DEERE & COMPANY MOLINE, Ill., Aug. 19, 2016 /PRNewswire/ -- Net income attributable to Deere & Company (NYSE: DE) was $488.8 million, or $1.55 per share, for the third quarter ended July 31, compared with $511.6 million, or $1.53 per share, for the same period last year.
For the first nine months of the year, net income attributable to Deere & Company was $1.239 billion, or $3.91 per share, compared with $1.589 billion, or $4.67 per share, last year.
Worldwide net sales and revenues decreased 11 percent, to $6.724 billion, for the third quarter and declined 9 percent, to $20.124 billion, for nine months. Net sales of the equipment operations were $5.861 billion for the quarter and $17.737 billion for the first nine months, compared with $6.840 billion and $19.843 billion for the periods last year.
"John Deere's performance in the third quarter reflected the continuing impact of the global farm recession as well as difficult conditions in construction equipment markets," said Samuel R. Allen, chairman and chief executive officer. "All of Deere's businesses remained profitable with the Agriculture & Turf division reporting higher operating profit than last year. As in past quarters, our results benefited from the sound execution of our operating plans, the impact of a broad product portfolio, and our success keeping a tight rein on costs and assets."
Summary of Operations
Net sales of the worldwide equipment operations declined 14 percent for the quarter and 11 percent for the first nine months compared with the same periods a year ago. Sales included price realization of 2 percent for the quarter and year to date. Additionally, sales included an unfavorable currency-translation effect of 2 percent for both the quarter and nine months. Equipment net sales in the United States and Canada decreased 16 percent for the quarter and 13 percent year to date. Outside the U.S. and Canada, net sales decreased 12 percent for the quarter and 7 percent for the first nine months, with unfavorable currency-translation effects of 4 percent and 6 percent for the respective periods.
Deere's equipment operations reported operating profit of $625 million for the quarter and $1.526 billion for nine months, compared with $601 million and $1.842 billion last year. The improvement for the quarter was primarily driven by price realization, lower production costs and a decrease in selling, administrative and general expenses, partially offset by reduced shipment volumes and the unfavorable effects of foreign-currency exchange. The year-to-date decline was mostly due to lower shipment volumes, unfavorable effects of foreign-currency exchange and a less favorable product mix. Partially offsetting these factors for the year-to-date period were price realization, lower production costs and decreased selling, administrative and general expenses. Both periods benefited from a gain on the sale of a partial interest in the unconsolidated affiliate SiteOne Landscape Supply, LLC.
Net income of the company's equipment operations was $353 million for the third quarter and $873 million for the first nine months, compared with $344 million and $1.109 billion for the corresponding periods of 2015.
Financial services reported net income attributable to Deere & Company of $125.9 million for the quarter and $357.9 million for nine months compared with $153.4 million and $480.0 million last year. Lower results for the quarter were primarily due to less-favorable financing spreads, a higher provision for credit losses and higher losses on lease residual values. The year-to-date decline was largely a result of higher losses on lease residual values, less-favorable financing spreads and a higher provision for credit losses. Additionally, prior year-to-date results benefited from a gain on the sale of the crop insurance business.
Company Outlook & Summary
Company equipment sales are projected to decrease about 10 percent for fiscal 2016 and be down about 8 percent for the fourth quarter compared with year-ago periods. Included in the forecast is a negative foreign-currency translation effect of about 2 percent for the full year and a positive translation effect of about 1 percent in the fourth quarter. For fiscal 2016, net income attributable to Deere & Company is anticipated to be about $1.350 billion.
"Deere continues to perform well in the face of challenging market conditions, particularly in relation to agricultural downturns of the past," Allen said. "This underscores the success of our efforts to develop a more durable business model and a wider range of revenue sources. At the same time, we are continuing to focus on ways to make our operations more efficient and achieve further structural cost reductions. We remain confident in the company's present direction and firmly believe Deere is on the right track to deliver significant value to its customers and investors in the years ahead."
Equipment Division Performance
Agriculture & Turf. Sales fell 11 percent for the quarter and 7 percent for nine months due largely to lower shipment volumes and the unfavorable effects of currency translation. These factors were partially offset by price realization.
Operating profit was $571 million for the quarter and $1.329 billion year to date, compared with $472 million and $1.378 billion, respectively, last year. The improvement for the quarter was primarily driven by price realization, lower production costs and lower selling, administrative and general expenses, partially offset by lower shipment volumes and unfavorable effects of foreign-currency exchange. Year-to-date results were down primarily because of reduced shipment volumes, unfavorable effects of foreign-currency exchange and a less favorable product mix, partially offset by price realization and lower production costs and selling, administrative and general expenses. Both periods benefited from a gain on the sale of a partial interest in SiteOne Landscape Supply, LLC.
Construction & Forestry. Construction and forestry sales decreased 24 percent for the quarter and 21 percent for nine months mainly as a result of lower shipment volumes.
Operating profit was $54 million for the quarter and $197 million for nine months, compared with $129 million and $464 million for the corresponding periods last year. Operating profit fell for the quarter mainly due to reduced shipment volumes and a less favorable product mix, partially offset by lower production costs, a decrease in selling, administrative and general expenses and price realization. Year-to-date results declined primarily due to lower shipment volumes, partially offset by lower production costs and selling, administrative and general expenses.
