MOLINE, Ill., May 18, 2018 /CNW/ -- Deere & Company
(NYSE: DE) reported net income of $1.208 billion for the second quarter ended
April 29, 2018, or $3.67 per share, compared with net income of
$808.5 million, or $2.50 per share, for the quarter ended
April 30, 2017. For the first six
months of the year, net income attributable to Deere & Company
was $673.2 million, or $2.05 per share, compared with $1.007 billion, or $3.14 per share, for the same period last
year.
Affecting results for the second quarter and first six months of
2018 were provisional adjustments to the provision for income taxes
due to the enactment of U.S. tax reform legislation on December 22, 2017 (tax reform). Second-quarter
results included a favorable net adjustment to provisional income
taxes of $174 million, while the
first six months reflected an unfavorable net provisional income
tax expense of $803 million. Without
these adjustments, net income attributable to Deere & Company
for the second quarter and first six months of the year would have
been $1.034 billion, or $3.14 per share, and $1.476 billion, or $4.49 per share, respectively. (For further
information, refer to the appendix on the non-GAAP financial
measures and Note 2 in the "Condensed Notes to Interim Consolidated
Financial Statements" accompanying this release.)
Worldwide net sales and revenues increased 29 percent, to
$10.720 billion, for the second
quarter and rose 27 percent, to $17.633
billion, for six months. Net sales of the equipment
operations were $9.747 billion for
the second quarter and $15.721
billion for the first six months, compared with $7.260 billion and $11.958
billion for the periods last year.
"John Deere reported another quarter of strong performance
helped by a broad-based improvement in market conditions throughout
the world and a favorable customer response to our lineup of
innovative products," said Samuel R.
Allen, chairman and chief executive officer. "Farm machinery
sales in both North and South
America are making solid gains and construction equipment
sales are continuing to move sharply higher. During the quarter,
Deere made significant progress working with its suppliers to ramp
up production and ensure that products reach customers in a timely
manner. At the same time, we are experiencing higher raw-material
and freight costs, which are being addressed through a continued
focus on structural cost reduction and future pricing actions."
Summary of Operations
Net sales of the worldwide equipment operations increased 34
percent for the quarter and 31 percent for the first six months
compared with the same periods a year ago. Deere's acquisition of
the Wirtgen Group (Wirtgen) in December
2017 added 12 percent to net sales for the quarter and 9
percent year to date. Sales included a favorable
currency-translation effect of 3 percent for both periods.
Equipment net sales in the United
States and Canada increased
27 percent for the quarter and 26 percent year to date, with
Wirtgen adding 5 percent and 3 percent for the respective periods.
Outside the U.S. and Canada, net
sales rose 45 percent for the quarter and 40 percent for the first
six months, with Wirtgen adding 23 percent and 19 percent for the
periods. Net sales included a favorable currency-translation effect
of 7 percent for the quarter and 6 percent for six months.
Deere's equipment operations reported operating profit of
$1.315 billion for the quarter and
$1.734 billion for the first six
months, compared with $1.120 billion
and $1.375 billion, respectively,
last year. Wirtgen, whose results are included in these amounts,
had operating profit of $41 million
for the quarter and an operating loss of $51
million year to date. The Wirtgen year-to-date operating
loss was attributable to the unfavorable effects of purchase
accounting and acquisition costs. Excluding Wirtgen results, the
improvement for both periods was primarily driven by higher
shipment volumes and lower warranty costs, partially offset by
higher research and development expenses and higher production
costs. The corresponding periods of 2017 included a gain on the
sale of SiteOne Landscapes Supply, Inc. (SiteOne).
Additionally, in the first six months of last year Deere incurred
expenses associated with a voluntary employee-separation
program.
Net income of the company's equipment operations was
$1.103 billion for the second quarter
and $139 million for the first six
months, compared with net income of $700
million and $785 million for
the same periods of 2017. In addition, the quarter was favorably
affected by $207 million and the
six-month period unfavorably affected by $1.032 billion due to provisional income tax
adjustments related to tax reform.
Financial services reported net income attributable to Deere
& Company of $104.1 million for
the quarter and $529.4 million for
the first six months compared with $103.5
million and $217.9 million
last year. Results for both periods benefited from a higher average
portfolio, lower losses on lease residual values, and a lower
provision for credit losses, partially offset by a less-favorable
financing spread. Additionally, provisional income tax adjustments
related to tax reform had an unfavorable effect of $33.2 million for the quarter and a favorable
effect of $228.8 million for six
months.
Company Outlook & Summary
Company equipment sales are projected to increase by about 30
percent for fiscal 2018 and by about 35 percent for the third
quarter compared with the same periods of 2017. Of these amounts,
Wirtgen is expected to add about 12 percent to Deere sales for the
full year and about 18 percent for the third quarter. Also included
in the forecast is a positive foreign-currency translation effect
of about 1 percent for the year and third quarter. Net sales and
revenues are expected to increase by about 26 percent for fiscal
2018 with net income attributable to Deere & Company forecast
to be about $2.3 billion. The
company's net income forecast includes $803
million of provisional income tax expense associated with
tax reform, representing discrete items for the remeasurement of
the company's net deferred tax assets to the new U.S. corporate tax
rate and a one-time deemed earnings repatriation tax. Adjusted net
income attributable to Deere & Company excluding the
provisional income tax adjustments associated with tax reform is
forecast to be about $3.1 billion.
(Information on non-GAAP financial measures is included in the
appendix.)
The current outlook for net income compares with previous
guidance of $2.1 billion, which
included $977 million of provisional
income tax expense.
"We are encouraged by strengthening demand for our products and
believe Deere is well-positioned to capitalize on further growth in
the world's agricultural and construction equipment markets," Allen
said. "This illustrates our success developing a more durable
business model as well as the impact of investments in new products
and businesses. We reaffirm our confidence in the company's present
direction and our belief that Deere remains on track to deliver
significant long-term value to customers and investors."
Equipment Division Performance
Agriculture & Turf. Sales rose 22 percent for the
quarter and 20 percent for the first six months due to higher
shipment volumes and the favorable effects of currency
translation.
Operating profit was $1.056
billion for the quarter and $1.443
billion year to date, compared with respective totals of
$1.009 billion and $1.227 billion for the same periods last year.
Results for the quarter were helped by higher shipment volumes,
partially offset by higher research and development expenses and
production costs. For the first six months, results benefited from
higher shipment volumes and lower warranty-related expenses,
partially offset by higher research and development expenses and
production costs. Prior-year periods benefited from gains on the
SiteOne sale, while the first six months of last year were affected
by voluntary employee-separation expenses.
Construction & Forestry. Construction and forestry
sales increased 84 percent for the quarter and 73 percent for six
months, with Wirtgen adding 60 percent and 44 percent for the
respective periods. Also helping sales for both periods were higher
shipment volumes and the favorable effects of currency
translation.
Operating profit was $259 million
for the quarter and $291 million for
six months, compared with $111
million and $148 million last
year. Wirtgen contributed operating profit of $41 million for the quarter and a six-month
operating loss of $51 million related
to the effects of purchase accounting and acquisition costs.
Excluding Wirtgen, the improvements were primarily driven by higher
shipment volumes and lower warranty expenses, partially offset by
higher production costs. Results for the first six months of last
year also included voluntary employee-separation costs.
