SECURITIES AND EXCHANGE COMMISSION
Washington, D. C. 20549
------------------------
FORM 10-Q
------------------------
Quarterly Report Pursuant to Section 13 or 15(d) of the
Securities Exchange Act of 1934
For the quarterly period ended July 31, 1997
--------------------------
Commission file no: 1-4121
--------------------------
DEERE & COMPANY
Delaware 36-2382580
(State of incorporation) (IRS employer identification no.)
John Deere Road
Moline, Illinois 61265
(Address of principal executive offices)
Telephone Number: (309) 765-8000
----------------------------
Indicate by check mark whether the registrant (1) has filed
all reports required to be filed by Section 13 or 15(d) of the
Securities Exchange Act of 1934 during the preceding 12 months
(or for such shorter period that the registrant was required to
file such reports), and (2) has been subject to such filing
requirements for the past 90 days. Yes x No
At July 31, 1997, 252,111,455 shares of common stock, $1 par
value, of the registrant were outstanding.
- -----------------------------------------------------------------
Page 1 of 35 Pages.
Index to Exhibits: Page 31.
<PAGE>
PART I. FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
DEERE & COMPANY CONSOLIDATED
STATEMENT OF CONSOLIDATED INCOME (Deere & Company
Three Months Ended July 31 Consolidated Subsidiaries)
Millions of dollars except per
share amounts Three Months Ended
(Unaudited) July 31
1997 1996
Net Sales and Revenues
Net sales of equipment $2,992.6 $2,516.1
Finance and interest income 224.5 187.8
Insurance and health care premiums 166.6 160.8
Investment income 16.8 16.1
Other income 29.8 23.8
Total 3,430.3 2,904.6
Costs and Expenses
Cost of goods sold 2,311.5 1,958.3
Research and development expenses 99.5 91.6
Selling, administrative and general
expenses 335.3 297.8
Interest expense 111.0 99.5
Insurance and health care claims
and benefits 155.6 121.0
Other operating expenses 17.8 19.0
Total 3,030.7 2,587.2
Income of Consolidated Group
Before Income Taxes 399.6 317.4
Provision for income taxes 151.4 116.2
Income of Consolidated Group 248.2 201.2
Equity in Income (Loss) of Unconsolidated
Subsidiaries and Affiliates
Credit (.3)
Insurance
Health care
Other 4.8 3.2
Total 4.5 3.2
Net Income $ 252.7 $ 204.4
Net income per share, primary and
fully diluted $ 1.00 $ .79
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 2
<PAGE>
PART I. FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
DEERE & COMPANY EQUIPMENT OPERATIONS
STATEMENT OF CONSOLIDATED INCOME (Deere & Company with
Financial Services on the
Three Months Ended July 31 Equity Basis)
Millions of dollars except per
share amounts Three Months Ended
(Unaudited) July 31
1997 1996
Net Sales and Revenues
Net sales of equipment $2,992.6 $2,516.1
Finance and interest income 26.7 26.5
Insurance and health care premiums
Investment income
Other income 12.7 11.5
Total 3,032.0 2,554.1
Costs and Expenses
Cost of goods sold 2,317.4 1,966.2
Research and development expenses 99.5 91.6
Selling, administrative and general
expenses 236.8 217.0
Interest expense 20.4 26.8
Insurance and health care claims
and benefits
Other operating expenses (.3) 9.6
Total 2,673.8 2,311.2
Income of Consolidated Group
Before Income Taxes 358.2 242.9
Provision for income taxes 137.1 89.8
Income of Consolidated Group 221.1 153.1
Equity in Income (Loss) of Unconsolidated
Subsidiaries and Affiliates
Credit 41.6 35.3
Insurance 6.6 8.0
Health care (21.4) 4.8
Other 4.8 3.2
Total 31.6 51.3
Net Income $ 252.7 $ 204.4
Page 3
<PAGE>
PART I. FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
DEERE & COMPANY FINANCIAL SERVICES
STATEMENT OF CONSOLIDATED INCOME
Three Months Ended July 31
Millions of dollars except per
share amounts Three Months Ended
(Unaudited) July 31
1997 1996
Net Sales and Revenues
Net sales of equipment
Finance and interest income $199.3 $161.9
Insurance and health care premiums 174.7 171.6
Investment income 16.8 16.1
Other income 18.0 13.4
Total 408.8 363.0
Costs and Expenses
Cost of goods sold
Research and development expenses
Selling, administrative and general
expenses 99.7 83.8
Interest expense 92.1 73.6
Insurance and health care claims
and benefits 157.4 121.6
Other operating expenses 18.1 9.4
Total 367.3 288.4
Income of Consolidated Group
Before Income Taxes 41.5 74.6
Provision for income taxes 14.4 26.5
Income of Consolidated Group 27.1 48.1
Equity in Income (Loss) of Unconsolidated
Subsidiaries and Affiliates
Credit (.3)
Insurance
Health care
Other
Total (.3)
Net Income $ 26.8 $ 48.1
Page 4
<PAGE>
DEERE & COMPANY CONSOLIDATED
STATEMENT OF CONSOLIDATED INCOME (Deere & Company and
Nine Months Ended July 31 Consolidated Subsidiaries)
Millions of dollars except per
share amounts Nine Months Ended
(Unaudited) July 31
1997 1996
Net Sales and Revenues
Net sales of equipment $8,102.8 $7,152.4
Finance and interest income 622.7 553.1
Insurance and health care premiums 499.8 486.5
Investment income 48.6 50.3
Other income 73.4 68.5
Total 9,347.3 8,310.8
Costs and Expenses
Cost of goods sold 6,160.5 5,504.5
