UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
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FORM 8-K |
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CURRENT REPORT
Pursuant to Section 13 OR 15(d) of The Securities Exchange Act of 1934
Date of Report: November 27, 2019
(Date of earliest event reported)
DEERE & COMPANY
(Exact name of registrant as specified in its charter)
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Delaware |
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1-4121 |
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36-2382580 |
(State or other jurisdiction of incorporation) |
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(Commission File Number) |
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(IRS Employer Identification No.) |
One John Deere Place
Moline, Illinois 61265
(Address of principal executive offices and zip code)
(309) 765-8000
(Registrant’s 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:
☐ Written communications pursuant to Rule 425 under the Securities Act (17 CFR 230.425)
☐ Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17 CFR 240.14a-12)
☐ Pre-commencement communications pursuant to Rule 14d-2(b) under the Exchange Act (17 CFR 240.14d-2(b))
☐ Pre-commencement communications pursuant to Rule 13e-4(c) under the Exchange Act (17 CFR 240.13e-4(c))
SECURITIES REGISTERED PURSUANT TO SECTION 12(b) OF THE ACT:
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Title of each class |
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Trading symbol |
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Name of each exchange on which registered |
Common stock, $1 par value |
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DE |
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New York Stock Exchange |
8½% Debentures Due 2022 |
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DE22 |
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New York Stock Exchange |
6.55% Debentures Due 2028 |
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DE28 |
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New York Stock Exchange |
Indicate by check mark whether the registrant is an emerging growth company as defined in Rule 405 of the Securities Act of 1933 (§230.405 of this chapter) or Rule 12b-2 of the Securities Exchange Act of 1934 (§240.12b-2 of this chapter).
Emerging growth company ☐
If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐
Items 2.02
and 8.01 Results of Operations and Financial Condition and Other Events.
The attached Deere & Company press release dated November 27, 2019 concerning Fourth Quarter of Fiscal 2019 financial results and supplemental financial information is filed as Exhibit 99.1 to this report and incorporated by reference herein.
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 Fourth Quarter 2019 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.
Item 9.01Financial Statements and Exhibits.
(d) |
Exhibits |
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Exhibit Index
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Number and Description of Exhibit |
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(99.1) |
Press Release and Supplemental Financial Information (Filed herewith) |
(99.2) |
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(99.3) |
Fourth Quarter 2019 Earnings Conference Call Information (Furnished herewith) |
(104) |
Cover Page Interactive Data File (the cover page XBRL tags are embedded in the Inline XBRL document) |
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Signature
Pursuant to the requirements of the Securities Exchange Act of 1934, the Registrant has duly caused this report to be signed on its behalf by the undersigned hereunto duly authorized.
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DEERE & COMPANY |
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By: |
/s/ Todd E. Davies |
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Todd E. Davies |
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Secretary |
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Dated: November 27, 2019 |
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4
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Exhibit 99.1 (Filed herewith) |
NEWS RELEASE
Ken Golden
Director, Global Public Relations
Deere & Company
309‑765‑5678
Deere Announces Net Income of $3.253 Billion for Year
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Net sales increase 4% for fourth quarter and 5% for full year. |
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Construction & Forestry reports higher sales and profit for year. |
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Full-year 2020 forecast calls for net income of $2.7 to $3.1 billion, reflecting uncertainties in our equipment operations. |
MOLINE, Illinois (November 27, 2019) — Deere & Company reported net income of $722 million for the fourth quarter ended November 3, 2019, or $2.27 per share, compared with net income of $785 million, or $2.42 per share, for the quarter ended October 28, 2018. For fiscal 2019, net income attributable to Deere & Company was $3.253 billion, or $10.15 per share, compared with $2.368 billion, or $7.24 per share, in 2018.
Worldwide net sales and revenues increased 5 percent in both the fourth quarter and full year of 2019 to $9.896 billion and $39.258 billion, for the respective periods. Net sales of the equipment operations were $8.703 billion for the quarter and $34.886 billion for the year, compared with respective totals of $8.343 billion and $33.351 billion in 2018.
“John Deere’s performance reflected continued uncertainties in the agricultural sector,” said John C. May, chief executive officer. “Lingering trade tensions coupled with a year of difficult growing and harvesting conditions have caused many farmers to become cautious about making major investments in new equipment. Additionally, financial services results have come under pressure due to operating-lease losses. At the same time, general economic conditions have remained favorable. This has supported demand for smaller equipment and led to solid results for Deere’s construction and forestry business, which had a record year for sales and operating profit.”