Market Conditions & Outlook
Agriculture & Turf. Deere's worldwide sales of agriculture and turf equipment are forecast to decrease by about 8 percent for fiscal-year 2016, including a negative currency-translation effect of about 2 percent.
Industry sales for agricultural equipment in the U.S. and Canada are forecast to be down 15 to 20 percent for 2016. The decline, reflecting the impact of low commodity prices and weak farm incomes, has been most pronounced in the sale of higher-horsepower models.
Full-year 2016 industry sales in the EU28 are forecast to be flat to down 5 percent, with the decline attributable to low commodity prices and farm incomes, including continued pressure on the dairy sector. In South America, industry sales of tractors and combines are projected to be down 15 to 20 percent largely as a result of economic and political concerns in Brazil. Asian sales are projected to be flat to down slightly, due in part to weakness in China.
Industry sales of turf and utility equipment in the U.S. and Canada are expected to be flat to up 5 percent for 2016. Deere sales are benefiting from new products and general economic growth.
Construction & Forestry. Deere's worldwide sales of construction and forestry equipment are forecast to be down about 18 percent for 2016, including a negative currency-translation effect of about 1 percent. The forecast decline in sales largely reflects the impact of weak conditions in North America. In forestry, global industry sales are expected to be down 5 to 10 percent from last year's strong levels.
Financial Services. Fiscal-year 2016 net income attributable to Deere & Company for the financial services operations is expected to be approximately $480 million. The outlook reflects less-favorable financing spreads, higher losses on lease residual values and an increased provision for credit losses. Additionally, 2015 results benefited from a gain on the sale of the crop insurance business.
John Deere Capital Corporation
The following is disclosed on behalf of the company's financial services subsidiary, John Deere Capital Corporation (JDCC), in connection with the disclosure requirements applicable to its periodic issuance of debt securities in the public market.
Net income attributable to John Deere Capital Corporation was $90.4 million for the third quarter and $259.9 million year to date, compared with $126.9 million and $376.4 million for the respective periods last year. The decline for the quarter was primarily due to a less favorable financing spread, higher losses on lease residual values and a higher provision for credit losses. Year-to-date results decreased mainly due to higher losses on lease residual values, less-favorable financing spreads and a higher provision for credit losses.
Net receivables and leases financed by JDCC were $32.928 billion at July 31, 2016, compared with $33.400 billion last year.
Safe Harbor Statement
Safe Harbor Statement under the Private Securities Litigation Reform Act of 1995: Statements under "Company Outlook & Summary," "Market Conditions & Outlook," and other forward-looking statements herein that relate to future events, expectations, trends and operating periods involve certain factors that are subject to change, and important risks and uncertainties that could cause actual results to differ materially. Some of these risks and uncertainties could affect particular lines of business, while others could affect all of the company's businesses.
The company's agricultural equipment business is subject to a number of uncertainties including the many interrelated factors that affect farmers' confidence and financial condition. These factors include demand for agricultural products, world grain stocks, weather conditions (including its effects on timely planting and harvesting), soil conditions (including low subsoil moisture), harvest yields, prices for commodities and livestock, crop and livestock production expenses, availability of transport for crops, the growth and sustainability of non-food uses for some crops (including ethanol and biodiesel production), real estate values, available acreage for farming, the land ownership policies of various governments, changes in government farm programs and policies (including those in Argentina, Brazil, China, the European Union, India, Russia and the U.S.), international reaction to such programs, changes in environmental regulations and their impact on farming practices; changes in and effects of crop insurance programs, global trade agreements, animal diseases and their effects on poultry, beef and pork consumption and prices, crop pests and diseases, and the level of farm product exports (including concerns about genetically modified organisms).
Factors affecting the outlook for the company's turf and utility equipment include consumer confidence, weather conditions, customer profitability, consumer borrowing patterns, consumer purchasing preferences, housing starts, infrastructure investment, spending by municipalities and golf courses, and consumable input costs.
Consumer spending patterns, real estate and housing prices, the number of housing starts and interest rates are especially important to sales of the company's construction and forestry equipment. The levels of public and non-residential construction also impact the results of the company's construction and forestry segment. Prices for pulp, paper, lumber and structural panels are important to sales of forestry equipment.
All of the company's businesses and its reported results are affected by general economic conditions in the global markets and industries in which the company operates, especially material changes in economic activity in these markets and industries; customer confidence in general economic conditions; foreign currency exchange rates and their volatility, especially fluctuations in the value of the U.S. dollar; interest rates; and inflation and deflation rates. Government spending and taxing could adversely affect the economy, employment, consumer and corporate spending, and company results.
Customer and company operations and results could be affected by changes in weather patterns; the political and social stability of the global markets in which the company operates; the effects of, or response to, terrorism and security threats; wars and other conflicts and the threat thereof and the response thereto; natural disasters; and the spread of major epidemics.
Significant changes in market liquidity conditions and any failure to comply with financial covenants in credit agreements could impact access to funding and funding costs, which could reduce the company's earnings and cash flows. Financial market conditions could also negatively impact customer access to capital for purchases of the company's products and customer confidence and purchase decisions, borrowing and repayment practices, and the number and size of customer loan delinquencies and defaults. A debt crisis, in Europe or elsewhere, could negatively impact currencies, global financial markets, social and political stability, funding sources and costs, asset and obligation values, customers, suppliers, demand for equipment, and company operations and results. The company's investment management activities could be impaired by changes in the equity, bond and other financial markets, which would negatively affect earnings.
