UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 8-K
CURRENT REPORT
Pursuant to Section 13 or 15(d) of The Securities Exchange Act of 1934
Date of Report: February 17, 2017
(Date of earliest event reported)
DEERE & COMPANY
(Exact name of registrant as specified in its charter)
DELAWARE |
|
1-4121 |
|
36-2382580 |
(State or other jurisdiction of
|
|
(Commission File Number) |
|
(IRS Employer Identification No.) |
One John Deere Place
Moline, Illinois 61265
(Address of principal executive offices and zip code)
(309) 765-8000
(Registrants telephone number, including area code)
___________________________________________________
(Former name or former address, if changed since last report.)
Check the appropriate box below if the Form 8-K filing is intended to simultaneously satisfy the filing obligation of the registrant under any of the following provisions:
o Written communications pursuant to Rule 425 under the Securities Act (17 CFR 230.425)
o Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17 CFR 240.14a-12)
o Pre-commencement communications pursuant to Rule 14d-2(b) under the Exchange Act (17 CFR 240.14d-2(b))
o Pre-commencement communications pursuant to Rule 13e-4(c) under the Exchange Act (17 CFR 240.13e-4(c))
Items 2.02
and 8.01 Results of Operations and Financial Condition and Other Events.
The following consists of Deere & Companys press release dated February 17, 2017 concerning First Quarter of Fiscal 2017 financial results and supplemental financial information filed as Exhibit 99.1 to this report and incorporated by reference herein.
Item 9.01 Financial Statements and Exhibits.
(d) Exhibits
(99.1) Press release and supplemental financial information (Filed herewith)
Items 2.02
and 7.01 Results of Operations and Financial Condition and Regulation FD Disclosure (Furnished herewith)
The attached schedules of Other Financial Information (Exhibit 99.2) and First Quarter 2017 Earnings Conference Call Information (Exhibit 99.3) are furnished under Form 8-K Items 2.02 and 7.01. The information is not filed for purposes of the Securities Exchange Act of 1934 and is not deemed incorporated by reference by any general statements incorporating by reference this report or future filings into any filings under the Securities Act of 1933 or the Securities Exchange Act of 1934, except to the extent Deere & Company specifically incorporates the information by reference.
Exhibit Index
Number and Description of Exhibit
Press Release and Supplemental Financial Information (Filed herewith) |
|
First Quarter 2017 Earnings Conference Call Information (Furnished herewith) |
|
(Filed herewith) |
NEWS RELEASE
Media Contact:
Ken Golden
Director, Global Public Relations
Deere & Company
309-765-5678
Deere Announces First-Quarter Earnings of $194 Million
· Results pressured by soft conditions in farm and construction equipment sectors.
· Efforts to establish more efficient cost structure on track.
· Key agricultural markets show signs of stabilization.
· Full-year forecast calls for improved sales, earnings of $1.5 billion.
MOLINE, Illinois (February 17, 2017) Net income attributable to Deere & Company was $193.8 million, or $0.61 per share, for the first quarter ended January 29, compared with $254.4 million, or $0.80 per share, for the period ended January 31, 2016. Worldwide net sales and revenues for the first quarter increased 2 percent, to $5.625 billion, compared with $5.525 billion last year. Net sales of the equipment operations were $4.698 billion for the quarter compared with $4.769 billion a year ago.
John Deere has started out the year on a positive note in the continued face of soft market conditions, said Samuel R. Allen, chairman and chief executive officer. Although the quarters sales and earnings were somewhat lower than last year, all of our businesses remained solidly profitable. Deeres performance showed further benefits from the sound execution of its operating plans, the strength of a broad product portfolio and the impact of a more flexible cost structure. At the same time, we are seeing signs that after several years of steep declines key agricultural markets may be stabilizing.
Summary of Operations
Net sales of the worldwide equipment operations declined 1 percent for the quarter. Sales included price realization of 2 percent and a favorable currency-translation effect of 1 percent. Equipment net sales in the United States and Canada decreased 8 percent. Outside the U.S. and Canada, net sales increased 11 percent, with a favorable currency-translation effect of 1 percent.
Deere Announces First-Quarter Earnings |
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Deeres equipment operations reported operating profit of $247 million for the quarter, compared with $214 million in 2016. The improvement for the quarter was primarily driven by price realization, partially offset by expenses associated with the previously announced voluntary employee-separation program, higher warranty costs and the unfavorable effects of foreign-currency exchange. Additionally, the current quarter benefited from a gain on the sale of a partial interest in the unconsolidated affiliate SiteOne Landscape Supply, Inc.
Net income of the companys equipment operations was $80 million for the quarter, compared with $127 million for the same period last year. In addition to the operating factors mentioned above, a higher effective tax rate in 2017 reduced quarterly results.
Financial services reported net income attributable to Deere & Company of $114.4 million for the quarter compared with $129.4 million last year. Lower results for the quarter were primarily due to less-favorable financing spreads and voluntary separation expenses.
Company Outlook & Summary
Company equipment sales are projected to increase about 4 percent for fiscal 2017 and be up about 1 percent for the second quarter compared with the same periods of 2016. Foreign-currency rates are not expected to have a material translation effect on equipment sales for the year or second quarter. Net sales and revenues are projected to increase about 4 percent for fiscal 2017 with net income attributable to Deere & Company of about $1.5 billion.
During the fourth quarter of 2016, the company announced voluntary employee-separation programs in the U.S. as part of an effort to reduce operating costs. Total pretax expenses related to the programs are estimated to be $111 million. Of this amount, $11 million was recorded in the fourth quarter of 2016, $94 million was recorded in first-quarter 2017, and $6 million is to be recognized over the remainder of the year. Savings from the separation programs are expected to be approximately $70 million in 2017.
Deere continues to perform far better than in agricultural downturns of the past, Allen said. This reflects our ongoing success developing a more durable business model and a wider range of revenue sources. Whats more, our efforts to improve operating efficiency are gaining traction and we remain confident that we can deliver at least $500 million of structural cost reductions by the end of 2018. These actions reinforce our belief that Deere is well-positioned to deliver significant value to customers and investors in the future.
* * *
Deere Announces First-Quarter Earnings |
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Equipment Division Performance
Agriculture & Turf. Sales were unchanged for the quarter with lower shipment volumes and higher warranty costs being offset by price realization and the favorable effects of currency translation.
Operating profit was $213 million compared with $144 million last year. The quarters improvement was mainly driven by a gain on the sale of a partial interest in SiteOne Landscape Supply, Inc. and price realization. These factors were partially offset by voluntary employee-separation expenses, higher warranty costs and the unfavorable effects of foreign-currency exchange.
Construction & Forestry. Construction and forestry sales decreased 6 percent for the quarter, mainly as a result of lower shipment volumes and higher sales-incentive costs. Operating profit was $34 million for the quarter compared to $70 million in 2016. Lower results for the quarter were mainly attributable to higher sales-incentive expenses and the voluntary separation program.
Market Conditions & Outlook
Agriculture & Turf. Deeres worldwide sales of agriculture and turf equipment are forecast to increase by about 3 percent for fiscal-year 2017, with currency translation not expected to have a material impact. Industry sales for agricultural equipment in the U.S. and Canada are forecast to be down 5 to 10 percent for 2017. The decline, reflecting weakness in the livestock sector as well as the continuing impact of low crop prices, is expected to affect both large and small equipment.
