-----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, I7C2aSj4PetLNnkrKFTEjFBfsKIBIb50/KIYM2Wflvfzx7D+gcYrG4PY/NCkE+iA 3Jc2WbGX/CvGBupMMnxr4Q== 0000315189-95-000003.txt : 19950615 0000315189-95-000003.hdr.sgml : 19950615 ACCESSION NUMBER: 0000315189-95-000003 CONFORMED SUBMISSION TYPE: 10-Q PUBLIC DOCUMENT COUNT: 2 CONFORMED PERIOD OF REPORT: 19950131 FILED AS OF DATE: 19950313 SROS: CSE SROS: NYSE FILER: COMPANY DATA: COMPANY CONFORMED NAME: DEERE & CO CENTRAL INDEX KEY: 0000315189 STANDARD INDUSTRIAL CLASSIFICATION: FARM MACHINERY & EQUIPMENT [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: 95520453 BUSINESS ADDRESS: STREET 1: JOHN DEERE RD CITY: MOLINE STATE: IL ZIP: 61265 BUSINESS PHONE: 3097658000 10-Q 1 SECURITIES AND EXCHANGE COMMISSION Washington, D. C. 20549 ___________________ FORM 10-Q ___________________ Quarterly Report Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934 For the quarterly period ended January 31, 1995 ______________________________ Commission file no: 1-4121 ______________________________ DEERE & COMPANY Delaware 36-2382580 (State of incorporation) (IRS employer identification no.) John Deere Road Moline, Illinois 61265 (Address of principal executive offices) Telephone Number: (309) 765-8000 ______________________________ Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes x No At January 31, 1995, 86,498,799 shares of common stock, $1 par value, of the registrant were outstanding. _________________________________________________________________ Page 1 of 21 Pages. Index to Exhibits: Page 18. PART I. FINANCIAL INFORMATION ITEM 1. FINANCIAL STATEMENTS DEERE & COMPANY STATEMENT OF CONSOLIDATED INCOME CONSOLIDATED (Deere & Company and Consolidated Subsidiaries) Three Months Ended January 31 Millions of dollars (Unaudited) 1995 1994 Net Sales and Revenues Net sales of equipment $1,730.5 $1,406.8 Finance and interest income 153.6 124.8 Insurance and health care premiums 180.5 157.5 Investment income 25.9 22.3 Other income 15.8 15.4 Total 2,106.3 1,726.8 Costs and Expenses Cost of goods sold 1,339.2 1,121.7 Research and development expenses 67.0 60.4 Selling, administrative and general expenses 220.5 197.6 Interest expense 88.4 71.2 Insurance and health care claims and benefits 158.9 135.4 Other operating expenses 10.9 7.1 Total 1,884.9 1,593.4 Income of Consolidated Group Before Income Taxes 221.4 133.4 Provision for income taxes 83.5 48.1 Income of Consolidated Group 137.9 85.3 Equity in Income (Loss) of Unconsolidated Subsidiaries and Affiliates Credit Insurance and health care .7 1.3 Other (.2) .4 Total .5 1.7 Net Income $ 138.4 $ 87.0 Per Share Data Primary and fully diluted net income $ 1.60 1.02 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 January 31 Millions of dollars (Unaudited) 1995 1994 Net Sales and Revenues Net sales of equipment $1,730.5 $1,406.8 Finance and interest income 23.8 19.7 Insurance and health care premiums Investment income Other income 6.1 4.5 Total 1,760.4 1,431.0 Costs and Expenses Cost of goods sold 1,353.2 1,125.1 Research and development expenses 67.0 60.4 Selling, administrative and general expenses 154.5 134.8 Interest expense 27.8 30.7 Insurance and health care claims and benefits Other operating expenses 5.7 2.0 Total 1,608.2 1,353.0 Income of Consolidated Group Before Income Taxes 152.2 78.0 Provision for income taxes 56.4 30.0 Income of Consolidated Group 95.8 48.0 Equity in Income (Loss) of Unconsolidated Subsidiaries and Affiliates Credit 29.7 25.6 Insurance and health care 13.1 13.0 Other (.2) .4 Total 42.6 39.0 Net Income $ 138.4 $ 87.0 PART I. FINANCIAL INFORMATION ITEM 1. FINANCIAL STATEMENTS DEERE & COMPANY STATEMENT OF CONSOLIDATED INCOME FINANCIAL SERVICES Three Months Ended January 31 Millions of dollars (Unaudited) 1995 1994 Net Sales and Revenues Net sales of equipment Finance and interest income $ 131.2 $ 106.0 Insurance and health care premiums 214.8 184.1 Investment income 25.9 22.3 Other income 10.5 12.0 Total 382.4 324.4 Costs and Expenses Cost of goods sold Research and development expenses Selling, administrative and general expenses 70.2 65.2 Interest expense 62.0 41.4 Insurance and health care claims and benefits 175.8 157.3 Other operating expenses 5.2 5.1 Total 313.2 269.0 Income of Consolidated Group Before Income Taxes 69.2 55.4 Provision for income taxes 27.1 18.1 Income of Consolidated Group 42.1 37.3 Equity in Income (Loss) of Unconsolidated Subsidiaries and Affiliates Credit Insurance and health care .7 1.3 Other Total .7 1.3 Net Income $ 42.8 $ 38.6 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) Jan 31 Oct 31 Jan 31 1995 1994 1994 Millions of dollars (Unaudited) Assets Cash and short-term investments $518.1 $254.4 $344.1 Cash deposited with unconsolidated subsidiaries Cash and cash equivalents 518.1 245.4 344.1 Marketable securities 1,103.3 1,126.3 988.3 Receivables from unconsolidated subsidiaries and affiliates .9 8.9 2.6 Dealer accounts and notes receivable - net 3,015.6 2,939.4 2,727.8 Credit receivables - net 4,662.2 4,501.7 3,907.0 Other receivables 420.0 429.7 412.3 Equipment on operating leases - net 215.6 219.5 197.0 Inventories 942.6 698.0 687.6 Property and equipment - net 1,282.6 1,314.1 1,208.4 Investments in unconsolidated subsidiaries and affiliates 152.0 154.3 146.3 Intangible assets - net 282.4 283.7 297.0 Deferred income taxes 684.1 679.8 681.8 Other assets and deferred charges 191.3 180.4 180.2 Total $13,470.7 $12,781.2 $11,780.4 Liabilities and Stockholders' Equity Short-term borrowings 3,329.4 2,637.4 2,219.0 Payables to unconsolidated subsidiaries and affiliates 35.9 34.0 21.5 Accounts payable and accrued expenses 2,123.0 