EX-99.1 2 ex-99d1.htm EX-99.1 de_Ex99_1

 

 

 

Picture 1

 

Exhibit 99.1

(Filed herewith)

 

 

NEWS RELEASE

Ken Golden

Director, Global Public Relations

Deere & Company

309-765-5678

Deere Reports Third-Quarter Net Income of $899 Million

 

·

Quarterly sales decline 3% to $8.97 billion.

·

Continued uncertainty in agricultural sector weighs on results.

·

Construction & Forestry reports sharply higher profit.

·

Full-year forecast revised to $3.2 billion of net income on approximately 4% sales gain.

 

MOLINE, Illinois (August 16, 2019) — Deere & Company reported net income of $899 million for the third quarter ended July 28, 2019, or $2.81 per share, compared with net income of $910 million, or $2.78 per share, for the quarter ended July 29, 2018. For the first nine months of the year, net income attributable to Deere & Company was $2.532 billion, or $7.87 per share, compared with $1.584 billion, or $4.82 per share, for the same period last year.

 

Affecting 2019 and 2018 results were charges or benefits to the provision for income taxes due to U.S. tax reform legislation (tax reform). Without these changes, adjusted net income attributable to Deere & Company for the third quarter and first nine months of 2019 and 2018 would have been as presented in the following table: 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Deere & Company

 

Third Quarter

 

Year to Date

 

$ in millions

 

2019

 

2018

 

% Change

 

2019

 

2018

 

% Change

 

Net income – adjusted

 

$
867

 

$

849

 
2%

 

$
2,505

 

$

2,325

 
8%

 

Fully diluted EPS – adjusted

 

$

2.71

 

$

2.59

 

 

 

$

7.79

 

$

7.08

 

 

 

 

(Information on non-GAAP financial measures is included in the appendix.)

 

Worldwide net sales and revenues decreased 3 percent, to $10.036 billion, for the third quarter of 2019 and increased 5 percent, to $29.362 billion, for nine months. Net sales of the equipment operations were $8.969 billion for the quarter and $26.182 billion for nine months, compared with $9.286 billion and $25.007 billion last year.

 

“John Deere’s third-quarter results reflected the high degree of uncertainty that continues to overshadow the agricultural sector,” said Samuel R. Allen, chairman and chief executive officer. “Concerns about export-market access, near-term demand for commodities such as soybeans, and overall crop conditions, have caused many farmers to postpone major equipment purchases. At the same time, general economic conditions remain positive and are contributing to strong results for Deere’s construction and forestry business.”

 

Company Outlook & Summary

Company equipment sales are projected to increase by about 4 percent for fiscal 2019 compared with 2018. Included in the forecast are Wirtgen results for the full fiscal year of 2019 compared with 10 months

 

 

 

 

 

 

Deere Announces Third-Quarter Earnings

5

 

 

of the prior year. This adds about 1 percent to the company’s net sales forecast for the current year. Also included is a negative foreign-currency translation effect of about 2 percent for the year. Net sales and revenues are projected to increase about 5 percent for fiscal 2019. Net income attributable to Deere & Company is forecast to be about $3.2 billion.

“In spite of present challenges, the long-term outlook for our businesses remains healthy and points to a promising future,” Allen said. “We continue to expand our global customer base and are encouraged by response to our lineup of advanced products and services. Furthermore, we are fully committed to the successful execution of our strategic plan focused on achieving sustainable profitable growth. In support of the strategy, we are conducting a thorough assessment of our cost structure and initiating a series of actions to make the organization more structurally efficient and profitable.”

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Deere & Company

 

Third Quarter

 

Year to Date

 

$ in millions

 

2019

 

2018

 

% Change

 

2019

 

2018

 

% Change

 

Net sales and revenues

 

$

10,036

 

$
10,308

 

-3%

 

$

29,362

 

$
27,942

 
5%

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Net income

 

$

899

 

$

910

 

-1%

 

$

2,532

 

$

1,584

 
60%

 

Fully diluted EPS

 

$

2.81

 

$

2.78

 

 

 

$

7.87

 

$

4.82

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Net income – adjusted

 

$

867

 

$

849

 
2%

 

$

2,505

 

$

2,325

 
8%

 

Fully diluted EPS – adjusted

 

$

2.71

 

$

2.59

 

 

 

$

7.79

 

$

7.08

 

 

 

 

Net income in the third quarter and first nine months of 2019 was favorably affected by discrete adjustments to the provision for income taxes related to tax reform of $32 million and $27 million for the respective periods. (Information on non-GAAP financial measures is included in the appendix.) Results were favorably affected by $61 million in the third quarter of 2018 and unfavorably affected by $741 million for the nine-month period due to discrete adjustments to the provision for income taxes related to tax reform.

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Equipment Operations

 

Third Quarter

 

Year to Date

 

$ in millions

 

2019

 

2018

 

% Change

 

2019

 

2018

 

% Change

 

Net sales

 

$

8,969

 

$

9,286

 

-3%

 

$

26,182

 

$

25,007

 
5%

 

Operating profit

 

$

990

 

$

1,087

 

-9%

 

$

2,932

 

$

2,822

 
4%

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Net income

 

$

717

 

$

750

 

-4%

 

$

2,067

 

$

889

 
133%

 

Tax reform unfavorable
(favorable) adjustments

 

 

(24)

 

 

(58)

 

-59%

 

 

(24)

 

 

974

 

-102%

 

Net income without tax reform

 

$

693

 

$

692

 

 

 

$

2,043

 

$

1,863

 
10%

 

 

For a discussion of net sales and operating profit results, see the Agriculture & Turf and Construction & Forestry sections below. Wirtgen results are included for the full year-to-date period of 2019 while the prior year reflected seven months of the respective period. The two additional months added about 2 percent to the company’s year-to-date net sales. Net income in the third quarter and first nine months of 2019 was favorably affected by discrete adjustments to the provision for income taxes.

