-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: keymaster@town.hall.org Originator-Key-Asymmetric: MFkwCgYEVQgBAQICAgADSwAwSAJBALeWW4xDV4i7+b6+UyPn5RtObb1cJ7VkACDq pKb9/DClgTKIm08lCfoilvi9Wl4SODbR1+1waHhiGmeZO8OdgLUCAwEAAQ== MIC-Info: RSA-MD5,RSA, DO2uKUwW87T5ncOoXzAs4Vnmh1wPTiFnny7dsDfTAixoCA5jrJjhK8hpAzcyU+Ke FnSqghob4tP44vPbAcomJg== 0000315189-94-000011.txt : 19940617 0000315189-94-000011.hdr.sgml : 19940617 ACCESSION NUMBER: 0000315189-94-000011 CONFORMED SUBMISSION TYPE: 10-Q PUBLIC DOCUMENT COUNT: 1 CONFORMED PERIOD OF REPORT: 19940430 FILED AS OF DATE: 19940610 FILER: COMPANY DATA: COMPANY CONFORMED NAME: DEERE & CO CENTRAL INDEX KEY: 0000315189 STANDARD INDUSTRIAL CLASSIFICATION: 3523 IRS NUMBER: 362382580 STATE OF INCORPORATION: DE FISCAL YEAR END: 1031 FILING VALUES: FORM TYPE: 10-Q SEC ACT: 1934 Act SEC FILE NUMBER: 001-04121 FILM NUMBER: 94533834 BUSINESS ADDRESS: STREET 1: JOHN DEERE RD CITY: MOLINE STATE: IL ZIP: 61265 BUSINESS PHONE: 3097658000 10-Q 1 FORM 10-Q 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, 1994 ______________________________ 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, 1994, 86,315,934 shares of common stock, $1 par value, of the registrant were outstanding. Page 1 of 24 Pages. Index to Exhibits: Page 22. PART I. FINANCIAL INFORMATION ITEM 1. FINANCIAL STATEMENTS DEERE & COMPANY STATEMENT OF CONSOLIDATED INCOME CONSOLIDATED (Deere & Company and Consolidated Subsidiaries) THREE MONTHS ENDED APRIL 30 Three Months Ended April 30 Millions of dollars (Unaudited) 1994 1993 Net Sales and Revenues Net sales of equipment $2,128.0 $ 1,788.2 Finance and interest income 127.8 141.5 Insurance and health care premiums 167.0 139.9 Investment income 23.7 23.7 Other income 13.7 12.0 Total 2,460.2 2,105.3 Costs and Expenses Cost of goods sold 1,646.2 1,449.0 Research and development expenses 68.7 67.8 Selling, administrative and general expenses 225.5 208.5 Interest expense 71.3 97.1 Insurance and health care claims and benefits 144.2 121.5 Other operating expenses 9.2 13.0 Restructuring costs 107.2 Total 2,165.1 2,064.1 Income (Loss) of Consolidated Group Before Income Taxes 295.1 41.2 Provision for income taxes 108.0 22.4 Income (Loss) of Consolidated Group 187.1 18.8 Equity in Income of Unconsolidated Subsidiaries and Affiliates Credit Insurance and health care .8 .7 Other 1.4 1.5 Total 2.2 2.2 Net Income $189.3 $21.0 Return on average assets 1.6% .2% Per share data Primary and fully diluted net income $ 2.20 $ .27 PART I. FINANCIAL INFORMATION ITEM 1. FINANCIAL STATEMENTS DEERE & COMPANY STATEMENT OF CONSOLIDATED INCOME EQUIPMENT OPERATIONS (Deere & Company with Financial Services on the Equity Basis) Three Months Ended April 30 Millions of dollars(Unaudited) 1994 1993 Net Sales and Revenues Net sales of equipment $2,128.0 $ 1,788.2 Finance and interest income 18.9 21.0 Insurance and health care premiums Investment income Other income 5.7 3.4 Total 2,152.6 1,812.6 Costs and Expenses Cost of goods sold 1,650.0 1,452.5 Research and development expenses 68.7 67.8 Selling, administrative and general expenses 162.5 146.2 Interest expense 30.2 48.3 Insurance and health care claims and benefits Other operating expenses 4.0 8.2 Restructuring costs 107.2 Total 1,915.4 1,830.2 Income (Loss) of Consolidated Group Before Income Taxes 237.2 (17.6) Provision for income taxes 89.7 2.7 Income (Loss) of Consolidated Group 147.5 (20.3) Equity in Income of Unconsolidated Subsidiaries and Affiliates Credit 28.4 29.1 Insurance and health care 12.0 10.7 Other 1.4 1.5 Total 41.8 41.3 Net Income $189.3 $ 21.0 PART I. FINANCIAL INFORMATION ITEM 1. FINANCIAL STATEMENTS DEERE & COMPANY STATEMENT OF CONSOLIDATED INCOME FINANCIAL SERVICES Three Months Ended April 30 Millions of dollars (Unaudited) 1994 1993 Net Sales and Revenues Net sales of equipment Finance and interest income $109.8 $121.2 Insurance and health care premiums 201.9 176.1 Investment income 23.7 23.7 Other income 9.2 10.0 Total 344.6 31.0 Costs and Expenses Cost of goods sold Research and development expenses Selling, administrative and general expenses 66.3 65.4 Interest expense 42.0 49.5 Insurance and health care claims and benefits 173.0 152.5 Other operating expenses 5.3 4.9 Restructuring costs Total 286.6 272.3 Income (Loss) of Consolidated Group Before Income Taxes 58.0 58.7 Provision for income taxes 18.4 19.6 Income (Loss) of Consolidated Group 39.6 39.1 Equity in Income of Unconsolidated Subsidiaries and Affiliates Credit Insurance and health care .8 .7 Other Total .8 .7 Net Income $ 40.4 $ 39.8 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 STATEMENT OF CONSOLIDATED INCOME CONSOLIDATED (Deere & Company and Consolidated Subsidiaries) SIX MONTHS ENDED APRIL 30 Six Months Ended April 30 Millions of dollars (Unaudited) 1994 1993 Net Sales and Revenues Net sales of equipment $3,534.8 $ 2,903.3 Finance and interest income 252.7 287.4 Insurance and health care premiums 324.5 266.8 Investment income 45.9 46.7 Other income 29.1 24.7 Total 4,187.0 3,528.9 Costs and Expenses Cost of goods sold 2,767.9 2,458.9 Research and development expenses 129.1 131.7 Selling, administrative and general expenses 423.1 405.2 Interest expense 142.5 192.1 Insurance and health care claims and benefits 279.6 228.6 Other operating expenses 16.3 19.5 Restructuring costs 107.2 Total 3,758.5 3,543.2 Income (Loss) of Consolidated Group Before Income Taxes and Changes in Accounting 428.5 (14.3) Provision (credit) for income taxes 156.1 4.1 Income (Loss) of Consolidated Group before Changes in Accounting 272.4 (18.4) Equity in Income of Unconsolidated Subsidiaries and Affiliates before Changes in Accounting Credit Insurance and health care 2.1 .8 Other 1.8 1.7 Total 3.9 2.5 Income (Loss) before Changes in Accounting 276.3 (15.9) Changes in accounting (1,105.3) Net Income (Loss) $ 276.3 $(1,121.2) Return on average assets: Before changes in accounting 2.3% (.1)% Total 2.3% (9.4)% Per share data Primary and fully diluted: Income (loss) before changes in accounting $ 3.22 $ (.21) Changes in accounting (14.30) Net income (loss) $ 3.22 $ (14.51) DEERE & COMPANY STATEMENT OF CONSOLIDATED INCOME EQUIPMENT OPERATIONS (Deere & Company with Financial Services on the Equity Basis) Six Months Ended April 30 Millions of dollars (Unaudited) 1994 1993 Net Sales and Revenues Net sales of equipment $3,534.8 $ 2,903.3 Finance and interest income 38.6 42.2 Insurance and health care premiums Investment income Other income 10.1 11.4 Total 3,583.5 2,956.9 Costs and Expenses Cost of goods sold 2,775.1 2,464.8 Research and development expenses 129.1 131.7 Selling, administrative and general expenses 297.3 283.4 Interest expense 60.9 93.4 Insurance and health care claims and benefits Other operating expenses 5.9 10.6 Restructuring costs 107.2 Total 3,268.3 3,091.1 Income (Loss) of Consolidated Group Before Income Taxes and Changes in Accounting 315.2 (134.2) Provision (credit) for income taxes 119.7 (35.8) Income (Loss) of Consolidated Group before Changes in Accounting 195.5 (98.4) Equity in Income of Unconsolidated Subsidiaries and Affiliates before Changes in Accounting Credit 54.0 59.9 Insurance and health care 25.0 20.9 Other 1.8 1.7 Total 80.8 82.5 Income (Loss) before Changes in Accounting 276.3 (15.9) Changes in accounting (1,105.3) Net Income (Loss) $ 276.3 $(1,121.2) DEERE & COMPANY STATEMENT OF CONSOLIDATED INCOME FINANCIAL SERVICES Six Months Ended April 30 Millions of dollars (Unaudited) 1994 1993 Net Sales and Revenues Net sales of equipment Finance and interest income $215.8 $246.5 Insurance and health care premiums 386.0 338.3 Investment income 45.9 46.7 Other income 21.2 16.3 Total 668.9 647.8 