Company Outlook & Summary
Net income attributable to Deere & Company for fiscal 2020 is forecast to be in a range of $2.7 billion to $3.1 billion.
“Despite present challenges, the longer-term outlook for our businesses remains healthy and points to a promising future for Deere,” May said. “We are particularly encouraged by the adoption of precision technologies and believe we are well-positioned to be a leader in the delivery of smarter, more efficient and sustainable solutions to our customers. At the same time, we are committed to the successful execution of our strategic plan and have initiated a series of measures to create a leaner organizational structure that can operate with more speed and agility. We’re confident these steps will lead to improved efficiencies and help the company focus its resources and investments on areas that have the greatest impact on performance.”
5
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Deere & Company |
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Fourth Quarter |
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Full Year |
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$ in millions |
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2019 |
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2018 |
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% Change |
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2019 |
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2018 |
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% Change |
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Net sales and revenues |
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$ |
9,896 |
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$ |
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$ |
39,258 |
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$ |
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Net income |
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$ |
722 |
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$ |
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-8% |
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$ |
3,253 |
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$ |
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Fully diluted EPS |
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$ |
2.27 |
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$ |
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$ |
10.15 |
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$ |
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Net income – adjusted |
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$ |
681 |
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$ |
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-9% |
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$ |
3,185 |
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$ |
3,073 |
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Fully diluted EPS – adjusted |
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$ |
2.14 |
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$ |
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$ |
9.94 |
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$ |
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Net income in the fourth quarter and full-year 2019 was favorably affected by discrete adjustments to the provision for income taxes, including those related to U.S. tax reform legislation (tax reform). The adjustments related to tax reform were $41 million and $68 million for the respective periods. (Information on non-GAAP financial measures is included in the appendix.) Prior-year results were favorably affected by $37 million in the fourth quarter and unfavorably affected by $705 million for the twelve-month period due to discrete adjustments to the provision for income taxes related to tax reform.
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Equipment Operations |
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Fourth Quarter |
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Full Year |
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$ in millions |
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2019 |
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2018 |
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% Change |
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2019 |
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2018 |
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% Change |
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Net sales |
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$ |
8,703 |
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$ |
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$ |
34,886 |
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$ |
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Operating profit |
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$ |
788 |
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$ |
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-9% |
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$ |
3,721 |
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$ |
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Net income |
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$ |
631 |
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$ |
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$ |
2,698 |
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$ |
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Tax reform unfavorable (favorable)
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72 |
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1,045 |
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Net income – adjusted |
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$ |
590 |
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$ |
586 |
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$ |
2,633 |
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$ |
2,449 |
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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 while 2018 contained ten months of Wirtgen activity. The two additional months added about 1 percent to the company’s 2019 net sales. Net income in the fourth quarter and full year of 2019 was favorably affected by discrete adjustments to the provision for income taxes.
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Agriculture & Turf |
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Fourth Quarter |
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Full Year |
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$ in millions |
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2019 |
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2018 |
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% Change |
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2019 |
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2018 |
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% Change |
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Net sales |
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$ |
5,756 |
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$ |
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$ |
23,666 |
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$ |
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Operating profit |
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$ |
527 |
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$ |
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-7% |
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$ |
2,506 |
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$ |
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-11% |
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Operating margin |
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Agriculture & Turf sales increased for the quarter and full year of 2019 due to price realization and higher shipment volumes, partially offset by the unfavorable effects of currency translation. Operating profit decreased for the quarter and year. The quarter’s decline was primarily due to higher production costs, higher selling, administrative, and general expenses, the unfavorable effects of currency exchange and increased research and development expenses. For the year, operating profit decreased largely due to higher productions costs, the unfavorable effects of currency exchange, increased research and development costs, higher selling, administrative, and general expenses, and a less-favorable sales mix, partially offset by higher shipment volumes. Both periods were positively affected by price realization.