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Agriculture & Turf

 

Third Quarter

 

Year to Date

 

$ in millions

 

2019

 

2018

 

% Change

 

2019

 

2018

 

% Change

 

Net sales

 

$

5,946

 

$

6,293

 

-6%

 

$

17,909

 

$

17,585

 
2%

 

Operating profit

 

$

612

 

$

806

 

-24%

 

$

1,978

 

$

2,249

 

-12%

 

Operating margin

 

 
10.3%

 

 
12.8%

 

 

 

 
11.0%

 

 
12.8%

 

 

 

 

Agriculture & Turf sales decreased for the quarter due to lower shipment volumes and the unfavorable effects of currency translation, partially offset by price realization. Year-to-date sales increased mainly as a result of price realization and increased shipment volumes, partially offset by the unfavorable effects of currency translation. Operating profit declined for the quarter primarily due to lower shipment volumes,

 

 

 

 

 

 

Deere Announces Third-Quarter Earnings

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higher production costs, and the unfavorable effects of foreign-currency exchange, partially offset by price realization. Nine-month operating profit moved lower resulting from higher production costs, the unfavorable effects of currency translation, increased research and development costs, and a less-favorable sales mix. These factors were partially offset by price realization and higher shipment volumes. 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Construction & Forestry

 

Third Quarter

 

Year to Date

 

$ in millions

 

2019

 

2018

 

% Change

 

2019

 

2018

 

% Change

 

Net sales

 

$

3,023

 

$

2,993

 
1%

 

$

8,273

 

$

7,422

 
11%

 

Operating profit

 

$

378

 

$

281

 
35%

 

$

954

 

$

573

 
66%

 

Operating margin

 

 
12.5%

 

 
9.4%

 

 

 

 
11.5%

 

 
7.7%

 

 

 

 

Construction & Forestry sales were higher for the quarter and nine months primarily due to price realization, partially offset by the unfavorable effects of currency translation. Nine-month sales also benefited from higher shipment volumes. The inclusion of Wirtgen’s sales for two additional months accounted for about 6 percent of the year-to-date net sales increase. Wirtgen’s operating profit was $159 million for the quarter and $275 million for nine months, compared with $88 million and $37 million for the corresponding periods last year. Excluding Wirtgen, the improvement in Construction & Forestry results for the quarter was driven by price realization, partially offset by a less-favorable sales mix. Year-to-date operating profit, excluding Wirtgen, increased mainly due to price realization and higher shipment volumes, partially offset by higher production costs and the unfavorable effects of currency exchange.

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Financial Services

 

Third Quarter

 

Year to Date

 

$ in millions

 

2019

 

2018

 

% Change

 

2019

 

2018

 

% Change

 

Net income

 

$

175

 

$

151

 
16%

 

$

450

 

$

681

 

-34%

 

Tax reform unfavorable
(favorable) adjustments

 

 
(8)

 

 
(3)

 
167%

 

 
(3)

 

 
(233)

 

-99%

 

Net income without tax reform

 

$

167

 

$

148

 
13%

 

$

447

 

$

448

 

 

 

 

Excluding tax-reform adjustments, the increase in financial services net income for the quarter was due to income earned on a higher average portfolio and favorable discrete adjustments to the provision for income taxes, partially offset by higher losses on operating-lease residual values and unfavorable financing spreads. Nine-month net income, adjusted for the tax-reform items, declined due to unfavorable financing spreads and higher losses on operating-lease residual values, largely offset by income earned on a higher average portfolio and favorable discrete adjustments to the provision for income taxes.

 

 

 

 

 

 

 

 

 

 

 

Market Conditions and Outlook (annual)

 

 

 

 

 

 

$ in millions

 

 

 

 

 

 

 

 

 

 

Agriculture & Turf

 

Net Sales

 

 
2%

 

Currency Translation

 

-2%

 

Construction & Forestry

 

Net Sales

 

 
10%

 

Currency Translation

 

-2%

 

 

 

 

 

 

 

 

 

 

 

 

John Deere Financial

 

Net Income

 

 

$ 620

 

 

 

 

 

 

Agriculture & Turf. Industry sales of agricultural equipment are expected to be about the same as last year for the U.S. and Canada as well as for the EU28-member nations. 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 flat to down slightly. Industry sales of turf and utility equipment in the U.S. and Canada are expected to be flat to up 5 percent for 2019.

Construction & Forestry. The Construction & Forestry forecast includes a full year of Wirtgen sales, versus 10 months in fiscal 2018, with the two additional months adding about 4 percent to division sales for the year. The outlook reflects generally positive fundamentals and economic growth worldwide. In forestry, global industry sales are expected to be flat to up 5 percent mainly as a result of improved demand in EU28 countries and Russia.

 

 

 

 

 

 

Deere Announces Third-Quarter Earnings

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Financial Services. Results are expected to benefit from a higher average portfolio and favorable adjustments to the provision for income taxes, largely offset by less-favorable financing spreads, higher losses on operating-lease residual values, and a higher provision for credit losses. Financial services net income for 2018 was $942 million, which included a tax benefit related to tax reform of $341 million. Without the tax benefit, net income would have been $601 million.

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.

