-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: webmaster@www.sec.gov Originator-Key-Asymmetric: MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB MIC-Info: RSA-MD5,RSA, OSw/g+TTCwaeNR5gwHZMGFk8/IY+BCQOwyXJI+rL1J3vvZEt+Q9YcxvxFnTCzb7C /7NkT69Ephlc9qjd9xUJnw== 0000912057-96-019374.txt : 19960903 0000912057-96-019374.hdr.sgml : 19960903 ACCESSION NUMBER: 0000912057-96-019374 CONFORMED SUBMISSION TYPE: 10-Q PUBLIC DOCUMENT COUNT: 5 CONFORMED PERIOD OF REPORT: 19960731 FILED AS OF DATE: 19960830 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: 96624664 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 JULY 31, 1996 ------------------------------ Commission file no: 1-4121 ------------------------------ DEERE & COMPANY Delaware 36-2382580 (State of incorporation) (IRS employer identification no.) John Deere Road Moline, Illinois 61265 (Address of principal executive offices) Telephone Number: (309) 765-8000 ------------------------------ Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes X No ----- ----- At July 31, 1996, 258,337,363 shares of common stock, $1 par value, of the registrant were outstanding. - -------------------------------------------------------------------------------- Page 1 of 40 Pages. Index to Exhibits: Page 21. PART I. FINANCIAL INFORMATION ITEM 1. FINANCIAL STATEMENTS DEERE & COMPANY CONSOLIDATED STATEMENT OF CONSOLIDATED INCOME (Deere & Company and Three Months Ended July 31 Consolidated Subsidiaries) - ------------------------------------------------------------------------------- Millions of dollars except per share amounts Three Months Ended July 31 (Unaudited) 1996 1995 - ------------------------------------------------------------------------------- Net Sales and Revenues Net sales of equipment . . . . . . . . . . . . . $ 2,516.1 $ 2,304.5 Finance and interest income. . . . . . . . . . . 187.8 162.5 Insurance and health care premiums . . . . . . . 160.8 160.2 Investment income. . . . . . . . . . . . . . . . 16.1 28.6 Other income . . . . . . . . . . . . . . . . . . 23.8 17.1 --------- --------- Total . . . . . . . . . . . . . . . . . . . . . 2,904.6 2,672.9 --------- --------- Costs and Expenses Cost of goods sold . . . . . . . . . . . . . . . 1,958.3 1,822.7 Research and development expenses. . . . . . . . 91.6 81.6 Selling, administrative and general expenses . . 297.8 252.3 Interest expense . . . . . . . . . . . . . . . . 99.5 99.7 Insurance and health care claims and benefits. . 121.0 132.9 Other operating expenses . . . . . . . . . . . . 19.0 10.5 --------- --------- Total . . . . . . . . . . . . . . . . . . . . . 2,587.2 2,399.7 --------- --------- Income of Consolidated Group Before Income Taxes. . . . . . . . . . . . . . . . . . 317.4 273.2 Provision for income taxes . . . . . . . . . . . 116.2 97.5 --------- --------- Income of Consolidated Group . . . . . . . . . . 201.2 175.7 --------- --------- Equity in Income of Unconsolidated Subsidiaries and Affiliates Credit. . . . . . . . . . . . . . . . . . . . . Insurance . . . . . . . . . . . . . . . . . . . Health care . . . . . . . . . . . . . . . . . . Other . . . . . . . . . . . . . . . . . . . . . 3.2 4.4 --------- --------- Total. . . . . . . . . . . . . . . . . . . . . 3.2 4.4 --------- --------- Net Income . . . . . . . . . . . . . . . . . . . $ 204.4 $ 180.1 --------- --------- --------- --------- Net income per share, primary and fully diluted. $ .79 $ .69 DEERE & COMPANY EQUIPMENT OPERATIONS STATEMENT OF CONSOLIDATED INCOME (Deere & Company with Financial Three Months Ended July 31 Services on the Equity Basis) - ------------------------------------------------------------------------------- Millions of dollars except per share amounts Three Months Ended July 31 (Unaudited) 1996 1995 - ------------------------------------------------------------------------------- Net Sales and Revenues Net sales of equipment . . . . . . . . . . . . . $ 2,516.1 $ 2,304.5 Finance and interest income. . . . . . . . . . . 26.5 25.6 Insurance and health care premiums . . . . . . . Investment income. . . . . . . . . . . . . . . . Other income . . . . . . . . . . . . . . . . . . 11.5 7.2 --------- --------- Total . . . . . . . . . . . . . . . . . . . . . 2,554.1 2,337.3 --------- --------- Costs and Expenses Cost of goods sold . . . . . . . . . . . . . . . 1,966.2 1,828.3 Research and development expenses. . . . . . . . 91.6 81.6 Selling, administrative and general expenses . . 217.0 179.1 Interest expense . . . . . . . . . . . . . . . . 26.8 35.0 Insurance and health care claims and benefits. . Other operating expenses . . . . . . . . . . . . 9.6 .8 --------- --------- Total . . . . . . . . . . . . . . . . . . . . . 2,311.2 2,124.8 --------- --------- Income of Consolidated Group Before Income Taxes. . . . . . . . . . . . . . . . . . 242.9 212.5 Provision for income taxes . . . . . . . . . . . 89.8 77.2 --------- --------- Income of Consolidated Group . . . . . . . . . . 153.1 135.3 --------- --------- Equity in Income of Unconsolidated Subsidiaries and Affiliates Credit. . . . . . . . . . . . . . . . . . . . . 35.3 28.1 Insurance . . . . . . . . . . . . . . . . . . . 8.0 8.7 Health care . . . . . . . . . . . . . . . . . . 4.8 3.6 Other . . . . . . . . . . . . . . . . . . . . . 3.2 4.4 --------- --------- Total. . . . . . . . . . . . . . . . . . . . . 51.3 44.8 --------- --------- Net Income . . . . . . . . . . . . . . . . . . . $ 204.4 $ 180.1 --------- --------- --------- --------- DEERE & COMPANY FINANCIAL SERVICES STATEMENT OF CONSOLIDATED INCOME Three Months Ended July 31 - ------------------------------------------------------------------------------- Millions of dollars except per share amounts Three Months Ended July 31 (Unaudited) 1996 1995 - ------------------------------------------------------------------------------- Net Sales and Revenues Net sales of equipment . . . . . . . . . . . . . Finance and interest income. . . . . . . . . . . $ 161.9 $ 139.1 Insurance and health care premiums . . . . . . . 171.6 176.3 Investment income. . . . . . . . . . . . . . . . 16.1 28.6 Other income . . . . . . . . . . . . . . . . . . 13.4 10.7 --------- --------- Total . . . . . . . . . . . . . . . . . . . . . 363.0 354.7 --------- --------- Costs and Expenses Cost of goods sold . . . . . . . . . . . . . . . Research and development expenses. . . . . . . . Selling, administrative and general expenses . . 83.8 76.0 Interest expense . . . . . . . . . . . . . . . . 73.6 66.8 Insurance and health care claims and benefits. . 121.6 141.4 Other operating expenses . . . . . . . . . . . . 9.4 9.8 --------- --------- Total . . . . . . . . . . . . . . . . . . . . . 288.4 294.0 --------- --------- Income of Consolidated Group Before Income Taxes. . . . . . . . . . . . . . . . . . 74.6 60.7 Provision for income taxes . . . . . . . . . . . 26.5 20.3 --------- --------- Income of Consolidated Group . . . . . . . . . . 48.1 40.4 --------- --------- Equity in Income of Unconsolidated Subsidiaries and Affiliates Credit. . . . . . . . . . . . . . . . . . . . . Insurance . . . . . . . . . . . . . . . . . . . Health care . . . . . . . . . . . . . . . . . . Other . . . . . . . . . . . . . . . . . . . . . --------- --------- Total. . . . . . . . . . . . . . . . . . . . . --------- --------- Net Income . . . . . . . . . . . . . . . . . . . $ 48.1 $ 40.4 --------- --------- --------- --------- 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 CONSOLIDATED STATEMENT OF CONSOLIDATED INCOME (Deere & Company and Nine Months Ended July 31 Consolidated Subsidiaries) - ------------------------------------------------------------------------------- Millions of dollars except per share amounts Nine Months Ended July 31 (Unaudited) 1996 1995 - ------------------------------------------------------------------------------- Net Sales and Revenues Net sales of equipment . . . . . . . . . . . . . $ 7,152.4 $ 6,487.9 Finance and interest income. . . . . . . . . . . 553.1 476.1 Insurance and health care premiums . . . . . . . 486.5 474.3 Investment income. . . . . . . . . . . . . . . . 50.3 77.6 Other income . . . . . . . . . . . . . . . . . . 68.5 56.2 --------- --------- Total . . . . . . . . . . . . . . . . . . . . . 8,310.8 7,572.1 --------- --------- Costs and Expenses Cost of goods sold . . . . . . . . . . . . . . . 5,504.5 5,035.3 Research and development expenses. . . . . . . . 268.7 230.9 Selling, administrative and general expenses . . 818.5 728.3 Interest expense . . . . . . . . . . . . . . . . 301.7 290.6 Insurance and health care claims and benefits. . 373.6 379.4 Other operating expenses . . . . . . . . . . . . 42.6 42.1 --------- --------- Total . . . . . . . . . . . . . . . . . . . . . 7,309.6 6,706.6 --------- --------- Income of Consolidated Group Before Income Taxes. . . . . . . . . . . . . . . . . . 1,001.2 865.5 Provision for income taxes . . . . . . . . . . . 365.4 317.9 --------- --------- Income of Consolidated Group . . . . . . . . . . 635.8 547.6 --------- --------- Equity in Income of Unconsolidated Subsidiaries and Affiliates Credit. . . . . . . . . . . . . . . . . . . . . Insurance . . . . . . . . . . . . . . . . . . . .7 Health care . . . . . . . . . . . . . . . . . . Other . . . . . . . . . . . . . . . . . . . . . 7.6 7.2 --------- --------- Total. . . . . . . . . . . . . . . . . . . . . 7.6 7.9 --------- --------- Net Income . . . . . . . . . . . . . . . . . . . $ 643.4 $ 555.5 --------- --------- --------- --------- Net income per share, primary and fully diluted. $ 2.46 $ 2.14 DEERE & COMPANY EQUIPMENT OPERATIONS STATEMENT OF CONSOLIDATED INCOME (Deere & Company with Financial Nine Months Ended July 31 Services on the Equity Basis) - ------------------------------------------------------------------------------- Millions of dollars except per share amounts Nine Months Ended July 31 (Unaudited) 1996 1995 - ------------------------------------------------------------------------------- Net Sales and Revenues Net sales of equipment . . . . . . . . . . . . . $ 7,152.4 $ 6,487.9 Finance and interest income. . . . . . . . . . . 84.5 71.3 Insurance and health care premiums . . . . . . . Investment income. . . . . . . . . . . . . . . . Other income . . . . . . . . . . . . . . . . . . 19.1 19.1 --------- --------- Total . . . . . . . . . . . . . . . . . . . . . 7,256.0 6,578.3 --------- --------- Costs and Expenses Cost of goods sold . . . . . . . . . . . . . . . 5,524.9 5,049.1 Research and development expenses. . . . . . . . 268.7 230.9 Selling, administrative and general expenses . . 586.4 514.9 Interest expense . . . . . . . . . . . . . . . . 85.4 97.5 Insurance and health care claims and benefits. . Other operating expenses . . . . . . . . . . . . 18.8 17.0 --------- --------- Total . . . . . . . . . . . . . . . . . . . . . 6,484.2 5,909.4 --------- --------- Income of Consolidated Group Before Income Taxes. . . . . . . . . . . . . . . . . . 771.8 668.9 Provision for income taxes . . . . . . . . . . . 285.2 246.2 --------- --------- Income of Consolidated Group . . . . . . . . . . 486.6 422.7 --------- --------- Equity in Income of Unconsolidated Subsidiaries and Affiliates Credit. . . . . . . . . . . . . . . . . . . . . 109.7 92.2 Insurance . . . . . . . . . . . . . . . . . . . 26.3 21.1 Health care . . . . . . . . . . . . . . . . . . 13.2 12.3 Other . . . . . . . . . . . . . . . . . . . . . 7.6 7.2 --------- --------- Total. . . . . . . . . . . . . . . . . . . . . 156.8 132.8 --------- --------- Net Income . . . . . . . . . . . . . . . . . . . $ 643.4 $ 555.5 --------- --------- --------- --------- DEERE & COMPANY FINANCIAL SERVICES STATEMENT OF CONSOLIDATED INCOME Nine Months Ended July 31 - ------------------------------------------------------------------------------- Millions of dollars except per share amounts Nine Months Ended July 31 (Unaudited) 1996 1995 - ------------------------------------------------------------------------------- Net Sales and Revenues Net sales of equipment Finance and interest income. . . . . . . . . . . $ 473.4 $ 410.0 Insurance and health care premiums . . . . . . . 516.2 511.8 Investment income. . . . . . . . . . . . . . . . 50.3 77.6 Other income . . . . . . . . . . . . . . . . . . 51.9 39.4 --------- --------- Total . . . . . . . . . . . . . . . . . . . . . 1,091.8 1,038.8 --------- --------- Costs and Expenses Cost of goods sold . . . . . . . . . . . . . . . Research and development expenses. . . . . . . . Selling, administrative and general expenses . . 241.5 222.4 Interest expense . . . . . . . . . . . . . . . . 221.2 198.2 Insurance and health care claims and benefits. . 376.1 396.4 Other operating expenses . . . . . . . . . . . . 23.6 25.2 --------- --------- Total . . . . . . . . . . . . . . . . . . . . . 862.4 842.2 --------- --------- Income of Consolidated Group Before Income Taxes. . . . . . . . . . . . . . . . . . 229.4 196.6 Provision for income taxes . . . . . . . . . . . 80.2 71.7 --------- --------- Income of Consolidated Group . . . . . . . . . . 