Research and development expenses 292.5 268.7
Selling, administrative and general
expenses 932.8 818.5
Interest expense 309.5 301.7
Insurance and health care claims
and benefits 407.1 373.6
Other operating expenses 52.2 42.6
Total 8,154.6 7,309.6
Income of Consolidated Group Before
Income Taxes 1,192.7 1,001.2
Provision for income taxes 446.3 365.4
Income of Consolidated Group 746.4 635.8
Equity in Income (Loss) of Unconsolidated
Subsidiaries and Affiliates
Credit (1.1)
Insurance
Health care
Other 3.5 7.6
Total 2.4 7.6
Net Income $ 748.8 $ 643.4
Net income per share, primary and
fully diluted $ 2.94 $ 2.46
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 5
<PAGE>
DEERE & COMPANY EQUIPMENT OPERATIONS
STATEMENT OF CONSOLIDATED INCOME (Deere & Company with
Financial Services on
Nine Months Ended July 31 the Equity Basis)
Millions of dollars except per
share amounts Nine Months Ended
(Unaudited) July 31
1997 1996
Net Sales and Revenues
Net sales of equipment $8,102.8 $7,152.4
Finance and interest income 81.2 84.5
Insurance and health care premiums
Investment income
Other income 33.2 19.1
Total 8,217.2 7,256.0
Costs and Expenses
Cost of goods sold 6,175.1 5,524.9
Research and development expenses 292.5 268.7
Selling, administrative and general
expenses 662.4 586.4
Interest expense 62.4 85.4
Insurance and health care claims
and benefits
Other operating expenses 3.7 18.8
Total 7,196.1 6,484.2
Income of Consolidated Group Before
Income Taxes 1,021.1 771.8
Provision for income taxes 386.0 285.2
Income of Consolidated Group 635.1 486.6
Equity in Income (Loss) of Unconsolidated
Subsidiaries and Affiliates
Credit 106.1 109.7
Insurance 23.7 26.3
Health care (19.6) 13.2
Other 3.5 7.6
Total 113.7 156.8
Net Income $ 748.8 $ 643.4
Page 6
<PAGE>
DEERE & COMPANY FINANCIAL SERVICES
STATEMENT OF CONSOLIDATED INCOME
Nine Months Ended July 31
Millions of dollars except per
share amounts Nine Months Ended
(Unaudited) July 31
1997 1996
Net Sales and Revenues
Net sales of equipment
Finance and interest income $ 545.1 $ 473.4
Insurance and health care premiums 523.9 516.2
Investment income 48.6 50.3
Other income 43.1 51.9
Total 1,160.7 1,091.8
Costs and Expenses
Cost of goods sold
Research and development expenses
Selling, administrative and general
expenses 278.1 241.5
Interest expense 250.7 221.2
Insurance and health care claims
and benefits 411.8 376.1
Other operating expenses 48.5 23.6
Total 989.1 862.4
Income of Consolidated Group Before
Income Taxes 171.6 229.4
Provision for income taxes 60.3 80.2
Income of Consolidated Group 111.3 149.2
Equity in Income (Loss) of Unconsolidated
Subsidiaries and Affiliates
Credit (1.1)
Insurance
Health care
Other
Total (1.1)
Net Income $ 110.2 $ 149.2
Page 7
<PAGE>
DEERE & COMPANY CONSOLIDATED
CONDENSED CONSOLIDATED BALANCE SHEET (Deere & Company and
Consolidated Subsidiaries)
Jul 31 Oct 31 Jul 31
Millions of dollars (Unaudited) 1997 1996 1996
Assets
Cash and short-term investments $ 250.1 $ 291.5 $ 301.2
Cash deposited with
unconsolidated subsidiaries
Cash and cash equivalents 250.1 291.5 301.2
Marketable securities 868.1 869.4 848.2
Receivables from unconsolidated
subsidiaries and affiliates 10.7 13.1 12.0
Trade accounts and notes
receivable - net 3,512.7 3,152.7 3,503.7
Financing receivables - net 6,431.0 5,912.2 5,782.1
Other receivables 438.0 549.6 485.1
Equipment on operating
leases - net 630.4 429.8 375.7
Inventories 1,170.8 828.9 941.3
Property and equipment - net 1,365.8 1,351.7 1,275.9
Investments in unconsolidated
subsidiaries and affiliates 138.5 127.4 160.4
Intangible assets - net 292.4 285.9 321.3
Deferred income taxes 643.3 653.0 634.2
Other assets and
deferred charges 198.3 187.5 174.8
Total $15,950.1 $14,652.7 $14,815.9
Liabilities and Stockholders' Equity
Short-term borrowings $ 3,796.6 $ 3,144.1 $ 3,958.0
Payables to unconsolidated
subsidiaries and affiliates 44.3 27.6 25.0
Accounts payable and
accrued expenses 2,619.0 2,676.2 2,477.3
Insurance and health care
claims and reserves 413.7 437.6 447.5
Accrued taxes 140.9 132.4 76.2
Deferred income taxes 10.3 9.4 15.9
Long-term borrowings 2,905.5 2,425.4 2,098.8
Retirement benefit accruals
and other liabilities 2,175.9 2,242.8 2,320.6
Total liabilities 12,106.2 11,095.5 11,419.3
Common stock, $1 par value
(issued shares at
July 31, 1997 - 263,849,303) 1,760.7 1,770.1 1,756.7
Retained earnings 2,890.6 2,299.5 2,177.4
Minimum pension liability
adjustment (235.4) (235.4) (300.4)
Cumulative translation adjustment (62.2) (14.0) (13.1)
Unrealized gain on
marketable securities 21.1 14.0 7.3
Unamortized restricted
stock compensation (21.5) (11.1) (11.2)
Common stock in treasury,
at cost (509.4) (265.9) (220.1)
Stockholders' equity 3,843.9 3,557.2 3,396.6
Total $15,950.1 $14,652.7 $14,815.9
See Notes to Interim Financial Statements. Supplemental
consolidating data are shown for the "Equipment Operations" and
"Financial Services". Transactions between the "Equipment
Operations" and "Financial Services" have been eliminated to
arrive at the "Consolidated" data.