Full-year 2017 industry sales in the EU28 member nations are forecast to be down about 5 percent, with the decline attributable to low commodity prices and farm incomes. South American industry sales of tractors and combines are projected to be up 15 to 20 percent as a result of improving economic and political conditions in Brazil and Argentina. Asian sales are projected to be flat to up slightly, benefiting from higher sales in India.
Industry sales of turf and utility equipment in the U.S. and Canada are expected to be about flat for 2017, with Deere sales outpacing the industry.
Construction & Forestry. Deeres worldwide sales of construction and forestry equipment are forecast to be up about 7 percent for 2017, with no material currency-translation impact. The forecast reflects moderate economic growth worldwide. In forestry, global industry sales are expected to be flat to down 5 percent, with soft conditions in North America offsetting strength in other regions.
Deere Announces First-Quarter Earnings |
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Financial Services. Fiscal-year 2017 net income attributable to Deere & Company for the financial services operations is expected to be approximately $480 million. In comparison with the divisions 2016 performance, the outlook reflects lower losses on lease residual values, partially offset by less-favorable financing spreads and an increased provision for credit losses.
John Deere Capital Corporation
The following is disclosed on behalf of the companys 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 $74.2 million for the first quarter compared with $99.9 million last year. The decline for the quarter was primarily due to less-favorable financing spreads and expenses related to the previously announced voluntary employee-separation program.
Net receivables and leases financed by JDCC were $30.643 billion at January 29, 2017, compared with $31.510 billion at January 31, 2016.
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 companys businesses.
The companys 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
Deere Announces First-Quarter Earnings |
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practices; changes in and effects of crop insurance programs, global trade agreements, animal diseases and their effects on poultry, beef and pork consumption and prices, crop pests and diseases, and the level of farm product exports (including concerns about genetically modified organisms).
Factors affecting the outlook for the companys turf and utility equipment include consumer confidence, weather conditions, customer profitability, consumer borrowing patterns, consumer purchasing preferences, housing starts, infrastructure investment, spending by municipalities and golf courses, and consumable input costs.
Consumer spending patterns, real estate and housing prices, the number of housing starts, interest rates and the levels of public and non-residential construction are important to sales and results of the companys construction and forestry equipment. Prices for pulp, paper, lumber and structural panels are important to sales of forestry equipment.
All of the companys 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 companys 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 companys earnings and cash flows. Financial market conditions could also negatively impact customer access to capital for purchases of the companys 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 companys investment management activities could be impaired by changes in the equity, bond and other financial markets, which would negatively affect earnings.
The potential withdrawal of the United Kingdom from the European Union and the perceptions as to the impact of the withdrawal may adversely affect business activity, political stability and economic conditions in the United Kingdom, the European Union and
Deere Announces First-Quarter Earnings |
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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 companys 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; 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 regulations; changes to accounting standards; changes in tax rates, estimates, and regulations and company actions related thereto; compliance with U.S. and foreign laws when expanding to new markets and otherwise; and actions by other regulatory bodies.
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 companys 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
Deere Announces First-Quarter Earnings |
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ethical business practices; events that damage the companys 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; the integration of new businesses; the implementation of organizational changes; difficulties related to the conversion and implementation of enterprise resource planning systems; security breaches and other disruptions to the companys 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 companys 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 companys 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 companys financial results, is included in the companys other filings with the SEC (including, but not limited to, the factors discussed in Item 1A. Risk Factors of the companys most recent annual report on Form 10-K and quarterly reports on Form 10-Q).
Deere Announces First-Quarter Earnings |
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First Quarter 2017 Press Release
(in millions of dollars)
Unaudited
|
|
Three Months Ended |
|
||||||
|
|
January 29 |
|
January 31 |
|
% |
|
||
|
|
2017 |
|
2016 |
|
Change |
|
||
Net sales and revenues: |
|
|
|
|
|
|
|
||
Agriculture and turf |
|
$ |
3,598 |
|
$ |
3,600 |
|
|
|
Construction and forestry |
|
1,100 |
|
1,169 |
|
-6 |
|
||
Total net sales |
|
4,698 |
|
4,769 |
|
-1 |
|
||
Financial services |
|
696 |
|
636 |
|
+9 |
|
||
Other revenues |
|
231 |
|
120 |
|
+93 |
|
||
Total net sales and revenues |
|
$ |
5,625 |
|
$ |
5,525 |
|
+2 |
|
|
|
|
|
|
|
|
|
||
Operating profit: * |
|
|
|
|
|
|
|
||
Agriculture and turf |
|
$ |
213 |
|
$ |
144 |
|
+48 |
|
Construction and forestry |
|
34 |
|
70 |
|
-51 |
|
||
Financial services |
|
169 |
|
194 |
|
-13 |
|
||
Total operating profit |
|
416 |
|
408 |
|
+2 |
|
||
Reconciling items ** |
|
(88) |
|
(58) |
|
+52 |
|
||
Income taxes |
|
(134) |
|
(96) |
|
+40 |
|
||
Net income attributable to Deere & Company |
|
$ |
194 |
|
$ |
254 |
|
-24 |
|
* Operating profit is income from continuing operations before corporate expenses, certain external interest expense, certain foreign exchange gains and losses and income taxes. Operating profit of the financial services segment includes the effect of interest expense and foreign exchange gains or losses.
** Reconciling items are primarily corporate expenses, certain external interest expense, certain foreign exchange gains and losses and net income attributable to noncontrolling interests.
DEERE & COMPANY
STATEMENT OF CONSOLIDATED INCOME
For the Three Months Ended January 29, 2017 and January 31, 2016
(In millions of dollars and shares except per share amounts) Unaudited
|
|
2017 |
|
2016 |
||
Net Sales and Revenues |
|
|
|
|
||
Net sales |
|
$ |
4,697.8 |
|
$ |
4,769.2 |
Finance and interest income |
|
655.5 |
|
599.0 |
||
Other income |
|
271.9 |
|
156.3 |
||
Total |
|
5,625.2 |
|
5,524.5 |
||
|
|
|
|
|
||
Costs and Expenses |
|
|
|
|
||
Cost of sales |
|
3,796.8 |
|
3,840.1 |
||
Research and development expenses |
|
310.9 |
|
319.3 |
||
Selling, administrative and general expenses |
|
659.4 |
|
592.9 |
||
Interest expense |
|
208.1 |
|
173.2 |
||
Other operating expenses |
|
322.0 |
|
247.8 |
||
Total |
|
5,297.2 |
|
5,173.3 |
||
|
|
|
|
|
||
Income of Consolidated Group before Income Taxes |
|
328.0 |
|
351.2 |
||
Provision for income taxes |
|
134.4 |
|
95.5 |
||
Income of Consolidated Group |
|
193.6 |
|
255.7 |
||
Equity in loss of unconsolidated affiliates |
|
(.4) |
|
(1.9) |
||
Net Income |
|
193.2 |
|
253.8 |
||
Less: Net loss attributable to noncontrolling interests |
|
(.6) |
|
(.6) |
||
Net Income Attributable to Deere & Company |
|
$ |
193.8 |
|
$ |
254.4 |
|
|
|
|
|
||
Per Share Data |
|
|
|
|
||
Basic |
|
$ |
.61 |
|
$ |
.80 |
Diluted |
|
$ |
.61 |
|
$ |
.80 |
|
|
|
|
|
||
Average Shares Outstanding |
|
|
|
|
||
Basic |
|
316.7 |
|
316.4 |
||
Diluted |
|
319.8 |
|
317.6 |
See Condensed Notes to Interim Consolidated Financial Statements.