149.2 124.9 --------- --------- Equity in Income of Unconsolidated Subsidiaries and Affiliates Credit. . . . . . . . . . . . . . . . . . . . . Insurance . . . . . . . . . . . . . . . . . . . .7 Health care . . . . . . . . . . . . . . . . . . Other . . . . . . . . . . . . . . . . . . . . . --------- --------- Total. . . . . . . . . . . . . . . . . . . . . .7 --------- --------- Net Income . . . . . . . . . . . . . . . . . . . $ 149.2 $ 125.6 --------- --------- --------- --------- 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 CONSOLIDATED CONDENSED CONSOLIDATED BALANCE SHEET (Deere & Company and Consolidated Subsidiaries) - ------------------------------------------------------------------------------------------------ July 31 October 31 July 31 Millions of dollars except per share amount (Unaudited) 1996 1995 1995 - ------------------------------------------------------------------------------------------------ Assets Cash and short-term investments. . . . . . . . . . $ 301.2 $ 363.7 $ 426.7 Cash deposited with unconsolidated subsidiaries ----------- ----------- ----------- Cash and cash equivalents . . . . . . . . . . . . 301.2 363.7 426.7 Marketable securities. . . . . . . . . . . . . . . 848.2 829.7 804.3 Receivables from unconsolidated subsidiaries and affiliates . . . . . . . . . . . 12.0 2.3 1.6 Dealer accounts and notes receivable - net . . . . 3,503.7 3,259.7 3,446.9 Credit receivables - net . . . . . . . . . . . . . 5,782.1 5,345.2 4,896.4 Other receivables. . . . . . . . . . . . . . . . . 485.1 492.4 474.8 Equipment on operating leases - net. . . . . . . . 375.7 258.8 246.3 Inventories. . . . . . . . . . . . . . . . . . . . 941.3 720.8 920.2 Property and equipment - net . . . . . . . . . . . 1,275.9 1,335.6 1,301.2 Investments in unconsolidated subsidiaries and affiliates. . . . . . . . . . . . . . . . . . 160.4 115.2 103.9 Intangible assets - net. . . . . . . . . . . . . . 321.3 305.0 287.2 Deferred income taxes. . . . . . . . . . . . . . . 634.2 639.8 666.1 Other assets and deferred charges. . . . . . . . . 174.8 179.2 186.1 ----------- ----------- ----------- Total. . . . . . . . . . . . . . . . . . . . . . $ 14,815.9 $ 13,847.4 $ 13,761.7 ----------- ----------- ----------- ----------- ----------- ----------- Liabilities and Stockholders' Equity Short-term borrowings. . . . . . . . . . . . . . . $ 3,958.0 $ 3,139.8 $ 3,248.0 Payables to unconsolidated subsidiaries and affiliates. . . . . . . . . . . . . . . . . . 25.0 27.5 47.7 Accounts payable and accrued expenses. . . . . . . 2,477.3 2,533.0 2,220.6 Insurance and health care claims and reserves. . . 447.5 470.3 465.5 Accrued taxes. . . . . . . . . . . . . . . . . . . 76.2 72.8 133.4 Deferred income taxes. . . . . . . . . . . . . . . 15.9 15.6 14.8 Long-term borrowings . . . . . . . . . . . . . . . 2,098.8 2,175.8 2,377.1 Retirement benefit accruals and other liabilities. 2,320.6 2,327.2 2,222.0 ----------- ----------- ----------- Total Liabilities. . . . . . . . . . . . . . . . 11,419.3 10,762.0 10,729.1 ----------- ----------- ----------- Common stock, $1 par value (issued shares at July 31, 1996 - 263,832,916). . . . . . . . . 1,756.7 1,728.7 1,539.0 Retained Earnings. . . . . . . . . . . . . . . . . 2,177.4 1,690.3 1,766.9 Minimum pension liability adjustment . . . . . . . (300.4) (300.4) (248.4) Cumulative translation adjustment. . . . . . . . . (13.1) (11.6) (1.0) Unrealized gain on marketable securities . . . . . 7.3 3.6 1.5 Unamortized restricted stock compensation. . . . . (11.2) (12.1) (13.4) Common stock in treasury, at cost. . . . . . . . . (220.1) (13.1) (12.0) ----------- ----------- ----------- Total stockholders' equity . . . . . . . . . . . . 3,396.6 3,085.4 3,032.6 ----------- ----------- ----------- Total. . . . . . . . . . . . . . . . . . . . . . $ 14,815.9 $ 13,847.4 $ 13,761.7 ----------- ----------- ----------- ----------- ----------- -----------
DEERE & COMPANY EQUIPMENT OPERATIONS CONDENSED CONSOLIDATED BALANCE SHEET (Deere & Company with Financial Services on the Equity Basis) - ------------------------------------------------------------------------------------------------ July 31 October 31 July 31 Millions of dollars except per share amount (Unaudited) 1996 1995 1995 - ------------------------------------------------------------------------------------------------ Assets Cash and short-term investments. . . . . . . . . . $ 91.0 $ 71.0 $ 133.8 Cash deposited with unconsolidated subsidiaries. . 134.2 460.1 100.2 ----------- ----------- ----------- Cash and cash equivalents . . . . . . . . . . . . 225.2 531.1 234.0 Marketable securities Receivables from unconsolidated subsidiaries and affiliates . . . . . . . . . . . 25.9 55.5 24.3 Dealer accounts and notes receivable - net . . . . 3,503.7 3,259.7 3,446.9 Credit receivables - net . . . . . . . . . . . . . 96.7 118.3 115.1 Other receivables. . . . . . . . . . . . . . . . . 8.0 3.2 Equipment on operating leases - net. . . . . . . . 134.9 119.3 114.2 Inventories. . . . . . . . . . . . . . . . . . . . 941.3 720.8 920.2 Property and equipment - net . . . . . . . . . . . 1,227.2 1,295.0 1,263.7 Investments in unconsolidated subsidiaries and affiliates. . . . . . . . . . . . . . . . . . 1,463.2 1,378.4 1,346.6 Intangible assets - net. . . . . . . . . . . . . . 311.2 295.4 277.4 Deferred income taxes. . . . . . . . . . . . . . . 576.7 578.9 600.6 Other assets and deferred charges. . . . . . . . . 109.0 108.5 111.3 ----------- ----------- ----------- Total. . . . . . . . . . . . . . . . . . . . . . $ 8,623.0 $ 8,464.1 $ 8,454.3 ----------- ----------- ----------- ----------- ----------- ----------- Liabilities and Stockholders' Equity Short-term borrowings. . . . . . . . . . . . . . . $ 358.7 $ 395.7 $ 513.7 Payables to unconsolidated subsidiaries and affiliates. . . . . . . . . . . . . . . . . . 25.3 27.5 47.7 Accounts payable and accrued expenses. . . . . . . 1,803.8 1,859.9 1,558.7 Insurance and health care claims and reserves Accrued taxes. . . . . . . . . . . . . . . . . . . 72.4 72.4 125.0 Deferred income taxes. . . . . . . . . . . . . . . 15.9 15.6 14.8 Long-term borrowings . . . . . . . . . . . . . . . 653.1 702.9 963.2 Retirement benefit accruals and other liabilities . . . . . . . . . . . . . . . . . . . 2,297.2 2,304.7 2,198.6 ----------- ----------- ----------- Total Liabilities. . . . . . . . . . . . . . . . 5,226.4 5,378.7 5,421.7 ----------- ----------- ----------- Common stock, $1 par value (issued shares at July 31, 1996 - 263,832,916). . . . . . . . . 1,756.7 1,728.7 1,539.0 Retained Earnings. . . . . . . . . . . . . . . . . 2,177.4 1,690.3 1,766.9 Minimum pension liability adjustment . . . . . . . (300.4) (300.4) (248.4) Cumulative translation adjustment. . . . . . . . . (13.1) (11.6) (1.0) Unrealized gain on marketable securities . . . . . 7.3 3.6 1.5 Unamortized restricted stock compensation. . . . . (11.2) (12.1) (13.4) Common stock in treasury, at cost. . . . . . . . . (220.1) (13.1) (12.0) ----------- ----------- ----------- Total stockholders' equity . . . . . . . . . . . . 3,396.6 3,085.4 3,032.6 ----------- ----------- ----------- Total. . . . . . . . . . . . . . . . . . . . . . $ 8,623.0 $ 8,464.1 $ 8,454.3 ----------- ----------- ----------- ----------- ----------- -----------
DEERE & COMPANY FINANCIAL SERVICES CONDENSED CONSOLIDATED BALANCE SHEET - ------------------------------------------------------------------------------------------------ July 31 October 31 July 31 Millions of dollars except per share amount (Unaudited) 1996 1995 1995 - ------------------------------------------------------------------------------------------------ Assets Cash and short-term investments. . . . . . . . . . $ 210.2 $ 292.7 $ 292.9 Cash deposited with unconsolidated subsidiaries. . ----------- ----------- ----------- Cash and cash equivalents . . . . . . . . . . . . 210.2 292.7 292.9 Marketable securities. . . . . . . . . . . . . . . 848.2 829.7 804.3 Receivables from unconsolidated subsidiaries and affiliates . . . . . . . . . . . .3 Dealer accounts and notes receivable - net . . . . Credit receivables - net . . . . . . . . . . . . . 5,685.4 5,226.9 4,781.3 Other receivables. . . . . . . . . . . . . . . . . 478.0 490.2 475.9 Equipment on operating leases - net. . . . . . . . 240.8 139.5 132.1 Inventories. . . . . . . . . . . . . . . . . . . . Property and equipment - net . . . . . . . . . . . 48.7 40.6 37.5 Investments in unconsolidated subsidiaries and affiliates. . . . . . . . . . . . . . . . . . Intangible assets - net. . . . . . . . . . . . . . 10.1 9.6 9.8 Deferred income taxes. . . . . . . . . . . . . . . 57.6 61.0 65.6 Other assets and deferred charges. . . . . . . . . 65.8 70.6 74.6 ----------- ----------- ----------- Total. . . . . . . . . . . . . . . . . . . . . . $ 7,645.1 $ 7,160.8 $ 6,674.0 ----------- ----------- ----------- ----------- ----------- ----------- Liabilities and Stockholders' Equity Short-term borrowings. . . . . . . . . . . . . . . $ 3,599.3 $ 2,744.1 $ 2,734.3 Payables to unconsolidated subsidiaries and affiliates. . . . . . . . . . . . . . . . . . 148.1 513.3 122.9 Accounts payable and accrued expenses. . . . . . . 674.6 674.1 663.0 Insurance and health care claims and reserves. . . 447.5 470.3 465.5 Accrued taxes. . . . . . . . . . . . . . . . . . . 3.7 .3 8.4 Deferred income taxes. . . . . . . . . . . . . . . Long-term borrowings . . . . . . . . . . . . . . . 1,445.7 1,472.9 1,413.8 Retirement benefit accruals and other liabilities. 23.4 22.6 23.4 ----------- ----------- ----------- Total Liabilities. . . . . . . . . . . . . . . . 6,342.3 5,897.6 5,431.3 ----------- ----------- ----------- Common stock, $1 par value (issued shares at July 31, 1996 - 263,832,916). . . . . . . . . 209.4 209.4 209.4 Retained Earnings. . . . . . . . . . . . . . . . . 1,090.7 1,054.3 1,035.5 Minimum pension liability adjustment . . . . . . . Cumulative translation adjustment. . . . . . . . . (4.6) (4.1) (3.7) Unrealized gain on marketable securities . . . . . 7.3 3.6 1.5 Unamortized restricted stock compensation. . . . . Common stock in treasury, at cost. . . . . . . . . ----------- ----------- ----------- Total stockholders' equity . . . . . . . . . . . . 1,302.8 1,263.2 1,242.7 ----------- ----------- ----------- Total. . . . . . . . . . . . . . . . . . . . . . $ 7,645.1 $ 7,160.8 $ 6,674.0 ----------- ----------- ----------- ----------- ----------- -----------
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. DEERE & COMPANY CONSOLIDATED CONDENSED STATEMENT OF CONSOLIDATED CASH FLOWS (Deere & Company and Nine Months Ended July 31 Consolidated Subsidiary - ------------------------------------------------------------------------------- Nine Months Ended July 31 Millions of dollars (Unaudited) 1996 1995 - ------------------------------------------------------------------------------- Cash Flows from Operating Activities Net income . . . . . . . . . . . . . . . . . . . $ 643.4 $ 555.5 Adjustments to reconcile net income to net cash provided by (used for) operating activities . . (279.2) (627.3) ---------- ---------- Net cash provided by (used for) operating activities . . . . . . . . . . . . . . . . . 364.2 (71.8) ---------- ---------- Cash Flows from Investing Activities Collections and sales of credit receivables. . 3,810.4 3,152.5 Proceeds from maturities and sales of marketable securities. . . . . . . . . . . . . 86.6 144.8 Proceeds from sales of businesses. . . . . . . . 86.7 Cost of credit receivables acquired. . . . . . . (4,253.7) (3,590.9) Purchases of marketable securities . . . . . . . (99.0) (137.5) Purchases of property and equipment. . . . . . . (150.8) (152.5) Cost of operating leases acquired. . . . . . . . (216.7) (105.5) Acquisitions of businesses . . . . . . . . . . . (64.2) Other. . . . . . . . . . . . . . . . . . . . . . 59.0 27.4 ---------- ---------- Net cash used for investing activities . . . . (828.4) (575.0) ---------- ---------- Cash Flows from Financing Activities Increase in short-term borrowings. . . . . . . . 644.2 972.2 Change in intercompany receivables/payables Proceeds from long-term borrowings . . . . . . . 550.0 515.0 Principal payments on long-term borrowings . . . (450.0) (554.1) Proceeds from issuance of common stock . . . . . 34.6 42.1 Repurchases of common stock. . . . . . . . . . . (218.8) (4.6) Dividends paid . . . . . . . . . . . . . . . . . (157.4) (142.7) Other. . . . . . . . . . . . . . . . . . . . . . (.1) (1.9) ---------- ---------- Net cash provided by (used for) financing activities . . . . . . . . . . . . . . . . . 402.5 826.0 ---------- ---------- Effect of Exchange Rate Changes on Cash. . . . . (.8) 2.1 ---------- ---------- Net Increase (Decrease) in Cash and Cash Equivalents. . . . . . . . . . . . . . . . . . (62.5) 181.3 Cash and Cash Equivalents at Beginning of Period . . . . . . . . . . . . . . . . . . . . 363.7 245.4 ---------- ---------- Cash and Cash Equivalents at End of Period . . . $ 301.2 $ 426.7 ---------- ---------- ---------- ---------- DEERE & COMPANY EQUIPMENT OPERATIONS CONDENSED STATEMENT OF CONSOLIDATED CASH FLOWS (Deere & Company with Financial Nine Months Ended July 31 Services on the Equity Basis) - ------------------------------------------------------------------------------- Nine Months Ended July 31 Millions of dollars (Unaudited) 1996 1995 - ------------------------------------------------------------------------------- Cash Flows from Operating Activities Net income . . . . . . . . . . . . . . . . . . . $ 643.4 $ 555.5 Adjustments to reconcile net income to net cash provided by (used for) operating activities . . (360.9) (719.3) ---------- ---------- Net cash provided by (used for) operating activities . . . . . . . . . . . . . . . . . 