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Construction & Forestry |
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Fourth Quarter |
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Full Year |
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$ in millions |
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2019 |
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2018 |
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% Change |
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2019 |
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2018 |
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% Change |
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Net sales |
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$ |
2,947 |
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$ |
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$ |
11,220 |
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$ |
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Operating profit |
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$ |
261 |
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$ |
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-12% |
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$ |
1,215 |
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$ |
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Operating margin |
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Construction & Forestry sales were higher for the quarter and year primarily due to higher shipment volumes and price realization, partially offset by the unfavorable effects of currency translation. The inclusion of Wirtgen’s sales for two additional months in 2019 accounted for about 4 percent of the year’s net sales increase. Wirtgen’s operating profit was $67 million for the quarter and $343 million for the full year, compared with $79 million and $116 million for the corresponding periods of 2018. Excluding Wirtgen, the decline in Construction & Forestry results for the quarter was primarily due to higher production costs, increased selling, administrative, and general expenses, and a less-favorable sales mix, partially offset by higher shipment volumes and price realization. Full-year 2019 results, excluding Wirtgen, moved higher as a result of price realization and higher shipment volumes, partially offset by higher production costs and a less-favorable sales mix.
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Financial Services |
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Fourth Quarter |
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Full Year |
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$ in millions |
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2019 |
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2018 |
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% Change |
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2019 |
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2018 |
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% Change |
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Net income |
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$ |
90 |
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$ |
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-66% |
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$ |
539 |
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$ |
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-43% |
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Tax reform unfavorable (favorable)
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-99% |
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Net income – adjusted |
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$ |
90 |
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$ |
152 |
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-41% |
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$ |
536 |
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$ |
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-11% |
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Excluding tax-reform adjustments, the decrease in financial services net income for the quarter and full year of 2019 was mainly due to impairments and higher losses on operating-lease residual values and unfavorable financing spreads, partially offset by income earned on a higher average portfolio. The quarter also benefited from a lower provision for credit losses.
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Market Conditions and Outlook (annual) |
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Currency |
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Price |
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$ in millions |
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Net Sales |
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Translation |
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Realization |
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Agriculture & Turf |
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-5% to -10% |
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-1% |
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+2% |
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Construction & Forestry |
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-10% to -15% |
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-1% |
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+1% |
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John Deere Financial |
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Net Income |
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$600 |
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Market Conditions & Outlook
Agriculture & Turf. Deere’s worldwide sales of agriculture and turf equipment are forecast to decline 5 to 10 percent for fiscal-year 2020, including a negative currency-translation effect of 1 percent. Industry sales of agricultural equipment in the U.S. and Canada are forecast to be down about 5 percent, driven by lower demand for large equipment. Full-year industry sales in the EU28 member nations are forecast to be approximately flat as are South American industry sales of tractors and combines. Asian sales are forecast to be about the same as the prior year. Industry sales of turf and utility equipment in the U.S. and Canada are expected to be about flat.
Construction & Forestry. Deere’s worldwide sales of construction and forestry equipment are anticipated to be down 10 to 15 percent for 2020, with foreign-currency rates having an unfavorable translation effect of 1 percent. The outlook reflects slowing construction activity as well as the company’s efforts to manage dealer inventory levels. In forestry, global industry sales are expected to be in line with the previous year.
Financial Services. Fiscal-year 2020 net income attributable to Deere & Company for the financial services operations is expected to benefit from lower losses on lease residual values as well as income
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earned on a higher average portfolio. These items are forecast to be partially offset by a higher provision for credit losses, less-favorable financing spreads, and higher selling and administrative expenses.
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.
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Fourth Quarter |
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Full Year |
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$ in millions |
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2019 |
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2018 |
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% Change |
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2019 |
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2018 |
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% Change |
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Revenue |
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$ |
785 |
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$ |
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$ |
2,890 |
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$ |
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Net income |
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$ |
68 |
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$ |
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-57% |
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$ |
419 |
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$ |
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-48% |
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Ending portfolio balance |
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$ |
38,251 |
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$ |
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Net income for the current quarter and full year were lower than for the respective periods of 2018 due to impairments and higher losses on operating-lease residual values, prior-year favorable discrete adjustments to the provision for income taxes associated with tax reform, and unfavorable financing spreads. These factors were partially offset by income from a higher average portfolio.
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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 table below provides a reconciliation of the non-GAAP financial measure with the most directly comparable GAAP financial measure for the three months and twelve months ended November 3, 2019 and October 28, 2018.
