SECURITIES AND EXCHANGE COMMISSION
Washington, D. C. 20549
___________________
FORM 10-Q
___________________
Quarterly Report Pursuant to Section 13 or 15(d) of the
Securities Exchange Act of 1934
For the quarterly period ended January 31, 1995
______________________________
Commission file no: 1-4121
______________________________
DEERE & COMPANY
Delaware 36-2382580
(State of incorporation) (IRS employer identification no.)
John Deere Road
Moline, Illinois 61265
(Address of principal executive offices)
Telephone Number: (309) 765-8000
______________________________
Indicate by check mark whether the registrant (1) has filed
all reports required to
be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the
preceding 12 months (or for such shorter period that the
registrant was required to file
such reports), and (2) has been subject to such filing
requirements for the past 90 days.
Yes x No
At January 31, 1995, 86,498,799 shares of common stock, $1
par value, of the
registrant were outstanding.
_________________________________________________________________
Page 1 of 21 Pages.
Index to Exhibits: Page 18.
<PAGE>
PART I. FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
DEERE & COMPANY
STATEMENT OF CONSOLIDATED INCOME
CONSOLIDATED
(Deere & Company
and Consolidated Subsidiaries)
Three Months Ended January 31
Millions of dollars (Unaudited) 1995 1994
Net Sales and Revenues
Net sales of equipment $1,730.5 $1,406.8
Finance and interest income 153.6 124.8
Insurance and health care premiums 180.5 157.5
Investment income 25.9 22.3
Other income 15.8 15.4
Total 2,106.3 1,726.8
Costs and Expenses
Cost of goods sold 1,339.2 1,121.7
Research and development expenses 67.0 60.4
Selling, administrative and general expenses 220.5 197.6
Interest expense 88.4 71.2
Insurance and health care claims
and benefits 158.9 135.4
Other operating expenses 10.9 7.1
Total 1,884.9 1,593.4
Income of Consolidated Group
Before Income Taxes 221.4 133.4
Provision for income taxes 83.5 48.1
Income of Consolidated Group 137.9 85.3
Equity in Income (Loss) of Unconsolidated
Subsidiaries and Affiliates
Credit
Insurance and health care .7 1.3
Other (.2) .4
Total .5 1.7
Net Income $ 138.4 $ 87.0
Per Share Data
Primary and fully diluted net income $ 1.60 1.02
<PAGE>
PART I. FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
DEERE & COMPANY
STATEMENT OF CONSOLIDATED INCOME
EQUIPMENT OPERATIONS
(Deere & Company with
Financial Services on the Equity Basis)
Three Months Ended January 31
Millions of dollars (Unaudited) 1995 1994
Net Sales and Revenues
Net sales of equipment $1,730.5 $1,406.8
Finance and interest income 23.8 19.7
Insurance and health care premiums
Investment income
Other income 6.1 4.5
Total 1,760.4 1,431.0
Costs and Expenses
Cost of goods sold 1,353.2 1,125.1
Research and development expenses 67.0 60.4
Selling, administrative and general
expenses 154.5 134.8
Interest expense 27.8 30.7
Insurance and health care claims and
benefits
Other operating expenses 5.7 2.0
Total 1,608.2 1,353.0
Income of Consolidated Group Before
Income Taxes 152.2 78.0
Provision for income taxes 56.4 30.0
Income of Consolidated Group 95.8 48.0
Equity in Income (Loss) of Unconsolidated
Subsidiaries and Affiliates
Credit 29.7 25.6
Insurance and health care 13.1 13.0
Other (.2) .4
Total 42.6 39.0
Net Income $ 138.4 $ 87.0
<PAGE>
PART I. FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
DEERE & COMPANY
STATEMENT OF CONSOLIDATED INCOME
FINANCIAL SERVICES
Three Months Ended January 31
Millions of dollars (Unaudited) 1995 1994
Net Sales and Revenues
Net sales of equipment
Finance and interest income $ 131.2 $ 106.0
Insurance and health care premiums 214.8 184.1
Investment income 25.9 22.3
Other income 10.5 12.0
Total 382.4 324.4
Costs and Expenses
Cost of goods sold
Research and development expenses
Selling, administrative and general expenses 70.2 65.2
Interest expense 62.0 41.4
Insurance and health care claims and
benefits 175.8 157.3
Other operating expenses 5.2 5.1
Total 313.2 269.0
Income of Consolidated Group Before
Income Taxes 69.2 55.4
Provision for income taxes 27.1 18.1
Income of Consolidated Group 42.1 37.3
Equity in Income (Loss) of Unconsolidated
Subsidiaries and Affiliates
Credit
Insurance and health care .7 1.3
Other
Total .7 1.3
Net Income $ 42.8 $ 38.6
See Notes to Interim Financial Statements. Supplemental
consolidating data are shown for the "Equipment Operations" and
"Financial Services". Transactions between the "Equipment
Operations" and "Financial Services" have been eliminated to
arrive
at the "Consolidated" data.
