27
UNITED STATES
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 April 30, 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 April 30, 1997, 253,018,613 shares of common stock, $1 par
value, of the registrant were outstanding.
Page 1 of 22 Pages
Index to Exhibits: Page 19
PART I. FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
DEERE & COMPANY CONSOLIDATED
STATEMENT OF CONSOLIDATED INCOME (Deere & Company and
Three Months Ended April 30 Consolidated Subsidiaries)
Millions of dollars except Three Months Ended April 30
per share amounts 1997 1996
(Unaudited)
Net Sales and Revenues
Net sales of equipment $3,107.6 $2,699.7
Finance and interest income 205.7 185.1
Insurance and health care premiums 171.3 162.3
Investment income 16.9 17.7
Other income 19.6 23.9
Total 3,521.1 3,088.7
Costs and Expenses
Cost of goods sold 2,319.4 2,045.0
Research and development expenses 106.6 97.1
Selling, administrative and
general expenses 335.7 282.3
Interest expense 103.7 103.4
Insurance and health care
claims and benefits 127.7 125.3
Other operating expenses 20.2 10.1
Total 3,013.3 2,663.2
Income of Consolidated Group
Before Income Taxes 507.8 425.5
Provision for income taxes 188.7 155.8
Income of Consolidated Group 319.1 269.7
Equity in Income (Loss) of Unconsolidated
Subsidiaries and Affiliates
Credit (.3)
Insurance
Health care
Other .7 3.0
Total .4 3.0
Net Income $ 319.5 $ 272.7
Net income per share, primary and
fully diluted $ 1.25 $ 1.04
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.
PART I. FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
DEERE & COMPANY EQUIPMENT OPERATIONS
STATEMENT OF CONSOLIDATED INCOME (Deere & Company with Financial
Three Months Ended April 30 Services on the Equity Basis)
Millions of dollars except Three Months Ended April 30
per share amounts 1997 1996
(Unaudited)
Net Sales and Revenues
Net sales of equipment $3,107.6 $2,699.7
Finance and interest income 25.0 27.5
Insurance and health care premiums
Investment income
Other income 8.7 1.8
Total 3,141.3 2,729.0
Costs and Expenses
Cost of goods sold 2,322.0 2,051.0
Research and development expenses 106.6 97.1
Selling, administrative and
general expenses 242.2 201.9
Interest expense 21.5 31.5
Insurance and health care claims and benefits
Other operating expenses 3.4 2.4
Total 2,695.7 2,383.9
Income of Consolidated Group
Before Income Taxes 445.6 345.1
Provision for income taxes 167.0 127.8
Income of Consolidated Group 278.6 217.3
Equity in Income (Loss) of Unconsolidated
Subsidiaries and Affiliates
Credit 31.6 40.0
Insurance 8.2 8.7
Health care .4 3.7
Other .7 3.0
Total 40.9 55.4
Net Income $ 319.5 $ 272.7
PART I. FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
DEERE & COMPANY FINANCIAL SERVICES
STATEMENT OF CONSOLIDATED INCOME
Three Months Ended April 30
Millions of dollars except Three Months Ended April 30
per share amounts 1997 1996
(Unaudited)
Net Sales and Revenues
Net sales of equipment
Finance and interest income $181.4 $160.2
Insurance and health care premiums 176.1 171.2
Investment income 16.9 17.7
Other income 12.0 22.1
Total 386.4 371.2
Costs and Expenses
Cost of goods sold
Research and development expenses
Selling, administrative and
general expenses 95.3 82.4
Interest expense 83.0 74.2
Insurance and health care claims
and benefits 129.2 126.6
Other operating expenses 16.7 7.6
Total 324.2 290.8
Income of Consolidated Group
Before Income Taxes 62.2 80.4
Provision for income taxes 21.7 28.0
Income of Consolidated Group 40.5 52.4
Equity in Income (Loss) of Unconsolidated
Subsidiaries and Affiliates
Credit (.3)
Insurance
Health care
Other
Total (.3)
Net Income $ 40.2 $ 52.4
DEERE & COMPANY CONSOLIDATED
STATEMENT OF CONSOLIDATED INCOME (Deere & Company and
Six Months Ended April 30 Consolidated Subsidiaries)
Millions of dollars except Six Months Ended April 30
per share amounts 1997 1996
(Unaudited)
Net Sales and Revenues
Net sales of equipment $5,110.2 $4,636.4
Finance and interest income 398.2 365.3
Insurance and health care premiums 333.2 325.7
Investment income 31.9 34.2
Other income 43.6 44.6
Total 5,917.1 5,406.2
Costs and Expenses
Cost of goods sold 3,849.0 3,546.2
Research and development expenses 193.0 177.1
Selling, administrative and
general expenses 597.6 520.7
Interest expense 198.6 202.2
Insurance and health care
claims and benefits 251.5 252.6
Other operating expenses 34.3 23.6
Total 5,124.0 4,722.4
Income of Consolidated Group
Before Income Taxes 793.1 683.8
Provision for income taxes 294.8 249.3
Income of Consolidated Group 498.3 434.5
Equity in Income (Loss) of Unconsolidated
Subsidiaries and Affiliates
Credit (.8)
Insurance
Health care
Other (1.3) 4.4
Total (2.1) 4.4
Net Income $ 496.2 $ 438.9
Net income per share, primary
and fully diluted $ 1.94 $ 1.67
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.