The potential withdrawal of the United Kingdom from the European Union and the perceptions as to the impact of the withdrawal may adversely affect business activity, political stability and economic conditions in the United Kingdom, the European Union and elsewhere. The economic conditions and outlook could be further adversely affected by (i) the uncertainty concerning the timing and terms of the exit, (ii) new or modified trading arrangements between the United Kingdom and other countries, (iii) the risk that one or more other European Union countries could come under increasing pressure to leave the European Union, or (iv) the risk that the euro as the single currency of the Eurozone could cease to exist. Any of these developments, or the perception that any of these developments are likely to occur, could affect economic growth or business activity in the United Kingdom or the European Union, and could result in the relocation of businesses, cause business interruptions, lead to economic recession or depression, and impact the stability of the financial markets, availability of credit, currency exchange rates, interest rates, financial institutions, and political, financial and monetary systems. Any of these developments could affect our businesses, liquidity, results of operations and financial position.
Additional factors that could materially affect the company's operations, access to capital, expenses and results include changes in and the impact of governmental trade, banking, monetary and fiscal policies, including financial regulatory reform and its effects on the consumer finance industry, derivatives, funding costs and other areas, and governmental programs, policies, tariffs and sanctions in particular jurisdictions or for the benefit of certain industries or sectors (including protectionist, economic, punitive and expropriation policies and trade and licensing restrictions that could disrupt international commerce); actions by the U.S. Federal Reserve Board and other central banks; actions by the U.S. Securities and Exchange Commission (SEC), the U.S. Commodity Futures Trading Commission and other financial regulators; actions by environmental, health and safety regulatory agencies, including those related to engine emissions, carbon and other greenhouse gas emissions, noise and the effects of climate change; changes in labor regulations; changes to accounting standards; changes in tax rates, estimates, and regulations and company actions related thereto; compliance with U.S. and foreign laws when expanding to new markets and otherwise; and actions by other regulatory bodies including changes in laws and regulations affecting the sectors in which the company operates. Trade, financial and other sanctions imposed by the U.S., the European Union, Russia and other countries could negatively impact company assets, operations, sales, forecasts and results. Customer and company operations and results also could be affected by changes to GPS radio frequency bands or their permitted uses.
Other factors that could materially affect results include production, design and technological innovations and difficulties, including capacity and supply constraints and prices; the availability and prices of strategically sourced materials, components and whole goods; delays or disruptions in the company's supply chain or the loss of liquidity by suppliers; disruptions of infrastructures that support communications, operations or distribution; the failure of suppliers to comply with laws, regulations and company policy pertaining to employment, human rights, health, safety, the environment and other ethical business practices; events that damage the company's reputation or brand; significant investigations, claims, lawsuits or other legal proceedings; start-up of new plants and new products; the success of new product initiatives and customer acceptance of new products; changes in customer product preferences and sales mix whether as a result of changes in equipment design to meet government regulations or for other reasons; gaps or limitations in rural broadband coverage, capacity and speed needed to support technology solutions; oil and energy prices, supplies and volatility; the availability and cost of freight; actions of competitors in the various industries in which the company competes, particularly price discounting; dealer practices especially as to levels of new and used field inventories; changes in demand and pricing for used equipment; labor relations and contracts; acquisitions and divestitures of businesses; the integration of new businesses; the implementation of organizational changes; difficulties related to the conversion and implementation of enterprise resource planning systems that disrupt business, negatively impact supply or distribution relationships or create higher than expected costs; security breaches and other disruptions to the company's and suppliers' information technology infrastructure; and changes in company declared dividends and common stock issuances and repurchases.
Company results are also affected by changes in the level and funding of employee retirement benefits, changes in market values of investment assets, the level of interest and discount rates, and compensation, retirement and mortality rates which impact retirement benefit costs, and significant changes in health care costs including those which may result from governmental action.
The liquidity and ongoing profitability of John Deere Capital Corporation and other credit subsidiaries depend largely on timely access to capital in order to meet future cash flow requirements, to fund operations and costs associated with engaging in diversified funding activities, and to fund purchases of the company's products. If general economic conditions deteriorate or capital markets become more volatile, funding could be unavailable or insufficient. Additionally, customer confidence levels may result in declines in credit applications and increases in delinquencies and default rates, which could materially impact write-offs and provisions for credit losses.
The company's outlook is based upon assumptions relating to the factors described above, which are sometimes based upon estimates and data prepared by government agencies. Such estimates and data are often revised. The company, except as required by law, undertakes no obligation to update or revise its outlook, whether as a result of new developments or otherwise. Further information concerning the company and its businesses, including factors that potentially could materially affect the company's financial results, is included in the company's other filings with the SEC (including, but not limited to, the factors discussed in Item 1A. Risk Factors of the company's most recent annual report on Form 10-K and quarterly reports on Form 10-Q).