Market Conditions & Outlook
Agriculture & Turf. Deere's worldwide sales of
agriculture and turf equipment are forecast to increase by about 14
percent for fiscal-year 2018, including a positive
currency-translation effect of about 1 percent. Industry sales for
agricultural equipment in the U.S. and Canada are forecast to be up about 10 percent
for 2018, led by higher demand for large equipment. Full-year
industry sales in the EU28 member nations are forecast to be up
about 5 percent due to favorable conditions in the dairy and
livestock sectors. South American industry sales of tractors and
combines are projected to be flat to up 5 percent benefiting from
strength in Brazil. Asian sales
are forecast to be in line with last year. Industry sales of turf
and utility equipment in the U.S. and Canada are expected to be flat to up 5 percent
for 2018.
Construction & Forestry. Deere's worldwide sales of
construction and forestry equipment are anticipated to be up about
83 percent for 2018, including a positive currency-translation
effect of about 1 percent. Wirtgen is expected to add about 56
percent to the division's sales for the year. The outlook reflects
continued improvement in demand driven by higher housing starts in
the U.S., increased activity in the oil and gas sector, and
economic growth worldwide. In forestry, global industry sales
are expected to be up about 10 percent mainly as a result of
improved demand throughout the world, led by North America.
Financial Services. Fiscal-year 2018 net income
attributable to Deere & Company for the financial services
operations is projected to be approximately $800 million, including a provisional income tax
benefit of $229 million associated
with tax reform. Forecasted fiscal-year 2018 adjusted net income
attributable to Deere & Company excluding the provisional
income tax benefit is projected to be $571
million. Results are expected to benefit from a higher
average portfolio and lower losses on lease residual values,
partially offset by less-favorable financing spreads and increased
selling, administrative and general expenses.
The financial services net income outlook provided last quarter
was $840 million. It included a
provisional tax benefit estimate of $262
million for remeasurement of the division's net deferred tax
liability to the new U.S. corporate tax rate and a one-time deemed
earnings repatriation tax.
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 JDCC was $119.2 million for the second quarter and
$518.6 million year to date, compared
with $64.5 million and $138.7 million for the respective periods last
year. Results for both periods benefited from a favorable provision
for income taxes associated with tax reform, a higher average
portfolio, lower losses on lease residual values and lower
provision for credit losses, partially offset by less-favorable
financing spreads.
Net receivables and leases financed by JDCC were $34.535 billion at April
29, 2018, compared with $32.015
billion at April 30, 2017.
APPENDIX
DEERE &
COMPANY
SUPPLEMENTAL STATEMENT OF CONSOLIDATED INCOME
INFORMATION
RECONCILIATION OF GAAP TO NON-GAAP FINANCIAL
MEASURES
(Millions, except per-share amounts)
(Unaudited)
In addition to reporting financial results in conformity with
accounting principles generally accepted in the United States (GAAP), the company also
discusses non-GAAP measures that exclude adjustments related to tax
reform. Net income attributable to Deere & Company and
diluted earnings per share measures that exclude this item are not
in accordance with nor a substitute for GAAP measures. The company
believes that discussion of results excluding this item provides a
useful analysis of ongoing operating trends.
The table below provides a reconciliation of the non-GAAP
financial measure with the most directly comparable GAAP financial
measure for the three months and six months ended April 29,
2018, and the outlook for the twelve months ended October 28, 2018.
|
Three Months
Ended
April 29, 2018
|
|
Six Months Ended
April 29, 2018
|
|
Net Income
Attributable to
Deere &
Company
|
|
Diluted
Earnings
Per Share
|
|
Net Income
Attributable to
Deere &
Company
|
|
Diluted
Earnings
Per Share
|
|
|
|
|
|
|
|
|
|
|
|
|
GAAP
measure
|
$
|
1,208.3
|
|
$
|
3.67
|
|
$
|
673.2
|
|
$
|
2.05
|
|
|
|
|
|
|
|
|
|
|
|
|
Discrete tax reform
expense (benefit)
|
|
(174.3)
|
|
|
(.53)
|
|
|
802.9
|
|
|
2.44
|
|
|
|
|
|
|
|
|
|
|
|
|
Non-GAAP
measure
|
$
|
1,034.0
|
|
$
|
3.14
|
|
$
|
1,476.1
|
|
$
|
4.49
|
|
Twelve Months
Ended
October 28, 2018
|
|
Net Income
Attributable to
Deere &
Company
|
|
|
|
GAAP
measure
|
$
|
2,300.0
|
|
|
|
Discrete tax reform
expense
|
|
803.0
|
|
|
|
Non-GAAP
measure
|
$
|
3,103.0
|
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, and trends involve factors that are subject to
change, and 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 factors that affect farmers'
confidence and financial condition. These factors include
demand for agricultural products, world grain stocks, weather
conditions, soil conditions, 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 governments, changes in government farm
programs and policies, 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 (including the North American Free Trade
Agreement and the Trans-Pacific Partnership), trade restrictions
and tariffs, 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, labor supply, consumer borrowing patterns, consumer
purchasing preferences, housing starts and supply, 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, interest rates and the levels of public
and non-residential construction are important to sales and results
of the company's construction and forestry equipment. Prices
for pulp, paper, lumber and structural panels are important to
sales of forestry equipment.
All of the company's businesses and its results are affected by
general economic conditions in the global markets and industries in
which the company operates; customer confidence in general economic
conditions; government spending and taxing; foreign currency
exchange rates and their volatility, especially fluctuations in the
value of the U.S. dollar; interest rates; inflation and deflation
rates; 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; natural disasters; and the spread of major
epidemics.
Significant changes in market liquidity conditions, changes in
the company's credit ratings 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 anticipated 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, uncertainty surrounding 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;
retaliatory actions to such changes in trade, banking, monetary and
fiscal policies; actions by central banks; actions by financial and
securities 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 to GPS radio frequency bands or their
permitted uses; changes in labor and immigration regulations;
changes to accounting standards; changes in tax rates, estimates,
laws and regulations and company actions related thereto; changes
to and compliance with privacy regulations; compliance with U.S.
and foreign laws when expanding to new markets and otherwise; and
actions by other regulatory bodies.
Other factors that could materially affect results include
production, design and technological innovations and difficulties,
including capacity and supply constraints and prices; the loss of
or challenges to intellectual property rights whether through
theft, infringement, counterfeiting or otherwise; 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 or the company to comply with laws, regulations and
company policy pertaining to employment, human rights, health,
safety, the environment, anti-corruption, privacy and data
protection 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 products; the success of new product initiatives; changes in
customer product preferences and sales mix; 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 and resulting impacts on
lease residual values; labor relations and contracts; changes in
the ability to attract, train and retain qualified personnel;
acquisitions and divestitures of businesses; greater than
anticipated transaction costs; the integration of new businesses;
the failure or delay in closing or realizing anticipated benefits
of acquisitions, joint ventures or divestitures; the implementation
of organizational changes; the failure to realize anticipated
savings or benefits of cost reduction, productivity, or efficiency
efforts; difficulties related to the conversion and implementation
of enterprise resource planning systems; security breaches,
cybersecurity attacks, technology failures and other disruptions to
the company's and suppliers' information technology infrastructure;
changes in company declared dividends and common stock issuances
and repurchases; changes in the level and funding of employee
retirement benefits; changes in market values of investment assets,
compensation, retirement, discount and mortality rates which impact
retirement benefit costs; and significant changes in health care
costs.
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,
and to fund operations, costs, and 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 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).
