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, 1996
______________________________
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, 1996, 262,587,284 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 CONSOLIDATED
STATEMENT OF CONSOLIDATED INCOME (Deere & Company and
Consolidated Subsidiaries)
Three Months Ended
January 31
Millions of dollars except
per share amounts
(Unaudited) 1996 1995
Net Sales and Revenues
Net sales of equipment $1,936.6 $1,730.5
Finance and interest income 180.2 153.6
Insurance and health care premiums 163.4 161.8
Investment income 16.5 25.9
Other income 20.8 15.8
Total 2,317.5 2,087.6
Costs and Expenses
Cost of goods sold 1,501.2 1,349.8
Research and development expenses 80.0 67.0
Selling, administrative and
general expenses 238.4 221.6
Interest expense 98.7 88.4
Insurance and health care claims
and benefits 127.3 128.5
Other operating expenses 13.6 10.9
Total 2,059.2 1,866.2
Income of Consolidated Group
Before Income Taxes 258.3 221.4
Provision for income taxes 93.5 83.5
Income of Consolidated Group 164.8 137.9
Equity in Income of Unconsolidated
Subsidiaries and Affiliates
Credit
Insurance .7
Health care
Other 1.4 (.2)
Total 1.4 .5
Net Income $ 166.2 $ 138.4
Net income per share, primary and
fully diluted $ .63 $ .53
<PAGE>
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>
PART I. FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
DEERE & COMPANY EQUIPMENT OPERATIONS
STATEMENT OF CONSOLIDATED INCOME (Deere & Company with Financial
Services on the Equity Basis)
Three Months Ended January 31
Millions of dollars except
per share amounts
(Unaudited) 1996 1995
Net Sales and Revenues
Net sales of equipment $1,936.6 $1,730.5
Finance and interest income 30.5 23.8
Insurance and health care premiums
Investment income
Other income 5.8 6.1
Total 1,972.9 1,760.4
Costs and Expenses
Cost of goods sold 1,507.7 1,353.2
Research and development expenses 80.0 67.0
Selling, administrative and
general expenses 167.5 154.5
Interest expense 27.0 27.8
Insurance and health care claims
and benefits
Other operating expenses 6.9 5.7
Total 1,789.1 1,608.2
Income of Consolidated Group Before
Income Taxes 183.8 152.2
Provision for income taxes 67.7 56.4
Income of Consolidated Group 116.1 95.8
Equity in Income of Unconsolidated
Subsidiaries and Affiliates
Credit 34.5 29.7
Insurance 9.6 8.2
Health care 4.6 4.9
Other 1.4 (.2)
Total 50.1 42.6
Net Income $ 166.2 $ 138.4
<PAGE>
PART I. FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
DEERE & COMPANY FINANCIAL SERVICES
STATEMENT OF CONSOLIDATED INCOME
Three Months Ended
January 31
Millions of dollars except
per share amounts
(Unaudited) 1996 1995
Net Sales and Revenues
Net sales of equipment
Finance and interest income $151.4 $131.2
Insurance and health care premiums 173.5 171.6
Investment income 16.5 25.9
Other income 16.2 10.5
Total 357.6 339.2
Costs and Expenses
Cost of goods sold
Research and development expenses
Selling, administrative and
general expenses 75.3 70.6
Interest expense 73.4 62.0
Insurance and health care claims
and benefits 127.9 132.2
Other operating expenses 6.5 5.2
Total 283.1 270.0
Income of Consolidated Group Before
Income Taxes 74.5 69.2
Provision for income taxes 25.8 27.1
Income of Consolidated Group 48.7 42.1
Equity in Income of Unconsolidated
Subsidiaries and Affiliates
Credit
Insurance .7
Health care
Other
Total .7
Net Income $ 48.7 $ 42.8
<PAGE>
DEERE & COMPANY CONSOLIDATED
CONDENSED CONSOLIDATED (Deere & Company and
Consolidated Subsidiaries)
Jan 31 Oct 31 Jan 31
Millions of dollars (Unaudited) 1996 1995 1995
Assets
Cash and short-term investments $364.2 $363.7 $518.1
Cash deposited with
unconsolidated subsidiaries
Cash and cash equivalents 364.2 363.7 518.1
Marketable securities 855.7 829.7 1,103.3
Receivables from unconsolidated
subsidiaries and affiliates 4.6 2.3 .9
Dealer accounts and notes
receivable - net 3,377.6 3,259.7 3,015.6
Credit receivables - net 5,502.3 5,345.2 4,662.2
Other receivables 488.5 492.4 420.0
Equipment on operating
leases - net 271.6 258.8 215.6
Inventories 979.8 720.8 942.6
Property and equipment - net 1,294.0 1,335.6 1,282.6
Investments in unconsolidated
subsidiaries and affiliates 172.8 115.2 152.0
Intangible assets - net 315.9 305.0 282.4
Deferred income taxes 625.1 639.8 684.1
Other assets and deferred charges 194.8 179.2 191.3
Total $14,446.9 $13,847.4 $13,470.7