DEERE & COMPANY
CONDENSED CONSOLIDATED BALANCE SHEET
(In millions of dollars) Unaudited
|
|
January 29 |
|
October 30 |
|
January 31 |
|||
|
|
2017 |
|
2016 |
|
2016 |
|||
Assets |
|
|
|
|
|
|
|||
Cash and cash equivalents |
|
$ |
3,890.0 |
|
$ |
4,335.8 |
|
$ |
3,459.9 |
Marketable securities |
|
445.5 |
|
453.5 |
|
476.3 |
|||
Receivables from unconsolidated affiliates |
|
28.9 |
|
16.5 |
|
22.9 |
|||
Trade accounts and notes receivable - net |
|
3,236.3 |
|
3,011.3 |
|
3,406.8 |
|||
Financing receivables - net |
|
23,030.9 |
|
23,702.3 |
|
23,630.4 |
|||
Financing receivables securitized - net |
|
4,250.4 |
|
5,126.5 |
|
4,003.2 |
|||
Other receivables |
|
876.8 |
|
1,018.5 |
|
1,094.0 |
|||
Equipment on operating leases - net |
|
5,825.3 |
|
5,901.5 |
|
5,074.4 |
|||
Inventories |
|
3,959.6 |
|
3,340.5 |
|
4,249.5 |
|||
Property and equipment - net |
|
5,030.4 |
|
5,170.6 |
|
5,039.2 |
|||
Investments in unconsolidated affiliates |
|
220.9 |
|
232.6 |
|
299.5 |
|||
Goodwill |
|
809.2 |
|
815.7 |
|
718.7 |
|||
Other intangible assets - net |
|
95.5 |
|
104.1 |
|
59.6 |
|||
Retirement benefits |
|
133.7 |
|
93.6 |
|
253.7 |
|||
Deferred income taxes |
|
2,963.4 |
|
2,964.4 |
|
2,516.6 |
|||
Other assets |
|
1,499.8 |
|
1,631.1 |
|
1,667.3 |
|||
Total Assets |
|
$ |
56,296.6 |
|
$ |
57,918.5 |
|
$ |
55,972.0 |
|
|
|
|
|
|
|
|||
Liabilities and Stockholders Equity |
|
|
|
|
|
|
|||
|
|
|
|
|
|
|
|||
Liabilities |
|
|
|
|
|
|
|||
Short-term borrowings |
|
$ |
7,441.6 |
|
$ |
6,910.7 |
|
$ |
7,824.7 |
Short-term securitization borrowings |
|
4,220.2 |
|
4,997.8 |
|
3,874.9 |
|||
Payables to unconsolidated affiliates |
|
94.7 |
|
81.6 |
|
79.6 |
|||
Accounts payable and accrued expenses |
|
6,334.5 |
|
7,240.1 |
|
6,196.4 |
|||
Deferred income taxes |
|
168.9 |
|
166.0 |
|
149.6 |
|||
Long-term borrowings |
|
22,916.6 |
|
23,703.0 |
|
24,474.4 |
|||
Retirement benefits and other liabilities |
|
8,270.4 |
|
8,274.5 |
|
6,768.6 |
|||
Total liabilities |
|
49,446.9 |
|
51,373.7 |
|
49,368.2 |
|||
|
|
|
|
|
|
|
|||
Redeemable noncontrolling interest |
|
14.0 |
|
14.0 |
|
|
|||
|
|
|
|
|
|
|
|||
Stockholders Equity |
|
|
|
|
|
|
|||
Total Deere & Company stockholders equity |
|
6,825.5 |
|
6,520.0 |
|
6,590.2 |
|||
Noncontrolling interests |
|
10.2 |
|
10.8 |
|
13.6 |
|||
Total stockholders equity |
|
6,835.7 |
|
6,530.8 |
|
6,603.8 |
|||
Total Liabilities and Stockholders Equity |
|
$ |
56,296.6 |
|
$ |
57,918.5 |
|
$ |
55,972.0 |
See Condensed Notes to Interim Consolidated Financial Statements.
DEERE & COMPANY
STATEMENT OF CONSOLIDATED CASH FLOWS
For the Three Months Ended January 29, 2017 and January 31, 2016
(In millions of dollars) Unaudited
|
|
2017 |
|
2016 |
||
Cash Flows from Operating Activities |
|
|
|
|
||
Net income |
|
$ |
193.2 |
|
$ |
253.8 |
Adjustments to reconcile net income to net cash used for operating activities: |
|
|
|
|
||
Provision for credit losses |
|
6.5 |
|
9.4 |
||
Provision for depreciation and amortization |
|
415.7 |
|
374.2 |
||
Impairment charges |
|
|
|
12.6 |
||
Share-based compensation expense |
|
18.2 |
|
17.5 |
||
Undistributed earnings of unconsolidated affiliates |
|
(1.0) |
|
(.6) |
||
Provision for deferred income taxes |
|
6.0 |
|
240.4 |
||
Changes in assets and liabilities: |
|
|
|
|
||
Trade, notes and financing receivables related to sales |
|
61.9 |
|
44.9 |
||
Inventories |
|
(743.1) |
|
(565.3) |
||
Accounts payable and accrued expenses |
|
(717.7) |
|
(869.5) |
||
Accrued income taxes payable/receivable |
|
15.5 |
|
(241.5) |
||
Retirement benefits |
|
46.5 |
|
22.8 |
||
Other |
|
(44.1) |
|
(76.3) |
||
Net cash used for operating activities |
|
(742.4) |
|
(777.6) |
||
|
|
|
|
|
||
Cash Flows from Investing Activities |
|
|
|
|
||
Collections of receivables (excluding receivables related to sales) |
|
4,814.8 |
|
4,633.4 |
||
Proceeds from maturities and sales of marketable securities |
|
23.7 |
|
18.7 |
||
Proceeds from sales of equipment on operating leases |
|
368.2 |
|
290.8 |
||
Proceeds from sales of businesses and unconsolidated affiliates, net of cash sold |
|
113.9 |
|
|
||
Cost of receivables acquired (excluding receivables related to sales) |
|
(3,644.6) |
|
(3,316.6) |
||
Purchases of marketable securities |
|
(21.7) |
|
(71.7) |
||
Purchases of property and equipment |
|
(155.2) |
|
(140.0) |
||
Cost of equipment on operating leases acquired |
|
(382.6) |
|
(570.4) |
||
Other |
|
(12.1) |
|
7.4 |
||
Net cash provided by investing activities |
|
1,104.4 |
|
851.6 |
||
|
|
|
|
|
||
Cash Flows from Financing Activities |
|
|
|
|
||
Decrease in total short-term borrowings |
|
(1,064.9) |
|
(1,074.9) |
||
Proceeds from long-term borrowings |
|
1,295.8 |
|
1,832.0 |
||
Payments of long-term borrowings |
|
(1,048.9) |
|
(1,181.3) |
||
Proceeds from issuance of common stock |
|
263.3 |
|
2.7 |
||
Repurchases of common stock |
|
(6.2) |
|
(107.8) |
||
Dividends paid |
|
(188.9) |
|
(193.1) |
||
Excess tax benefits from share-based compensation |
|
5.7 |
|
1.0 |
||
Other |
|
(24.4) |
|
(21.5) |
||
Net cash used for financing activities |
|
(768.5) |
|
(742.9) |
||
|
|
|
|
|
||
Effect of Exchange Rate Changes on Cash and Cash Equivalents |
|
(39.3) |
|
(33.4) |
||
|
|
|
|
|
||
Net Decrease in Cash and Cash Equivalents |
|
(445.8) |
|
(702.3) |
||
Cash and Cash Equivalents at Beginning of Period |
|
4,335.8 |
|
4,162.2 |
||
Cash and Cash Equivalents at End of Period |
|
$ |
3,890.0 |
|
$ |
3,459.9 |
See Condensed Notes to Interim Consolidated Financial Statements.