Costs and Expenses Cost of goods sold Research and development expenses Selling, administrative and general expenses 131.6 127.9 Interest expense 83.4 100.1 Insurance and health care claims and benefits 330.2 290.9 Other operating expenses 10.4 8.9 Restructuring costs Total 555.6 527.8 Income (Loss) of Consolidated Group Before Income Taxes and Changes in Accounting 113.3 120.0 Provision (credit) for income taxes 36.4 40.0 Income (Loss) of Consolidated Group before Changes in Accounting 76.9 80.0 Equity in Income of Unconsolidated Subsidiaries and Affiliates before Changes in Accounting Credit Insurance and health care 2.1 .8 Other Total 2.1 .8 Income (Loss) before Changes in Accounting 79.0 80.8 Changes in accounting (6.9) Net Income (Loss) $ 79.0 $ 73.9 See Notes to Interim Financial Statements. Supplemental consolidating data are shown for the "Equipment Operations" and "Financial Services". Transactions between the "Equipment Operations" and "Financial Services" have been eliminated to arrive at the "Consolidated" data. DEERE & COMPANY CONDENSED CONSOLIDATED BALANCE SHEET CONSOLIDATED (Deere & Company and Consolidated Subsidiaries) Apr 30 Oct 31 Apr 30 Millions of dollars (Unaudited) 1994 1993 1993 Assets Cash and cash equivalents $ 280.0 $ 338.2 $450.7 Marketable securities carried at cost 1,061.7 994.8 976.9 Receivables from unconsolidated subsidiaries and affiliates 4.0 4.0 16.5 Dealer accounts and notes receivable - net 3,153.0 2,793.7 3,123.4 Credit receivables - net 4,163.8 3,754.8 3,851.7 Other receivables 357.2 393.5 325.1 Equipment on operating leases - net 200.5 195.4 193.5 Inventories (Note 5) 745.5 464.4 729.3 Property and equipment - net 1,200.0 1,240.3 1,261.6 Investments in unconsolidated subsidiaries and affiliates 144.9 140.6 119.8 Intangible assets - net 295.3 296.8 332.3 Deferred income taxes 683.7 681.7 635.4 Other assets and deferred charges 202.9 169.0 169.9 Total $12,492.5 $11,467.2 $12,186.1 Liabilities and Stockholders' Equity Short-term borrowings $ 2,953.0 $ 1,601.4 $ 3,139.6 Payables to unconsolidated subsidiaries and affiliates 26.4 32.8 24.8 Accounts payable and accrued expenses 2,077.0 2,085.9 1,918.3 Insurance and health care claims and reserves 712.1 672.5 655.0 Accrued taxes 86.8 71.0 49.9 Deferred income taxes 8.2 8.6 6.8 Long-term borrowings 1,974.7 2,547.5 2,603.9 Retirement benefit accruals and other liabilities 2,345.3 2,362.1 2,336.0 Total liabilities 10,183.5 9,381.8 10,734.3 Common stock, $1 par value (issued shares at April 30, 1994 - 86,593,068) 1,473.8 1,436.8 847.9 Retained earnings (Note 3) 1,117.1 926.5 807.0 Minimum pension liability adjustment (215.5) (215.5) (156.4) Cumulative translation adjustment (Note 4) (45.0) (41.5) (27.5) Unamortized restricted stock compensation (6.2) (8.2) (5.7) Common stock in treasury, at cost (15.2) (12.7) (13.5) Total stockholders' equity 2,309.0 2,085.4 1,451.8 Total $12,492.5 $11,467.2 $12,186.1 DEERE & COMPANY CONDENSED CONSOLIDATED BALANCE SHEET EQUIPMENT OPERATIONS (Deere & Company with Financial Services on the Equity Basis) Apr 30 Oct 31 Apr 30 Millions of dollars (Unaudited) 1994 1993 1993 Assets Cash and cash equivalents $28.2 $71.7 $ 109.6 Marketable securities carried at cost Receivables from unconsolidated subsidiaries and affiliates 174.1 511.9 160.3 Dealer accounts and notes receivable - net 3,153.0 2,793.7 3,123.4 Credit receivables - net 151.9 115.8 140.2 Other receivables 14.3 Equipment on operating leases - net 70.4 76.2 75.8 Inventories (Note 5) 745.5 464.4 729.3 Property and equipment - net 1,172.0 1,215.5 1,238.2 Investments in unconsolidated subsidiaries and affiliates 1,236.8 1,341.7 1,340.9 Intangible assets - net 277.4 277.8 311.5 Deferred income taxes 629.3 628.9 581.2 Other assets and deferred charges 117.1 106.3 105.1 Total $7,755.7 $7,618.2 $7,915.5 Liabilities and Stockholders' Equity Short-term borrowings $ 493.9 $ 476.3 $1,519.7 Payables to unconsolidated subsidiaries and affiliates 41.8 32.8 29.8 Accounts payable and accrued expenses 1,460.5 1,533.4 1,344.6 Insurance and health care claims and reserves Accrued taxes 83.0 66.1 49.1 Deferred income taxes 8.1 8.4 6.4 Long-term borrowings 1,029.5 1,069.3 1,192.5 Retirement benefit accruals and other liabilities 2,329.9 2,346.5 2,321.6 Total liabilities 5,446.7 5,532.8 6,463.7 Common stock, $1 par value (issued shares at April 30, 1994 - 86,593,068) 1,473.8 1,436.8 847.9 Retained earnings (Note 3) 1,117.1 926.5 807.0 Minimum pension liability adjustment ( 215.5) (215.5) (156.4) Cumulative translation adjustment (Note 4) (45.0) (41.5) (27.5) Unamortized restricted stock compensation (6.2) (8.2) (5.7) Common stock in treasury, at cost (15.2) (12.7) (13.5) Total stockholders' equity 2,309.0 2,085.4 1,451.8 Total $ 7,755.7 $7,618.2 $7,915.5 DEERE & COMPANY CONDENSED CONSOLIDATED BALANCE SHEET FINANCIAL SERVICES Apr 30 Oct 31 Apr 30 Millions of dollars (Unaudited) 1994 1993 1993 Assets Cash and cash equivalents $ 251.8 $ 266.5 $ 341.1 Marketable securities carried at cost 1,061.7 994.8 976.9 Receivables from unconsolidated subsidiaries and affiliates 15.4 15.0 Dealer accounts and notes receivable - net Credit receivables - net 4,011.9 3,639.0 3,711.5 Other receivables 358.2 380.2 326.2 Equipment on operating leases - net 130.1 119.2 117.7 Inventories (Note 5) Property and equipment - net 28.0 24.8 23.4 Investments in unconsolidated subsidiaries and affiliates 54.7 52.1 35.7 Intangible assets - net 18.0 19.0 20.7 Deferred income taxes 54.4 52.8 54.2 Other assets and deferred charges 85.7 62.8 64.8 Total $6,069.9 $5,611.2 $5,687.2 Liabilities and Stockholders' Equity Short-term borrowings $2,459.1 $1,125.1 $1,619.9 Payables to unconsolidated subsidiaries and affiliates 170.1 507.9 153.7 Accounts payable and accrued expenses 617.5 553.6 574.8 Insurance and health care claims and reserves 712.1 672.5 655.0 Accrued taxes 3.8 4.9 .8 Deferred income taxes .2 .4 Long-term borrowings 945.2 1,478.2 1,411.4 Retirement benefit accruals and other liabilities 15.4 15.6 14.4 Total liabilities 4,923.2 4,358.0 4,430.4 Common stock, $1 par value (issued shares at April 30, 1994 - 86,593,068) 209.0 208.2 206.6 Retained earnings (Note 3) 942.5 1,046.5 1,048.8 Minimum pension liability adjustment Cumulative translation adjustment (Note 4) (4.8) (1.5) 1.4 Unamortized restricted stock compensation Common stock in treasury, at cost Total stockholders' equity 1,146.7 1,253.2 1,256.8 Total $6,069.9 $5,611.2 $5,687.2 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 CONDENSED STATEMENT OF CONSOLIDATED CASH FLOWS CONSOLIDATED (Deere & Company and Consolidated Subsidiaries) SIX MONTHS ENDED APRIL 30 Six Months Ended April 30 Millions of dollars (Unaudited) 1994 1993 Cash Flows From Operating Activities Net income (loss) $ 276.3 $(1,121.2) Adjustments to reconcile net income (loss) to net cash provided by (used for) operating activities (548.4) 862.9 Net cash provided by (used for) operating activities (272.1) (258.3) Cash Flows From Investing Activities Collections and sales of credit receivables 1,588.5 2,226.7 Proceeds from sales of marketable securities 146.7 138.4 Cost of credit receivables acquired (1,986.5) (1,735.3) Purchases of marketable securities (209.3) (158.0) Purchases of property and equipment (73.5) (80.6) Cost of operating leases acquired (45.4) (59.5) Other 58.3 22.6 Net cash provided by (used for) investing activities (521.2) 354.3 Cash Flows From Financing Activities Increase (decrease) in short-term borrowings 1,265.8 (180.5) Change in intercompany receivables/payables Proceeds from issuance of long-term borrowings 10.0 442.0 Principal payments on long-term borrowings (486.9) (50.1) Proceeds from