2,285.2 1,959.5 Insurance and health care claims and reserves 774.2 761.3 691.5 Accrued taxes 132.0 80.2 99.9 Deferred income taxes 12.9 13.5 8.7 Long-term borrowings 2,101.9 2,053.9 2,292.4 Retirement benefit accruals and other liabilities 2,337.4 2,357.8 2,343.8 Total liabilities 10,846.7 10,223.3 9,636.3 Common stock, $1 par value (issued shares at January 31, 1995 - 86,661,548) 1,493.5 1,491.4 1,450.8 Retained earnings 1,444.9 1,353.9 970.8 Minimum pension liability adjustment (248.4) (248.4) (215.5) Cumulative translation adjustment (33.9) (17.9) (40.4) Unrealized loss on marketable securities available for sale (10.9) Unamortized restricted stock compensation (11.1) (8.8) (7.1) Common stock in treasury, at cost (10.1) (12.3) (14.5) Total stockholders' equity 2,624.0 2,557.9 2,144.1 Total $13,470.7 $12,781.2 $11,780.4 DEERE & COMPANY CONDENSED CONSOLIDATED BALANCE SHEET EQUIPMENT OPERATIONS (Deere & Company with Financial Services on the Equity Basis) Jan 31 Oct 31 Jan 31 Millions of dollars (Unaudited) 1995 1994 1994 Assets Cash and short-term investments $144.5 $ 104.0 $ 144.1 Cash deposited with unconsolidated subsidiaries 65.0 Cash and cash equivalents 209.5 104.0 144.1 Marketable securities Receivables from unconsolidated subsidiaries and affiliates 58.6 196.9 71.5 Dealer accounts and notes receivable - net 3,015.6 2,939.4 2,727.8 Credit receivables - net 109.2 115.8 152.2 Other receivables 15.2 Equipment on operating leases - net 94.9 94.3 75.0 Inventories 942.6 698.0 687.6 Property and equipment - net 1,249.1 1,281.8 1,182.3 Investments in unconsolidated subsidiaries and affiliates 1,286.4 1,285.9 1,218.1 Intangible assets - net 266.4 266.8 278.6 Deferred income taxes 619.7 620.5 628.2 Other assets and deferred charges 101.5 91.8 110.0 Total $7,953.5 $7,710.4 $7,275.4 Liabilities and Stockholders' Equity Short-term borrowings $ 403.5 $ 53.8 $ 352.7 Payables to unconsolidated subsidiaries and affiliates 35.9 34.0 21.5 Accounts payable and accrued expenses 1,414.1 1,617.3 1,295.9 Insurance and health care claims and reserves Accrued taxes 130.7 79.7 93.0 Deferred income taxes 12.9 13.5 8.7 Long-term borrowings 1,018.2 1,019.4 1,031.0 Retirement benefit accruals and other liabilities 2,314.2 2,334.8 2,328.5 Total liabilities 5,329.5 5,152.5 5,131.3 Common stock, $1 par value (issued shares at January 31, 1995 - 86,661,548) 1,493.5 1,491.4 1,450.8 Retained earnings 1,444.9 1,353.9 970.8 Minimum pension liability adjustment (248.4) (248.4) (215.5) Cumulative translation adjustment (33.9) (17.9) (40.4) Unrealized loss on marketable securities available for sale (10.9) Unamortized restricted stock compensation (11.1) (8.8) (7.1) Common stock in treasury, at cost (10.1) (12.3) (14.5) Total stockholders' equity 2,624.0 2,557.9 2,144.1 Total $7,953.5 $7,710.4 $7,275.4 DEERE & COMPANY CONDENSED CONSOLIDATED BALANCE SHEET FINANCIAL SERVICES Jan 31 Oct 31 Jan 31 Millions of dollars (Unaudited) 1995 1994 1994 Assets Cash and short-term investments $373.6 $ 141.4 $ 200.0 Cash deposited with unconsolidated subsidiaries Cash and cash equivalents 373.6 141.4 200.0 Marketable securities 1,103.3 1,126.3 988.3 Receivables from unconsolidated subsidiaries and affiliates Dealer accounts and notes receivable - net Credit receivables - net 4,553.1 4,385.9 3,754.8 Other receivables 420.9 415.5 413.4 Equipment on operating leases - net 120.6 125.2 121.9 Inventories Property and equipment - net 33.5 32.3 26.2 Investments in unconsolidated subsidiaries and affiliates 53.2 55.1 57.4 Intangible assets - net 16.0 16.9 18.5 Deferred income taxes 64.4 59.2 53.6 Other assets and deferred charges 89.8 88.6 70.1 Total $6,828.4 $6,446.4 $5,704.2 Liabilities and Stockholders' Equity Short-term borrowings $2,925.8 $2,583.5 $1,866.3 Payables to unconsolidated subsidiaries and affiliates 122.6 187.9 69.0 Accounts payable and accrued expenses 709.8 668.9 664.7 Insurance and health care claims and reserves 774.2 761.3 691.5 Accrued taxes 1.4 .5 6.8 Deferred income taxes .1 Long-term borrowings 1,083.6 1,034.5 1,261.3 Retirement benefit accruals and other liabilities 23.2 23.0 15.4 Total liabilities 5,640.7 5,259.6 4,575.0 Common stock, $1 par value (issued shares at January 31, 1995 - 86,661,548) 209.4 209.5 208.7 Retained earnings 995.8 980.3 922.1 Minimum pension liability adjustment Cumulative translation adjustment (6.6) (3.0) (1.6) Unrealized loss on marketable securities available for sale (10.9) Unamortized restricted stock compensation Common stock in treasury, at cost Total stockholders' equity 1,187.7 1,186.8 1,129.2 Total $6,828.4 $6,446.4 $5,704.2 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) Three Months Ended Jan 31 Million of dollars (Unaudited) 1995 1994 Cash Flows from Operating Activities Net income $138.4 $87.0 Adjustments to reconcile net income to net cash provided by (used for) operating activities (383.7) (307.3) Net cash provided by (used for) operating activities (245.3) (220.3) Cash Flows from Investing Activities Collections and sales of credit receivables 884.3 773.9 Proceeds from sales of marketable securities 35.4 86.2 Cost of credit receivables acquired (1,072.1) (935.3) Purchases of marketable securities (26.0) (80.4) Purchases of property and equipment (34.7) (31.9) Cost of operating leases acquired (23.7) (18.3) Other 45.2 93.2 Net cash used for investing activities (191.6) (112.6) Cash Flows from Financing Activities Increase (decrease) in short-term borrowings 889.0 630.3 Change in intercompany receivables/payables Proceeds from long-term borrowings 90.0 Principal payments on long-term borrowings (219.2) (259.1) Proceeds from issuance of common stock .9 13.9 Dividends