Third Quarter 2016 Press Release
--------------------------------
(in millions of dollars)
Unaudited
Three Months Ended Nine Months Ended
July 31 July 31
------- -------
% %
2016 2015 Change 2016 2015 Change
---- ---- ------ ---- ---- ------
Net sales and revenues:
Agriculture and turf $4,704 $5,308 -11 $14,046 $15,155 -7
Construction and forestry 1,157 1,532 -24 3,691 4,688 -21
----- ----- ----- -----
Total net sales 5,861 6,840 -14 17,737 19,843 -11
Financial services 667 636 +5 1,954 1,937 +1
Other revenues 196 118 +66 433 367 +18
--- --- --- ---
Total net sales and revenues $6,724 $7,594 -11 $20,124 $22,147 -9
====== ====== ======= =======
Operating profit: *
Agriculture and turf $571 $472 +21 $1,329 $1,378 -4
Construction and forestry 54 129 -58 197 464 -58
Financial services 191 239 -20 545 737 -26
--- --- --- ---
Total operating profit 816 840 -3 2,071 2,579 -20
Reconciling items ** (100) (87) +15 (272) (254) +7
Income taxes (227) (241) -6 (560) (736) -24
---- ---- ---- ----
Net income attributable to
Deere & Company $489 $512 -4 $1,239 $1,589 -22
==== ==== ====== ======
* Operating profit is income from
continuing operations before
corporate expenses, certain
external interest expense,
certain foreign exchange gains
and losses and income taxes.
Operating profit of the financial
services segment includes the
effect of interest expense and
foreign exchange gains or losses.
** Reconciling items are primarily
corporate expenses, certain
external interest expense,
certain foreign exchange gains
and losses and net income
attributable to noncontrolling
interests.
DEERE & COMPANY
STATEMENT OF CONSOLIDATED INCOME
For the Three Months Ended July 31, 2016 and 2015
(In millions of dollars and shares except per share amounts) Unaudited
----------------------------------------------------------------------
2016 2015
---- ----
Net Sales and Revenues
Net sales $5,861.4 $6,839.5
Finance and interest
income 638.5 596.7
Other income 224.5 157.5
----- -----
Total 6,724.4 7,593.7
------- -------
Costs and Expenses
Cost of sales 4,494.2 5,358.0
Research and
development expenses 338.8 346.8
Selling, administrative
and general expenses 709.0 755.3
Interest expense 200.7 171.5
Other operating
expenses 276.6 223.6
----- -----
Total 6,019.3 6,855.2
------- -------
Income of Consolidated
Group before Income
Taxes 705.1 738.5
Provision for income
taxes 226.5 241.0
----- -----
Income of Consolidated
Group 478.6 497.5
Equity in income of
unconsolidated
affiliates 10.0 14.2
---- ----
Net Income 488.6 511.7
Less: Net income (loss)
attributable to
noncontrolling
interests (.2) .1
--- ---
Net Income Attributable
to Deere & Company $488.8 $511.6
====== ======
Per Share Data
Basic $1.55 $1.54
Diluted $1.55 $1.53
Average Shares
Outstanding
Basic 314.3 331.4
Diluted 315.7 334.1
See Condensed Notes to Interim
Consolidated Financial
Statements.
DEERE & COMPANY
STATEMENT OF CONSOLIDATED INCOME
For the Nine Months Ended July 31, 2016 and 2015
(In millions of dollars and shares except per share amounts) Unaudited
----------------------------------------------------------------------
2016 2015
---- ----
Net Sales and
Revenues
Net sales $17,737.1 $19,843.1
Finance and interest
income 1,849.0 1,766.7
Other income 538.3 537.7
----- -----
Total 20,124.4 22,147.5
-------- --------
Costs and Expenses
Cost of sales 13,865.3 15,472.8
Research and
development expenses 1,003.1 1,021.1
Selling,
administrative and
general expenses 2,016.8 2,154.2
Interest expense 564.9 517.1
Other operating
expenses 884.7 659.1
----- -----
Total 18,334.8 19,824.3
-------- --------
Income of
Consolidated Group
before Income Taxes 1,789.6 2,323.2
Provision for income
taxes 559.9 735.6
----- -----
Income of
Consolidated Group 1,229.7 1,587.6
Equity in income of
unconsolidated
affiliates 7.3 1.8
--- ---
Net Income 1,237.0 1,589.4
Less: Net income
(loss) attributable
to noncontrolling
interests (1.6) .6
---- ---
Net Income
Attributable to
Deere & Company $1,238.6 $1,588.8
======== ========
Per Share Data
Basic $3.93 $4.71
Diluted $3.91 $4.67
Average Shares
Outstanding
Basic 315.4 337.3
Diluted 316.7 339.9
See Condensed Notes to Interim
Consolidated Financial
Statements.