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Three Months Ended |
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Twelve Months Ended |
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November 3, 2019 |
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November 3, 2019 |
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Net Income |
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Net Income |
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Attributable to |
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Diluted |
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Attributable to |
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Diluted |
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Deere & |
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Earnings |
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Deere & |
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Earnings |
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Company |
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Per Share |
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Company |
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Per Share |
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GAAP measure |
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$ |
722 |
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$ |
2.27 |
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$ |
3,253 |
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$ |
10.15 |
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Tax reform unfavorable (favorable)
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(41) |
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(.13) |
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(68) |
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(.21) |
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Non-GAAP measure |
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$ |
681 |
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$ |
2.14 |
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$ |
3,185 |
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$ |
9.94 |
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Three Months Ended |
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Twelve Months Ended |
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October 28, 2018 |
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October 28, 2018 |
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Net Income |
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Net Income |
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Attributable to |
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Diluted |
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Attributable to |
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Diluted |
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Deere & |
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Earnings |
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Deere & |
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Earnings |
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Company |
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Per Share |
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Company |
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Per Share |
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GAAP measure |
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$ |
785 |
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$ |
2.42 |
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$ |
2,368 |
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$ |
7.24 |
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Tax reform unfavorable (favorable) discrete adjustments |
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(37) |
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(.12) |
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705 |
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2.15 |
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Non-GAAP measure |
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$ |
748 |
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$ |
2.30 |
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$ |
3,073 |
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$ |
9.39 |
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9
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 (e.g., China), global trade agreements (e.g., the United States-Mexico-Canada 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 (including the availability of IBOR reference 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
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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
11
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).
12
Fourth Quarter 2019 Press Release
(in millions of dollars)
Unaudited
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three Months Ended |
|
Twelve Months Ended |
||||||||||||
|
|
November 3 |
|
October 28 |
|
% |
|
November 3 |
|
October 28 |
|
% |
||||
|
|
2019 |
|
2018 |
|
Change |
|
2019 |
|
2018 |
|
Change |
||||
Net sales and revenues: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Agriculture and turf |
|
$ |
5,756 |
|
$ |
|
|
+3 |
|
$ |
23,666 |
|
$ |
|
|
+2 |
Construction and forestry |
|
|
2,947 |
|
|
|
|
+8 |
|
|
11,220 |
|
|
|
|
+10 |
Total net sales |
|
|
8,703 |
|
|
|
|
+4 |
|
|
34,886 |
|
|
|
|
+5 |
Financial services |
|
|
971 |
|
|
|
|
+14 |
|
|
3,621 |
|
|
|
|
+11 |
Other revenues |
|
|
222 |
|
|
|
|
|
|
|
751 |
|
|
|
|
-1 |
Total net sales and revenues |
|
$ |
9,896 |
|
$ |
|
|
+5 |
|
$ |
39,258 |
|
$ |
|
|
+5 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Operating profit: * |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Agriculture and turf |
|
$ |
527 |
|
$ |
|
|
-7 |
|
$ |
2,506 |
|
$ |
|
|
-11 |
Construction and forestry |
|
|
261 |
|
|
|
|
-12 |
|
|
1,215 |
|
|
|
|
+40 |
Financial services |
|
|
128 |
|
|
|
|
-36 |
|
|
694 |
|
|
|
|
-12 |
Total operating profit |
|
|
916 |
|
|
|
|
-14 |
|
|
4,415 |
|
|
|
|
-1 |
Reconciling items ** |
|
|
|
|
|
|
|
+20 |
|
|
|
|
|
|
|
-19 |
Income taxes |
|
|
|
|
|
|
|
-49 |
|
|
|
|
|
|
|
-51 |
Net income attributable to Deere & Company |
|
$ |
722 |
|
$ |
|
|
-8 |
|
$ |
3,253 |
|
$ |
|
|
+37 |
* 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 November 3, 2019 and October 28, 2018
(In millions of dollars and shares except per share amounts) Unaudited
|
|
|
|
|
|
|
|
|
2019 |
|
2018 |
||
Net Sales and Revenues |
|
|
|
|
|
|
Net sales |
|
$ |
8,703 |
|
$ |
8,343 |
Finance and interest income |
|
|
956 |
|
|
844 |
Other income |
|
|
237 |
|
|
229 |
Total |
|
|
9,896 |
|
|
9,416 |
|
|
|
|
|
|
|
Costs and Expenses |
|
|
|
|
|
|
Cost of sales |
|
|
6,735 |
|
|
6,381 |
Research and development expenses |
|
|
488 |
|
|
470 |
Selling, administrative and general expenses |
|
|
945 |
|
|
899 |
Interest expense |
|
|
388 |
|
|
322 |
Other operating expenses |
|
|
515 |
|
|
365 |
Total |
|
|
9,071 |
|
|
8,437 |
|
|
|
|
|
|
|
Income of Consolidated Group before Income Taxes |
|
|
825 |
|
|
979 |
Provision for income taxes |
|
|
104 |
|
|
204 |
Income of Consolidated Group |
|
|
721 |
|
|
775 |
Equity in income of unconsolidated affiliates |
|
|
1 |
|
|
9 |
Net Income |
|
|
722 |
|
|
784 |
Less: Net loss attributable to noncontrolling interests |
|
|
|
|
|
(1) |
Net Income Attributable to Deere & Company |
|
$ |
722 |
|
$ |
785 |
|
|
|
|
|
|
|
Per Share Data |
|
|
|
|
|
|
Basic |
|
$ |
2.30 |
|
$ |
2.45 |
Diluted |
|
$ |
2.27 |
|
$ |
2.42 |
|
|
|
|
|
|
|
Average Shares Outstanding |
|
|
|
|
|
|
Basic |
|
|
313.9 |
|
|
320.3 |
Diluted |
|
|
317.9 |
|
|
324.7 |
See Condensed Notes to Consolidated Financial Statements.