Second Quarter 2018
Press Release
|
(in millions of
dollars)
|
Unaudited
|
|
|
Three Months
Ended
|
|
Six Months
Ended
|
|
April 29
|
|
April 30
|
|
%
|
|
April 29
|
|
April 30
|
|
%
|
|
2018
|
|
2017
|
|
Change
|
|
2018
|
|
2017
|
|
Change
|
Net sales and
revenues:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Agriculture and
turf
|
$
|
7,049
|
|
$
|
5,794
|
|
+22
|
|
$
|
11,292
|
|
$
|
9,392
|
|
+20
|
Construction and
forestry
|
|
2,698
|
|
|
1,466
|
|
+84
|
|
|
4,429
|
|
|
2,566
|
|
+73
|
Total net
sales
|
|
9,747
|
|
|
7,260
|
|
+34
|
|
|
15,721
|
|
|
11,958
|
|
+31
|
Financial
services
|
|
795
|
|
|
716
|
|
+11
|
|
|
1,572
|
|
|
1,412
|
|
+11
|
Other
revenues
|
|
178
|
|
|
311
|
|
-43
|
|
|
340
|
|
|
542
|
|
-37
|
Total net sales and
revenues
|
$
|
10,720
|
|
$
|
8,287
|
|
+29
|
|
$
|
17,633
|
|
$
|
13,912
|
|
+27
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Operating profit:
*
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Agriculture and
turf
|
$
|
1,056
|
|
$
|
1,009
|
|
+5
|
|
$
|
1,443
|
|
$
|
1,227
|
|
+18
|
Construction and
forestry
|
|
259
|
|
|
111
|
|
+133
|
|
|
291
|
|
|
148
|
|
+97
|
Financial
services
|
|
179
|
|
|
158
|
|
+13
|
|
|
396
|
|
|
325
|
|
+22
|
Total operating
profit
|
|
1,494
|
|
|
1,278
|
|
+17
|
|
|
2,130
|
|
|
1,700
|
|
+25
|
Reconciling items
**
|
|
(109)
|
|
|
(104)
|
|
+5
|
|
|
(222)
|
|
|
(198)
|
|
+12
|
Income
taxes
|
|
(177)
|
|
|
(366)
|
|
-52
|
|
|
(1,235)
|
|
|
(495)
|
|
+149
|
Net income
attributable to Deere & Company
|
$
|
1,208
|
|
$
|
808
|
|
+50
|
|
$
|
673
|
|
$
|
1,007
|
|
-33
|
|
|
*
|
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, pension and
postretirement benefit costs excluding the service cost component,
and net income attributable to noncontrolling interests.
|
DEERE &
COMPANY
|
STATEMENT OF
CONSOLIDATED INCOME
|
For the Three Months
Ended April 29, 2018 and April 30, 2017
|
(In millions of
dollars and shares except per share amounts) Unaudited
|
|
2018
|
|
2017
|
Net Sales and
Revenues
|
|
|
|
|
|
Net sales
|
$
|
9,747.0
|
|
$
|
7,259.8
|
Finance and interest
income
|
|
753.9
|
|
|
665.0
|
Other
income
|
|
219.1
|
|
|
362.2
|
Total
|
|
10,720.0
|
|
|
8,287.0
|
|
|
|
|
|
|
Costs and
Expenses
|
|
|
|
|
|
Cost of
sales
|
|
7,333.3
|
|
|
5,427.7
|
Research and
development expenses
|
|
415.2
|
|
|
325.4
|
Selling,
administrative and general expenses
|
|
939.2
|
|
|
783.6
|
Interest
expense
|
|
303.7
|
|
|
226.9
|
Other operating
expenses
|
|
344.9
|
|
|
354.1
|
Total
|
|
9,336.3
|
|
|
7,117.7
|
|
|
|
|
|
|
Income of
Consolidated Group before Income Taxes
|
|
1,383.7
|
|
|
1,169.3
|
Provision for income
taxes
|
|
177.1
|
|
|
365.8
|
Income of
Consolidated Group
|
|
1,206.6
|
|
|
803.5
|
Equity in income of
unconsolidated affiliates
|
|
3.1
|
|
|
4.8
|
Net
Income
|
|
1,209.7
|
|
|
808.3
|
Less: Net income (loss)
attributable to noncontrolling interests
|
|
1.4
|
|
|
(.2)
|
Net Income
Attributable to Deere & Company
|
$
|
1,208.3
|
|
$
|
808.5
|
|
|
|
|
|
|
Per Share
Data
|
|
|
|
|
|
Basic
|
$
|
3.73
|
|
$
|
2.53
|
Diluted
|
$
|
3.67
|
|
$
|
2.50
|
|
|
|
|
|
|
Average Shares
Outstanding
|
|
|
|
|
|
Basic
|
|
324.2
|
|
|
319.2
|
Diluted
|
|
329.2
|
|
|
323.0
|
|
|
See Condensed Notes
to Interim Consolidated Financial Statements.
|
DEERE &
COMPANY
|
STATEMENT OF
CONSOLIDATED INCOME
|
For the Six Months
Ended April 29, 2018 and April 30, 2017
|
(In millions of
dollars and shares except per share amounts) Unaudited
|
|
2018
|
|
2017
|
Net Sales and
Revenues
|
|
|
|
|
|
Net sales
|
$
|
15,721.0
|
|
$
|
11,957.7
|
Finance and interest
income
|
|
1,476.8
|
|
|
1,320.5
|
Other
income
|
|
435.7
|
|
|
634.0
|
Total
|
|
17,633.5
|
|
|
13,912.2
|
|
|
|
|
|
|
Costs and
Expenses
|
|
|
|
|
|
Cost of
sales
|
|
12,037.8
|
|
|
9,209.2
|
Research and
development expenses
|
|
772.0
|
|
|
637.5
|
Selling,
administrative and general expenses
|
|
1,644.3
|
|
|
1,451.0
|
Interest
expense
|
|
590.0
|
|
|
434.9
|
Other operating
expenses
|
|
687.8
|
|
|
682.3
|
Total
|
|
15,731.9
|
|
|
12,414.9
|
|
|
|
|
|
|
Income of
Consolidated Group before Income Taxes
|
|
1,901.6
|
|
|
1,497.3
|
Provision for income
taxes
|
|
1,234.7
|
|
|
495.1
|
Income of
Consolidated Group
|
|
666.9
|
|
|
1,002.2
|
Equity in income of
unconsolidated affiliates
|
|
8.0
|
|
|
4.5
|
Net
Income
|
|
674.9
|
|
|
1,006.7
|
Less: Net income (loss)
attributable to noncontrolling interests
|
|
1.7
|
|
|
(.8)
|
Net Income
Attributable to Deere & Company
|
$
|
673.2
|
|
$
|
1,007.5
|
|
|
|
|
|
|
Per Share
Data
|
|
|
|
|
|
Basic
|
$
|
2.08
|
|
$
|
3.17
|
Diluted
|
$
|
2.05
|
|
$
|
3.14
|
|
|
|
|
|
|
Average Shares
Outstanding
|
|
|
|
|
|
Basic
|
|
323.4
|
|
|
317.9
|
Diluted
|
|
328.4
|
|
|
321.3
|
|
|
See Condensed Notes
to Interim Consolidated Financial Statements.