issuance of common stock 35.5 7.8 Dividends paid (85.5) (76.3) Other (4.1) (4.7) Net cash provided by (used for) financing activities 734.8 138.2 Effect of Exchange Rate Changes on Cash .3 (.3) Net Increase (Decrease) in Cash and Cash Equivalents (58.2) 233.9 Cash and Cash Equivalents at Beginning of Period 338.2 216.8 Cash and Cash Equivalents at End of Period $ 280.0 $450.7 DEERE & COMPANY CONDENSED STATEMENT OF CONSOLIDATED CASH FLOWS EQUIPMENT OPERATIONS (Deere & Company with Financial Services on the Equity Basis) Six Months Ended April 30 Millions of dollars (Unaudited 1994 1993 Cash Flows From Operating Activities Net income (loss) $ 276.3 $(1,121.2) Adjustments to reconcile net income (loss) to net cash provided by (used for) operating activities (491.4) 760.2 Net cash provided by (used for) operating activities (215.1) (361.0) Cash Flows From Investing Activities Collections and sales of credit receivables 32.5 42.5 Proceeds from sales of marketable securities Cost of credit receivables acquired (67.9) (103.2) Purchases of marketable securities Purchases of property and equipment (68.1) (75.6) Cost of operating leases acquired (12.3) (8.7) Other 13.1 12.7 Net cash provided by (used for) investing activities (102.7) (132.3) Cash Flows From Financing Activities Increase (decrease) in short-term borrowings 144.8 666.5 Change in intercompany receivables/payables 353.2 .2 Proceeds from issuance of long-term borrowings Principal payments on long-term borrowings (169.9) (30.7) Proceeds from issuance of common stock 35.5 7.8 Dividends paid (85.5) (76.3) Other (4.1) (4.7) Net cash provided by (used for) financing activities 274.0 562.8 Effect of Exchange Rate Changes on Cash .3 (.3) Net Increase (Decrease) in Cash and Cash Equivalents (43.5) 69.2 Cash and Cash Equivalents at Beginning of Period 71.7 40.4 Cash and Cash Equivalents at End of Period $ 28.2 $ 109.6 DEERE & COMPANY CONDENSED STATEMENT OF CONSOLIDATED CASH FLOWS FINANCIAL SERVICES Six Months Ended April 30 Millions of dollars (Unaudited) 1994 1993 Cash Flows From Operating Activities Net income (loss) $ 79.0 $ 73.9 Adjustments to reconcile net income (loss) to net cash provided by (used for) operating activities 47.0 28.8 Net cash provided by (used for) operating activities 126.0 102.7 Cash Flows From Investing Activities Collections and sales of credit receivables 1,566.7 2,192.9 Proceeds from sales of marketable securities 146.7 138.4 Cost of credit receivables acquired (1,929.3) (1,640.8) Purchases of marketable securities (209.3) (158.0) Purchases of property and equipment (5.4) (5.0) Cost of operating leases acquired (33.1) (50.8) Other 45.2 9.9 Net cash provided by (used for) investing activities (418.5) 486.6 Cash Flows From Financing Activities Increase (decrease) in short-term borrowings 1,121.0 (847.0) Change in intercompany receivables/payables (353.2) (.2) Proceeds from issuance of long-term borrowings 10.0 442.0 Principal payments on long-term borrowings (316.9) (19.4) Proceeds from issuance of common stock Dividends paid (183.1) Other Net cash provided by (used for)financing activities 277.8 (424.6) Effect of Exchange Rate Changes on Cash Net Increase (Decrease) in Cash and Cash Equivalents (14.7) 164.7 Cash and Cash Equivalents at Beginning of Period 266.5 176.4 Cash and Cash Equivalents at End of Period $ 251.8 $ 341.1 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. 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 condensed financial statements be read in conjunction with the financial statements and the notes thereto included in the Company's latest annual report on Form 10-K. Results for interim periods are not necessarily indicative of those to be expected for the fiscal year. (2) The Company's consolidated financial statements and some information in the notes and related commentary are presented in a format which includes data grouped as follows: Equipment Operations - These data include the Company's agricultural equipment, industrial equipment and lawn and grounds care equipment operations with Financial Services reflected on the equity basis. Data relating to the above equipment operations, including the consolidated group data in the income statement, are also referred to as "Equipment Operations" in this report. Financial Services - These data include the Company's credit, insurance and health care operations. Consolidated - These data represent the consolidation of the Equipment Operations and Financial Services in conformity with Financial Accounting Standards Board (FASB) Statement No. 94. References to "Deere & Company" or "the Company" refer to the entire enterprise. (3) An analysis of the Company's retained earnings follows in millions of dollars: Three Months Six Months Ended Ended April 30 April 30 1994 1993 1994 1993 Balance, beginning of period........ $ 970.8 $824.0 $ 926.5 $2,004.3 Net income (loss).. 189.3 21.0 276.3(1,121.2) Dividends declared. (43.0) (38.0) (85.7) (76.1) Balance, end of period........... $1,117.1 $807.0 $1,117.1 $ 807.0 (4) An analysis of the Cumulative Translation Adjustment in millions of dollars follows: Three Months Six Months Ended Ended April 30 April 30 1994 1993 1994 1993 Balance, beginning of period................ $40.4 $21.4 $41.5 $19.4 Translation adjustments.... 5.4 4.5 3.6 8.0 Income taxes applicable to translation adjustments.. (.8) 1.6 (.1) .1 Balance, end of period..... $45.0 $27.5 $45.0 $27.5 (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. Under this method, cost of goods sold ordinarily reflects current production costs, thus providing a matching of current costs and current revenues in the income statement. However, when LIFO-valued inventories decline, lower costs that prevailed in prior years are matched against current year revenues, resulting in higher reported net income. In the first six months of 1993, the Company recognized a proportionate part of the lower, prior-year costs relating to the estimated reduction in LIFO inventories. Consequently, the after-tax results for the second quarter and first six months of 1993 benefited by $6.6 million or $.09 per share and $15.3 million or $.20 per share, respectively. A LIFO benefit was not recognized in 1994. 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: April 30 October 31 April 30 1994 1993 1993 Raw materials and supplies................ $ 196 $ 192 $ 192 Work-in-process........... 374 295 396 Finished machines and parts................... 1,140 919 1,189 Total FIFO value.......... 1,710 1,406 1,777 Adjustment to LIFO basis................... 