14
DEERE & COMPANY
STATEMENT OF CONSOLIDATED INCOME
For the Years Ended November 3, 2019 and October 28, 2018
(In millions of dollars and shares except per share amounts) Unaudited
|
|
|
|
|
|
|
|
|
2019 |
|
2018 |
||
Net Sales and Revenues |
|
|
|
|
|
|
Net sales |
|
$ |
34,886 |
|
$ |
33,351 |
Finance and interest income |
|
|
3,493 |
|
|
3,107 |
Other income |
|
|
879 |
|
|
900 |
Total |
|
|
39,258 |
|
|
37,358 |
|
|
|
|
|
|
|
Costs and Expenses |
|
|
|
|
|
|
Cost of sales |
|
|
26,792 |
|
|
25,571 |
Research and development expenses |
|
|
1,783 |
|
|
1,658 |
Selling, administrative and general expenses |
|
|
3,551 |
|
|
3,455 |
Interest expense |
|
|
1,466 |
|
|
1,204 |
Other operating expenses |
|
|
1,578 |
|
|
1,399 |
Total |
|
|
35,170 |
|
|
33,287 |
|
|
|
|
|
|
|
Income of Consolidated Group before Income Taxes |
|
|
4,088 |
|
|
4,071 |
Provision for income taxes |
|
|
852 |
|
|
1,727 |
Income of Consolidated Group |
|
|
3,236 |
|
|
2,344 |
Equity in income of unconsolidated affiliates |
|
|
21 |
|
|
27 |
Net Income |
|
|
3,257 |
|
|
2,371 |
Less: Net income attributable to noncontrolling interests |
|
|
4 |
|
|
3 |
Net Income Attributable to Deere & Company |
|
$ |
3,253 |
|
$ |
2,368 |
|
|
|
|
|
|
|
Per Share Data |
|
|
|
|
|
|
Basic |
|
$ |
10.28 |
|
$ |
7.34 |
Diluted |
|
$ |
10.15 |
|
$ |
7.24 |
|
|
|
|
|
|
|
Average Shares Outstanding |
|
|
|
|
|
|
Basic |
|
|
316.5 |
|
|
322.6 |
Diluted |
|
|
320.6 |
|
|
327.3 |
See Condensed Notes to Consolidated Financial Statements.