Liabilities and Stockholders' Equity
Short-term borrowings $3,774.4 $3,139.8 $3,329.4
Payables to unconsolidated
subsidiaries and affiliates 24.1 27.5 35.9
Accounts payable and accrued
expenses 2,234.8 2,533.0 2,123.0
Insurance and health care claims
and reserves 462.0 470.3 774.2
Accrued taxes 149.1 72.8 132.0
Deferred income taxes 16.9 15.6 12.9
Long-term borrowings 2,215.4 2,175.8 2,101.9
Retirement benefit accruals
and other liabilities 2,343.2 2,327.2 2,337.4
Total liabilities 11,219.9 10,762.0 10,846.7
Common stock, $1 par value
(issued shares at
January 31, 1996 - 263,195,184) 1,743.5 1,728.7 1,493.5
Retained earnings 1,804.2 1,690.3 1,444.9
Minimum pension liability
adjustment (300.4) (300.4) (248.4)
Cumulative translation adjustment (23.5) (11.6) (33.9)
Unrealized gain (loss) on
marketable securities 29.9 3.6 (10.9)
Unamortized restricted
stock compensation (11.6) (12.1) (11.1)
Common stock in treasury,
at cost (15.1) (13.1) (10.1)
Stockholders' equity 3,227.0 3,085.4 2,624.0
Total $14,446.9 $13,847.4 $13,470.7
See Notes to Interim Financial Statements. Supplemental
consolidating
data are shown for the "Equipment Operations" and "Financial
Services". Transactions between the "Equipment Operations" and
"Financial Services" have been eliminated to arrive at the
"Consolidated" data.
<PAGE>
DEERE & COMPANY EQUIPMENT OPERATIONS
CONDENSED CONSOLIDATED (Deere & Company with Financial
BALANCE SHEET Services on the Equity Basis)
January 31 October 31 January 31
Millions of dollars (Unaudited) 1996 1995 1995
Assets
Cash and short-term investments $ 97.3 $71.0 $ 144.5
Cash deposited with
unconsolidated subsidiaries 118.9 460.1 65.0
Cash and cash equivalents 216.2 531.1 209.5
Marketable securities
Receivables from unconsolidated
subsidiaries and affiliates 49.7 55.5 58.6
Dealer accounts and notes
receivable - net 3,377.6 3,259.7 3,015.6
Credit receivables - net 105.0 118.3 109.2
Other receivables 4.3 3.2
Equipment on operating
leases - net 120.3 119.3 94.9
Inventories 979.8 720.8 942.6
Property and equipment - net 1,249.0 1,295.0 1,249.1
Investments in unconsolidated
subsidiaries and affiliates 1,467.4 1,378.4 1,286.4
Intangible assets - net 306.6 295.4 266.4
Deferred income taxes 576.8 578.9 619.7
Other assets and deferred charges 122.9 108.5 101.5
Total $8,575.6 $8,464.1 $7,953.5
Liabilities and Stockholders' Equity
Short-term borrowings $ 615.2 $ 395.7 $403.5
Payables to unconsolidated
subsidiaries and affiliates 24.1 27.5 35.9
Accounts payable and
accrued expenses 1,531.6 1,859.9 1,414.1
Insurance and health care claims
and reserves
Accrued taxes 149.2 72.4 130.7
Deferred income taxes 15.7 15.6 12.9
Long-term borrowings 692.4 702.9 1,018.2
Retirement benefit accruals and
other liabilities 2,320.4 2,304.7 2,314.2
Total liabilities 5,348.6 5,378.7 5,329.5
<PAGE>
Common stock, $1 par value
(issued shares at
January 31, 1996 - 263,195,184) 1,743.5 1,728.7 1,493.5
Retained earnings 1,804.2 1,690.3 1,444.9
Minimum pension liability
adjustment (300.4) (300.4) (248.4)
Cumulative translation adjustment (23.5) (11.6) (33.9)
Unrealized gain (loss) on
marketable securities 29.9 3.6 (10.9)
Unamortized restricted
stock compensation (11.6) (12.1) (11.1)
Common stock in treasury,
at cost (15.1) (13.1) (10.1)
Stockholders' equity 3,227.0 3,085.4 2,624.0
Total $8,575.6 $8,464.1 $7,953.5
<PAGE>
DEERE & COMPANY FINANCIAL SERVICES
CONDENSED CONSOLIDATED
BALANCE SHEET
Jan Oct Jan
31 31 31
Millions of dollars (Unaudited) 1996 1995 1995
Assets
Cash and short-term investments $267.0 $292.7 $373.6
Cash deposited with
unconsolidated subsidiaries
Cash and cash equivalents 267.0 292.7 373.6
Marketable securities 855.7 829.7 1,103.3
Receivables from unconsolidated
subsidiaries and affiliates
Dealer accounts and notes receivable
- net
Credit receivables - net 5,397.3 5,226.9 4,553.1
Other receivables 485.2 490.2 420.9
Equipment on operating leases - net 151.3 139.5 120.6
Inventories
Property and equipment - net 45.1 40.6 33.5
Investments in unconsolidated
subsidiaries and affiliates 53.2
Intangible assets - net 9.3 9.6 16.0
Deferred income taxes 48.3 61.0 64.4
Other assets and deferred charges 71.8 70.6 89.8
Total $7,331.0 $7,160.8 $6,828.4
Liabilities and Stockholders' Equity
Short-term borrowings $3,159.3 $2,744.1 $2,925.8
Payables to unconsolidated
subsidiaries and affiliates 164.0 513.3 122.6
Accounts payable and accrued expenses 704.2 674.1 709.8