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Third Quarter

 

Year to Date

 

$ in millions

 

2019

 

2018

 

% Change

 

2019

 

2018

 

% Change

 

Revenue

 

$

742

 

$

661

 
12%

 

$

2,106

 

$

1,864

 
13%

 

Net income

 

$

145

 

$

120

 
21%

 

$

351

 

$

639

 

-45%

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Ending portfolio balance

 

 

 

 

 

 

 

 

 

$

38,625

 

$

35,633

 
8%

 

 

Prior-year results for the third quarter and year to date included a favorable provision for income taxes associated with tax reform. Results for the current quarter and first nine months included income from a higher average portfolio and favorable discrete adjustments to the provision for income taxes, partially offset by less-favorable financing spreads and higher losses on operating-lease residual values.

 

 

 

 

 

 

 

Deere Announces Third-Quarter Earnings

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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 tables below provide a reconciliation of the non-GAAP financial measure with the most directly comparable GAAP financial measure for the three months and nine months ended July 28, 2019, and July 29, 2018.

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Three Months Ended

 

Nine Months Ended

 

 

 

July 28, 2019

 

July 28, 2019

 

 

 

Net Income

 

 

 

 

Net Income

 

 

 

 

 

 

Attributable to

 

Diluted

 

Attributable to

 

Diluted

 

 

 

Deere &

 

Earnings

 

Deere &

 

Earnings

 

 

 

Company

 

Per Share

 

Company

 

Per Share

 

GAAP measure

 

$

899

 

$

2.81

 

$

2,532

 

$

7.87

 

Discrete tax reform expense (benefit)

 

 

(32)

 

 

(.10)

 

 

(27)

 

 

(.08)

 

Non-GAAP measure

 

$

867

 

$

2.71

 

$

2,505

 

$

7.79

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Three Months Ended

 

Nine Months Ended

 

 

 

July 29, 2018

 

July 29, 2018

 

 

 

Net Income

 

 

 

 

Net Income

 

 

 

 

 

 

Attributable to

 

Diluted

 

Attributable to

 

Diluted

 

 

 

Deere &

 

Earnings

 

Deere &

 

Earnings

 

 

 

Company

 

Per Share

 

Company

 

Per Share

 

GAAP measure

 

$

910

 

$

2.78

 

$

1,584

 

$

4.82

 

Discrete tax reform expense (benefit)

 

 

(61)

 

 

(.19)

 

 

741

 

 

2.26

 

Non-GAAP measure

 

$

849

 

$

2.59

 

$

2,325

 

$

7.08

 

 

 

 

 

 

 

 

 

Deere Announces Third-Quarter Earnings

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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, trade restrictions and tariffs, global trade agreements (e.g., the North American Free Trade Agreement), the level of farm product exports (including concerns about genetically modified organisms), 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 and effects of crop insurance programs, changes in environmental regulations and their impact on farming practices, animal diseases (e.g., African swine fever) and their effects on poultry, beef and pork consumption and prices and on livestock feed demand, and crop pests and diseases.

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

 

 

 

 

 

 

Deere Announces Third-Quarter Earnings

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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

 

 

 

 

 

 

Deere Announces Third-Quarter Earnings

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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).

 

 

 

 

 

 

 

 

 

Deere Announces Third-Quarter Earnings

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Third Quarter 2019 Press Release

(in millions of dollars)

Unaudited

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Three Months Ended

 

Nine Months Ended

 

   

July 28

   

July 29

   

%

   

July 28

   

July 29

   

%

 

 

2019

 

2018

 

Change

 

2019

 

2018

 

Change

Net sales and revenues:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Agriculture and turf

 

$

5,946

 

$

6,293

 

-6

 

$

17,909

 

$

17,585

 

+2

Construction and forestry

 

 

3,023

 

 

2,993

 

+1

 

 

8,273

 

 

7,422

 

+11

Total net sales

 

 

8,969

 

 

9,286

 

-3

 

 

26,182

 

 

25,007

 

+5

Financial services

 

 

910

 

 

830

 

+10

 

 

2,650

 

 

2,402

 

+10

Other revenues

 

 

157

 

 

192

 

-18

 

 

530

 

 

533

 

-1

Total net sales and revenues

 

$

10,036

 

$

10,308

 

-3

 

$

29,362

 

$

27,942

 

+5

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Operating profit: *

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Agriculture and turf

 

$

612

 

$

806

 

-24

 

$

1,978

 

$

2,249

 

-12

Construction and forestry

 

 

378

 

 

281

 

+35

 

 

954

 

 

573

 

+66

Financial services

 

 

204

 

 

196

 

+4

 

 

566

 

 

591

 

-4

Total operating profit

 

 

1,194

 

 

1,283

 

-7

 

 

3,498

 

 

3,413

 

+2

Reconciling items **

 

 
(74)

 

 
(84)

 

-12

 

 
(218)

 

 
(305)

 

-29

Income taxes

 

 
(221)

 

 
(289)

 

-24

 

 
(748)

 

 
(1,524)

 

-51

Net income attributable to Deere & Company

 

$

899

 

$

910

 

-1

 

$

2,532

 

$

1,584

 

+60

 

*       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.