282.5 (163.8) ---------- ---------- Cash Flows from Investing Activities Collections and sales of credit receivables. . . 49.0 40.9 Proceeds from maturities and sales of marketable securities. . . . . . . . . . . . . Proceeds from sales of businesses. . . . . . . . Cost of credit receivables acquired. . . . . . . (26.2) (38.8) Purchases of marketable securities . . . . . . . Purchases of property and equipment. . . . . . . (136.2) (140.2) Cost of operating leases acquired. . . . . . . . (51.5) (66.1) Acquisitions of businesses . . . . . . . . . . . (64.2) Other. . . . . . . . . . . . . . . . . . . . . . 30.4 36.9 ---------- ---------- Net cash used for investing activities . . . . (198.7) (167.3) ---------- ---------- Cash Flows from Financing Activities Increase in short-term borrowings. . . . . . . . 220.2 411.7 Change in intercompany receivables/payables. . . 39.6 165.2 Proceeds from long-term borrowings . . . . . . . Principal payments on long-term borrowings . . . (307.0) (10.8) Proceeds from issuance of common stock . . . . . 34.6 42.1 Repurchases of common stock. . . . . . . . . . . (218.8) (4.6) Dividends paid . . . . . . . . . . . . . . . . . (157.4) (142.7) Other. . . . . . . . . . . . . . . . . . . . . . (.1) (1.9) ---------- ---------- Net cash provided by (used for) financing activities . . . . . . . . . . . . . . . . . (388.9) 459.0 ---------- ---------- Effect of Exchange Rate Changes on Cash. . . . . (.8) 2.1 ---------- ---------- Net Increase (Decrease) in Cash and Cash Equivalents. . . . . . . . . . . . . . . . . . (305.9) 130.0 Cash and Cash Equivalents at Beginning of Period . . . . . . . . . . . . . . . . . . . . 531.1 104.0 ---------- ---------- Cash and Cash Equivalents at End of Period . . . $ 225.2 $ 234.0 ---------- ---------- ---------- ---------- DEERE & COMPANY FINANCIAL SERVICES CONDENSED STATEMENT OF CONSOLIDATED CASH FLOWS Nine Months Ended July 31 - ------------------------------------------------------------------------------- Nine Months Ended July 31 Millions of dollars (Unaudited) 1996 1995 - ------------------------------------------------------------------------------- Cash Flows from Operating Activities Net income . . . . . . . . . . . . . . . . . . . $ 149.2 $ 125.6 Adjustments to reconcile net income to net cash provided by (used for) operating activities . . 45.4 36.8 ---------- ---------- Net cash provided by (used for) operating activities . . . . . . . . . . . . . . . . . 194.6 162.4 ---------- ---------- Cash Flows from Investing Activities Collections and sales of credit receivables. . . 3,761.4 3,111.6 Proceeds from maturities and sales of marketable securities. . . . . . . . . . . . . 86.6 144.8 Proceeds from sales of businesses. . . . . . . . 86.7 Cost of credit receivables acquired. . . . . . . (4,227.5) (3,552.1) Purchases of marketable securities . . . . . . . (99.0) (137.5) Purchases of property and equipment. . . . . . . (14.6) (12.3) Cost of operating leases acquired. . . . . . . . (165.2) (39.4) Acquisitions of businesses . . . . . . . . . . . Other. . . . . . . . . . . . . . . . . . . . . . 28.5 (9.5) ---------- ---------- Net cash used for investing activities . . . . (629.8) (407.7) ---------- ---------- Cash Flows from Financing Activities Increase in short-term borrowings. . . . . . . . 423.9 560.6 Change in intercompany receivables/payables. . . (365.4) (65.1) Proceeds from long-term borrowings . . . . . . . 550.0 515.0 Principal payments on long-term borrowings . . . (143.0) (543.3) Proceeds from issuance of common stock . . . . . Repurchases of common stock. . . . . . . . . . . Dividends paid . . . . . . . . . . . . . . . . . (112.8) (70.4) Other. . . . . . . . . . . . . . . . . . . . . . ---------- ---------- Net cash provided by (used for) financing activities . . . . . . . . . . . . . . . . . 352.7 396.8 ---------- ---------- Effect of Exchange Rate Changes on Cash. . . . . ---------- ---------- Net Increase (Decrease) in Cash and Cash Equivalents. . . . . . . . . . . . . . . . . . (82.5) 151.5 Cash and Cash Equivalents at Beginning of Period . . . . . . . . . . . . . . . . . . . . 292.7 141.4 ---------- ---------- Cash and Cash Equivalents at End of Period . . . $ 210.2 $ 292.9 ---------- ---------- ---------- ---------- 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. 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 commercial and consumer equipment operations with Financial Services reflected on the equity basis. Data relating to the above equipment operations, including the consolidated group data in the income statement, are also referred to as "Equipment Operations" in this report. FINANCIAL SERVICES - These data include the Company's credit, insurance and health care operations. CONSOLIDATED - These data represent the consolidation of the Equipment Operations and Financial Services in conformity with Financial Accounting Standards Board (FASB) Statement No. 94. References to "Deere & Company" or "the Company" refer to the entire enterprise. (3) An analysis of the Company's retained earnings in millions of dollars follows: Three Months Nine Months Ended Ended July 31 July 31 ------------------- ------------------- 1996 1995 1996 1995 ---- ---- ---- ---- Balance, beginning of period........ $2,024.5 $1,634.6 $1,690.3 $1,353.9 Net income......... 204.4 180.1 643.4 555.5 Dividends declared. (51.5) (47.8) (156.3) (142.5) -------- -------- ------- -------- Balance, end of period........... $2,177.4 $1,766.9 $2,177.4 $1,766.9 -------- -------- -------- -------- -------- -------- -------- -------- 6 (4) An analysis of the cumulative translation adjustment in millions of dollars follows: Three Months Nine Months Ended Ended July 31 July 31 ------------- ------------- 1996 1995 1996 1995 ---- ---- ---- ---- Balance, beginning of period................ $(19.6) $(8.0) $(11.6) $(17.9) Translation adjustments.... 6.8 7.1 (.3) 17.5 Income taxes applicable to translation adjustments.. (.3) (.1) (1.2) (.6) ------ ----- ------ ------ Balance, end of period..... $(13.1) $(1.0) $(13.1) $ (1.0) ------ ----- ------ ------ ------ ----- ------ ------ (5) Substantially all inventories owned by Deere & Company and its United States equipment subsidiaries are valued at cost on the "last-in, first- out" (LIFO) method. If all of the Company's inventories had been valued on a "first-in, first-out" (FIFO) method, estimated inventories by major classification in millions of dollars would have been as follows: July 31 October 31 July 31 1996 1995 1995 ------- ---------- ------- Raw materials and supplies................ $ 208 $ 223 $ 221 Work-in-process........... 403 343 413 Finished machines and parts................... 1,323 1,100 1,269 ------ ------ ------ Total FIFO value.......... 1,934 1,666 1,903 Adjustment to LIFO basis................... 993 945 983 ------ ------ ------ Inventories............... $ 941 $ 721 $ 920 ------ ------ ------ ------ ------ ------ (6) During the first nine months of 1996, the Financial Services subsidiaries and the Equipment Operations received proceeds from the sale of retail notes of $623 million. At July 31, 1996, the net unpaid balance of all retail notes previously sold by the Financial Services subsidiaries and the Equipment Operations was $1,181 million. At July 31, 1996, the Company's maximum exposure under all credit receivable recourse provisions was $174 million for all retail notes sold. Certain foreign subsidiaries have pledged assets with a balance sheet value of $36 million as collateral for bank borrowings as of July 31, 1996. At July 31, 1996, the Company had commitments of approximately $93 million for construction and acquisition of property and equipment. 7 (7) Worldwide net sales and revenues and operating profit in millions of dollars follow: Three Months Ended Nine Months Ended July 31 July 31 -------------------- -------------------- % % 1996 1995 Change 1996 1995 Change ---- ---- ------ ---- ---- ------ Net sales: Agricultural equipment........ $1,612 $1,365 +18 $4,437 $3,821 +16 Industrial equipment.......... 496 504 - 2 1,454 1,412 + 3 Commercial and consumer equipment................... 408 435 - 6 1,261 1,255 ------ ------ ------ ------ Total net sales.............. 2,516 2,304 + 9 7,152 6,488 +10 Financial Services revenues..... 352 338 + 4 1,059 1,000 + 6 Other revenues.................. 37 31 +19 100 84 +19 ------ ------ ------ ------ Total net sales and revenues................... $2,905 $2,673 + 9 $8,311 $7,572 +10 ------ ------ ------ ------ ------ ------ ------ ------ United States and Canada: Equipment net sales........... $1,691 $1,661 + 2 $5,050 $4,868 + 4 Financial Services revenues.................... 352 338 + 4 1,059 1,000 + 6 ------ ------ ------ ------ Total........................ 2,043 1,999 + 2 6,109 5,868 + 4 Overseas net sales.............. 825 643 +28 2,102 1,620 +30 Other revenues.................. 37 31 +19 100 84 +19 ------ ------ ------ ------ Total net sales and revenues................... $2,905 $2,673 + 9 $8,311 $7,572 +10 ------ ------ ------ ------ ------ ------ ------ ------ Operating profit*: Agricultural equipment........ $ 216 $ 156 +38 $ 619 $ 508 +22 Industrial equipment.......... 53 63 -16 153 162 - 6 Commercial and consumer equipment................... 15 38 -61 117 130 -10 Financial Services............ 75 61 +23 229 197 +16 ------ ------ ------ ------ Total operating profit. 359 318 +13 1,118 997 +12 Interest and corporate expenses-net.................. (39) (40) - 3 (110) (123) -11 Income taxes.................... (116) (98) +18 (365) (318) +15 ------ ------ ------ ------ Net income................... $ 204 $ 180 +13 $ 643 $ 556 +16 ------ ------ ------ ------ ------ ------ ------ ------ * Operating profit is defined as income before interest expense, foreign exchange gains and losses, income taxes and certain corporate expenses, except for the operating profit of Financial Services which includes the effect of interest expense. 8 (8) Dividends declared and paid on a per share basis were as follows: Three Months Nine Months Ended Ended July 31 July 31 --------------- ----------- 1996 1995 1996 1995 ---- ---- ---- ---- Dividends declared..... $.20 $.18-1/3 $.60 $.55 Dividends paid......... $.20 $.18-1/3 $.60 $.55 (9) The calculation of primary net income per share is based on the average number of shares outstanding during the nine months ended July 31, 1996 and 1995 of 261,341,000 and 260,097,000, 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) The Company is subject to various unresolved legal actions which arise in the normal course of its business, the most prevalent of which relate to product liability, retail credit matters, and patent and trademark matters. Although it is not possible to predict with certainty the outcome of these unresolved legal actions or the range of possible loss, the Company believes these unresolved legal actions will not have a material effect on its financial position or results of operations. (11) 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 $.34 per share ($107 million before income taxes). The charge mainly represented the cost of employment reductions to be implemented during 1993 and the next few years. As of July 31, 1996, the expected employment reductions and the disbursement of the $107 million accrual were both nearly 95 percent complete. (12) During November 1995, in concurrence with the adoption of "A Guide to Implementation of Statement 115 on Accounting for Certain Investments in Debt and Equity Securities - Questions and Answers," the Company transferred all its held-to-maturity debt securities to the available- for-sale category. Held-to-maturity debt securities are carried at amortized cost. Available-for-sale securities are carried at fair value with unrealized gains and losses after income taxes shown as a separate component of stockholders' equity. The amortized cost of these debt securities at the time of 9 transfer was $484 million and the unrealized gain was $29 million ($19 million after income taxes). Although the Company's intention to hold a majority of its debt securities to maturity has not changed, the transfer was made to increase flexibility in responding to future changes in investment needs. (13) In the first quarter of 1996, Deere & Company purchased 40 percent of Sunstate Equipment Company, which is a regional rental equipment company based in Phoenix, Arizona. In the first nine months of 1996, Deere & Company also made additional investments in its unconsolidated affiliate in Brazil, increasing its ownership to 40 percent. (14) On February 28, 1996, the Company announced its intention to repurchase up to $500 million of Deere & Company common stock. At the Company's discretion, repurchases of common stock will be made from time to time in the open market and through privately negotiated transactions. During the first nine months of 1996, the Company repurchased $155 million of common stock related to this program and $64 million of common stock for ongoing stock option and restricted stock plans. (15) In June 1996, the Company granted 72,914 shares of stock under the Company's restricted stock plan for key employees. The market value of the restricted stock at the time of grant totaled $3.0 million. At July 31, 1996, 689,766 restricted shares were outstanding and 3,764,168 shares remained available for award under both the plans for employees and nonemployee directors. 