Page 8
<PAGE>
DEERE & COMPANY EQUIPMENT OPERATIONS
CONDENSED CONSOLIDATED BALANCE SHEET (Deere & Company with
Financial Services on
the Equity Basis)
Jul 31 Oct 31 Jul 31
Millions of dollars (Unaudited) 1997 1996 1996
Assets
Cash and short-term investments $ 52.3 $ 80.0 $ 91.0
Cash deposited with unconsolidated
subsidiaries 123.6 544.8 134.2
Cash and cash equivalents 175.9 624.8 225.2
Marketable securities
Receivables from unconsolidated
subsidiaries and affiliates 132.0 105.3 25.9
Trade accounts and notes
receivable - net 3,512.7 3,152.7 3,503.7
Financing receivables - net 79.7 103.4 96.7
Other receivables 56.6 8.0
Equipment on operating
leases - net 170.5 152.9 134.9
Inventories 1,170.8 828.9 941.3
Property and equipment - net 1,317.2 1,301.3 1,227.2
Investments in unconsolidated
subsidiaries and affiliates 1,476.4 1,445.3 1,463.2
Intangible assets - net 282.7 276.3 311.2
Deferred income taxes 593.3 603.2 576.7
Other assets and deferred charges 131.0 117.4 109.0
Total $9,042.2 $8,768.1 $8,623.0
Liabilities and Stockholders' Equity
Short-term borrowings $ 401.5 $ 223.6 $ 358.7
Payables to unconsolidated
subsidiaries and affiliates 44.3 27.6 25.3
Accounts payable and accrued
expenses 1,909.0 1,975.1 1,803.8
Insurance and health care
claims and reserves
Accrued taxes 134.8 130.3 72.4
Deferred income taxes 10.0 9.4 15.9
Long-term borrowings 551.8 625.9 653.1
Retirement benefit accruals
and other liabilities 2,146.9 2,219.0 2,297.2
Total liabilities 5,198.3 5,210.9 5,226.4
Common stock, $1 par value
(issued shares at
July 31, 1997 - 263,849,303) 1,760.7 1,770.1 1,756.7
Retained earnings 2,890.6 2,299.5 2,177.4
Minimum pension liability
adjustment (235.4) (235.4) (300.4)
Cumulative translation adjustment (62.2) (14.0) (13.1)
Unrealized gain on marketable
securities 21.1 14.0 7.3
Unamortized restricted stock
compensation (21.5) (11.1) (11.2)
Common stock in treasury, at cost (509.4) (265.9) (220.1)
Stockholders' equity 3,843.9 3,557.2 3,396.6
Total $9,042.2 $8,768.1 $8,623.0
Page 9
<PAGE>
DEERE & COMPANY FINANCIAL SERVICES
CONDENSED CONSOLIDATED BALANCE SHEET
Jul 31 Oct 31 Jul 31
Millions of dollars (Unaudited) 1997 1996 1996
Assets
Cash and short-term investments $ 197.8 $ 211.6 $ 210.2
Cash deposited with
unconsolidated subsidiaries
Cash and cash equivalents 197.8 211.6 210.2
Marketable securities 868.1 869.4 848.2
Receivables from unconsolidated
subsidiaries and affiliates .3
Trade accounts and notes
receivable - net
Financing receivables - net 6,351.3 5,808.8 5,685.4
Other receivables 438.0 492.9 478.0
Equipment on operating leases - net 459.9 276.8 240.8
Inventories
Property and equipment - net 48.6 50.4 48.7
Investments in unconsolidated
subsidiaries and affiliates 8.5 6.3
Intangible assets - net 9.7 9.7 10.1
Deferred income taxes 50.0 49.7 57.6
Other assets and deferred charges 67.3 70.2 65.8
Total $8,499.2 $7,845.8 $7,645.1
Liabilities and Stockholders' Equity
Short-term borrowings $3,395.1 $2,920.6 $3,599.3
Payables to unconsolidated
subsidiaries and affiliates 245.0 637.0 148.1
Accounts payable and accrued
expenses 710.0 701.1 674.6
Insurance and health care
claims and reserves 413.7 437.6 447.5
Accrued taxes 6.1 2.1 3.7
Deferred income taxes .3
Long-term borrowings 2,353.7 1,799.5 1,445.7
Retirement benefit accruals
and other liabilities 28.9 23.7 23.4
Total liabilities 7,152.8 6,521.6 6,342.3
Common stock, $1 par value
(issued shares at
July 31, 1997 - 263,849,303) 238.4 209.4 209.4
Retained earnings 1,091.6 1,103.2 1,090.7
Minimum pension liability
adjustment
Cumulative translation
adjustment (4.7) (2.4) (4.6)
Unrealized gain on marketable
securities 21.1 14.0 7.3
Unamortized restricted stock
compensation
Common stock in treasury, at cost
Stockholders' equity 1,346.4 1,324.2 1,302.8
Total $8,499.2 $7,845.8 $7,645.1
Page 10
<PAGE>
DEERE & COMPANY CONSOLIDATED
CONDENSED STATEMENT OF CONSOLIDATED CASH FLOWS (Deere & Company
and
Nine Months Ended July 31 Consolidated Subsidiaries)
Nine Months Ended July 31
Millions of dollars (Unaudited) 1997 1996
Cash Flows from Operating Activities
Net income $ 748.8 $ 643.4
Adjustments to reconcile net income to
net cash provided by operating activities (447.8) (279.2)
Net cash provided by
operating activities 301.0 364.2
Cash Flows from Investing Activities
Collections and sales of
financing receivables 4,468.4 3,810.4
Proceeds from maturities and
sales of marketable securities 114.3 86.6
Cost of financing receivables acquired (4,981.0) (4,253.7)
Purchases of marketable securities (102.9) (99.0)
Purchases of property and equipment (271.8) (150.8)
Cost of operating leases acquired (332.6) (216.7)
Acquisitions of businesses (36.9) (64.2)
Other 83.0 59.0
Net cash used for investing activities (1,059.5) (828.4)
Cash Flows from Financing Activities
Increase in short-term borrowings 949.7 644.2
Change in intercompany receivables/payables
Proceeds from long-term borrowings 885.0 550.0
Principal payments on long-term borrowings (678.5) (450.0)
Proceeds from issuance of common stock 31.4 34.6
Repurchases of common stock (310.9) (218.8)
Dividends paid (153.7) (157.4)
Other (.6) (.1)
Net cash provided by (used for)
financing activities 722.4 402.5
Effect of Exchange Rate Changes on Cash (5.3) (.8)
Net Decrease in Cash and Cash Equivalents (41.4) (62.5)
Cash and Cash Equivalents at
Beginning of Period 291.5 363.7
Cash and Cash Equivalents at End of Period $ 250.1 $ 301.2
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 11
<PAGE>
DEERE & COMPANY EQUIPMENT OPERATIONS
CONDENSED STATEMENT OF CONSOLIDATED CASH FLOWS (Deere & Company
Nine Months Ended July 31 with Financial
Services on
Millions of dollars (Unaudited) the Equity Basis)
Nine Months Ended
July 31
1997 1996
Cash Flows from Operating Activities
Net income $ 748.8 $ 643.4
Adjustments to reconcile net income to net cash
provided by operating activities (535.9) (360.9)
Net cash provided by operating activities 212.9 282.5
Cash Flows from Investing Activities
Collections and sales of financing receivables 48.1 49.0
Proceeds from maturities and sales of
marketable securities
Cost of financing receivables acquired (24.4) (26.2)
Purchases of marketable securities
Purchases of property and equipment (264.7) (136.2)
Cost of operating leases acquired (63.9) (51.5)
Acquisitions of businesses (33.2) (64.2)
Other 25.3 30.4
Net cash used for investing activities (312.8) (198.7)
Cash Flows from Financing Activities
Increase in short-term borrowings 220.1 220.2
Change in intercompany receivables/payables (29.1) 39.6
Proceeds from long-term borrowings
Principal payments on long-term borrowings (101.0) (307.0)
Proceeds from issuance of common stock 31.4 34.6
Repurchases of common stock (310.9) (218.8)
Dividends paid (153.7) (157.4)
Other (.6) (.1)
Net cash provided by (used for)
financing activities (343.8) (388.9)
Effect of Exchange Rate Changes on Cash (5.2) (.8)
Net Decrease in Cash and Cash Equivalents (448.9) (305.9)
Cash and Cash Equivalents at
Beginning of Period 624.8 531.1
Cash and Cash Equivalents at End of Period $ 175.9 $ 225.2
Page 12
<PAGE>
DEERE & COMPANY FINANCIAL SERVICES
CONDENSED STATEMENT OF CONSOLIDATED CASH FLOWS
Nine Months Ended July 31
Nine Months Ended
Millions of dollars (Unaudited) July 31
1997 1996
Cash Flows from Operating Activities
Net income $ 110.2 $ 149.2
Adjustments to reconcile net income to
net cash provided by operating activities 99.7 45.4
Net cash provided by
operating activities 209.9 194.6
Cash Flows from Investing Activities
Collections and sales of
financing receivables 4,420.3 3,761.4
Proceeds from maturities and
sales of marketable securities 114.3 86.6
Cost of financing receivables acquired (4,956.6) (4,227.5)
Purchases of marketable securities (102.9) (99.0)
Purchases of property and equipment (7.2) (14.6)
Cost of operating leases acquired (268.8) (165.2)
Acquisitions of businesses (3.7)
Other 28.9 28.5
Net cash used for investing activities (775.7) (629.8)
Cash Flows from Financing Activities
Increase in short-term borrowings 729.6 423.9
Change in intercompany receivables/payables (392.1) (365.4)
Proceeds from long-term borrowings 885.0 550.0
Principal payments on long-term borrowings (577.5) (143.0)
Proceeds from issuance of common stock 29.0
Repurchases of common stock
Dividends paid (121.8) (112.8)
Other
Net cash provided by (used for)
financing activities 552.2 352.7
Effect of Exchange Rate Changes on Cash (.2)
Net Decrease in Cash and Cash Equivalents (13.8) (82.5)
Cash and Cash Equivalents at
Beginning of Period 211.6 292.7
Cash and Cash Equivalents at End of Period $ 197.8 $ 210.2
Page 13
<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.