15
DEERE & COMPANY
CONDENSED CONSOLIDATED BALANCE SHEET
As of November 3, 2019 and October 28, 2018
(In millions of dollars) Unaudited
|
|
|
|
|
|
|
|
|
2019 |
|
2018 |
||
Assets |
|
|
|
|
|
|
Cash and cash equivalents |
|
$ |
3,857 |
|
$ |
3,904 |
Marketable securities |
|
|
581 |
|
|
490 |
Receivables from unconsolidated affiliates |
|
|
46 |
|
|
22 |
Trade accounts and notes receivable - net |
|
|
5,230 |
|
|
5,004 |
Financing receivables - net |
|
|
29,195 |
|
|
27,054 |
Financing receivables securitized - net |
|
|
4,383 |
|
|
4,022 |
Other receivables |
|
|
1,487 |
|
|
1,736 |
Equipment on operating leases - net |
|
|
7,567 |
|
|
7,165 |
Inventories |
|
|
5,975 |
|
|
6,149 |
Property and equipment - net |
|
|
5,973 |
|
|
5,868 |
Investments in unconsolidated affiliates |
|
|
215 |
|
|
207 |
Goodwill |
|
|
2,917 |
|
|
3,101 |
Other intangible assets - net |
|
|
1,380 |
|
|
1,562 |
Retirement benefits |
|
|
840 |
|
|
1,298 |
Deferred income taxes |
|
|
1,466 |
|
|
808 |
Other assets |
|
|
1,899 |
|
|
1,718 |
Total Assets |
|
$ |
73,011 |
|
$ |
70,108 |
|
|
|
|
|
|
|
Liabilities and Stockholders’ Equity |
|
|
|
|
|
|
|
|
|
|
|
|
|
Liabilities |
|
|
|
|
|
|
Short-term borrowings |
|
$ |
10,784 |
|
$ |
11,062 |
Short-term securitization borrowings |
|
|
4,321 |
|
|
3,957 |
Payables to unconsolidated affiliates |
|
|
142 |
|
|
129 |
Accounts payable and accrued expenses |
|
|
9,656 |
|
|
10,111 |
Deferred income taxes |
|
|
495 |
|
|
556 |
Long-term borrowings |
|
|
30,229 |
|
|
27,237 |
Retirement benefits and other liabilities |
|
|
5,953 |
|
|
5,751 |
Total liabilities |
|
|
61,580 |
|
|
58,803 |
|
|
|
|
|
|
|
Redeemable noncontrolling interest |
|
|
14 |
|
|
14 |
|
|
|
|
|
|
|
Stockholders’ Equity |
|
|
|
|
|
|
Total Deere & Company stockholders’ equity |
|
|
11,413 |
|
|
11,288 |
Noncontrolling interests |
|
|
4 |
|
|
3 |
Total stockholders’ equity |
|
|
11,417 |
|
|
11,291 |
Total Liabilities and Stockholders’ Equity |
|
$ |
73,011 |
|
$ |
70,108 |
See Condensed Notes to Consolidated Financial Statements.
16
DEERE & COMPANY
STATEMENT OF CONSOLIDATED CASH FLOWS
For the Years Ended November 3, 2019 and October 28, 2018
(In millions of dollars) Unaudited
|
|
|
|
|
|
|
|
|
2019 |
|
2018 |
||
Cash Flows from Operating Activities |
|
|
|
|
|
|
Net income |
|
$ |
3,257 |
|
$ |
2,371 |
Adjustments to reconcile net income to net cash provided by operating activities: |
|
|
|
|
|
|
Provision for credit losses |
|
|
43 |
|
|
90 |
Provision for depreciation and amortization |
|
|
2,019 |
|
|
1,927 |
Impairment charges |
|
|
77 |
|
|
|
Share-based compensation expense |
|
|
82 |
|
|
84 |
(Gain) loss on sales of businesses and unconsolidated affiliates |
|
|
5 |
|
|
(25) |
Undistributed earnings of unconsolidated affiliates |
|
|
9 |
|
|
(26) |
Provision (credit) for deferred income taxes |
|
|
(465) |
|
|
1,480 |
Changes in assets and liabilities: |
|
|
|
|
|
|
Trade, notes, and financing receivables related to sales |
|
|
(869) |
|
|
(1,531) |
Inventories |
|
|
(780) |
|
|
(1,772) |
Accounts payable and accrued expenses |
|
|
46 |
|
|
722 |
Accrued income taxes payable/receivable |
|
|
173 |
|
|
(466) |