DEERE & COMPANY EQUIPMENT OPERATIONS
STATEMENT OF CONSOLIDATED INCOME (Deere & Company with Financial
Six Months Ended April 30 Services on the Equity Basis)
Millions of dollars except Six Months Ended April 30
per share amounts 1997 1996
(Unaudited)
Net Sales and Revenues
Net sales of equipment $5,110.2 $4,636.4
Finance and interest income 54.5 58.0
Insurance and health care premiums
Investment income
Other income 20.5 7.5
Total 5,185.2 4,701.9
Costs and Expenses
Cost of goods sold 3,857.7 3,558.7
Research and development expenses 193.0 177.1
Selling, administrative and
general expenses 425.6 369.4
Interest expense 42.0 58.5
Insurance and health care
claims and benefits
Other operating expenses 3.9 9.3
Total 4,522.2 4,173.0
Income of Consolidated Group
Before Income Taxes 663.0 528.9
Provision for income taxes 249.0 195.5
Income of Consolidated Group 414.0 333.4
Equity in Income (Loss) of Unconsolidated
Subsidiaries and Affiliates
Credit 64.6 74.5
Insurance 17.1 18.2
Health care 1.8 8.4
Other (1.3) 4.4
Total 82.2 105.5
Net Income $ 496.2 $ 438.9
DEERE & COMPANY FINANCIAL SERVICES
STATEMENT OF CONSOLIDATED INCOME
Six Months Ended April 30
Millions of dollars except Six Months Ended April 30
per share amounts 1997 1996
(Unaudited)
Net Sales and Revenues
Net sales of equipment
Finance and interest income $345.8 $311.6
Insurance and health care premiums 349.1 344.6
Investment income 31.9 34.2
Other income 25.1 38.4
Total 751.9 728.8
Costs and Expenses
Cost of goods sold
Research and development expenses
Selling, administrative and
general expenses 178.4 157.7
Interest expense 158.6 147.6
Insurance and health care
claims and benefits 254.4 254.4
Other operating expenses 30.4 14.2
Total 621.8 573.9
Income of Consolidated Group
Before Income Taxes 130.1 154.9
Provision for income taxes 45.8 53.8
Income of Consolidated Group 84.3 101.1
Equity in Income (Loss) of Unconsolidated
Subsidiaries and Affiliates
Credit (.8)
Insurance
Health care
Other
Total (.8)
Net Income $ 83.5 $101.1
DEERE & COMPANY CONSOLIDATED
CONDENSED CONSOLIDATED BALANCE SHEET (Deere & Company and
Consolidated Subsidiaries)
Apr 30 Oct 31 Apr 30
Millions of dollars 1997 1996 1996
(Unaudited)
Assets
Cash and short-term
investments $ 267.6 $ 291.5 $ 278.1
Cash deposited with unconsolidated
Cash and cash equivalents 267.6 291.5 278.1
Marketable securities 850.3 869.4 850.1
Receivables from unconsolidated
subsidiaries and affiliates 26.3 13.1 8.8
Trade accounts and notes
receivable - net 3,639.6 3,152.7 3,830.7
Financing receivables - net 6,438.7 5,912.2 5,308.1
Other receivables 411.0 549.6 504.6
Equipment on operating leases-net 564.9 429.8 320.5
Inventories 1,289.8 828.9 1,066.7
Property and equipment - net 1,334.0 1,351.7 1,281.9
Investments in unconsolidated
subsidiaries and affiliates 129.9 127.4 174.4
Intangible assets - net 278.8 285.9 321.3
Deferred income taxes 648.1 653.0 631.4
Other assets and deferred charges 193.5 187.5 177.7
Total $16,072.5 $14,652.7 $14,754.3
Liabilities and Stockholders' Equity
Short-term borrowings $ 4,257.7 $ 3,144.1 $ 3,619.9
Payables to unconsolidated
subsidiaries and affiliates 49.0 27.6 32.3
Accounts payable and
accrued expenses 2,609.5 2,676.2 2,528.1
Insurance and health care
claims and reserves 411.7 437.6 451.4
Accrued taxes 160.4 132.4 101.7
Deferred income taxes 9.8 9.4 16.3
Long-term borrowings 2,548.9 2,425.4 2,311.8
Retirement benefit accruals
and other liabilities 2,312.9 2,242.8 2,349.9
Total liabilities 12,359.9 11,095.5 11,411.4
Common stock, $1 par value
(issued shares at April 30,
1997 - 253,018,613 ) 1,762.4 1,770.1 1,757.3
Retained earnings 2,694.0 2,299.5 2,024.5
Minimum pension liability
adjustment (235.4) (235.4) (300.4)
Cumulative translation adjustment (48.8) (14.0) (19.6)
Unrealized gain on marketable
securities 6.2 14.0 12.3
Unamortized restricted stock
compensation (19.8) (11.1) (11.3)
Common stock in treasury, at cost (446.0) (265.9) (119.9)
Total Stockholders' equity 3,712.6 3,557.2 3,342.9
Total $16,072.5 $14,652.7 $14,754.3
See Notes to Interim Financial Statements. Supplemental
consolidating data are shown for the "Equipment Operations" and
"Financial Services". Transactions between the "Equipment
Operations" and "Financial Services" have been eliminated to
arrive at the "Consolidated" data.