 

 

 

 

 

 

 

 

13

 

 

DEERE & COMPANY

STATEMENT OF CONSOLIDATED INCOME

For the Three Months Ended July 28, 2019 and July 29, 2018

(In millions of dollars and shares except per share amounts) Unaudited

 

 

 

 

 

 

 

 

    

2019

    

2018

Net Sales and Revenues

 

 

 

 

 

 

Net sales

 

$

8,969

 

$

9,286

Finance and interest income

 

 

884

 

 

786

Other income

 

 

183

 

 

236

Total

 

 

10,036

 

 

10,308

 

 

 

 

 

 

 

Costs and Expenses

 

 

 

 

 

 

Cost of sales

 

 

6,870

 

 

7,152

Research and development expenses

 

 

431

 

 

416

Selling, administrative and general expenses

 

 

896

 

 

913

Interest expense

 

 

374

 

 

291

Other operating expenses

 

 

352

 

 

346

Total

 

 

8,923

 

 

9,118

 

 

 

 

 

 

 

Income of Consolidated Group before Income Taxes

 

 

1,113

 

 

1,190

Provision for income taxes

 

 

221

 

 

289

Income of Consolidated Group

 

 

892

 

 

901

Equity in income of unconsolidated affiliates

 

 
7

 

 
10

Net Income

 

 

899

 

 

911

Less: Net income attributable to noncontrolling interests

 

 

 

 

 
1

Net Income Attributable to Deere & Company

 

$

899

 

$

910

 

 

 

 

 

 

 

Per Share Data

 

 

 

 

 

 

Basic

 

$

2.84

 

$

2.81

Diluted

 

$

2.81

 

$

2.78

 

 

 

 

 

 

 

Average Shares Outstanding

 

 

 

 

 

 

Basic

 

 

315.9

 

 

323.5

Diluted

 

 

319.8

 

 

328.0

 

 

 

See Condensed Notes to Interim Consolidated Financial Statements.

 

 

 

 

 

 

 

 

 

14

 

 

DEERE & COMPANY

STATEMENT OF CONSOLIDATED INCOME

For the Nine Months Ended July 28, 2019 and July 29, 2018

(In millions of dollars and shares except per share amounts) Unaudited

 

 

 

 

 

 

 

 

    

2019

    

2018

Net Sales and Revenues

 

 

 

 

 

 

Net sales

 

$

26,182

 

$

25,007

Finance and interest income

 

 

2,537

 

 

2,263

Other income

 

 

643

 

 

672

Total

 

 

29,362

 

 

27,942

 

 

 

 

 

 

 

Costs and Expenses

 

 

 

 

 

 

Cost of sales

 

 

20,056

 

 

19,190

Research and development expenses

 

 

1,295

 

 

1,188

Selling, administrative and general expenses

 

 

2,607

 

 

2,557

Interest expense

 

 

1,078

 

 

881

Other operating expenses

 

 

1,063

 

 

1,034

Total

 

 

26,099

 

 

24,850

 

 

 

 

 

 

 

Income of Consolidated Group before Income Taxes

 

 

3,263

 

 

3,092

Provision for income taxes

 

 

748

 

 

1,524

Income of Consolidated Group

 

 

2,515

 

 

1,568

Equity in income of unconsolidated affiliates

 

 

20

 

 

18

Net Income

 

 

2,535

 

 

1,586

Less: Net income attributable to noncontrolling interests

 

 
3

 

 
2

Net Income Attributable to Deere & Company

 

$

2,532

 

$

1,584

 

 

 

 

 

 

 

Per Share Data

 

 

 

 

 

 

Basic

 

$

7.98

 

$

4.90

Diluted

 

$

7.87

 

$

4.82

 

 

 

 

 

 

 

Average Shares Outstanding

 

 

 

 

 

 

Basic

 

 

317.3

 

 
323.4

Diluted

 

 

321.5

 

 

328.2

 

 

See Condensed Notes to Interim Consolidated Financial Statements.

 

 

 

 

 

 

 

 

15

 

 

DEERE & COMPANY

CONDENSED CONSOLIDATED BALANCE SHEET

(In millions of dollars) Unaudited

 

 

 

 

 

 

 

 

 

 

 

 

July 28

 

October 28

 

July 29

 

   

2019

   

2018

   

2018

Assets

 

 

 

 

 

 

 

 

 

Cash and cash equivalents

 

$

3,383

 

$

3,904

 

$

3,923

Marketable securities

 

 

565

 

 

490

 

 

488

Receivables from unconsolidated affiliates

 

 

54

 

 

22

 

 

28

Trade accounts and notes receivable - net

 

 

6,758

 

 

5,004

 

 

6,208

Financing receivables - net

 

 

27,049

 

 

27,054

 

 

25,213

Financing receivables securitized - net

 

 

5,200

 

 

4,022

 

 

4,662

Other receivables

 

 

1,535

 

 

1,736

 

 

1,300

Equipment on operating leases - net

 

 

7,269

 

 

7,165

 

 

6,805

Inventories

 

 

6,747

 

 

6,149

 

 

6,239

Property and equipment - net

 

 

5,798

 

 

5,868

 

 

5,638

Investments in unconsolidated affiliates

 

 

219

 

 

207

 

 

199

Goodwill

 

 

3,013

 

 

3,101

 

 

3,047

Other intangible assets - net

 

 

1,444

 

 

1,562

 

 

1,581

Retirement benefits

 

 

1,431

 

 

1,298

 

 

737

Deferred income taxes

 

 

1,088

 

 

808

 

 

1,645

Other assets

 

 

1,977

 

 

1,718

 

 

1,677

Total Assets

 

$

73,530

 

$

70,108

 

$

69,390

 

 

 

 

 

 

 

 

 

 

Liabilities and Stockholders’ Equity

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Liabilities

 

 

 

 

 

 

 

 

 

Short-term borrowings

 

$

11,142

 

$

11,062

 