Condensed Notes to Interim Consolidated Financial Statements (Unaudited)
(1) During the fourth quarter of 2016, the Company announced voluntary employee separation programs as part of its effort to reduce operating costs. The programs provided for cash payments based on previous years of service. The expense was recorded in the period the employees accept the separation offer. The programs total pretax expenses were approximately $111 million, of which $11 million was recorded in the fourth quarter of 2016, $94 million was recorded in the first quarter of 2017, and $6 million to be recognized over the remainder of the fiscal year. The payments for all programs were substantially made in the first quarter of 2017. The total 2017 expenses are allocated approximately 30 percent cost of sales, 16 percent research and development, and 54 percent selling, administrative and general. In addition, the expenses are allocated 75 percent to agriculture and turf operations, 17 percent to the construction and forestry operations, and 8 percent to the financial services operations. Savings from these programs are estimated to be approximately $70 million in 2017 .
(2) In December 2016, the Company sold approximately 38 percent of its interest in SiteOne resulting in gross proceeds of approximately $114 million and a gain of $105 million pretax or $66 million after-tax. The gain is recorded in other income in the agriculture and turf operating segment. The Company retained approximately a 15 percent ownership interest in SiteOne after this sale.
(3) Dividends declared and paid on a per share basis were as follows:
|
|
Three Months Ended |
|
||||
|
|
January 29 |
|
January 31 |
|
||
|
|
2017 |
|
2016 |
|
||
|
|
|
|
|
|
||
Dividends declared |
|
$ |
.60 |
|
$ |
.60 |
|
Dividends paid |
|
$ |
.60 |
|
$ |
.60 |
|
(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 & Companys subsidiaries. In the supplemental consolidating data in Note 6 to the financial statements, Equipment Operations include the Companys 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 January 29, 2017 and January 31, 2016
(In millions of dollars) Unaudited |
|
EQUIPMENT OPERATIONS* |
|
FINANCIAL SERVICES |
||||||||
|
|
2017 |
|
2016 |
|
2017 |
|
2016 |
||||
Net Sales and Revenues |
|
|
|
|
|
|
|
|
||||
Net sales |
|
$ |
4,697.8 |
|
$ |
4,769.2 |
|
|
|
|
||
Finance and interest income |
|
21.3 |
|
17.8 |
|
$ |
687.3 |
|
$ |
635.0 |
||
Other income |
|
258.1 |
|
140.2 |
|
58.3 |
|
48.1 |
||||
Total |
|
4,977.2 |
|
4,927.2 |
|
745.6 |
|
683.1 |
||||
|
|
|
|
|
|
|
|
|
||||
Costs and Expenses |
|
|
|
|
|
|
|
|
||||
Cost of sales |
|
3,797.2 |
|
3,840.6 |
|
|
|
|
||||
Research and development expenses |
|
310.9 |
|
319.3 |
|
|
|
|
||||
Selling, administrative and general expenses |
|
539.0 |
|
481.0 |
|
121.8 |
|
114.0 |
||||
Interest expense |
|
66.7 |
|
62.1 |
|
148.8 |
|
120.0 |
||||
Interest compensation to Financial Services |
|
45.7 |
|
44.8 |
|
|
|
|
||||
Other operating expenses |
|
57.9 |
|
21.2 |
|
306.8 |
|
256.1 |
||||
Total |
|
4,817.4 |
|
4,769.0 |
|
577.4 |
|
490.1 |
||||
|
|
|
|
|
|
|
|
|
||||
Income of Consolidated Group before Income Taxes |
|
159.8 |
|
158.2 |
|
168.2 |
|
193.0 |
||||
Provision for income taxes |
|
80.1 |
|
31.1 |
|
54.3 |
|
64.4 |
||||
Income of Consolidated Group |
|
79.7 |
|
127.1 |
|
113.9 |
|
128.6 |
||||
|
|
|
|
|
|
|
|
|
||||
Equity in Income (Loss) of Unconsolidated Subsidiaries and Affiliates |
|
|
|
|
|
|
|
|
||||
Financial Services |
|
114.4 |
|
129.4 |
|
.5 |
|
.8 |
||||
Other |
|
(.9) |
|
(2.7) |
|
|
|
|
||||
Total |
|
113.5 |
|
126.7 |
|
.5 |
|
.8 |
||||
Net Income |
|
193.2 |
|
253.8 |
|
114.4 |
|
129.4 |
||||
Less: Net loss attributable to noncontrolling interests |
|
(.6) |
|
(.6) |
|
|
|
|
||||
Net Income Attributable to Deere & Company |
|
$ |
193.8 |
|
$ |
254.4 |
|
$ |
114.4 |
|
$ |
129.4 |
* Deere & Company with Financial Services on the equity basis.
The supplemental consolidating data is presented for informational purposes. Transactions between the Equipment Operations and Financial Services have been eliminated to arrive at the consolidated financial statements.
SUPPLEMENTAL CONSOLIDATING DATA (Continued)
CONDENSED BALANCE SHEET
(In millions of dollars) Unaudited |
|
EQUIPMENT OPERATIONS* |
|
FINANCIAL SERVICES |
||||||||||||||
|
|
January 29 |
|
October 30 |
|
January 31 |
|
January 29 |
|
October 30 |
|
January 31 |
||||||
|
|
2017 |
|
2016 |
|
2016 |
|
2017 |
|
2016 |
|
2016 |
||||||
Assets |
|
|
|
|
|
|
|
|
|
|
|
|
||||||
Cash and cash equivalents |
|
$ |
2,667.9 |
|
$ |
3,140.5 |
|
$ |
2,308.2 |
|
$ |
1,222.1 |
|
$ |
1,195.3 |
|
$ |
1,151.7 |
Marketable securities |
|
29.1 |
|
34.2 |
|
76.3 |
|
416.4 |
|
419.3 |
|
400.0 |
||||||
Receivables from unconsolidated subsidiaries and affiliates |
|
2,855.8 |
|
3,150.1 |
|
1,417.9 |
|
|
|
|
|
|
||||||
Trade accounts and notes receivable - net |
|
537.4 |
|
654.2 |
|
417.6 |
|
3,787.5 |
|
3,370.5 |
|
4,032.8 |
||||||
Financing receivables - net |
|
.7 |
|
.4 |
|
.9 |
|
23,030.2 |
|
23,701.9 |
|
23,629.5 |
||||||
Financing receivables securitized - net |
|
|
|
|
|
|
|
4,250.4 |
|
5,126.5 |
|
4,003.2 |
||||||
Other receivables |
|
773.1 |
|
855.4 |
|
1,005.8 |
|
116.2 |
|
164.0 |
|
105.0 |
||||||
Equipment on operating leases - net |
|
|
|
|
|
|
|
5,825.3 |
|
5,901.5 |
|
5,074.4 |
||||||
Inventories |
|
3,959.6 |
|
3,340.5 |
|
4,249.5 |
|
|
|
|
|
|
||||||
Property and equipment - net |
|
4,979.3 |
|
5,118.5 |
|
4,985.3 |
|
51.1 |
|
52.1 |
|
53.9 |
||||||
Investments in unconsolidated subsidiaries and affiliates |
|
4,658.6 |
|
4,697.0 |
|
4,621.2 |
|
12.2 |
|
11.9 |
|
11.3 |
||||||
Goodwill |
|
809.2 |
|
815.7 |
|
718.7 |
|
|
|
|
|
|
||||||
Other intangible assets - net |
|
95.5 |
|
104.1 |
|
59.6 |
|
|
|
|
|
|
||||||
Retirement benefits |
|
133.7 |
|
93.6 |
|
249.3 |
|
19.8 |
|
20.5 |
|
24.0 |
||||||
Deferred income taxes |
|
3,573.0 |
|
3,556.0 |
|
3,018.5 |
|
72.1 |
|
75.5 |
|
