UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D. C. 20549
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FORM 10-Q
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Quarterly Report Pursuant to Section 13 or 15(d) of the
Securities Exchange Act of 1934
For the quarterly period ended January 31, 1999
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Commission file no: 1-4121
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DEERE & COMPANY
Delaware 36-2382580
(State of incorporation) (IRS employer identification no.)
One John Deere Place
Moline, Illinois 61265
(Address of principal executive offices)
Telephone Number: (309) 765-8000
----------------------------
Indicate by check mark whether the registrant (1) has filed
all reports required to be filed by Section 13 or 15(d) of the
Securities Exchange Act of 1934 during the preceding 12 months
(or for such shorter period that the registrant was required to
file such reports), and (2) has been subject to such filing
requirements for the past 90 days. Yes x No
At January 31, 1999, 231,713,393 shares of common stock, $1
par value, of the registrant were outstanding.
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<PAGE>
PART 1. FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
DEERE & COMPANY CONSOLIDATED
STATEMENT OF CONSOLIDATED INCOME (Deere & Company and
Consolidated
Subsidiaries)
Millions of dollars except per Three Months Ended
share amounts January 31
(Unaudited) 1999 1998
Net Sales and Revenues
Net sales of equipment $1,973.2 $2,404.7
Finance and interest income 259.0 233.2
Insurance and health care premiums 179.8 169.0
Investment income 18.7 17.1
Other income 27.8 22.1
Total 2,458.5 2,846.1
Costs and Expenses
Cost of goods sold 1,653.8 1,866.5
Research and development expenses 95.9 94.7
Selling, administrative and general
expenses 301.8 283.1
Interest expense 134.1 114.7
Insurance and health care claims
and benefits 153.9 138.6
Other operating expenses 42.7 27.6
Total 2,382.2 2,525.2
Income of Consolidated Group
Before Income Taxes 76.3 320.9
Provision for income taxes 26.5 117.8
Income of Consolidated Group 49.8 203.1
Equity in Income (Loss) of Unconsolidated
Subsidiaries and Affiliates
Credit .4 (.2)
Insurance
Health Care
Other (.5) .4
Total (.1) .2
Net Income $ 49.7 $ 203.3
Per Share:
Net income $ .21 $ .81
Net income - diluted $ .21 $ .81
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 Services
on the Equity Basis)
Millions of dollars except per Three Months Ended
share amounts January 31
(Unaudited) 1999 1998
Net Sales and Revenues
Net sales of equipment $1,973.2 $2,404.7
Finance and interest income 21.8 32.1
Insurance and health care premiums
Investment income
Other income 15.5 10.9
Total 2,010.5 2,447.7
Costs and Expenses
Cost of goods sold 1,658.5 1,871.0
Research and development expenses 95.9 94.7
Selling, administrative and general
expenses 207.8 194.6
Interest expense 39.9 21.7
Insurance and health care claims
and benefits
Other operating expenses (2.2) 1.6
Total 1,999.9 2,183.6
Income of Consolidated Group
Before Income Taxes 10.6 264.1
Provision for income taxes 3.8 97.2
Income of Consolidated Group 6.8 166.9
Equity in Income (Loss) of Unconsolidated
Subsidiaries and Affiliates
Credit 41.6 32.9
Insurance (1.1) 5.5
Health Care 2.9 (2.4)
Other (.5) .4
Total 42.9 36.4
Net Income $ 49.7 $ 203.3
DEERE & COMPANY FINANCIAL SERVICES
STATEMENT OF CONSOLIDATED INCOME
Millions of dollars except per Three Months Ended
share amounts January 31
(Unaudited) 1999 1998
Net Sales and Revenues
Net sales of equipment
Finance and interest income $ 240.7 $ 203.2
Insurance and health care premiums 186.6 175.4
Investment income 18.7 17.1
Other income 20.7 12.5
Total 466.7 408.2
Costs and Expenses
Cost of goods sold
Research and development expenses
Selling, administrative and general
expenses 95.2 90.9
Interest expense 97.6 95.1
Insurance and health care claims
and benefits 155.7 139.4
Other operating expenses 52.5 25.9
Total 401.0 351.3
Income of Consolidated Group
Before Income Taxes 65.7 56.9
Provision for income taxes 22.7 20.7
Income of Consolidated Group 43.0 36.2
Equity in Income (Loss) of Unconsolidated
Subsidiaries and Affiliates
Credit .4 (.2)
Insurance
Health Care
Other
Total .4 (.2)
Net Income $ 43.4 $ 36.0
<PAGE>
DEERE & COMPANY CONSOLIDATED
CONDENSED CONSOLIDATED (Deere & Company and
BALANCE SHEET Consolidated Subsidiaries)
Millions of dollars January 31 October 31 January 31
(Unaudited) 1999 1998 1998
Assets
Cash and short-term
investments $ 325.5 $ 309.7 $ 319.2
Cash deposited with
unconsolidated subsidiaries
Cash and cash equivalents 325.5 309.7 319.2
Marketable securities 870.8 867.3 867.6
Receivables from
unconsolidated subsidiaries
and affiliates 48.4 36.2 14.9
Trade accounts and notes
receivable - net 3,828.8 4,059.2 3,526.4
Financing receivables - net 6,696.7 6,332.7 6,613.6
Other receivables 519.3 536.8 395.3
Equipment on operating
leases - net 1,256.5 1,209.2 820.8
Inventories 1,614.7 1,286.7 1,464.3