DEERE & COMPANY EQUIPMENT OPERATIONS
CONDENSED CONSOLIDATED BALANCE SHEET (Deere & Company with
Financial Services on
the Equity Basis)
Apr 30 Oct 31 Apr 30
Millions of dollars (Unaudited) 1997 1996 1996
Assets
Cash and short-term
investments $ 66.6 $ 80.0 $ 77.1
Cash deposited with unconsoli-
dated subsidiaries 57.7 544.8
Cash and cash equivalents 124.3 624.8 77.1
Marketable securities
Receivables from unconsolidated
subsidiaries and affiliates 128.4 105.3 88.5
Trade accounts and notes
receivable - net 3,639.6 3,152.7 3,830.7
Financing receivables - net 82.3 103.4 97.9
Other receivables 56.6 7.3
Equipment on operating
leases - net 162.3 152.9 121.1
Inventories 1,289.8 828.9 1,066.7
Property and equipment - net 1,283.7 1,301.3 1,233.6
Investments in unconsolidated
subsidiaries and affiliates 1,448.1 1,445.3 1,450.0
Intangible assets - net 269.8 276.3 312.2
Deferred income taxes 592.7 603.2 576.8
Other assets and deferred
charges 126.9 117.4 110.6
Total $9,147.9 $8,768.1 $8,972.5
Liabilities and Stockholders' Equity
Short-term borrowings $ 410.8 $ 223.6 $ 652.5
Payables to unconsolidated
subsidiaries and affiliates 49.0 27.6 57.3
Accounts payable and accrued
expenses 1,923.0 1,975.1 1,786.6
Insurance and health care
claims and reserves
Accrued taxes 157.9 130.3 98.8
Deferred income taxes 9.5 9.4 16.3
Long-term borrowings 599.3 625.9 691.2
Retirement benefit accruals and
other liabilities 2,285.8 2,219.0 2,326.9
Total liabilities 5,435.3 5,210.9 5,629.6
Common stock, $1 par value
(issued shares at April 30,
1997 - 253,018,613 ) 1,762.4 1,770.1 1,757.3
Retained earnings 2,694.0 2,299.5 2,024.5
Minimum pension liability
adjustment (235.4) (235.4) (300.4)
Cumulative translation
adjustment (48.8) (14.0) (19.6)
Unrealized gain on marketable
securities 6.2 14.0 12.3
Unamortized restricted stock
compensation (19.8) (11.1) (11.3)
Common stock in treasury,
at cost (446.0) (265.9) (119.9)
Total Stockholders' equity 3,712.6 3,557.2 3,342.9
Total $9,147.9 $8,768.1 $8,972.5
DEERE & COMPANY FINANCIAL SERVICES
CONDENSED CONSOLIDATED BALANCE SHEET
Apr 30 Oct 31 Apr 30
Millions of dollars (Unaudited) 1997 1996 1996
Assets
Cash and short-term investments $ 201.0 $ 211.6 $ 201.0
Cash deposited with unconsoli-
dated subsidiaries
Cash and cash equivalents 201.0 211.6 201.0
Marketable securities 850.3 869.4 850.1
Receivables from unconsolidated
subsidiaries and affiliates 25.0
Trade accounts and notes
receivable - net
Financing receivables - net 6,356.5 5,808.8 5,210.3
Other receivables 411.0 492.9 498.3
Equipment on operating
leases - net 402.6 276.8 199.4
Inventories
Property and equipment - net 50.3 50.4 48.2
Investments in unconsolidated
subsidiaries and affiliates 5.4 6.3
Intangible assets - net 9.0 9.7 9.1
Deferred income taxes 55.4 49.7 54.5
Other assets and deferred charges 66.6 70.2 67.4
Total $8,408.1 $7,845.8 $7,163.3
Liabilities and Stockholders' Equity
Short-term borrowings $3,846.9 $2,920.6 $2,967.3
Payables to unconsolidated
subsidiaries and affiliates 159.8 637.0 79.8
Accounts payable and accrued
expenses 686.5 701.1 742.5
Insurance and health care
claims and reserves 411.7 437.6 451.4
Accrued taxes 2.5 2.1 2.9
Deferred income taxes .3
Long-term borrowings 1,949.6 1,799.5 1,620.6
Retirement benefit accruals and
other liabilities 27.2 23.7 23.2
Total liabilities 7,084.5 6,521.6 5,887.7
Common stock, $1 par value
(issued shares at April 30,
1997 - 253,018,613 ) 209.4 209.4 209.4
Retained earnings 1,113.9 1,103.2 1,057.5
Minimum pension liability adjustment
Cumulative translation adjustment (5.9) (2.4) (3.6)
Unrealized gain on marketable
securities 6.2 14.0 12.3
Unamortized restricted stock
compensation
Common stock in treasury, at cost
Total Stockholders' equity 1,323.6 1,324.2 1,275.6
Total $8,408.1 $7,845.8 $7,163.3
DEERE & COMPANY CONSOLIDATED
CONDENSED STATEMENT OF CONSOLIDATED (Deere & Company and
CASH FLOWS Consolidated Subsidiaries)
Six Months Ended April 30 Six Months Ended April 30
1997 1996
Millions of dollars (Unaudited)
Cash Flows from Operating Activities
Net income $ 496.2 $ 438.9
Adjustments to reconcile net income
to net cash provided by (used for)
operating activities (660.3) (787.6)
Net cash provided by (used for)
operating activities (164.1) (348.7)
Cash Flows from Investing Activities
Collections and sales of financing
receivables 2,811.4 2,788.5
Proceeds from maturities and sales
of marketable securities 86.6 61.3
Cost of financing receivables acquired (3,317.0) (2,756.0)
Purchases of marketable securities (78.7) (68.2)
Purchases of property and equipment (147.3) (101.5)
Cost of operating leases acquired (217.6) (128.1)
Acquisitions of businesses (8.7) (39.5)
Other 54.6 77.5
Net cash used for investing activities (816.7) (166.0)
Cash Flows from Financing Activities
Increase in short-term borrowings 849.1 600.0
Change in intercompany receivables/payables
Proceeds from long-term borrowings 455.0 175.0
Principal payments on long-term
borrowings (39.0) (156.8)
Proceeds from issuance of common stock 10.9 29.4
Repurchases of common stock (212.1) (112.1)
Dividends paid (102.8) (104.9)
Other (.6) (.1)
Net cash provided by (used for)
financing activities 960.5 430.5
Effect of Exchange Rate Changes on Cash (3.6) (1.4)
Net Decrease in Cash and Cash Equivalents (23.9) (85.6)
Cash and Cash Equivalents at Beginning
of Period 291.5 363.7
Cash and Cash Equivalents at
End of Period $ 267.6 $ 278.1
See Notes to Interim Financial Statements. Supplemental
consolidating data are shown for the "Equipment Operations" and
"Financial Services". Transactions between the "Equipment
Operations" and "Financial Services" have been eliminated to
arrive at the "Consolidated" data.