67.4 |
||||||
Other assets |
|
847.0 |
|
834.9 |
|
855.2 |
|
654.5 |
|
798.1 |
|
814.9 |
||||||
Total Assets |
|
$ |
25,919.9 |
|
$ |
26,395.1 |
|
$ |
23,984.0 |
|
$ |
39,457.8 |
|
$ |
40,837.1 |
|
$ |
39,368.1 |
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||
Liabilities and Stockholders Equity |
|
|
|
|
|
|
|
|
|
|
|
|
||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||
Liabilities |
|
|
|
|
|
|
|
|
|
|
|
|
||||||
Short-term borrowings |
|
$ |
269.7 |
|
$ |
249.0 |
|
$ |
249.0 |
|
$ |
7,171.9 |
|
$ |
6,661.7 |
|
$ |
7,575.7 |
Short-term securitization borrowings |
|
|
|
|
|
|
|
4,220.2 |
|
4,997.8 |
|
3,874.9 |
||||||
Payables to unconsolidated subsidiaries and affiliates |
|
94.7 |
|
81.5 |
|
79.6 |
|
2,826.9 |
|
3,133.6 |
|
1,395.0 |
||||||
Accounts payable and accrued expenses |
|
5,885.0 |
|
6,661.2 |
|
5,775.9 |
|
1,552.4 |
|
1,595.2 |
|
1,483.7 |
||||||
Deferred income taxes |
|
87.4 |
|
87.3 |
|
78.2 |
|
763.2 |
|
745.9 |
|
640.7 |
||||||
Long-term borrowings |
|
4,533.8 |
|
4,565.3 |
|
4,496.4 |
|
18,382.8 |
|
19,137.7 |
|
19,978.0 |
||||||
Retirement benefits and other liabilities |
|
8,199.6 |
|
8,206.0 |
|
6,701.1 |
|
90.6 |
|
89.0 |
|
87.1 |
||||||
Total liabilities |
|
19,070.2 |
|
19,850.3 |
|
17,380.2 |
|
35,008.0 |
|
36,360.9 |
|
35,035.1 |
||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||
Redeemable noncontrolling interest |
|
14.0 |
|
14.0 |
|
|
|
|
|
|
|
|
||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||
Stockholders Equity |
|
|
|
|
|
|
|
|
|
|
|
|
||||||
Total Deere & Company stockholders equity |
|
6,825.5 |
|
6,520.0 |
|
6,590.2 |
|
4,449.8 |
|
4,476.2 |
|
4,333.0 |
||||||
Noncontrolling interests |
|
10.2 |
|
10.8 |
|
13.6 |
|
|
|
|
|
|
||||||
Total stockholders equity |
|
6,835.7 |
|
6,530.8 |
|
6,603.8 |
|
4,449.8 |
|
4,476.2 |
|
4,333.0 |
||||||
Total Liabilities and Stockholders Equity |
|
$ |
25,919.9 |
|
$ |
26,395.1 |
|
$ |
23,984.0 |
|
$ |
39,457.8 |
|
$ |
40,837.1 |
|
$ |
39,368.1 |
* 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 Three Months Ended January 29, 2017 and January 31, 2016
(In millions of dollars) Unaudited |
|
EQUIPMENT OPERATIONS* |
|
FINANCIAL SERVICES |
||||||||
|
|
2017 |
|
2016 |
|
2017 |
|
2016 |
||||
Cash Flows from Operating Activities |
|
|
|
|
|
|
|
|
||||
Net income |
|
$ |
193.2 |
|
$ |
253.8 |
|
$ |
114.4 |
|
$ |
129.4 |
Adjustments to reconcile net income to net cash provided by (used for) operating activities: |
|
|
|
|
|
|
|
|
||||
Provision (credit) for credit losses |
|
(.2) |
|
2.0 |
|
6.7 |
|
7.4 |
||||
Provision for depreciation and amortization |
|
212.3 |
|
203.7 |
|
233.3 |
|
194.2 |
||||
Impairment charges |
|
|
|
|
|
|
|
12.6 |
||||
Undistributed earnings of unconsolidated subsidiaries and affiliates |
|
25.1 |
|
147.9 |
|
(.5) |
|
(.8) |
||||
Provision (credit) for deferred income taxes |
|
(16.7) |
|
65.6 |
|
22.7 |
|
174.8 |
||||
Changes in assets and liabilities: |
|
|
|
|
|
|
|
|
||||
Trade receivables |
|
102.1 |
|
41.6 |
|
|
|
|
||||
Inventories |
|
(624.6) |
|
(450.1) |
|
|
|
|
||||
Accounts payable and accrued expenses |
|
(618.5) |
|
(834.3) |
|
(23.9) |
|
21.2 |
||||
Accrued income taxes payable/receivable |
|
6.3 |
|
(231.6) |
|
9.2 |
|
(9.9) |
||||
Retirement benefits |
|
44.2 |
|
20.8 |
|
2.3 |
|
2.0 |
||||
Other |
|
(74.7) |
|
(46.8) |
|
60.5 |
|
4.7 |
||||
Net cash provided by (used for) operating activities |
|
(751.5) |
|
(827.4) |
|
424.7 |
|
535.6 |
||||
|
|
|
|
|
|
|
|
|
||||
Cash Flows from Investing Activities |
|
|
|
|
|
|
|
|
||||
Collections of receivables (excluding trade and wholesale) |
|
|
|
|
|
5,132.5 |
|
4,925.3 |
||||
Proceeds from maturities and sales of marketable securities |
|
6.2 |
|
2.4 |
|
17.5 |
|
16.3 |
||||
Proceeds from sales of equipment on operating leases |
|
|
|
|
|
368.2 |
|
290.8 |
||||
Proceeds from sales of businesses and unconsolidated affiliates, net of cash sold |
|
113.9 |
|
|
|
|
|
|
||||
Cost of receivables acquired (excluding trade and wholesale) |
|
|
|
|
|
(3,864.2) |
|
(3,496.0) |
||||
Purchases of marketable securities |
|
|
|
(46.0) |
|
(21.7) |
|
(25.7) |
||||
Purchases of property and equipment |
|
(154.9) |
|
(139.5) |
|
(.3) |
|
(.5) |
||||
Cost of equipment on operating leases acquired |
|
|
|
|
|
(542.8) |
|
(726.1) |
||||
Increase in trade and wholesale receivables |
|
|
|
|
|
(213.5) |
|
(163.1) |
||||
Other |
|
(5.7) |
|
(40.2) |
|
(6.4) |
|
31.3 |
||||
Net cash provided by (used for) investing activities |
|
(40.5) |
|
(223.3) |
|
869.3 |
|
852.3 |
||||
|
|
|
|
|
|
|
|
|
||||
Cash Flows from Financing Activities |
|
|
|
|
|
|
|
|
||||
Decrease in total short-term borrowings |
|
(14.5) |
|
(216.3) |
|
(1,050.4) |
|
(858.6) |
||||
Change in intercompany receivables/payables |
|
316.9 |
|
935.2 |
|
(316.9) |
|
(935.2) |
||||
Proceeds from long-term borrowings |
|
19.2 |
|
79.5 |
|
1,276.6 |
|
1,752.5 |
||||
Payments of long-term borrowings |
|
(18.3) |
|
(.1) |
|
(1,030.6) |
|
(1,181.2) |
||||
Proceeds from issuance of common stock |
|
263.3 |
|
2.7 |
|
|
|
|
||||
Repurchases of common stock |
|
(6.2) |
|
(107.8) |
|
|
|
|
||||
Dividends paid |
|
(188.9) |
|
(193.1) |
|
(140.0) |
|
(277.1) |
||||
Excess tax benefits from share-based compensation |
|
5.7 |
|
1.0 |
|
|
|
|
||||
Other |
|
(19.1) |
|
(13.7) |
|
(5.3) |
|
6.1 |
||||
Net cash provided by (used for) financing activities |
|
358.1 |
|
487.4 |
|
(1,266.6) |
|
(1,493.5) |
||||
|
|
|
|
|
|
|
|
|
||||
Effect of Exchange Rate Changes on Cash and Cash Equivalents |
|
(38.7) |
|
(28.5) |
|
(.6) |
|
(4.9) |
||||
|
|
|
|
|
|
|
|
|
||||
Net Increase (Decrease) in Cash and Cash Equivalents |
|
(472.6) |
|
(591.8) |
|
26.8 |
|
(110.5) |
||||
Cash and Cash Equivalents at Beginning of Period |
|
3,140.5 |
|
2,900.0 |
|
1,195.3 |
|
1,262.2 |
||||
Cash and Cash Equivalents at End of Period |
|
$ |
2,667.9 |
|
$ |
2,308.2 |
|
$ |
1,222.1 |
|
$ |
1,151.7 |
* Deere & Company with Financial Services on the equity basis.