Property and equipment - net 1,674.3 1,700.3 1,534.8
Investments in unconsolidated
subsidiaries and affiliates 173.8 172.0 148.2
Intangible assets - net 212.0 217.6 183.8
Prepaid pension costs 662.3 674.3 574.7
Deferred income taxes 400.2 396.3 528.9
Other assets and
deferred charges 219.9 203.2 194.8
Total $18,503.2 $18,001.5 $17,187.3
Liabilities and Stockholders'
Equity
Short-term borrowings $ 5,871.2 $ 5,322.1 $ 4,934.0
Payables to unconsolidated
subsidiaries and affiliates 31.9 31.1 43.2
Accounts payable and
accrued expenses 2,359.5 2,853.2 2,458.1
Insurance and health care
claims and reserves 402.9 411.3 405.1
Accrued taxes 141.7 144.9 178.3
Deferred income taxes 18.3 19.7 21.3
Long-term borrowings 3,275.7 2,791.7 2,642.3
Retirement benefit accruals
and other liabilities 2,373.5 2,347.7 2,359.0
Total liabilities 14,474.7 13,921.7 13,041.3
Common stock, $1 par value
(issued shares at January 31,
1999 - 263,852,871) 1,788.5 1,789.8 1,778.5
Retained earnings 3,824.3 3,839.5 3,194.3
Minimum pension liability
adjustment (18.7) (18.7) (14.0)
Cumulative translation
adjustment (89.6) (80.5) (87.5)
Unrealized gain on marketable
securities 29.0 24.5 26.6
Unamortized restricted
stock compensation (25.1) (7.2) (16.1)
Common stock in treasury (1,479.9) (1,467.6) (735.8)
Stockholders' equity 4,028.5 4,079.8 4,146.0
Total $18,503.2 $18,001.5 $17,187.3
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 (Deere & Company with Financial
BALANCE SHEET Services on the Equity Basis)
Millions of dollars January 31 October 31 January 31
(Unaudited) 1999 1998 1998
Assets
Cash and short-term
investments $ 80.3 $ 68.3 $ 73.5
Cash deposited with
unconsolidated subsidiaries 92.8 139.6 180.5
Cash and cash equivalents 173.1 207.9 254.0
Marketable securities
Receivables from
unconsolidated subsidiaries
and affiliates 227.4 95.5 107.7
Trade accounts and notes
receivable - net 3,828.8 4,059.2 3,526.4
Financing receivables - net 83.4 85.8 82.7
Other receivables 42.2 139.4
Equipment on operating
leases - net 218.6 186.6
Inventories 1,614.7 1,286.7 1,464.3
Property and equipment - net 1,625.7 1,653.9 1,491.0
Investments in unconsolidated
subsidiaries and affiliates 1,693.9 1,620.4 1,510.5
Intangible assets - net 204.8 210.1 174.4
Prepaid pension costs 662.3 674.3 574.7
Deferred income taxes 379.1 372.6 485.6
Other assets and
deferred charges 159.4 141.6 125.9
Total $10,694.8 $10,766.0 $9,983.8
Liabilities and Stockholders'
Equity
Short-term borrowings $ 2,076.2 $ 1,512.4 $1,036.6
Payables to unconsolidated
subsidiaries and affiliates 31.9 43.0 43.2
Accounts payable and
accrued expenses 1,473.8 2,098.1 1,693.1
Insurance and health care
claims and reserves
Accrued taxes 136.3 142.1 165.9
Deferred income taxes 5.5 19.7 20.8
Long-term borrowings 601.2 552.9 551.9
Retirement benefit accruals
and other liabilities 2,341.4 2,318.0 2,326.3
Total liabilities 6,666.3 6,686.2 5,837.8
Common stock, $1 par value
(issued shares at January 31,
1999 - 263,852,871) 1,788.5 1,789.8 1,778.5
Retained earnings 3,824.3 3,839.5 3,194.3
Minimum pension liability
adjustment (18.7) (18.7) (14.0)
Cumulative translation
adjustment (89.6) (80.5) (87.5)
Unrealized gain on marketable
securities 29.0 24.5 26.6
Unamortized restricted
stock compensation (25.1) (7.2) (16.1)
Common stock in treasury (1,479.9) (1,467.6) (735.8)
Stockholders' equity 4,028.5 4,079.8 4,146.0
Total $10,694.8 $10,766.0 $9,983.8
DEERE & COMPANY FINANCIAL SERVICES
CONDENSED CONSOLIDATED
BALANCE SHEET
Millions of dollars January 31 October 31 January 31
(Unaudited) 1999 1998 1998
Assets
Cash and short-term
investments $ 245.2 $ 241.5 $ 245.7
Cash deposited with
unconsolidated subsidiaries
Cash and cash equivalents 245.2 241.5 245.7
Marketable securities 870.8 867.3 867.6
Receivables from
unconsolidated subsidiaries
and affiliates 6.7
Trade accounts and notes
receivables - net
Financing receivables - net 6,613.2 6,246.9 6,530.9
Other receivables 477.1 397.3 395.3
Equipment on operating
leases - net 1,256.5 990.6 634.2
Inventories
Property and equipment - net 48.6 46.4 43.8
Investments in unconsolidated
subsidiaries and affiliates 20.9 20.3 12.7
Intangible assets - net 7.2 7.6 9.4
Prepaid pension costs
Deferred income taxes 21.0 23.7 43.4
Other assets and
deferred charges 60.5 61.5 68.9
Total $9,627.7 $8,903.1 $8,851.9
Liabilities and Stockholders'
Equity
Short-term borrowings $3,795.0 $3,809.7 $3,897.4
Payables to unconsolidated
subsidiaries and affiliates 278.5 187.0 273.3
Accounts payable and
accrued expenses 885.6 755.1 765.0
Insurance and health care
claims and reserves 402.9 411.3 405.1
Accrued taxes 5.4 2.8 12.4
Deferred income taxes 12.8 .5
Long-term borrowings 2,674.6 2,238.8 2,090.4
Retirement benefit accruals
and other liabilities 32.1 29.7 32.7
Total liabilities 8,086.9 7,434.4 7,476.8
Common stock, $1 par value
(issued shares at January 31,
1999 - 263,852,871) 247.5 237.1 237.1
Retained earnings 1,284.5 1,223.2 1,121.5
Minimum pension liability
adjustment
Cumulative translation
