director and )
- - ---------------------- Chief Executive Officer )
Hans W. Becherer )
)
/s/ John R. Block Director )
- - ---------------------- )
John R. Block )
)
/s/ Pierre E. Leroy Senior Vice President, )
- - ---------------------- Principal Financial Officer )
P. E. Leroy and Principal Accounting Officer )
)
/s/ Leonard A. Hadley Director )
- - --------------------- )
Leonard A. Hadley )
)
/s/ Regina Herzlinger Director ) 24 January 1995
- - --------------------- )
Regina Herzlinger )
)
/s/ Samuel C. Johnson Director )
- - --------------------- )
Samuel C. Johnson )
)
/s/ Arthur L. Kelly Director )
- - --------------------- )
Arthur L. Kelly )
)
/s/ A. Santamarina V Director )
- - --------------------- )
A. Santamarina V )
48
<PAGE>
Signature Title Date
- - --------- ----- ----
/s/ William A. Schreyer Director ) 24 January 1995
- - ------------------------ )
William A. Schreyer )
)
/s/ D. H. Stowe, Jr. Director )
- - ------------------------ )
D. H. Stowe, Jr. )
)
/s/ John R. Walter Director )
- - ------------------------ )
John R. Walter )
)
/s/ Dr. Arnold R. Weber Director )
- - ------------------------ )
Dr. Arnold R. Weber )
49
<PAGE>
SCHEDULE II
DEERE & COMPANY AND CONSOLIDATED SUBSIDIARIES
VALUATION AND QUALIFYING ACCOUNTS
For the Years Ended October 31, 1994, 1993 and 1992
(In thousands of dollars)
<TABLE>
<CAPTION>
Column A Column B
-------- --------
Balance at
beginning
Description of period
----------- ---------
<S> <C>
YEAR ENDED OCTOBER 31, 1994
Allowance for doubtful receivables:
Equipment Operations
--------------------
Dealer receivable allowances..... $ 18,051
Financial Services
------------------
Credit receivable allowances..... 83,243
--------
Consolidated receivable
allowances..................... $101,294
--------
--------
YEAR ENDED OCTOBER 31, 1993
Allowance for doubtful receivables:
Equipment Operations
--------------------
Dealer receivable allowances..... $ 19,804
Financial Services
------------------
Credit receivable allowances.... 89,068
--------
Consolidated receivable
allowances.................... $108,872
--------
--------
YEAR ENDED OCTOBER 31, 1992
Allowance for doubtful receivables:
Equipment Operations
--------------------
Dealer receivable allowances..... $ 18,618
Financial Services
------------------
Credit receivable allowances..... 81,090
--------
Consolidated receivable
allowances..................... $ 99,708
--------
--------
<PAGE>
SCHEDULE II
DEERE & COMPANY AND CONSOLIDATED SUBSIDIARIES
VALUATION AND QUALIFYING ACCOUNTS - PAGE 2
For the Years Ended October 31, 1994, 1993 and 1992
(In thousands of dollars)
Column C
--------
Additions
- - -----------------------------------------------
other
Charged to Charged to accounts
costs and ---------------------------------
expenses Description Amount
- - --------- ----------- ------
<C> <S> <C>
Bad debt
recoveries........... $1,565
Purchase of Homelite
$ 5,572 dealer receivables... 1,364
30,538
- - ------- ------
$36,110 $2,929
- - ------- ------
- - ------- ------
Bad debt
$ 2,328 recoveries........... $ 909
30,380
- - ------- ------
$32,708 $ 909
- - ------- ------
- - ------- ------
Bad debt
$ 3,157 recoveries........... $2,032
52,146
- - ------- ------
$55,303 $2,032
- - ------- ------
- - ------- ------
<PAGE>
SCHEDULE II
DEERE & COMPANY AND CONSOLIDATED SUBSIDIARIES
VALUATION AND QUALIFYING ACCOUNTS - PAGE 3
For the Years Ended October 31, 1994, 1993 and 1992
(In thousands of dollars)
Column D Column E
-------- --------
Deductions Balance
- - ------------------------------------------ at end
Description Amount of period
- - ----------- ------ ---------
<S> <C> <C>
Dealer receivable write-offs... $ 3,549 $ 23,003
Transfers related to
retail note sales............ 3,584
Credit receivable write-offs... 24,406 85,791
------- --------
$31,539 $108,794
------- --------
------- --------
Dealer receivable write-offs... $ 4,990 $ 18,051
Transfers related to
retail note sales............ 7,511
Credit receivable write-offs... 28,694 83,243
------- --------
$41,195 $101,294
------- --------
------- --------
Write-offs:
Dealer receivables........... $ 4,003 $ 19,804
Credit receivables........... 44,168 89,068
------- --------
$48,171 $108,872
------- --------
------- --------
</TABLE>
<PAGE>
INDEX TO EXHIBITS
Exhibit
- - -------
3.1 Certificate of incorporation as amended (Exhibit 3.1 to Form 10-Q of
registrant for the period ended April 30, 1993*)
3.2 Certificate of Designation Preferences and Rights of Series A
Participating Preferred Stock (Exhibit 3.2 to Form 10-Q of registrant
for the period ended April 30, 1993*)
3.3 By-laws, as amended
4.1 Indenture dated February 15, 1991 between registrant and Citibank,
N.A., as Trustee.
(Exhibit 4.1 to Form 10-Q of registrant for the quarter ended April 30,
1993*)
4.2 Credit agreements among registrant, John Deere Capital Corporation,
various financial institutions, and Chemical Bank and Deutsche Bank,
as Managing Agents, dated as of December 15, 1993 (Exhibit 4.1 to 1993
Form 10-K of John Deere Capital Corporation, Commission file no. 1-6458*)
4.3 Revolving evergreen credit facility REF loan agreement among John
Deere Limited, John Deere Finance Limited with a number of banks dated
March 26, 1993 and REF linked credit agreement among registrant, John
Deere Capital Corporation and a number of banks dated as of March 26,
1993. (Exhibit 4.3 to Form 10-Q of registrant for the quarter ended
April 30, 1993*)
4.4 Form common stock certificates (Exhibit 4.4 to Form 10-Q of registrant
for the quarter ended April 30, 1993*)
4.5 Rights Agreement dated as of December 9, 1987 as amended between
registrant and Morgan Shareholder Services Trust Company (Exhibit 4.5
to Form 10-Q of registrant for the quarter ended April 30, 1993*)
4.6 First Amendment to Rights Agreement, dated as of February 28, 1990
between registrant and First Chicago Trust Co. of New York (Exhibit
4.6 to Form 10-Q of registrant for the quarter ended April 30, 1993*)
4.7 Second Amendment to Rights Agreement, dated as of March 1, 1991
between registrant and First Chicago Trust Co. of New York (Exhibit
4.7 to Form 10-Q of registrant for the quarter ended April 30, 1993*)
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)(A) of Regulation S-K. The
registrant will file copies of such instruments upon request of the
Commission.