$

11,004

Short-term securitization borrowings

 

 

5,048

 

 

3,957

 

 

4,528

Payables to unconsolidated affiliates

 

 

136

 

 

129

 

 

111

Accounts payable and accrued expenses

 

 

9,390

 

 

10,111

 

 

9,483

Deferred income taxes

 

 

507

 

 

556

 

 

524

Long-term borrowings

 

 

29,242

 

 

27,237

 

 

26,838

Retirement benefits and other liabilities

 

 

5,781

 

 

5,751

 

 

6,522

Total liabilities

 

 

61,246

 

 

58,803

 

 

59,010

 

 

 

 

 

 

 

 

 

 

Redeemable noncontrolling interest

 

 

14

 

 

14

 

 

14

 

 

 

 

 

 

 

 

 

 

Stockholders’ Equity

 

 

 

 

 

 

 

 

 

Total Deere & Company stockholders’ equity

 

 

12,266

 

 

11,288

 

 

10,356

Noncontrolling interests

 

 
4

 

 
3

 

 

10

Total stockholders’ equity

 

 

12,270

 

 

11,291

 

 

10,366

Total Liabilities and Stockholders’ Equity

 

$

73,530

 

$

70,108

 

$

69,390

 

 

See Condensed Notes to Interim Consolidated Financial Statements.

 

 

 

 

 

 

 

 

16

 

 

DEERE & COMPANY

STATEMENT OF CONSOLIDATED CASH FLOWS

For the Nine Months Ended July 28, 2019 and July 29, 2018

(In millions of dollars) Unaudited

 

 

 

 

 

 

 

 

   

2019

   

2018

Cash Flows from Operating Activities

 

 

 

 

 

 

Net income

 

$

2,535

 

$

1,586

Adjustments to reconcile net income to net cash provided by (used for) operating activities:

 

 

 

 

 

 

Provision for credit losses

 

 

58

 

 

66

Provision for depreciation and amortization

 

 

1,522

 

 

1,445

Share-based compensation expense

 

 

63

 

 

63

Gain on sales of businesses

 

 

 

 

 
(25)

Undistributed earnings of unconsolidated affiliates

 

 

10

 

 
(10)

Provision (credit) for deferred income taxes

 

 
(332)

 

 

641

Changes in assets and liabilities:

 

 

 

 

 

 

Trade, notes, and financing receivables related to sales

 

 
(2,206)

 

 
(2,365)

Inventories

 

 
(1,168)

 

 
(1,539)

Accounts payable and accrued expenses

 

 
(306)

 

 

213

Accrued income taxes payable/receivable

 

 

253

 

 

176

Retirement benefits

 

 

40

 

 
(814)

Other

 

 
(65)

 

 
(109)

Net cash provided by (used for) operating activities

 

 

404

 

 
(672)

 

 

 

 

 

 

 

Cash Flows from Investing Activities

 

 

 

 

 

 

Collections of receivables (excluding receivables related to sales)

 

 

12,685

 

 

12,162

Proceeds from maturities and sales of marketable securities

 

 

72

 

 

56

Proceeds from sales of equipment on operating leases

 

 

1,171

 

 

1,116

Proceeds from sales of businesses, net of cash sold

 

 

 

 

 

133

Cost of receivables acquired (excluding receivables related to sales)

 

 
(13,662)

 

 
(12,586)

Acquisitions of businesses, net of cash acquired

 

 

 

 

 
(5,171)

Purchases of marketable securities

 

 
(110)

 

 
(101)

Purchases of property and equipment

 

 
(756)

 

 
(571)

Cost of equipment on operating leases acquired

 

 
(1,462)

 

 
(1,428)

Other

 

 
(67)

 

 
(103)

Net cash used for investing activities

 

 
(2,129)

 

 
(6,493)

 

 

 

 

 

 

 

Cash Flows from Financing Activities

 

 

 

 

 

 

Increase (decrease) in total short-term borrowings

 

 
(336)

 

 

1,183

Proceeds from long-term borrowings

 

 

7,440

 

 

5,739

Payments of long-term borrowings

 

 
(4,356)

 

 
(4,372)

Proceeds from issuance of common stock

 

 

133

 

 

209

Repurchases of common stock

 

 
(880)

 

 
(454)

Dividends paid

 

 
(703)

 

 
(583)

Other

 

 
(82)

 

 
(66)

Net cash provided by financing activities

 

 

1,216

 

 

1,656

 

 

 

 

 

 

 

Effect of Exchange Rate Changes on Cash, Cash Equivalents, and Restricted Cash

 

 
(24)

 

 

71

 

 

 

 

 

 

 

Net Decrease in Cash, Cash Equivalents, and Restricted Cash

 

 
(533)

 

 
(5,438)

Cash, Cash Equivalents, and Restricted Cash at Beginning of Period

 

 

4,015

 

 

9,467

Cash, Cash Equivalents, and Restricted Cash at End of Period

 

$

3,482

 

$

4,029

 

 

See Condensed Notes to Interim Consolidated Financial Statements.

 

 

 

 

 

 

 

 

17

 

 

Condensed Notes to Interim Consolidated Financial Statements (Unaudited)

 

(1)

Dividends declared and paid on a per share basis were as follows:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Three Months Ended

 

Nine Months Ended

 

 

 

July 28

 

July 29

 

July 28

 

July 29

 

 

    

2019

    

2018

    

2019

    

2018

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Dividends declared

 

$

.76

 

$

.69

 

$

2.28

 

$

1.89

 

Dividends paid

 

$

.76

 

$

.60

 

$

2.21

 

$

1.80

 

 

(2)

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.