964 942 1,048 Inventories............... $ 746 $ 464 $ 729 (6) During the first six months of 1994, the Financial Services subsidiaries and the Equipment Operations received proceeds from the sale of retail notes in the public market and to other financial institutions of $39 million. At April 30, 1994, the net unpaid balance of all retail notes previously sold by the Financial Services subsidiaries and the Equipment Operations was $900 million. The Company was contingently liable for recourse on credit receivable sales in the maximum amount of $90 million at April 30, 1994. Certain foreign subsidiaries have pledged assets with a balance sheet value of $35 million as collateral for bank advances of $1 million as of April 30, 1994. At April 30, 1994, the Company had commitments of approximately $73 million for construction and acquisition of property and equipment. (7) Dividends declared and paid on a per share basis were as follows: Three Months Six Months Ended Ended April 30 April 30 1994 1993 1994 1993 Dividends declared $.50 $.50 $1.00 $1.00 Dividends paid $.50 $.50 $1.00 $1.00 (8) The calculation of primary net income per share is based on the average number of shares outstanding during the six months ended April 30, 1994 and 1993 of 85,867,000 and 77,291,000, respectively. The calculation of fully diluted net income per share recognizes the dilutive effect of the assumed exercise of stock options, stock appreciation rights and conversion of convertible debentures. The effect of the fully diluted calculation was either immaterial or anti-dilutive. (9) In the first quarter of 1994, the Company adopted FASB Statement No. 113, Accounting and Reporting for Reinsurance of Short- Duration and Long-Duration Contracts. This Statement eliminates the practice of reporting amounts for reinsured contracts net of the effects of reinsurance. The consolidated balance sheets for prior periods were restated which increased total assets and liabilities by immaterial amounts. There were no effects on stockholders' equity or the consolidated income statement. (10) In the fourth quarter of 1993, the Company adopted FASB Statement No. 106, Employers' Accounting for Postretirement Benefits Other Than Pensions, and FASB Statement No. 112, Employers' Accounting for Postemployment Benefits, effective November 1, 1992. Previous periods of 1993 were restated as required by these Statements. As a result, the first six months of 1993 have been restated for the cumulative pretax effect of these changes in accounting of $1,728 million ($1,105 million or $14.30 per share after income taxes). The second quarter and first six months of 1993 have also been restated to reflect an incremental pretax benefits expense of $14.4 million ($9.2 million or $.12 per share after income taxes) and $29.0 million ($18.5 million or $.24 per share after income taxes), respectively. (11) During the second quarter of 1993, the Company initiated plans to downsize and rationalize its European operations. This resulted in a second quarter restructuring charge of $107.2 million ($80.0 million or $1.03 per share after income taxes). The charge mainly represents the cost of employment reductions to be implemented during 1993 and the next few years. (12) In February 1994, the Company granted 1,800 shares of stock under the Company's restricted stock plan for nonemployee directors. The market value of the restricted stock at the time of grant totaled $.2 million. At April 30, 1994, a total of 243,348 restricted shares were outstanding and 443,007 shares remained available for award under both the Plans for employees and nonemployee directors. (13) The Company is subject to various unresolved legal actions which arise in the normal course of its business, the most prevalent of which relate to product liability and retail credit matters. The Company and certain subsidiaries of the Capital Corporation are currently involved in legal actions relating to alleged violations of certain technical provisions of Texas consumer credit statutes in connection with John Deere Company's financing of the retail purchase of recreational vehicles and boats in that state. On May 23, 1994, the 162nd Judicial District Court, Dallas County, Texas approved a settlement of a class action brought by Russell Durrett individually and on behalf of others against John Deere Company (remanded on March 22, 1994 from the United States District Court for the Northern District of Texas, Dallas Division). The estimated cost of this settlement is not material. Although this settlement resolved all claims arising from 95 percent of the contracts at issue, certain cases related to the remaining five percent of the contracts are still pending. The Company and the Capital Corporation subsidiaries believe that they have substantial defenses and intend to defend the remaining actions vigorously. Although it is not possible to predict with certainty the outcome of these unresolved legal actions or the range of possible loss and the amounts of claimed damages and penalties are unspecified, the Company believes these unresolved legal actions will not be material. (14) Certain amounts for 1993 have been reclassified to conform with 1994 financial statement presentations. Item 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS RESULTS OF OPERATIONS Deere & Company's record worldwide net income for the second quarter of the 1994 fiscal year totaled $189.3 million or $2.20 per share compared with last year's restated second quarter income of $101.0 million or $1.30 per share before restructuring charges. Results for the quarter were significantly better than last year primarily due to higher North American production and sales volumes, improved operating efficiencies and substantially improved results from the overseas operations. Price realization continued to improve during the quarter compared with last year as sales incentive costs declined. Additionally, net income from the Financial Services subsidiaries remained at a very strong level during the quarter. The 1993 second quarter restated net income was $21.0 million or $.27 per share including overseas restructuring charges of $80.0 million or $1.03 per share. The 1993 second quarter and six-month results were restated as follows for accounting changes relating to Financial Accounting Standards Board (FASB) Statement No. 106, Employers' Accounting for Postretirement Benefits Other Than Pensions, and FASB Statement No. 112, Employers' Accounting for Postemployment Benefits, which were adopted in the fourth quarter of 1993, effective November 1, 1992. Three Months Six Months Ended Ended April 30 April 30 1994 1993 1994 1993 Net income as originally reported $189.3 $ 30.2 $276.3 $ 2.6 Restatement of income for the incremental effect of changes in accounting (9.2) (18.5) Income (loss) before cumulative effect of changes in accounting 189.3 21.0 276.3 (15.9) Cumulative effect of changes in accounting (1,105.3) Net income (loss) as restated $189.3 $ 21.0 $276.3 $(1,121.2) The Company also recorded restructuring charges of $80.0 million ($107.2 million before income taxes) during the second quarter of last year. The restructuring charges were mainly in response to the continuing long-term decline in agricultural equipment volumes in Western Europe. These charges consisted mainly of the cost of employment reductions resulting from the downsizing and rationalizing of the Company's European operations. These actions were to be implemented during 1993 and the next few years. As of April 30, 1994, the expected employment reductions from the restructuring in Europe were approximately 53 percent complete and approximately 52 percent of the $107 million accrual established during the second quarter of 1993 had been disbursed. Total worldwide production tonnage for the quarter was up 17 percent compared with the second quarter of 1993. Worldwide net sales and revenues increased 17 percent to $2,460 million in the second quarter of 1994 from $2,105 million during the same period last year. Net sales of equipment were $2,128 million in the quarter, an increase of 19 percent compared with $1,788 million in the second quarter of 1993. The physical volume of worldwide net sales to dealers increased approximately 16 percent in the second quarter. Net sales and revenues also include revenues of the Company's credit, insurance and health care operations, which totaled $309 million in the second quarter of 1994 compared with $295 million last year. Worldwide net income for the first six months of 1994 totaled $276.3 million or $3.22 per share compared with restated income of $64.1 million or $.82 per share before special items during the same period last year. The increase was primarily due to higher production