paid (47.5) (42.7) Other (1.1) (2.5) Net cash provided by (used for) financing activities 712.1 339.9 Effect of Exchange Rate Changes on Cash (2.5) (1.1) Net Increase (Decrease) in Cash and Cash Equivalents 272.7 5.9 Cash and Cash Equivalents at Beginning of Period 245.4 338.2 Cash and Cash Equivalents at End of Period $ 518.1 $ 344.1 DEERE & COMPANY CONDENSED STATEMENT OF CONSOLIDATED CASH FLOWS EQUIPMENT OPERATIONS (Deere & Company with Financial Services on the Equity Basis) Three Months Ended January 31 Million of dollars (Unaudited) 1995 1994 Cash Flows from Operating Activities Net income $138.4 $ 87.0 Adjustments to reconcile net income to net cash provided by (used for) operating activities (434.4) (197.0) Net cash provided by (used for) operating activities (296.0) (110.0) Cash Flows from Investing Activities Collections and sales of credit receivables 16.3 19.0 Proceeds from sales of marketable securities Cost of credit receivables acquired (8.2) (55.5) Purchases of marketable securities Purchases of property and equipment (31.9) (29.2) Cost of operating leases acquired (17.9) (6.1) Other 12.1 .4 Net cash used for investing activities (29.6) (71.4) Cash Flows from Financing Activities Increase (decrease) in short-term borrowings 353.3 (47.5) Change in intercompany receivables/payables 130.2 439.0 Proceeds from long-term borrowings Principal payments on long-term borrowings (2.2) (106.1) Proceeds from issuance of common stock .9 13.9 Dividends paid (47.5) (42.7) Other (1.1) (2.5) Net cash provided by (used for) financing activities 433.6 254.1 Effect of Exchange Rate Changes on Cash (2.5) (.3) Net Increase (Decrease) in Cash and Cash Equivalents 105.5 72.4 Cash and Cash Equivalents at Beginning of Period 104.0 71.7 Cash and Cash Equivalents at End of Period $209.5 144.1 DEERE & COMPANY CONDENSED STATEMENT OF CONSOLIDATED CASH FLOWS FINANCIAL SERVICES Three Months Ended January 31 Million of dollars (Unaudited) 1995 1994 Cash Flows from Operating Activities Net income $ 42.8 $ 38.6 Adjustments to reconcile net income to net cash provided by (used for) operating activities 35.3 14.2 Net cash provided by (used for) operating activities 78.1 52.8 Cash Flows from Investing Activities Collections and sales of credit receivables 868.0 759.9 Proceeds from sales of marketable securities 35.4 86.2 credit receivables acquired (1,064.0) (884.7) Purchases of marketable securities (26.0) (80.4) Purchases of property and equipment (2.8) (2.7) Cost of operating leases acquired (5.8) (12.2) Other 33.2 92.7 Net cash used for investing activities (162.0) (41.2) Cash Flows from Financing Activities Increase (decrease) in short-term borrowings 535.7 677.8 Change in intercompany receivables/payables (65.3) (439.0) Proceeds from long-term borrowings 90.0 Principal payments on long-term borrowings (217.0) (153.0) Proceeds from issuance of common stock Dividends paid (27.3) (163.1) Other Net cash provided by (used for) financing activities 316.1 (77.3) Effect of Exchange Rate Changes on Cash (.8) Net Increase (Decrease) in Cash and Cash Equivalents 232.2 (66.5) Cash and Cash Equivalents at Beginning of Period 141.4 266.5 Cash and Cash Equivalents at End of Period $ 373.6 $200.0 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 interim financial statements be read in conjunction with the financial statements and the notes thereto included in the Company's latest annual report on Form 10-K. Results for interim periods are not necessarily indicative of those to be expected for the fiscal year. (2) The Company's consolidated financial statements and some information in the notes and related commentary are presented in a format which includes data grouped as follows: Equipment Operations - These data include the Company's agricultural equipment, industrial equipment and lawn and grounds care equipment operations with Financial Services reflected on the equity basis. Data relating to the above equipment operations, including the consolidated group data in the income statement, are also referred to as "Equipment Operations" in this report. Financial Services - These data include the Company's credit, insurance and health care operations. Consolidated - These data represent the consolidation of the Equipment Operations and Financial Services in conformity with Financial Accounting Standards Board (FASB) Statement No. 94. References to "Deere & Company" or "the Company" refer to the entire enterprise. (3) An analysis of the Company's retained earnings follows in millions of dollars: Three Months Ended January 31 1995 1994 Balance, beginning of period......... $1,353.9 $926.5 Net income........................... 138.4 87.0 Dividends declared................... (47.4) (42.7) Balance, end of period............... $1,444.9 $970.8 (4) An analysis of the cumulative translation adjustment follows in millions of dollars: Three Months Ended January 31 1995 1994 Balance, beginning of period......... $17.9 $41.5 Translation adjustment............... 16.0 (1.8) Income taxes applicable to translation adjustments .7 Balance, end of period............... $33.9 $40.4 (5) Substantially all inventories owned by Deere & Company and its United States equipment subsidiaries are valued at cost on the last-in, first-out (LIFO) method. If all of the Company's inventories had been valued on an approximate first-in, first-out (FIFO) value, estimated inventories by major classification in millions of dollars would have been as follows: January 31 October 31 January 31 1995 1994 1994 Raw materials and supplies................ $ 224 $ 206 $ 191 Work-in-process........... 432 357 369 Finished machines and parts................... 