DEERE & COMPANY EQUIPMENT OPERATIONS
CONDENSED STATEMENT OF CONSOLIDATED (Deere & Company with
CASH FLOWS Financial Services on
Six Months Ended April 30 the Equity Basis)
Six Months Ended April 30
Millions of dollars (Unaudited) 1997 1996
Cash Flows from Operating Activities
Net income $ 496.2 $ 438.9
Adjustments to reconcile net income
to net cash provided by (used for)
operating activities (707.3) (799.8)
Net cash provided by (used for)
operating activities (211.1) (360.9)
Cash Flows from Investing Activities
Collections and sales of financing
receivables 30.5 30.3
Proceeds from maturities and sales
of marketable securities
Cost of financing receivables acquired (10.5) (10.3)
Purchases of marketable securities
Purchases of property and equipment (142.2) (89.9)
Cost of operating leases acquired (36.0) (22.2)
Acquisitions of businesses (8.7) (39.5)
Other 20.5 (20.7)
Net cash used for investing activities (146.4) (152.3)
Cash Flows from Financing Activities
Increase in short-term borrowings 186.5 283.7
Change in intercompany
receivables/payables (9.9) (1.6)
Proceeds from long-term borrowings
Principal payments on long-term borrowings (11.5) (33.8)
Proceeds from issuance of common stock 10.9 29.4
Repurchases of common stock (212.1) (112.1)
Dividends paid (102.8) (104.9)
Other (.6) (.1)
Net cash provided by (used for)
financing activities (139.5) 60.6
Effect of Exchange Rate Changes on Cash (3.5) (1.4)
Net Decrease in Cash and Cash Equivalents (500.5) (454.0)
Cash and Cash Equivalents at Beginning
of Period 624.8 531.1
Cash and Cash Equivalents at End
of Period $ 124.3 $ 77.1
DEERE & COMPANY FINANCIAL SERVICES
CONDENSED STATEMENT OF CONSOLIDATED CASH FLOWS
Six Months Ended April 30
Six Months Ended April 30
Millions of dollars (Unaudited) 1997 1996
Cash Flows from Operating Activities
Net income $ 83.5 $ 101.1
Adjustments to reconcile net income to
net cash provided by (used for)
operating activities 36.3 9.0
Net cash provided by (used for)
operating activities 119.8 110.1
Cash Flows from Investing Activities
Collections and sales of financing
receivables 2,780.9 2,758.2
Proceeds from maturities and sales of
marketable securities 86.6 61.3
Cost of financing receivables acquired (3,306.5) (2,745.7)
Purchases of marketable securities (78.7) (68.2)
Purchases of property and equipment (5.1) (11.6)
Cost of operating leases acquired (181.5) (105.9)
Acquisitions of businesses
Other 33.9 98.1
Net cash used for investing activities (670.4) (13.8)
Cash Flows from Financing Activities
Increase in short-term borrowings 662.6 316.4
Change in intercompany
receivables/payables (477.2) (458.5)
Proceeds from long-term borrowings 455.0 175.0
Principal payments on long-term borrowings (27.5) (123.0)
Proceeds from issuance of common stock
Repurchases of common stock
Dividends paid (72.8) (97.9)
Other
Net cash provided by (used for)
financing activities 540.1 (188.0)
Effect of Exchange Rate Changes on Cash (.1)
Net Decrease in Cash and Cash Equivalents (10.6) (91.7)
Cash and Cash Equivalents at Beginning
of Period 211.6 292.7
Cash and Cash Equivalents at End
of Period $ 201.0 $ 201.0
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 (formerly known as
industrial 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.
(3) An analysis of the Company's retained earnings follows in
millions of dollars:
Three Months Six Months
Ended Ended
April 30 April 30
1997 1996 1997 1996
Balance, beginning
of period $2,425.2 $1,804.2 $2,299.5 $1,690.3
Net income 319.5 272.7 496.2 438.9
Dividends declared (50.7) (52.4) (101.7) (104.7)
Balance, end of period $2,694.0 $2,024.5 $2,694.0 $2,024.5
(4) An analysis of the cumulative translation adjustment in
millions of dollars follows:
Three Months Six Months
Ended Ended
April 30 April 30
1997 1996 1997 1996
Balance, beginning
of period $(29.2) $(23.5) $(14.0) $(11.6)
Translation adjustment (16.8) 4.3 (29.2) (7.1)
Income taxes applicable to
translation adjustments (2.8) (.4) (5.6) (.9)
Balance, end of period $(48.8) $(19.6) $(48.8) $(19.6)
(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:
Apr 30 Oct 31 Apr 30
1997 1996 1996
Raw materials and supplies $ 237 $ 228 $ 222
Work-in-process 467 397 425
Finished machines and parts 1,598 1,232 1,382
Total FIFO value 2,302 1,857 2,029
Adjustment to LIFO basis 1,012 1,028 962
Inventories $1,290 $ 829 $1,067
(6) During the first six months of 1997, the Financial Services
subsidiaries and the Equipment Operations received proceeds from
the sale of retail notes of $29 million. At April 30, 1997, the
net unpaid balance of all retail notes previously sold by the
Financial Services subsidiaries and the Equipment Operations was
$856 million. At April 30, 1997, the Company's maximum exposure
under all credit receivable recourse provisions was $132 million
for all retail notes sold.
Certain foreign subsidiaries have pledged assets with a balance
sheet value of $29 million as collateral for bank borrowings as
of April 30, 1997.
At April 30, 1997, the Company had commitments of approximately
$93 million for construction and acquisition of property and
equipment.