and sales volumes reflecting higher retail sales and reduced factory production shutdowns in 1994. Operating efficiencies also continued to improve compared to the same period last year. For the first six months of 1993, the restated net loss after special items was $1,121 million or $14.51 per share, which included $1,105 million for the cumulative effect of accounting changes and $80.0 million of overseas restructuring charges. Worldwide production tonnage during the first six months of 1994 was 20 percent higher than in the same 1993 period. Worldwide net sales and revenues were $4,187 million for the initial six months of 1994, a 19 percent increase compared to $3,529 million over the same period last year. Net sales of equipment increased 22 percent to $3,535 million for the first six months of 1994 from $2,903 million during the same period of 1993. The physical volume of worldwide net sales increased approximately 18 percent in the first six months of this year. The Company's Financial Services revenues totaled $607 million during the first six months of 1994, a five percent increase compared with $576 million during the same period last year. Worldwide net sales and revenues in millions of dollars follow: Three Months Ended April 30 % 1994 1993 Change Net sales: Agricultural equipment $1,332 $1,117 +19 Industrial equipment 432 339 +27 Lawn and grounds care equipment 364 332 +10 Total net sales 2,128 1,788 +19 Financial Services revenues 309 295 + 5 Other revenues 23 22 + 5 Total net sales and revenues $2,460 $2,105 +17 United States and Canada: Equipment net sales $1,663 $1,340 +24 Financial Services revenues 309 295 + 5 Total 1,972 1,635 +21 Overseas net sales 465 448 + 4 Other revenues 23 22 + 5 Total net sales and revenues $2,460 $2,105 +17 Six Months Ended April 30 % 1994 1993 Change Net sales: Agricultural equipment $2,219 $1,806 +23 Industrial equipment 740 570 +30 Lawn and grounds care equipment 576 527 + 9 Total net sales 3,535 2,903 +22 Financial Services revenues 607 576 + 5 Other revenues 45 50 -10 Total net sales and revenues $4,187 $3,529 +19 United States and Canada: Equipment net sales $2,783 $2,169 +28 Financial Services revenues 607 576 + 5 Total 3,390 2,745 +23 Overseas net sales 752 734 + 2 Other revenues 45 50 -10 Total net sales and revenues $4,187 $3,529 +19 North American retail sales of John Deere agricultural equipment during the second quarter and the first six months were higher than last year reflecting strong customer demand. North American lawn and grounds care retail sales for both the quarter and the first six months were substantially higher than last year as a result of the continuing strength in the general economy. North American retail sales of John Deere industrial equipment were significantly higher in both the quarter and first six months compared with a year ago primarily resulting from increases in residential and public construction activity. Overseas industry retail demand for agricultural equipment remained relatively weak. The Company's worldwide Equipment Operations, which exclude the Financial Services subsidiaries, had income of $147.5 million for the quarter and $195.5 million year-to-date in 1994 compared with income before special items of $59.7 million for the quarter and a loss of $18.4 million year-to-date last year. Including the restructuring charges and the cumulative effect of the accounting changes, these operations had a net loss of $20.3 million for the second quarter last year and incurred a net loss of $1,196.8 million for the first half of 1993. Results in the second quarter and first six months of 1993 benefited by $6.6 million and $15.3 million after income taxes, respectively, from the expected reduction of inventories valued on a last-in, first-out (LIFO) basis. The income tax provisions relating to the Equipment Operations for the second quarter and first half of 1993 were affected by losses, including restructuring charges, recorded in taxing jurisdictions having low tax rates or where the Company could not record tax benefits, coupled with income realized in countries having higher income tax rates. The ratio of cost of goods sold to net sales of the Equipment Operations decreased from 81.2 percent in the second quarter of 1993 to 77.5 percent in the same period this year. During the first six months of 1994, the ratio of cost of goods sold to net sales was 78.5 percent compared with 84.9 percent in the first half of last year. The North American operations' cost ratios were lower due mainly to significantly higher production volume and improved productivity compared with last year. The overseas operations also had lower cost ratios this year due mainly to lower operating costs and somewhat higher production volume. Operating profit is defined as income before interest expense, foreign exchange gains and losses, income taxes and certain corporate expenses, except for the operating profit of the credit segment which includes the effect of interest expense. All of the Company's equipment businesses reported higher operating profits for both the quarter and first six months compared with last year. The North American agricultural equipment division generated substantially larger operating profits in both the current quarter and first six months of 1994 compared with a year ago, reflecting higher production and sales volumes and continued improvements in operating efficiencies. North American agricultural equipment production tonnage was 19 percent higher and sales increased 26 percent for the second quarter of 1994 compared with last year. Year-to-date tonnage was up 28 percent and sales were 32 percent higher compared to last year. The North American lawn and grounds care equipment division generated higher operating profits in both the second quarter and first six months of 1994 compared with last year primarily due to higher production and sales volumes. North American lawn and grounds care equipment production tonnage was up 17 percent and sales increased 11 percent in the second quarter of 1994 compared with last year. Production increased 18 percent and sales were 11 percent higher in the first six months compared with last year. The North American industrial equipment division generated improved operating profits in both the second quarter and first six months of 1994 compared with last year's small second quarter operating profit and year-to-date operating loss, mainly as a result of higher production and sales volumes and lower operating costs. North American industrial equipment production was 24 percent higher in the second quarter while sales were up 31 percent compared with last year. For the first half of 1994, production tonnage increased 23 percent while sales were 34 percent higher compared with the same period of 1993. The overseas equipment division had an operating profit in both the second quarter and first six months of 1994 compared with an operating profit before restructuring charges for the quarter last year and an operating loss year-to-date. The improvement in overseas profitability resulted from lower operating costs due to the restructuring of these operations, and sales volumes which were slightly higher than a year ago. Including the restructuring charge, the overseas division incurred large operating losses in both the second quarter and the first six months of 1993. Production tonnage increased four percent in the second quarter and two percent in the first six months of 1994 compared with the same periods last year. The physical volume of overseas sales was approximately two percent higher in the current quarter and one percent higher in