adjustment (20.2) (16.1) (10.1)
Unrealized gain on marketable
securities 29.0 24.5 26.6
Unamortized restricted
stock compensation
Common stock in treasury
Stockholders' equity 1,540.8 1,468.7 1,375.1
Total $9,627.7 $8,903.1 $8,851.9
<PAGE>
DEERE & COMPANY CONSOLIDATED
CONDENSED STATEMENT OF (Deere & Company and
CONSOLIDATED CASH FLOWS Consolidated Subsidiaries)
Three Months Ended
January 31
Millions of dollars (Unaudited) 1999 1998
Cash Flows from Operating Activities
Net income $ 49.7 $ 203.3
Adjustments to reconcile net income
to net cash provided by (used for)
operating activities (446.8) (809.0)
Net cash provided by (used for)
operating activities (397.1) (605.7)
Cash Flows from Investing Activities
Collections and sales of
financing receivables 1,700.5 1,492.7
Proceeds from maturities and
sales of marketable securities 37.3 36.9
Cost of financing receivables
acquired (2,042.2) (1,725.7)
Purchases of marketable securities (33.8) (76.8)
Purchases of property and
equipment (54.9) (73.0)
Cost of operating leases acquired (125.2) (117.9)
Acquisitions of businesses (38.5)
Other 109.9 82.6
Net cash used for investing
activities (408.4) (419.7)
Cash Flows from Financing Activities
Increase (decrease) in short-term
borrowings 541.7 979.5
Change in intercompany
receivables/payables
Proceeds from long-term borrowings 675.0 306.0
Principal payments on long-term
borrowings (297.5) (92.6)
Proceeds from issuance of
common stock .4 6.6
Repurchases of common stock (46.1) (132.8)
Dividends paid (51.7) (50.2)
Other
Net cash provided by
financing activities 821.8 1,016.5
Effect of Exchange Rate
Changes on Cash (.5) (1.9)
Net Increase (Decrease) in Cash
and Cash Equivalents 15.8 (10.8)
Cash and Cash Equivalents at
Beginning of Period 309.7 330.0
Cash and Cash Equivalents at
End of Period $ 325.5 $ 319.2
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.
DEERE & COMPANY EQUIPMENT OPERATIONS
CONDENSED STATEMENT OF (Deere & Company with
CONSOLIDATED CASH FLOWS Financial Services on the
Equity Basis)
Three Months Ended
January 31
Millions of dollars (Unaudited) 1999 1998
Cash Flows from Operating Activities
Net income $ 49.7 $203.3
Adjustments to reconcile net income
to net cash provided by (used for)
operating activities (566.4) (879.8)
Net cash provided by (used for)
operating activities (516.7) (676.5)
Cash Flows from Investing Activities
Collections and sales of
financing receivables 7.5 10.1
Proceeds from maturities and
sales of marketable securities
Cost of financing receivables
acquired (9.0) (10.3)
Purchases of marketable securities
Purchases of property and
equipment (50.9) (71.2)
Cost of operating leases acquired (16.1)
Acquisitions of businesses (38.5)
Other 3.5 10.9
Net cash used for investing
activities (48.9) (115.1)
Cash Flows from Financing Activities
Increase (decrease) in short-term
borrowings 561.2 869.9
Change in intercompany
receivables/payables 17.6 (56.1)
Proceeds from long-term borrowings 50.0
Principal payments on long-term
borrowings (1.1)
Proceeds from issuance of
common stock .4 6.6
Repurchases of common stock (46.1) (132.8)
Dividends paid (51.7) (50.2)
Other (.1)
Net cash provided by
financing activities 531.3 636.3
Effect of Exchange Rate
Changes on Cash (.5) (1.9)
Net Increase (Decrease) in Cash
and Cash Equivalents (34.8) (157.2)
Cash and Cash Equivalents at
Beginning of Period 207.9 411.2
Cash and Cash Equivalents at
End of Period $173.1 $254.0
DEERE & COMPANY FINANCIAL SERVICES
CONDENSED STATEMENT OF Three Months Ended
CONSOLIDATED CASH FLOWS January 31
Millions of dollars (Unaudited) 1999 1998
Cash Flows from Operating Activities
Net income $ 43.4 $ 36.0
Adjustments to reconcile net income
to net cash provided by (used for)
operating activities 81.2 54.1
Net cash provided by (used for)
operating activities 124.6 90.1
Cash Flows from Investing Activities
Collections and sales of
financing receivables 1,693.0 1,482.6
Proceeds from maturities and
sales of marketable securities 37.3 36.9
Cost of financing receivables
acquired (2,033.2) (1,715.4)
Purchases of marketable securities (33.8) (76.8)
Purchases of property and
equipment (4.0) (1.8)
Cost of operating leases acquired (125.2) (101.8)
Acquisitions of businesses
Other 106.4 72.9
Net cash used for investing
activities (359.5) (303.4)
Cash Flows from Financing Activities
Increase (decrease) in short-term
borrowings (19.5) 109.6
Change in intercompany
receivables/payables (64.4) (113.3)
Proceeds from long-term borrowings 625.0 306.0
Principal payments on long-term
borrowings (297.5) (91.5)
Proceeds from issuance of
common stock
Repurchases of common stock
Dividends paid (5.0) (19.3)
Other (1.3)
Net cash provided by
financing activities 238.6 190.2
Effect of Exchange Rate
Changes on Cash
Net Increase (Decrease) in Cash
and Cash Equivalents 3.7 (23.1)
Cash and Cash Equivalents at
Beginning of Period 241.5 268.8
Cash and Cash Equivalents at End
of Period $245.2 $245.7
<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 subsidiaries.