Insurance and health care claims
and reserves 462.0 470.3 774.2
Accrued taxes .3 1.4
Deferred income taxes 1.2 .1
Long-term borrowings 1,523.0 1,472.9 1,083.6
Retirement benefit accruals and
other liabilities 22.7 22.6 23.2
Total liabilities 6,036.4 5,897.6 5,640.7
<PAGE>
Common stock, $1 par value
(issued shares at
January 31, 1996 - 263,195,184) 209.4 209.4 209.4
Retained earnings 1,060.2 1,054.3 995.8
Minimum pension liability adjustment
Cumulative translation adjustment (4.9) (4.1) (6.6)
Unrealized gain (loss) on
marketable securities 29.9 3.6 (10.9)
Unamortized restricted stock compensation
Common stock in treasury, at cost
Stockholders' equity 1,294.6 1,263.2 1,187.7
Total $7,331.0 $7,160.8 $6,828.4
<PAGE>
DEERE & COMPANY CONSOLIDATED
CONDENSED STATEMENT OF (Deere & Company and
CONSOLIDATED CASH FLOWS Consolidated
Subsidiaries)
Three Months Ended
Millions of dollars (Unaudited) 1996 1995
Cash Flows from Operating Activities
Net income $166.2 $138.4
Adjustments to reconcile net income
to net cash provided by (used for)
operating activities (551.3) (383.7)
Net cash provided by
(used for) operating activities (385.1) (245.3)
Cash Flows from Investing Activities
Collections and sales of credit receivables 1,154.1 884.3
Proceeds from maturities and sales
of marketable securities 26.1 35.4
Cost of credit receivables acquired (1,318.9) (1,072.1)
Purchases of marketable securities (12.2) (26.0)
Purchases of property and equipment (39.4) (34.7)
Cost of operating leases acquired (48.5) (23.7)
Acquisitions of businesses (32.4)
Other 19.0 45.2
Net cash used for investing activities (252.2) (191.6)
Cash Flows from Financing Activities
Increase in short-term borrowings 681.1 889.0
Change in intercompany receivables/payables
Proceeds from long-term borrowings 50.0 90.0
Principal payments on long-term borrowings (49.3) (219.2)
Proceeds from issuance of common stock 11.9 .9
Dividends paid (52.4) (47.5)
Other (2.1) (1.1)
Net cash provided by financing activities 639.2 712.1
Effect of Exchange Rate Changes on Cash (1.4) (2.5)
Net Increase (Decrease) in Cash and
Cash Equivalents .5 272.7
Cash and Cash Equivalents at
Beginning of Period 363.7 245.4
Cash and Cash Equivalents at End of Period $364.2 $518.1
<PAGE>
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 EQUIPMENT OPERATIONS
CONDENSED STATEMENT OF (Deere & Company
CONSOLIDATED CASH FLOWS with Financial
Services on the
Equity Basis)
Three Months Ended
Millions of dollars (Unaudited) 1996 1995
Cash Flows from Operating Activities
Net income $ 166.2 $ 138.4
Adjustments to reconcile net income
to net cash provided by (used for)
operating activities (560.6) (434.4)
Net cash provided by (used for)
operating activities (394.4) (296.0)
Cash Flows from Investing Activities
Collections and sales of credit receivables 18.8 16.3
Proceeds from maturities and sales of
marketable securities
Cost of credit receivables acquired (4.5) (8.2)
Purchases of marketable securities
Purchases of property and equipment (33.2) (31.9)
Cost of operating leases acquired (16.0) (17.9)
Acquisitions of businesses (32.4)
Other (29.8) 12.1
Net cash used for
investing activities (97.1) (29.6)
Cash Flows from Financing Activities
Increase in short-term borrowings 213.8 353.3
Change in intercompany receivables/payables 8.1 130.2
Proceeds from long-term borrowings
Principal payments on long-term borrowings (1.3) (2.2)
Proceeds from issuance of common stock 11.9 .9
Dividends paid (52.4) (47.5)
Other (2.1) (1.1)
Net cash provided by financing
activities 178.0 433.6
Effect of Exchange Rate Changes on Cash (1.4) (2.5)
Net Increase (Decrease) in Cash and
Cash Equivalents (314.9) 105.5
Cash and Cash Equivalents at
Beginning of Period 531.1 104.0
Cash and Cash Equivalents at
End of Period $ 216.2 $ 209.5
<PAGE>
DEERE & COMPANY FINANCIAL SERVICES
CONDENSED STATEMENT OF
CONSOLIDATED CASH FLOWS
Three Months Ended
Millions of dollars (Unaudited) 1996 1995
Cash Flows from Operating Activities
Net income $48.7 $42.8
Adjustments to reconcile net income to
net cash provided by (used for)
operating activities 3.4 35.3
Net cash provided by
(used for) operating activities 52.1 78.1
Cash Flows from Investing Activities
Collections and sales of credit receivables 1,135.4 868.0
Proceeds from maturities and sales of
marketable securities 26.1 35.4
Cost of credit receivables acquired (1,314.4) 1,064.0)