|
DEERE &
COMPANY
|
CONDENSED
CONSOLIDATED BALANCE SHEET
|
(In millions of
dollars) Unaudited
|
|
April 29
|
|
October 29
|
|
April 30
|
|
2018
|
|
2017
|
|
2017
|
Assets
|
|
|
|
|
|
|
|
|
Cash and cash
equivalents
|
$
|
4,201.4
|
|
$
|
9,334.9
|
|
$
|
4,525.8
|
Marketable
securities
|
|
479.3
|
|
|
451.6
|
|
|
546.3
|
Receivables from
unconsolidated affiliates
|
|
34.3
|
|
|
35.9
|
|
|
34.9
|
Trade accounts and
notes receivable - net
|
|
6,511.1
|
|
|
3,924.9
|
|
|
4,482.3
|
Financing receivables
- net
|
|
24,275.5
|
|
|
25,104.1
|
|
|
23,301.1
|
Financing receivables
securitized - net
|
|
4,436.3
|
|
|
4,158.8
|
|
|
4,281.8
|
Other
receivables
|
|
1,398.2
|
|
|
1,200.0
|
|
|
931.3
|
Equipment on
operating leases - net
|
|
6,723.1
|
|
|
6,593.7
|
|
|
5,923.9
|
Inventories
|
|
6,888.9
|
|
|
3,904.1
|
|
|
4,114.8
|
Property and
equipment - net
|
|
5,742.9
|
|
|
5,067.7
|
|
|
4,959.9
|
Investments in
unconsolidated affiliates
|
|
202.1
|
|
|
182.5
|
|
|
215.7
|
Goodwill
|
|
3,188.7
|
|
|
1,033.3
|
|
|
806.2
|
Other intangible
assets - net
|
|
1,692.2
|
|
|
218.0
|
|
|
90.8
|
Retirement
benefits
|
|
617.9
|
|
|
538.2
|
|
|
176.2
|
Deferred income
taxes
|
|
1,718.5
|
|
|
2,415.0
|
|
|
3,041.9
|
Other
assets
|
|
1,762.6
|
|
|
1,623.6
|
|
|
1,535.9
|
Total
Assets
|
$
|
69,873.0
|
|
$
|
65,786.3
|
|
$
|
58,968.8
|
|
|
|
|
|
|
|
|
|
Liabilities and
Stockholders' Equity
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Liabilities
|
|
|
|
|
|
|
|
|
Short-term
borrowings
|
$
|
10,894.6
|
|
$
|
10,035.3
|
|
$
|
7,963.6
|
Short-term
securitization borrowings
|
|
4,401.1
|
|
|
4,118.7
|
|
|
4,224.6
|
Payables to
unconsolidated affiliates
|
|
145.7
|
|
|
121.9
|
|
|
101.6
|
Accounts payable and
accrued expenses
|
|
9,789.6
|
|
|
8,417.0
|
|
|
7,215.9
|
Deferred income
taxes
|
|
562.7
|
|
|
209.7
|
|
|
169.0
|
Long-term
borrowings
|
|
26,278.6
|
|
|
25,891.3
|
|
|
23,253.1
|
Retirement benefits
and other liabilities
|
|
7,366.1
|
|
|
7,417.9
|
|
|
8,333.2
|
Total
liabilities
|
|
59,438.4
|
|
|
56,211.8
|
|
|
51,261.0
|
|
|
|
|
|
|
|
|
|
Redeemable
noncontrolling interest
|
|
14.6
|
|
|
14.0
|
|
|
14.0
|
|
|
|
|
|
|
|
|
|
Stockholders'
Equity
|
|
|
|
|
|
|
|
|
Total Deere &
Company stockholders' equity
|
|
10,410.3
|
|
|
9,557.3
|
|
|
7,684.7
|
Noncontrolling
interests
|
|
9.7
|
|
|
3.2
|
|
|
9.1
|
Total stockholders'
equity
|
|
10,420.0
|
|
|
9,560.5
|
|
|
7,693.8
|
Total Liabilities
and Stockholders' Equity
|
$
|
69,873.0
|
|
$
|
65,786.3
|
|
$
|
58,968.8
|
|
|
See Condensed Notes
to Interim Consolidated Financial Statements.
|
DEERE &
COMPANY
|
STATEMENT OF
CONSOLIDATED CASH FLOWS
|
For the Six Months
Ended April 29, 2018 and April 30, 2017
|
(In millions of
dollars) Unaudited
|
|
2018
|
|
2017
|
Cash Flows from
Operating Activities
|
|
|
|
|
|
Net income
|
$
|
674.9
|
|
$
|
1,006.7
|
Adjustments to
reconcile net income to net cash used for operating
activities:
|
|
|
|
|
|
Provision for credit
losses
|
|
26.8
|
|
|
32.6
|
Provision for
depreciation and amortization
|
|
950.8
|
|
|
843.1
|
Share-based
compensation expense
|
|
39.8
|
|
|
32.3
|
Gain on sale of
affiliates and investments
|
|
(13.2)
|
|
|
(281.4)
|
Undistributed earnings
of unconsolidated affiliates
|
|
(4.5)
|
|
|
(3.1)
|
Provision (credit) for
deferred income taxes
|
|
604.3
|
|
|
(100.4)
|
Changes in assets and
liabilities:
|
|
|
|
|
|
Trade, notes and
financing receivables related to sales
|
|
(2,094.1)
|
|
|
(989.5)
|
Inventories
|
|
(1,796.8)
|
|
|
(1,090.4)
|
Accounts payable and
accrued expenses
|
|
306.9
|
|
|
103.6
|
Accrued income taxes
payable/receivable
|
|
153.0
|
|
|
195.1
|
Retirement
benefits
|
|
67.6
|
|
|
115.6
|
Other
|
|
(137.2)
|
|
|
(27.9)
|
Net cash used for
operating activities
|
|
(1,221.7)
|
|
|
(163.7)
|
|
|
|
|
|
|
Cash Flows from
Investing Activities
|
|
|
|
|
|
Collections of
receivables (excluding receivables related to sales)
|
|
8,780.9
|
|
|
8,228.0
|
Proceeds from
maturities and sales of marketable securities
|
|
23.8
|
|
|
41.3
|
Proceeds from sales
of equipment on operating leases
|
|
748.6
|
|
|
786.4
|
Proceeds from sales
of businesses and unconsolidated affiliates, net of cash
sold
|
|
55.0
|
|
|
113.9
|
Cost of receivables
acquired (excluding receivables related to sales)
|
|
(8,181.2)
|
|
|
(7,628.6)
|
Acquisitions of
businesses, net of cash acquired
|
|
(5,171.1)
|
|
|
|
Purchases of
marketable securities
|
|
(62.8)
|
|
|
(43.7)
|
Purchases of property
and equipment
|
|
(352.2)
|
|
|
(253.0)
|
Cost of equipment on
operating leases acquired
|
|
(926.5)
|
|
|
(925.1)
|
Other
|
|
(67.5)
|
|
|
(18.7)
|
Net cash provided by
(used for) investing activities
|
|
(5,153.0)
|
|
|
300.5
|
|
|
|
|
|
|
Cash Flows from
Financing Activities
|
|
|
|
|
|
Increase in total
short-term borrowings
|
|
199.1
|
|
|
183.1
|
Proceeds from
long-term borrowings
|
|
4,077.7
|
|
|
2,661.6
|
Payments of long-term
borrowings
|
|
(2,888.7)
|
|
|
(2,742.2)
|
Proceeds from
issuance of common stock
|
|
198.6
|
|
|
383.6
|
Repurchases of common
stock
|
|
(60.6)
|
|
|
(6.2)
|
Dividends
paid
|
|
(386.9)
|
|
|
(379.5)
|
Other
|
|
(43.9)
|
|
|
(39.7)
|
Net cash provided by
financing activities
|
|
1,095.3
|
|
|
60.7
|
|
|
|
|
|
|
Effect of Exchange
Rate Changes on Cash and Cash Equivalents
|
|
145.9
|
|
|
(7.5)
|
|
|
|
|
|
|
Net Increase
(Decrease) in Cash and Cash Equivalents
|
|
(5,133.5)
|
|
|
190.0
|
Cash and Cash
Equivalents at Beginning of Period
|
|
9,334.9
|
|
|
4,335.8
|
Cash and Cash
Equivalents at End of Period
|
$
|
4,201.4
|
|
$
|
4,525.8
|
|
|
See Condensed Notes
to Interim Consolidated Financial Statements.