9. Not applicable
10.1 Agreement dated May 11, 1993 between registrant and John Deere Capital
Corporation concerning agricultural retail notes (Exhibit 10.1 to Form
10-Q of registrant for the quarter ended April 30, 1993*)
52
<PAGE>
Exhibit
- - -------
10.2 Agreement dated May 11, 1993 between registrant and John Deere
Capital Corporation relating to lawn and grounds care retail
notes (Exhibit 10.2 to Form 10-Q of registrant for the
quarter ended April 30, 1993*)
10.3 Agreement dated May 11, 1993 between John Deere Industrial
Equipment Company, a wholly-owned subsidiary of registrant and
John Deere Capital Corporation concerning industrial retail notes
(Exhibit 10.3 to Form 10-Q of registrant for the quarter ended
April 30, 1993*)
10.4 Agreement dated January 26, 1983 between registrant and John
Deere Capital Corporation relating to agreements on retail notes
with United States sales branches (Exhibit 10.4 to Form 10-Q of
registrant for the quarter ended April 30, 1993*)
10.5 John Deere Supplemental Pension Benefit Plan, as amended May 26,
1993. (Exhibit 10.5 to Form 10-Q of registrant for the quarter
ended April 30, 1993*)**
10.6 1981 John Deere Incentive Stock Option Plan (Exhibit 10.6 to Form
10-Q of registrant for the quarter ended April 30, 1993*)**
10.7 1986 John Deere Stock Option Plan (Exhibit 10.7 to Form 10-Q of
registrant for the quarter ended April 30, 1993*)**
10.8 1991 John Deere Stock Option Plan (Exhibit 10.8 to Form 10-Q of
registrant for the quarter ended April 30, 1993*)**
10.9 Deere & Company Voluntary Deferred Compensation Plan (Exhibit
10.9 to Form 10-Q of registrant for the quarter ended April 30,
1993*)**
10.10 John Deere Restricted Stock Plan (Exhibit 10.10 to Form 10-Q
of registrant for the quarter ended April 30, 1993*)**
10.11 1993 Nonemployee Director Stock Ownership Plan (Exhibit to
Notice and Proxy Statement of registrant for the annual
shareholder meeting on February 24, 1993*)**
10.12 John Deere Performance Bonus Plan (Exhibit A to Notice and
Proxy Statement of registrant for the annual shareholder
meeting on February 22, 1995*)**
10.13 John Deere Equity Incentive Plan (Exhibit B to Notice and
Proxy Statement of registrant for the annual shreholder
meeting on February 22, 1995*)**
11. Computation of net income per share
12. Computation of ratio of earnings to fixed charges
13. Not applicable
16. Not applicable
18. Not applicable
53
<PAGE>
Exhibits
- - --------
21. Subsidiaries
22. Not applicable
23. Consent of Deloitte & Touche
24. Not applicable
27. Financial Data Schedule
28. Not applicable
99.1 Press Release dated December 9, 1987 announcing adoption of
Shareholder Rights Plan (Exhibit 99.1 to Form 10-Q of registrant for
the quarter ended April 30, 1993*)
99.2 Form of Letter to Shareholders dated December 10, 1987 describing
Shareholder Rights Plan (Exhibit 99.2 to Form 10-Q of registrant for
the quarter ended April 30, 1993*)
__________________________________________________________________
*Incorporated by reference. Copies of these exhibits are available from the
Company upon request.
**Compensatory plan or arrangement filed as an exhibit pursuant to Item 14(c) of
Form 10-K.
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EXHIBIT 3.3
BYLAWS
of
DEERE & COMPANY
(Adopted July 30, 1958; Amended May 25, 1994)
ARTICLE I - IDENTIFICATION
SECTION 1. NAME. The name of the Company is Deere & Company (hereinafter
referred to as the "Company").
SECTION 2. OFFICES. The principal office of the Company in Delaware shall be
in the City of Wilmington, County of New Castle, State of Delaware. The Company
may maintain, change or discontinue its other offices, including its principal
business office in the County of Rock Island, State of Illinois, and may have
such other offices both within and outside of the State of Delaware as its
business may require.
SECTION 3. SEAL. The seal of the Company shall be circular in form and mounted
upon a metal die, suitable for impressing the same upon paper. About the upper
periphery of the seal shall appear the words "Deere & Company" and about the
lower periphery thereof the word "Delaware". In the center of the seal shall
appear a representation of a leaping deer.
SECTION 4. FISCAL YEAR. The fiscal year of the Company shall begin on the
first day of November in each calendar year and end on the last day of October
in the following calendar year.
ARTICLE II - THE STOCKHOLDERS
SECTION 1. PLACE OF MEETINGS. Annual meetings of the stockholders for the
election of directors shall be held at the principal business office of the
Company in Rock Island County, State of Illinois. Meetings of the stockholders
for any other purpose may be held at such place within the State of Delaware or
the State of Illinois as may be specified by the Chairman or the Board of
Directors.
SECTION 2. ANNUAL MEETING. The annual meeting of the stockholders, at which
they shall elect directors by ballot and by plurality vote and may transact such
other business as may properly be brought before the meeting accordance with
Section 3 of Article II of these Bylaws, shall be held at ten o'clock in the
morning, local time, on the last Wednesday in February of each year or on such
business day and at such time and at such place as may be designated by the
Board of Directors. If the date designated for the annual meeting is a legal
holiday then the annual meeting shall be held on the first following day that is
not a legal holiday.
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SECTION 3. NOMINATION OF DIRECTORS AND OTHER BUSINESS.
(a) Only persons who are nominated in accordance with the following procedures
shall be eligible for election as directors. Nominations of persons for
election as directors may be made at a meeting of stockholders only (i) by
or at the direction of the Board of Directors, (ii) by any person or
persons authorized to do so by the Board or (iii) by any stockholder of the
Company entitled to vote for the election of directors at the meeting who
complies with the notice procedures set forth in this Section 3. Such
nomination, other than those made by or at the direction of the Board or by
persons authorized by the Board, shall be made pursuant to timely notice in
writing to the Secretary of the Company. Such stockholder's notice to the
Secretary of a proposed nomination shall set forth, as to each person whom
the stockholder proposes to nominate for election or re-election as a
director, (i) the name, age, business address and residence address of the
person, (ii) the principal occupation or employment of the person, (iii)
the class and number of shares of capital stock of the Company which are
beneficially owned by the person, and (iv) any other information relating
to the person that is required to be disclosed in solicitations for proxies
for election of directors pursuant to Regulation 14A under the Securities
Exchange Act of 1934, as now or hereafter amended; such notice shall
further set forth, as to the stockholder giving the notice, (i) the name
and record address of such stockholder and (ii) the class and number of
shares of the Company which are beneficially owned by such stockholder.