<PAGE>
DEERE & COMPANY
CONDENSED CONSOLIDATED BALANCE SHEET
CONSOLIDATED
(Deere & Company and
Consolidated Subsidiaries)
Jan 31 Oct 31 Jan 31
1995 1994 1994
Millions of dollars (Unaudited)
Assets
Cash and short-term investments $518.1 $254.4 $344.1
Cash deposited with unconsolidated
subsidiaries
Cash and cash equivalents 518.1 245.4 344.1
Marketable securities 1,103.3 1,126.3 988.3
Receivables from unconsolidated
subsidiaries and affiliates .9 8.9 2.6
Dealer accounts and notes
receivable - net 3,015.6 2,939.4 2,727.8
Credit receivables - net 4,662.2 4,501.7 3,907.0
Other receivables 420.0 429.7 412.3
Equipment on operating
leases - net 215.6 219.5 197.0
Inventories 942.6 698.0 687.6
Property and equipment - net 1,282.6 1,314.1 1,208.4
Investments in unconsolidated
subsidiaries and affiliates 152.0 154.3 146.3
Intangible assets - net 282.4 283.7 297.0
Deferred income taxes 684.1 679.8 681.8
Other assets and deferred charges 191.3 180.4 180.2
Total $13,470.7 $12,781.2 $11,780.4
Liabilities and Stockholders'
Equity
Short-term borrowings 3,329.4 2,637.4 2,219.0
Payables to unconsolidated
subsidiaries
and affiliates 35.9 34.0 21.5
Accounts payable and
accrued expenses 2,123.0 2,285.2 1,959.5
Insurance and health care claims
and reserves 774.2 761.3 691.5
Accrued taxes 132.0 80.2 99.9
Deferred income taxes 12.9 13.5 8.7
Long-term borrowings 2,101.9 2,053.9 2,292.4
Retirement benefit accruals
and other liabilities 2,337.4 2,357.8 2,343.8
Total liabilities 10,846.7 10,223.3 9,636.3
Common stock, $1 par value
(issued shares at January 31,
1995 - 86,661,548) 1,493.5 1,491.4 1,450.8
Retained earnings 1,444.9 1,353.9 970.8
Minimum pension liability
adjustment (248.4) (248.4) (215.5)
Cumulative translation adjustment (33.9) (17.9) (40.4)
Unrealized loss on marketable
securities
available for sale (10.9)
Unamortized restricted stock
compensation (11.1) (8.8) (7.1)
Common stock in treasury,
at cost (10.1) (12.3) (14.5)
Total stockholders' equity 2,624.0 2,557.9 2,144.1
Total $13,470.7 $12,781.2 $11,780.4
<PAGE>
DEERE & COMPANY
CONDENSED CONSOLIDATED BALANCE SHEET
EQUIPMENT OPERATIONS
(Deere & Company with Financial
Services on the Equity Basis)
Jan 31 Oct 31 Jan 31
Millions of dollars (Unaudited) 1995 1994 1994
Assets
Cash and short-term investments $144.5 $ 104.0 $ 144.1
Cash deposited with unconsolidated
subsidiaries 65.0
Cash and cash equivalents 209.5 104.0 144.1
Marketable securities
Receivables from unconsolidated
subsidiaries and affiliates 58.6 196.9 71.5
Dealer accounts and notes
receivable - net 3,015.6 2,939.4 2,727.8
Credit receivables - net 109.2 115.8 152.2
Other receivables 15.2
Equipment on operating
leases - net 94.9 94.3 75.0
Inventories 942.6 698.0 687.6
Property and equipment - net 1,249.1 1,281.8 1,182.3
Investments in unconsolidated
subsidiaries and affiliates 1,286.4 1,285.9 1,218.1
Intangible assets - net 266.4 266.8 278.6
Deferred income taxes 619.7 620.5 628.2
Other assets and deferred charges 101.5 91.8 110.0
Total $7,953.5 $7,710.4 $7,275.4
Liabilities and Stockholders'
Equity
Short-term borrowings $ 403.5 $ 53.8 $ 352.7
Payables to unconsolidated
subsidiaries
and affiliates 35.9 34.0 21.5
Accounts payable and
accrued expenses 1,414.1 1,617.3 1,295.9
Insurance and health care claims
and reserves
Accrued taxes 130.7 79.7 93.0
Deferred income taxes 12.9 13.5 8.7
Long-term borrowings 1,018.2 1,019.4 1,031.0
Retirement benefit accruals and
other liabilities 2,314.2 2,334.8 2,328.5
Total liabilities 5,329.5 5,152.5 5,131.3
Common stock, $1 par value
(issued shares at January 31, 1995
- 86,661,548) 1,493.5 1,491.4 1,450.8
Retained earnings 1,444.9 1,353.9 970.8
Minimum pension liability
adjustment (248.4) (248.4) (215.5)
Cumulative translation adjustment (33.9) (17.9) (40.4)
Unrealized loss on marketable
securities available for sale (10.9)
Unamortized restricted stock
compensation (11.1) (8.8) (7.1)
Common stock in treasury, at cost (10.1) (12.3) (14.5)
Total stockholders' equity 2,624.0 2,557.9 2,144.1
Total $7,953.5 $7,710.4 $7,275.4
<PAGE>
DEERE & COMPANY
CONDENSED CONSOLIDATED BALANCE SHEET
FINANCIAL SERVICES
Jan 31 Oct 31 Jan 31
Millions of dollars (Unaudited) 1995 1994 1994
Assets
Cash and short-term investments $373.6 $ 141.4 $ 200.0
Cash deposited with unconsolidated
subsidiaries
Cash and cash equivalents 373.6 141.4 200.0
Marketable securities 1,103.3 1,126.3 988.3
Receivables from unconsolidated
subsidiaries and affiliates
Dealer accounts and notes
receivable - net
Credit receivables - net 4,553.1 4,385.9 3,754.8
Other receivables 420.9 415.5 413.4
Equipment on operating
leases - net 120.6 125.2 121.9
Inventories
Property and equipment - net 33.5 32.3 26.2
Investments in unconsolidated
subsidiaries and affiliates 53.2 55.1 57.4
Intangible assets - net 16.0 16.9 18.5
Deferred income taxes 64.4 59.2 53.6
Other assets and deferred charges 89.8 88.6 70.1
Total $6,828.4 $6,446.4 $5,704.2
Liabilities and Stockholders'
Equity
Short-term borrowings $2,925.8 $2,583.5 $1,866.3
Payables to unconsolidated
subsidiaries
and affiliates 122.6 187.9 69.0
Accounts payable and accrued
expenses 709.8 668.9 664.7
Insurance and health care claims
and reserves 774.2 761.3 691.5
Accrued taxes 1.4 .5 6.8
Deferred income taxes .1
Long-term borrowings 1,083.6 1,034.5 1,261.3
Retirement benefit accruals and
other liabilities 23.2 23.0 15.4
Total liabilities 5,640.7 5,259.6 4,575.0
Common stock, $1 par value (issued shares
at January 31, 1995 -
86,661,548) 209.4 209.5 208.7
Retained earnings 995.8 980.3 922.1
Minimum pension liability adjustment
Cumulative translation adjustment (6.6) (3.0) (1.6)
Unrealized loss on marketable securities
available for sale (10.9)
Unamortized restricted stock compensation
Common stock in treasury, at cost
Total stockholders' equity 1,187.7 1,186.8 1,129.2
Total $6,828.4 $6,446.4 $5,704.2
See Notes to Interim Financial Statements. Supplemental
consolidating data are shown for
the "Equipment Operations" and "Financial Services".