(3)

In the first quarter of 2019, the Company adopted Financial Accounting Standards Board Accounting Standards Update (ASU) No. 2016-18, which amends ASC 230, Statement of Cash Flows. The ASU requires that restricted cash be included with cash and cash equivalents in the statement of cash flows. The ASU was adopted on a retrospective basis. As a result, the 2018 consolidated statement of cash flows was updated to add $132 million and $106 million of restricted cash in the beginning period and ending period balances, respectively. The 2018 supplemental consolidating statement of cash flows was updated to add $6 million and $7 million of restricted cash in the equipment operations’ beginning and ending period balances, respectively, and $126 million and $99 million in the financial services’ beginning and ending period balances, respectively. The equipment operations’ restricted cash at October 28, 2018 and July 28, 2019 was $7 million and $9 million, respectively. The financial services’ restricted cash for the same periods was $104 million and $90 million, respectively.

(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.

 

 

 

 

 

 

 

 

 

18

 

 

(5) SUPPLEMENTAL CONSOLIDATING DATA

STATEMENT OF INCOME

For the Three Months Ended July 28, 2019 and July 29, 2018

 

 

 

 

 

 

 

 

 

 

 

 

 

(In millions of dollars) Unaudited

 

EQUIPMENT OPERATIONS*

 

FINANCIAL SERVICES

 

    

2019

    

2018

    

2019

    

2018

Net Sales and Revenues

 

 

 

 

 

 

 

 

 

 

 

 

Net sales

 

$

8,969

 

$

9,286

 

 

 

 

 

 

Finance and interest income

 

 

30

 

 

31

 

$

952

 

$

852

Other income

 

 

185

 

 

231

 

 

51

 

 

67

Total

 

 

9,184

 

 

9,548

 

 

1,003

 

 

919

 

 

 

 

 

 

 

 

 

 

 

 

 

Costs and Expenses

 

 

 

 

 

 

 

 

 

 

 

 

Cost of sales

 

 

6,871

 

 

7,153

 

 

 

 

 

 

Research and development expenses

 

 

431

 

 

416

 

 

 

 

 

 

Selling, administrative and general expenses

 

 

751

 

 

769

 

 

147

 

 

145

Interest expense

 

 

67

 

 

52

 

 

311

 

 

250

Interest compensation to Financial Services

 

 

93

 

 

86

 

 

 

 

 

 

Other operating expenses

 

 

64

 

 

80

 

 

339

 

 

326

Total

 

 

8,277

 

 

8,556

 

 

797

 

 

721

 

 

 

 

 

 

 

 

 

 

 

 

 

Income of Consolidated Group before Income Taxes

 

 

907

 

 

992

 

 

206

 

 

198

Provision for income taxes

 

 

190

 

 

242

 

 

31

 

 

47

Income of Consolidated Group

 

 

717

 

 

750

 

 

175

 

 

151

 

 

 

 

 

 

 

 

 

 

 

 

 

Equity in Income of Unconsolidated Subsidiaries and Affiliates

 

 

 

 

 

 

 

 

 

 

 

 

Financial Services

 

 

175

 

 

151

 

 

 

 

 

 

Other

 

 
7

 

 

10

 

 

 

 

 

 

Total

 

 

182

 

 

161

 

 

 

 

 

 

Net Income

 

 

899

 

 

911

 

 

175

 

 

151

Less: Net income attributable to noncontrolling interests

 

 

 

 

 
1

 

 

 

 

 

 

Net Income Attributable to Deere & Company

 

$

899

 

$

910

 

$

175

 

$

151

 

 

* 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.

 

 

 

 

 

 

 

 

19

 

 

SUPPLEMENTAL CONSOLIDATING DATA (Continued)
STATEMENT OF INCOME

For the Nine Months Ended July 28, 2019 and July 29, 2018

 

 

 

 

 

 

 

 

 

 

 

 

 

(In millions of dollars) Unaudited

 

EQUIPMENT OPERATIONS*

 

FINANCIAL SERVICES

 

    

2019

    

2018

    

2019

    

2018

Net Sales and Revenues

 

 

 

 

 

 

 

 

 

 

 

 

Net sales

 

$

26,182

 

$

25,007

 

 

 

 

 

 

Finance and interest income

 

 

79

 

 

70

 

$

2,727

 

$

2,441

Other income

 

 

614

 

 

631

 

 

184

 

 

195

Total

 

 

26,875

 

 

25,708

 

 

2,911

 

 

2,636

 

 

 

 

 

 

 

 

 

 

 

 

 

Costs and Expenses

 

 

 

 

 

 

 

 

 

 

 

 

Cost of sales

 

 

20,058

 

 

19,192

 

 

 

 

 

 

Research and development expenses

 

 

1,295

 

 

1,188

 

 

 

 

 

 

Selling, administrative and general expenses

 

 

2,191

 

 

2,159

 

 

422

 

 

403

Interest expense

 

 

182

 

 

226

 

 

910

 

 

675

Interest compensation to Financial Services

 

 

254

 

 

228

 

 

 

 

 

 

Other operating expenses

 

 

203

 

 

219

 

 

1,008

 

 

962

Total

 

 

24,183

 

 

23,212

 

 

2,340

 

 

2,040

 

 

 

 

 

 

 

 

 

 

 

 

 

Income of Consolidated Group before Income Taxes

 

 

2,692

 

 

2,496

 

 

571

 

 

596

Provision (credit) for income taxes

 

 

625

 