10 Item 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS RESULTS OF OPERATIONS Deere & Company achieved record third quarter net income of $204.4 million or $.79 per share, an increase of 13 percent compared with 1995 third quarter net income of $180.1 million or $.69 per share. Year-to-date net income totaled $643.4 million or $2.46 per share compared with $555.5 million or $2.14 per share for the first nine months of 1995. Both the third quarter and nine month results represent new Company earnings records. The Company's operating margins remain strong as continuous improvement and quality initiatives are having a positive impact in all areas of the Company's business. Worldwide net sales and revenues increased nine percent to $2,905 million in the third quarter and increased 10 percent to $8,311 million for the first nine months of 1996 compared with $2,673 million and $7,572 million, respectively, last year. Net sales to dealers of agricultural, industrial, and commercial and consumer (formerly known as lawn and grounds care) equipment were $2,516 million in the third quarter and $7,152 million year-to-date this year compared with $2,304 million and $6,488 million, respectively, last year. Export sales from the United States totaled $1,219 million for the first nine months, a gain of 21 percent over last year's export sales of $1,009 million. Overseas net sales and physical volume of sales for the past nine months continued to increase, rising by 30 percent and 28 percent, respectively, compared with a year ago and sales are expected to exceed $2.5 billion for the year for the first time in the Company's history. Overseas sales for the quarter included $95 million of combine sales to Ukraine, the first phase of a $187 million contract. Overall, the Company's worldwide physical volume of sales increased eight percent for both the quarter and year-to-date compared with last year, reflecting the increased worldwide demand for the Company's products. The Company's worldwide Equipment Operations, which exclude the Financial Services subsidiaries and unconsolidated affiliates, had income of $153.1 million in the third quarter and $486.6 million year-to- date in 1996 compared with $135.3 million and $422.7 million, respectively, last year. Worldwide agricultural equipment operating profits were higher compared with last year for both the quarter and year-to-date, primarily due to increased production and sales volumes, partially offset by expenses related to the development of new markets and products. Industrial equipment operating profits were lower in both the quarter and first nine months compared with last year, reflecting increased new engine development expenses, coupled with a 11 slightly less favorable product mix. However, retail sales of industrial equipment remained at strong levels in both periods. Worldwide commercial and consumer equipment operating profits were lower for both the quarter and year- to-date, reflecting slightly lower third quarter sales volume, coupled with higher sales incentives. Unusual weather conditions in several areas of North America have caused commercial and consumer equipment industry sales to decline substantially in some markets during much of 1996. Additionally, higher expenditures for various ongoing growth initiatives continued to impact the short-term profitability of the division. Overseas results continued to strengthen, reflecting higher production and sales volumes, continued cost improvements and a favorable sales mix. The ratio of cost of goods sold to net sales of the Equipment Operations decreased from 79.3 percent in the third quarter of 1995 to 78.1 percent in the same period this year. During the first nine months of 1996, the ratio of cost of goods sold to net sales was 77.2 percent compared with 77.8 percent in the first nine months of last year. Additional information on business segments is presented in Note 7 to the interim financial statements. Net income of the Company's credit operations was $35.3 million in the third quarter of 1996 compared with $28.1 million last year. For the first nine months of 1996, net income of these subsidiaries was $109.7 million compared with $92.2 million in 1995. This year's third quarter and year-to-date results continued to reflect higher earnings from a larger average portfolio. Total revenues of the credit operations increased 18 percent from $149 million in the third quarter of 1995 to $175 million in the current quarter and increased 17 percent in the first nine months from $449 million last year to $523 million this year. The average balance of receivables and leases financed was 22 percent higher in the third quarter and 20 percent higher in the first nine months of 1996 compared with the same periods last year. The resulting increase in average borrowings this year resulted in a 10 percent increase in interest expense in the current quarter and a 12 percent increase in the first nine months of 1996 compared with 1995. The credit subsidiaries' consolidated ratio of earnings to fixed charges was 1.74 to 1 for the third quarter this year compared with 1.66 to 1 in 1995. This ratio was 1.77 to 1 for the first nine months this year compared with 1.73 to 1 in the comparable period of 1995. Net income from insurance operations was $8.0 million in the third quarter of 1996 compared with $8.7 million last year. For the first nine months, net income from these operations was $26.3 million this year compared with $21.1 million in 1995. Earnings benefited from improved underwriting results in the current quarter and first nine months of 1996. Additionally, last year's nine month results were affected by the small loss on the sale of 12 the division's life insurance subsidiary. However, third quarter net income last year was slightly higher compared to the current quarter as a result of unusually high investment income caused by rebalancing the investment portfolio following the sale of the life insurance subsidiary. Primarily as a result of the sale of the life insurance subsidiary, third quarter insurance premiums decreased 17 percent in 1996 compared with the same period last year, while total claims, benefits, and selling, administrative and general expenses decreased 24 percent this year. For the nine month period, insurance premiums decreased four percent in 1996, while total claims, benefits, and selling, administrative and general expenses decreased 11 percent compared with last year. Net income from health care operations was $4.8 million in the third quarter of 1996 compared with $3.6 million last year. In the first nine months, net income from these operations was $13.2 million this year compared with $12.3 million in 1995. Earnings improved this year primarily due to increased managed care membership and favorable results on self-insured incentive based contracts. Health care premiums and administrative services revenues increased 16 percent in the third quarter compared with the same period last year, while total claims, benefits, and selling, administrative and general expenses increased 14 percent this year. For the nine month period, health care premiums and administrative services revenues increased seven percent, while total claims, benefits, and selling, administrative and general expenses also increased seven percent compared with last year. OUTLOOK The current level of both North American and overseas agricultural equipment retail sales in the first nine months of 1996 continues to provide a solid base for operations. Growing worldwide demand for agricultural commodities coupled with the existing low levels of world grain stocks have resulted in strong prices for grains and oilseeds. Additionally, the new "freedom to farm" bill has further strengthened United States farm income by establishing substantial transition payments to participating farmers while reducing restrictions on farm acreage utilization. Export markets for agricultural commodities remain strong despite substantially higher prices and a strengthening dollar. Based on these factors, continued farmer confidence should promote strong market conditions, resulting in healthy levels of worldwide retail demand for both new and used agricultural equipment. In the United States, overall farmers' confidence continues to remain high despite a variety of regional conditions that include late plantings and ongoing dry weather conditions in certain areas of the country. 13 Erratic weather conditions throughout much of the United States have reduced the overall industry sales of commercial and consumer equipment. However, retail demand for Deere equipment has stabilized at relatively good and sustainable levels, primarily as a result of the Company's strong dealer network, initial growth from the new Sabre-branded product line and effectively targeted sales promotions. Additionally, industry demand for industrial equipment remained strong during the third quarter, and is expected to continue at current levels based primarily on expectations of a high level of new housing starts and stable interest rates. As a result of this outlook, the Company's worldwide physical volume of sales to dealers is projected to increase by approximately seven percent for the year compared with 1995. SAFE HARBOR STATEMENT SAFE HARBOR STATEMENT UNDER THE PRIVATE SECURITIES LITIGATION REFORM ACT OF 1995: Statements under the "Outlook" heading that relate to future operating periods are subject to important risks and uncertainties that could cause actual results to differ materially. The Company's businesses include Equipment Operations (agricultural, industrial, and commercial and consumer) and Financial Services (credit, insurance and health care). Forward-looking statements relating to these businesses involve certain factors that are subject to change, including: the many interrelated factors that affect farmers' confidence, including worldwide demand for agricultural products, world grain stocks, commodities prices, weather, animal diseases, crop pests, harvest yields, real estate values and government farm programs; general economic conditions and housing starts; legislation, primarily legislation relating to agriculture, the environment, commerce and infrastructure; actions of competitors in the various industries in which the Company competes; production difficulties, including capacity and supply constraints; labor relations; interest and currency exchange rates; accounting standards; and other risks and uncertainties. Further information concerning the Company and its businesses, including factors that potentially could materially affect the Company's financial results, is contained in the Company's filings with the Securities and Exchange Commission. 14 CAPITAL RESOURCES AND LIQUIDITY The discussion of capital resources and liquidity has been organized to review separately, where appropriate, the Company's Equipment Operations, Financial Services operations and the consolidated totals. EQUIPMENT OPERATIONS The Company's equipment businesses are capital intensive and are subject to large seasonal variations in financing requirements for receivables from dealers and inventories. Accordingly, to the extent necessary, funds provided from operations are supplemented from external sources. Positive cash flows from operating activities in the first nine months of 1996 resulted primarily from the record level of net income, and dividends received from the Financial Services subsidiaries. Partially offsetting these positive operating cash flows were relatively low seasonal increases in dealer receivables and Company-owned inventories. The aggregate amount of these operating cash flows of $282 million, along with cash and cash equivalents at the beginning of the period were used primarily for repurchases of common stock, payment of dividends, purchases of property and equipment, acquisitions of businesses and a decrease in total borrowings. In the first nine months of 1995, negative cash flows from operating activities resulted from increases in dealer receivables and Company-owned inventories due to normal seasonal increases and higher retail demand, coupled with contributions of $285 million 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 of $164 million, along with cash required for payment of dividends, purchases of property and equipment and an increase in cash and cash equivalents were provided primarily from an increase in borrowings and a decrease in receivables from the Financial Services operations. Net dealer accounts and notes receivable, which largely represent dealers' inventories financed by the Company, have increased $244 million since October 31, 1995 and $57 million compared to a year ago, due primarily to a normal seasonal increase, a higher level of retail demand and higher dealer inventories of used equipment. The ratios of these receivables to the last 12 months net sales were 37 percent at July 31, 1996, 37 