Transactions between the "Equipment
Operations" and "Financial Services" have been eliminated to
arrive at the "Consolidated"
data.
<PAGE>
DEERE & COMPANY
CONDENSED STATEMENT OF CONSOLIDATED CASH FLOWS
CONSOLIDATED
(Deere & Company and
Consolidated Subsidiaries)
Three Months Ended Jan 31
Million of dollars (Unaudited) 1995 1994
Cash Flows from Operating Activities
Net income $138.4 $87.0
Adjustments to reconcile net income to
net cash provided by (used for)
operating activities (383.7) (307.3)
Net cash provided by (used for)
operating activities (245.3) (220.3)
Cash Flows from Investing Activities
Collections and sales of credit
receivables 884.3 773.9
Proceeds from sales of marketable
securities 35.4 86.2
Cost of credit receivables acquired (1,072.1) (935.3)
Purchases of marketable securities (26.0) (80.4)
Purchases of property and equipment (34.7) (31.9)
Cost of operating leases acquired (23.7) (18.3)
Other 45.2 93.2
Net cash used for investing activities (191.6) (112.6)
Cash Flows from Financing Activities
Increase (decrease) in short-term
borrowings 889.0 630.3
Change in intercompany
receivables/payables
Proceeds from long-term borrowings 90.0
Principal payments on
long-term borrowings (219.2) (259.1)
Proceeds from issuance of common stock .9 13.9
Dividends paid (47.5) (42.7)
Other (1.1) (2.5)
Net cash provided by (used for)
financing activities 712.1 339.9
Effect of Exchange Rate Changes on Cash (2.5) (1.1)
Net Increase (Decrease) in Cash and
Cash Equivalents 272.7 5.9
Cash and Cash Equivalents at
Beginning of Period 245.4 338.2
Cash and Cash Equivalents at
End of Period $ 518.1 $ 344.1
<PAGE>
DEERE & COMPANY
CONDENSED STATEMENT OF CONSOLIDATED CASH FLOWS
EQUIPMENT OPERATIONS
(Deere & Company with Financial
Services on the Equity Basis)
Three Months Ended January 31
Million of dollars (Unaudited) 1995 1994
Cash Flows from Operating Activities
Net income $138.4 $ 87.0
Adjustments to reconcile net income
to net cash provided by (used for)
operating activities (434.4) (197.0)
Net cash provided by (used for)
operating activities (296.0) (110.0)
Cash Flows from Investing Activities
Collections and sales of credit
receivables 16.3 19.0
Proceeds from sales of marketable
securities
Cost of credit receivables acquired (8.2) (55.5)
Purchases of marketable securities
Purchases of property and equipment (31.9) (29.2)
Cost of operating leases acquired (17.9) (6.1)
Other 12.1 .4
Net cash used for investing activities (29.6) (71.4)
Cash Flows from Financing Activities
Increase (decrease) in short-term
borrowings 353.3 (47.5)
Change in intercompany
receivables/payables 130.2 439.0
Proceeds from long-term borrowings
Principal payments on
long-term borrowings (2.2) (106.1)
Proceeds from issuance of
common stock .9 13.9
Dividends paid (47.5) (42.7)
Other (1.1) (2.5)
Net cash provided by (used for)
financing activities 433.6 254.1
Effect of Exchange Rate Changes on Cash (2.5) (.3)
Net Increase (Decrease) in Cash and
Cash Equivalents 105.5 72.4
Cash and Cash Equivalents at
Beginning of Period 104.0 71.7
Cash and Cash Equivalents at
End of Period $209.5 144.1
<PAGE>
DEERE & COMPANY
CONDENSED STATEMENT OF CONSOLIDATED CASH FLOWS
FINANCIAL SERVICES
Three Months Ended January 31
Million of dollars (Unaudited) 1995 1994
Cash Flows from Operating Activities
Net income $ 42.8 $ 38.6
Adjustments to reconcile net income to
net cash provided by (used for)
operating activities 35.3 14.2
Net cash provided by (used for)
operating activities 78.1 52.8
Cash Flows from Investing Activities
Collections and sales of credit receivables 868.0 759.9
Proceeds from sales of marketable securities 35.4 86.2
credit receivables acquired (1,064.0) (884.7)
Purchases of marketable securities (26.0) (80.4)
Purchases of property and equipment (2.8) (2.7)
Cost of operating leases acquired (5.8) (12.2)
Other 33.2 92.7
Net cash used for investing
activities (162.0) (41.2)
Cash Flows from Financing Activities
Increase (decrease) in short-term borrowings 535.7 677.8
Change in intercompany receivables/payables (65.3) (439.0)
Proceeds from long-term borrowings 90.0
Principal payments on long-term borrowings (217.0) (153.0)
Proceeds from issuance of common stock
Dividends paid (27.3) (163.1)
Other
Net cash provided by (used for)
financing activities 316.1 (77.3)
Effect of Exchange Rate Changes on Cash (.8)
Net Increase (Decrease) in Cash and Cash
Equivalents 232.2 (66.5)
Cash and Cash Equivalents at
Beginning of Period 141.4 266.5
Cash and Cash Equivalents at
End of Period $ 373.6 $200.0
See Notes to Interim Financial Statements. Supplemental
consolidating data are shown for the "Equipment Operations" and
"Financial Services". Transactions between the "Equipment
Operations" and "Financial Services" have been eliminated to
arrive at the "Consolidated" data.