1,247 1,079 1,075 Total FIFO value.......... 1,903 1,642 1,635 Adjustment to LIFO basis................... 960 944 947 Inventories............... $ 943 $ 698 $ 688 (6) At January 31, 1995, the net unpaid balance of all retail notes previously sold by the Financial Services subsidiaries and the Equipment Operations was $953 million. At January 31, 1995, the Company's maximum exposure under all credit receivable recourse provisions was $143 million for all retail notes sold. Certain foreign subsidiaries have pledged assets with a balance sheet value of $46 million as collateral for bank advances of $1 million as of January 31, 1995. At January 31, 1995, the Company had commitments of approximately $48 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 1995 1994 Dividends declared................... $.55 $.50 Dividends paid....................... $.55 $.50 (8) Worldwide net sales and revenues and operating profit in millions of dollars follow: Three Months Ended January 31 % 1995 1994 Change Net sales: Agricultural equipment $1,022 $ 887 +15 Industrial equipment 408 308 +32 Lawn and grounds care equipment* 301 212 +42 Total net sales 1,731 1,407 +23 Financial Services revenues 347 298 +16 Other revenues 28 22 +27 Total net sales and revenues $2,106 $1,727 +22 United States and Canada: Equipment net sales* $1,326 $1,120 +18 Financial Services revenues 347 298 +16 Total 1,673 1,418 +18 Overseas net sales* 405 287 +41 Other revenues 28 22 +27 Total net sales and revenues $2,106 $1,727 +22 Operating profit: Agricultural equipment $ 115 $ 85 Industrial equipment 45 9 Lawn and grounds care equipment 28 20 Financial Services** 70 57 Total operating profit 258 171 Interest and corporate expenses-net (36) (36) Income taxes (84) (48) Net income $ 138 $ 87 * First quarter 1995 worldwide lawn and grounds care equipment net sales, United States and Canada net sales and overseas net sales include $50 million, $39 million and $11 million, respectively, of sales by Homelite, which was acquired in the fourth quarter of 1994. ** Operating profit of Financial Services includes the effect of interest expense. (9) The calculation of primary net income per share is based on the average number of shares outstanding during the three months ended January 31, 1995 and 1994 of 86,486,000 and 85,592,000, 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 immaterial. (10) In February 1995, the stockholders approved an equity incentive plan (Plan) for key employees of the Company. Under the Plan, up to 1,000,000 shares may be granted as restricted stock. The Company will establish the performance goals and the periods of restriction for each award, and hold the restricted stock during the restriction period. The employee will receive any dividends and vote the restricted stock during this period. No stock may be granted under this Plan after December 31, 2004. In December 1994, subject to stockholder approval, the Company granted 66,852 shares of restricted stock under this Plan. The market value of the restricted stock at the time of grant totaled $4.2 million and was recorded as unamortized restricted stock compensation in a separate component of stockholders' equity, which will be amortized to expense over the restricted period. The market value of the stock is remeasured at the end of each reporting period with appropriate adjustments made to the unamortized and amortized expense. At January 31, 1995, 312,777 restricted shares were outstanding and 1,311,422 shares remained available for award under all restricted stock plans for employees and nonemployee directors. (11) In December 1994, the Company granted options to employees for the purchase of 841,864 shares of common stock at an exercise price of $63.06 per share. At January 31, 1995, options for 2,608,773 shares were outstanding at option prices in a range of $23.31 to $70.69 per share. A total of 3,024,949 shares remain available for the granting of future options. (12) The Company is subject to various unresolved legal actions which arise in the normal course of its business, the most prevalent of which relate to product liability and retail credit matters. Although it is not possible to predict with certainty the outcome of these unresolved legal actions or the range of possible loss, the Company believes these unresolved legal actions will not have a material effect on its financial position or results of operations. (13) During the second quarter of 1993, the Company initiated plans to downsize and rationalize its European operations. This resulted in a restructuring charge of $80 million after income taxes or $1.03 per share ($107 million before income taxes). The charge mainly represents the cost of employment reductions to be implemented during 1993 and the next few years. As of January 31, 1995, the expected employment reductions and the disbursement of the $107 million accrual were both approximately 70 percent complete. (14) In the first quarter of 1995, the Company adopted FASB Statement No. 115, Accounting for Certain Investments in Debt and Equity Securities. The Company designated approximately two-thirds of its debt securities as held-to-maturity with the remaining debt and equity securities classified as available- for-sale. The held-to-maturity debt securities are carried at cost and the available-for-sale securities are carried at fair value with unrealized gains and losses shown as a separate component of stockholders' equity. Previously, the Company valued all its securities on a cost basis. The Statement had an immaterial effect on stockholders' equity and no impact on the consolidated income statement. (15) In January 