the first half of 1994 compared with the same periods last year. Net income of the Company's credit operations was $28.4 million in the second quarter of 1994 compared with $29.1 million in last year's second quarter. For the first six months of 1994, net income of these subsidiaries was $54.0 million compared with income of $59.9 million last year before the cumulative effect of accounting changes. Compared with last year, earnings for both the quarter and the first six months were unfavorably affected by lower margins from a smaller average receivable and lease portfolio caused mainly by the sale of retail notes in 1993. These lower margins were partially offset by higher securitization and servicing fee income from retail notes previously sold but still administered. Administrative and operating expenses also increased as a result of an additional provision related to a legal settlement. Additionally, the provision for credit losses decreased as a result of a reduction in the credit loss provision for agricultural loans based on current and future expected credit losses. Net income of the credit operations totaled $56.1 million in the first half of 1993 including the cumulative effect of the accounting changes. Total revenues of the credit operations decreased nine percent from $131 million in the second quarter of 1993 to $119 million in the current quarter and decreased 10 percent in the first half from $263 million last year to $237 million this year. Revenues were affected by the sale of receivables during 1993 and lower levels of interest rates in 1994 resulting in lower finance charges earned on the receivable and lease portfolio compared to last year. These decreases were partially offset by securitization and servicing fee income from retail notes previously sold, which increased from $6 million in the second quarter of 1993 to $7 million in the current quarter and from $8 million in the first half of 1993 to $17 million this year. The average balance of total net receivables and leases financed was seven percent lower in the second quarter and 10 percent lower in the first six months of 1994 compared with the same periods last year. Lower borrowing rates and a decrease in average borrowings this year also resulted in a 16 percent decrease in interest expense in the current quarter and a 17 percent decrease in the first half of 1994 compared with 1993. The credit subsidiaries' consolidated ratio of earnings before fixed charges to fixed charges was 2.11 to 1 for the second quarter this year compared with 1.91 to 1 in 1993. This ratio was 2.00 to 1 for the first six months this year compared with 1.92 to 1 in the comparable period of 1993. Net income from insurance and health care operations was $12.0 million in the second quarter of 1994 compared with $10.7 million in the same quarter last year. For the first six months, net income from these operations increased to $25.0 million this year compared with income of $20.9 million in 1993 before the cumulative effect of accounting changes. Insurance and health care results for both the second quarter and the first half of 1994 have improved, reflecting the continued profitable growth of these businesses. For the second quarter, insurance and health care premiums earned increased 14 percent in 1994 compared with the same period last year, while expenses and the provision for losses increased 13 percent this year. For the six-month period, insurance and health care premiums earned increased by 13 percent in 1994, while expenses and the provision for losses increased 12 percent compared with last year. Net income of the insurance and health care operations totaled $17.8 million in the first six months of 1993 including the cumulative effect of the accounting changes. North American retail sales activity during the first two quarters of 1994 provides a sound base for operations during the remainder of the year. For 1994, the United States Department of Agriculture has projected substantial increases in planted acreages of corn and soybeans, and is forecasting that farm net cash income will be at one of the highest levels in history. These factors are expected to result in continued strong retail sales activity for agricultural equipment throughout 1994, assuming normal weather patterns and reasonably stable levels in both interest rates and farm commodity prices. The European agricultural industry remains in the midst of fundamental change due to revisions to government agricultural policies. Although the long-term downward trend of European industry retail sales of agricultural equipment is expected to continue, the current outlook for 1994 anticipates the Company's retail sales being approximately equal to 1993 levels. The North American economy in 1994 has continued to strengthen despite recent increases in interest rates, providing a solid base for industrial and lawn and grounds care equipment retail sales during the remainder of the year. Housing starts are expected to remain strong, which should further support increases in retail activity. In response to strong retail demand, the Company has increased its North American production schedules. As a result, 1994 worldwide production tonnage is now anticipated to be 16 percent higher than 1993 output, up from the Company's prior estimate of 13 percent. Worldwide agricultural equipment production tonnage is expected to be up approximately 13 percent from last year, when dealer receivables were reduced by $146 million. Lawn and grounds care equipment production is expected to be 19 percent higher than 1993 and industrial equipment production 23 percent higher than a year ago. Worldwide production during the last six months of 1994 is expected to be up 13 percent over the same period last year. However, it is important to note that production in the last half of 1994 is expected to be three percent lower than in the first six months of the year, reflecting the effects of normal seasonal vacation shutdown periods and the start-up of production of a major new tractor line. CAPITAL RESOURCES AND LIQUIDITY The discussion of capital resources and liquidity focuses on the balance sheet and statement of cash flows. The nature of the Company's Equipment Operations and Financial Services businesses are so different that most of the asset, liability and cash flow categories do not lend themselves to simple combination. Additionally, the fundamental differences between these businesses are reflected in different financial measurements commonly used by investors, rating agencies and financial analysts. In recognition of these differences and to provide greater clarity with respect to the analyses of the capital resources and liquidity of these different businesses, the following discussion has been organized to discuss 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 of $215 million in the first six months of 1994 resulted from the normal seasonal increases in dealer receivables and Company-owned inventories, annual volume discount program payments made to dealers and contributions to the pension fund. Partially offsetting these operating cash outflows were positive cash flows from net income and dividends received from the Financial Services operations. The resulting net cash requirement for operating activities, along with cash required for payment of dividends, purchases of property and equipment and a decrease in borrowings were provided primarily from a decrease in receivables from the Financial Services operations and a decrease in cash and cash equivalents. In the first half of 1993, the normal seasonal increases in dealer receivables and