<PAGE>
Notes to Interim Financial Statements
(1) The consolidated financial statements of Deere & Company and
consolidated subsidiaries have been prepared by the Company,
without audit, pursuant to the rules and regulations of the
Securities and Exchange Commission. Certain information and
footnote disclosures normally included in annual financial
statements prepared in accordance with generally accepted
accounting principles have been condensed or omitted as
permitted by such rules and regulations. All adjustments,
consisting of normal recurring adjustments, have been
included. Management believes that the disclosures are
adequate to present fairly the financial position, results
of operations and cash flows at the dates and for the
periods presented. It is suggested that these interim
financial statements be read in conjunction with the
financial statements and the notes thereto included in the
Company's latest annual report on Form 10-K. Results for
interim periods are not necessarily indicative of those to
be expected for the fiscal year.
(2) The Company's consolidated financial statements and some
information in the notes and related commentary are
presented in a format which includes data grouped as
follows:
Equipment Operations - These data include the Company's
agricultural equipment, industrial equipment and lawn and
grounds care equipment operations with Financial Services
reflected on the equity basis. Data relating to the above
equipment operations, including the consolidated group data
in the income statement, are also referred to as "Equipment
Operations" in this report.
Financial Services - These data include the Company's
credit, insurance and health care operations.
Consolidated - These data represent the consolidation of the
Equipment Operations and Financial Services in conformity
with Financial Accounting Standards Board (FASB) Statement
No. 94. References to "Deere & Company" or "the Company"
refer to the entire enterprise.
(3) An analysis of the Company's retained earnings follows in
millions of dollars:
Three Months Ended
January 31
1995 1994
Balance, beginning of period......... $1,353.9 $926.5
Net income........................... 138.4 87.0
Dividends declared................... (47.4) (42.7)
Balance, end of period............... $1,444.9 $970.8
<PAGE>
(4) An analysis of the cumulative translation adjustment follows
in millions of dollars:
Three Months Ended
January 31
1995 1994
Balance, beginning of period......... $17.9 $41.5
Translation adjustment............... 16.0 (1.8)
Income taxes applicable to
translation adjustments .7
Balance, end of period............... $33.9 $40.4
(5) Substantially all inventories owned by Deere & Company and
its United States equipment subsidiaries are valued at cost
on the last-in, first-out (LIFO) method. If all of the
Company's inventories had been valued on an approximate
first-in, first-out (FIFO) value, estimated inventories by
major classification in millions of dollars would have been
as follows:
January 31 October 31 January
31
1995 1994 1994
Raw materials and
supplies................ $ 224 $ 206 $ 191
Work-in-process........... 432 357 369
Finished machines and
parts................... 1,247 1,079 1,075
Total FIFO value.......... 1,903 1,642 1,635
Adjustment to LIFO
basis................... 960 944 947
Inventories............... $ 943 $ 698 $ 688
(6) At January 31, 1995, the net unpaid balance of all retail
notes
previously sold by the Financial Services subsidiaries and
the
Equipment Operations was $953 million. At January 31, 1995,
the
Company's maximum exposure under all credit receivable
recourse
provisions was $143 million for all retail notes sold.
Certain foreign subsidiaries have pledged assets with a
balance sheet value of $46 million as collateral for bank
advances of $1 million as of January 31, 1995.
At January 31, 1995, the Company had commitments of
approximately
$48 million for construction and acquisition of property and
equipment.
(7) Dividends declared and paid on a per share basis were as
follows:
Three Months Ended
January 31
1995 1994
Dividends declared................... $.55 $.50
Dividends paid....................... $.55 $.50
<PAGE>
(8) Worldwide net sales and revenues and operating profit in
millions of dollars follow:
Three Months Ended
January 31 %
1995 1994 Change
Net sales:
Agricultural equipment $1,022 $ 887 +15
Industrial equipment 408 308 +32
Lawn and grounds care
equipment* 301 212 +42
Total net sales 1,731 1,407 +23
Financial Services revenues 347 298 +16
Other revenues 28 22 +27
Total net sales and
revenues $2,106 $1,727 +22
United States and Canada:
Equipment net sales* $1,326 $1,120 +18
Financial Services
revenues 347 298 +16
Total 1,673 1,418 +18
Overseas net sales* 405 287 +41
Other revenues 28 22 +27
Total net sales and
revenues $2,106 $1,727 +22
Operating profit:
Agricultural equipment $ 115 $ 85
Industrial equipment 45 9
Lawn and grounds care
equipment 28 20
Financial Services** 70 57
Total operating profit 258 171
Interest and corporate
expenses-net (36) (36)
Income taxes (84) (48)
Net income $ 138 $ 87
* First quarter 1995 worldwide lawn and grounds care
equipment net sales, United States and Canada net sales
and
overseas net sales include $50 million, $39 million and
$11
million, respectively, of sales by Homelite, which was
acquired in the fourth quarter of 1994.