percent at October 31, 1995 and 40 percent at July 31, 1995. North American agricultural equipment and commercial and consumer equipment dealer 15 receivables increased approximately $145 million and $20 million, respectively, compared with the levels 12 months earlier. North American industrial dealer receivables decreased approximately $170 million compared to a year earlier. Total overseas dealer receivables were approximately $60 million higher than a year ago. The percentage of total worldwide dealer receivables outstanding for periods exceeding 12 months was seven percent at July 31, 1996, eight percent at October 31, 1995 and seven percent at July 31, 1995. Company-owned inventories at July 31, 1996 have increased by $221 million compared with the end of the previous fiscal year and $21 million compared to one year ago, reflecting a normal seasonal increase as well as increased sales and production volumes. Total interest-bearing debt of the Equipment Operations was $1,012 million at July 31, 1996 compared with $1,099 million at the end of fiscal year 1995 and $1,477 million at July 31, 1995. The ratio of total debt to total capital (total interest-bearing debt and stockholders' equity) was 23 percent, 26 percent and 33 percent at July 31, 1996, October 31, 1995 and July 31, 1995, respectively. During the first nine months of 1996, Deere & Company retired $150 million of 8-1/4% notes due in 1996, $100 million of 9-1/8% notes due in 1996 and $47 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 credit subsidiaries periodically sell substantial amounts of retail notes. The insurance and health care operations generate their funds through internal operations and have no external borrowings. During the first nine months of 1996, the aggregate cash provided from operating and financing activities was used primarily to increase credit receivables and leases. Cash provided from operating activities was $195 million in the first nine months. Financing activities provided $353 million in 1996, representing a $466 million increase in total borrowings, partially offset by a $113 million dividend to the Equipment Operations. Investing activities used $630 million of cash in the first nine months, primarily due to the acquisitions of credit receivables and leases exceeding collections by $1,254 million, partially offset by $623 million of proceeds from the sale of retail notes. Cash and cash equivalents decreased $83 million during the first nine months of 1996. 16 In the first nine months 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 operating activities was $162 million in the first nine months of last year. Financing activities provided $397 million during the same period, representing a $532 million increase in outside borrowings, partially offset by a $65 million decrease in payables to the Equipment Operations and payment of a $70 million dividend to the Equipment Operations. Cash used for investing activities totaled $408 million in the first nine months of 1995, primarily due to acquisitions of credit receivables exceeding collections by $1,167 million, which was partially offset by proceeds of $726 million received from the sale of retail notes in the public market. Cash and cash equivalents increased $151 million during the first nine months of 1995. Marketable securities consist primarily of debt securities held by the insurance and health care operations in support of their obligations to policyholders. These investments increased $19 million in the first nine months of 1996 and $44 million during the last 12 months due to the recognition of current market values caused by the transfer of debt securities from the held-to-maturity category to the available-for-sale category in November 1995 (see note 12), and purchases of marketable securities exceeding maturities and sales. Credit receivables increased by $459 million in the first nine months of 1996 and $904 million during the past 12 months. These receivables consist primarily 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 first nine months of 1996 due to acquisitions of credit receivables exceeding collections, which was partially offset by the sale of retail notes for proceeds of $623 million. Total acquisitions of credit receivables were 19 percent higher in the first nine months of 1996 compared with the same period last year. This significant increase resulted mainly from increased acquisitions of retail notes, revolving charge accounts and wholesale receivables. The increase in credit receivables from acquisitions exceeding collections in the past 12 months was partially offset by the sale of receivables for proceeds of $733 million during the same period. The levels of retail notes, revolving charge accounts, wholesale receivables and financing lease receivables were higher than one year ago. Credit receivables administered by the credit subsidiaries, which include receivables previously sold, amounted to $6,879 million at July 31, 1996 compared with $6,526 million at October 31, 1995 17 and $6,108 million at July 31, 1995. At July 31, 1996, the unpaid balance of all retail notes previously sold was $1,181 million compared with $1,278 million at October 31, 1995 and $1,302 million at July 31, 1995. Additional sales of retail notes are expected to be made in the future. Total outside interest-bearing debt of the credit subsidiaries was $5,045 million at July 31, 1996 compared with $4,217 million at the end of fiscal year 1995 and $4,148 million at July 31, 1995. Total outside borrowings increased during the first nine months of 1996 and the past 12 months, generally corresponding with the levels of the credit receivable and lease portfolio financed, the level of cash and cash equivalents and the change in the amounts of payables owed to the Equipment Operations. The credit subsidiaries' ratio of total interest-bearing debt to stockholder's equity was 6.2 to 1 at July 31, 1996 compared with 6.1 to 1 at October 31, 1995 and 5.6 to 1 at July 31, 1995. John Deere Capital Corporation issued $550 million and retired $143 million of medium-term notes during the first nine months of 1996. CONSOLIDATED The Company maintains unsecured lines of credit with various banks in North America and overseas. Some of the lines are available to both the Equipment Operations and certain credit subsidiaries. Worldwide lines of credit totaled $4,321 million at July 31, 1996, $1,204 million of which were unused. For the purpose of computing unused credit lines, total short-term borrowings, excluding the current portion of long-term borrowings, were considered to constitute utilization. Included in the total credit lines is a long-term credit agreement commitment for $3,675 million. Stockholders' equity was $3,397 million at July 31, 1996 compared with $3,085 million at October 31, 1995 and $3,033 million at July 31, 1995. The increase of $311 million in the first nine months of 1996 resulted primarily from net income of $643 million and an increase in common stock of $28 million, partially offset by an increase in common stock in treasury of $207 million and dividends declared of $156 million. The Board of Directors at its meeting on August 28, 1996 declared a quarterly dividend of 20 cents per share payable November 1, 1996 to stockholders of record on September 30, 1996. 18 PART II. OTHER INFORMATION ITEM 1. LEGAL PROCEEDINGS See Note (10) 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 Report on Form 8-K dated May 14, 1996 (Item 7). 19 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: August 30, 1996 By s/ Robert W. Lane ------------------- --------------------------- Robert W. Lane Senior Vice President, Principal Financial Officer and Principal Accounting Officer 20 INDEX TO EXHIBITS Number Page - ------ ---- 2 Not applicable - 3 By-laws, as amended 22 4 Not applicable - 10 Not applicable - 11 Computation of net income per share 38 12 Computation of ratio of earnings to fixed charges 39 15 Not applicable - 18 Not applicable - 19 Not applicable - 22 Not applicable - 23 Not applicable - 24 Not applicable - 27 Financial data schedule 40 99 Not applicable - 21 EX-3 2 EXHIBIT 3 Exhibit 3 BYLAWS of DEERE & COMPANY (Adopted July 30, 1958; Amended August 28, 1996) ARTICLE I - IDENTIFICATION SECTION 1. NAME. The name of the Company is Deere & Company (hereinafter referred to as the "Company"). SECTION 2. OFFICES. The principal office of the Company in Delaware shall be in the City of Wilmington, County of New Castle, State of Delaware. The Company may maintain, change or discontinue its other offices, including its principal business office in the County of Rock Island, State of Illinois, and may have such other offices both within and outside of the State of Delaware as its business may require. SECTION 3. SEAL. The seal of the Company shall be circular in form and mounted upon a metal die, suitable for impressing the same upon paper. About the upper periphery of the seal shall appear the words "Deere & Company" and about the lower periphery thereof the word "Delaware". In the center of the seal shall appear a representation of a leaping deer. SECTION 4. FISCAL YEAR. The fiscal year of the Company shall begin on the first day of November in each calendar year and end on the last day of October in the following calendar year. ARTICLE II - THE STOCKHOLDERS SECTION 1. PLACE OF MEETINGS. Annual meetings of the stockholders for the election of directors shall be held at the principal business office of the Company in Rock Island County, State of Illinois. Meetings of the stockholders for any other purpose may be held at such place within the State of Delaware or the State of Illinois as may be specified by the Chairman or the Board of Directors. SECTION 2. ANNUAL MEETING. The annual meeting of the stockholders, at which they shall elect directors by ballot and by plurality vote and may transact such other business as may properly be brought before the meeting accordance with Section 3 of Article II of these Bylaws, shall be held at ten o'clock in the morning, local time, on the last Wednesday in February of each year or on such business day and at such time and at such place as may be designated by the Board of Directors. If the date designated for the annual meeting is a legal holiday then the annual meeting shall be held on the first following day that is not a legal holiday. 22 SECTION 3. NOMINATION OF DIRECTORS AND OTHER BUSINESS. (a) Only persons who are nominated in accordance with the following procedures shall be eligible for election as directors. Nominations of persons for election as directors may be made at a meeting of stockholders only (i) by or at the direction of the Board of Directors, (ii) by any person or persons authorized to do so by the Board or (iii) by any stockholder of the Company entitled to vote for the election of directors at the meeting who complies with the notice procedures set forth in this Section 3. Such nomination, other than those made by or at the direction of the Board or by persons authorized by the Board, shall be made pursuant to timely notice in writing to the Secretary of the Company. Such stockholder's notice to the Secretary of a proposed nomination shall set forth, as to each person whom the stockholder proposes to nominate for election or re-election as a director, (i) the name, age, business address and residence address of the person, (ii) the principal occupation or employment of the person, (iii) the class and number of shares of capital stock of the Company which are beneficially owned by the person, and (iv) any other information relating to the person that is required to be disclosed in solicitations for proxies for election of directors pursuant to Regulation 14A under the Securities Exchange Act of 1934, as now or hereafter amended; such notice shall further set forth, as to the stockholder giving the notice, (i) the name and record address of such stockholder and (ii) the class and number of shares of the Company which are beneficially owned by such stockholder. The Company may require any proposed nominee to furnish such other information as may reasonably be required by the Company to determine the eligibility of such proposed nominee to serve as director. No person shall be eligible for election as a director of the Company unless nominated in accordance with the procedures set forth herein and unless qualified under the other provisions of these bylaws. If the Chairman of the meeting determines that a nomination was not made in accordance with the foregoing procedure, he shall so declare to the meeting and the defective nomination shall be disregarded. (b) To be properly brought before any annual or special meeting of stockholders, business must be either (i) specified in the notice of meeting (or any supplement thereto) given by or at the direction of the Board, (ii) otherwise properly brought before the meeting by or at the direction of the Board, or (iii) otherwise properly brought before the meeting by a stockholder. In addition to any other applicable requirements, for business to be properly brought before a meeting by a stockholder, the stockholder must have given timely notice thereof in writing to the Secretary of the Company. A stockholder's