(7) Worldwide net sales and revenues and operating profit in
millions of dollars follow:
Three Months Ended Six Months Ended
April 30 April 30
% %
1997 1996 Chng 1997 1996 Chng
Net sales:
Agricultural equipment $1,949 $1,639 +19 $3,221 $2,825 +14
Construction equipment 591 515 +15 1,052 958 +10
Commercial and consumer
equipment 568 546 + 4 837 853 - 2
Total net sales 3,108 2,700 +15 5,110 4,636 +10
Financial Services
revenues 381 360 + 6 735 708 + 4
Other revenues 32 28 +14 72 62 +16
Total net sales
and revenues $3,521 $3,088 +14 $5,917 $5,406 + 9
United States and Canada:
Equipment net sales $2,221 $1,962 +13 $3,635 $3,358 + 8
Financial Services
revenues 381 360 + 6 735 708 + 4
Total 2,602 2,322 +12 4,370 4,066 + 7
Overseas net sales 887 738 +20 1,475 1,278 +15
Other revenues 32 28 +14 72 62 +16
Total net sales
and revenues $3,521 $3,088 +14 $5,917 $5,406 + 9
Operating profit:
Agricultural equipment $ 339 $ 255 +33 $ 534 $ 403 +33
Construction equipment 77 48 +60 115 100 +15
Commercial and consumer
equipment 58 81 -28 62 102 -39
Equipment Operations 474 384 +23 711 605 +18
Financial Services* 62 80 -23 129 155 -17
Total operating profit 536 464 +16 840 760 +11
Interest and corporate
expenses-net (28) (35) -20 (49) (72) -32
Income taxes (189) (156) +21 (295) (249) +18
Net income $ 319 $ 273 +17 $ 496 $ 439 +13
* 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.
(8) Dividends declared and paid on a per share basis were as
follows:
Three Months Six Months
Ended Ended
April 30 April 30
1997 1996 1997 1996
Dividends declared $.20 $.20 $.40 $.40
Dividends paid $.20 $.20 $.40 $.40
(9) The calculation of primary net income per share is based on
the average number of shares outstanding during the six months
ended April 30, 1997 and 1996 of 255,254,000 and 262,199,000,
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 six months of 1997,
the Company repurchased $167 million of common stock related to
this program and $45 million of common stock for ongoing stock
option and restricted stock plans. At April 30, 1997, the
Company had repurchased a total of $368 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 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 February 1997, Deere & Company announced it would
acquire the assets of Maschinenfabrik Kemper GmbH for
approximately $35 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
announced it has agreed to invest $13 million over the next few
years to reach a 60 percent ownership interest in a combine
factory in China. While the Company's combine technology has
been licensed in China since the early 1980s, this is the first
Deere & Company ownership interest in an agricultural equipment
manufacturing operation in China.
Item 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS
RESULTS OF OPERATIONS
Deere & Company achieved record second quarter worldwide net
income of $319.5 million or $1.25 per share for the quarter, an
increase of 20 percent in earnings per share compared with $272.7
million or $1.04 per share in the second quarter of 1996. Net
income for the first six months was $496.2 million or $1.94 per
share compared with $438.9 million or $1.67 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 improved, reflecting the results of the
Company's continuous improvement and quality initiatives. Net
income for the first six months increased 13 percent compared
with last year, while net income per share increased 16 percent
due to the Company's previously announced share repurchase
program.
Worldwide net sales and revenues for the second quarter increased
14 percent to $3,521 million and nine percent to $5,917 million
for the first six months of 1997 compared with $3,088 million and
$5,406 million, respectively, last year. Net sales of the
agricultural, construction (formerly known as industrial), and
commercial and consumer equipment divisions increased 15 percent
to $3,108 million for the quarter and 10 percent to $5,110
million for the first six months compared with $2,700 million and
$4,636 million, respectively, last year. Export sales from the
United States continued to benefit from increased sales to the
former Soviet Union and totaled $547 million for the quarter and
$939 million year-to-date compared to $415 million and $723
million for the same periods last year. Overseas sales also
increased, rising by 20 percent over last year's strong second
quarter levels and 15 percent for the first six months compared
with a year ago. Overseas physical volume of sales (excluding
the sales by the newly consolidated Mexican subsidiaries) also
increased 15 percent year-to-date compared with last year.
Overall, the Company's physical volume of sales (excluding
Mexico) increased eight percent for the first six months of 1997
compared to last year.
The Company's worldwide Equipment Operations, which exclude the
Financial Services subsidiaries and unconsolidated affiliates,
had income of $278.6 million for the second quarter and $414.0
million for the first six months compared with $217.3 million and
$333.4 million for the same periods last year. Worldwide
Equipment Operating profit increased to $474 million or 15
percent of net sales for the quarter and to $711 million or 14
percent of net sales for the first six months of 1997 compared
with $384 million or 14 percent of net sales for the quarter and
$605 million or 13 percent of net sales for the first six months
of last year. Worldwide agricultural equipment operating profit
increased 33 percent to $339 million for the quarter and also 33
percent to $534 million for the first six months compared with
$255 million and $403 million, respectively, last year,
reflecting higher production and sales volumes as well as
improved operating margins in both the Company's North American
and overseas operations. Worldwide construction equipment
operating profit totaled $77 million in the quarter and $115
million year-to-date compared with $48 million and $100 million,
respectively, last year, reflecting higher sales, lower sales
incentive costs and improved operating efficiencies. Worldwide
commercial and consumer equipment operating profit totaled $58
million for the quarter and $62 million year-to-date, down from
last year's $81 million and $102 million, respectively. The
quarterly decline was due primarily to higher growth expenditures
and costs associated with the discontinuation of the electric-
start string trimmer line in the quarter. Additionally, year-to-
date results were affected by lower shipping activity associated
with the Company's asset control efforts. These efforts include
a program, started during the fourth quarter of 1996, that
focuses on providing products closer to the required customer
delivery dates, thereby enabling the Company to reduce its level
of asset investment. As a result of this program, shipments to
dealers for the remainder of 1997 should be at higher levels than
last year. Overseas equipment operating profit totaled $112
million for the quarter and $181 million year-to-date, compared
to $101 million and $160 million, respectively, a year ago,
reflecting strong sales demand. The ratio of cost of goods sold
to net sales of the Equipment Operations decreased from 76.0
percent in the second quarter of 1996 to 74.7 percent in the same
period of this year. During the first six months of 1997, the
ratio of cost of goods sold to net sales was 75.5 percent
compared with 76.8 percent in the first half 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 April 30,
1997 represented 76 percent of the last 12 months net sales
compared with 82 percent a year ago. Trade receivables and
Company inventories totaled $4,929 million at April 30 compared
with $4,897 million at the end of the same period last year.