|
Condensed Notes to
Interim Consolidated Financial Statements (Unaudited)
|
|
|
(1)
|
On December 1, 2017,
the Company acquired the stock and certain assets of substantially
all of Wirtgen Group Holding GmbH's (Wirtgen) operations. The total
cash purchase price, net of cash acquired of $197 million, was
$5,130 million, a portion of which is held in escrow to secure
certain indemnity obligations of Wirtgen. In addition to the cash
purchase price, the Company assumed $1,717 million in liabilities,
which represented substantially all of Wirtgen's liabilities. The
preliminary fair values assigned to the assets and liabilities of
the acquired entity in millions of dollars, which is based on
information as of the acquisition date and available at April 29,
2018 follow:
|
|
|
|
Trade accounts and
notes receivable
|
$
|
457
|
|
|
Financing
receivables
|
|
43
|
|
|
Financing receivables
securitized
|
|
125
|
|
|
Other
receivables
|
|
100
|
|
|
Inventories
|
|
1,538
|
|
|
Property and
equipment
|
|
757
|
|
|
Goodwill
|
|
2,060
|
|
|
Other intangible
assets
|
|
1,458
|
|
|
Deferred income
taxes
|
|
96
|
|
|
Other
assets
|
|
221
|
|
|
Total
assets
|
$
|
6,855
|
|
|
|
|
|
|
|
Short-term
borrowings
|
$
|
285
|
|
|
Short-term
securitization borrowings
|
|
127
|
|
|
Accounts payable and
accrued expenses
|
|
725
|
|
|
Deferred income
taxes
|
|
502
|
|
|
Long-term
borrowings
|
|
50
|
|
|
Retirement benefits
and other liabilities
|
|
28
|
|
|
Total
liabilities
|
$
|
1,717
|
|
|
|
|
|
|
|
Noncontrolling
interests
|
$
|
8
|
|
|
|
|
During the second
quarter of 2018, measurement period adjustments decreased the total
assets $8 million, total liabilities $7 million, and noncontrolling
interests $1 million. The Company continues to review the fair
value of the assets and liabilities acquired, which may be updated
during the measurement period.
|
|
|
|
Wirtgen's results
were included in the Company's consolidated financial statements
beginning on the acquisition date. The results are incorporated
with the Company's results using a 30-day lag period and are
included in the construction and forestry segment. The net sales
and revenues and operating profit (loss) included in the Company's
results in the second quarter and first six months of 2018 were
$873 million and $1,127 million, and $41 million and $(51) million,
respectively.
|
|
|
(2)
|
On December 22, 2017,
the U.S. government enacted new tax legislation (tax reform). As a
result of tax reform, the Company recorded a provisional income tax
expense (benefit) in the first quarter and measurement period
adjustments in the second quarter of fiscal year 2018. The
provisional income tax expense or benefit primarily related to
discrete items for the remeasurement of the Company's net deferred
tax assets to the new corporate income tax rate and a one-time,
deemed earnings repatriation tax. The tax reform measurement period
adjustments and the effects on the results of the second quarter
and first six months in millions of dollars follow:
|
|
|
|
|
Three Months
Ended
April 29, 2018
|
|
Six Months Ended
April 29, 2018
|
|
|
Equipment
Operations
|
|
|
Financial
Services
|
|
Total
|
|
Equipment
Operations
|
|
|
Financial
Services
|
|
Total
|
|
Net deferred tax
asset remeasurement
|
$
|
(158)
|
|
$
|
(19)
|
|
$
|
(177)
|
|
$
|
853
|
|
$
|
(314)
|
|
$
|
539
|
|
Deemed earnings
repatriation tax
|
|
(49)
|
|
|
52
|
|
|
3
|
|
|
179
|
|
|
85
|
|
|
264
|
|
Total discrete tax
expense (benefit)
|
$
|
(207)
|
|
$
|
33
|
|
$
|
(174)
|
|
$
|
1,032
|
|
$
|
(229)
|
|
$
|
803
|
|
|
|
The second quarter
measurement period benefit on the net deferred tax assets primarily
results from the planned, voluntary $1,000 million contribution to
U.S. pension and other postretirement benefit plans, which results
in a tax deduction applicable to the 2017 tax year. In the second
quarter, the Company received authorization for this contribution
and $50 million was contributed during the second quarter with the
remainder planned during the third quarter. The provision for
income taxes was also affected by other tax reform items, primarily
the lower corporate income tax rate on current year
income.
|
|
|
|
The Company continues
to analyze the provisions of tax reform and related pronouncements,
the information necessary to refine calculations, and evaluate
potential Company actions. As a result, the effects of tax reform
may change during the one-year measurement period.
|
|
|
(3)
|
Dividends declared
and paid on a per share basis were as follows:
|
|
|
|
|
Three Months
Ended
|
|
Six Months
Ended
|
|
|
April 29
|
|
April 30
|
|
April 29
|
|
April 30
|
|
|
2018
|
|
2017
|
|
2018
|
|
2017
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Dividends
declared
|
$
|
.60
|
|
$
|
.60
|
|
$
|
1.20
|
|
$
|
1.20
|
|
Dividends
paid
|
$
|
.60
|
|
$
|
.60
|
|
$
|
1.20
|
|
$
|
1.20
|
|
|
(4)
|
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.
|
|
|
(5)
|
The consolidated
financial statements represent the consolidation of all
Deere & Company's subsidiaries. In the supplemental
consolidating data in Note 6 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.
|
(6) SUPPLEMENTAL
CONSOLIDATING DATA
|
STATEMENT OF
INCOME
|
For the Three Months
Ended April 29, 2018 and April 30, 2017
|
(In millions of dollars) Unaudited
|
EQUIPMENT OPERATIONS*
|
|
FINANCIAL SERVICES
|
|
2018
|
|
2017
|
|
2018
|
|
2017
|
Net Sales and
Revenues
|
|
|
|
|
|
|
|
|
|
|
|
Net sales
|
$
|
9,747.0
|
|
$
|
7,259.8
|
|
|
|
|
|
|
Finance and interest
income
|
|
27.8
|
|
|
18.7
|
|
$
|
812.5
|
|
$
|
716.4
|
Other
income
|
|
202.9
|
|
|
339.6
|
|
|
64.9
|
|
|
61.0
|
Total
|
|