1995, the Company's insurance subsidiaries agreed to sell their 3.1 million shares (43.8 percent) of Re Capital Corporation to Zurich Reinsurance Centre Holdings, Inc. for $18.50 a share. The sale did not have a significant effect on the consolidated financial position or net income for the first quarter of 1995. Item 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS RESULTS OF OPERATIONS Deere & Company's worldwide net income was $138.4 million or $1.60 per share in the first quarter of the 1995 fiscal year compared with $87.0 million or $1.02 per share in the first quarter of 1994. This was the Company's sixth consecutive quarter of record earnings and the first time that earnings in the first quarter exceeded $100 million. Worldwide net income improved by $51.4 million or approximately 60 percent compared with last year's previous record first quarter, due primarily to continued improvements in both overseas and domestic operating efficiencies, combined with higher production and sales activity. The first quarter 1995 worldwide production tonnage was approximately 11 percent higher than last year. Worldwide net sales and revenues increased 22 percent to $2,106 million in the first quarter of 1995 compared with $1,727 million last year. Net sales and revenues include net sales to dealers of agricultural, industrial and lawn and grounds care equipment which totaled $1,731 million (including $50 million of sales by Homelite) in the first quarter of 1995, an increase of 23 percent from sales of $1,407 million in the first quarter of last year. The physical volume of worldwide net sales to dealers increased approximately 18 percent in the first quarter this year. North American sales of John Deere agricultural, industrial and lawn and grounds care equipment all increased during the quarter compared with last year. Overseas net sales and physical volume of sales were 41 percent and 29 percent higher, respectively, in the first quarter of 1995 compared with the same period a year ago. The Company's worldwide Equipment Operations, which exclude the Financial Services subsidiaries and unconsolidated affiliates, had income of $95.8 million in the first quarter this year compared with $48.0 million last year. All of the Company's equipment businesses generated higher operating profits for the quarter compared with last year. The improved results generally reflect higher production and sales volumes and continued domestic and overseas improvements in operating efficiencies. The ratio of cost of goods sold to net sales of the Equipment Operations decreased from 80.0 percent in the first quarter of 1994 to 78.2 percent in the same period this year. Operating profit is defined as income before interest expense, foreign exchange gains and losses, income taxes and certain corporate expenses, except for the operating profit of the credit segment, which includes the effect of interest expense. Additional information on business segments is presented in Note 8 to the interim financial statements. On March 5, 1995, the United Auto Workers (UAW) ratified a new agreement with the Company extending through September 30, 1997. UAW employees have been working under the terms of the former contract, which expired on September 30, 1994. Net income of the Company's credit operations was $29.7 million for the first quarter of 1995 compared to $25.6 million last year. The increase in earnings primarily reflects a larger receivable and lease portfolio and a lower provision for credit losses. Total revenues of the credit operations increased 20 percent from $118 million in the first quarter of 1994 to $142 million in the first quarter of 1995. The average balance of receivables and leases financed was 20 percent higher than in the first three months of last year. An increase in average borrowings and higher borrowing rates this year resulted in a 50 percent increase in interest expense compared with the first quarter of 1994. The credit subsidiaries' consolidated ratio of earnings to fixed charges was 1.75 to 1 during the first three months this year compared with 1.90 to 1 in the comparable period of 1994. Net income from insurance and health care operations was $13.1 million in the first quarter of 1995 compared with $13.0 million last year. The improvement in insurance and health care underwriting earnings and investment income in 1995 was offset by an increase in the provision for income taxes primarily due to an increase in the effective tax rate. For the three-month period, insurance and health care premiums earned increased 17 percent in 1995 compared with the same period last year, while expenses and the provision for losses increased 14 percent this year. First quarter North American retail sales of agricultural equipment continue to provide a strong base for operations. Near-record United States net farm cash income in 1994 should support strong 1995 farm expenditures. Higher exports of farm commodities should continue to result from ratification of the General Agreement on Tariffs and Trade, which lowers European Union export subsidies. Higher incomes in developing countries are expected to promote better markets for United States grains and oil seeds. Although some uncertainty may develop during 1995 as a result of a new pending United States farm bill, farmers have made significant improvements in their balance sheets, which increases their ability to modernize their equipment lines. Additionally, the Company's new row-crop tractor lines have been well received by customers throughout the world. The Company believes, on balance, these factors will support farmers' buying confidence and, as