The Company may require any proposed nominee to furnish such other
information as may reasonably be required by the Company to determine the
eligibility of such proposed nominee to serve as director. No person shall
be eligible for election as a director of the Company unless nominated in
accordance with the procedures set forth herein and unless qualified under
the other provisions of these bylaws. If the Chairman of the meeting
determines that a nomination was not made in accordance with the foregoing
procedure, he shall so declare to the meeting and the defective nomination
shall be disregarded.
(b) To be properly brought before any annual or special meeting of
stockholders, business must be either (i) specified in the notice of
meeting (or any supplement thereto) given by or at the direction of the
Board, (ii) otherwise properly brought before the meeting by or at the
direction of the Board, or (iii) otherwise properly brought before the
meeting by a stockholder. In addition to any other applicable
requirements, for business to be properly brought before a meeting by a
stockholder, the stockholder must have given timely notice thereof in
writing to the Secretary of the Company. A stockholder's notice to the
Secretary shall set forth with respect to each matter the stockholder
proposes to bring before the meeting (i) a brief description of the
business desired to be brought before the meeting and the reasons for
conducting such business at the meeting, (ii) the name and record address
of the stockholder proposing such business, (iii) the class and number of
shares of the Company which are beneficially owned by the stockholder, and
(iv) any material
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interest of the stockholder in such business. Notwithstanding anything in
these bylaws to the contrary, no business shall be conducted at any meeting
of stockholders except in accordance with the procedures set forth in this
Section 3, PROVIDED, HOWEVER, that nothing in this Section 3 shall be
deemed to preclude discussion by any stockholder of any business properly
brought before the meeting. If the Chairman of the meeting determines that
such business was not properly brought before the meeting in accordance
with the foregoing procedure, he shall so declare to the meeting, any such
business not properly brought before the meeting shall not be transacted.
(c) To be timely, a stockholder's notice of nomination or other business must
be delivered to, or mailed and received at, the principal executive offices
of the Company, not less than 50 days nor more than 75 days prior to the
meeting; PROVIDED, HOWEVER, that in the event that less than 65 days'
notice or prior public disclosure of the date of the meeting is given or
made to stockholders, notice by the stockholder to be timely must be so
received not later than the close of business on the 15th day following the
day on which such notice of the date of the annual meeting was mailed or
such public disclosure was made, whichever first occurs.
SECTION 4. SPECIAL MEETINGS. Special meetings of the stockholders may be
called by the Chairman or the Board of Directors. The business transacted at
any special meeting of the stockholders shall be limited to the purposes stated
in the notice for the meeting.
SECTION 5. NOTICE OF MEETINGS. Written notice of each meeting of stockholders,
stating the place, day and hour of the meeting and, in case of a special
meeting, the purpose or purposes for which the meeting is called, shall be
delivered not less than ten nor more than sixty days before the date of the
meeting, either personally or by mail, by or at the direction of the Chairman or
the Secretary to each stockholder of record entitled to vote at such meeting.
If mailed, such notice shall be deemed to be delivered when deposited in the
United States mail addressed to the stockholder at his address as it appears on
the stock transfer books of the Company, with postage thereon prepaid.
SECTION 6. FIXING OF RECORD DATES. In order that the Company may determine the
stockholders entitled to notice of or to vote at any meeting of stockholders or
any adjournment thereof, or entitled to receive payment or any dividend or other
distribution or allotment of any rights, or entitled to exercise any rights in
respect of any change, conversion or exchange of stock or for the purpose of any
other lawful action, the Board of Directors may fix, in advance, a record date,
which shall not be more than sixty nor less than ten days before the date of
such meeting, nor more than sixty days prior to any other action. A
determination of stockholders of record entitled to notice of or to vote at a
meeting of stockholders shall apply to any adjournment of the meeting; provided,
however, that the Board of Directors may fix a new record date for the adjourned
meeting.
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SECTION 7. VOTING LIST. The Secretary shall prepare and make, or cause to be
prepared and made, at least ten days before every meeting of stockholders, a
complete list of the stockholders entitled to vote at such meeting, arranged in
alphabetical order, showing the address of and the number of shares registered
in the name of each stockholder. Such list shall be open to the examination of
any stockholder for any purpose germane to the meeting, during ordinary business
hours, for a period of at least ten days prior to the meeting, either at a place
within the city where the meeting is to be held, which place shall be specified
in the notice of meeting, or, if not so specified, at the place where the
meeting is to be held, and the list shall be produced and kept at the time and
place of the meeting during the whole time thereof, and subject to the
inspection of any stockholder who may be present.
SECTION 8. QUORUM AND ADJOURNED MEETINGS. The holders of a majority of the
shares entitled to vote at any meeting of stockholders, present in person or by
proxy, shall constitute a quorum at such meeting except as otherwise provided by
statute. Whenever a quorum shall be present at any meeting all matters shall be
decided by vote of the holders of a majority of the shares present, unless
otherwise provided by statute, the certificate of incorporation, or by these
bylaws.
Meetings of stockholders may be adjourned from time to time for any reason and,
if a quorum shall not be present, the holders of the shares entitled to vote
present in person or by proxy, may so adjourn the meeting. When a meeting is
adjourned to another time or place, unless the bylaws otherwise require, notice
need not be given of the adjourned meeting if the time and place thereof are
announced at the meeting at which the adjournment is taken except that, if the
adjournment is for more than thirty days, or if after the adjournment a new
record date is fixed for the adjourned meeting, a notice of the adjourned
meeting shall be given to each stockholder of record entitled to vote at the
meeting. At the adjourned meeting the Company may transact any business which
might have been transacted at the original meeting. If a quorum shall not be
present at any meeting of the Board of Directors the directors present thereat
may adjourn the meeting from time to time, without notice other than at the
meeting, until a quorum shall be present.
SECTION 9. VOTING AT MEETINGS. Unless otherwise required by law, the
certificate of incorporation or these bylaws, each stockholder shall at every
meeting of the stockholders be entitled to one vote in person or by proxy for
each share of the capital stock having voting power held by such stockholder,
but no proxy shall be voted after three years from its date, unless the proxy
provides for a longer period.
SECTION 10. ORGANIZATION. The Chairman shall preside at all meetings of the
stockholders. In the absence or inability to act of the Chairman, the Vice
Chairman, the President or an Executive Vice President (in that order) shall
preside, and in their absence or inability to act another person designated by
one of them shall preside. The Secretary of the Company shall act as secretary
of each meeting of the stockholders. In the event of his absence or inability
to act, the chairman of the meeting shall appoint a person who need
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not be a stockholder to act as secretary of the meeting.