The preparation of financial statements in conformity with
generally accepted accounting principles requires management to
make estimates and assumptions that affect the reported amounts
and related disclosures. Actual results could differ from those
estimates.
(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, construction equipment and commercial and
consumer 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.
Page 14
<PAGE>
(3) An analysis of the Company's retained earnings follows in
millions of dollars:
Three Months Nine Months
Ended Ended
July 31 July 31
Balance, beginning 1997 1996 1997 1996
of period $2,694.0 2,024.5 $2,299.5 $1,690.3
Net income 252.7 204.4 748.8 643.4
Dividends declared (50.6) (51.5) (152.2) (156.3)
Other (5.5) (5.5)
Balance, end of
period) $2,890.6 $2,177.4 $2,890.6 $2,177.4
(4) An analysis of the cumulative translation adjustment in
millions of dollars follows:
Three Months Nine Months
Ended Ended
July 31 July 31
Balance, beginning 1997 1996 1997 1996
of period $(48.8) $(19.6) $(14.0) $(11.6)
Translation adjustment (13.5) 6.8 (42.7) (.3)
Income taxes applicable
to translation
adjustments .1 (.3) (5.5) (1.2)
Balance, end of period $(62.2) $(13.1) $(62.2) $(13.1)
(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 a "first-in, first-out" (FIFO)
method, estimated inventories by major classification in millions
of dollars would have been as follows:
Jul 31 Oct 31 Jul 31
1997 1996 1996
Raw materials and supplies $ 215 $ 228 $ 208
Work-in-process 441 397 403
Finished machines and parts 1,527 1,232 1,323
Total FIFO value 2,183 1,857 1,934
Adjustment to LIFO basis 1,012 1,028 993
Inventories $1,171 $ 829 $ 941
Page 15
<PAGE>
(6) During the first nine months of 1997, the Financial Services
subsidiaries and the Equipment Operations received proceeds from
the sale of retail notes of $565 million. At July 31, 1997, the
net unpaid balance of all retail notes previously sold by the
Financial Services subsidiaries and the Equipment Operations was
$1,288 million. At July 31, 1997, the Company's maximum exposure
under all financing receivable recourse provisions was $157
million for all retail notes sold.
Certain foreign subsidiaries have pledged assets with a balance
sheet value of $27 million as collateral for bank borrowings as
of July 31, 1997. At July 31, 1997, the Company had commitments
of approximately $173 million for construction and acquisition of
property and equipment.
Page 16
<PAGE>
(7) Worldwide net sales and revenues and operating profit in
millions of dollars follow:
Three Months Ended Nine Months Ended
July 31 % July 31 %
1997 1996 Chng 1997 1996 Chng
Net Sales:
Agricultural equipment $1,907 $1,612 + 18 $5,128 $4,437 +16
Construction equipment 579 496 + 17 1,631 1,454 +12
Commercial and consumer
equipment 507 408 + 24 1,344 1,261 + 7
Total net sales 2,993 2,516 + 19 8,103 7,152 +13
Financial Services
revenues 400 352 + 14 1,135 1,059 + 7
Other revenues 37 37 109 100 + 9
Total net sales and
revenues $3,430 $2,905 + 18 $9,347 $8,311 +12
United States and Canada:
Equipment net sales $2,113 $1,691 + 25 $5,748 $5,050 +14
Financial Services
revenues 400 352 + 14 1,135 1,059 + 7
Total 2,513 2,043 + 23 6,883 6,109 +13
Overseas net sales 880 825 + 7 2,355 2,102 +12
Other revenues 37 37 109 100 + 9
Total net sales and
revenues $3,430 $2,905 + 18 $9,347 $8,311 +12
Operating profit*:
Agricultural equipment $ 279 $ 216 + 29 $ 813 $ 619 +31
Construction equipment 60 53 + 13 175 153 +14
Commercial and consumer
equipment 45 15 +200 107 117 - 9
Equipment Operations 384 284 + 35 1,095 889 +23
Financial Services 41 75 - 45 171 229 -25
Total operating profit 425 359 + 18 1,266 1,118 +13
Interest and corporate
expenses-net (21) (39) - 46 (71) (110) -35
Income taxes (151) (116) + 30 (446) (365) +22
Net income $ 253 $ 204 + 24 $ 749 $ 643 +16
* 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 Financial
Services which includes the effect of interest expense.
Page 17
<PAGE>
(8) Dividends declared and paid on a per share basis were as
follows:
Three Months Nine Months
Ended Ended
July 31 July 31
1997 1996 1997 1996
Dividends declared $.20 $.20 $.60 $.60
Dividends paid $.20 $.20 $.60 $.60
(9) The calculation of primary net income per share is based on
the average number of shares outstanding during the nine months
ended July 31, 1997 and 1996 of 254,530,000 and 261,341,000,
respectively. The calculation of fully diluted net income per
share recognizes the dilutive effect of the assumed exercise of
stock options, stock appreciation rights, contingent shares and
conversion of convertible debentures. The effect of the fully
diluted calculation was immaterial.
(10) 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, retail credit
matters and patent and trademark 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.
(11) In February 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. During the first nine months of 1997,
the Company repurchased $234 million of common stock related to
this program and $77 million of common stock for ongoing stock
option and restricted stock plans. At July 31, 1997, the Company
had repurchased a total of $434 million (including commissions)
of common stock related to the stock repurchase program.