a result, worldwide demand for agricultural equipment will remain strong. Similarly, the markets for the Company's other major businesses remain healthy. The North American general economy continues to show moderate growth, which should support strong demand for both industrial and lawn and grounds care equipment as well as providing a sound basis for expansion of the Company's Financial Services revenues. In response to these market conditions, the Company's worldwide Equipment Operations' production tonnage is expected to increase by approximately four percent in 1995 compared with 1994. North American production tonnage is expected to increase by six percent, while overseas schedules are expected to decrease by four percent. Second quarter worldwide production tonnage is expected to increase by approximately seven percent compared with last year, reflecting continued strong retail demand coupled with the excellent initial acceptance of the new 8000-series row-crop tractor line. Although certain tires remain in tight supply due to a work stoppage at one of the Company's key suppliers, second quarter product availability should not be adversely affected if promised supply dates are met. CAPITAL RESOURCES AND LIQUIDITY The discussion of capital resources and liquidity has been organized to review separately, where appropriate, the Company's Equipment Operations, Financial Services operations and the consolidated totals. Equipment Operations The Company's equipment businesses are capital intensive and are subject to large seasonal variations in financing requirements for receivables from dealers and inventories. Accordingly, to the extent necessary, funds provided from operations are supplemented from external borrowing sources. Negative cash flows from operating activities of $296 million in the first quarter of 1995 resulted from the normal seasonal increases in Company-owned inventories and dealer receivables and annual volume discount program payments made to dealers. Partially offsetting these operating cash outflows were positive cash flows from net income and dividends received from the Financial Services operations. The resulting net cash requirement for operating activities, along with cash required for increases in cash and cash equivalents, payment of dividends and purchases of property and equipment were provided primarily from an increase in borrowings and a decrease in receivables from the Financial Services operations. In the first quarter of 1994, the negative cash flows from operating activities of $110 million resulted from the normal seasonal increases in Company-owned inventories, annual volume discount program payments made to dealers and contributions to the pension fund. Partially offsetting these operating cash outflows were dividends received from the Financial Services operations and positive cash flows from net income and the decline in dealer receivables. The resulting net cash requirements for operating activities, along with cash required for the payment of borrowings, increases in cash and cash equivalents, payment of dividends and purchases of property and equipment were provided primarily from a decrease in receivables from the Financial Services operations. Net dealer accounts and notes receivable, which largely represent dealers' inventories financed by the Company, increased $76 million during the first quarter reflecting the normal seasonal build up and slightly higher dealer inventories of used and pre-sold equipment. Dealer receivables were $288 million higher than one year ago primarily due to a higher level of sales. North American agricultural equipment and industrial equipment dealer receivables increased approximately $80 million and $35 million, respectively, compared with the levels 12 months earlier. North American lawn and grounds care dealer receivables increased approximately $100 million compared to a year earlier, which included an additional $33 million of Homelite receivables in 1995. Total overseas dealer receivables were approximately $70 million higher than a year ago, half of which was due to higher foreign currency exchange rates in 1995. The ratios of worldwide net dealer accounts and notes receivable to the last 12 months' net sales were 38 percent at January 31, 1995, 38 percent at October 31, 1994 and 40 percent at January 31, 1994. The percentage of total worldwide dealer receivables outstanding for periods exceeding 12 months was seven percent at January 31, 1995, seven percent at October 31, 1994 and 10 percent at January 31, 1994. Company-owned inventories at January 31, 1995 have increased by approximately $250 million compared with the end of the previous fiscal year and one year ago, reflecting normal seasonal increases as well as higher raw material and work-in-process inventories required to produce second quarter schedules. Additionally, certain models of tractors were temporarily delayed in shipment to dealers at quarter end awaiting February tire deliveries. Total interest-bearing debt of the Equipment Operations was $1,422 million at January 31, 1995 compared with $1,073 million at the end of fiscal year 1994 and $1,384 million at January 31, 1994. The ratio of total debt to total capital (total interest-bearing debt and stockholders' equity) was 35 percent, 30 percent and 39 percent at January 31, 1995, October 31, 1994 and January 31, 1994, respectively. Financial Services The Financial Services' credit subsidiaries rely on their ability to raise substantial amounts of funds to finance their receivable and lease portfolios. Their primary sources of funds for this purpose are a combination of borrowings