SECTION 11. INSPECTORS OF VOTING. Except as otherwise provided by statute, the
Chairman or in his absence the chairman of the meeting, shall appoint inspectors
of voting for each meeting of stockholders.
SECTION 12. MEETING PROCEDURES. Meetings of the stockholders shall be
conducted in a fair manner but need not be governed by any prescribed rules of
order. The presiding officer's rulings on procedural matters shall be final.
The presiding officer is authorized to impose reasonable time limits on the
remarks of individual stockholders and may take such steps as such officer may
deem necessary or appropriate to assure that the business of the meeting is
conducted in a fair and orderly manner.
ARTICLE III - THE BOARD OF DIRECTORS
SECTION 1. NUMBER AND QUALIFICATIONS. The business and affairs of the Company
shall be under the direction of or managed by a Board of Directors who need not
be residents of the State of Delaware or stockholders of the Company. The
number of directors may be increased or decreased from time to time by
resolution of the Board of Directors, provided no decrease shall have the effect
of shortening the term of any incumbent director.
Persons who are or have been officers of the Company, other than persons who
hold or have held either or both of the office of Chairman and Chief Executive
Officer and the office of President, shall not be elected directors of the
Company for terms beginning after the date they retire from active employment
with the Company. No candidate shall be elected director of the Company for a
term beginning after his or her 70th birthday.
SECTION 2. ELECTION. Directors shall be elected by class for three year terms
as specified in the Certificate of Incorporation at the annual meeting of
stockholders, except as provided in Section 3 of this Article and except as
required under the terms of any preferred shares, and each director elected
shall hold office during the term for which he is elected and until his
successor is elected and qualified. A director may be removed only for cause.
SECTION 3. VACANCIES. Any vacancies occurring in the Board of Directors and
newly created directorships resulting from any increase in the authorized number
of directors may be filled by a majority of the remaining directors though less
than a quorum of the Board of Directors, or by the sole remaining director, and
any director so chosen shall hold office until the next election of the class
for which he was chosen and until his successor is duly elected and qualified.
SECTION 4. REGULAR MEETINGS. Regular meetings of the Board of Directors shall
be held at nine-thirty o'clock in the morning, local time, or at such other time
as may be established from time to time by resolution of the Board of Directors,
on the last
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Wednesday of May and August, and the first Wednesday in December, and
immediately following the adjournment of the Annual Meeting of stockholders on
the last Wednesday in February in each year. Should any of such days be a legal
holiday, the meeting shall be held at the same time on the first following day
that is not a legal holiday. The February meeting shall be held at the same
place as the annual meeting of stockholders. All other regular meetings shall
be held at the principal business office of the Company in Rock Island County,
Illinois, or at any other place either within or outside the State of Delaware
approved in writing not less than ten days in advance of the meeting by a
majority of the number of directors then in office or approved at the last
preceding regular meeting of the Board of Directors.
SECTION 5. SPECIAL MEETINGS. Special meetings of the Board of Directors may be
held upon call of the Chairman at any time; special meetings also shall be
called by the Chairman or by the Secretary whenever requested by one-third of
the directors then in office. Such meetings shall be held at the principal
business office of the Company in Rock Island County, Illinois, or at any other
place either within or outside the State of Delaware as is designated in the
call and notice for the meeting.
SECTION 6. NOTICE OF MEETINGS. No notice of any kind shall be necessary for
regular meetings of the Board of Directors to be held at the principal business
office of the Company in Rock Island County, Illinois.
Notice of special meetings of the Board of Directors wherever held in the United
States other than Alaska or Hawaii, and notice of regular meetings of the Board
of Directors to be held at a place in the United States other than at the
principal business office of the Company and other than in Alaska or Hawaii
shall be given by letter, telegram, cable or radiogram addressed to each
director's regular business office and delivered for transmission not later than
during the second day immediately preceding the day for such meeting. One day
personal, telegraphic or telephonic notice given by the Chairman, Secretary or
any other officer, shall be sufficient notice of the calling of a special
meeting; provided that such persons may give shorter notice if that is deemed
necessary or appropriate under the circumstances provided that the shorter
notice is actually received by the director prior to the meeting and provision
is made at the meeting for participation by means of telecommunication, as
permitted by Section 10 of this Article.
Notice of special meetings and of regular meetings of the Board of Directors to
be held at a place in Alaska or Hawaii or outside the United States shall be
given by letter, telegram, cable or radiogram addressed to each director's
regular business office and delivered for transmission not later than during the
tenth day immediately preceding the day for such meeting.
Notice of any meeting of the Board of Directors for which a notice is required
may be waived in writing signed by the person or persons entitled to such
notice, whether before or after the time of such meeting, and such waiver shall
be equivalent to the giving of such
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notice. Attendance of a director at any such meeting shall constitute a waiver
of notice thereof, except where a director attends a meeting for the express
purpose of objecting to the transaction of any business because such meeting is
not lawfully convened. Neither the business to be transacted at nor the purpose
of any meeting of the Board of Directors for which a notice is required need be
specified in the notice, or waiver of notice, of such meeting.
SECTION 7. QUORUM. A majority of the number of directors in office shall
constitute a quorum for the transaction of business. The act of a majority of
the directors present at a meeting at which a quorum is present shall be the act
of the Board of Directors except as otherwise provided by law or these bylaws.
[During an emergency period following a national catastrophe, due to enemy
attack, a majority of the surviving members of the Board of Directors who have
not been rendered incapable of acting as the result of physical or mental
incapacity or the difficulty of transportation to the place of the meeting shall
constitute a quorum for the purpose of filling vacancies in the Board of
Directors and among the elected officers of the Company.]
SECTION 8. ORGANIZATION. The Chairman shall preside at all meetings of the
Board of Directors. In the absence or inability to act of the Chairman, the
Vice Chairman, the President or an Executive Vice President (in that order)
shall preside, and in their absence or inability to act another director
designated by one of them shall preside.
SECTION 9. ACTIONS BY WRITTEN CONSENT. Any action required or permitted to be
taken at any meeting of the Board of Directors or of any committee thereof may
be taken without a meeting, if prior to such action a written consent thereto is
signed by all members of the Board or of such committee as the case may be, and
such written consent is filed with the minutes of proceedings of the Board or
such committee.
SECTION 10. MEETINGS BY MEANS OF TELECOMMUNICATION. Members of the Board of
Directors of the Company, or any committee designated by the Board of Directors,
may participate in a meeting of the Board of Directors or such committee by
means of a conference telephone or similar communications equipment by means of
which all persons participating in the meeting can hear each other, and
participation in a meeting pursuant to this Section 10 shall constitute presence
in person at such meeting.
