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ACQUISITIONS | 6 Months Ended
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Apr. 29, 2018
ACQUISITIONS |
ACQUISITIONS | (18) On December 1, 2017, the Company acquired Wirtgen, which was a privately-held international company and is the leading manufacturer worldwide of road construction equipment. Headquartered in Germany, Wirtgen has six brands across the road construction sector spanning processing, mixing, paving, compaction, and rehabilitation. Wirtgen sells products in more than 100 countries and had approximately 8,200 employees at the acquisition date. 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 Company financed the acquisition and associated transaction expenses from a combination of cash and new debt financing, which consisted of medium-term notes, including €850 million issued in September 2017. 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 follows:
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 by $8 million, total liabilities by $7 million, and noncontrolling interests by $1 million. The Company continues to review the fair value of the assets and liabilities acquired, which may be updated during the measurement period. The identifiable intangible assets’ preliminary fair values in millions of dollars and weighted-average useful lives in years follows:
|  | Weighted-Average Useful Lives |  | Preliminary Fair Values |
Customer lists and relationships |  | 16 |  | $ | 534 |
Technology, patents, trademarks, and other |  | 19 |  | $ | 924 |
The goodwill was the result of future cash flows and related fair value of Wirtgen exceeding the fair value of the identified assets and liabilities. The goodwill is not expected to be deductible for income tax purposes and is included in the construction and forestry segment. Wirtgen’s results were included in the Company’s consolidated financial statements beginning on the acquisition date. The results are incorporated 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 statement of consolidated income in the second quarter of 2018 and first six months of 2018 were $873 million and $1,127 million, and $41 million and $(51) million, respectively. The Company also recognized $3 million of acquisition related costs in the second quarter of 2018, which were recorded in selling, administrative and general expenses. In the first six months of 2018, the Company recognized $53 million of acquisition related costs, which were recorded $27 million in selling, administrative and general expenses and $26 million in other operating expenses. The unaudited pro forma consolidated net sales and revenues and net income are prepared as if the acquisition closed at the beginning of fiscal year 2017 and follow in millions of dollars:
|  | Three Months Ended |  |  | Six Months Ended |
|  | April 29 |  | April 30 |  |  | April 29 |  | April 30 |
|  | 2018 |  | 2017 |  |  | 2018 |  | 2017 |
Net sales and revenues |  | $ | 10,720 |  | $ | 9,045 |  |  | $ | 18,098 |  | $ | 15,253 |
Net income attributable to Deere & Company |  | $ | 1,310 |  | $ | 837 |  |  | $ | 877 |  | $ | 942 |
The pro forma amounts have been calculated using policies consistent with the Company’s accounting policies and include the additional expense from the amortization from the allocated purchase price adjustments. The pro forma results exclude acquisition related costs incurred in both periods and assume the medium-term notes used to fund the acquisition were issued in fiscal year 2016 at the interest rate of the actual notes. In addition, the pro forma results for the second quarter and six months ended April 30, 2017 include nonrecurring pretax expenses of $102 million and $264 million, for the higher cost basis from the inventory fair value adjustment and $21 million and $42 million for the amortization of identifiable intangible assets. Anticipated synergies or other expected benefits of the acquisition are not included in the pro forma results. As a result, the unaudited pro forma financial information may not be indicative of the results for future operations or the results if the acquisition closed at the beginning of fiscal year 2017. In March 2018, the Company acquired King Agro, a privately held manufacturer of carbon fiber technology products with headquarters in Valencia, Spain and a production facility in Campana, Argentina. The total cash purchase price, net of cash acquired of $3 million, was $41 million, excluding a loan to King Agro of $4 million that was forgiven on the acquisition date. In addition to the cash purchase price, the Company assumed $11 million of liabilities. The preliminary asset and liability fair values are as follows:
Trade accounts and notes receivable |  | $ | 4 |
Other receivables |  |  | 3 |
Inventories |  |  | 6 |
Property and equipment |  |  | 5 |
Goodwill |  |  | 25 |
Other intangible assets |  |  | 13 |
Total assets |  | $ | 56 |
Short-term borrowings |  | $ | 2 |
Accounts payable and accrued expenses |  |  | 4 |
Deferred income taxes |  |  | 3 |
Long-term borrowings |  |  | 2 |
Total liabilities |  | $ | 11 |
The identifiable intangibles were primarily related to trade name and technology, which have a weighted-average amortization period of 10 years. The goodwill was the result of future cash flows and related fair values of the entity exceeding the fair value of the identified assets and liabilities, which is not expected to be deducted for tax purposes. The results of King Agro were included in the Company’s consolidated financial statements in the agriculture and turf segment since the date of acquisition. The pro forma results of operations as if the acquisition had occurred at the beginning of the prior fiscal year would not differ significantly from the reported results.

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