The supplemental consolidating data is presented for informational purposes. Transactions between the Equipment Operations and Financial Services have been eliminated to arrive at the consolidated financial statements.
|
Deere & Company |
|
|
Other Financial Information |
(Furnished herewith) |
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For the Three Months Ended |
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Equipment Operations |
Agriculture and Turf |
Construction and Forestry |
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January 29 |
January 31 |
January 29 |
January 31 |
January 29 |
January 31 |
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Dollars in millions |
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2017 |
2016 |
2017 |
2016 |
2017 |
2016 |
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Net Sales |
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$ |
4,698 |
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$ |
4,769 |
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$ |
3,598 |
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$ |
3,600 |
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$ |
1,100 |
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$ |
1,169 |
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Average Identifiable Assets |
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With Inventories at LIFO |
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$ |
11,596 |
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$ |
11,800 |
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$ |
8,591 |
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$ |
8,615 |
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$ |
3,005 |
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$ |
3,185 |
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With Inventories at Standard Cost |
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$ |
12,870 |
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$ |
13,062 |
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$ |
9,627 |
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$ |
9,651 |
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$ |
3,243 |
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$ |
3,411 |
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Operating Profit |
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$ |
247 |
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$ |
214 |
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$ |
213 |
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$ |
144 |
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$ |
34 |
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$ |
70 |
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Percent of Net Sales |
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5.3 |
% |
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4.5 |
% |
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5.9 |
% |
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4.0 |
% |
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3.1 |
% |
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6.0 |
% |
Operating Return on Assets |
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With Inventories at LIFO |
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2.1 |
% |
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1.8 |
% |
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2.5 |
% |
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1.7 |
% |
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1.1 |
% |
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2.2 |
% |
With Inventories at Standard Cost |
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1.9 |
% |
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1.6 |
% |
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2.2 |
% |
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1.5 |
% |
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1.0 |
% |
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2.1 |
% |
SVA Cost of Assets |
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$ |
(386 |
) |
$ |
(392 |
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$ |
(289 |
) |
$ |
(289 |
) |
$ |
(97 |
) |
$ |
(103 |
) |
SVA |
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$ |
(139 |
) |
$ |
(178 |
) |
$ |
(76 |
) |
$ |
(145 |
) |
$ |
(63 |
) |
$ |
(33 |
) |
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For the Three Months Ended |
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Financial Services |
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January 29 |
January 31 |
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Dollars in millions |
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2017 |
2016 |
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Net Income Attributable to Deere & Company |
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$ |
114 |
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$ |
129 |
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Average Equity |
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$ |
4,442 |
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$ |
4,455 |
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Return on Equity |
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2.6 |
% |
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2.9 |
% |
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Operating Profit |
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$ |
169 |
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$ |
194 |
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Average Equity |
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$ |
4,442 |
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$ |
4,455 |
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Cost of Equity |
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$ |
(164 |
) |
$ |
(166 |
) |
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SVA |
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$ |
5 |
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$ |
28 |
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The Company evaluates its business results based on 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 based on 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 segments 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 Companys investment in the asset. The Financial Services segment is assessed an annual pretax cost of approximately 15 percent of the segments 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. |