notice to the Secretary shall set forth with respect to each matter the stockholder proposes to bring before the meeting (i) a brief description of the business desired to be brought before the meeting and the reasons for conducting such business at the meeting, (ii) the name and record address of the stockholder proposing 23 such business, (iii) the class and number of shares of the Company which are beneficially owned by the stockholder, and (iv) any material interest of the stockholder in such business. Notwithstanding anything in these bylaws to the contrary, no business shall be conducted at any meeting of stockholders except in accordance with the procedures set forth in this Section 3, PROVIDED, HOWEVER, that nothing in this Section 3 shall be deemed to preclude discussion by any stockholder of any business properly brought before the meeting. If the Chairman of the meeting determines that such business was not properly brought before the meeting in accordance with the foregoing procedure, he shall so declare to the meeting, any such business not properly brought before the meeting shall not be transacted. (c) To be timely, a stockholder's notice of nomination or other business must be delivered to, or mailed and received at, the principal executive offices of the Company, not less than 90 days nor more than 120 days prior to the meeting; PROVIDED, HOWEVER, that in the event that less than 105 days' notice or prior public disclosure of the date of the meeting is given or made to stockholders, notice by the stockholder to be timely must be so received not later than the close of business on the 15th day following the day on which such notice of the date of the annual meeting was mailed or such public disclosure was made, whichever first occurs. SECTION 4. SPECIAL MEETINGS. Special meetings of the stockholders may be called by the Chairman or the Board of Directors. The business transacted at any special meeting of the stockholders shall be limited to the purposes stated in the notice for the meeting. SECTION 5. NOTICE OF MEETINGS. Written notice of each meeting of stockholders, stating the place, day and hour of the meeting and, in case of a special meeting, the purpose or purposes for which the meeting is called, shall be delivered not less than ten nor more than sixty days before the date of the meeting, either personally or by mail, by or at the direction of the Chairman or the Secretary to each stockholder of record entitled to vote at such meeting. If mailed, such notice shall be deemed to be delivered when deposited in the United States mail addressed to the stockholder at his address as it appears on the stock transfer books of the Company, with postage thereon prepaid. 24 SECTION 6. FIXING OF RECORD DATES. In order that the Company may determine the stockholders entitled to notice of or to vote at any meeting of stockholders or any adjournment thereof, or entitled to receive payment or any dividend or other distribution or allotment of any rights, or entitled to exercise any rights in respect of any change, conversion or exchange of stock or for the purpose of any other lawful action, the Board of Directors may fix, in advance, a record date, which shall not be more than sixty nor less than ten days before the date of such meeting, nor more than sixty days prior to any other action. A determination of stockholders of record entitled to notice of or to vote at a meeting of stockholders shall apply to any adjournment of the meeting; provided, however, that the Board of Directors may fix a new record date for the adjourned meeting. SECTION 7. VOTING LIST. The Secretary shall prepare and make, or cause to be prepared and made, at least ten days before every meeting of stockholders, a complete list of the stockholders entitled to vote at such meeting, arranged in alphabetical order, showing the address of and the number of shares registered in the name of each stockholder. Such list shall be open to the examination of any stockholder for any purpose germane to the meeting, during ordinary business hours, for a period of at least ten days prior to the meeting, either at a place within the city where the meeting is to be held, which place shall be specified in the notice of meeting, or, if not so specified, at the place where the meeting is to be held, and the list shall be produced and kept at the time and place of the meeting during the whole time thereof, and subject to the inspection of any stockholder who may be present. SECTION 8. QUORUM AND ADJOURNED MEETINGS. The holders of a majority of the shares entitled to vote at any meeting of stockholders, present in person or by proxy, shall constitute a quorum at such meeting except as otherwise provided by statute. Whenever a quorum shall be present at any meeting all matters shall be decided by vote of the holders of a majority of the shares present, unless otherwise provided by statute, the certificate of incorporation, or by these bylaws. Meetings of stockholders may be adjourned from time to time for any reason and, if a quorum shall not be present, the holders of the shares entitled to vote present in person or by proxy, may so adjourn the meeting. When a meeting is adjourned to another time or place, unless the bylaws otherwise require, notice need not be given of the adjourned meeting if the time and place thereof are announced at the meeting at which the adjournment is taken except that, if the adjournment is for more than thirty days, or if after the adjournment a new record date is fixed for the adjourned meeting, a notice of the adjourned meeting shall be given to each stockholder of record entitled to vote at the meeting. At the adjourned meeting the Company may transact any business which might have been transacted at the original meeting. If a quorum shall not be present at any meeting of the Board of Directors the directors present thereat may adjourn the meeting from time to time, without notice other than at the meeting, until a quorum shall be present. 25 SECTION 9. VOTING AT MEETINGS. Unless otherwise required by law, the certificate of incorporation or these bylaws, each stockholder shall at every meeting of the stockholders be entitled to one vote in person or by proxy for each share of the capital stock having voting power held by such stockholder, but no proxy shall be voted after three years from its date, unless the proxy provides for a longer period. SECTION 10. ORGANIZATION. The Chairman shall preside at all meetings of the stockholders. In the absence or inability to act of the Chairman, the Vice Chairman, the President or an Executive Vice President (in that order) shall preside, and in their absence or inability to act another person designated by one of them shall preside. The Secretary of the Company shall act as secretary of each meeting of the stockholders. In the event of his absence or inability to act, the chairman of the meeting shall appoint a person who need not be a stockholder to act as secretary of the meeting. SECTION 11. INSPECTORS OF VOTING. Except as otherwise provided by statute, the Chairman or in his absence the chairman of the meeting, shall appoint inspectors of voting for each meeting of stockholders. SECTION 12. MEETING PROCEDURES. Meetings of the stockholders shall be conducted in a fair manner but need not be governed by any prescribed rules of order. The presiding officer's rulings on procedural matters shall be final. The presiding officer is authorized to impose reasonable time limits on the remarks of individual stockholders and may take such steps as such officer may deem necessary or appropriate to assure that the business of the meeting is conducted in a fair and orderly manner. ARTICLE III - THE BOARD OF DIRECTORS SECTION 1. NUMBER AND QUALIFICATIONS. The business and affairs of the Company shall be under the direction of or managed by a Board of Directors who need not be residents of the State of Delaware or stockholders of the Company. The number of directors may be increased or decreased from time to time by resolution of the Board of Directors, provided no decrease shall have the effect of shortening the term of any incumbent director. Persons who are or have been officers of the Company, other than persons who hold or have held either or both of the office of Chairman and Chief Executive Officer and the office of President, shall not be elected directors of the Company for terms beginning after the date they retire from active employment with the Company. No candidate shall be elected director of the Company for a term beginning after his or her 70th birthday. 26 SECTION 2. ELECTION. Directors shall be elected by class for three year terms as specified in the Certificate of Incorporation at the annual meeting of stockholders, except as provided in Section 3 of this Article and except as required under the terms of any preferred shares, and each director elected shall hold office during the term for which he is elected and until his successor is elected and qualified. A director may be removed only for cause. SECTION 3. VACANCIES. Any vacancies occurring in the Board of Directors and newly created directorships resulting from any increase in the authorized number of directors may be filled by a majority of the remaining directors though less than a quorum of the Board of Directors, or by the sole remaining director, and any director so chosen shall hold office until the next election of the class for which he was chosen and until his successor is duly elected and qualified. SECTION 4. REGULAR MEETINGS. Regular meetings of the Board of Directors shall be held at nine-thirty o'clock in the morning, local time, or at such other time as may be established from time to time by resolution of the Board of Directors, on the last Wednesday of May and August, and the first Wednesday in December, and immediately following the adjournment of the Annual Meeting of stockholders on the last Wednesday in February in each year. Should any of such days be a legal holiday, the meeting shall be held at the same time on the first following day that is not a legal holiday. The February meeting shall be held at the same place as the annual meeting of stockholders. All other regular meetings shall be held at the principal business office of the Company in Rock Island County, Illinois, or at any other place either within or outside the State of Delaware approved in writing not less than ten days in advance of the meeting by a majority of the number of directors then in office or approved at the last preceding regular meeting of the Board of Directors. SECTION 5. SPECIAL MEETINGS. Special meetings of the Board of Directors may be held upon call of the Chairman at any time; special meetings also shall be called by the Chairman or by the Secretary whenever requested by one-third of the directors then in office. Such meetings shall be held at the principal business office of the Company in Rock Island County, Illinois, or at any other place either within or outside the State of Delaware as is designated in the call and notice for the meeting. 27 SECTION 6. NOTICE OF MEETINGS. No notice of any kind shall be necessary for regular meetings of the Board of Directors to be held at the principal business office of the Company in Rock Island County, Illinois. Notice of special meetings of the Board of Directors wherever held in the United States other than Alaska or Hawaii, and notice of regular meetings of the Board of Directors to be held at a place in the United States other than at the principal business office of the Company and other than in Alaska or Hawaii shall be given by letter, telegram, cable or radiogram addressed to each director's regular business office and delivered for transmission not later than during the second day immediately preceding the day for such meeting. One day personal, telegraphic or telephonic notice given by the Chairman, Secretary or any other officer, shall be sufficient notice of the calling of a special meeting; provided that such persons may give shorter notice if that is deemed necessary or appropriate under the circumstances provided that the shorter notice is actually received by the director prior to the meeting and provision is made at the meeting for participation by means of telecommunication, as permitted by Section 10 of this Article. Notice of special meetings and of regular meetings of the Board of Directors to be held at a place in Alaska or Hawaii or outside the United States shall be given by letter, telegram, cable or radiogram addressed to each director's regular business office and delivered for transmission not later than during the tenth day immediately preceding the day for such meeting. Notice of any meeting of the Board of Directors for which a notice is required may be waived in writing signed by the person or persons entitled to such notice, whether before or after the time of such meeting, and such waiver shall be equivalent to the giving of such notice. Attendance of a director at any such meeting shall constitute a waiver of notice thereof, except where a director attends a meeting for the express purpose of objecting to the transaction of any business because such meeting is not lawfully convened. Neither the business to be transacted at nor the purpose of any meeting of the Board of Directors for which a notice is required need be specified in the notice, or waiver of notice, of such meeting. SECTION 7. QUORUM. A majority of the number of directors in office shall constitute a quorum for the transaction of business. The act of a majority of the directors present at a meeting at which a quorum is present shall be the act of the Board of Directors except as otherwise provided by law or these bylaws. [During an emergency period following a national catastrophe, due to enemy attack, a majority of the surviving members of the Board of Directors who have not been rendered incapable of acting as the result of physical or mental incapacity or the difficulty of transportation to the place of the meeting shall constitute a quorum for the purpose of filling vacancies in the Board of Directors and among the elected officers of the Company.] 