Purchases of marketable securities (12.2) (26.0)
Purchases of property and equipment (6.1) (2.8)
Cost of operating leases acquired (32.5) (5.8)
Acquisitions of businesses
Other 48.7 33.2
Net cash used for investing activities (155.0) (162.0)
Cash Flows from Financing Activities
Increase in short-term borrowings 467.3 535.7
Change in intercompany receivables/payables (349.3) (65.3)
Proceeds from long-term borrowings 50.0 90.0
Principal payments on long-term borrowings (48.0) (217.0)
Proceeds from issuance of common stock
Dividends paid (42.8) (27.3)
Other
Net cash provided by financing
activities 77.2 316.1
Effect of Exchange Rate Changes on Cash
Net Increase (Decrease) in Cash and
Cash Equivalents (25.7) 232.2
Cash and Cash Equivalents at
Beginning of Period 292.7 141.4
Cash and Cash Equivalents at End of Period $ 267.0 $373.6
<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
1996 1995
Balance, beginning of period......... $1,690.3 $1,353.9
Net income........................... 166.2 138.4
Dividends declared................... (52.3) (47.4)
Balance, end of period............... $1,804.2 $1,444.9
<PAGE>
(4) An analysis of the cumulative translation adjustment follows
in millions of dollars:
Three Months Ended
January 31
1996 1995
Balance, beginning of period......... $11.6 $17.9
Translation adjustment............... 11.4 16.0
Income taxes applicable to
translation adjustments .5
Balance, end of period............... $23.5 $33.9
(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
1996 1995 1995
Raw materials and
supplies.............. $ 234 $ 223 $ 224
Work-in-process......... 412 343 432
Finished machines and
parts................. 1,342 1,100 1,247
Total FIFO value........ 1,988 1,666 1,903
Adjustment to LIFO
basis................. 1,008 945 960
Inventories............. $ 980 $ 721 $ 943
(6) At January 31, 1996, the net unpaid balance of all retail
notes previously sold by the Financial Services subsidiaries
and the Equipment Operations was $1,051 million. At January
31, 1996, the Company's maximum exposure under all credit
receivable recourse provisions was $186 million for all
retail notes sold.
Certain foreign subsidiaries have pledged assets with a
balance sheet value of $37 million as collateral for bank
advances of $1 million as of January 31, 1996.
At January 31, 1996, the Company had commitments of
approximately $64 million for construction and acquisition
of property and equipment.
(7) Dividends declared and paid on a per share basis were as
follows:
<PAGE>
Three Months Ended
January 31
1996 1995
Dividends declared................... $.20 $.18-1/3
Dividends paid....................... $.20 $.18-1/3
<PAGE>
(8) Worldwide net sales and revenues and operating profit in
millions of dollars follow:
Three Months Ended
January 31 %
1996 1995 Change
Net sales:
Agricultural equipment $1,186 $1,022 +16
Industrial equipment 443 408 + 9
Lawn and grounds care
equipment 308 301 + 2
Total net sales 1,937 1,731 +12
Financial Services revenues 347 329 + 5
Other revenues 34 28 +21
Total net sales and
revenues $2,318 $2,088 +11
United States and Canada:
Equipment net sales $1,397 $1,326 + 5
Financial Services
revenues 347 329 + 5
Total 1,744 1,655 + 5
Overseas net sales 540 405 +33
Other revenues 34 28 +21
Total net sales and
revenues $2,318 $2,088 +11
Operating profit:
Agricultural equipment $ 148 $ 115
Industrial equipment 52 45
Lawn and grounds care
equipment 21 28
Financial Services* 75 70
Total operating profit 296 258
Interest and corporate
expenses-net (37) (36)
Income taxes (93) (84)
Net income $ 166 $ 138
* Operating profit of Financial Services includes the effect
of interest expense.
(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, 1996 and 1995 of 262,229,000 and
259,457,000, respectively, on a post-split basis. On
November 15, 1995, the Company declared a three-for-one
stock split in the form of a 200 percent stock dividend
effective November 17, 1995. 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.
<PAGE>
(10) In December 1995, the Company granted options to employees
for
the purchase of 1,676,953 shares of common stock at an
exercise price of $34.13 per share. At January 31, 1996,
options for 7,723,823 shares were outstanding at option
prices
in a range of $7.77 to $34.13 per share and a total of
5,717,270 shares remained available for the granting of
future
options.