9,977.7
|
|
|
7,618.1
|
|
|
877.4
|
|
|
777.4
|
|
|
|
|
|
|
|
|
|
|
|
|
Costs and
Expenses
|
|
|
|
|
|
|
|
|
|
|
|
Cost of
sales
|
|
7,333.8
|
|
|
5,428.1
|
|
|
|
|
|
|
Research and
development expenses
|
|
415.2
|
|
|
325.4
|
|
|
|
|
|
|
Selling,
administrative and general expenses
|
|
799.5
|
|
|
644.1
|
|
|
141.5
|
|
|
141.3
|
Interest
expense
|
|
78.2
|
|
|
67.0
|
|
|
231.2
|
|
|
169.4
|
Interest compensation
to Financial Services
|
|
80.6
|
|
|
60.4
|
|
|
|
|
|
|
Other operating
expenses
|
|
66.7
|
|
|
83.2
|
|
|
324.7
|
|
|
307.3
|
Total
|
|
8,774.0
|
|
|
6,608.2
|
|
|
697.4
|
|
|
618.0
|
|
|
|
|
|
|
|
|
|
|
|
|
Income of
Consolidated Group before Income Taxes
|
|
1,203.7
|
|
|
1,009.9
|
|
|
180.0
|
|
|
159.4
|
Provision for income
taxes
|
|
100.8
|
|
|
309.7
|
|
|
76.3
|
|
|
56.1
|
Income of
Consolidated Group
|
|
1,102.9
|
|
|
700.2
|
|
|
103.7
|
|
|
103.3
|
|
|
|
|
|
|
|
|
|
|
|
|
Equity in Income
of Unconsolidated Subsidiaries and Affiliates
|
|
|
|
|
|
|
|
|
|
|
|
Financial
Services
|
|
104.1
|
|
|
103.5
|
|
|
.4
|
|
|
.2
|
Other
|
|
2.7
|
|
|
4.6
|
|
|
|
|
|
|
Total
|
|
106.8
|
|
|
108.1
|
|
|
.4
|
|
|
.2
|
Net
Income
|
|
1,209.7
|
|
|
808.3
|
|
|
104.1
|
|
|
103.5
|
Less: Net income (loss)
attributable to noncontrolling interests
|
|
1.4
|
|
|
(.2)
|
|
|
|
|
|
|
Net Income
Attributable to Deere & Company
|
$
|
1,208.3
|
|
$
|
808.5
|
|
$
|
104.1
|
|
$
|
103.5
|
|
|
|
*
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 Six Months
Ended April 29, 2018 and April 30, 2017
|
(In millions of dollars) Unaudited
|
EQUIPMENT OPERATIONS*
|
|
FINANCIAL SERVICES
|
|
2018
|
|
2017
|
|
2018
|
|
2017
|
Net Sales and
Revenues
|
|
|
|
|
|
|
|
|
|
|
|
Net sales
|
$
|
15,721.0
|
|
$
|
11,957.7
|
|
|
|
|
|
|
Finance and interest
income
|
|
39.4
|
|
|
40.0
|
|
$
|
1,589.4
|
|
$
|
1,403.7
|
Other
income
|
|
399.3
|
|
|
597.6
|
|
|
127.7
|
|
|
119.2
|
Total
|
|
16,159.7
|
|
|
12,595.3
|
|
|
1,717.1
|
|
|
1,522.9
|
|
|
|
|
|
|
|
|
|
|
|
|
Costs and
Expenses
|
|
|
|
|
|
|
|
|
|
|
|
Cost of
sales
|
|
12,038.8
|
|
|
9,210.0
|
|
|
|
|
|
|
Research and
development expenses
|
|
772.0
|
|
|
637.5
|
|
|
|
|
|
|
Selling,
administrative and general expenses
|
|
1,390.2
|
|
|
1,189.3
|
|
|
257.7
|
|
|
264.7
|
Interest
expense
|
|
174.2
|
|
|
133.8
|
|
|
425.3
|
|
|
318.1
|
Interest compensation
to Financial Services
|
|
142.2
|
|
|
106.1
|
|
|
|
|
|
|
Other operating
expenses
|
|
138.9
|
|
|
148.9
|
|
|
635.9
|
|
|
612.5
|
Total
|
|
14,656.3
|
|
|
11,425.6
|
|
|
1,318.9
|
|
|
1,195.3
|
|
|
|
|
|
|
|
|
|
|
|
|
Income of
Consolidated Group before Income Taxes
|
|
1,503.4
|
|
|
1,169.7
|
|
|
398.2
|
|
|
327.6
|
Provision (credit)
for income taxes
|
|
1,364.7
|
|
|
384.6
|
|
|
(130.0)
|
|
|
110.5
|
Income of
Consolidated Group
|
|
138.7
|
|
|
785.1
|
|
|
528.2
|
|
|
217.1
|
|
|
|
|
|
|
|
|
|
|
|
|
Equity in Income
of Unconsolidated Subsidiaries and Affiliates
|
|
|
|
|
|
|
|
|
|
|
|
Financial
Services
|
|
529.4
|
|
|
217.9
|
|
|
1.2
|
|
|
.8
|
Other
|
|
6.8
|
|
|
3.7
|
|
|
|
|
|
|
Total
|
|
536.2
|
|
|
221.6
|
|
|
1.2
|
|
|
.8
|
Net
Income
|
|
674.9
|
|
|
1,006.7
|
|
|
529.4
|
|
|
217.9
|
Less: Net income (loss)
attributable to noncontrolling interests
|
|
1.7
|
|
|
(.8)
|
|
|
|
|
|
|
Net Income
Attributable to Deere & Company
|
$
|
673.2
|
|
$
|
1,007.5
|
|
$
|
529.4
|
|
$
|
217.9
|
|
|
|
*
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)
|
CONDENSED BALANCE
SHEET
|
(In millions of dollars) Unaudited
|
EQUIPMENT OPERATIONS*
|
|
FINANCIAL SERVICES
|
|
April 29
|
|
October 29
|
|
April 30
|
|
April 29
|
|
October 29
|
|
April 30
|
|
2018
|
|
2017
|
|
2017
|
|
2018
|
|
2017
|
|
2017
|
Assets
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cash and cash
equivalents
|
$
|
2,988.9
|
|
$
|
8,168.4
|
|
$
|
3,343.8
|
|
$
|
1,212.5
|
|
$
|
1,166.5
|
|
$
|
1,182.0
|
Marketable
securities
|
|
16.9
|
|
|
20.2
|
|
|
118.1
|
|
|
462.4
|
|
|
431.4
|
|
|
428.2
|
Receivables from
unconsolidated subsidiaries and affiliates
|
|
1,668.0
|
|
|
1,032.1
|
|
|
3,453.0
|
|
|
|
|
|
|
|
|
|
Trade accounts and
notes receivable - net
|
|
1,515.9
|
|
|
876.3
|
|
|
742.9
|
|
|
6,436.0
|
|
|
4,134.1
|
|
|
4,867.3
|
Financing receivables
- net
|
|
75.7
|
|
|
|
|
|
|
|
|
24,199.8
|
|
|
25,104.1
|
|
|
23,301.1
|
Financing receivables
securitized - net
|
|
113.1
|
|
|
|
|
|
|
|
|
4,323.2
|
|
|
4,158.8
|
|
|
4,281.8
|
Other
receivables
|
|
1,273.3
|
|
|
1,045.6
|
|
|
801.6
|
|
|
190.1
|
|
|
195.5
|
|
|
136.0
|
Equipment on
operating leases - net
|
|
|
|
|
|
|
|
|
|
|
6,723.1
|
|
|
6,593.7
|
|
|
5,923.9
|
Inventories
|
|
6,888.9
|
|
|
3,904.1
|
|
|
4,114.8
|
|
|
|
|
|
|
|
|
|
Property and
equipment - net
|
|
5,696.0
|
|
|
5,017.3
|
|
|
4,909.7
|
|
|
46.9
|
|
|
50.4
|
|
|
50.2
|
Investments in
unconsolidated subsidiaries and affiliates
|
|
4,915.9
|
|
|
4,812.3
|
|
|
4,612.2
|
|
|
15.3
|
|
|
13.8
|
|
|
12.5
|
Goodwill
|
|
3,188.7
|
|
|
1,033.3
|
|
|
806.2
|
|
|
|
|
|
|
|
|
|
Other intangible
assets - net
|
|
1,692.2
|
|
|
218.0
|
|
|
90.8
|
|
|
|
|
|
|
|
|
|
Retirement
benefits
|
|
617.9
|
|
|
538.1
|
|
|
176.2
|
|
|
15.0
|
|
|
16.9
|
|
|
18.9
|
Deferred income
taxes
|
|
2,065.5
|
|
|
3,098.8
|
|
|
3,651.1
|
|
|
76.4
|
|
|
79.8
|
|
|
76.3
|
Other
assets
|
|
1,186.3
|
|
|
973.9
|
|
|
901.1
|
|
|
577.3
|
|
|
651.4
|
|
|
636.8
|
Total
Assets
|
$
|
33,903.2
|
|
$
|
30,738.4
|
|
$
|
27,721.5
|
|
$
|
44,278.0
|
|
$
|
42,596.4
|
|
$
|
40,915.0
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Liabilities and
Stockholders' Equity
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Liabilities
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Short-term
borrowings
|
$
|
659.1