CONSOLIDATED - These data represent the consolidation of the
Equipment Operations and Financial Services in conformity with
Financial Accounting Standards Board (FASB) Statement No. 94.
References to "Deere & Company" or "the Company" refer to the
entire enterprise.
3. An analysis of the Company's retained earnings follows in
millions of dollars:
Three Months Ended
January 31
1999 1998
Balance, beginning of period $3,839.5 $3,048.4
Net income 49.7 203.3
Dividends declared (50.7) (54.8)
Other (14.2) (2.6)
Balance, end of period $3,824.3 $3,194.3
<PAGE>
4. An analysis of the cumulative adjustment follows in
millions of dollars:
Three Months Ended
January 31
1999 1998
Balance, beginning of period $(80.5) $(57.4)
Translation adjustment (7.4) (29.9)
Income taxes applicable to
translation adjustments (1.7) (.2)
Balance, end of period $(89.6) $(87.5)
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:
January 31 October 31 January 31
1999 1998 1998
Raw Materials and supplies $ 341 $ 250 $ 259
Work-in-process 555 475 532
Finished machines and parts 1,776 1,612 1,686
Total FIFO value 2,672 2,337 2,477
Adjustment to LIFO basis 1,057 1,050 1,013
Inventories 1,615 1,287 1,464
6. During the first three months of 1999, the Financial
Services operations received proceeds from the sale of retail
notes of $102 million. At January 31, 1999, the net unpaid
balance of all retail notes previously sold by the Financial
Services operations was $1,951 million and the Company's
maximum exposure under all related recourse provisions was
$184 million.
At January 31, 1999, the Company had commitments of
approximately $85 million for construction and acquisition of
property and equipment.
7. Dividends declared and paid on a per share basis were as
follows:
Three Months Ended
January 31
1999 1998
Dividends declared $.22 $.22
Dividends paid $.22 $.20
<PAGE>
8. Worldwide net sales and revenues and operating profit in
millions of dollars follow:
Three Months Ended
January 31
%
1999 1998 Change
Net sales:
Agricultural equipment $1,123 $1,451 -23
Construction equipment 443 578 -23
Commercial and consumer equipment 407 376 + 8
Total net sales 1,973 2,405 -18
Financial Services revenues 460 401 +15
Other revenues 26 40 -35
Total net sales and revenues $2,459 $2,846 -14
United States and Canada:
Equipment net sales $1,401 $1,815 -23
Financial Services revenues 460 401 +15
Total 1,861 2,216 -16
Overseas net sales 572 590 - 3
Other revenues 26 40 -35
Total net sales and revenues $2,459 $2,846 -14
Operating profit**:
Agricultural equipment $ 25 $ 206 -88
Construction equipment 12 64 -81
Commercial and consumer equipment 14 18 -22
Equipment Operations 51 288 -82
Financial Services 66 57 +16
Total operating profit* 117 345 -66
Interest and corporate expenses-net (40) (24) +67
Income taxes (27) (118) -77
Net income $ 50 $ 203 -75
* Includes overseas operating
profit as follows: $ 54 $ 57 - 5
** Operating profit is income before interest expense,
foreign exchange gains and losses, income taxes and
certain corporate expenses. However, operating profit of
Financial Services includes the effect of interest
expense.
<PAGE>
9. A reconciliation of basic and diluted net income per share
in millions, except per share amounts, follows:
Three Months Ended
January 31
1999 1998
Net income $49.7 $203.3
Average shares outstanding 231.7 249.5
Basic net income per share $ .21 $ .81
Average shares outstanding 231.7 249.5
Effect of dilutive securities:
Stock options .9 2.6
Other .1 .3
Total potential shares outstanding 232.7 252.4
Diluted net income per share $ .21 $ .81
Stock options to purchase 4.3 million shares during the first
quarter of 1999 and 2.2 million shares during the first
quarter of 1998 were outstanding, but not included in the
above diluted per share computation because the options'
exercise prices were greater than the average market price of
the Company's common stock during the period.
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, software licensing, 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 the first quarter of 1999, the Company adopted FASB
Statement No. 130, Reporting Comprehensive Income.
Comprehensive income includes all changes in the Company's
equity during the period, except transactions with stockholders
of the Company. Comprehensive income for the first quarter of
1999 and 1998 consisted of the following in millions of
dollars:
Three Months Ended
January 31
1999 1998
Net income $49.7 $203.3
Change in cumulative translation adjustment (9.1) (30.1)
Unrealized gain on marketable securities 4.5 4.4
Comprehensive income $45.1 $177.6
12. In December 1998, the Company granted options to employees
for the purchase of 3.8 million shares of common stock at an
exercise price of $32.53 per share and .7 million shares at an
exercise price of $50.97 per share. At January 31, 1999,
options for 12.1 million shares were outstanding at option
prices in a range of $13.63 to $82.19 per share and a
weighted-average exercise price of $38.37 per share. A total
of 8.1 million shares remained available for the granting of
future options.
<PAGE>
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS
RESULTS OF OPERATIONS
Deere & Company's net income in the first quarter of 1999 was
$49.7 million, or $.21 per share (basic and diluted), compared
with $203.3 million, or $.81 per share (basic and diluted),
last year. The farm sector is continuing to feel the effects
of depressed agricultural commodity prices and demand for
agricultural equipment, especially large tractors, remained
extremely weak during the quarter. In support of the
Company's emphasis on cash flow and asset management,
agricultural equipment production schedules have been set
below the level of retail demand, resulting in a decline in
trade receivables for the quarter. Although earnings were
adversely affected by the lower production, all equipment
businesses remained profitable.
Worldwide net sales and revenues for the quarter decreased 14
percent, to $2,459 million, compared with $2,846 million last
year. Net sales to dealers of agricultural, construction, and
commercial and consumer equipment were $1,973 million,
compared to $2,405 million last year. Overseas sales were
down 3 percent in comparison with the previous year. Overall,
the Company's worldwide physical volume of sales decreased 18
percent for the quarter.