(12) In the first quarter of 1997, the Company adopted FASB
Statement No. 121, Accounting for the Impairment of Long-Lived
Assets and for Long-Lived Assets to Be Disposed Of. The adoption
of this Statement had no effect on the Company's financial
position or results of operations. In the first quarter of 1997,
the Company adopted FASB Statement No. 123, Accounting for Stock-
Based Compensation. The Company retained the intrinsic value
method of Accounting Principles Board Opinion No. 25, Accounting
for Stock Issued to Employees, and, therefore, the new standard
had no effect on the Company's financial position or results
Page 18
<PAGE>
of operations. In the first quarter of 1997, the Company adopted
FASB Statement No. 125, Accounting for Transfers and Servicing of
Financial Assets and Extinguishments of Liabilities. The
adoption of this Statement had no effect on the Company's
financial position or results of operations.
(13) In February 1997, the FASB issued Statement No. 128,
Earnings per Share, which the Company will adopt in fiscal year
1998. This Statement will have no effect on the Company's
primary net income per share and an insignificant effect on
diluted net income per share.
(14) In May 1997, Deere & Company acquired the assets of
Maschinenfabrik Kemper GmbH for $36 million. Kemper is a leading
European producer of specialized corn headers for self-propelled
forage harvesters, based in Stadtlohn, Germany. In May 1997,
Deere & Company also agreed to invest $13 million over the next
few years to reach a 60 percent ownership interest in a combine
factory in China.
Page 19
<PAGE>
Item 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS
RESULTS OF OPERATIONS
Deere & Company achieved record third quarter worldwide net
income of $252.7 million or $1.00 per share, an increase of 27
percent in earnings per share compared with $204.4 million or
$.79 per share in the third quarter of 1996. Net income for the
first nine months was $748.8 million or $2.94 per share compared
with $643.4 million or $2.46 per share last year. The higher
profits resulted from strong worldwide retail demand for the
Company's products, especially tractors and combines. Operating
margins also continued at historically strong levels, reflecting
the results of the Company's continuous improvement and quality
initiatives. Net income for the first nine months increased 16
percent compared with last year, while net income per share
increased 20 percent due to the Company's previously announced
share repurchase program.
Worldwide net sales and revenues increased 18 percent to $3,430
million for the third quarter and 12 percent to $9,347 million
for the first nine months of 1997 compared with $2,905 million
and $8,311 million, respectively, last year. Of these amounts,
sales of agricultural, construction and commercial and consumer
equipment were up 19 percent for the current quarter and 13
percent for the first nine months of 1997. International demand
continued to be strong, with export sales from the United States
totaling $585 million for the quarter and $1,524 million year-to-
date compared to $495 million and $1,219 million for the same
periods last year. Additionally, overseas sales also increased,
rising by seven percent over last year's strong third quarter
levels and 12 percent for the first nine months compared with a
year ago. Overseas physical volume of sales (excluding the sales
by the newly consolidated Mexican subsidiaries) increased 14
percent year-to-date compared with last year. Overall, the
Company's physical volume of sales (excluding Mexico) increased
12 percent for the first nine months of 1997 compared to last
year reflecting strong worldwide demand for our products,
including shipments to the former Soviet Union.
The Company's worldwide Equipment Operations, which exclude the
Financial Services subsidiaries and unconsolidated affiliates,
had net income of $221.1 million for the third quarter and $635.1
million for the first nine months of 1997 compared with $153.1
million and $486.6 million for the same periods last year.
Worldwide equipment operating profit increased to $384 million or
13 percent of net sales for the quarter and to $1,095 million or
14 percent of net sales for the first nine months of 1997
compared with $284 million or 11 percent of net sales for the
quarter and $889 million or 12 percent of net sales for the first
nine months of last year. Worldwide agricultural equipment
operating profit increased 29 percent to $279 million for the
quarter and 31 percent to $813 million for the first nine months
Page 20
<PAGE>
compared with $216 million and $619 million, respectively, last
year, reflecting higher production and sales volumes and improved
operating efficiencies. Worldwide construction equipment
operating profit totaled $60 million in the quarter and $175
million year-to-date compared with $53 million and $153 million,
respectively, last year, reflecting higher sales and improved
operating efficiencies, partially offset by start-up expenses
primarily at the new Torreon engine facility. Worldwide
commercial and consumer equipment operating profit totaled $45
million for the quarter and $107 million year-to-date compared
with last year's $15 million and $117 million, respectively. The
improvement in quarterly earnings was due primarily to higher
shipments resulting from strong demand coupled with the impact
from the division's continuing asset control program, which
focuses on providing products closer to the required customer
delivery dates. Year-to-date results were lower compared with
last year reflecting higher growth expenditures and costs
associated with the discontinuation of the electric start string
trimmer line recorded during the second quarter of 1997, which
were partially offset by higher sales volume. Overseas equipment
operating profit totaled $109 million for the quarter and $290
million year-to-date compared to $104 million and $265 million,
respectively, a year ago, reflecting continued strong sales
demand. The ratio of cost of goods sold to net sales of the
Equipment Operations decreased from 78.1 percent in the third
quarter of 1996 to 77.4 percent in the same period of this year.
During the first nine months of 1997, the ratio of cost of goods
sold to net sales was 76.2 percent compared with 77.2 percent in
the first nine months of last year. Additional information on
business segments is presented in Note 7 to the interim financial
statements.
The Company's asset management initiatives continued to show
excellent results. Equipment Operations' assets at July 31, 1997
represented 70 percent of the last 12 months net sales compared
with 76 percent a year ago. Trade receivables and Company
inventories totaled $4,684 million at July 31 compared with
$4,445 million at the end of the same period last year.
Net income of the Company's credit operations was $41.6 million
in the third quarter of 1997 compared with $35.3 million in last
year's third quarter. For the first nine months of 1997, net
income of these subsidiaries was $106.1 million compared with
$109.7 million last year. Third quarter earnings reflect higher
income from a larger average receivable and lease portfolio and
gains from the sale of retail notes. Year-to-date results
decreased primarily due to narrower financing spreads, higher
expenditures associated with several growth initiatives and lower
securitization and servicing fee income, which were partially
offset by higher income from the larger average portfolio. Total
revenues of the credit operations increased 24 percent from $175
million in the third quarter of 1996 to $217 million in the
current quarter and increased 12 percent in the first nine months
from $523 million last year to $588 million this year. The
Page 21
<PAGE>
average balance of receivables and leases financed was 22 percent
higher in the third quarter and 17 percent higher in the first
nine months of 1997 compared with the same periods last year.
The resulting increase in average borrowings this year resulted
in a 24 percent increase in interest expense in the current
quarter and a 13 percent increase in the first nine months of
1997 compared with 1996. The credit subsidiaries' consolidated
ratio of earnings to fixed charges was 1.71 to 1 for the third
quarter this year compared with 1.74 to 1 for the same quarter in
1996. This ratio was 1.66 to 1 for the first nine months this
year compared with 1.77 to 1 in the comparable period of 1996.