DEERE & COMPANY
CONDENSED CONSOLIDATED BALANCE SHEET
(In millions of dollars) Unaudited
----------------------------------
July 31 October 31 July 31
2016 2015 2015
---- ---- ----
Assets
Cash and cash
equivalents $4,321.0 $4,162.2 $4,130.8
Marketable
securities 468.9 437.4 421.1
Receivables
from
unconsolidated
affiliates 18.7 33.3 43.2
Trade
accounts and
notes
receivable -
net 3,924.6 3,051.1 4,220.4
Financing
receivables
-net 22,594.8 24,809.0 24,973.4
Financing
receivables
securitized
-net 5,947.4 4,834.6 4,737.8
Other
receivables 811.9 991.2 823.1
Equipment on
operating
leases -net 5,602.7 4,970.4 4,426.0
Inventories 3,851.3 3,817.0 4,319.0
Property and
equipment -
net 5,047.3 5,181.5 5,126.4
Investments
in
unconsolidated
affiliates 246.2 303.5 310.6
Goodwill 823.6 726.0 715.9
Other
intangible
assets -net 109.5 63.6 57.8
Retirement
benefits 323.1 215.6 335.0
Deferred
income taxes 2,612.6 2,767.3 2,705.0
Other assets 1,902.8 1,583.9 1,586.7
------- ------- -------
Total Assets $58,606.4 $57,947.6 $58,932.2
========= ========= =========
Liabilities
and
Stockholders'
Equity
Liabilities
Short-term
borrowings $7,362.1 $8,426.6 $9,347.9
Short-term
securitization
borrowings 5,728.9 4,590.0 4,595.4
Payables to
unconsolidated
affiliates 74.2 80.6 73.7
Accounts
payable and
accrued
expenses 6,799.5 7,311.5 7,235.8
Deferred
income taxes 172.3 160.8 150.9
Long-term
borrowings 24,128.4 23,832.8 23,200.9
Retirement
benefits and
other
liabilities 6,886.9 6,787.7 6,602.6
------- ------- -------
Total
liabilities 51,152.3 51,190.0 51,207.2
-------- -------- --------
Redeemable
noncontrolling
interest 14.4
Stockholders'
Equity
Total Deere &
Company
stockholders'
equity 7,428.4 6,743.4 7,723.1
Noncontrolling
interests 11.3 14.2 1.9
---- ---- ---
Total
stockholders'
equity 7,439.7 6,757.6 7,725.0
------- ------- -------
Total
Liabilities
and
Stockholders'
Equity $58,606.4 $57,947.6 $58,932.2
========= ========= =========
See Condensed Notes to Interim
Consolidated Financial
Statements.
DEERE & COMPANY
STATEMENT OF CONSOLIDATED CASH FLOWS
For the Nine Months Ended July 31, 2016 and 2015
(In millions of dollars) Unaudited
----------------------------------
2016 2015
---- ----
Cash Flows from Operating Activities
Net income $1,237.0 $1,589.4
Adjustments to reconcile net income
to net cash provided by operating
activities:
Provision for credit losses 70.3 35.4
Provision for depreciation and
amortization 1,158.4 1,029.2
Impairment charges 49.7
Share-based compensation expense 51.8 47.7
Undistributed earnings of
unconsolidated affiliates .7 (5.2)
Provision for deferred income taxes 155.5 73.0
Changes in assets and liabilities:
Trade, notes and financing
receivables related to sales (588.1) (598.0)
Insurance receivables 333.4
Inventories (380.1) (941.5)
Accounts payable and accrued expenses (461.9) (594.6)
Accrued income taxes payable/
receivable 78.3 (58.1)
Retirement benefits 145.8 293.4
Other (197.5) (12.3)
------ -----
Net cash provided by operating
activities 1,319.9 1,191.8
------- -------
Cash Flows from Investing Activities
Collections of receivables (excluding
receivables related to sales) 11,312.7 11,517.9
Proceeds from maturities and sales of
marketable securities 139.2 833.0
Proceeds from sales of equipment on
operating leases 916.6 773.7
Proceeds from sales of business and
unconsolidated affiliates, net of
cash sold 81.1 149.2
Cost of receivables acquired
(excluding receivables related to
sales) (10,423.4) (11,162.9)
Purchases of marketable securities (149.9) (100.8)
Purchases of property and equipment (387.0) (461.4)
Cost of equipment on operating leases
acquired (1,730.6) (1,355.7)
Acquisitions of businesses, net of
cash acquired (198.9)
Other 77.8 (23.4)
---- -----
Net cash provided by (used for)
investing activities (362.4) 169.6
------ -----
Cash Flows from Financing Activities
Increase (decrease) in total short-
term borrowings (133.7) 1,805.2
Proceeds from long-term borrowings 4,115.2 3,639.8
Payments of long-term borrowings (3,977.3) (3,980.1)
Proceeds from issuance of common
stock 17.5 170.4
Repurchases of common stock (205.4) (1,833.9)
Dividends paid (572.6) (617.9)
Excess tax benefits from share-based
compensation 3.8 18.5
Other (53.6) (56.9)
----- -----
Net cash used for financing
activities (806.1) (854.9)
------ ------
Effect of Exchange Rate Changes on
Cash and Cash Equivalents 7.4 (162.7)
--- ------
Net Increase in Cash and Cash
Equivalents 158.8 343.8
Cash and Cash Equivalents at
Beginning of Period 4,162.2 3,787.0
------- -------
Cash and Cash Equivalents at End of
Period $4,321.0 $4,130.8
======== ========
See Condensed Notes to Interim
Consolidated Financial
Statements.
Condensed Notes to Interim Consolidated Financial
Statements (Unaudited)
-------------------------------------------------
(1) In May 2016, the Company received a
distribution of $60 million from
SiteOne Landscapes, LLC (SiteOne)
that reduced the Company's
investment in unconsolidated
affiliates. The distribution
included $4 million of a return on
investment, which is shown in the
Statement of Consolidated Cash Flows
in undistributed earnings of
unconsolidated affiliates in net
cash provided by operating
activities, and $56 million of a
return of investment shown in other
cash flows from investing
activities. In May 2016, the Company
also sold approximately 30 percent
of its interest in SiteOne in an
initial public offering and
terminated a service agreement
resulting in gross proceeds of
approximately $81 million with a
total gain of $75 million pretax or
$47 million after-tax. The gain is
recorded in other income. The
Company retained an approximately 24
percent ownership interest in
SiteOne.