The Company's worldwide Equipment Operations, which exclude
the Financial Services operations and unconsolidated
affiliates, had income of $6.8 million for the first quarter,
compared with $166.9 million last year. Contributing to the
lower results were reduced sales and production volumes, lower
margins and higher interest costs. Worldwide equipment
operating profit, which excludes certain corporate expenses,
interest and taxes, was $51 million, compared with $288
million last year.
. Worldwide agricultural equipment operating profit totaled
$25 million for the quarter, compared with $206 million last
year. Results were severely affected by lower sales and
production levels, especially of large tractors and combines,
as well as by inefficiencies related to the production
cutbacks. In addition, sales incentive costs moved higher,
with a particular emphasis on used goods. Overseas
operations, which continued to benefit from many management
initiatives, were primary contributors to the segment's
profit.
. Worldwide construction equipment operating profit totaled
$12 million for the quarter, compared with $64 million last
year. During the quarter, the segment began implementation of
its Estimate to Cash program, which is aimed at better
matching product availability to customer requirements while
reducing field inventories. Initial stages of the program, as
expected, resulted in lower sales to dealers and had an
adverse impact on the first quarter's operating results.
Retail demand, however, remained at favorable levels.
. Worldwide commercial and consumer equipment operating profit
was $14 million for the quarter, compared with $18 million last
year. Results were negatively affected by higher costs
associated with the start-up of new facilities and the
introduction of new products, as well as by the impact of a
strengthening Japanese yen. Partly offsetting these factors were
higher worldwide sales and production volumes, resulting from the
success of many new products and a continuation of strong retail
demand.
Additional information on business segments is presented in Note
8 to the interim financial statements.
<PAGE>
Net income of the Company's credit operations was $41.6 million
in the first quarter of 1999, compared with $32.9 million in last
year's first quarter. The 1999 first quarter results benefited
from higher income on a larger average receivable and lease
portfolio, higher gains on retail note sales, a temporary
reduction in leverage position and improved financing spreads,
partially offset by higher operating expenses. Total revenues of
the credit operations increased 21 percent from $216 million in
the first quarter of 1998 to $261 million in the current quarter.
The average balance of receivables and leases financed was 11
percent higher in the first quarter, compared with the same
period last year. Interest expense increased 3 percent in the
current quarter, compared with 1998, primarily as a result of an
increase in average borrowings. The credit operations'
consolidated ratio of earnings to fixed charges was 1.63 to 1 for
the first quarter this year, compared with 1.54 to 1 in 1998.
The insurance operations had a net loss of $1.1 million in the
first quarter of 1999, compared with net income of $5.5 million
last year. The quarterly decrease primarily reflected
unfavorable underwriting results and lower investment income.
For the first quarter, insurance premiums increased 3 percent in
1999, compared with the same period last year, while total
claims, benefits, and selling, administrative and general
expenses increased 17 percent this year.
Net income from health care operations was $2.9 million in the
first quarter of 1999, compared with a net loss of $2.4 million
last year. The 1999 results benefited primarily from improved
margins, higher premium revenues and higher investment income.
For the first quarter, health care premiums and administrative
services revenues increased 9 percent in 1999, compared with the
same period last year, while total claims, benefits, and selling,
administrative and general expenses increased 4 percent this
year.
MARKET CONDITIONS AND OUTLOOK
. AGRICULTURAL EQUIPMENT. Farm commodity prices remain under
pressure due to large supplies of grains, oilseeds and livestock
and the effects of slowing growth in global demand. While the
United States government has supplemented farm income through
additional direct payments, farmers' net cash income is expected
to fall by approximately 9 percent this year with declines also
anticipated in other parts of the world. Credit availability for
equipment purchases in emerging markets also should remain under
pressure. As a result, retail demand for farm equipment is
projected to decline by 20 to 25 percent in North America this
year, with declines of 10 to 15 percent expected in other major
markets.
. CONSTRUCTION EQUIPMENT. Slower United States economic growth
is expected in 1999. However, low inflation and interest rates
should help keep housing starts near last year's levels.
Nonresidential construction is expected to show little growth
this year, but public construction, led by highway expenditures,
is expected to grow 3 to 4 percent. In this environment,
construction machinery sales should remain near 1998 levels.
. COMMERCIAL AND CONSUMER EQUIPMENT. A continuation of current
economic conditions, strong retail sales momentum, and the
introduction of a number of innovative products are expected to
support higher sales of commercial and consumer equipment during
the year.
. FINANCIAL SERVICES. A larger overall receivable and lease
portfolio should support continued improvement in the credit
operations in 1999. Health care is also well positioned for
improved results, while the Company's insurance organization
continues to face severe competitive pressures.
<PAGE>
Based on these conditions, the Company's worldwide physical
volume of sales is currently projected to decrease by
approximately 13 to 15 percent in 1999, compared with 1998.
Physical volumes in the second quarter of 1999 are projected to
be 13 percent lower than in the comparable 1998 period.
The Company enters this period of weakening demand for farm
machinery in strong financial condition. Furthermore,
performance is being supported by the Company's nonagricultural
businesses and overseas operations, which are seeing benefits
from many growth and quality initiatives. Aggressive asset
management actions, as well, are having a positive impact. Steps
to reduce agricultural equipment receivables, while contributing
to lower earnings, are helping the Company generate solid levels
of cash flow in support of its long-range global growth
objectives.
YEAR 2000
The Company has established a global program (the "Year 2000
Program") to address the inability of certain computer and
infrastructure systems to process dates in the Year 2000 and
later. The major assessment areas include business information
systems, mainframe and personal computers, software, the
distributed network, the shop floor, facilities systems, the
Company's products, product research and development facilities,
and the readiness of the Company's suppliers and distribution
network. The program includes the following phases:
identification and assessment, business criticality analysis,
project work prioritization, compliance plan development,
remediation and testing, production implementation, and
contingency plan development for mission critical systems.