** Operating profit of Financial Services includes the
effect
of interest expense.
<PAGE>
(9) The calculation of primary net income per share is based on
the average number of shares outstanding during the three
months ended January 31, 1995 and 1994 of 86,486,000 and
85,592,000, respectively. The calculation of fully diluted
net income per share recognizes the dilutive effect of the
assumed exercise of stock options, stock appreciation rights
and conversion of convertible debentures. The effect of the
fully diluted calculation was immaterial.
(10) In February 1995, the stockholders approved an equity
incentive plan (Plan) for key employees of the Company.
Under
the Plan, up to 1,000,000 shares may be granted as
restricted
stock. The Company will establish the performance goals
and
the periods of restriction for each award, and hold the
restricted stock during the restriction period. The
employee
will receive any dividends and vote the restricted stock
during this period. No stock may be granted under this
Plan
after December 31, 2004.
In December 1994, subject to stockholder approval, the
Company
granted 66,852 shares of restricted stock under this Plan.
The market value of the restricted stock at the time of
grant
totaled $4.2 million and was recorded as unamortized
restricted stock compensation in a separate component of
stockholders' equity, which will be amortized to expense
over
the restricted period. The market value of the stock is
remeasured at the end of each reporting period with
appropriate adjustments made to the unamortized and
amortized
expense. At January 31, 1995, 312,777 restricted shares
were
outstanding and 1,311,422 shares remained available for
award
under all restricted stock plans for employees and
nonemployee
directors.
(11) In December 1994, the Company granted options to employees
for
the purchase of 841,864 shares of common stock at an
exercise
price of $63.06 per share. At January 31, 1995, options
for
2,608,773 shares were outstanding at option prices in a
range
of $23.31 to $70.69 per share. A total of 3,024,949 shares
remain available for the granting of future options.
(12) The Company is subject to various unresolved legal actions
which arise in the normal course of its business, the most
prevalent of which relate to product liability and retail
credit matters. Although it is not possible to predict
with
certainty the outcome of these unresolved legal actions or
the
range of possible loss, the Company believes these
unresolved
legal actions will not have a material effect on its
financial
position or results of operations.
(13) 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 January 31, 1995, the expected employment reductions and
the
disbursement of the $107 million accrual were both
approximately 70 percent complete.
(14) In the first quarter of 1995, the Company adopted FASB
Statement No. 115, Accounting for Certain Investments in
Debt
and Equity Securities. The Company designated
approximately
two-thirds of its debt securities as held-to-maturity with
the
remaining debt and equity securities classified as
available-
for-sale. The held-to-maturity debt securities are carried
at
cost and the available-for-sale securities are carried at
fair
value with unrealized gains and losses shown as a separate
component of stockholders' equity. Previously, the Company
valued all its securities on a cost basis. The Statement
had
an immaterial effect on stockholders' equity and no impact
on
the consolidated income statement.
(15) In January 1995, the Company's insurance subsidiaries
agreed
to sell their 3.1 million shares (43.8 percent) of Re
Capital
Corporation to Zurich Reinsurance Centre Holdings, Inc. for
$18.50 a share. The sale did not have a significant effect
on
the consolidated financial position or net income for the
first quarter of 1995.
<PAGE>
Item 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS
RESULTS OF OPERATIONS
Deere & Company's worldwide net income was $138.4 million or
$1.60
per share in the first quarter of the 1995 fiscal year compared
with
$87.0 million or $1.02 per share in the first quarter of 1994.
This
was the Company's sixth consecutive quarter of record earnings
and
the first time that earnings in the first quarter exceeded $100
million.
Worldwide net income improved by $51.4 million or approximately
60
percent compared with last year's previous record first quarter,
due
primarily to continued improvements in both overseas and domestic
operating efficiencies, combined with higher production and sales
activity. The first quarter 1995 worldwide production tonnage
was
approximately 11 percent higher than last year.
Worldwide net sales and revenues increased 22 percent to $2,106
million in the first quarter of 1995 compared with $1,727 million
last year. Net sales and revenues include net sales to dealers
of
agricultural, industrial and lawn and grounds care equipment
which
totaled $1,731 million (including $50 million of sales by
Homelite)
in the first quarter of 1995, an increase of 23 percent from
sales
of $1,407 million in the first quarter of last year. The
physical
volume of worldwide net sales to dealers increased approximately
18
percent in the first quarter this year. North American sales of
John Deere agricultural, industrial and lawn and grounds care
equipment all increased during the quarter compared with last
year.
Overseas net sales and physical volume of sales were 41 percent
and
29 percent higher, respectively, in the first quarter of 1995
compared with the same period a year ago.
The Company's worldwide Equipment Operations, which exclude the
Financial Services subsidiaries and unconsolidated affiliates,
had
income of $95.8 million in the first quarter this year compared
with
$48.0 million last year. All of the Company's equipment
businesses
generated higher operating profits for the quarter compared with
last year. The improved results generally reflect higher
production
and sales volumes and continued domestic and overseas
improvements
in operating efficiencies. The ratio of cost of goods sold to
net
sales of the Equipment Operations decreased from 80.0 percent in
the
first quarter of 1994 to 78.2 percent in the same period this
year.
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.
Additional
information on business segments is presented in Note 8 to the
interim financial statements.
On March 5, 1995, the United Auto Workers (UAW) ratified a new
agreement with the Company extending through September 30, 1997.
UAW employees have been working under the terms of the former
contract, which expired on September 30, 1994.
Net income of the Company's credit operations was $29.7 million
for
the first quarter of 1995 compared to $25.6 million last year.