 

1,607

 

 

123

 

 
(83)

Income of Consolidated Group

 

 

2,067

 

 

889

 

 

448

 

 

679

 

 

 

 

 

 

 

 

 

 

 

 

 

Equity in Income of Unconsolidated Subsidiaries and Affiliates

 

 

 

 

 

 

 

 

 

 

 

 

Financial Services

 

 

450

 

 

681

 

 
2

 

 
2

Other

 

 

18

 

 

16

 

 

 

 

 

 

Total

 

 

468

 

 

697

 

 
2

 

 
2

Net Income

 

 

2,535

 

 

1,586

 

 

450

 

 

681

Less: Net income attributable to noncontrolling interests

 

 
3

 

 
2

 

 

 

 

 

 

Net Income Attributable to Deere & Company

 

$

2,532

 

$

1,584

 

$

450

 

$

681

 

 

* 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.

 

 

 

 

 

 

 

 

 

 

20

 

 

SUPPLEMENTAL CONSOLIDATING DATA (Continued)

CONDENSED BALANCE SHEET

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

(In millions of dollars) Unaudited

 

EQUIPMENT OPERATIONS*

 

FINANCIAL SERVICES

 

   

July 28

 

October 28

 

July 29

  

July 28

 

October 28

 

July 29

 

 

2019

    

2018

    

2018

 

2019

    

2018

    

2018

Assets

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Cash and cash equivalents

 

$

2,694

 

$

3,195

 

$

2,803

 

$

689

 

$

709

 

$

1,120

Marketable securities

 

 
5

 

 
8

 

 

11

 

 

560

 

 

482

 

 

477

Receivables from unconsolidated subsidiaries and affiliates

 

 

2,395

 

 

1,700

 

 

1,795

 

 

 

 

 

 

 

 

 

Trade accounts and notes receivable - net

 

 

1,606

 

 

1,374

 

 

1,586

 

 

6,807

 

 

4,906

 

 

6,080

Financing receivables - net

 

 

100

 

 

93

 

 

78

 

 

26,949

 

 

26,961

 

 

25,135

Financing receivables securitized - net

 

 

54

 

 

76

 

 

90

 

 

5,146

 

 

3,946

 

 

4,572

Other receivables

 

 

1,428

 

 

1,010

 

 

1,131

 

 

126

 

 

776

 

 

176

Equipment on operating leases - net

 

 

 

 

 

 

 

 

 

 

 

7,269

 

 

7,165

 

 

6,805

Inventories

 

 

6,747

 

 

6,149

 

 

6,239

 

 

 

 

 

 

 

 

 

Property and equipment - net

 

 

5,753

 

 

5,821

 

 

5,592

 

 

45

 

 

47

 

 

46

Investments in unconsolidated subsidiaries and affiliates

 

 

5,309

 

 

5,231

 

 

4,992

 

 

16

 

 

15

 

 

15

Goodwill

 

 

3,013

 

 

3,101

 

 

3,047

 

 

 

 

 

 

 

 

 

Other intangible assets - net

 

 

1,444

 

 

1,562

 

 

1,581

 

 

 

 

 

 

 

 

 

Retirement benefits

 

 

1,374

 

 

1,241

 

 

727

 

 

57

 

 

57

 

 

14

Deferred income taxes

 

 

1,579

 

 

1,503

 

 

1,984

 

 

72

 

 

69

 

 

68

Other assets

 

 

1,269

 

 

1,133

 

 

1,148

 

 

708

 

 

587

 

 

530

Total Assets 

 

$

34,770

 

$

33,197

 

$

32,804

 

$

48,444

 

$

45,720

 

$

45,038

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Liabilities and Stockholders’ Equity 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Liabilities

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Short-term borrowings

 

$

1,372

 

$

1,434

 

$

789

 

$

9,770

 

$

9,628

 

$

10,215

Short-term securitization borrowings

 

 

53

 

 

75

 

 

90

 

 

4,995

 

 

3,882

 

 

4,438

Payables to unconsolidated subsidiaries and affiliates

 

 

136

 

 

129

 

 

111

 

 

2,341

 

 

1,678

 

 

1,766

Accounts payable and accrued expenses

 

 

9,422

 

 

9,383

 

 

9,047

 

 

1,641

 

 

2,056

 

 

1,902

Deferred income taxes

 

 

454

 

 

497

 

 

431

 

 

616

 

 

823

 

 

500

Long-term borrowings

 

 

5,364

 

 

4,714

 

 

5,526

 

 

23,878

 

 

22,523

 

 

21,312

Retirement benefits and other liabilities

 

 

5,685

 

 

5,660

 

 

6,430

 

 

97

 

 

91

 

 

96

Total liabilities

 

 

22,486

 

 

21,892

 

 

22,424

 

 

43,338

 

 

40,681

 

 

40,229

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Redeemable noncontrolling interest

 

 

14

 

 

14

 

 

14

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Stockholders’ Equity

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Total Deere & Company stockholders’ equity

 

 

12,266

 

 

11,288

 

 

10,356

 

 

5,106

 

 

5,039

 

 

4,809

Noncontrolling interests

 

 
4

 

 
3

 

 

10

 

 

 

 

 

 

 

 

 

Total stockholders’ equity

 

 

12,270

 

 

11,291

 

 

10,366

 

 

5,106

 

 

5,039

 

 

4,809

Total Liabilities and Stockholders’ Equity 

 

$

34,770

 

$

33,197

 

$

32,804

 

$

48,444

 

$

45,720

 

$

45,038

 

 

* 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.