(2) Dividends declared and paid on a per
share basis were as follows:
Three Months Ended Nine Months Ended
July 31 July 31
------- -------
2016 2015 2016 2015
---- ---- ---- ----
Dividends declared $.60 $.60 $1.80 $1.80
Dividends paid $.60 $.60 $1.80 $1.80
(3) The calculation of basic net income
per share is based on the average
number of shares outstanding. The
calculation of diluted net income
per share recognizes any dilutive
effect of share-based
compensation.
(4) The consolidated financial
statements represent the
consolidation of all Deere &
Company's subsidiaries. In the
supplemental consolidating data in
Note 5 to the financial
statements, "Equipment Operations"
include the Company's agriculture
and turf operations and
construction and forestry
operations with "Financial
Services" reflected on the equity
basis.
(5) SUPPLEMENTAL CONSOLIDATING DATA
STATEMENT OF INCOME
For the Three Months Ended July 31, 2016 and 2015
(In millions of dollars) Unaudited EQUIPMENT OPERATIONS* FINANCIAL SERVICES
---------------------------------- -------------------- ------------------
2016 2015 2016 2015
---- ---- ---- ----
Net Sales and Revenues
Net sales $5,861.4 $6,839.5
Finance and interest income 15.1 20.8 $691.0 $644.3
Other income 216.9 140.8 27.6 51.2
----- ----- ---- ----
Total 6,093.4 7,001.1 718.6 695.5
------- ------- ----- -----
Costs and Expenses
Cost of sales 4,494.6 5,358.4
Research and development expenses 338.8 346.8
Selling, administrative and general expenses 573.1 633.5 137.6 123.9
Interest expense 65.9 69.6 140.8 113.6
Interest compensation to Financial Services 61.6 56.7
Other operating expenses 45.6 36.3 248.9 219.3
---- ---- ----- -----
Total 5,579.6 6,501.3 527.3 456.8
------- ------- ----- -----
Income of Consolidated Group before Income Taxes 513.8 499.8 191.3 238.7
Provision for income taxes 160.9 155.5 65.6 85.5
----- ----- ---- ----
Income of Consolidated Group 352.9 344.3 125.7 153.2
----- ----- ----- -----
Equity in Income of Unconsolidated Subsidiaries and Affiliates
Financial Services 125.9 153.4 .2 .2
Other 9.8 14.0
--- ----
Total 135.7 167.4 .2 .2
----- ----- --- ---
Net Income 488.6 511.7 125.9 153.4
Less: Net income (loss) attributable to noncontrolling interests (.2) .1
--- ---
Net Income Attributable to Deere & Company $488.8 $511.6 $125.9 $153.4
====== ====== ====== ======
* Deere & Company with
Financial Services on
the equity basis.
The supplemental consolidating
data is presented for
informational purposes.
Transactions between the
"Equipment Operations" and
"Financial Services" have been
eliminated to arrive at the
consolidated financial
statements.
SUPPLEMENTAL CONSOLIDATING DATA (Continued)
STATEMENT OF INCOME
For the Nine Months Ended July 31, 2016 and 2015
(In millions of dollars) Unaudited EQUIPMENT OPERATIONS* FINANCIAL SERVICES
---------------------------------- -------------------- ------------------
2016 2015 2016 2015
---- ---- ---- ----
Net Sales and Revenues
Net sales $17,737.1 $19,843.1
Finance and interest income 45.8 58.8 $1,988.9 $1,900.9
Other income 497.1 451.2 143.9 201.4
----- ----- ----- -----
Total 18,280.0 20,353.1 2,132.8 2,102.3
-------- -------- ------- -------
Costs and Expenses
Cost of sales 13,866.7 15,474.2
Research and development expenses 1,003.1 1,021.1
Selling, administrative and general expenses 1,642.6 1,794.1 379.6 366.9
Interest expense 195.7 208.0 386.7 346.0
Interest compensation to Financial Services 168.2 156.0
Other operating expenses 158.2 112.6 822.4 653.3
----- ----- ----- -----
Total 17,034.5 18,766.0 1,588.7 1,366.2
-------- -------- ------- -------
Income of Consolidated Group before Income Taxes 1,245.5 1,587.1 544.1 736.1
Provision for income taxes 372.5 478.5 187.4 257.1
----- ----- ----- -----
Income of Consolidated Group 873.0 1,108.6 356.7 479.0
----- ------- ----- -----
Equity in Income of Unconsolidated Subsidiaries and Affiliates
Financial Services 357.9 480.0 1.2 1.0
Other 6.1 .8
--- ---
Total 364.0 480.8 1.2 1.0
----- ----- --- ---
Net Income 1,237.0 1,589.4 357.9 480.0
Less: Net income (loss) attributable to noncontrolling interests (1.6) .6
---- ---
Net Income Attributable to Deere & Company $1,238.6 $1,588.8 $357.9 $480.0
======== ======== ====== ======
* Deere & Company with Financial
Services on the equity basis.
The supplemental consolidating
data is presented for
informational purposes.
Transactions between the
"Equipment Operations" and
"Financial Services" have been
eliminated to arrive at the
consolidated financial
statements.