Net income of the Company's credit operations was $31.6 million
in the second quarter of 1997 compared with $40.0 million in last
year's second quarter. For the first six months of 1997, net
income of these subsidiaries was $64.6 million compared with
$74.5 million last year. The decreases in income resulted
primarily from a gain from the sale of retail notes in the second
quarter of 1996. Additionally, earnings were lower due to
narrower financing spreads and higher expenditures associated
with several growth initiatives, which were partially offset by
higher income from a larger average receivable and lease
portfolio financed. Total revenues of the credit operations
increased 13 percent from $182 million in the second quarter of
1996 to $207 million in the current quarter and increased seven
percent in the first half from $348 million last year to $371
million this year. The average balance of receivables and leases
financed was 16 percent higher in the second quarter and 15
percent higher in the first six months of 1997 compared with the
same periods last year. The resulting increase in average
borrowings this year resulted in a 12 percent increase in
interest expense in the current quarter and a seven percent
increase in the first half of 1997 compared with 1996. The
credit subsidiaries' consolidated ratio of earnings to fixed
charges was 1.59 to 1 for the second quarter this year compared
with 1.83 to 1 in 1996. This ratio was 1.64 to 1 for the first
six months this year compared with 1.78 to 1 in the comparable
period of 1996.
Net income from insurance operations was $8.2 million in the
second quarter of 1997 compared with $8.7 million last year. For
the first six months, net income from these operations was $17.1
million this year compared with $18.2 million in 1996. The
decreases in income were due to lower investment income in both
periods this year and a small gain from the sale of the personal
lines business in the first six months of last year. For the
second quarter, insurance premiums decreased 13 percent in 1997
compared with the same period last year, while total claims,
benefits, and selling, administrative and general expenses also
decreased 13 percent this year. For the six month period,
insurance premiums decreased 13 percent in 1997, while total
claims, benefits, and selling, administrative and general expense
decreased 14 percent compared with last year.
Net income from health care operations was $.4 million in the
second quarter of 1997 compared with $3.7 million last year. In
the first six months, net income from these operations was $1.8
million this year compared with $8.4 million in 1996. Although
managed care membership grew by 23 percent from a year ago,
earnings decreased this year reflecting higher selling,
administrative and general expenses associated with several
business initiatives, higher claims activity and reduced margins
on some governmental business. For the second quarter, health
care premiums and administrative services revenues increased 19
percent in 1997 compared with the same period last year, while
total claims, benefits, and selling, administrative and general
expenses increased 25 percent this year. For the six month
period, health care premiums and administrative services revenues
increased 17 percent in 1997, while total claims, benefits, and
selling, administrative and general expenses increased 24 percent
compared with last year.
The various growth initiatives of the Financial Services
operations should result in improvements in future periods.
Outlook
The Company's strong results for the first six months were in
line with the Company's expectations for both the period and the
full year. Despite some regional flooding in certain
agricultural areas, the remainder of 1997 should benefit 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, and
grain and oilseed prices remain at relatively strong levels.
Additionally, in 1996, many United States farmers received
substantial direct government payments provided by the new farm
bill and these payments, which were unrelated to commodity
prices, are expected to continue during 1997. Based on these
factors, as well as continued strong overseas demand and the
excellent customer response to the many new and innovative
products being introduced, the Company expects 1997 to be another
strong year for the agricultural equipment division.
Industry retail demand for construction equipment is strong and
is expected to remain at similar levels throughout 1997 as
favorable economic growth, rising incomes and low inflation rates
continue to result in good housing demand. Additionally, Deere
retail demand is expected to benefit from sales of the recently
announced new construction equipment models. Commercial and
consumer equipment industry retail sales volumes increased
compared with last year's levels, which were adversely impacted
by a late spring selling season. Retail volumes for both the
industry and Deere are expected to be at strong levels throughout
the remainder of the year. Financial Services operations also
are expected to remain at favorable levels, reflecting both the
healthy demand for the Company's products and good economic
conditions.
Based on this outlook, the 1997 planned comparable physical
volume of sales to dealers has been increased and is now expected
to be approximately eight percent higher than last year. Third
quarter comparable physical volume of sales to dealers also has
been increased, and is expected to be approximately 10 percent
higher than a year ago.
Overall, the outlook for the Company's businesses remains very
positive. Although the Company is investing in numerous
strategic growth opportunities throughout the world, its overall
net sales and revenues and operating margins continue at strong
levels due to favorable market conditions and continuous
improvement initiatives. Additionally, the Company's excellent
worldwide dealer organization, which provides a strong and
important link to the Company's customers, continues to
effectively market and support its lines of quality products and
assists the Company 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 during the remainder of 1997.