|
|
$
|
375.5
|
|
$
|
276.6
|
|
$
|
10,235.5
|
|
$
|
9,659.8
|
|
$
|
7,687.0
|
Short-term
securitization borrowings
|
|
113.2
|
|
|
|
|
|
|
|
|
4,287.9
|
|
|
4,118.7
|
|
|
4,224.6
|
Payables to
unconsolidated subsidiaries and affiliates
|
|
145.7
|
|
|
121.9
|
|
|
101.6
|
|
|
1,633.7
|
|
|
996.2
|
|
|
3,418.1
|
Accounts payable and
accrued expenses
|
|
9,265.7
|
|
|
7,718.1
|
|
|
6,765.0
|
|
|
2,030.8
|
|
|
1,827.1
|
|
|
1,587.1
|
Deferred income
taxes
|
|
462.9
|
|
|
115.6
|
|
|
89.7
|
|
|
523.2
|
|
|
857.7
|
|
|
764.8
|
Long-term
borrowings
|
|
5,536.5
|
|
|
5,490.9
|
|
|
4,520.4
|
|
|
20,742.1
|
|
|
20,400.4
|
|
|
18,732.7
|
Retirement benefits
and other liabilities
|
|
7,285.5
|
|
|
7,341.9
|
|
|
8,260.4
|
|
|
95.6
|
|
|
92.9
|
|
|
91.7
|
Total
liabilities
|
|
23,468.6
|
|
|
21,163.9
|
|
|
20,013.7
|
|
|
39,548.8
|
|
|
37,952.8
|
|
|
36,506.0
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Redeemable
noncontrolling interest
|
|
14.6
|
|
|
14.0
|
|
|
14.0
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Stockholders'
Equity
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total
Deere & Company stockholders' equity
|
|
10,410.3
|
|
|
9,557.3
|
|
|
7,684.7
|
|
|
4,729.2
|
|
|
4,643.6
|
|
|
4,409.0
|
Noncontrolling
interests
|
|
9.7
|
|
|
3.2
|
|
|
9.1
|
|
|
|
|
|
|
|
|
|
Total stockholders'
equity
|
|
10,420.0
|
|
|
9,560.5
|
|
|
7,693.8
|
|
|
4,729.2
|
|
|
4,643.6
|
|
|
4,409.0
|
Total Liabilities
and Stockholders' Equity
|
$
|
33,903.2
|
|
$
|
30,738.4
|
|
$
|
27,721.5
|
|
$
|
44,278.0
|
|
$
|
42,596.4
|
|
$
|
40,915.0
|
|
|
|
*
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)
|
STATEMENT OF CASH
FLOWS
|
For the Six Months
Ended April 29, 2018 and April 30, 2017
|
(In millions of dollars) Unaudited
|
EQUIPMENT OPERATIONS*
|
|
FINANCIAL SERVICES
|
|
2018
|
|
2017
|
|
2018
|
|
2017
|
Cash Flows from
Operating Activities
|
|
|
|
|
|
|
|
|
|
|
|
Net income
|
$
|
674.9
|
|
$
|
1,006.7
|
|
$
|
529.4
|
|
$
|
217.9
|
Adjustments to
reconcile net income to net cash provided by operating
activities:
|
|
|
|
|
|
|
|
|
|
|
|
Provision (credit) for
credit losses
|
|
9.2
|
|
|
(.2)
|
|
|
17.6
|
|
|
32.8
|
Provision for
depreciation and amortization
|
|
483.8
|
|
|
427.0
|
|
|
529.3
|
|
|
476.9
|
Gain on sale of
affiliates and investments
|
|
(13.2)
|
|
|
(281.4)
|
|
|
|
|
|
|
Undistributed earnings
of unconsolidated subsidiaries and affiliates
|
|
(93.8)
|
|
|
59.8
|
|
|
(1.0)
|
|
|
(.6)
|
Provision (credit) for
deferred income taxes
|
|
934.5
|
|
|
(118.8)
|
|
|
(330.2)
|
|
|
18.4
|
Changes in assets and
liabilities:
|
|
|
|
|
|
|
|
|
|
|
|
Trade
receivables
|
|
(188.5)
|
|
|
(87.7)
|
|
|
|
|
|
|
Inventories
|
|
(1,439.5)
|
|
|
(771.8)
|
|
|
|
|
|
|
Accounts payable and
accrued expenses
|
|
578.0
|
|
|
200.0
|
|
|
84.2
|
|
|
18.0
|
Accrued income taxes
payable/receivable
|
|
147.4
|
|
|
191.5
|
|
|
5.6
|
|
|
3.6
|
Retirement
benefits
|
|
62.7
|
|
|
111.0
|
|
|
4.9
|
|
|
4.6
|
Other
|
|
(106.1)
|
|
|
(49.2)
|
|
|
72.0
|
|
|
104.8
|
Net cash provided by
operating activities
|
|
1,049.4
|
|
|
686.9
|
|
|
911.8
|
|
|
876.4
|
|
|
|
|
|
|
|
|
|
|
|
|
Cash Flows from
Investing Activities
|
|
|
|
|
|
|
|
|
|
|
|
Collections of
receivables (excluding trade and wholesale)
|
|
|
|
|
|
|
|
9,486.7
|
|
|
8,833.8
|
Proceeds from
maturities and sales of marketable securities
|
|
3.6
|
|
|
7.9
|
|
|
20.2
|
|
|
33.4
|
Proceeds from sales
of equipment on operating leases
|
|
|
|
|
|
|
|
748.6
|
|
|
786.4
|
Proceeds from sales
of businesses and unconsolidated
affiliates, net of cash sold
|
|
55.0
|
|
|
113.9
|
|
|
|
|
|
|
Cost of receivables
acquired (excluding trade and wholesale)
|
|
|
|
|
|
|
|
(8,918.8)
|
|
|
(8,238.0)
|
Acquisitions of
businesses, net of cash acquired
|
|
(5,171.1)
|
|
|
|
|
|
|
|
|
|
Purchases of
marketable securities
|
|
|
|
|
|
|
|
(62.8)
|
|
|
(43.7)
|
Purchases of property
and equipment
|
|
(351.6)
|
|
|
(252.2)
|
|
|
(.6)
|
|
|
(.8)
|
Cost of equipment on
operating leases acquired
|
|
|
|
|
|
|
|
(1,409.3)
|
|
|
(1,355.6)
|
Increase in trade and
wholesale receivables
|
|
|
|
|
|
|
|
(2,293.8)
|
|
|
(1,012.7)
|
Other
|
|
44.2
|
|
|
(18.1)
|
|
|
(47.0)
|
|
|
(.6)
|
Net cash used for
investing activities
|
|
(5,419.9)
|
|
|
(148.5)
|
|
|
(2,476.8)
|
|
|
(997.8)
|
|
|
|
|
|
|
|
|
|
|
|
|
Cash Flows from
Financing Activities
|
|
|
|
|
|
|
|
|
|
|
|
Increase (decrease)
in total short-term borrowings
|
|
(67.1)
|
|
|
(7.4)
|
|
|
266.2
|
|
|
190.5
|
Change in
intercompany receivables/payables
|
|
(641.6)
|
|
|
(287.5)
|
|
|
641.6
|
|
|
287.5
|
Proceeds from
long-term borrowings
|
|
107.1
|
|
|
19.1
|
|
|
3,970.6
|
|
|
2,642.5
|
Payments of long-term
borrowings
|
|
(85.3)
|
|
|
(24.7)
|
|
|
(2,803.4)
|
|
|
(2,717.5)
|
Proceeds from
issuance of common stock
|
|
198.6
|
|
|
383.6
|
|
|
|
|
|
|
Repurchases of common
stock
|
|
(60.6)
|
|
|
(6.2)
|
|
|
|
|
|
|
Dividends
paid
|
|
(386.9)
|
|
|
(379.5)
|
|
|
(439.1)
|
|
|
(280.2)
|
Other
|
|
(25.5)
|
|
|
(25.8)
|
|
|
(18.5)
|
|
|
(13.9)
|
Net cash provided by
(used for) financing activities
|
|
(961.3)
|
|
|
(328.4)
|
|
|
1,617.4
|
|
|
108.9
|
|
|
|
|
|
|
|
|
|
|
|
|
Effect of Exchange
Rate Changes on Cash and Cash Equivalents
|
|
152.3
|
|
|
(6.7)
|
|
|
(6.4)
|
|
|
(.8)
|
|
|
|
|
|
|
|
|
|
|
|
|
Net Increase
(Decrease) in Cash and Cash Equivalents
|
|
(5,179.5)
|
|
|
203.3
|
|
|
46.0
|
|
|
(13.3)
|
Cash and Cash
Equivalents at Beginning of Period
|
|
8,168.4
|
|
|
3,140.5
|
|
|
1,166.5
|
|
|
1,195.3
|
Cash and Cash
Equivalents at End of Period
|
$
|
2,988.9
|
|
$
|
3,343.8
|
|
$
|
1,212.5
|
|
$
|
1,182.0
|
|
|
|
*
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.