SECTION 11. INTERESTED DIRECTORS: QUORUM.
(a) No contract or transaction between the Company and one or more of its
directors or officers, or between the Company and any other
corporation, partnership, association or other organization in which
one or more of its directors or officers are directors or officers, or
have a financial interest, shall be void or voidable solely for this
reason, or solely because the director or officer is present at or
participates in the meeting of the Board or committee thereof which
authorizes the contract or transaction, or solely because his or
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their votes are counted for such purpose, if:
(1) The material facts as to his relationship or interest and as to
the contract or transaction are disclosed or are known to the
Board of Directors or the committee, and the Board or committee
in good faith authorizes the contract or transaction by the
affirmative votes of a majority of the disinterested directors,
even though the disinterested directors be less than a quorum; or
(2) The material facts as to his relationship or interest and as to
the contract or transaction are disclosed or are known to the
shareholders entitled to vote thereon, and the contract or
transaction is specifically approved in good faith by vote of the
shareholders; or
(3) The contract or transaction is fair as to the Company as of the
time it is authorized, approved, or ratified by the Board of
Directors, a committee thereof or the shareholders.
(b) Common or interested directors may be counted in determining the
presence of a quorum at a meeting of the Board of Directors or of a
committee which authorizes the contract or transaction.
SECTION 12. COMPENSATION. The Board of Directors, by the affirmative vote of a
majority of the whole Board, and irrespective to any personal interest of its
members, shall provide reasonable compensation of all directors for services,
ordinary or extraordinary, to the Company as directors, officers or otherwise.
Directors shall be paid their actual expenses of attendance at each meeting of
the Board of Directors and committees thereof.
ARTICLE IV - EXECUTIVE COMMITTEE
SECTION 1. DESIGNATION AND MEMBERS. During the intervals between meetings of
the Board of Directors and subject to such limitations as may be imposed by law
and these bylaws, an Executive Committee shall have and may exercise all of the
authority of the Board of Directors in the management of the business and
affairs of the Company. The membership of such Executive Committee shall
include the Chairman and such other directors as are designated by the Board of
Directors at the recommendation of the Chairman.
This designation of the Executive Committee and the delegation of authority
granted to it shall not operate to relieve the Board of Directors, or any
director, of any responsibility imposed upon it or him by law. No member of the
Executive Committee shall continue to be a member thereof after he ceases to be
a director of the Company.
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SECTION 2. LIMITATION OF POWERS. Neither the Executive Committee, nor any
other Board Committee, shall have the authority of the Board of Directors in
reference to amending the certificate of incorporation; adopting an agreement of
merger or consolidation with another corporation or corporations; amending,
altering or repealing the bylaws; electing or removing the Chairman, Vice
Chairman, President, any Executive Vice President or any Senior Vice President;
declaring dividends; or amending, altering or repealing any resolution of the
Board of Directors which by its terms provides that it shall not be amended,
altered or repealed by the Executive Committee. Nor, unless specifically
authorized by the Board of Directors, shall the Executive Committee have the
authority of the Board of Directors in reference to incurring indebtedness for a
term of longer than one year except that this limitation shall not apply to
indebtedness of up to five years which (i) do not involve registration with the
Securities & Exchange Commission and (ii) do not result in a total of
indebtedness of $50,000,000 for a term longer than one year to any one lender,
nor shall this limitation apply to the guaranty of an indebtedness which runs
longer than one year.
In any resolution of the Board of Directors providing for action to be taken or
approval to be given by, or a report to be made to, the Board, the term "Board
of Directors" standing alone shall not be deemed to mean the Executive
Committee.
All minutes of meetings of the Executive Committee shall be submitted to the
next succeeding meeting of the Board of Directors, provided that no rights other
than those of the Company shall be affected by any revision or alteration by the
Board of Directors of actions of the Executive Committee.
SECTION 3. PROCEDURE, MEETINGS, QUORUM. The Chairman shall preside at all
meetings of the Executive Committee. In the absence or inability to act of the
Chairman, the Vice Chairman, the President or an Executive Vice President (in
that order) shall preside, and in their absence or inability to act another
member designated by one of them shall preside.
The Executive Committee shall keep a record of its acts and proceedings.
Meetings of the Executive Committee shall be called at the request of any member
of the Committee with the concurrence of the Chairman, or in the event of his
absence or inability to act, the Vice Chairman, or in the event of the Vice
Chairman's absence or inability to act, the President or an Executive Vice
President of the Company, in the order of their availability. Such meeting
shall be held at such location as shall be stated in the notice for such
meetings.
Meetings of the Executive Committee may be held upon notice given by word of
mouth or written notice delivered during regular business hours to the office of
each member or at other times to his residence. In the case of a meeting held
at the principal business office of the Company in Rock Island County, Illinois,
such notice may be given at any time prior
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to said meeting. In the case of a meeting held at any place in the United
States other than the principal business office and other than Alaska or Hawaii,
such notice may be given 48 hours prior to said meeting. In the case of a
meeting held in Alaska or Hawaii or elsewhere outside the United States, such
notice may be given four days prior to said meeting.
A majority of the members of the Executive Committee shall constitute a quorum
for the transaction of any business, and the act of a majority of the members
present at a meeting at which a quorum is present shall be the act of the
Executive Committee.
ARTICLE V - BOARD COMMITTEES
OTHER THAN THE EXECUTIVE COMMITTEE
SECTION 1. GENERAL PROVISIONS. The Board of Directors may from time to time
establish such committees of the Board as it shall deem appropriate in addition
to the Executive Committee. The resolution establishing each such committee
shall state its powers and duties and the number of directors who shall be
members. The membership of and committee chairman of each such committee shall
be designated by the Board of Directors upon the recommendation of the
Chairman. No such committee of the Board shall exercise any of the powers of
the Board other than those set forth in such resolution establishing the
committee, as such resolution may be amended from time to time.
SECTION 2. PROCEDURES, MEETINGS, QUORUM. Meetings of such Board committees may
be held on call of the Chairman of the committee or upon call issued by the
Secretary of the Company at the request of a majority of the committee.
Unless stated otherwise in the resolution establishing a committee, a majority
of the members shall constitute a quorum for the conduct of business.
Meetings of such Board committees may be held at such place as may be designated
in the notice of meeting. Notice of meetings shall be given by the Secretary of
the Company and shall be by word of mouth delivered to the office of the
committee member not later than the third day before the meeting or in writing
or by telegram mailed or sent not later than the fourth day before the meeting.
The notice need not specify the business to be conducted at a meeting.