The Company is on schedule to become Year 2000 ready with its
mission critical activities and systems, allowing substantial
time for further testing, verification and the final conversion
of less important systems. Over 95 percent of the Company's
systems identified as being mission critical have been tested and
verified as being Year 2000 compliant. The Company's goal has
been to have all remaining mission critical and non-mission
critical systems compliant by October 31, 1999, and the progress
to date makes this goal realistic. The Company has initiated
information and infrastructure systems modifications in its
effort to ensure that both information technology (IT) and non-IT
systems are compliant. The Company is requiring suppliers of new
software or equipment and third parties who develop or modify
software to provide written certification that their products are
Year 2000 compliant and have been tested accordingly. In some
instances, the Company is independently testing the software.
The Company is also working with suppliers to confirm embedded
systems are compliant and perform the necessary testing.
The Company is assessing the Year 2000 readiness of its product
suppliers and dealers, raising awareness among its supply base by
sponsoring seminars and developing contingency plans for its
mission critical suppliers. The Company has surveyed its major
suppliers and is following up as appropriate with risk assessment
and prioritization based on mission criticality. Date testing is
in process with many suppliers. A survey of the Company's
dealers is also in process and readiness progress will be
assessed throughout 1999. A dealer communications team has been
established to provide dealers with pertinent information,
possible areas of investigation and follow-up on dealers'
readiness.
The total cost of the modifications and upgrades to date has not
been material and the future costs to become Year 2000 ready are
not expected to be material. These costs are expensed as
incurred and do not include the cost of scheduled replacement
software. Other major systems projects have not been deferred
due to the Year 2000 compliance projects.
Although no assurances can be given as to the Company's
readiness, particularly as it relates to third parties, based
upon the progress to date, the Company does not expect the
consequences of any of the Company's unanticipated or
unsuccessful modifications to have a material adverse effect on
its financial position or
<PAGE>
results of operations. However, the failure to correct a
material Year 2000 problem could result in the interruption of
certain normal business activities and operations. The Company's
most reasonably likely worst case scenario is that the Year 2000
noncompliance of a critical third party could cause the supplier
to fail to deliver, with the result that production is
interrupted at one or more facilities. Such a disruption in
production could result in lost sales or profits. The Company is
developing contingency plans, which will be an ongoing activity
for the first three calendar quarters of 1999, should any Year
2000 failures occur in any of the assessment areas noted above.
EURO CONVERSION
The Company is well advanced in the process of identification,
implementation and testing of its systems to adopt the euro
currency in its operations affected by this change. The
Company's affected suppliers, distribution network and
financial institutions have been contacted and the Company
does not believe the currency change will significantly impact
these relationships. As a result, the Company expects to have
its systems ready to process the euro conversion during the
transition period from January 1, 1999 through January 1,
2002. The cost of information systems modifications, effects
on product pricing and purchase contracts, and the impact on
foreign currency financial instruments, including derivatives,
are not expected to be material.
SAFE HARBOR STATEMENT
SAFE HARBOR STATEMENT UNDER THE PRIVATE SECURITIES LITIGATION
REFORM ACT OF 1995: Statements under the "Outlook," "Year 2000"
and "Euro Conversion" headings and other statements herein that
relate to future operating periods are subject to important risks
and uncertainties that could cause actual results to differ
materially. Forward-looking statements relating to the Company's
businesses involve certain factors that are subject to change,
including: the many interrelated factors that affect farmers'
confidence, including worldwide demand for agricultural products
(including the impact on United States grain and meat exports of
economic difficulties in Asia and other parts of the world),
world grain stocks, commodities prices, weather conditions, real
estate values, animal diseases, crop pests, harvest yields 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 (including the
effect of conversion to the euro); technological difficulties
(including Year 2000 compliance); accounting standards; and other
risks and uncertainties. Economic difficulties in Asia and other
parts of the world could continue to adversely affect North
American grain and meat exports. The number of housing starts is
especially important to sales of construction equipment. Sales
of commercial and consumer equipment during the spring are
affected by spring weather patterns. The company's outlook is
based upon assumptions relating to the factors described above,
which are sometimes based upon estimates and data prepared by
government agencies. Such estimates and data are often revised.
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.
<PAGE>
CAPITAL RESOURCES AND LIQUIDITY
The discussion of capital resources and liquidity has been
organized to review separately, where appropriate, the Company's
Equipment Operations, Financial Services operations and the
consolidated totals.
EQUIPMENT OPERATIONS
The Company's equipment businesses are capital intensive and are
subject to large seasonal variations in financing requirements
for trade receivables from dealers and inventories. Accordingly,
to the extent necessary, funds provided from operations are
supplemented from external borrowing sources.
In the first three months of 1999, negative cash flows from
operating activities of $517 million resulted primarily from a
decrease in accounts payable and accrued expenses and an increase
in Company-owned inventories. Partially offsetting these
operating cash outflows were positive cash flows from a decrease
in trade receivables and net income. The resulting net cash
requirement for operating activities, along with payment of
dividends, purchases of property and equipment and repurchases of
common stock were provided primarily from an increase in
borrowings.
Negative cash flows from operating activities in the first three
months of 1998 of $677 million resulted primarily from an
increase in trade receivables and Company-owned inventories, and
a decrease in accounts payable and accrued expenses. Partially
offsetting these operating cash outflows were positive cash flows
from net income. The resulting net cash requirement for
operating activities, along with repurchases of common stock,
purchases of property and equipment, an increase in receivables
from Financial Services and payment of dividends, were provided
primarily from an increase in borrowings and a decrease in cash
and cash equivalents.