(11) On February 28, 1996, the stockholders approved an
amendment
to the 1991 John Deere Stock Option Plan which extends the
period for grants to eligible employees under the stock
option
plan to December 31, 2000 and increased by 10,500,000 on a
post-split basis the number of shares for which stock
options
and stock appreciation rights may be granted under this
plan.
The stockholders also approved an amendment to the 1989
John
Deere Restricted Stock Plan, which extends the period for
grants under this restricted stock plan for up to an
additional 10 years by extending the allowable ending date
for
restriction periods to October 31, 2009.
(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 $.34 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, 1996, the expected employment reductions and
the
disbursement of the $107 million accrual were both
approximately 85 percent complete.
(14) During November 1995, in concurrence with the adoption of
"A
Guide to Implementation of Statement 115 on Accounting for
Certain Investments in Debt and Equity Securities -
Questions
and Answers," the Company transferred all its
held-to-maturity
debt securities to the available-for-sale category.
Held-to-
maturity debt securities are carried at amortized cost.
Available-for-sale securities are carried at fair value
with
unrealized gains and losses after income taxes shown as a
separate component of stockholders' equity. The amortized
cost of these debt securities at the time of transfer was
$484
million and the unrealized gain was $29 million ($19
million
after income taxes). Although the Company's intention to
hold
a majority of its debt securities to maturity has not
changed,
the transfer was made to increase flexibility in responding
to
future changes.
<PAGE>
(15) In the first quarter of 1996, Deere & Company purchased 40
percent of Sunstate Equipment Company, which is a regional
rental equipment company based in Phoenix, Arizona. Deere
&
Company also made an additional investment in its
unconsolidated affiliate in Brazil.
(16) On February 28, 1996, the Company announced its intention
to
repurchase up to $500 million of Deere & Company common
stock.
At the Company's discretion, repurchases of common stock
will
be made from time to time in the open market and through
privately negotiated transactions. The purpose of the
stock
repurchase program is to enhance shareholder value.
(17) On February 29, 1996, the Company announced that it will
build
a new facility for the production of off-highway diesel
engines in Torreon, State of Coahuila, Mexico. The factory
is
being built to expand production capacity for the Company's
300-series diesel engines to meet future growth
opportunities.
The size of the new facility is estimated to be
approximately
400,000 to 500,000 square feet and construction will begin
in
April 1996, with initial engine production scheduled for
late
1997.
<PAGE>
Item 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS
RESULTS OF OPERATIONS
Deere & Company achieved record first quarter net income of
$166.2
million or $.63 per share, an increase of 20 percent compared
with
1995 first quarter net income of $138.4 million or $.53 per
share.
Results of both the Equipment and Financial Services Operations
improved compared with a year ago, reflecting the continued
strong
retail demand in most of the Company's major markets.
Worldwide net sales and revenues increased 11 percent to $2,318
million in the first quarter of 1996 compared with $2,088 million
last year. Net sales to dealers of agricultural, industrial and
lawn and grounds care equipment totaled $1,937 million in the
first
quarter of 1996, an increase of 12 percent from sales of $1,731
million last year. All of the equipment businesses reported
higher
net sales during the quarter compared with last year. Export
sales
from the United States continued to strengthen and totaled $308
million, a gain of 19 percent over last year's export sales of
$259
million. Additionally, overseas net sales and physical volume of
sales were 33 percent and 24 percent higher, respectively, in the
first quarter of 1996 compared with the same period a year ago.
Overall, the Company's worldwide physical volume of net sales to
dealers increased eight percent in the first quarter compared
with
last year, an increase which was slightly lower than anticipated
due
to shipping delays related to the extreme winter weather
conditions
in North America.
The Company's worldwide Equipment Operations, which exclude the
Financial Services subsidiaries and unconsolidated affiliates,
had
income of $116.1 million in the first quarter of 1996 compared
with
$95.8 million last year. Worldwide agricultural and industrial
equipment operating profits for the quarter were higher compared
with last year, primarily due to increased production and sales
volumes. Overseas results continued to improve significantly,
reflecting higher sales and production volumes as well as
continued
cost improvements. Operating profits for the lawn and grounds
care
equipment operations declined compared with last year, reflecting
higher selling and promotional expenses associated with new
products, coupled with increased returns and allowances for hand-
held products. The ratio of cost of goods sold to net sales of
the
Equipment Operations decreased from 78.2 percent in the first
quarter of 1995 to 77.8 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.
Net income of the Company's credit operations was $34.5 million
for
the first quarter of 1996 compared to $29.7 million last year.