and equity capital. Additionally, the 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 quarter of 1995, the aggregate cash provided from operating and financing activities was used primarily to increase credit receivables and cash and cash equivalents. Cash provided from Financial Services operating activities was $78 million in the current quarter. Cash provided by financing activities totaled $316 million in 1995, resulting from a $408 million increase in outside borrowings, which was partially offset by a $65 million decrease in payables to the Equipment Operations and payment of a $27 million dividend to the Equipment Operations. Cash used for investing activities totaled $162 million in the current quarter, primarily due to the cost of credit receivables acquired exceeding collections. Cash and cash equivalents increased $232 million during the first quarter. In the first quarter of last year, $53 million of cash provided from operating activities and $67 million of cash and cash equivalents were used for financing and investing activities. Cash outlays for financing activities totaled $77 million during the first quarter of 1994, resulting from a $439 million decrease in payables to the Equipment Operations and payment of a $163 million dividend to the Equipment Operations, which were partially offset by proceeds from a $525 million net increase in outside borrowings. Cash used for investing activities totaled $41 million in the first quarter of 1994, 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 the trusts. The positive cash flows from insurance and health care operations have been primarily invested in marketable securities during the past 12 months. However, during the first quarter of 1995, these investments decreased due to payment of a dividend to the Equipment Operations and the recognition in stockholders' equity of an unrealized loss on marketable securities which were classified as available for sale according to FASB Statement No. 115. Marketable securities consist primarily of debt securities held by the insurance and health care operations in support of their obligations to policyholders. During the past 12 months, marketable securities have increased due primarily to the continuing growth in the insurance and health care operations. Credit receivables increased by $167 million in the first quarter of 1995 and $798 million during the past 12 months. These receivables consist of retail notes originating in connection with retail sales of new and used equipment by dealers of John Deere products, retail notes from non-Deere-related customers, revolving charge accounts, financing leases and wholesale notes receivable. The credit subsidiaries' receivables increased during the last 12 months due to the cost of credit receivables acquired exceeding collections, which was partially offset by the sale of retail notes during the fourth quarter of 1994. Total acquisitions of credit receivables were 20 percent higher in the first quarter of 1995 compared with the same period last year. This significant increase resulted from increased acquisitions of John Deere retail notes, revolving charge accounts and wholesale receivables. At January 31, 1995, the levels of retail notes, revolving charge accounts, financing lease receivables and wholesale receivables were higher than one year ago. Credit receivables administered by the credit subsidiaries, which include receivables previously sold, amounted to $5,540 million at January 31, 1995 compared with $5,600 million at October 31, 1994 and $4,934 million at January 31, 1994. At January 31, 1995, the unpaid balance of all retail notes previously sold was $952 million compared with $1,175 million at October 31, 1994 and $1,137 million at January 31, 1994. Additional sales of retail notes are expected to be made in the future. Total interest-bearing debt of the credit subsidiaries was $4,009 million at January 31, 1995 compared with $3,618 million at the end of fiscal year 1994 and $3,128 million at January 31, 1994. Total outside borrowings increased during the first quarter of 1995 and the past 12 months, generally corresponding with the level of the credit receivable and lease portfolio financed, the level of cash and cash equivalents and the change in payables owed to the Equipment Operations. The credit subsidiaries' ratio of total interest-bearing debt to stockholder's equity was 5.7 to 1 at January 31, 1995 compared with 5.3 to 1 at October 31, 1994 and 4.6 to 1 at January 31, 1994. During the first quarter of 1995, the Capital Corporation retired $150 million of 5% debentures due in 1995. The Capital Corporation also issued $90 million and retired $67 million of medium-term notes during the current quarter. 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 $3,332 million at January 31, 1995, $472 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 $2,399 million. Stockholders' equity was $2,624 million at January 31, 1995 compared with $2,558 million at October 31, 1994 and $2,144 million at January 31, 1994. The increase of $66 million in the first three months of 1995 resulted primarily from net income of $138 million, partially offset by dividends declared of $47 million, an increase in the cumulative translation adjustment of $16 million and an unrealized loss on marketable securities available for sale of $11 million. The Board of Directors at its meeting on February 22, 1995 declared a quarterly dividend of 55 cents per share payable May 1, 1995 to stockholders of record on March 31, 1995. PART II. OTHER INFORMATION Item 1. Legal Proceedings See Note (12) to the Interim Financial Statements. Item 