Net trade accounts and notes receivable result mainly from sales
to dealers of equipment that is being carried in their
inventories. Trade receivables decreased $230 million during the
first three months of 1999 and increased $302 million, compared
to one year ago. While remaining above year-ago levels, trade
receivables for agricultural and construction equipment declined
for the quarter as production volumes trailed retail demand.
Receivables related to used agricultural equipment continued at a
high level. Commercial and consumer equipment trade receivables
increased seasonally in the current quarter, and were higher than
a year ago primarily due to higher sales volumes. North American
agricultural, and commercial and consumer equipment trade
receivables increased approximately $260 million and $105
million, respectively, while construction equipment receivables
decreased approximately $155 million, compared with the levels 12
months earlier. Total overseas trade receivables were
approximately $90 million higher than a year ago. The ratios of
worldwide net trade accounts and notes receivable to the last 12
months' net sales were 33 percent at January 31, 1999, compared
to 34 percent at October 31, 1998 and 31 percent at January 31,
1998. The percentage of total worldwide trade receivables
outstanding for periods exceeding 12 months was 7 percent, 8
percent and 5 percent at January 31, 1999, October 31, 1998 and
January 31, 1998, respectively.
Company inventories at January 31, 1999 increased by $328 million
during the first three months and $150 million during the past 12
months, primarily reflecting a seasonal increase in the first
quarter and the start-up of new facilities and the introduction
of new products, compared to a year ago. Most of the Company's
inventories are valued on the last-in, first-out (LIFO) basis.
Inventories valued on an approximate current cost basis increased
by 8 percent from a year ago.
Total interest-bearing debt of the Equipment Operations was
$2,677 million at January 31, 1999, compared with $2,065 million
at the end of fiscal year 1998 and $1,588 million at January 31,
1998, generally corresponding to the levels of trade receivables,
inventories, accounts payable and accrued expenses, and
<PAGE>
treasury stock. The ratio of total debt to total capital (total
interest-bearing debt and stockholders' equity) was 40 percent,
34 percent and 28 percent at January 31, 1999, October 31, 1998
and January 31, 1998, respectively. During the first three
months, Deere & Company received proceeds of $50 million from the
issuance of medium-term notes.
FINANCIAL SERVICES
The Financial Services' credit operations 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 operations periodically sell substantial
amounts of retail notes. The insurance and health care
operations generate their funds through internal operations and
intercompany loans.
During the first quarter of 1999, the aggregate cash provided
from operating and financing activities was used primarily to
increase financing receivables and leases. Cash provided from
Financial Services operating activities was $125 million in the
current quarter. Cash provided by financing activities totaled
$239 million in the first three months of 1999, primarily
resulting from $244 million of proceeds from total borrowings,
which was partially offset by payment of a $5 million dividend to
the Equipment Operations. Cash used for investing activities
totaled $360 million in the current quarter, primarily due to the
cost of financing receivables and leases acquired exceeding
collections and sales of retail notes.
In the first quarter of 1998, the aggregate cash provided from
operating and financing activities was used primarily to increase
financing receivables. Cash provided from Financial Services
operating activities was $90 million in the first quarter of
1998. Cash provided by financing activities totaled $190 million
in 1998, primarily resulting from a $211 million increase in
total borrowings, which was partially offset by payment of a $19
million dividend to the Equipment Operations. Cash used for
investing activities totaled $303 million in the first quarter of
1998, primarily due to the cost of financing receivables and
leases acquired exceeding collections. Cash and cash equivalents
decreased $23 million during the first quarter of 1998.
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 three months of
1999 and the last 12 months, the balance has not changed
significantly.
Financing receivables and leases held by the credit operations
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. These receivables and leases
increased by $632 million in the first three months of 1999 and
$705 million during the past 12 months due to the cost of
acquisitions exceeding collections and sales of retail notes.
Total acquisitions of financing receivables and leases were 19
percent higher in the first three months of 1999, compared with
the same period last year. Acquisition volumes of retail notes,
wholesale notes, revolving charge accounts and leases were all
higher in the first three months of 1999, compared to the same
period last year. Financing receivables and leases administered
by the credit operations, which include receivables previously
sold, amounted to $9,820 million at January 31, 1999, compared
with $9,625 million at October 31, 1998 and $8,347 million at
January 31, 1998. At January 31, 1999, the unpaid balance of all
retail notes previously sold was $1,951 million, compared with
$2,388 million at October 31, 1998 and $1,182 million at January
31, 1998.
Total outside interest-bearing debt of the credit operations was
$6,470 million at January 31, 1999, compared with $6,049 million
at the end of fiscal year 1998 and $5,988 million at January 31,
1998. Total outside borrowings increased during the first three
months of 1999 and the past 12 months, generally corresponding
with the level of the financing receivable and lease portfolio,
the level of cash and cash equivalents and the
<PAGE>
change in payables owed to the Equipment Operations. The credit
operations' ratio of total interest-bearing debt to stockholder's
equity was 6.2 to 1 at January 31, 1999, compared with 6.1 to 1
at October 31, 1998 and 6.7 to 1 at January 31, 1998.
During the first quarter of 1999, the Capital Corporation retired
$150 million of 9-5/8% subordinated notes, $97 million of 5%
Swiss franc bonds and $50 million of medium-term notes all due in
the first quarter. The Capital Corporation also received
proceeds of $625 million from the issuance of medium-term notes
during the first three months of 1999.
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
operations. Worldwide lines of credit totaled $5,475 million at
January 31, 1999, $1,463 million of which were unused. For the
purpose of computing unused credit lines, total short-term
borrowings, excluding the current portion of long-term
borrowings, were considered to constitute utilization. Included
in the total credit lines is a long-term credit agreement
commitment totaling $3,500 million.