Safe Harbor Statement & Disclosures The earnings call and accompanying material include forward-looking comments and information concerning the companys plans and projections for the future, including estimates and assumptions with respect to economic, political, technological, weather, market acceptance and other factors that impact our businesses and customers. They also may include financial measures that are not in conformance with accounting principles generally accepted in the United States of America (GAAP). Words such as forecast, projection, outlook, prospects, expected, estimated, will, plan, anticipate, intend, believe, or other similar words or phrases often identify forward-looking statements. Actual results may differ materially from those projected in these forward-looking statements based on a number of factors and uncertainties. Additional information concerning factors that could cause actual results to differ materially is contained in the companys most recent Form 8-K and periodic report filed with the U.S. Securities and Exchange Commission, and is incorporated by reference herein. Investors should refer to and consider the incorporated information on risks and uncertainties in addition to the information presented here. Investors should consider non-GAAP financial measures in addition to, and not as a substitute for, financial measures prepared in accordance with GAAP. The company, except as required by law, undertakes no obligation to update or revise its forward-looking statements whether as a result of new developments or otherwise. The call and accompanying materials are not an offer to sell or a solicitation of offers to buy any of the companys securities. 22
1Q 2017 Overview ($ millions except where noted) 1Q 2017 1Q 2017 vs. 1Q 2016 Net Sales & Revenues $5,625 2% Net Sales (equipment operations) $4,698 1% Net Income (attributable to Deere & Company) $194 24% Diluted EPS ($ per share) $0.61 24% 23
1Q 2017 Overview Equipment Operations 1Q 2017 vs. 1Q 2016 Net Sales 1% Price realization Currency translation 2 points 1 point 24
Worldwide Agriculture & Turf 1Q 2017 Overview ($ millions) 1Q 2017 1Q 2017 vs. 1Q 2016 Net Sales $3,598 Flat Operating Profit* $213 48% *1Q 2017 operating profit impacted by: + Gain on sale of partial interest in SiteOne Landscape Supply, Inc. + Price realization Voluntary employee-separation program expenses Warranty costs Foreign-currency exchange 25
U.S. Farm Cash Receipts Source: 20012015: USDA, 7 February 2017 2016F2017F: Deere & Company forecast as of 17 February 2017 26 $0 $100 $200 $300 $400 $500 2001 2003 2005 2007 2009 2011 2013 2015 2017F $ Billions Crops Livestock Government Payments
Global Stocks-to-Use Ratios Source: USDA, 9 February 2017 Cotton Wheat Corn Soybeans 27 0% 20% 40% 60% 80% 100% 120% 0% 10% 20% 30% 40% 50% 60% 1995 1998 2001 2004 2007 2010 2013 2016P Cotton Ratios
Economic Update EU 28 * Includes wheat, barley, corn, sunflower seed, rapeseed, soybean, sugar beet, cotton, rice Source: IHS Global Insight, February 2017 Source: EU Com, LTO, IFCN, January 2017 Deere & Company forecast as of 17 February 2017 28 $0 $30 $60 $90 $120 $150 2008 2011 2014 2017F US$ Billions Crop Value of Production* 120 180 240 300 360 420 220 270 320 370 420 470 2008 2011 2014 2017F Beef meat and Pork meat - per 100 kg Milk - per MT Dairy, Beef and Pork Prices Milk Milk 10yr avg Beef meat Beef meat 10yr avg Pork meat Pork meat 10yr avg
Economic Update Brazil * Includes key grains, ethanol, sugar Source: IHS Global Insight, February 2017 Rate change effective July 2016 10.5% 8.5% Note: PSI-FINAME was key credit line for machinery acquisition 20112014; Moderfrota is currently the most attractive credit line Source: ABIMAQ (Brazilian Association of Machinery & Equipment) and BNDES Eligible Finance Rates for Agriculture Equipment 29 $0 $30 $60 $90 $120 $150 2008 2011 2014 2017F US$ Billions Crop Value of Production* Farmers with Annual Revenues >R$90M Farmers with Annual Revenues <R$90M 2011 2012 2013 2014 2015 2016 All Farmers 12% 10% 8% 6% 4% 2% 0%
Agriculture & Turf Retail Sales Industry Outlook Fiscal 2017 Forecast Previous Forecast U.S. and Canada Ag 5-10% 5-10% EU 28 Ag ~ 5% ~ 5% South America Ag (tractors and combines) 15-20% ~ 15% Asia Ag Flat to up slightly Flat to up slightly U.S. and Canada Turf and Utility ~ Flat ~ Flat Source: Deere & Company forecast as of 17 February 2017 (previous forecast as of 23 November 2016) 30
Worldwide Agriculture & Turf Deere & Company Outlook Fiscal 2017 Forecast Previous Forecast Net Sales ~ 3% ~ 1% Currency translation ~ Flat ~ 1 point Source: Deere & Company forecast as of 17 February 2017 (previous forecast as of 23 November 2016) 31
Worldwide Construction & Forestry 1Q 2017 Overview ($ millions) 1Q 2017 1Q 2017 vs. 1Q 2016 Net Sales $1,100 6% Operating Profit* $34 51% *1Q 2017 operating profit impacted by: Sales-incentive expenses Voluntary employee-separation program expenses 32
Worldwide Construction & Forestry U.S. Economic Indicators (annual percentage rate* except where noted) Fiscal 2017 Forecast Previous Forecast GDP Growth 2.2% 2.0% Housing Starts (thousands) 1,220 1,197 Total Construction Investment 2.5% 1.9% Government Construction Investment 1.4% 2.6% * Change from prior year in real dollars Source: IHS Global Insight, Calendar Year Estimates January 2017 (previous forecast as of October 2016) 33
Worldwide Construction & Forestry Deere & Company Outlook Fiscal 2017 Forecast Previous Forecast Net Sales ~ 7% ~ 1% Currency translation ~ Flat ~ 1 point Source: Deere & Company forecast as of 17 February 2017 (previous forecast as of 23 November 2016) 34
Worldwide Financial Services Credit Loss History Provision for Credit Losses / Average Owned Portfolio 0.29% 15 Year Average Source: Deere & Company forecast as of 17 February 2017 35 0.0% 0.5% 1.0% 1.5% 2.0% 1991 1993 1995 1997 1999 2001 2003 2005 2007 2009 2011 2013 2015 2017F 10 Year Average
Worldwide Financial Services ($ millions) 1Q 2017 Fiscal 2017 Forecast Previous Forecast Net Income (attributable to Deere & Company) $114 ~ $480 ~ $480 Source: Deere & Company forecast as of 17 February 2017 (previous forecast as of 23 November 2016) 36
Consolidated Trade Receivables & Inventory ($ millions) 1Q 2017* Fiscal 2017 Forecast** Previous Forecast** Agriculture & Turf $307 ~ $125 ~ $125 Construction & Forestry $154 ~ $75 ~ $125 Total (as reported) $461 ~ $200 ~ $250 Total (constant exchange) $567 ~ $200 ~ $300 * Change at 29 January 2017 vs. 31 January 2016 ** Forecasted change at 29 October 2017 vs. 30 October 2016 Note: Before the sale of receivables to John Deere Financial Source: Deere & Company forecast as of 17 February 2017 (previous forecast as of 23 November 2016) 37
1Q 2017 Fiscal 2017 Forecast Previous Forecast COS (percent of Net Sales) 80.8% ~ 78% ~ 78% Cost of Sales Equipment Operations Source: Deere & Company forecast as of 17 February 2017 (previous forecast as of 23 November 2016) 38
1Q 2017 vs. 1Q 2016 Fiscal 2017 Forecast Previous Forecast R&D Expense 3% ~ 2% ~ 3% Research & Development Expense Equipment Operations Source: Deere & Company forecast as of 17 February 2017 (previous forecast as of 23 November 2016) 39
Selling, Administrative & General Expense Equipment Operations 1Q 2017 vs. 1Q 2016 Fiscal 2017 Forecast Previous Forecast SA&G Expense 12% ~ 5% ~ 1% Voluntary separation program Commissions paid to dealers Currency translation Pension/OPEB Incentive compensation 9 points 2 points 1 point 1 point 1 point ~ 2 points ~ 1 point ~ Flat ~ Flat ~ Flat ~ 2 points ~ Flat ~ 1 point ~ Flat ~ 1 point Source: Deere & Company forecast as of 17 February 2017 (previous forecast as of 23 November 2016) 40
1Q 2017 Fiscal 2017 Forecast Previous Forecast Effective Tax Rate 50% 33-35% 33-35% Income Taxes Equipment Operations Source: Deere & Company forecast as of 17 February 2017 (previous forecast as of 23 November 2016) 41