Net income from insurance operations was $6.6 million in the
third quarter of 1997 compared with $8.0 million last year. For
the first nine months, net income from these operations was $23.7
million this year compared with $26.3 million in 1996. The
decreases in income were due to lower investment income in both
periods this year, lower underwriting results in the third
quarter of this year due to both assigned risk business
assessments and less favorable loss experience, coupled with a
small gain from the sale of the personal lines business in the
first nine months of last year. For the third quarter, insurance
premiums decreased five percent in 1997 compared with the same
period last year, while total claims, benefits, and selling,
administrative and general expenses decreased two percent this
year. For the nine month period, insurance premiums decreased 11
percent in 1997, while total claims, benefits, and selling,
administrative and general expense decreased 10 percent compared
with last year.
The health care operations incurred a net loss of $21.4 million
in the third quarter of 1997 compared with net income of $4.8
million last year. In the first nine months, the net loss from
these operations was $19.6 million this year compared with net
income of $13.2 million in 1996. Although managed care
membership grew by 20 percent from a year ago, the losses this
year reflect continuing higher claims costs, reduced margins on
the health care insured business portfolio caused by highly
competitive industry market conditions, a strengthening of health
care claims reserves and higher selling, administrative and
general expenses. Additionally, charges associated with the
recently planned closure of two health care centers were recorded
in the quarter. Despite these losses on external business, John
Deere Health Care's efforts in controlling Deere's internal
health care costs, the primary mission of these operations,
remain on target with previous expectations and are expected to
continue to provide Deere & Company with high quality health care
at competitive costs. For the third quarter, health care
premiums and administrative services revenues increased eight
percent in 1997 compared with the same period last year, while
total claims, benefits, and selling, administrative and general
expenses increased 58 percent this year. For the nine month
period, health care premiums and administrative services revenues
increased 14 percent in 1997, while total claims, benefits, and
Page 22
<PAGE>
selling, administrative and general expenses increased 36 percent
compared with last year.
Outlook
The Company's excellent financial results and the continued
strong levels of demand for its products provide a solid base for
future operations. Retail demand for 1997 is benefiting from a
growing global economy, healthy agricultural markets and
generally high levels of farmer confidence. Improving dietary
trends and rapid income growth in many developing nations
continue to stimulate strong demand for farm commodities.
Despite lower commodity prices compared to a year ago, this
year's anticipated good harvests should bolster farm cash income.
Additionally, substantial payments to farmers provided by the
United States farm bill, which are unrelated to commodity prices,
continue to promote solid agricultural cash flow to farmers.
Based on these factors, as well as strong overseas demand and the
excellent customer response to the many new and innovative
products being introduced, the Company expects worldwide
agricultural demand to remain at high levels throughout 1997.
Industry retail demand for construction equipment is strong and
is expected to remain at current levels throughout the remainder
of the year as favorable economic growth, rising incomes and low
inflation rates continue to result in good housing demand.
Additionally, Deere's retail demand is benefiting from sales of
the recently introduced new construction equipment models.
Commercial and consumer equipment industry retail sales volumes
increased compared with last year's levels, which were
unfavorably impacted by adverse weather during the spring selling
season. Retail volumes for both the industry and Deere are
expected to be at strong levels throughout the remainder of the
year. The credit and insurance operations are expected to remain
at good levels reflecting both the healthy demand for the
Company's products and continued economic growth. Health care
margins will continue to be under pressure due to the extremely
competitive operating conditions in the market place.
Based on this outlook, the 1997 planned comparable physical
volume of sales has been increased and is now expected to be
approximately 11 percent higher than last year. Fourth quarter
comparable planned physical volume of sales also has been
increased, and is expected to be approximately eight percent
higher than a year ago. Additionally, negotiations are currently
underway on a new labor agreement which will replace the current
agreement that expires October 1, 1997 covering all U.A.W.
employees. It is premature to discuss these negotiations.
Overall, the outlook for the Company's businesses remains very
positive. The Company's overall net sales and revenues continue
to benefit from favorable market conditions and new product
introductions. Although the Company is investing in numerous
strategic growth opportunities, its operating margins are
Page 23
<PAGE>
benefiting from continuous improvement initiatives.
Additionally, the Company's excellent worldwide dealer
organization, which provides a strong and important link to its
customers, continues to effectively market and support the
Company's lines of quality products while assisting in attaining
exceptionally high levels of customer satisfaction. In summary,
industry demand for the Company's products remains strong, and
the recent introductions of a wide array of exciting new products
should promote market share growth in existing and new markets
throughout the world. Based on these factors, the Company
expects continued excellent operating performance.
Safe Harbor Statement
Safe Harbor Statement under the Private Securities Litigation
Reform Act of 1995: Statements under the "Outlook" heading which
relate to future operating periods, are subject to important
risks and uncertainties that could cause actual results to differ
materially. The Company's businesses include Equipment
Operations (agricultural, construction and commercial and
consumer) and Financial Services (credit, insurance and health
care). Forward-looking statements relating to these businesses
involve certain factors that are subject to change, including:
the many interrelated factors that affect farmers' confidence,
including worldwide demand for agricultural products, world grain
stocks, commodities prices, weather, animal diseases, crop pests,
harvest yields, real estate values and government farm programs;
general economic conditions and housing starts; legislation,
primarily legislation relating to agriculture, the environment,
commerce and government spending on infrastructure; actions of
competitors in the various industries in which the Company
competes; production difficulties, including capacity and supply
constraints; dealer practices; labor relations; interest and
currency exchange rates; accounting standards; and other risks
and uncertainties. The Company's outlook is based upon
assumptions relating to the factors described in the preceding
sentence. Factors and assumptions affecting current expectations
for the Company's health care operations include competitive
conditions in the industry, the Company's ability to respond to
changes in government regulations, the Company's ability to
control costs and the Company's strategies concerning growth,
among other factors. Further information concerning the Company
and its businesses, including factors that potentially could
materially affect the Company's financial results, is included in
the Company's most recent annual report on Form 10-K and other
filings with the Securities and Exchange Commission.
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.
Page 24
<PAGE>
Equipment Operations
The Company's equipment businesses are capital intensive and are
subject to large seasonal variations in financing requirements
for receivables from dealers and inventories. Accordingly, to
the extent necessary, funds provided from operations are
supplemented from external sources.
Positive cash flows from operating activities in the first nine
months of 1997 resulted primarily from the record level of net
income, and dividends received from the Financial Services
operations, which were partially offset by normal seasonal
increases in trade receivables and Company-owned inventories. The
aggregate amount of these operating cash flows of $213 million,
along with cash and cash equivalents at the beginning of the
period and increased borrowings were used primarily for
repurchases of common stock, purchases of property and equipment
and payment of dividends. Purchases of property and equipment
have increased compared to last year, primarily due to
construction of new facilities for the production of engines and
commercial and consumer equipment.