The
increase in earnings primarily reflects a larger receivable and
lease portfolio and a lower provision for credit losses. Total
revenues of the credit operations increased 20 percent from $118
million in the first quarter of 1994 to $142 million in the first
quarter of 1995. The average balance of receivables and leases
financed was 20 percent higher than in the first three months of
last year. An increase in average borrowings and higher
borrowing
rates this year resulted in a 50 percent increase in interest
expense compared with the first quarter of 1994. The credit
subsidiaries' consolidated ratio of earnings to fixed charges was
1.75 to 1 during the first three months this year compared with
1.90
to 1 in the comparable period of 1994.
Net income from insurance and health care operations was $13.1
million in the first quarter of 1995 compared with $13.0 million
last year. The improvement in insurance and health care
underwriting earnings and investment income in 1995 was offset by
an
increase in the provision for income taxes primarily due to an
increase in the effective tax rate. For the three-month period,
insurance and health care premiums earned increased 17 percent in
1995 compared with the same period last year, while expenses and
the
provision for losses increased 14 percent this year.
First quarter North American retail sales of agricultural
equipment
continue to provide a strong base for operations. Near-record
United States net farm cash income in 1994 should support strong
1995 farm expenditures. Higher exports of farm commodities
should
continue to result from ratification of the General Agreement on
Tariffs and Trade, which lowers European Union export subsidies.
Higher incomes in developing countries are expected to promote
better markets for United States grains and oil seeds. Although
some uncertainty may develop during 1995 as a result of a new
pending United States farm bill, farmers have made significant
improvements in their balance sheets, which increases their
ability
to modernize their equipment lines. Additionally, the Company's
new
row-crop tractor lines have been well received by customers
throughout the world. The Company believes, on balance, these
factors will support farmers' buying confidence and, as a result,
worldwide demand for agricultural equipment will remain strong.
Similarly, the markets for the Company's other major businesses
remain healthy. The North American general economy continues to
show moderate growth, which should support strong demand for both
industrial and lawn and grounds care equipment as well as
providing
a sound basis for expansion of the Company's Financial Services
revenues.
In response to these market conditions, the Company's worldwide
Equipment Operations' production tonnage is expected to increase
by
approximately four percent in 1995 compared with 1994. North
American production tonnage is expected to increase by six
percent,
while overseas schedules are expected to decrease by four
percent.
Second quarter worldwide production tonnage is expected to
increase
by approximately seven percent compared with last year,
reflecting
continued strong retail demand coupled with the excellent initial
acceptance of the new 8000-series row-crop tractor line.
Although
certain tires remain in tight supply due to a work stoppage at
one
of the Company's key suppliers, second quarter product
availability
should not be adversely affected if promised supply dates are
met.
CAPITAL RESOURCES AND LIQUIDITY
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.
Negative cash flows from operating activities of $296 million in
the
first quarter of 1995 resulted from the normal seasonal increases
in
Company-owned inventories and dealer receivables and annual
volume
discount program payments made to dealers. Partially offsetting
these operating cash outflows were positive cash flows from net
income and dividends received from the Financial Services
operations. The resulting net cash requirement for operating
activities, along with cash required for increases in cash and
cash
equivalents, payment of dividends and purchases of property and
equipment were provided primarily from an increase in borrowings
and
a decrease in receivables from the Financial Services operations.
In the first quarter of 1994, the negative cash flows from
operating
activities of $110 million resulted from the normal seasonal
increases in Company-owned inventories, annual volume discount
program payments made to dealers and contributions to the pension
fund. Partially offsetting these operating cash outflows were
dividends received from the Financial Services operations and
positive cash flows from net income and the decline in dealer
receivables. The resulting net cash requirements for operating
activities, along with cash required for the payment of
borrowings,
increases in cash and cash equivalents, payment of dividends and
purchases of property and equipment were provided primarily from
a
decrease in receivables from the Financial Services operations.
Net dealer accounts and notes receivable, which largely represent
dealers' inventories financed by the Company, increased $76
million
during the first quarter reflecting the normal seasonal build up
and
slightly higher dealer inventories of used and pre-sold
equipment.
Dealer receivables were $288 million higher than one year ago
primarily due to a higher level of sales. North American
agricultural equipment and industrial equipment dealer
receivables
increased approximately $80 million and $35 million,
respectively,
compared with the levels 12 months earlier. North American lawn
and
grounds care dealer receivables increased approximately $100
million
compared to a year earlier, which included an additional $33
million
of Homelite receivables in 1995. Total overseas dealer
receivables
were approximately $70 million higher than a year ago, half of
which
was due to higher foreign currency exchange rates in 1995. The
ratios of worldwide net dealer accounts and notes receivable to
the
last 12 months' net sales were 38 percent at January 31, 1995, 38
percent at October 31, 1994 and 40 percent at January 31, 1994.
The
percentage of total worldwide dealer receivables outstanding for
periods exceeding 12 months was seven percent at January 31,
1995,
seven percent at October 31, 1994 and 10 percent at January 31,
1994.
Company-owned inventories at January 31, 1995 have increased by
approximately $250 million compared with the end of the previous
fiscal year and one year ago, reflecting normal seasonal
increases
as well as higher raw material and work-in-process inventories
required to produce second quarter schedules. Additionally,
certain
models of tractors were temporarily delayed in shipment to
dealers
at quarter end awaiting February tire deliveries.
Total interest-bearing debt of the Equipment Operations was
$1,422
million at January 31, 1995 compared with $1,073 million at the
end
of fiscal year 1994 and $1,384 million at January 31, 1994. The
ratio of total debt to total capital (total interest-bearing debt
and stockholders' equity) was 35 percent, 30 percent and 39
percent
at January 31, 1995, October 31, 1994 and January 31, 1994,
respectively.