|
Deere &
Company
|
Other Financial
Information
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
For the Six Months
Ended
|
|
Equipment Operations*
|
Agriculture and Turf
|
Construction and Forestry*
|
|
|
April 29
|
April 30
|
April 29
|
April 30
|
April 29
|
April 30
|
Dollars in millions
|
|
2018
|
2017**
|
2018
|
2017**
|
2018
|
2017**
|
Net
Sales
|
|
$
|
15,721
|
|
$
|
11,958
|
|
$
|
11,292
|
|
$
|
9,392
|
|
$
|
4,429
|
|
$
|
2,566
|
|
Net Sales -
excluding Wirtgen
|
|
$
|
14,594
|
|
$
|
11,958
|
|
$
|
11,292
|
|
$
|
9,392
|
|
$
|
3,302
|
|
$
|
2,566
|
|
Average
Identifiable Assets
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
With Inventories at
LIFO
|
|
$
|
19,268
|
|
$
|
11,868
|
|
$
|
10,275
|
|
$
|
8,797
|
|
$
|
8,993
|
|
$
|
3,071
|
|
With Inventories at
LIFO - excluding Wirtgen
|
|
$
|
13,561
|
|
$
|
11,868
|
|
$
|
10,275
|
|
$
|
8,797
|
|
$
|
3,286
|
|
$
|
3,071
|
|
With Inventories at
Standard Cost
|
|
$
|
20,544
|
|
$
|
13,140
|
|
$
|
11,305
|
|
$
|
9,832
|
|
$
|
9,239
|
|
$
|
3,308
|
|
With Inventories at
Standard Cost - excluding Wirtgen
|
|
$
|
14,837
|
|
$
|
13,140
|
|
$
|
11,305
|
|
$
|
9,832
|
|
$
|
3,532
|
|
$
|
3,308
|
|
Operating
Profit
|
|
$
|
1,734
|
|
$
|
1,375
|
|
$
|
1,443
|
|
$
|
1,227
|
|
$
|
291
|
|
$
|
148
|
|
Operating Profit -
excluding Wirtgen
|
|
$
|
1,785
|
|
$
|
1,375
|
|
$
|
1,443
|
|
$
|
1,227
|
|
$
|
342
|
|
$
|
148
|
|
Percent of Net Sales
- excluding Wirtgen
|
|
|
12.2
|
%
|
|
11.5
|
%
|
|
12.8
|
%
|
|
13.1
|
%
|
|
10.4
|
%
|
|
5.8
|
%
|
Operating Return
on Assets - excluding Wirtgen
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
With Inventories at
LIFO - excluding Wirtgen
|
|
|
13.2
|
%
|
|
11.6
|
%
|
|
14.0
|
%
|
|
13.9
|
%
|
|
10.4
|
%
|
|
4.8
|
%
|
With Inventories at
Standard Cost - excluding Wirtgen
|
|
|
12.0
|
%
|
|
10.5
|
%
|
|
12.8
|
%
|
|
12.5
|
%
|
|
9.7
|
%
|
|
4.5
|
%
|
SVA Cost of Assets
- excluding Wirtgen
|
|
$
|
(890)
|
|
$
|
(788)
|
|
$
|
(678)
|
|
$
|
(590)
|
|
$
|
(212)
|
|
$
|
(198)
|
|
SVA - excluding
Wirtgen
|
|
$
|
895
|
|
$
|
587
|
|
$
|
765
|
|
$
|
637
|
|
$
|
130
|
|
$
|
(50)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
For the Six Months
Ended
|
|
Financial
Services
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
April 29
|
April 30
|
|
|
|
|
|
|
|
|
|
|
|
|
Dollars in
millions
|
|
2018***
|
2017**
|
|
|
|
|
|
|
|
|
|
|
|
|
Net Income
Attributable to Deere & Company
|
|
$
|
529
|
|
$
|
218
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net Income
Attributable to Deere & Company - Tax
Adjusted
|
|
$
|
271
|
|
$
|
218
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Average
Equity
|
|
$
|
4,827
|
|
$
|
4,431
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Average Equity -
Tax Adjusted
|
|
$
|
4,752
|
|
$
|
4,431
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Return on Equity -
Tax Adjusted
|
|
|
5.7
|
%
|
|
4.9
|
%
|
|
|
|
|
|
|
|
|
|
|
|
|
Operating
Profit
|
|
$
|
396
|
|
$
|
325
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Average Equity -
Tax Adjusted
|
|
$
|
4,752
|
|
$
|
4,431
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cost of
Equity
|
|
$
|
(349)
|
|
$
|
(334)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
SVA
|
|
$
|
47
|
|
$
|
(9)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
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.
* On December 1, 2017, the Company acquired the stock and certain
assets of substantially all of Wirtgen Group Holding GmbH's
operations (Wirtgen), the leading manufacturer worldwide of road
construction equipment. Wirtgen is included in the construction and
forestry segment. Wirtgen is excluded from the metrics above in
order to provide comparability to the Company's performance in
prior periods.
** During the first quarter of fiscal 2018, the Company adopted ASU
No. 2017-07, Improving the Presentation of Net Periodic Pension
Cost and Net Periodic Postretirement Benefit Cost. The ASU requires
that employers report only the service cost component of the total
defined benefit pension and postretirement benefit cost in
Operating Profit. The ASU was adopted on a retrospective basis for
the presentation of Operating Profit and on a prospective basis for
the capitalization of only the service cost. Operating Profit
amounts reported for fiscal 2017 have been restated
accordingly.
*** On December 22, 2017, the U.S. government enacted new tax
legislation (tax reform). The primary provisions of tax reform
expected to impact the Company in fiscal year 2018 are a reduction
to the U.S. federal income tax rate from 35 percent to 21 percent
and a transition from a worldwide corporate tax system to a
territorial tax system. As the Financial Services segment SVA is
based on average equity, the "Tax Adjusted" amounts remove the
effects of the discrete income tax benefit and the lower corporate
tax rate provided in tax reform for comparability to the prior
period.
|
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SOURCE Deere & Company