SUPPLEMENTAL CONSOLIDATING DATA (Continued)
CONDENSED BALANCE SHEET
(In millions of dollars) Unaudited EQUIPMENT OPERATIONS* FINANCIAL SERVICES
---------------------------------- -------------------- ------------------
July 31 October 31 July 31 July 31 October 31 July 31
2016 2015 2015 2016 2015 2015
---- ---- ---- ---- ---- ----
Assets
Cash and cash equivalents $3,134.9 $2,900.0 $2,907.1 $1,186.1 $1,262.2 $1,223.7
Marketable securities 40.2 47.7 47.4 428.7 389.7 373.7
Receivables from unconsolidated subsidiaries and
affiliates 2,429.5 2,428.7 2,941.5
Trade accounts and notes receivable - net 535.4 485.2 581.2 4,560.6 3,553.1 4,780.9
Financing receivables - net .4 .9 4.7 22,594.4 24,808.1 24,968.7
Financing receivables securitized - net 5,947.4 4,834.6 4,737.8
Other receivables 726.6 849.5 779.2 103.0 152.9 76.2
Equipment on operating leases - net 5,602.7 4,970.4 4,426.0
Inventories 3,851.3 3,817.0 4,319.0
Property and equipment - net 4,994.7 5,126.2 5,072.4 52.6 55.3 54.0
Investments in unconsolidated subsidiaries 4,752.9 4,817.6 4,923.8 11.6 10.5 10.2
and affiliates
Goodwill 823.6 726.0 715.9
Other intangible assets - net 109.5 63.6 57.8
Retirement benefits 319.0 211.9 335.5 21.8 25.0 27.1
Deferred income taxes 3,173.2 3,092.0 3,028.6 71.9 67.9 61.6
Other assets 860.1 807.3 859.4 1,045.8 779.1 730.0
----- ----- ----- ------- ----- -----
Total Assets $25,751.3 $25,373.6 $26,573.5 $41,626.6 $40,908.8 $41,469.9
========= ========= ========= ========= ========= =========
Liabilities and Stockholders' Equity
Liabilities
Short-term borrowings $261.7 $464.3 $650.8 $7,100.4 $7,962.3 $8,697.1
Short-term securitization borrowings 5,728.9 4,590.0 4,595.4
Payables to unconsolidated subsidiaries and affiliates 74.2 80.6 73.7 2,410.7 2,395.4 2,898.3
Accounts payable and accrued expenses 6,470.8 6,801.2 7,025.1 1,521.0 1,511.2 1,387.3
Deferred income taxes 97.3 86.8 79.9 707.5 466.6 456.2
Long-term borrowings 4,578.6 4,460.6 4,475.4 19,549.8 19,372.2 18,725.5
Retirement benefits and other liabilities 6,814.6 6,722.5 6,543.6 90.0 86.4 86.7
------- ------- ------- ---- ---- ----
Total liabilities 18,297.2 18,616.0 18,848.5 37,108.3 36,384.1 36,846.5
-------- -------- -------- -------- -------- --------
Redeemable noncontrolling interest 14.4
Stockholders' Equity
Total Deere & Company stockholders' equity 7,428.4 6,743.4 7,723.1 4,518.3 4,524.7 4,623.4
Noncontrolling interests 11.3 14.2 1.9
---- ---- ---
Total stockholders' equity 7,439.7 6,757.6 7,725.0 4,518.3 4,524.7 4,623.4
------- ------- ------- ------- ------- -------
Total Liabilities and Stockholders' Equity $25,751.3 $25,373.6 $26,573.5 $41,626.6 $40,908.8 $41,469.9
========= ========= ========= ========= ========= =========
* Deere & Company with Financial
Services on the equity basis.
The supplemental consolidating
data is presented for
informational purposes.
Transactions between the
"Equipment Operations" and
"Financial Services" have been
eliminated to arrive at the
consolidated financial
statements.