Positive cash flows from operating activities in the first nine
months of 1996 resulted primarily from the record level of net
income, and dividends received from Financial Services
subsidiaries. Partially offsetting these positive operating cash
flows were seasonal increases in dealer receivables and Company-
owned inventories. The aggregate amount of these operating cash
flows of $282 million, along with cash and cash equivalents at
the beginning of the period were used primarily for repurchases
of common stock, payment of dividends, purchases of property and
equipment, acquisitions of businesses and a decrease in total
borrowings.
Net trade accounts and notes receivable, which largely represent
dealers' inventories financed by the Company, have increased $360
million since October 31, 1996 reflecting normal seasonal
increases of new and used equipment in dealer inventories.
However, trade receivables are approximately equal to a year ago.
The ratios of these receivables to the last 12 months net sales
were 33 percent at July 31, 1997, 33 percent at October 31, 1996
and 37 percent at July 31, 1996. North American agricultural
equipment trade receivables increased approximately $80 million
compared to a year ago. Construction equipment trade receivables
and commercial and consumer equipment trade receivables decreased
approximately $80 million and $10 million, respectively, compared
with the levels 12 months earlier. Total overseas trade
receivables were approximately $10 million higher than a year
ago. The percentage of total worldwide trade receivables
outstanding for periods exceeding 12 months was five percent at
July 31, 1997, eight percent at October 31, 1996 and seven
percent at July 31, 1996.
Page 25
<PAGE>
Company-owned inventories at July 31, 1997 increased by $342
million compared with the end of the previous fiscal year and
$229 million compared to one year ago, reflecting a normal
seasonal increase in the first nine months, increased sales and
production volumes from a year ago, the commercial and consumer
equipment division's program to provide products closer to
required customer delivery dates and consolidation of the Mexican
subsidiaries in October 1996.
Total interest-bearing debt of the Equipment Operations was $953
million at July 31, 1997 compared with $850 million at the end of
fiscal year 1996 and $1,012 million at July 31, 1996. The ratio
of total debt to total capital (total interest-bearing debt and
stockholders' equity) was 20 percent, 19 percent and 23 percent
at July 31, 1997, October 31, 1996 and July 31, 1996,
respectively.
During the first nine month of 1997, Deere & Company retired $60
million of adjustable rate senior notes due in 2002 and $41
million of medium-term notes.
Financial Services
The Financial Services' credit subsidiaries rely on their ability
to raise substantial amounts of funds to finance their receivable
and lease portfolio. 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. The insurance and health
care subsidiaries generate their funds through internal
operations and intercompany loans.
During the first nine months of 1997, the aggregate cash provided
from operating and financing activities were used for investing
activities. Cash provided from Financial Services operating
activities was $210 million in the first nine months. Cash
provided by financing activities totaled $552 million in 1997,
primarily representing a $645 million increase in total
borrowings, partially offset by a $122 million dividend to the
Equipment Operations. Investing activities used $776 million of
cash in the first nine months of 1997, primarily due to
acquisitions of financing receivables and leases exceeding
collections by $1,370 million, partially offset by $565 million
of proceeds from the sale of retail notes. Cash and cash
equivalents decreased $14 million during the first nine months of
1997.
In the first nine months of 1996, the aggregate cash provided
from operating and financing activities was used primarily to
increase financing receivables and leases. Cash provided from
operating activities was $195 million in the first nine months.
Financing activities provided $353 million in 1996, representing
a $466 million increase in total borrowings, partially offset by
a $113 million dividend to the Equipment Operations. Investing
Page 26
<PAGE>
activities used $630 million of cash in the first nine months of
1996, primarily due to the acquisitions of financing receivables
and leases exceeding collections by $1,254 million, partially
offset by $623 million of proceeds from the sale of retail notes.
Cash and cash equivalents decreased $83 million during the first
nine months of 1996.
Marketable securities consist primarily of debt securities held
by the insurance and health care operations in support of their
obligations to policyholders. Marketable securities at July 31,
1997 were approximately equal to October 31, 1996 and increased
$20 million compared to a year ago. The increase from a year ago
was primarily due to an increase in the unrealized gain on the
portfolio.
Financing receivables and leases increased by $726 million in the
first nine months of 1997 and increased by $885 million during
the past 12 months. These receivables and leases 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, wholesale notes receivable, and financing and operating
leases.
The credit subsidiaries' receivables and leases increased during
the first nine months of 1997 due to acquisitions of financing
receivables and leases exceeding collections. Total acquisitions
of financing receivables and leases were 19 percent higher in the
first nine months of 1997 compared with the same period last
year. This significant increase resulted from increased
acquisitions of retail notes, wholesale receivables, leases and
revolving charge accounts. The increase in financing receivables
and leases in the past 12 months was partially offset by the sale
of receivables for proceeds of $902 million during the same
period. The levels of retail notes, wholesale receivables,
leases and revolving charge accounts were higher than one year
ago. Financing receivables and leases administered by the credit
subsidiaries, which include receivables previously sold, amounted
to $8,100 million at July 31, 1997 compared with $7,487 million
at October 31, 1996 and $7,119 million at July 31, 1996. At July
31, 1997, the unpaid balance of all retail notes previously sold
was $1,288 million compared with $1,390 million at October 31,
1996 and $1,181 million at July 31, 1996.
Total outside interest-bearing debt of the credit subsidiaries
was $5,749 million at July 31, 1997 compared with $4,720 million
at the end of fiscal year 1996 and $5,045 million at July 31,
1996. Total outside borrowings increased during the first nine
months of 1997 and the past 12 months, generally corresponding
with the levels of the financing receivable and lease portfolio,
the level of cash and cash equivalents and the change in the
amounts of payables owed to the Equipment Operations. The credit
subsidiaries' ratio of total interest-bearing debt to
Page 27
<PAGE>
stockholder's equity was 6.7 to 1 at July 31, 1997 compared with
6.3 to 1 at October 31, 1996 and 6.2 to 1 at July 31, 1996.
During the first nine months of 1997, the John Deere Capital
Corporation issued $200 million of 6% notes and $200 million of
6.30% notes both due in 1999, and retired $100 million of 7.20%
notes due in 1997. Additionally, the Capital Corporation issued
$485 million and retired $478 million of medium-term notes during
the first nine months of 1997.
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 $4,191 million
at July 31, 1997, $1,062 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 for $3,500 million.
Stockholders' equity was $3,844 million at July 31, 1997 compared
with $3,557 million at October 31, 1996 and $3,397 million at
July 31, 1996. The increase of $287 million in the first nine
months of 1997 resulted primarily from net income of $749
million, partially offset by an increase in common stock in
treasury of $244 million related to the Company's stock
repurchase and employee benefit programs, dividends declared of
$152 million and a change in the cumulative translation
adjustment of $48 million.