 

 

 

 

 

 

 

 

 

21

 

 

SUPPLEMENTAL CONSOLIDATING DATA (Continued)

STATEMENT OF CASH FLOWS

For the Nine Months Ended July 28, 2019 and July 29, 2018

 

 

 

 

 

 

 

 

 

 

 

 

 

(In millions of dollars) Unaudited

 

EQUIPMENT OPERATIONS*

 

FINANCIAL SERVICES

 

  

2019

  

2018

  

2019

  

2018

Cash Flows from Operating Activities

 

 

 

 

 

 

 

 

 

 

 

 

Net income

 

$

2,535

 

$

1,586

 

$

450

 

$

681

Adjustments to reconcile net income to net cash provided by operating activities:

 

 

 

 

 

 

 

 

 

 

 

 

Provision for credit losses

 

 
1

 

 

19

 

 

57

 

 

47

Provision for depreciation and amortization

 

 

782

 

 

741

 

 

836

 

 

800

Gain on sales of businesses

 

 

 

 

 
(25)

 

 

 

 

 

 

Undistributed earnings of unconsolidated subsidiaries and affiliates

 

 
(62)

 

 
(235)

 

 
(1)

 

 
(1)

Provision (credit) for deferred income taxes

 

 
(123)

 

 

986

 

 
(209)

 

 
(345)

Changes in assets and liabilities:

 

 

 

 

 

 

 

 

 

 

 

 

Trade receivables and Equipment Operations' financing receivables

 

 
(248)

 

 
(331)

 

 

 

 

 

 

Inventories

 

 
(670)

 

 
(975)

 

 

 

 

 

 

Accounts payable and accrued expenses

 

 

50

 

 

519

 

 

23

 

 

66

Accrued income taxes payable/receivable

 

 
(282)

 

 

231

 

 

535

 

 
(55)

Retirement benefits

 

 

35

 

 
(821)

 

 
5

 

 
7

Other

 

 
(59)

 

 
(86)

 

 

140

 

 

141

Net cash provided by operating activities

 

 

1,959

 

 

1,609

 

 

1,836

 

 

1,341

 

 

 

 

 

 

 

 

 

 

 

 

 

Cash Flows from Investing Activities

 

 

 

 

 

 

 

 

 

 

 

 

Collections of receivables (excluding trade and wholesale)

 

 

 

 

 

 

 

 

13,807

 

 

13,246

Proceeds from maturities and sales of marketable securities

 

 
9

 

 
9

 

 

63

 

 

47

Proceeds from sales of equipment on operating leases

 

 

 

 

 

 

 

 

1,171

 

 

1,116

Proceeds from sales of businesses, net of cash sold

 

 

 

 

 

133

 

 

 

 

 

 

Cost of receivables acquired (excluding trade and wholesale)

 

 

 

 

 

 

 

 
(14,597)

 

 
(13,830)

Acquisitions of businesses, net of cash acquired

 

 

 

 

 
(5,171)

 

 

 

 

 

 

Purchases of marketable securities

 

 
(3)

 

 

 

 

 
(107)

 

 
(101)

Purchases of property and equipment

 

 
(754)

 

 
(569)

 

 
(2)

 

 
(2)

Cost of equipment on operating leases acquired

 

 

 

 

 

 

 

 
(2,135)

 

 
(2,190)

Increase in trade and wholesale receivables

 

 

 

 

 

 

 

 
(2,551)

 

 
(2,330)

Other

 

 
(64)

 

 

42

 

 

12

 

 
(61)

Net cash used for investing activities

 

 
(812)

 

 
(5,556)

 

 
(4,339)

 

 
(4,105)

 

 

 

 

 

 

 

 

 

 

 

 

 

Cash Flows from Financing Activities

 

 

 

 

 

 

 

 

 

 

 

 

Increase (decrease) in total short-term borrowings

 

 
(119)

 

 

119

 

 
(217)

 

 

1,064

Change in intercompany receivables/payables

 

 
(683)

 

 
(797)

 

 

683

 

 

797

Proceeds from long-term borrowings

 

 

868

 

 

159

 

 

6,572

 

 

5,580

Payments of long-term borrowings

 

 
(194)

 

 
(118)

 

 
(4,162)

 

 
(4,254)

Proceeds from issuance of common stock

 

 

133

 

 

209

 

 

 

 

 

 

Repurchases of common stock

 

 
(880)

 

 
(454)

 

 

 

 

 

 

Dividends paid

 

 
(703)

 

 
(583)

 

 
(377)

 

 
(454)

Other

 

 
(52)

 

 
(41)

 

 
(22)

 

 
(25)

Net cash provided by (used for) financing activities

 

 
(1,630)

 

 
(1,506)

 

 

2,477

 

 

2,708

 

 

 

 

 

 

 

 

 

 

 

 

 

Effect of Exchange Rate Changes on Cash, Cash Equivalents, and Restricted Cash

 

 
(16)

 

 

89

 

 
(8)

 

 
(18)

 

 

 

 

 

 

 

 

 

 

 

 

 

Net Decrease in Cash, Cash Equivalents, and Restricted Cash

 

 
(499)

 

 
(5,364)

 

 
(34)

 

 
(74)

Cash, Cash Equivalents, and Restricted Cash at Beginning of Period

 

 

3,202

 

 

8,174

 

 

813

 

 

1,293

Cash, Cash Equivalents, and Restricted Cash at End of Period

 

$

2,703

 

$

2,810

 

$

779

 

$

1,219

 

 

* 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.

 

 

 

 

 

 

 

22