Safe Harbor Statement
Safe Harbor Statement under the Private Securities Litigation
Reform Act of 1995: Statements under the "Outlook" heading as
well as the sentence immediately preceding the "Outlook" section,
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. Dealers' retail sales of agricultural equipment are
especially affected by the weather in the summer, while housing
starts, which respond to interest rate fluctuations, are
especially important to dealers' retail sales of construction
equipment. 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.
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.
Negative cash flows from operating activities in the first six
months of 1997 resulted primarily from the normal seasonal
increases in dealer receivables and Company-owned inventories.
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 of $211 million, along with
cash required for repurchases of common stock, purchases of
property and equipment and payment of dividends were provided
primarily from a decrease in cash and cash equivalents and an
increase in borrowings. 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.
In the first half of 1996, negative cash flows from operating
activities resulted from the normal seasonal increases in dealer
receivables and Company-owned inventories, 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 of $361 million, along with repurchases of common
stock, payment of dividends, purchases of property and equipment
and acquisitions of businesses were provided primarily from a
decrease in cash and cash equivalents and an increase in
borrowings.
Net trade accounts and notes receivable, which largely represent
dealers' inventories financed by the Company, have increased $487
million since October 31, 1996 reflecting seasonal increases of
new and used equipment in dealer inventories. Trade receivables
have decreased $191 million compared to a year ago. The ratios
of these receivables to the last 12 months net sales were 36
percent at April 30, 1997, 33 percent at October 31, 1996 and 41
percent at April 30, 1996. North American agricultural equipment
dealer receivables have increased approximately $5 million
compared to a year ago. Construction equipment dealer
receivables and commercial and consumer equipment dealer
receivables decreased approximately $125 million and $105
million, respectively, compared with the levels 12 months
earlier. Total overseas dealer receivables were approximately
$30 million higher than a year ago. The percentage of total
worldwide dealer receivables outstanding for periods exceeding 12
months was seven percent at April 30, 1997, eight percent at
October 31, 1996 and eight percent at April 30, 1996.
Company-owned inventories at April 30, 1997 have increased by
$461 million compared with the end of the previous fiscal year
and $223 million compared to one year ago, reflecting a normal
seasonal increase in the first six 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, consolidation of the Mexican
subsidiaries in October 1996 and increased inventory in-transit
due to equipment being shipped overseas.
Total interest-bearing debt of the Equipment Operations was
$1,010 million at April 30, 1997 compared with $850 million at
the end of fiscal year 1996 and $1,344 million at April 30, 1996.
The ratio of total debt to total capital (total interest-bearing
debt and stockholders' equity) was 21 percent, 19 percent and 29
percent at April 30, 1997, October 31, 1996 and April 30, 1996,
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. The insurance and health
care subsidiaries generate their funds through internal
operations and intercompany loans.
During the first six 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 $120 million in the first six months. Cash
provided by financing activities totaled $540 million in 1997,
representing a $613 million increase in total borrowings,
partially offset by payment of a $73 million dividend to the
Equipment Operations. Investing activities used $670 million of
cash in the first six months of 1997, primarily due to
acquisitions of credit receivables and leases exceeding
collections by $707 million. Cash and cash equivalents decreased
$11 million during the first half of 1997.
In the first six months of 1996, $110 million of cash provided
from operating activities and $92 million of cash and cash
equivalents were used for financing and investing activities.
Cash used for financing activities totaled $188 million in 1996,
representing a $90 million decrease in total borrowings and
payment of a $98 million dividend to the Equipment Operations.
Investing activities used $14 million of cash in the first six
months of 1996, primarily due to the acquisitions of credit
receivables and leases exceeding collections by $704 million,
which was partially offset by $610 million of proceeds from the
sale of retail notes.
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 six months of
1997, marketable securities decreased $19 million primarily due
to a dividend paid by the insurance operations to the Equipment
Operations. Marketable securities are approximately equal to a
year ago.
Financing receivables and leases increased by $674 million in the
first six months of 1997 and increased by $1,349 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 six months of 1997 due to acquisitions of financing
receivables and leases exceeding collections. Total acquisitions
of financing receivables and leases were 22 percent higher in the
first six months of 1997 compared with the same period last year.
This significant increase resulted mainly 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 $379 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 $7,615 million at April 30, 1997 compared with $7,487 million
at October 31, 1996 and $6,744 million at April 30, 1996. At
April 30, 1997, the unpaid balance of all retail notes previously
sold was $856 million compared with $1,390 million at October 31,
1996 and $1,319 million at April 30, 1996. Additional sales of
retail notes may be made in the future.
Total outside interest-bearing debt of the credit subsidiaries
was $5,797 million at April 30, 1997 compared with $4,720 million
at the end of fiscal year 1996 and $4,588 million at April 30,
1996. Total outside borrowings increased during the first six
months of 1997 and the past 12 months, generally corresponding
with the levels of the credit receivable and lease portfolio
financed, 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
stockholder's equity was 6.8 to 1 at April 30, 1997 compared with
6.3 to 1 at October 31, 1996 and 5.7 to 1 at April 30, 1996.
During the first six months of 1997, the Capital Corporation
issued $200 million of 6% notes due in 1999. Additionally, the
Capital Corporation issued $255 million and retired $28 million
of medium-term notes during the first six 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 $4,174 million
at April 30, 1997, $1,143 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 $3,713 million at April 30, 1997
compared with $3,557 million at October 31, 1996 and $3,343
million at April 30, 1996. The increase of $156 million in the
first six months of 1997 resulted primarily from net income of
$496 million, partially offset by an increase in common stock in
treasury of $180 million related to the Company's stock
repurchase and employee benefit programs, dividends declared of
$102 million and a change in the cumulative translation
adjustment of $35 million.
The Board of Directors at its meeting on May 28, 1997 declared a
quarterly dividend of 20 cents per share payable August 1, 1997
to stockholders of record on June 30, 1997. The Company also
announced that John R. Stafford, chairman, president and chief
executive officer of American Home Products Corporation, has been
elected to the Company's Board of Directors.