Net Operating Cash Flows Equipment Operations * Previous forecast ~ $2.5 billion Source: Deere & Company forecast as of 17 February 2017 (previous forecast as of 23 November 2016) Fiscal 2017 Forecast* ~ $2.6 billion 42 $0 $1,000 $2,000 $3,000 $4,000 $5,000 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017F $ Millions
Deere & Company Outlook Fiscal 2017 Forecast ($ billions except where noted) 2Q 2017 Forecast Fiscal 2017 Forecast Previous Forecast Net Sales (equipment operations) ~ 1% ~ 4% ~ 1% Price realization Currency translation ~ 2 points ~ Flat ~ 1 point ~ Flat ~ 1 point ~ 1 point Net Income (attributable to Deere & Company) ~ $1.5 ~ $1.4 Source: Deere & Company forecast as of 17 February 2017 (previous forecast as of 23 November 2016) 43
Appendix 44
45
Manage the balance sheet, including liquidity, to support a rating that provides access to low-cost and readily available short- and long-term funding mechanisms Reflects the strategic nature of our financial services operation Committed to A Rating Cash from Operations Fund Operating and Growth Needs Common Stock Dividend Share Repurchase Fund value-creating investments in our businesses Consistently and moderately raise dividend targeting a 25%-35% payout ratio of mid-cycle earnings Consider share repurchase as a means to deploy excess cash to shareholders, once above requirements are met and repurchase is viewed as value-enhancing Deere Use-of-Cash Priorities 46
Sources and Uses of Cash Fiscal 2004-2016 Equipment Operations $ Millions ~ 62% of cash from operations returned to shareholders * Other includes proceeds from maturities and sales of marketable securities and purchases of marketable securities and reconciliation for non-cash items including excess tax benefits from share-based compensation and the effect of exchange rates on cash and cash equivalents Source: Deere & Company SEC filings = Source of Cash = Use of Cash 47 $4,287 $3,141 $34,488 $835 $10,060 $1,325 $3,102 $7,084 $14,427 $473 $0 $10,000 $20,000 $30,000 $40,000 $50,000 Beginning Cash & Cash Equivalents (Fiscal 2004) Cash From Operations Divestitures, net of Acquisitions Capital Expenditures Investment in Financial Services Net Change in Debt and Intercompany Balances Dividends Share Repurchase, net of Common Stock Issuances Other* Ending Cash & Cash Equivalents (Fiscal 2016)
Deere Quarterly Dividends Declared 1Q 2004 1Q 2017 * Adjusted for 2 for 1 stock split on 26 November 2007 Dividend raised 114% since 2010 48 $0.11 $0.28 $0.60 $0.00 $0.10 $0.20 $0.30 $0.40 $0.50 $0.60 $0.70 2004 2005 2006 2007* 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017
Share Repurchase As Part of Publicly Announced Plans * All shares adjusted for two-for-one stock split effective 26 November 2007 20041Q 2017: Cumulative cost of repurchases $16.4 billion Shares repurchased 245.0 million Average repurchase price $66.96 December 2013 authorization of $8 billion: Amount remaining $3.3 billion 29 January 2017 period ended basic shares 318.3 million 1Q 2017 average diluted shares 319.8 million Share Repurchase 36% net share reduction since 2004 49 $0.0 $0.5 $1.0 $1.5 $2.0 $2.5 $3.0 0 10 20 30 40 2005 2007 2009 2011 2013 2015 2017 YTD $ Billions Millions of Shares* Shares Repurchased Amount Spent
Pension and OPEB Expense ($ millions) 1Q 2017 Fiscal 2017 Forecast Previous Forecast Pension and OPEB Expense $2 ~ $35 ~ $30 Source: Deere & Company forecast as of 17 February 2017 (previous forecast as of 23 November 2016) 50
($ millions) Fiscal 2017 Forecast Previous Forecast Capital Expenditures ~ $600 ~ $600 Depreciation and Amortization ~ $850 ~ $850 Pension/OPEB Contributions ~ $100 ~ $100 Other Information Equipment Operations Source: Deere & Company forecast as of 17 February 2017 (previous forecast as of 23 November 2016) 51
Economic Update Other Selected Markets * Includes corn, wheat, rice, barley, sorghum, oilseeds, peanut, sugar, cotton Source: IHS Global Insight, February 2017 52 $0 $75 $150 $225 $300 2008 2011 2014 2017F US$ Billions China - Crop Value of Production* $0 $75 $150 $225 $300 2008 2011 2014 2017F US$ Billions India - Crop Value of Production*
($ per bushel except where noted) 2015/16 Estimate 2016/17 Projection Previous 2016/17 Corn $3.61 $3.40 $3.30 Soybeans $8.95 $9.50 $9.20 Wheat $4.89 $3.85 $3.70 Cotton ($ per pound) $0.61 $0.69 $0.67 U.S. Farm Commodity Prices Source: Deere & Company forecast as of 17 February 2017 (previous forecast as of 23 November 2016) 53
Source: USDA, 9 February 2017 U.S. Farm Commodity Prices 54 $0.00 $0.20 $0.40 $0.60 $0.80 $1.00 $0 $4 $8 $12 $16 $20 2004 2006 2008 2010 2012 2014 2016 Cotton - $ per Pound $ per Bushel Cotton Wheat Corn Soybeans
(millions) 2015/16 Estimate 2016/17 Projection Corn 88.0 94.0 Soybeans 82.7 83.4 Wheat 55.0 50.2 Cotton 8.6 10.1 Source: Deere & Company forecast as of 17 February 2017 U.S. Acres Planted 55
(bushels per acre except where noted) 2015/16 Estimate 2016/17 Projection Corn 168.4 174.6 Soybeans 48.0 52.1 Wheat 43.6 52.6 Cotton (pounds per acre) 766 855 Source: Deere & Company forecast as of 17 February 2017 U.S. Crop Yields 56
U.S. Farm Cash Receipts ($ billions) 2015 2016 Forecast 2017 Forecast Previous 2017 Crops $185.7 $187.7 $186.7 $186.2 Livestock $189.8 $168.2 $168.2 $168.4 Government Payments $10.8 $13.0 $12.5 $12.5 Total Cash Receipts $386.3 $368.9 $367.4 $367.1 Source: 2015: USDA, 7 February 2017 2016F2017F: Deere & Company forecast as of 17 February 2017 (previous forecast as of 23 November 2016) 57
U.S. Net Farm Cash Income ($ billions) 2015 2016 Forecast 2017 Forecast Previous 2017 Total Cash Receipts $386.3 $368.9 $367.4 $367.1 Other Farm-Related Income $34.3 $30.6 $34.4 $34.3 Gross Cash Income $420.6 $399.5 $401.8 $401.4 Cash Expenses ($315.9) ($307.6) ($308.3) ($299.0) Net Cash Income $104.7 $91.9 $93.5 $102.4 Source: 2015: USDA, 7 February 2017 2016F2017F: Deere & Company forecast as of 17 February 2017 (previous forecast as of 23 November 2016) 58
U.S. Farm Balance Sheet Source: 19732015: USDA, 7 February 2017 2016F2017F: Deere & Company forecast as of 17 February 2017 59 10% 15% 20% 25% 30% $0 $500 $1,000 $1,500 $2,000 $2,500 $3,000 $3,500 1973 1977 1981 1985 1989 1993 1997 2001 2005 2009 2013 2017F $ Billions Farm Debt Farm Equity Debt to Equity Ratio (%) Debt to Asset Ratio (%)
January 2017 Retail Sales and Dealer Inventories Retail Sales U.S. and Canada Ag Industry* Deere** 2WD Tractors (< 40 PTO hp) 15% Single digit 2WD Tractors (40 < 100 PTO hp) 9% More than the industry 2WD Tractors (100+ PTO hp) 30% More than the industry 4WD Tractors 40% More than the industry Combines 36% In line with the industry Deere Dealer Inventories*** U.S. and Canada Ag 2017 2016 2WD Tractors (100+ PTO hp) 38% 29% Combines 14% 10% * As reported by the Association of Equipment Manufacturers ** As reported to the Association of Equipment Manufacturers *** In units as a % of trailing 12 months retail sales, as reported to the Association of Equipment Manufacturers 60
Retail Sales U.S. and Canada Deere* Selected Turf & Utility Equipment Single digit Construction & Forestry First-in-the-Dirt Settlements Double digits Double digits January 2017 Retail Sales Retail Sales EU 28 Ag Deere* Tractors Double digits Combines Flat * Based on internal sales reports 61
Deere & Companys 2Q 2017 earnings call is scheduled for 9:00 a.m. central time on Friday, 19 May 2017 62