Company-owned inventories, annual volume discount payments to dealers and contributions to the pension fund resulted in negative cash flows from operating activities of $361 million. Partially offsetting these operating cash outflows was the positive cash flow from income, excluding the noncash effects of accounting changes and restructuring charges. The resulting net cash requirement for operating activities, along with cash required for purchases of property and equipment, payment of dividends and an increase in cash and cash equivalents were provided primarily by an increase in borrowings. Net dealer accounts and notes receivable, which largely represent dealers' inventories financed by the Company, have increased seasonally since October 31, 1993 and were comparable to a year ago despite the sizeable increase in retail demand for the Company's products. North American agricultural equipment dealer receivables increased approximately $100 million, while North American industrial equipment dealer receivables and North American lawn and grounds care dealer receivables were comparable with the levels 12 months earlier. Total overseas dealer receivables were approximately $70 million lower than a year ago. The ratios of worldwide net dealer accounts and notes receivable to the last 12 months' net sales were 44 percent at April 30, 1994, 43 percent at October 31, 1993 and 53 percent at April 30, 1993. The percentage of total worldwide dealer receivables outstanding for periods exceeding 12 months was eight percent at April 30, 1994, 11 percent at October 31, 1993 and 11 percent at April 30, 1993. Company-owned inventories at April 30, 1994 have increased seasonally by $281 million compared with the end of the previous fiscal year and are comparable to the levels one year ago. Capital expenditures for the first six months of 1994 were $68 million compared with $76 million during the same period last year. Capital expenditures were $196 million for the 1993 fiscal year and are currently expected to approximate $230 million in 1994. Total interest-bearing debt of the Equipment Operations was $1,523 million at April 30, 1994 compared with $1,546 million at the end of fiscal year 1993 and $2,712 million at April 30, 1993. The ratio of total debt to total capital (total interest-bearing debt and stockholders' equity) was 40 percent, 43 percent and 51 percent at April 30, 1994, October 31, 1993 and April 30, 1993, respectively. In January 1994, Deere & Company redeemed $80 million of its 8% debentures due 2002 and in March 1994 redeemed $37 million of its 8.45% debentures due 2000. During the first six months of 1994, Deere & Company also retired $16 million of medium-term notes. Financial Services The Financial Services' credit subsidiaries rely on their ability to raise substantial amounts of funds to finance their receivable and lease portfolios. Their primary sources of funds for this purpose are a combination of borrowings and equity capital. Additionally, the John Deere Capital Corporation (Capital Corporation), the Company's United States credit subsidiary, periodically sells substantial amounts of retail notes in the public market. The insurance and health care operations generate their funds through internal operations and have no external borrowings. During the first six months of 1994, the aggregate cash provided from operating and financing activities was used primarily to increase credit receivables. Cash provided from Financial Services operating activities was $126 million during the first six months of 1994. Financing activities provided $278 million during the same period, resulting from an $814 million increase in outside borrowings which was partially offset by a $353 million decrease in payables to the Equipment Operations and payment of a $183 million dividend to the Equipment Operations. Cash used for investing activities totaled $419 million in the first six months, primarily due to the cost of credit receivables acquired exceeding collections. Other cash flows from investing activities increased in 1994 mainly due to collections on receivables previously sold that were being held for payment to trusts. Cash and cash equivalents also decreased $15 million in the first six months of 1994. In the first six months of last year, the aggregate cash provided from operating and investing activities was used primarily to reduce outside borrowings and increase cash and cash equivalents. Cash provided from Financial Services operating activities was $103 million during the first six months of 1993. Investing activities provided $487 million of cash in the first six months of 1993, primarily due to net proceeds of $560 million received from the sale of receivables in the public market, which was partially offset by the cost of operating leases acquired of $51 million. Cash used for financing activities totaled $425 million in the first half of 1993, representing a net decrease in outside borrowings. Additionally, there was a $165 million increase in cash and cash equivalents during the first six months of 1993. The positive cash flows from insurance and health care operations have been primarily invested in marketable securities. Marketable securities carried at cost consist primarily of debt securities held by the insurance and health care operations in support of their obligations to policyholders. These investments increased in the first six months of 1994 and during the past 12 months, resulting primarily from the continuing growth in the insurance and health care operations. Net credit receivables increased by $373 million in the first six months of 1994 and by $300 million during the past 12 months. These receivables consist of retail notes originating in connection with retail sales by dealers of John Deere products, retail notes from non-Deere-related customers, revolving charge accounts, financing leases and wholesale notes receivable. The credit subsidiaries' receivables increased during the first six months of 1994 and the past 12 months due to the cost of credit receivables acquired exceeding collections. Total acquisitions of credit receivables were 18 percent higher in the first six months of 1994 compared with the same period last year. This significant increase resulted mainly from improvements in the general economy, increased retail sales of John Deere equipment and recreational products, and a higher revolving charge account and wholesale note volume. The increase in the credit receivable balance during the past 12 months was partially offset by the sale of John Deere retail notes for which net proceeds of $622 million were received. The levels of retail notes, revolving charge accounts and financing lease receivables were higher than one year ago, while wholesale receivables decreased slightly. Net credit receivables administered by the credit subsidiaries, which include receivables previously sold, amounted to $4,949 million at April 30, 1994 compared with $5,076 million at October 31, 1993 and $4,756 million at April 30, 1993. At April 30, 1994, the net unpaid balance of all retail notes previously sold was $896 million compared with $1,394 million at October 31, 1993 and $1,001 million at April 30, 1993. Additional sales of retail notes are expected to be made in future periods. Total interest-bearing debt of the credit subsidiaries was $3,404 million at April 30, 1994 compared with $2,603 million at the end of fiscal year 1993 and $3,031 million at April 30, 1993. Total outside borrowings increased during the first six months of 1994 and the past 12 months, generally corresponding with the levels of the net credit receivable and