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 7,200 shares of
restricted stock as compensation to the Company's
nonemployee directors. These shares 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
At the annual meeting of stockholders held February 26,
1997, the following directors were elected for terms
expiring at the annual meeting in 2000:
Votes For Votes Withheld
Leonard A. Hadley 215,017,822 2,377,815
Samuel C. Johnson 215,000,395 2,395,242
Arthur L. Kelly 215,046,345 2,349,292
William A. Schreyer 215,018,851 2,376,786
Hans W. Becherer, Agustin Santamarina V., David H.
Stowe, Jr. and John R. Walter continue to serve as
directors of the Company for terms expiring at the
annual meeting in 1998.
John R. Block, Regina E. Herzlinger and Arnold R. Weber
continue to serve as directors of the Company for terms
expiring at the annual meeting in 1999.
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 February 11, 1997
(Item 7).
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: June 9, 1997 By s/ Robert W. Lane
----------------------
Robert W. Lane
Senior Vice President,
Principal Financial Officer
and Principal Accounting Officer
INDEX TO EXHIBITS
Exhibit Page Number
2 Not applicable -
3 Not applicable -
4 Not applicable -
10 Not applicable -
11 Computation of net income per share 26
12 Computation of ratio of earnings to
fixed charges 27
15 Not applicable -
18 Not applicable -
19 Not applicable -
22 Not applicable -
23 Not applicable -
24 Not applicable -
27 Financial data schedule 28
99 Not applicable -
EXHIBIT 12
DEERE & COMPANY AND CONSOLIDATED SUBSIDIARIES
COMPUTATION OF RATIO OF EARNINGS TO FIXED CHARGES
Six Months Ended Year Ended
April 30 October 31
1997 1996 1996
---------------- ----------
(In thousands of dollars)
- ----------------------------------------------------------------
Earnings:
Income of consolidated group
before income taxes and
changes in accounting $793,079 $683,775 $1,286,634
Dividends received from
less-than-fifty-percent
owned affiliates 2,948 6,660 7,937
Fixed charges net of
capitalized interest 202,856 205,509 410,764
- ----------------------------------------------------------------
Total earnings $998,883 $895,944 $1,705,335
- ----------------------------------------------------------------
Fixed charges:
Interest expense of
consolidated group
(includes capitalized
interest) $198,661 $202,178 $ 402,168
Portion of rental charges
deemed to be interest 4,298 3,331 8,596
- ----------------------------------------------------------------
Total fixed charges $202,959 $205,509 $ 410,764
- ----------------------------------------------------------------
Ratio of earnings to
fixed charges* 4.92 4.36 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.
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
WARNING: THE EDGAR SYSTEM ENCOUNTERED ERROR(S) WHILE PROCESSING THIS SCHEDULE.
<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>
<RESTATED>
<CIK> 0000315189
<NAME> DEERE&COMPANY
<MULTIPLIER> 1,000,000
<CURRENCY> U.S. DOLLARS
<S> <C>
<PERIOD-TYPE> 6-MOS.
<FISCAL-YEAR-END> OCT-31-1997
<PERIOD-START> NOV-01-1996
<PERIOD-END> APR-30-1997
<EXCHANGE-RATE> 1
<CASH> 268
<SECURITIES> 850
<RECEIVABLES> 10,655
<ALLOWANCES> 139
<INVENTORY> 1,290
<CURRENT-ASSETS> 0
<PP&E> 4,218
<DEPRECIATION> 2,884
<TOTAL-ASSETS> 16,073
<CURRENT-LIABILITIES> 0
<BONDS> 2,549
<COMMON> 1,762
0
0
<OTHER-SE> 1,950
<TOTAL-LIABILITY-AND-EQUITY> 16,073
<SALES> 5,110
<TOTAL-REVENUES> 5,917
<CGS> 3,849
<TOTAL-COSTS> 4,328
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 29
<INTEREST-EXPENSE> 199
<INCOME-PRETAX> 793
<INCOME-TAX> 295
<INCOME-CONTINUING> 496
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 496
<EPS-PRIMARY> 1.94
<EPS-DILUTED> 1.94
</TABLE>
Exhibit 11
DEERE & COMPANY AND CONSOLIDATED SUBSIDIARIES
COMPUTATION OF NET INCOME PER SHARE
(Shares and dollars in thousands except per share amounts)
For the Six Months
Ended April 30
1997 1996
1. Net income $496,165 $438,907
2. Adjustment - Interest expense, after tax
benefit, applicable to convertible
debentures outstanding 6 10
--------------------
3. Net income applicable to common stock -
before interest applicable to
convertible debentures $496,171 $438,917
====================
PRIMARY NET INCOME PER COMMON SHARE:
Shares:
4. Weighted average number of common
shares outstanding 255,254 262,199
====================
5. Incremental shares:
Dilutive common stock options 2,370 2,848
Dilutive stock appreciation rights 20 51
Dilutive contingent shares 174
--------------------
Total incremental shares 2,564 2,899
====================
6. Primary net income per common share
(1 divided by 4) $ 1.94* 1.67*
====================
FULLY DILUTED NET INCOME PER COMMON SHARE:
Shares:
7. Weighted average number of common
shares outstanding 255,254 262,199
8. Incremental shares:
Dilutive common stock options 2,604 2,954
Dilutive stock appreciation rights 21 53
Dilutive contingent shares 174
9. Common equivalent shares from assumed
conversion of convertible debentures:
5-1/2% debentures due 2001 35 51
--------------------
10. Total 258,088 265,257
====================
11. Fully diluted net income per common
share (3 divided by 10) $ 1.94* $ 1.67*
====================
- --------------
* Net income per common stare 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.