Stockholders' equity was $4,029 million at January 31, 1999,
compared with $4,080 million at October 31, 1998 and $4,146
million at January 31, 1998. The decrease of $51 million for the
first three months of 1999 resulted primarily from dividends
declared of $51 million, a change in unamortized restricted stock
compensation of $18 million, other adjustments to retained
earnings of $14 million for treasury stock transactions and an
increase in common stock in treasury of $12 million, partially
offset by net income of $50 million.
The Board of Directors at its meeting on February 24, 1999
declared a quarterly dividend of 22 cents per share payable May
3, 1999 to stockholders of record on March 31, 1999.
ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET
RISK
See the Company's most recent annual report filed on Form 10-K
(Item 7A). There has been no material change in this
information.
<PAGE>
PART II. OTHER INFORMATION
ITEM 1. LEGAL PROCEEDINGS
See Note (10) to the Interim Financial Statements.
ITEM 2. CHANGES IN SECURITIES AND USE OF PROCEEDS
None
ITEM 3. DEFAULTS UPON SENIOR SECURITIES
None
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
None
ITEM 5. OTHER INFORMATION
None
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
(a) Exhibits
See the index to exhibits immediately preceding the exhibits
filed with this report.
Certain instruments relating to long-term debt constituting
less than 10% of the registrant's total assets are not filed
as exhibits herewith pursuant to Item 601 (b) (4) (iii) (A) of
Regulation S-K. The registrant will file copies of such
instruments upon request of the Commission.
(b) Reports on Form 8-K
Current Report on Form 8-K dated November 24, 1998 (Item 7).
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of
1934, the registrant has duly caused this report to be signed
on its behalf by the undersigned thereunto duly authorized.
DEERE & COMPANY
Date: March 9, 1999 By: s/ Nathan J. Jones
Nathan J. Jones
Senior Vice President
Principal Financial Officer
and Principal Accounting Officer
<PAGE>
INDEX TO EXHIBITS
Number
2 Not applicable
3 Not applicable
4 Not applicable
10 Not applicable
11 Not applicable
12 Computation of ratio of earnings to fixed charges
15 Not applicable
18 Not applicable
19 Not applicable
22 Not applicable
23 Not applicable
24 Not applicable
27 Financial data schedule
99 Not applicable
EXHIBIT 12
DEERE & COMPANY AND CONSOLIDATED SUBSIDIARIES
COMPUTATION OF RATIO OF EARNINGS TO FIXED CHARGES
Three Months Year
Ended Ended
January 31, October 31,
1999 1998 1998
(In thousands of dollars)
Earnings:
Income of consolidated group
before income taxes
and changes in accounting $ 76,315 $320,896 $1,560,032
Dividends received from less-
than-fifty percent owned
affiliates 394 329 5,555
Fixed charges excluding
capitalized interest 137,187 117,912 531,817
Total earnings $213,896 $439,137 $2,097,404
Fixed charges:
Interest expense of con-
solidated group including
capitalized interest $134,497 $115,372 $ 521,418
Portion of rental charges
deemed to be interest 3,113 3,184 12,451
Total fixed charges $137,610 $118,556 $ 533,869
Ratio of earnings to
fixed charges* 1.55 3.70 3.93
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>
DEERE & COMPANY AND CONSOLIDATED SUBSIDIARIES
COMPUTATION OF RATIO OF EARNINGS TO FIXED CHARGES
Year Ended
October 31,
1997 1996
(In thousands of dollars)
Earnings:
Income of consolidated group
before income taxes
and changes in accounting $1,507,070 $1,286,634
Dividends received from less-
than-fifty percent owned
affiliates 3,591 7,937
Fixed charges excluding
capitalized interest 433,673 410,764
Total earnings $1,944,334 1,705,335
Fixed charges:
Interest expense of con-
solidated group including
capitalized interest $ 422,588 $ 402,168
Portion of rental charges
deemed to be interest 11,497 8,596
Total fixed charges $ 434,085 $ 410,764
Ratio of earnings to
fixed charges* 4.48 4.15
<PAGE>
DEERE & COMPANY AND CONSOLIDATED SUBSIDIARIES
COMPUTATION OF RATIO OF EARNINGS TO FIXED CHARGES
Year Ended
October 31,
1995 1994
(In thousands of dollars)
Earnings:
Income of consolidated group
before income taxes
and changes in accounting $1,092,751 $ 920,920
Dividends received from less-
than-fifty percent owned
affiliates 2,023 2,329
Fixed charges excluding
capitalized interest 399,056 310,047
Total earnings $1,493,830 $1,233,296
Fixed charges:
Interest expense of con-
solidated group including
capitalized interest $ 392,408 $ 303,080
Portion of rental charges
deemed to be interest 6,661 7,008
Total fixed charges $ 399,069 310,088
Ratio of earnings to
fixed charges* 3.74 3.98
<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> 3-MOS
<FISCAL-YEAR-END> OCT-31-1999
<PERIOD-START> NOV-01-1998
<PERIOD-END> JAN-31-1999
<EXCHANGE-RATE> 1.0
<CASH> 326
<SECURITIES> 871
<RECEIVABLES> 11,215
<ALLOWANCES> 122
<INVENTORY> 1,615
<CURRENT-ASSETS> 0
<PP&E> 4,700
<DEPRECIATION> 3,026
<TOTAL-ASSETS> 18,503
<CURRENT-LIABILITIES> 0
<BONDS> 3,276
0
0
<COMMON> 1,789
<OTHER-SE> 2,240
<TOTAL-LIABILITY-AND-EQUITY> 18,503
<SALES> 1,973
<TOTAL-REVENUES> 2,459
<CGS> 1,654
<TOTAL-COSTS> 1,946
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 10
<INTEREST-EXPENSE> 134
<INCOME-PRETAX> 76
<INCOME-TAX> 26
<INCOME-CONTINUING> 50
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 50
<EPS-PRIMARY> .21
<EPS-DILUTED> .21
</TABLE>