The
increase in income resulted primarily from a larger average
receivable and lease portfolio financed, slightly offset by lower
financing spreads. Total revenues of the credit operations
increased 17 percent from $142 million in the first quarter of
1995
to $166 million in the first quarter of 1996. The average
balance
of receivables and leases financed was 19 percent higher than in
the
first three months of last year. Interest expense increased 19
percent compared with the first quarter of 1995 primarily as a
result of an increase in average borrowings. The credit
subsidiaries' consolidated ratio of earnings to fixed charges was
1.73 to 1 during the first three months this year compared with
1.75
to 1 in the comparable period of 1995.
Net income from insurance operations was $9.6 million in the
first
quarter of 1996 compared with $8.2 million last year, reflecting
improved underwriting results and a lower effective tax rate,
partially offset by lower investment income. For the three-month
period, insurance premiums increased five percent in 1996
compared
with the same period last year, while total claims, benefits, and
selling, administrative and general expenses increased one
percent
this year.
Net income from health care operations was $4.6 million in the
first
quarter of 1996 compared with $4.9 million last year. Although
managed care membership grew by 15 percent from a year ago,
health
care premiums and administrative services revenues decreased four
percent in the first three months of 1996 compared with the same
period last year due to a shift from insured to self-insured
accounts. Total claims, benefits, and selling, administrative
and
general expenses decreased four percent this year also due to the
shift from insured to self-insured business.
The high level of worldwide retail sales of John Deere
agricultural
equipment in the first quarter provides a solid base for
operations
during the remainder of the year. The continued strong worldwide
demand for agricultural commodities, coupled with lower than
anticipated harvest yields, have resulted in substantial
increases
in commodity prices. Additionally, world grain stocks, relative
to
use, are currently at the lowest levels in more than 35 years.
The
Company believes these positive conditions are maintaining
farmers'
confidence at very high levels, which should result in continued
strong demand for new and used agricultural equipment.
North American demand for John Deere industrial and lawn and
grounds
care equipment and Financial Services products also remained
strong
during the first quarter of 1996. The markets for these products
are benefiting from the positive effects of lower interest rates
and
the solid economic fundamentals of most of the markets in which
the
Company competes.
In response to these positive market conditions and based on
current
1996 production schedules, the Company's worldwide physical
volume
of sales to dealers for 1996 is expected to increase by
approximately five percent compared with 1995. During the second
quarter, the worldwide physical volume of sales is expected to
increase approximately 11 percent compared with last year.
<PAGE>
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 $394 million in
the
first quarter of 1996 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 payment of dividends, purchases of
property
and equipment, and acquisitions of businesses were provided
primarily from an increase in borrowings and a decrease in cash
and
cash equivalents.
In the first quarter of 1995, the negative cash flows from
operating
activities of $296 million 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 requirements 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.
Net dealer accounts and notes receivable, which largely represent
dealers' inventories financed by the Company, increased $118
million
during the first quarter reflecting the normal seasonal increase.
Dealer receivables were $362 million higher than one year ago
primarily due to a higher level of retail demand and higher
dealer
inventories of used equipment. The ratios of worldwide net
dealer
accounts and notes receivable to the last 12 months' net sales
were
37 percent at January 31, 1996, 37 percent at October 31, 1995
and
38 percent at January 31, 1995. North American agricultural
equipment and lawn and grounds care equipment dealer receivables
increased approximately $210 million and $65 million,
respectively,
compared with the levels 12 months earlier, while industrial
equipment dealer receivables were approximately equal to one year
ago. Total overseas dealer receivables were approximately $85
million higher than a year ago. The percentage of total
worldwide
dealer receivables outstanding for periods exceeding 12 months
was
nine percent at January 31, 1996, eight percent at October 31,
1995
and seven percent at January 31, 1995.
Company-owned inventories at January 31, 1996 have increased by
$259 million compared with the end of the previous fiscal year
and
$37 million compared to January 31, 1995, reflecting a normal
seasonal increase in the first quarter and increased sales and
production volumes from a year ago.
Total interest-bearing debt of the Equipment Operations was
$1,308
million at January 31, 1996 compared with $1,099 million at the
end
of fiscal year 1995 and $1,422 million at January 31, 1995. The
ratio of total debt to total capital (total interest-bearing debt
and stockholders' equity) was 29 percent, 26 percent and 35
percent
at January 31, 1996, October 31, 1995 and January 31, 1995,
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 credit subsidiaries periodically sell 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 1996, the aggregate cash provided
from
operating and financing activities was used primarily to increase
credit receivables. Cash provided from Financial Services
operating
activities was $52 million in the current quarter. Cash provided
by
financing activities totaled $77 million in 1996, resulting from
a
$120 million increase in total borrowings, which was partially
offset by payment of a $43 million dividend to the Equipment
Operations. Cash used for investing activities totaled $155
million
in the current quarter, primarily due to the cost of credit
receivables acquired exceeding collections. Cash and cash
equivalents decreased $26 million during the first quarter.
In the first quarter of last year, 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
first quarter of 1995. Cash provided by financing activities
totaled $316 million in 1995, resulting from a $343 million
increase
in total borrowings, which was partially offset by a $27 million
dividend to the Equipment Operations. Cash used for investing
activities totaled $162 million in 1995, primarily due to the
cost
of credit receivables acquired exceeding collections. Cash and
cash
equivalents increased $232 million during the first quarter of
last
year.