Financial Services
The Financial Services' credit subsidiaries rely on their ability
to
raise substantial amounts of funds to finance their receivable
and
lease portfolios. Their primary sources of funds for this
purpose
are a combination of borrowings and equity capital.
Additionally,
the John Deere Capital Corporation (Capital Corporation), the
Company's United States credit subsidiary, periodically sells
substantial amounts of retail notes in the public market. The
insurance and health care operations generate their funds through
internal operations and have no external borrowings.
During the first quarter of 1995, the aggregate cash provided
from
operating and financing activities was used primarily to increase
credit receivables and cash and cash equivalents. Cash provided
from Financial Services operating activities was $78 million in
the
current quarter. Cash provided by financing activities totaled
$316
million in 1995, resulting from a $408 million increase in
outside
borrowings, which was partially offset by a $65 million decrease
in
payables to the Equipment Operations and payment of a $27 million
dividend to the Equipment Operations. Cash used for investing
activities totaled $162 million in the current quarter,
primarily
due to the cost of credit receivables acquired exceeding
collections. Cash and cash equivalents increased $232 million
during the first quarter.
In the first quarter of last year, $53 million of cash provided
from
operating activities and $67 million of cash and cash equivalents
were used for financing and investing activities. Cash outlays
for
financing activities totaled $77 million during the first quarter
of
1994, resulting from a $439 million decrease in payables to the
Equipment Operations and payment of a $163 million dividend to
the
Equipment Operations, which were partially offset by proceeds
from a
$525 million net increase in outside borrowings. Cash used for
investing activities totaled $41 million in the first quarter of
1994, primarily due to the cost of credit receivables acquired
exceeding collections. Other cash flows from investing
activities
increased in 1994 mainly due to collections on receivables
previously sold that were being held for payment to the trusts.
The positive cash flows from insurance and health care operations
have been primarily invested in marketable securities during the
past 12 months. However, during the first quarter of 1995, these
investments decreased due to payment of a dividend to the
Equipment
Operations and the recognition in stockholders' equity of an
unrealized loss on marketable securities which were classified as
available for sale according to FASB Statement No. 115.
Marketable
securities consist primarily of debt securities held by the
insurance and health care operations in support of their
obligations
to policyholders. During the past 12 months, marketable
securities
have increased due primarily to the continuing growth in the
insurance and health care operations.
Credit receivables increased by $167 million in the first quarter
of
1995 and $798 million during the past 12 months. These
receivables
consist of retail notes originating in connection with retail
sales
of new and used equipment by dealers of John Deere products,
retail
notes from non-Deere-related customers, revolving charge
accounts,
financing leases and wholesale notes receivable.
The credit subsidiaries' receivables increased during the last 12
months due to the cost of credit receivables acquired exceeding
collections, which was partially offset by the sale of retail
notes
during the fourth quarter of 1994. Total acquisitions of credit
receivables were 20 percent higher in the first quarter of 1995
compared with the same period last year. This significant
increase
resulted from increased acquisitions of John Deere retail notes,
revolving charge accounts and wholesale receivables. At January
31,
1995, the levels of retail notes, revolving charge accounts,
financing lease receivables and wholesale receivables were higher
than one year ago. Credit receivables administered by the credit
subsidiaries, which include receivables previously sold, amounted
to
$5,540 million at January 31, 1995 compared with $5,600 million
at
October 31, 1994 and $4,934 million at January 31, 1994. At
January
31, 1995, the unpaid balance of all retail notes previously sold
was
$952 million compared with $1,175 million at October 31, 1994 and
$1,137 million at January 31, 1994. Additional sales of retail
notes are expected to be made in the future.
Total interest-bearing debt of the credit subsidiaries was $4,009
million at January 31, 1995 compared with $3,618 million at
the end of fiscal year 1994 and $3,128 million at January 31,
1994.
Total outside borrowings increased during the first quarter of
1995
and the past 12 months, generally corresponding with the level of
the credit receivable and lease portfolio financed, the level of
cash and cash equivalents and the change in payables owed to the
Equipment Operations. The credit subsidiaries' ratio of total
interest-bearing debt to stockholder's equity was 5.7 to 1 at
January 31, 1995 compared with 5.3 to 1 at October 31, 1994 and
4.6
to 1 at January 31, 1994.
During the first quarter of 1995, the Capital Corporation retired
$150 million of 5% debentures due in 1995. The Capital
Corporation
also issued $90 million and retired $67 million of medium-term
notes
during the current quarter.
Consolidated
The parent, Deere & Company, maintains unsecured lines of credit
with various banks in North America and overseas. Some of the
lines
are available to both the Equipment Operations and certain credit
subsidiaries. Worldwide lines of credit totaled $3,332 million
at
January 31, 1995, $472 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
$2,399 million.
Stockholders' equity was $2,624 million at January 31, 1995
compared
with $2,558 million at October 31, 1994 and $2,144 million at
January 31, 1994. The increase of $66 million in the first three
months of 1995 resulted primarily from net income of $138
million,
partially offset by dividends declared of $47 million, an
increase
in the cumulative translation adjustment of $16 million and an
unrealized loss on marketable securities available for sale of
$11
million.
The Board of Directors at its meeting on February 22, 1995
declared
a quarterly dividend of 55 cents per share payable May 1, 1995 to
stockholders of record on March 31, 1995.
<PAGE>
PART II. OTHER
INFORMATION
Item 1. Legal Proceedings
See Note (12) to the Interim Financial Statements.