The Board of Directors at its meeting on August 27, 1997 declared
a quarterly dividend of 20 cents per share payable November 3,
1997 to stockholders of record on September 30, 1997.
Page 28
<PAGE>
PART II. OTHER INFORMATION
Item 1. Legal Proceedings
See Note (10) to the Interim Financial Statements.
Item 2. Changes in Securities
During the quarter, the Company issued 450 shares of restricted
stock and 879 stock appreciation rights as compensation to the
Company's nonemployee directors and employee's of affiliates.
These shares and rights were not registered under the Securities
Act of 1933 pursuant to an exemption from registration.
Item 3. Defaults upon Senior Securities
None
Item 4. Submission of Matters to a Vote of Security Holders
None
Item 5. Other Information
On August 26, 1997, Antonio Madero, chairman, president and chief
executive officer of Sanluis Corporation S. A. de C. V., located
in Mexico City, joined the Company's Board of Directors.
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 May 13, 1997 (Item 7).
Page 29
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of
1934, the registrant has duly caused this report to be signed on
its behalf by the undersigned thereunto duly authorized.
DEERE & COMPANY
Date: September 4, 1997 By s/ Robert W. Lane
Robert W. Lane
Senior Vice President,
Principal Financial Officer
and Principal Accounting
Officer
Page 30
<PAGE>
INDEX TO EXHIBITS
Exhibit
Number Page
2 Not applicable -
3 Not applicable -
4 Not applicable -
10 Not applicable -
11 Computation of net income per share 32
12 Computation of ratio of earnings to
fixed charges 33
15 Not applicable -
18 Not applicable -
19 Not applicable -
22 Not applicable -
23 Not applicable -
24 Not applicable -
27 Financial data schedule 35
99 Not applicable -
Page 31
<PAGE>
EXHIBIT 11
DEERE & COMPANY AND CONSOLIDATED SUBSIDIARIES
COMPUTATION OF NET INCOME PER SHARE
(Shares and dollars in thousands except per share amounts)
For the Nine Months
Ended July 31
1997 1996
1. Net income $748,829 $643,351
2. Adjustment - Interest expense, after tax
benefit, applicable to convertible
debentures outstanding 9 15
3. Net income applicable to common stock -
before interest applicable to
convertible debentures $748,838 $643,366
PRIMARY NET INCOME PER COMMON SHARE:
Shares:
4. Weighted average number of common
shares outstanding 254,530 261,341
5. Incremental shares:
Dilutive common stock options 3,208 2,344
Dilutive stock appreciation rights 19 47
Dilutive contingent shares 174
Total incremental shares 3,401 2,391
6. Primary net income per common share
(1 divided by 4) $ 2.94* $ 2.46*
FULLY DILUTED NET INCOME PER COMMON SHARE:
Shares:
7. Weighted average number of common
shares outstanding 254,530 261,341
8. Incremental shares:
Dilutive common stock options 3,374 2,344
Dilutive stock appreciation rights 20 48
Dilutive contingent shares 174
9. Common equivalent shares from assumed
conversion of convertible debentures:
5-1/2% debentures due 2001 34 51
10. Total 258,132 263,784
11. Fully diluted net income per common
share (3 divided by 10) $ 2.94* $ 2.46*
- ----------------
* Net income per common share outstanding was used in the
designated calculations since the dilutive effects of common
stock options, stock appreciation rights, contingent shares and
assumed conversion of convertible debentures were immaterial.
Page 32
<PAGE>
EXHIBIT 12
DEERE & COMPANY AND CONSOLIDATED SUBSIDIARIES
COMPUTATION OF RATIO OF EARNINGS TO FIXED CHARGES
Nine Months Ended Year Ended
July 31 October 31
1997 1996 1996
------------------ ----------
(In thousands of dollars)
Earnings:
Income of consolidated
group before income taxes
and changes in accounting $1,192,701 $1,001,211 $1,286,634
Dividends received from
less than fifty percent
owned affiliates 3,268 7,609 7,937
Fixed charges net of
capitalized interest 315,988 306,690 410,764
Total earnings $1,511,957 $1,315,510 $1,705,335
Fixed charges:
Interest expense of con-
solidated group (includes
capitalized interest) $ 309,541 $ 301,694 $ 402,168
Portion of rental charges
deemed to be interest 6,447 4,996 8,596
Total fixed charges $ 315,988 $ 306,690 $ 410,764
Ratio of earnings to
fixed charges* 4.78 4.29 4.15
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.
* The Company has not issued preferred stock. Therefore, the
ratios of earnings to combined fixed charges and preferred stock
dividends are the same as the ratios presented above.
Page 33
<PAGE>
EXHIBIT 12
DEERE & COMPANY AND CONSOLIDATED SUBSIDIARIES
COMPUTATION OF RATIO OF EARNINGS TO FIXED CHARGES
Year Ended October 31
1995 1994 1993 1992
(In thousands of dollars)
Earnings:
Income of consolidated
group before income
taxes and changes
in accounting $1,092,751 $ 920,920 $272,345 $ 43,488
Dividends received
from less than
fifty percent
owned affiliates 2,023 2,329 1,706 2,325
Fixed charges net of
capitalized interest 399,056 310,047 375,238 420,133
Total earnings $1,493,830 $1,233,296 $649,289 $465,946
Fixed charges:
Interest expense of
consolidated group
(includes capitalized
interest) $ 392,408 $ 303,080 $369,325 $415,205
Portion of rental
charges deemed to
be interest 6,661 7,008 6,127 6,720
Total fixed charges $ 399,069 $ 310,088 $375,452 $421,925
Ratio of earnings to
fixed charges* 3.74 3.98 1.73 1.10
Page 34
<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> 1000000
<CURRENCY> U.S. DOLLARS
<S> <C>
<PERIOD-TYPE> 9-MOS
<FISCAL-YEAR-END> OCT-31-1997
<PERIOD-START> NOV-01-1996
<PERIOD-END> JUL-31-1997
<EXCHANGE-RATE> 1
<CASH> 250
<SECURITIES> 868
<RECEIVABLES> 10527
<ALLOWANCES> 135
<INVENTORY> 1171
<CURRENT-ASSETS> 0
<PP&E> 4244
<DEPRECIATION> 2878
<TOTAL-ASSETS> 15950
<CURRENT-LIABILITIES> 0
<BONDS> 2906
0
0
<COMMON> 1761
<OTHER-SE> 2083
<TOTAL-LIABILITY-AND-EQUITY> 15950
<SALES> 8103
<TOTAL-REVENUES> 9347
<CGS> 6160
<TOTAL-COSTS> 6912
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 42
<INTEREST-EXPENSE> 310
<INCOME-PRETAX> 1193
<INCOME-TAX> 446
<INCOME-CONTINUING> 749
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 749
<EPS-PRIMARY> 2.94
<EPS-DILUTED> 2.94
</TABLE>