ARTICLE VI - THE OFFICERS
SECTION 1. NUMBER AND QUALIFICATIONS. The principal officers of the Company
shall consist of a Chairman, a President, a Secretary, and a Treasurer; and the
Company may have a Vice Chairman, one or more Executive Vice Presidents, one or
more Senior Vice Presidents, one or more Vice Presidents, a General Counsel, a
Comptroller and such other officers and assistant officers as may be deemed
necessary by the Board of Directors. The Chairman, Vice Chairman and President
shall be chosen from among the directors, but
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no other officer need be a director. Any number of offices may be held by the
same person.
SECTION 2. GENERAL DUTIES. All officers of the Company shall have such
authority and perform such duties in the management of the Company as may be
provided by or delegated in accordance with these bylaws, or as may be
determined by resolution of the Board of Directors not inconsistent with these
bylaws. All agents and employees of the Company not appointed by the Board of
Directors may be appointed by the Chairman or by persons authorized by him to do
so, to serve for such time and to have such duties as the appointing authority
may determine from time to time.
SECTION 3. ELECTION AND TERM OF OFFICE. The officers shall be elected annually
by the Board of Directors at its regular meeting in February of each year. Each
officer shall hold office for one year and until his successor is elected and
qualified, or until he shall have resigned, or shall have been removed in the
manner provided in Section 4.
SECTION 4. REMOVAL. Any officer may be removed by the Board of Directors
whenever in its judgment the interests of the Company will be served thereby,
but such removal shall be without prejudice to the contract rights, if any, of
the person removed. Election of an officer shall not of itself create contract
rights.
SECTION 5. RESIGNATIONS. Any officer may resign at any time by giving written
notice to the Board of Directors or to the Chairman. Such resignation shall
take effect at the time specified therein and, unless specified therein, the
acceptance of such resignation shall not be necessary to make it effective.
SECTION 6. VACANCIES. Subject to the limitations in Article IV, Section 2 of
these Bylaws, the Board of Directors may at any time create and fill new offices
and may at any time fill the unexpired portion of the term of any vacant office.
SECTION 7. CHAIRMAN. The Chairman shall be the chief executive officer of the
Company and as such shall have the active executive management of the operations
of the Company, and shall see that the orders and resolutions of the Board of
Directors and of the Executive Committee are carried into effect. He shall have
power to execute in the name of the Company all bonds, contracts, other
obligations and property conveyances which are duly authorized, and he shall
have all the powers and perform all duties devolving upon him by law and as head
of the Company. He may call special meetings of the stockholders and of the
Board of Directors. From time to time he shall bring to the attention of the
Board of Directors such information or recommendations concerning the business
and affairs of the Company as he may deem necessary or appropriate. When
present he shall preside at all meetings of the stockholders, of the Board of
Directors and of the Executive Committee.
SECTION 8. VICE CHAIRMAN. The Vice Chairman shall be the second ranking
officer of the Company. He shall have such powers and perform such duties as
the Board of Directors may from time to time prescribe or as the Chairman may
from time to time
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delegate to him. In the absence or inability to act of the Chairman, the Vice
Chairman shall act as the chief executive officer of the Company and shall
perform the duties of the Chairman.
SECTION 9. PRESIDENT. The President shall have such powers and perform such
duties as the Board of Directors may from time to time prescribe or as the Chief
Executive Officer may from time to time delegate to him. In the absence or
inability to act of the Chairman and the Vice Chairman, the President shall
perform the duties of Chairman.
SECTION 10. EXECUTIVE VICE PRESIDENTS. Each Executive Vice President shall
have such powers and perform such duties as the Board of Directors may from time
to time prescribe or as the Chairman may from time to time delegate to him. In
the absence or inability to act of the Chairman, the Vice Chairman and the
President, an Executive Vice President present shall act as the chief executive
officer of the Company and shall perform the duties of the Chairman.
SECTION 11. SENIOR VICE PRESIDENTS. Each Senior Vice President shall have such
powers and perform such duties as the Board of Directors may from time to time
prescribe or as the Chairman may from time to time delegate to him. In the
absence or inability to act of the Chairman, the Vice Chairman, the President
and Executive Vice Presidents, the duties of the Chairman shall be performed by
a Senior Vice President present, acting in such order of priority as shall be
designated by the Chairman.
SECTION 12. VICE PRESIDENTS. Each Vice President shall have such powers and
perform such duties as the Board of Directors may from time to time prescribe or
as the Chairman may from time to time delegate to him.
SECTION 13. SECRETARY. The Secretary shall act as secretary of all meetings of
the stockholders, the Board of Directors and the Executive Committee. He shall
prepare and keep or cause to be kept in books provided for the purpose minutes
of all meetings of the stockholders, the Board of Directors and the Executive
Committee; shall see that all notices are duly given in accordance with the
provisions of these bylaws and as required by law, shall be custodian of the
records and of the seal of the Company and see that the seal is affixed to all
documents, the execution of which on behalf of the Company under its seal is
duly authorized and, in general, he shall perform all duties incident to the
office of Secretary and as required by law and such other duties as may be
assigned to him from time to time by the Board of Directors or by the Chairman.
Each Assistant Secretary (if one or more Assistant Secretaries be elected) shall
assist the Secretary in his duties and shall perform such other duties as the
Board of Directors may prescribe from time to time, or the Chairman or the
Secretary may delegate to him from time to time. In the event of the absence or
inability to act of the Secretary, his duties shall be performed by an Assistant
Secretary designated by the Chairman.
66
<PAGE>
SECTION 14. TREASURER. The Treasurer shall have charge and custody of, and be
responsible for, all moneys, notes and securities in the possession of the
Company, and deposit all funds in the name of the Company in such banks, trust
companies or other depositories as he may select; shall receive, and give
receipts for, moneys due and payable to the Company from any source whatsoever;
and, in general, he shall perform all the duties incident to the office of
Treasurer and as required by law and such other duties as may be assigned to him
from time to time by the Board of Directors or by the Chairman.
Each Assistant Treasurer (if one or more Assistant Treasurers be elected) shall
assist the Treasurer in his duties and shall perform such other duties as the
Board of Directors may prescribe from time to time, or the Chairman or the
Treasurer may delegate to him from time to time. In the event of the absence or
inability to act of the Treasurer, his duties shall be performed by an Assistant
Treasurer designated by the Chairman.
SECTION 15. GENERAL COUNSEL. The General Counsel shall be the chief legal
advisor of the Company as to all matters affecting the Company and its business
and, in general, he shall perform all the duties incident to the office of
General Counsel and such other duties as may be assigned to him from time to
time by the Board of Directors or by the Chairman.
SECTION 16. COMPTROLLER. The Comptroller shall direct the preparation and
maintenance, on a current basis, of such accounting books, records and reports
as may be necessary to permit the directors, officers and executives of the
Company to exercise adequate planning and control of the business of the Company
or as may be required by law; and in general, he shall perform all the duties
incident to the office of Comptroller and such other duties as may be assigned
to him from time to time by the Board of Directors or by the Chairman.