2. Changes in Securities 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 Reports on Form 8-K dated December 6, 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: March 13, 1995 By s/ Pierre E. Leroy Pierre E. Leroy Senior Vice President, Principal Financial Officer and Principal Accounting Officer INDEX TO EXHIBITS Number Page 2 Not applicable - 3 Not applicable - 4 Not applicable - 10 Not applicable - 11 Computation of net income per share 19 12 Computation of ratio of earnings to fixed charges 20 15 Not applicable - 18 Not applicable - 19 Not applicable - 22 Not applicable - 23 Not applicable - 24 Not applicable - 27 Financial data schedule 21 99 Not applicable - Exhibit 11 DEERE & COMPANY AND CONSOLIDATED SUBSIDIARIES COMPUTATION OF NET INCOME PER SHARE (Shares and dollars in thousands except per share amounts) For the Three Months Ended January 31 1995 1994 1. Net income $138,416 $87,015 2. Adjustment - Interest expense, after tax benefit, applicable to convertible debentures outstanding 6 15 3. Net income applicable to common stock - before interest applicable to convertible debentures $138,422 $87,030 PRIMARY NET INCOME PER COMMON SHARE: Shares: 4. Weighted average number of common shares outstanding 86,486 85,592 5. Incremental shares: Dilutive common stock options 409 864 Dilutive stock appreciation rights 18 66 Total incremental shares 427 930 6. Primary net income per common share (1 divided by 4) $ 1.60 * $ 1.02 * FULLY DILUTED NET INCOME PER COMMON SHARE: Shares: 7. Weighted average number of common shares outstanding 86,486 85,592 8. Incremental shares: Dilutive common stock options 470 935 Dilutive stock appreciation rights 18 66 9. Common equivalent shares from assumed conversion of convertible debentures: 5-1/2% debentures due 2001 19 47 10. Total 86,993 86,640 11. Fully diluted net income per common share (3 divided by 10) 1.60 * $ 1.02 * ____________ * Net income per common share outstanding was used in the designated calculations since the dilutive effects of common stock options,stock appreciation rights and assumed conversion of convertible debentures were immaterial. EXHIBIT 12 DEERE & COMPANY AND CONSOLIDATED SUBSIDIARIES COMPUTATION OF RATIO OF EARNINGS TO FIXED CHARGES Three Months Ended January 31 1995 1994 (In thousands of dollars) Earnings: Income (loss) of consolidated group before income taxes and changes in accounting $221,427 $133,422 Dividends received from less-than-fifty-percent owned affiliates 373 514 Fixed charges net of capitalized interest 90,120 72,722 Total earnings $311,920 $206,658 Fixed charges: Interest expense of con- solidated group (includes capitalized interest) $ 88,432 $ 71,190 Portion of rental charges deemed to be interest 1,752 1,532 Total fixed charges $ 90,184 $ 72,722 Ratio of earnings to fixed charges* 3.46 2.84 EXHIBIT 12 DEERE & COMPANY AND CONSOLIDATED SUBSIDIARIES COMPUTATION OF RATIO OF EARNINGS TO FIXED CHARGES Year Ended October 31 1994 1993 (In thousands of dollars) Earnings: Income (loss) of consolidated group before income taxes and changes in accounting $ 920,920 $272,345 Dividends received from less-than-fifty-percent owned affiliates 2,329 1,706 Fixed charges net of capitalized interest 310,047 375,238 Total earnings $1,233,296 $649,289 Fixed charges: Interest expense of con- solidated group (includes capitalized interest) $ 303,080 $369,325 Portion of rental charges deemed to be interest 7,008 6,127 Total fixed charges $ 310,088 $375,452 Ratio of earnings to fixed charges** 3.98 1.73 EXHIBIT 12 DEERE & COMPANY AND CONSOLIDATED SUBSIDIARIES COMPUTATION OF RATIO OF EARNINGS TO FIXED CHARGES Year Ended October 31 1992 1991 1990 (In thousands of dollars) Earnings: Income (loss) of consolidated group before income taxes and changes in accounting $43,488 $(26,176) $ 587,528 Dividends received from less-than-fifty-percent owned affiliates 2,325 6,229 7,775 Fixed charges net of capitalized interest. 420,133 454,092 439,200 Total earnings $465,946 $434,145 $1,034,503 Fixed charges: Interest expense of con- solidated group (includes capitalized interest) $415,205 $451,936 $ 435,217 Portion of rental charges deemed to be interest 6,720 4,088 3,983 Total fixed charges $421,925 $456,024 $439,200 Ratio of earnings to fixed charges** 1.10 * 2.36 The computation of the ratio of earnings to fixed charges is based on applicable amounts of the Company and its consolidated subsidiaries plus dividends received from less-than fifty percent owned affiliates. "Earnings" consist of income before income taxes, the cumulative effect of changes in accounting and fixed charges excluding capitalized interest. "Fixed charges" consist of interest on indebtedness, amortization of debt discount and expense, an estimated amount of rental expense which is deemed to be representative of the interest factor, and capitalized interest. * For the year ended October 31, 1991, earnings available for fixed charges coverage were $22 million less than the amount required for a ratio of earnings to fixed charges of 1.0. ** The Company has not issued preferred stock. Therefore, the ratios of earnings to combined fixed charges and preferred stock dividends are the same as the ratios presented above. EX-27 2
5 This schedule contains summary financial information extracted from Form 10-Q and is qualified in its entirety by reference to such financial statements. 0000315189 DEERE&COMPANY 1,000,000 U.S. DOLLARS 3-MOS OCT-31-1995 NOV-01-1994 JAN-31-1995 1 518 1,103 8,205 106 943 0 4,103 2,820 13,471 0 2,102 1,494 0 0 1,130 13,471 1,731 2,106 1,339 1,576 0 9 88 221 84 138 0 0 0 138 1.60 1.60
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