28 SECTION 8. ORGANIZATION. The Chairman shall preside at all meetings of the Board of Directors. In the absence or inability to act of the Chairman, the Vice Chairman, the President or an Executive Vice President (in that order) shall preside, and in their absence or inability to act another director designated by one of them shall preside. SECTION 9. ACTIONS BY WRITTEN CONSENT. Any action required or permitted to be taken at any meeting of the Board of Directors or of any committee thereof may be taken without a meeting, if prior to such action a written consent thereto is signed by all members of the Board or of such committee as the case may be, and such written consent is filed with the minutes of proceedings of the Board or such committee. SECTION 10. MEETINGS BY MEANS OF TELECOMMUNICATION. Members of the Board of Directors of the Company, or any committee designated by the Board of Directors, may participate in a meeting of the Board of Directors or such committee by means of a conference telephone or similar communications equipment by means of which all persons participating in the meeting can hear each other, and participation in a meeting pursuant to this Section 10 shall constitute presence in person at such meeting. SECTION 11. INTERESTED DIRECTORS: QUORUM. (a) No contract or transaction between the Company and one or more of its directors or officers, or between the Company and any other corporation, partnership, association or other organization in which one or more of its directors or officers are directors or officers, or have a financial interest, shall be void or voidable solely for this reason, or solely because the director or officer is present at or participates in the meeting of the Board or committee thereof which authorizes the contract or transaction, or solely because his or their votes are counted for such purpose, if: (1) The material facts as to his relationship or interest and as to the contract or transaction are disclosed or are known to the Board of Directors or the committee, and the Board or committee in good faith authorizes the contract or transaction by the affirmative votes of a majority of the disinterested directors, even though the disinterested directors be less than a quorum; or 29 (2) The material facts as to his relationship or interest and as to the contract or transaction are disclosed or are known to the shareholders entitled to vote thereon, and the contract or transaction is specifically approved in good faith by vote of the shareholders; or (3) The contract or transaction is fair as to the Company as of the time it is authorized, approved, or ratified by the Board of Directors, a committee thereof or the shareholders. (b) Common or interested directors may be counted in determining the presence of a quorum at a meeting of the Board of Directors or of a committee which authorizes the contract or transaction. Section 12. COMPENSATION. The Board of Directors, by the affirmative vote of a majority of the whole Board, and irrespective to any personal interest of its members, shall provide reasonable compensation of all directors for services, ordinary or extraordinary, to the Company as directors, officers or otherwise. Directors shall be paid their actual expenses of attendance at each meeting of the Board of Directors and committees thereof. ARTICLE IV - EXECUTIVE COMMITTEE Section 1. DESIGNATION AND MEMBERS. During the intervals between meetings of the Board of Directors and subject to such limitations as may be imposed by law and these bylaws, an Executive Committee shall have and may exercise all of the authority of the Board of Directors in the management of the business and affairs of the Company. The membership of such Executive Committee shall include the Chairman and such other directors as are designated by the Board of Directors at the recommendation of the Chairman. This designation of the Executive Committee and the delegation of authority granted to it shall not operate to relieve the Board of Directors, or any director, of any responsibility imposed upon it or him by law. No member of the Executive Committee shall continue to be a member thereof after he ceases to be a director of the Company. Section 2. LIMITATION OF POWERS. Neither the Executive Committee, nor any other Board Committee, shall have the authority of the Board of Directors in reference to amending the certificate of incorporation; adopting an agreement of merger or consolidation with another corporation or corporations; amending, altering or repealing the bylaws; electing or removing the Chairman, Vice Chairman, President, any Executive Vice President or any Senior Vice President; declaring dividends; or 30 amending, altering or repealing any resolution of the Board of Directors which by its terms provides that it shall not be amended, altered or repealed by the Executive Committee. Nor, unless specifically authorized by the Board of Directors, shall the Executive Committee have the authority of the Board of Directors in reference to incurring indebtedness for a term of longer than one year except that this limitation shall not apply to indebtedness of up to five years which (i) do not involve registration with the Securities & Exchange Commission and (ii) do not result in a total of indebtedness of $50,000,000 for a term longer than one year to any one lender, nor shall this limitation apply to the guaranty of an indebtedness which runs longer than one year. In any resolution of the Board of Directors providing for action to be taken or approval to be given by, or a report to be made to, the Board, the term "Board of Directors" standing alone shall not be deemed to mean the Executive Committee. All minutes of meetings of the Executive Committee shall be submitted to the next succeeding meeting of the Board of Directors, provided that no rights other than those of the Company shall be affected by any revision or alteration by the Board of Directors of actions of the Executive Committee. Section 3. PROCEDURE, MEETINGS, QUORUM. The Chairman shall preside at all meetings of the Executive Committee. In the absence or inability to act of the Chairman, the Vice Chairman, the President or an Executive Vice President (in that order) shall preside, and in their absence or inability to act another member designated by one of them shall preside. The Executive Committee shall keep a record of its acts and proceedings. Meetings of the Executive Committee shall be called at the request of any member of the Committee with the concurrence of the Chairman, or in the event of his absence or inability to act, the Vice Chairman, or in the event of the Vice Chairman's absence or inability to act, the President or an Executive Vice President of the Company, in the order of their availability. Such meeting shall be held at such location as shall be stated in the notice for such meetings. Meetings of the Executive Committee may be held upon notice given by word of mouth or written notice delivered during regular business hours to the office of each member or at other times to his residence. In the case of a meeting held at the principal business office of the Company in Rock Island County, Illinois, such notice may be given at any time prior to said meeting. In the case of a meeting held at any place in the United States other than the principal business office and other than Alaska or Hawaii, such notice may be given 48 hours prior to said meeting. In the case of a meeting held in Alaska or Hawaii or elsewhere outside the United States, such notice may be given four days prior to said meeting. 31 A majority of the members of the Executive Committee shall constitute a quorum for the transaction of any business, and the act of a majority of the members present at a meeting at which a quorum is present shall be the act of the Executive Committee. ARTICLE V - BOARD COMMITTEES OTHER THAN THE EXECUTIVE COMMITTEE Section 1. GENERAL PROVISIONS. The Board of Directors may from time to time establish such committees of the Board as it shall deem appropriate in addition to the Executive Committee. The resolution establishing each such committee shall state its powers and duties and the number of directors who shall be members. The membership of and committee chairman of each such committee shall be designated by the Board of Directors upon the recommendation of the Chairman. No such committee of the Board shall exercise any of the powers of the Board other than those set forth in such resolution establishing the committee, as such resolution may be amended from time to time. Section 2. PROCEDURES, MEETINGS, QUORUM. Meetings of such Board committees may be held on call of the Chairman of the committee or upon call issued by the Secretary of the Company at the request of a majority of the committee. Unless stated otherwise in the resolution establishing a committee, a majority of the members shall constitute a quorum for the conduct of business. Meetings of such Board committees may be held at such place as may be designated in the notice of meeting. Notice of meetings shall be given by the Secretary of the Company and shall be by word of mouth delivered to the office of the committee member not later than the third day before the meeting or in writing or by telegram mailed or sent not later than the fourth day before the meeting. The notice need not specify the business to be conducted at a meeting. 32 ARTICLE VI - THE OFFICERS Section 1. NUMBER AND QUALIFICATIONS. The principal corporate officers of the Company shall consist of a Chairman, a President, a Secretary, and a Treasurer; and the Company may have a Vice Chairman, one or more Executive Vice Presidents, one or more Senior Vice Presidents, one or more Vice Presidents, a General Counsel, a Comptroller and such other corporate officers and assistant officers as may be elected or appointed pursuant to these Bylaws. The Chairman, Vice Chairman and President shall be chosen from among the directors, but no other officer need be a director. The Company may also have such divisional officers as may be elected or appointed pursuant to these Bylaws. Any number of offices may be held by the same person. Section 2. GENERAL DUTIES. All corporate and divisional officers of the Company shall have such authority and perform such duties in the management of the Company as may be provided by or delegated in accordance with Sections 7 through 16 of these Bylaws, or as may be determined by resolution of the Board of Directors not inconsistent with these bylaws. All agents and employees of the Company not elected by the Board of Directors may be appointed by the Chairman or by persons authorized by him to do so, to serve for such time and to have such duties as the appointing authority may determine from time to time. Section 3. ELECTION AND TERM OF OFFICE. All corporate officers and each divisional officer reporting to the Office of the Chairman (hereinafter "Divisional Head") shall be elected annually by the Board of Directors at its regular meeting in February of each year. Each such corporate and divisional officer shall hold office for one year and until his successor is elected and qualified, or until he shall have resigned, or shall have been removed in the manner provided in Section 4. Section 4. REMOVAL. Any corporate or divisional officer may be removed by the Board of Directors, and any corporate officer below the rank of Senior Vice President or divisional officer below the rank of Divisional Head may be removed by the Chairman, whenever in the judgment of the Board or the Chairman, respectively, the interests of the Company will be served thereby. Such removal shall be without prejudice to the contract rights, if any, of the person removed. Election of an officer shall not of itself create contract rights. Section 5. RESIGNATIONS. Any officer may resign at any time by giving written notice to the Board of Directors or to the Chairman. Such resignation shall take effect at the time specified therein and, unless specified therein, the acceptance of such resignation shall not be necessary to make it effective. Section 6. VACANCIES. The Board of Directors may at any time create and fill new offices and may at any time fill the unexpired portion of the term of any vacant office. In addition, as to any