Item 2. Changes in Securities
None
Item 3. Defaults upon Senior Securities
None
Item 4. Submission of Matters to a Vote of Security Holders
None
Item 5. Other Information
None
Item 6. Exhibits and Reports on Form 8-K
(a) Exhibits
See the index to exhibits immediately preceding the
exhibits filed with this report.
Certain instruments relating to long-term debt
constituting less than 10% 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.
(b) Reports on Form 8-K
Current Reports on Form 8-K dated December 6, 1994
(Item 7).
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of
1934, the registrant has duly caused this report to be signed on
its behalf by the undersigned thereunto duly authorized.
DEERE & COMPANY
Date: March 13, 1995 By s/ Pierre E. Leroy
Pierre E. Leroy
Senior Vice President,
Principal Financial Officer
and Principal Accounting
Officer
<PAGE>
INDEX TO EXHIBITS
Number Page
2 Not applicable -
3 Not applicable -
4 Not applicable -
10 Not applicable -
11 Computation of net income per share 19
12 Computation of ratio of earnings to
fixed charges 20
15 Not applicable -
18 Not applicable -
19 Not applicable -
22 Not applicable -
23 Not applicable -
24 Not applicable -
27 Financial data schedule 21
99 Not applicable -
<PAGE>
Exhibit 11
DEERE & COMPANY AND
CONSOLIDATED SUBSIDIARIES
COMPUTATION OF NET INCOME
PER SHARE
(Shares and dollars in
thousands except per share amounts)
For the Three Months Ended
January 31
1995 1994
1. Net income $138,416 $87,015
2. Adjustment - Interest expense, after tax
benefit, applicable to convertible
debentures outstanding 6 15
3. Net income applicable to common stock -
before interest applicable to
convertible debentures $138,422 $87,030
PRIMARY NET INCOME PER COMMON SHARE:
Shares:
4. Weighted average number of common
shares outstanding 86,486 85,592
5. Incremental shares:
Dilutive common stock options 409 864
Dilutive stock appreciation
rights 18 66
Total incremental shares 427 930
6. Primary net income per common share
(1 divided by 4) $ 1.60 * $ 1.02 *
FULLY DILUTED NET INCOME PER COMMON SHARE:
Shares:
7. Weighted average number of common
shares outstanding 86,486 85,592
8. Incremental shares:
Dilutive common stock options 470 935
Dilutive stock appreciation rights 18 66
9. Common equivalent shares from assumed
conversion of convertible debentures:
5-1/2% debentures due 2001 19 47
10. Total 86,993 86,640
11. Fully diluted net income per common
share (3 divided by 10) 1.60 * $ 1.02
*
____________
* Net income per common share outstanding was used in the
designated calculations since the dilutive effects of common
stock options,stock appreciation rights and assumed conversion
of
convertible debentures were immaterial.
<PAGE>
EXHIBIT 12
DEERE & COMPANY AND CONSOLIDATED SUBSIDIARIES
COMPUTATION OF RATIO OF EARNINGS TO FIXED CHARGES
Three Months Ended
January 31
1995 1994
(In thousands of dollars)
Earnings:
Income (loss) of
consolidated group before
income taxes and changes in
accounting $221,427 $133,422
Dividends received from
less-than-fifty-percent
owned affiliates 373 514
Fixed charges net of
capitalized interest 90,120 72,722
Total earnings $311,920 $206,658
Fixed charges:
Interest expense of con-
solidated group (includes
capitalized interest) $ 88,432 $ 71,190
Portion of rental charges
deemed to be interest 1,752 1,532
Total fixed charges $ 90,184 $ 72,722
Ratio of earnings to
fixed charges* 3.46 2.84
<PAGE>
EXHIBIT 12
DEERE & COMPANY AND CONSOLIDATED SUBSIDIARIES
COMPUTATION OF RATIO OF EARNINGS TO FIXED CHARGES
Year Ended October 31
1994 1993
(In thousands of
dollars)
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 con-
solidated 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
<PAGE>
EXHIBIT 12
DEERE & COMPANY AND CONSOLIDATED SUBSIDIARIES
COMPUTATION OF RATIO OF EARNINGS TO FIXED CHARGES
Year Ended October 31
1992 1991 1990
(In thousands of
dollars)
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 con-
solidated 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
The computation of the ratio of earnings to fixed charges is
based on applicable amounts of the Company and its consolidated
subsidiaries plus dividends received from less-than fifty
percent
owned affiliates. "Earnings" consist of income before income
taxes, the cumulative effect of 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> <S> <C>
<ARTICLE> 5
<LEGEND>
This schedule contains summary financial information extracted
from
Form 10-Q and is qualified in its entirety by reference to such
financial statements.
</LEGEND>
<CIK> 0000315189
<NAME> DEERE&COMPANY
<MULTIPLIER> 1,000,000
<CURRENCY> U.S. DOLLARS
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> OCT-31-1995
<PERIOD-START> NOV-01-1994
<PERIOD-END> JAN-31-1995
<EXCHANGE-RATE> 1
<CASH> 518
<SECURITIES> 1,103
<RECEIVABLES> 8,205
<ALLOWANCES> 106
<INVENTORY> 943
<CURRENT-ASSETS> 0
<PP&E> 4,103
<DEPRECIATION> 2,820
<TOTAL-ASSETS> 13,471
<CURRENT-LIABILITIES> 0
<BONDS> 2,102
<COMMON> 1,494
0
0
<OTHER-SE> 1,130
<TOTAL-LIABILITY-AND-EQUITY> 13,471
<SALES> 1,731
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<CGS> 1,339
<TOTAL-COSTS> 1,576
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<INTEREST-EXPENSE> 88
<INCOME-PRETAX> 221
<INCOME-TAX> 84
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<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 138
<EPS-PRIMARY> 1.60
<EPS-DILUTED> 1.60
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