Retirement benefits |
|
|
(233) |
|
|
(1,026) |
Other |
|
|
48 |
|
|
(6) |
Net cash provided by operating activities |
|
|
3,412 |
|
|
1,822 |
|
|
|
|
|
|
|
Cash Flows from Investing Activities |
|
|
|
|
|
|
Collections of receivables (excluding receivables related to sales) |
|
|
16,706 |
|
|
15,589 |
Proceeds from maturities and sales of marketable securities |
|
|
89 |
|
|
76 |
Proceeds from sales of equipment on operating leases |
|
|
1,648 |
|
|
1,483 |
Proceeds from sales of business and unconsolidated affiliates, net of cash sold |
|
|
93 |
|
|
156 |
Cost of receivables acquired (excluding receivables related to sales) |
|
|
(18,873) |
|
|
(17,013) |
Acquisitions of businesses, net of cash acquired |
|
|
|
|
|
(5,245) |
Purchases of marketable securities |
|
|
(140) |
|
|
(133) |
Purchases of property and equipment |
|
|
(1,120) |
|
|
(896) |
Cost of equipment on operating leases acquired |
|
|
(2,329) |
|
|
(2,054) |
Other |
|
|
2 |
|
|
(139) |
Net cash used for investing activities |
|
|
(3,924) |
|
|
(8,176) |
|
|
|
|
|
|
|
Cash Flows from Financing Activities |
|
|
|
|
|
|
Increase (decrease) in total short-term borrowings |
|
|
(917) |
|
|
473 |
Proceeds from long-term borrowings |
|
|
9,986 |
|
|
8,288 |
Payments of long-term borrowings |
|
|
(6,426) |
|
|
(6,245) |
Proceeds from issuance of common stock |
|
|
178 |
|
|
217 |
Repurchases of common stock |
|
|
(1,253) |
|
|
(958) |
Dividends paid |
|
|
(943) |
|
|
(806) |
Other |
|
|
(116) |
|
|
(93) |
Net cash provided by financing activities |
|
|
509 |
|
|
876 |
|
|
|
|
|
|
|
Effect of Exchange Rate Changes on Cash, Cash Equivalents, and Restricted Cash |
|
|
(56) |
|
|
26 |
|
|
|
|
|
|
|
Net Decrease in Cash, Cash Equivalents, and Restricted Cash |
|
|
(59) |
|
|
(5,452) |
Cash, Cash Equivalents, and Restricted Cash at Beginning of Year |
|
|
4,015 |
|
|
9,467 |
Cash, Cash Equivalents, and Restricted Cash at End of Year |
|
$ |
3,956 |
|
$ |
4,015 |
See Condensed Notes to Consolidated Financial Statements.
17
Condensed Notes to Consolidated Financial Statements (Unaudited)
|
(1) |
|
Dividends declared and paid on a per share basis were as follows: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three Months Ended |
|
Twelve Months Ended |
||||||||
|
|
November 3 |
|
October 28 |
|
November 3 |
|
October 28 |
||||
|
|
2019 |
|
2018 |
|
2019 |
|
2018 |
||||
|
|
|
|
|
|
|
|
|
|
|
|
|
Dividends declared |
|
$ |
.76 |
|
$ |
.69 |
|
$ |
3.04 |
|
$ |
2.58 |
Dividends paid |
|
$ |
.76 |
|
$ |
.69 |
|
$ |
2.97 |
|
$ |
2.49 |
|
(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. The Company’s restricted cash held was as follows in millions of dollars: |
|
|
|
|
|
|
|
|
|
|
|
|
|
November 3 |
|
October 28 |
|
October 29 |
|
|||
|
|
2019 |
|
2018 |
|
2017 |
|
|||
Equipment operations |
|
$ |
|
|
$ |
|
|
$ |
|
|
Financial services |
|
|
|
|
|
|
|
|
|
|
Total |
|
$ |
|
|
$ |
|
|
$ |
|
|
The equipment operations’ restricted cash relates to miscellaneous operations activities. The financial services’ restricted cash relates to securitization of financing receivables. The restricted cash is recorded in other assets in the consolidated balance sheet.