corporate office below the rank of Senior Vice President, or any 33 divisional office below the rank of Divisional Head, the Chairman may at any time create and fill new offices and may at any time fill the unexpired term of any such office. Section 7. CHAIRMAN. The Chairman shall be the chief executive officer of the Company and as such shall have the active executive management of the operations of the Company, and shall see that the orders and resolutions of the Board of Directors and of the Executive Committee are carried into effect. He shall have power to execute in the name of the Company all bonds, contracts, other obligations and property conveyances which are duly authorized, and he shall have all the powers and perform all duties devolving upon him by law and as head of the Company. He may call special meetings of the stockholders and of the Board of Directors. From time to time he shall bring to the attention of the Board of Directors such information or recommendations concerning the business and affairs of the Company as he may deem necessary or appropriate. When present he shall preside at all meetings of the stockholders, of the Board of Directors and of the Executive Committee. Section 8. VICE CHAIRMAN. The Vice Chairman shall be the second ranking officer of the Company. He shall have such powers and perform such duties as the Board of Directors may from time to time prescribe or as the Chairman may from time to time delegate to him. In the absence or inability to act of the Chairman, the Vice Chairman shall act as the chief executive officer of the Company and shall perform the duties of the Chairman. Section 9. PRESIDENT. The President shall have such powers and perform such duties as the Board of Directors may from time to time prescribe or as the Chief Executive Officer may from time to time delegate to him. In the absence or inability to act of the Chairman and the Vice Chairman, the President shall perform the duties of Chairman. Section 10. EXECUTIVE VICE PRESIDENTS. Each Executive Vice President shall have such powers and perform such duties as the Board of Directors may from time to time prescribe or as the Chairman may from time to time delegate to him. In the absence or inability to act of the Chairman, the Vice Chairman and the President, an Executive Vice President present shall act as the chief executive officer of the Company and shall perform the duties of the Chairman. 34 Section 11. SENIOR VICE PRESIDENTS. Each Senior Vice President shall have such powers and perform such duties as the Board of Directors may from time to time prescribe or as the Chairman may from time to time delegate to him. In the absence or inability to act of the Chairman, the Vice Chairman, the President and Executive Vice Presidents, the duties of the Chairman shall be performed by a Senior Vice President present, acting in such order of priority as shall be designated by the Chairman. Section 12. VICE PRESIDENTS. Each Vice President shall have such powers and perform such duties as the Board of Directors may from time to time prescribe or as the Chairman may from time to time delegate to him. Section 13. SECRETARY. The Secretary shall act as secretary of all meetings of the stockholders, the Board of Directors and the Executive Committee. He shall prepare and keep or cause to be kept in books provided for the purpose minutes of all meetings of the stockholders, the Board of Directors and the Executive Committee; shall see that all notices are duly given in accordance with the provisions of these bylaws and as required by law, shall be custodian of the records and of the seal of the Company and see that the seal is affixed to all documents, the execution of which on behalf of the Company under its seal is duly authorized and, in general, he shall perform all duties incident to the office of Secretary and as required by law and such other duties as may be assigned to him from time to time by the Board of Directors or by the Chairman. Each Assistant Secretary (if one or more Assistant Secretaries be elected) shall assist the Secretary in his duties and shall perform such other duties as the Board of Directors may prescribe from time to time, or the Chairman or the Secretary may delegate to him from time to time. In the event of the absence or inability to act of the Secretary, his duties shall be performed by an Assistant Secretary designated by the Chairman. Section 14. TREASURER. The Treasurer shall have charge and custody of, and be responsible for, all moneys, notes and securities in the possession of the Company, and deposit all funds in the name of the Company in such banks, trust companies or other depositories as he may select; shall receive, and give receipts for, moneys due and payable to the Company from any source whatsoever; and, in general, he shall perform all the duties incident to the office of Treasurer and as required by law and such other duties as may be assigned to him from time to time by the Board of Directors or by the Chairman. 35 Each Assistant Treasurer (if one or more Assistant Treasurers be elected) shall assist the Treasurer in his duties and shall perform such other duties as the Board of Directors may prescribe from time to time, or the Chairman or the Treasurer may delegate to him from time to time. In the event of the absence or inability to act of the Treasurer, his duties shall be performed by an Assistant Treasurer designated by the Chairman. Section 15. GENERAL COUNSEL. The General Counsel shall be the chief legal advisor of the Company as to all matters affecting the Company and its business and, in general, he shall perform all the duties incident to the office of General Counsel and such other duties as may be assigned to him from time to time by the Board of Directors or by the Chairman. Section 16. COMPTROLLER. The Comptroller shall direct the preparation and maintenance, on a current basis, of such accounting books, records and reports as may be necessary to permit the directors, officers and executives of the Company to exercise adequate planning and control of the business of the Company or as may be required by law; and in general, he shall perform all the duties incident to the office of Comptroller and such other duties as may be assigned to him from time to time by the Board of Directors or by the Chairman. ARTICLE VII - ACTS WITH RESPECT TO SECURITIES OWNED Section 1. ACTS WITH RESPECT TO SECURITIES OWNED. Subject always to the specific directions of the Board of Directors, the Chairman, the Vice Chairman, the President, an Executive Vice President, a Senior Vice President, a Vice President, or the Treasurer on behalf of the Company may exercise all the rights, powers and privileges of ownership, including the right to vote, by proxy or otherwise, any security or securities owned by the Company (including reacquired shares of capital stock of the Company). The endorsement of such officers may be attested by the Secretary or an Assistant Secretary either with or without affixing thereto the corporate seal. ARTICLE VIII - OTHER PROVISIONS Section 1. CERTIFICATES OF STOCK. Certificates to evidence ownership of stock of the Company shall be issued in such form as the Board of Directors shall from time to time approve. The Board of Directors shall appoint a transfer agent and registrar for the stock of the Company in the Borough of Manhattan, City of New York. The Board of Directors may adopt such regulations concerning the authority and duties of the transfer agent and registrar, the transfer and registration of certificates of stock and the substitution or replacement of lost, stolen, destroyed or mutilated certificates as it shall see fit. 36 Section 2. LOANS. The Company may lend money to, or guarantee any obligation of, or otherwise assist any officer or other employee of the Company or of any of its subsidiaries, including any officer or employee who is a director of the Company or of any of its subsidiaries, whenever, in the judgment of the Board of Directors, such loan, guaranty or assistance may reasonably be expected to benefit the Company. The loan, guaranty or other assistance may be with or without interest and may be unsecured or secured in such manner as the Board of Directors shall approve including, without limitation, a pledge of shares of stock of the Company. Section 3. AMENDMENT OF BYLAWS. In addition to such power of amendment as is vested by law in the shareholders, the Board of Directors is authorized to alter, amend or repeal the bylaws at any meeting of the Board of Directors by the affirmative vote of a majority of the number of directors then in office. ****** 37 EX-11 3 EXHIBIT 11 Exhibit 11 DEERE & COMPANY AND CONSOLIDATED SUBSIDIARIES COMPUTATION OF NET INCOME PER SHARE (Shares and dollars in thousands except per share amounts) For the Nine Months Ended July 31 -------------------------- 1996 1995 ---- ---- 1. Net income ............................... $643,351 $555,508 2. Adjustment - Interest expense, after tax benefit, applicable to convertible debentures outstanding.................. 15 16 -------- -------- 3. Net income applicable to common stock - before interest applicable to convertible debentures.................. $643,366 $555,524 -------- -------- -------- -------- PRIMARY NET INCOME PER COMMON SHARE: Shares: 4. Weighted average number of common shares outstanding.................... 261,341 260,097 -------- -------- -------- -------- 5. Incremental shares: Dilutive common stock options......... 2,344 2,451 Dilutive stock appreciation rights.... 47 57 -------- -------- Total incremental shares............ 2,391 2,508 -------- -------- -------- -------- 6. Primary net income per common share (1 divided by 4)........................ $ 2.46* $ 2.14* -------- -------- -------- -------- FULLY DILUTED NET INCOME PER COMMON SHARE: Shares: 7. Weighted average number of common shares outstanding.................... 261,341 260,097 8. Incremental shares: Dilutive common stock options......... 2,344 2,625 Dilutive stock appreciation rights.... 48 65 9. Common equivalent shares from assumed conversion of convertible debentures: 5-1/2% debentures due 2001.......... 51 55 -------- -------- 10. Total............................... 263,784 262,842 -------- -------- -------- -------- 11. Fully diluted net income per common share (3 divided by 10)................. $ 2.46* $ 2.14* -------- -------- -------- -------- - ------------ * 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. 38 EX-12 4 EXHIBIT 12 U EXHIBIT 12 DEERE & COMPANY AND CONSOLIDATED SUBSIDIARIES COMPUTATION OF RATIO OF EARNINGS TO FIXED CHARGES
Nine Months Ended July 31 ------------------ 1996 1995 ---- ---- Earnings: Income (loss) of consolidated group before income taxes and changes in accounting........ $1,001,211 $ 865,480 Dividends received from less than fifty percent owned affiliates............. 7,609 1,997 Fixed charges net of capitalized interest......... 306,690 295,848 --------- --------- Total earnings............... $1,315,510 $1,163,325 --------- --------- --------- --------- Fixed charges: Interest expense of con- solidated group (includes capitalized interest)........ $ 301,694 $ 290,605 Portion of rental charges deemed to be interest........ 4,996 5,256 --------- --------- Total fixed charges.......... $ 306,690 $ 295,861 --------- --------- --------- --------- Ratio of earnings to fixed charges **................ 4.29 3.93 Year Ended October 31 ----------------------------------------------------- 1995 1994 1993 1992 1991 ---- ---- ---- ---- ---- Earnings: Income (loss) of consolidated group before income taxes and changes in accounting........ $1,092,751 $920,920 $ 272,345 $ 43,488 $(26,176) Dividends received from less than fifty percent owned affiliates............. 2,023 2,329 1,706 2,325 6,229 Fixed charges net of capitalized interest......... 399,056 310,047 375,238 420,133 454,092 --------- --------- --------- --------- --------- Total earnings............... $1,493,830 $1,233,296 $ 649,289 $ 465,946 $434,145 --------- --------- --------- --------- --------- --------- --------- --------- --------- --------- Fixed charges: Interest expense of con- solidated group (includes capitalized interest)........ $ 392,408 303,080 $ 369,325 $ 415,205 $451,936 Portion of rental charges deemed to be interest........ 6,661 7,008 6,127 6,720 4,088 --------- --------- --------- --------- --------- Total fixed charges.......... $ 399,069 $ 310,088 $ 375,452 $ 421,925 $456,024 --------- --------- --------- --------- --------- --------- --------- --------- --------- --------- Ratio of earnings to fixed charges **................ 3.74 3.98 1.73 1.10 *
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 combinedfixed charges and preferred stock dividends are the same as the ratios presented above. 39 EX-27 5 FINANCIAL DATA SCHEDULE
5 THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM FORM 10-Q AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH FINANCIAL STATEMENTS. 1,000,000 9-MOS OCT-31-1996 NOV-01-1995 JUL-31-1996 301 848 9,918 135 941 0 4,222 2,946 14,816 0 2,099 0 0 1,757 1,640 14,816 7,152 8,311 5,505 6,189 0 48 302 1,001 365 643 0 0 0 643 2.46 2.46
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