ARTICLE VII - ACTS WITH RESPECT TO SECURITIES OWNED
SECTION 1. ACTS WITH RESPECT TO SECURITIES OWNED. Subject always to the
specific directions of the Board of Directors, the Chairman, the Vice Chairman,
the President, an Executive Vice President, a Senior Vice President, a Vice
President, or the Treasurer on behalf of the Company may exercise all the
rights, powers and privileges of ownership, including the right to vote, by
proxy or otherwise, any security or securities owned by the Company (including
reacquired shares of capital stock of the Company). The endorsement of such
officers may be attested by the Secretary or an Assistant Secretary either with
or without affixing thereto the corporate seal.
ARTICLE VIII - OTHER PROVISIONS
SECTION 1. CERTIFICATES OF STOCK. Certificates to evidence ownership of stock
of the Company shall be issued in such form as the Board of Directors shall from
time to time approve. The Board of Directors shall appoint a transfer agent and
registrar for the stock of the Company in the Borough of Manhattan, City of New
York. The Board of Directors
67
<PAGE>
may adopt such regulations concerning the authority and duties of the transfer
agent and registrar, the transfer and registration of certificates of stock and
the substitution or replacement of lost, stolen, destroyed or mutilated
certificates as it shall see fit.
SECTION 2. LOANS. The Company may lend money to, or guarantee any obligation
of, or otherwise assist any officer or other employee of the Company or of any
of its subsidiaries, including any officer or employee who is a director of the
Company or of any of its subsidiaries, whenever, in the judgment of the Board of
Directors, such loan, guaranty or assistance may reasonably be expected to
benefit the Company. The loan, guaranty or other assistance may be with or
without interest and may be unsecured or secured in such manner as the Board of
Directors shall approve including, without limitation, a pledge of shares of
stock of the Company.
SECTION 3. AMENDMENT OF BYLAWS. In addition to such power of amendment as is
vested by law in the shareholders, the Board of Directors is authorized to
alter, amend or repeal the bylaws at any meeting of the Board of Directors by
the affirmative vote of a majority of the number of directors then in office.
******
68
<PAGE>
EXHIBIT 11
DEERE & COMPANY AND CONSOLIDATED SUBSIDIARIES
COMPUTATION OF NET INCOME PER SHARE
For the Five Years Ended October 31, 1994
(All amounts other than per share data
are stated in thousands)
<TABLE>
<CAPTION>
Year Ended October 31
-----------------------------
1994 1993
---- ----
<S> <C> <C>
1. Net income (loss)..................... $603,563 $(920,860)
2. Adjustment - Interest expense,
after income tax benefit,
applicable to convertible
debentures outstanding.............. 35 60
-------- ---------
3. Net income (loss) applicable to common
stock - before interest applicable
to convertible debentures........... $603,598 $(920,800)
-------- ---------
-------- ---------
PRIMARY NET INCOME PER COMMON SHARE:
Shares:
4. Weighted average number of common
shares outstanding.................. 86,146 77,291
-------- ---------
-------- ---------
5. Incremental shares:
Dilutive common stock options....... 453 1,000
Dilutive stock appreciation
rights............................ 48 22
-------- ---------
Total incremental shares.......... 501 1,022
-------- ---------
-------- ---------
6. Primary net income (loss) per common
share (1 divided by 4).............. $ 7.01* $ (11.91)*
-------- ---------
-------- ---------
FULLY DILUTED NET INCOME PER COMMON SHARE:
Shares:
7. Weighted average number of common
shares outstanding.................. 86,146 77,291
8. Incremental shares:
Dilutive common stock options....... 501 1,126
Dilutive stock appreciation
rights............................ 49 42
9. Common equivalent shares from
assumed conversion of
convertible debentures:
5-1/2% debentures due 2001........ 19 50
-------- ---------
10. Total............................. 86,715 78,509
-------- --------
-------- --------
11. Fully diluted net income (loss) per
common share (3 divided by 10)...... $ 7.01* $ (11.91)*
-------- --------
-------- --------
</TABLE>
<PAGE>
EXHIBIT 11
DEERE & COMPANY AND CONSOLIDATED SUBSIDIARIES
COMPUTATION OF NET INCOME PER SHARE - PAGE 2
For the Five Years Ended October 31, 1994
(All amounts other than per share data
are stated in thousands)
<TABLE>
<CAPTION>
Year Ended October 31
------------------------------
1992 1991 1990
---- ---- ----
<S> <C> <C> <C>
1. Net income (loss)..................... $ 37,426 $(20,191) $411,068
2. Adjustment - Interest expense,
after income tax benefit,
applicable to convertible
debentures outstanding.............. 67 91 174
-------- -------- --------
3. Net income (loss) applicable to common
stock - before interest applicable
to convertible debentures........... $ 37,493 $(20,100) $411,242
-------- -------- --------
-------- -------- --------
PRIMARY NET INCOME PER COMMON SHARE:
Shares:
4. Weighted average number of common
shares outstanding.................. 76,274 76,164 75,883
-------- -------- --------
-------- -------- --------
5. Incremental shares:
Dilutive common stock options....... 147 271 210
Dilutive stock appreciation
rights............................ 11 11 37
-------- -------- --------
Total incremental shares.......... 158 282 247
-------- -------- --------
-------- -------- --------
6. Primary net income (loss) per common
share (1 divided by 4).............. $ .49* $ (.27)* $ 5.42*
-------- -------- --------
-------- -------- --------
FULLY DILUTED NET INCOME PER COMMON SHARE:
Shares:
7. Weighted average number of common
shares outstanding.................. 76,274 76,164 75,883
8. Incremental shares:
Dilutive common stock options....... 147 322 210
Dilutive stock appreciation
rights............................ 15 16 40
9. Common equivalent shares from
assumed conversion of
convertible debentures:
5-1/2% debentures due 2001........ 54 59 136
-------- -------- --------
10. Total............................. 76,490 76,561 76,269
-------- -------- --------
-------- -------- --------
11. Fully diluted net income (loss) per
common share (3 divided by 10)...... $ .49* $ (.27)* $ 5.42*
-------- -------- --------
-------- -------- --------
<FN>
__________
* 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 antidilutive.