Marketable securities consist primarily of debt securities held
by
the insurance and health care operations in support of their
obligations to policyholders. During the first quarter of 1996,
marketable securities increased $26 million due to the transfer
of
debt securities from the held-to-maturity category to the
available-
for-sale category in November 1995 (see note 14) and an increase
in
the unrealized gain associated with all marketable securities.
During the past 12 months, marketable securities have decreased
$248
million primarily from the sale of the John Deere Life Insurance
Company in 1995.
Credit receivables increased by $170 million in the first quarter
of
1996 and $844 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 same period. Total acquisitions of credit receivables
were 24 percent higher in the first quarter of 1996 compared with
the same period last year. This significant increase resulted
from
increased acquisitions of retail notes, revolving charge
accounts,
leases and wholesale receivables. At January 31, 1996, the
levels
of retail notes, revolving charge accounts, leases and wholesale
receivables were all higher than one year ago. Credit
receivables
administered by the credit subsidiaries, which include
receivables
previously sold, amounted to $6,466 million at January 31, 1996
compared with $6,526 million at October 31, 1995 and $5,540
million
at January 31, 1995. At January 31, 1996, the unpaid balance of
all
retail notes previously sold was $1,051 million compared with
$1,278
million at October 31, 1995 and $952 million at January 31, 1995.
Additional sales of retail notes are expected to be made in the
future.
Total outside interest-bearing debt of the credit subsidiaries
was
$4,682 million at January 31, 1996 compared with $4,217 million
at
the end of fiscal year 1995 and $4,009 million at January 31,
1995.
Total outside borrowings increased during the first quarter of
1996
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 6.2 to 1 at
January 31, 1996 compared with 6.1 to 1 at October 31, 1995 and
5.7
to 1 at January 31, 1995.
The Capital Corporation issued $50 million and retired $48
million
of medium-term notes during the current quarter.
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 $4,138 million at January 31,
1996, $988 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 is a long-term credit agreement commitment totaling $3,500
million.
Stockholders' equity was $3,227 million at January 31, 1996
compared
with $3,085 million at October 31, 1995 and $2,624 million at
January 31, 1995. The increase of $142 million in the first
three
months of 1996 resulted primarily from net income of $166 million
and an increase in the unrealized gain on marketable securities
of
$26 million (see note 14), partially offset by dividends declared
of
$52 million.
In February 1996, the Company announced its intention to
repurchase
$500 million of Deere & Company common stock (see note 16). The
Company also announced that it will build a new 400,000 to
500,000
square foot engine production facility in Mexico (see note 17).
The Board of Directors at its meeting on February 28, 1996
declared
a quarterly dividend of 20 cents per share payable May 1, 1996 to
stockholders of record on March 31, 1996.
<PAGE>
PART II. OTHER INFORMATION
Item 1. Legal Proceedings
See Note (12) to the Interim Financial Statements.
Item 2. Changes in Securities
On November 15, 1995, the Company declared a three-for-
one stock split in the form of a 200 percent stock
dividend to stockholders of record on November 17, 1995.
Item 3. Defaults upon Senior Securities
None
Item 4. Submission of Matters to a Vote of Security Holders
A special meeting of stockholders was held on November
15, 1995. The purpose of the meeting was to approve an
amendment to Article Four of the Company's restated
Certificate of Incorporation increasing the number of
shares of stock the Company is authorized to issue from
203 million (200 million in common stock and 3 million
in preferred stock) to 609 million (600 million in
common stock and 9 million in preferred stock). The
increase in authorized shares was necessary to provide
the Company with authority to issue a sufficient number
of shares to effect a three-for-one stock split. There
were 71,753,934 votes cast for the proposal, 1,544,947
votes against the proposal and 82,905 abstentions.
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 Report on Form 8-K dated November 15, 1995 (Item
5).
Current Report on Form 8-K dated November 30, 1995 (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 6, 1996 By /s//Robert W. Lane
Robert W. Lane
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 -
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
1996 1995
1. Net income ............................. $166,244 $138,416
2. Adjustment - Interest expense, after tax
benefit, applicable to convertible
debentures outstanding.................. 5 6
3. Net income applicable to common stock -
before interest applicable to
convertible debentures.................. $166,249 $138,422
PRIMARY NET INCOME PER COMMON SHARE:
Shares:
4. Weighted average number of common
shares outstanding.................... 262,229 259,457
5. Incremental shares:
Dilutive common stock options......... 2,184 1,227
Dilutive stock appreciation rights.... 57 53
Total incremental shares............ 2,241 1,280
6. Primary net income per common share
(1 divided by 4)........................ $ .63* $ .53*
FULLY DILUTED NET INCOME PER COMMON SHARE:
Shares:
7. Weighted average number of common
shares outstanding.................... 262,229 259,457
8. Incremental shares:
Dilutive common stock options......... 2,485 1,409
Dilutive stock appreciation rights.... 61 53
9. Common equivalent shares from assumed
conversion of convertible debentures:
5-1/2% debentures due 2001.......... 52 58
10. Total............................... 264,827 260,977
11. Fully diluted net income per common
share (3 divided by 10).............. $ .63* $ .53*
____________
* 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. All share and per share amounts
have been adjusted retroactively for a three-for-one stock split
effective November 17, 1995.