lease portfolio financed and the changes in the amounts of payables owed and dividends paid to the Equipment Operations. The credit subsidiaries' ratio of total interest-bearing debt to stockholder's equity was 5.1 to 1 at April 30, 1994 compared with 3.8 to 1 at October 31, 1993 and 3.8 to 1 at April 30, 1993. In January 1994, the Capital Corporation redeemed $40 million of its 9.35% subordinated debentures due 2003. During the first six months of 1994, the Capital Corporation also issued $10 million and retired $267 million of medium-term notes. Consolidated The parent, Deere & Company, maintains unsecured lines of credit with various banks in North America and overseas. Some of the lines are available to both the Equipment Operations and certain credit subsidiaries. Worldwide lines of credit totaled $3,357 million at April 30, 1994, $1,054 million of which were unused. For the purpose of computing unused credit lines, total short-term borrowings, excluding the current portion of long-term borrowings, were considered to constitute utilization. Included in the total credit lines are two long-term credit agreement commitments totaling $2,417 million. Stockholders' equity was $2,309 million at April 30, 1994 compared with $2,085 million at October 31, 1993 and $1,452 million at April 30, 1993. The increase of $224 million in the first six months of 1994 resulted primarily from net income of $276 million and an increase in common stock of $37 million, partially offset by dividends declared of $86 million. The Board of Directors at its meeting on May 25, 1994 declared a quarterly dividend of 50 cents per share payable August 1, 1994 to stockholders of record on June 30, 1994. PART II. OTHER INFORMATION Item 1. Legal Proceedings See Note (13) to the Interim Financial Statements. Item 2. Changes in Securities On March 1, 1994, Deere & Company redeemed all of its outstanding 8.45% debentures due 2000. Item 3. Defaults upon Senior Securities None Item 4. Submission of Matters to a Vote of Security Holders (a,c) At the annual meeting of stockholders held February 23, 1994 the following directors were elected: Votes For Votes Withheld Samuel C. Johnson 72,288,699 233,683 Arthur L. Kelly 72,306,215 216,167 William A. Schreyer 72,277,309 245,073 Hans W. Becherer, Agustin Santamarina, David H. Stowe, Jr. and John R. Walter continue to serve as directors of the Company for terms expiring at the annual meeting in 1995. John R. Block and Regina E. Herzlinger continue to serve as directors of the Company for terms expiring at the annual meeting in 1996. Owen B. Butler resigned from the Board of Directors, effective May 25, 1994. 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) 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 22, 1994 (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, 1994 By s/ P. E. Leroy P. E. Leroy Senior Vice President (Chief Financial Officer) INDEX TO EXHIBITS Number Page 2 Not applicable - 4 Not applicable - 10 Not applicable - 11 Computation of per share earnings 23 12 Computation of ratio of earnings to fixed charges 24 15 Not applicable - 18 Not applicable - 19 Not applicable - 22 Not applicable - 23 Not applicable - 24 Not applicable - 27 Not applicable - 99 Not applicable - Exhibit 11 DEERE & COMPANY AND CONSOLIDATED SUBSIDIARIES COMPUTATION OF NET INCOME PER SHARE (Shares and dollars in thousands except per share amounts) For the Six Months Ended April 30 1994 1993 1. Net income (loss) $276,265 $(1,121,201) 2. Adjustment - Interest expense, after tax benefit, applicable to convertible debentures outstanding 22 31 3. Net income (loss) applicable to common stock - before interest applicable to convertible debentures $276,287 $(1,121,170) PRIMARY NET INCOME PER COMMON SHARE: Shares: 4. Weighted average number of common shares outstanding 85,867 77,291 5. Incremental shares: Dilutive common stock options 916 917 Dilutive stock appreciation rights 57 12 Total incremental shares 973 929 6. Primary net income (loss) per common share (1 divided by 4) $ 3.22* $(14.51)* FULLY DILUTED NET INCOME PER COMMON SHARE: Shares: 7. Weighted average number of common shares outstanding 85,867 77,291 8. Incremental shares: Dilutive common stock options 916 917 Dilutive stock appreciation rights 57 26 9. Common equivalent shares from assumed conversion of convertible debentures: 5-1/2% debentures due 2001 28 53 10. Total 86,868 78,287 11. Fully diluted net income (loss) per common share (3 divided by 10) $ 3.22* $(14.51)* ____________ * Net income per common share outstanding was used in the designated calculations since the dilutive effect of common stock options, stock appreciation rights and assumed conversion of convertible debentures was immaterial or anti-dilutive. EXHIBIT 12 DEERE & COMPANY AND CONSOLIDATED SUBSIDIARIES COMPUTATION OF RATIO OF EARNINGS TO FIXED CHARGES Six Months Ended April 30 1994 1993 Earnings: Pretax income (loss) of consolidated group............ $428,527 $(14,311) Dividends received from less-than-fifty-percent owned affiliates.............. 782 286 Fixed charges net of capitalized interest.......... 145,586 195,467 Total earnings...................... $574,895 $181,442 Fixed charges: Interest expense of con- solidated group (includes capitalized interest)......... $142,522 $192,229 Portion of rental charges deemed to be interest......... 3,064 3,360 Total fixed charges........... $145,586 $195,589 Ratio of earnings to fixed charges **................. 3.95 * EXHIBIT 12 DEERE & COMPANY AND CONSOLIDATED SUBSIDIARIES COMPUTATION OF RATIO OF EARNINGS TO FIXED CHARGES Year Ended October 31 1993 1992 1991 (In thousands of dollars) Earnings: Pretax income (loss) of consolidated group $272,345 $ 43,488 $(26,176) Dividends received from less-than-fifty-percent owned affiliates 1,706 2,325 6,229 Fixed charges net of capitalized interest 375,238 420,133 454,092 Total earnings $649,289 $465,946 $434,145 Fixed charges: Interest expense of consolidated group (includes capitalized interest) $369,325 $415,205 $451,936 Portion of rental charges deemed to be interest 6,127 6,720 4,088 Total fixed charges $375,452 $421,925 $456,024 Ratio of earnings to fixed charges ** 1.73 1.10 * EXHIBIT 12 DEERE & COMPANY AND CONSOLIDATED SUBSIDIARIES COMPUTATION OF RATIO OF EARNINGS TO FIXED CHARGES Year Ended October 31 1990 1989 (In thousands of dollars) Earnings: Pretax income (loss) of consolidated group $ 587,528 $539,126 Dividends received from less-than-fifty-percent owned affiliates 7,775 1,200 Fixed charges net of capitalized interest 439,200 412,041 Total earnings $1,034,503 $952,367 Fixed charges: Interest expense of consolidated group (includes capitalized interest) $ 435,217 $406,583 Portion of rental charges deemed to be interest 3,983 5,468 Total fixed charges $ 439,200 $412,051 Ratio of earnings to fixed charges ** 2.36 2.31 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 accounting changes and fixed charges excluding capitalized interest. "Fixed charges" consist of interest on indebtedness, amortization of debt discount and expense, an estimated amount of rental expense which is deemed to be representative of the interest factor, and capitalized interest. * For the six months ended April 30, 1993 and the year ended October 31, 1991, earnings available for fixed charges coverage were $14 million less and $22 million less, respectively, than the amount required for a ratio of earnings to fixed charges of 1.0. ** The Company has not issued preferred stock. Therefore, the ratios of earnings to combined fixed charges and preferred stock dividends are the same as the ratios presented above. -----END PRIVACY-ENHANCED MESSAGE-----