</TABLE>
<PAGE>
EXHIBIT 12
DEERE & COMPANY AND CONSOLIDATED SUBSIDIARIES
COMPUTATION OF RATIO OF EARNINGS TO FIXED CHARGES
(In thousands of dollars)
<TABLE>
<CAPTION>
Year Ended October 31
------------------------------
1994 1993
<S> <C> <C>
Earnings:
Income (loss) of consolidated
group before income taxes
and changes in accounting.... $ 920,920 $272,345
Dividends received from
less than fifty percent
owned affiliates............. 2,329 1,706
Fixed charges net of
capitalized interest......... 310,047 375,238
---------- --------
Total earnings............... $1,233,296 $649,289
---------- --------
---------- --------
Fixed charges:
Interest expense of
consolidated group (includes
capitalized interest)........ $ 303,080 $369,325
Portion of rental charges
deemed to be interest........ 7,008 6,127
---------- --------
Total fixed charges.......... $ 310,088 $375,452
---------- --------
---------- --------
Ratio of earnings to
fixed charges**................ 3.98 1.73
---------- --------
---------- --------
__________
<FN>
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, changes in accounting
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.
</TABLE>
<PAGE>
EXHIBIT 12
DEERE & COMPANY AND CONSOLIDATED SUBSIDIARIES
COMPUTATION OF RATIO OF EARNINGS TO FIXED CHARGES
PAGE 2
(In thousands of dollars)
<TABLE>
<CAPTION>
Year Ended October 31
------------------------------
1992 1991 1990
---- ---- ----
<S> <C> <C> <C>
Earnings:
Income (loss) of consolidated
group before income taxes
and changes in accounting.... $ 43,488 $(26,176) $ 587,528
Dividends received from
less than fifty percent
owned affiliates............. 2,325 6,229 7,775
Fixed charges net of
capitalized interest......... 420,133 454,092 439,200
-------- -------- ----------
Total earnings............... $465,946 $434,145 $1,034,503
-------- -------- ----------
-------- -------- ----------
Fixed charges:
Interest expense of
consolidated group (includes
capitalized interest)........ $415,205 $451,936$ 435,217
Portion of rental charges
deemed to be interest........ 6,720 4,088 3,983
-------- -------- ----------
Total fixed charges.......... $421,925 $456,024$ 439,200
-------- -------- ----------
-------- -------- ----------
Ratio of earnings to
fixed charges**................ 1.10 * 2.36
-------- -------- ----------
-------- -------- ----------
__________
<FN>
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, changes in accounting
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.
</TABLE>
<PAGE>
EXHIBIT 21
DEERE & COMPANY
AND CONSOLIDATED SUBSIDIARIES
SUBSIDIARIES OF THE REGISTRANT
As of October 31, 1994
Subsidiary companies of Deere & Company are listed below. Except where
otherwise indicated, 100 percent of the voting securities of the companies named
is owned directly or indirectly by Deere & Company.
<TABLE>
<CAPTION>
Organized
under the
Name of subsidiary laws of
- - ------------------ ---------
<S> <C>
Subsidiaries included in consolidated
financial statements *
John Deere Industrial Equipment Company................Delaware
John Deere Limited.....................................Canada
John Deere - Lanz Verwaltungs A.G. (99.9% owned by
Deere & Company)....................................Germany
John Deere S.A.........................................France
John Deere Iberica S.A.................................Spain
John Deere Intercontinental GmbH (Germany).............Germany
Chamberlain Holdings Limited (Australia)...............Australia
John Deere Limited Australia ..........................Australia
John Deere Power Products, Inc.........................Tennessee
John Deere Foreign Sales Corporation Limited...........Jamaica
John Deere Credit Company..............................Delaware
John Deere Capital Corporation.........................Delaware
John Deere Finance Limited.............................Canada
John Deere Receivables, Inc............................Nevada
Deere Credit, Inc......................................Delaware
Deere Credit Services, Inc.............................Delaware
John Deere Insurance Group, Inc........................Delaware
John Deere Insurance Company of Canada.................Canada
Rock River Insurance Company...........................Illinois
John Deere Life Insurance Company......................Illinois
Sierra General Life Insurance Company..................Nevada
Tahoe Insurance Company................................Nevada
John Deere Insurance Company...........................Illinois
John Deere Health Care, Inc............................Delaware
Heritage National Healthplan, Inc......................Illinois
Heritage National Healthplan Services, Inc.............Delaware
Heritage National Healthplan of Tennessee, Inc.........Tennessee
_________
<FN>
* Twenty-four consolidated subsidiaries and sixteen unconsolidated
affiliates whose names are omitted, considered in the aggregate as a single
subsidiary, would not constitute a significant subsidiary.
</TABLE>
<PAGE>
EXHIBIT 23
DELOITTE & TOUCHE LLP
Two Prudential Plaza
180 North Stetson Avenue
Chicago, Illinois 60601-6779
INDEPENDENT AUDITORS' CONSENT
We consent to the incorporation by reference in Registration Statements
No. 2-62630, 2-76637, 2-77915, 2-90384, 33-15949, 33-17990, 33-24397, 33-44294,
33-49740, 33-49762, 33-55551, and 33-55549 of Deere & Company on Form S-8, and
in Registration Statements No. 33-54165, 33-39006, 33-54149, and 33-66134 of
Deere & Company on Form S-3, of our report dated December 7, 1994, appearing in
the Annual Report on Form 10-K of Deere & Company for the year ended
October 31, 1994 and to the reference to us under the heading "Experts" in the
Prospectuses, which are a part of such Registration Statements.
DELOITTE & TOUCHE LLP
Chicago, Illinois
January 23, 1995
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 5
<LEGEND>
This schedule contains summary financial information extracted from
Form 10-K and is qualified in its entirety by reference to such
financial statements.
</LEGEND>
<CIK> 0000315189
<NAME> DEERE & COMPANY
<MULTIPLIER> 1,000,000
<CURRENCY> U.S. DOLLARS
<S> <C>
<PERIOD-TYPE> 12-MOS
<FISCAL-YEAR-END> OCT-31-1994
<PERIOD-START> NOV-01-1993
<PERIOD-END> OCT-31-1994
<EXCHANGE-RATE> 1
<CASH> 245
<SECURITIES> 1,125
<RECEIVABLES> 7,989
<ALLOWANCES> 109
<INVENTORY> 698
<CURRENT-ASSETS> 0
<PP&E> 4,038
<DEPRECIATION> 2,724
<TOTAL-ASSETS> 12,781
<CURRENT-LIABILITIES> 0
<BONDS> 2,054
<COMMON> 1,491
0
0
<OTHER-SE> 1,067
<TOTAL-LIABILITY-AND-EQUITY> 12,781
<SALES> 7,885
<TOTAL-REVENUES> 9,030
<CGS> 6,005
<TOTAL-COSTS> 5,899
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 36
<INTEREST-EXPENSE> 303
<INCOME-PRETAX> 921
<INCOME-TAX> 332
<INCOME-CONTINUING> 604
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 604
<EPS-PRIMARY> 7.01
<EPS-DILUTED> 7.01
</TABLE>