EXHIBIT 12
DEERE & COMPANY AND CONSOLIDATED SUBSIDIARIES
COMPUTATION OF RATIO OF EARNINGS TO FIXED CHARGES
Three Months Ended
January 31
1996 1995
(In thousands of dollars)
Earnings:
Income (loss) of consolidated
group before income taxes and
changes in accounting $258,288 $221,427
Dividends received from
less-than-fifty-percent
owned affiliates 5,454 373
Fixed charges net of
capitalized interest 100,403 90,120
Total earnings $364,145 $311,920
Fixed charges:
Interest expense of con-
solidated group (includes
capitalized interest) $ 98,738 $ 88,432
Portion of rental charges
deemed to be interest 1,665 1,752
Total fixed charges $100,403 $ 90,184
Ratio of earnings to
fixed charges ** 3.63 3.46
<PAGE>
EXHIBIT 12
DEERE & COMPANY AND CONSOLIDATED SUBSIDIARIES
COMPUTATION OF RATIO OF EARNINGS TO FIXED CHARGES
Year Ended October 31
1995 1994
(In thousands of dollars)
Earnings:
Income (loss) of consolidated
group before income taxes and
changes in accounting $1,092,751 $ 920,920
Dividends received from
less-than-fifty-percent
owned affiliates 2,023 2,329
Fixed charges net of
capitalized interest 399,056 310,047
Total earnings $ $1,493,830 $1,233,296
Fixed charges:
Interest expense of con-
solidated group (includes
capitalized interest) $ 392,408 $ 303,080
Portion of rental charges
deemed to be interest 6,661 7,008
Total fixed charges $ 399,069 $ 310,088
Ratio of earnings to
fixed charges ** 3.74 3.98
<PAGE>
EXHIBIT 12
DEERE & COMPANY AND CONSOLIDATED SUBSIDIARIES
COMPUTATION OF RATIO OF EARNINGS TO FIXED CHARGES
Year Ended October 31
1993 1992 1991
(In thousands of dollars)
Earnings:
Income (loss) of consolidated
group before income taxes and
changes in accounting $272,345 $ 43,488 $(26,176)
Dividends received from
less-than-fifty-percent
owned affiliates 1,706 2,325 6,229
Fixed charges net of
capitalized interest 375,238 420,133 454,092
Total earnings $649,289 $465,946 $434,145
Fixed charges:
Interest expense of con-
solidated group (includes
capitalized interest) $369,325 $415,205 $451,936
Portion of rental charges
deemed to be interest 6,127 6,720 4,088
Total fixed charges $375,452 $421,925 $456,024
Ratio of earnings to
fixed charges ** 1.73 1.10 *
<PAGE>
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.
WARNING: THE EDGAR SYSTEM ENCOUNTERED ERROR(S) WHILE PROCESSING THIS SCHEDULE.
<TABLE> <S> <C>
EXHIBIT 27
DEERE & COMPANY AND CONSOLIDATED SUBSIDIARIES
FINANCIAL DATA SCHEDULE
(In millions of dollars except per share amounts)
<ARTICLE> 5
<LEGEND>
This schedule contains summary financial information extracted from
Form 10-Q and is qualified in its entirety by reference to such
financial statements.
</LEGEND>
<RESTATED>
<CIK> 0000315189
<NAME> DEERE&COMPANY
<MULTIPLIER> 1,000,000
<CURRENCY> U.S. DOLLARS
<S> <C>
<PERIOD-TYPE> 3-MOS.
<FISCAL-YEAR-END> OCT-31-1996
<PERIOD-START> NOV- 1-1995
<PERIOD-END> JAN-31-1996
<EXCHANGE-RATE> 1
<CASH> 364
<SECURITIES> 856
<RECEIVABLES> 9,486
<ALLOWANCES> 113
<INVENTORY> 980
<CURRENT-ASSETS> 0
<PP&E> 4,178
<DEPRECIATION> 2,884
<TOTAL-ASSETS> 14,447
<CURRENT-LIABILITIES> 0
<BONDS> 2,215
<COMMON> 1,743
0
0
<OTHER-SE> 1,484
<TOTAL-LIABILITY-AND-EQUITY> 14,447
<SALES> 1,937
<TOTAL-REVENUES> 2,318
<CGS> 1,501
<TOTAL-COSTS> 1,722
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 7
<INTEREST-EXPENSE> 99
<INCOME-PRETAX> 258
<INCOME-TAX> 93
<INCOME-CONTINUING> 166
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 166
<EPS-PRIMARY> .63
<EPS-DILUTED> .63
</TABLE>