SUPPLEMENTAL CONSOLIDATING DATA (Continued)
STATEMENT OF CASH FLOWS
For the Nine Months Ended July 31, 2016 and 2015
(In millions of dollars) Unaudited EQUIPMENT OPERATIONS* FINANCIAL SERVICES
---------------------------------- -------------------- ------------------
2016 2015 2016 2015
---- ---- ---- ----
Cash Flows from Operating Activities
Net income $1,237.0 $1,589.4 $357.9 $480.0
Adjustments to reconcile net income to net cash provided by
operating activities:
Provision for credit losses 5.3 2.1 65.0 33.3
Provision for depreciation and amortization 613.7 605.6 615.5 503.2
Impairment charges 49.7
Undistributed earnings of unconsolidated subsidiaries and
affiliates 55.9 (4.9) (1.0) (.8)
Provision (credit) for deferred income taxes (77.0) (39.6) 232.5 112.6
Changes in assets and liabilities:
Trade receivables (57.5) 37.2
Insurance receivables 333.4
Inventories 59.5 (473.2)
Accounts payable and accrued expenses (285.6) (113.4) 7.8 (322.3)
Accrued income taxes payable/receivable 72.4 (82.9) 5.9 24.8
Retirement benefits 139.6 282.1 6.2 11.3
Other (118.8) 145.8 56.8 (25.5)
------ ----- ---- -----
Net cash provided by operating activities 1,644.5 1,948.2 1,396.3 1,150.0
------- ------- ------- -------
Cash Flows from Investing Activities
Collections of receivables (excluding trade and wholesale) 12,208.1 12,516.5
Proceeds from maturities and sales of marketable securities 75.6 700.1 63.6 132.9
Proceeds from sales of equipment on operating leases 916.6 773.7
Proceeds from sales of business and unconsolidated affiliates, 81.1 149.2
net of cash sold
Cost of receivables acquired (excluding trade and wholesale) (11,236.7) (12,063.2)
Purchases of marketable securities (61.0) (49.1) (88.9) (51.7)
Purchases of property and equipment (385.4) (458.1) (1.6) (3.3)
Cost of equipment on operating leases acquired (2,324.8) (1,988.6)
Increase in trade and wholesale receivables (786.5) (924.0)
Acquisitions of businesses, net of cash acquired (198.9)
Other (24.2) 2.2 70.7 (22.1)
----- --- ---- -----
Net cash provided by (used for) investing activities (512.8) 195.1 (1,179.5) (1,480.6)
------ ----- -------- --------
Cash Flows from Financing Activities
Increase (decrease) in total short-term borrowings (170.0) 318.5 36.3 1,486.7
Change in intercompany receivables/payables (12.1) 447.2 12.1 (447.2)
Proceeds from long-term borrowings 139.4 6.7 3,975.8 3,633.1
Payments of long-term borrowings (70.3) (147.1) (3,907.0) (3,833.0)
Proceeds from issuance of common stock 17.5 170.4
Repurchases of common stock (205.4) (1,833.9)
Dividends paid (572.6) (617.9) (412.1) (479.6)
Excess tax benefits from share-based compensation 3.8 18.5
Other (28.7) (38.1) (3.8) 9.5
----- ----- ---- ---
Net cash provided by (used for) financing activities (898.4) (1,675.7) (298.7) 369.5
------ -------- ------ -----
Effect of Exchange Rate Changes on Cash and Cash Equivalents 1.6 (129.7) 5.8 (33.0)
--- ------ --- -----
Net Increase (Decrease) in Cash and Cash Equivalents 234.9 337.9 (76.1) 5.9
Cash and Cash Equivalents at Beginning of Period 2,900.0 2,569.2 1,262.2 1,217.8
------- ------- ------- -------
Cash and Cash Equivalents at End of Period $3,134.9 $2,907.1 $1,186.1 $1,223.7
======== ======== ======== ========
* Deere & Company with Financial
Services on the equity basis.
The supplemental consolidating
data is presented for
informational purposes.
Transactions between the
"Equipment Operations" and
"Financial Services" have been
eliminated to arrive at the
consolidated financial
statements.
Deere & Company
Other Financial Information
For the Nine Months Ended July 31, Equipment Operations Agriculture and Turf Construction and Forestry
---------------------------------- -------------------- -------------------- -------------------------
Dollars in millions 2016 2015 2016 2015 2016 2015
------------------- ---- ---- ---- ---- ---- ----
Net Sales $17,737 $19,843 $14,046 $15,155 $3,691 $4,688
Average Identifiable Assets
With Inventories at LIFO $11,918 $12,720 $8,750 $9,260 $3,168 $3,460
With Inventories at Standard Cost $13,188 $14,073 $9,794 $10,383 $3,394 $3,690
Operating Profit $1,526 $1,842 $1,329 $1,378 $197 $464
Percent of Net Sales 8.6% 9.3% 9.5% 9.1% 5.3% 9.9%
Operating Return on Assets
With Inventories at LIFO 12.8% 14.5% 15.2% 14.9% 6.2% 13.4%
With Inventories at Standard Cost 11.6% 13.1% 13.6% 13.3% 5.8% 12.6%
SVA Cost of Assets $(1,187) $(1,266) $(881) $(934) $(306) $(332)
SVA $339 $576 $448 $444 $(109) $132
--- ---- ---- ---- ---- ----- ----
For the Nine Months Ended July 31, Financial Services
---------------------------------- ------------------
Dollars in millions 2016 2015
------------------- ---- ----
Net Income Attributable to Deere &
Company $358 $480
Average Equity $4,481 $4,687
Return on Equity 8.0% 10.2%
Operating Profit $545 $737
Average Equity $4,481 $4,687
Cost of Equity $(511) $(540)
SVA $34 $197
--- --- ----
The Company evaluates its business results on the basis of accounting principles generally accepted in the United States. In addition, it uses a metric referred to as Shareholder Value Added (SVA), which management believes is an appropriate measure for the performance of its businesses. SVA is, in effect,
the pretax profit left over after subtracting the cost of enterprise capital. The Company is aiming for a sustained creation of SVA and is using this metric for various performance goals. Certain compensation is also determined on the basis of performance using this measure. For purposes of determining
SVA, each of the equipment segments is assessed a pretax cost of assets, which on an annual basis is approximately 12 percent of the segment's average identifiable operating assets during the applicable period with inventory at standard cost. Management believes that valuing inventories at standard cost
more closely approximates the current cost of inventory and the Company's investment in the asset. The Financial Services segment is assessed an annual pretax cost of approximately 15 percent of the segment's average equity. The cost of assets or equity, as applicable, is deducted from the operating
profit or added to the operating loss of each segment to determine the amount of SVA.
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SOURCE Deere & Company