|
(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 November 3, 2019 and October 28, 2018
|
|
|
|
|
|
|
|
|
|
|
|
|
(In millions of dollars) Unaudited |
|
EQUIPMENT OPERATIONS* |
|
FINANCIAL SERVICES |
||||||||
|
|
2019 |
|
2018 |
|
2019 |
|
2018 |
||||
Net Sales and Revenues |
|
|
|
|
|
|
|
|
|
|
|
|
Net sales |
|
$ |
8,703 |
|
$ |
8,343 |
|
|
|
|
|
|
Finance and interest income |
|
|
40 |
|
|
56 |
|
$ |
1,007 |
|
$ |
870 |
Other income |
|
|
267 |
|
|
244 |
|
|
50 |
|
|
54 |
Total |
|
|
9,010 |
|
|
8,643 |
|
|
1,057 |
|
|
924 |
|
|
|
|
|
|
|
|
|
|
|
|
|
Costs and Expenses |
|
|
|
|
|
|
|
|
|
|
|
|
Cost of sales |
|
|
6,735 |
|
|
6,381 |
|
|
|
|
|
|
Research and development expenses |
|
|
488 |
|
|
470 |
|
|
|
|
|
|
Selling, administrative and general expenses |
|
|
840 |
|
|
776 |
|
|
106 |
|
|
125 |
Interest expense |
|
|
75 |
|
|
72 |
|
|
323 |
|
|
261 |
Interest compensation to Financial Services |
|
|
81 |
|
|
71 |
|
|
|
|
|
|
Other operating expenses |
|
|
96 |
|
|
96 |
|
|
498 |
|
|
336 |
Total |
|
|
8,315 |
|
|
7,866 |
|
|
927 |
|
|
722 |
|
|
|
|
|
|
|
|
|
|
|
|
|
Income of Consolidated Group before Income Taxes |
|
|
695 |
|
|
777 |
|
|
130 |
|
|
202 |
Provision (credit) for income taxes |
|
|
64 |
|
|
263 |
|
|
40 |
|
|
(59) |
Income of Consolidated Group |
|
|
631 |
|
|
514 |
|
|
90 |
|
|
261 |
|
|
|
|
|
|
|
|
|
|
|
|
|
Equity in Income of Unconsolidated Subsidiaries
|
|
|
|
|
|
|
|
|
|
|
|
|
Financial Services |
|
|
90 |
|
|
261 |
|
|
|
|
|
|
Other |
|
|
1 |
|
|
9 |
|
|
|
|
|
|
Total |
|
|
91 |
|
|
270 |
|
|
|
|
|
|
Net Income |
|
|
722 |
|
|
784 |
|
|
90 |
|
|
261 |
Less: Net loss attributable to noncontrolling interests |
|
|
|
|
|
(1) |
|
|
|
|
|
|
Net Income Attributable to Deere & Company |
|
$ |
722 |
|
$ |
785 |
|
$ |
90 |
|
$ |
261 |
* 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 Years Ended November 3, 2019 and October 28, 2018
|
|
|
|
|
|
|
|
|
|
|
|
|
(In millions of dollars) Unaudited |
|
EQUIPMENT OPERATIONS* |
|
FINANCIAL SERVICES |
||||||||
|
|
2019 |
|
2018 |
|
2019 |
|
2018 |
||||
Net Sales and Revenues |
|
|
|
|
|
|
|
|
|
|
|
|
Net sales |
|
$ |
34,886 |
|
$ |
33,351 |
|
|
|
|
|
|
Finance and interest income |
|
|
118 |
|
|
126 |
|
$ |
3,735 |
|
$ |
3,311 |
Other income |
|
|
881 |
|
|
875 |
|
|
234 |
|
|
249 |
Total |
|
|
35,885 |
|
|
34,352 |
|
|
3,969 |
|
|
3,560 |
|
|
|
|
|
|
|
|
|
|
|
|
|
Costs and Expenses |
|
|
|
|
|
|
|
|
|
|
|
|
Cost of sales |
|
|
26,793 |
|
|
25,573 |
|
|
|
|
|
|
Research and development expenses |
|
|
1,783 |
|
|
1,658 |
|
|
|
|
|
|
Selling, administrative and general expenses |
|
|
3,031 |
|
|
2,935 |
|
|
528 |
|
|
528 |
Interest expense |
|
|
256 |
|
|
298 |
|
|
1,234 |
|
|
936 |
Interest compensation to Financial Services |
|
|
336 |
|
|
300 |
|
|
|
|
|
|
Other operating expenses |
|
|
299 |
|
|
315 |
|
|
1,506 |
|
|
1,298 |
Total |
|
|
32,498 |
|
|
31,079 |
|
|
3,268 |
|
|
2,762 |
|
|
|
|
|
|
|
|
|
|
|
|
|
Income of Consolidated Group before Income Taxes |
|
|
3,387 |
|
|
3,273 |
|
|
701 |
|
|
798 |
Provision (credit) for income taxes |
|
|
689 |
|
|
1,869 |
|
|
163 |
|
|
(142) |
Income of Consolidated Group |
|
|
2,698 |
|
|
1,404 |
|
|
538 |
|
|
940 |
|
|
|
|
|
|
|
|
|
|
|
|
|
Equity in Income of Unconsolidated Subsidiaries
|
|
|
|
|
|
|
|
|
|
|
|
|
Financial Services |
|
|
539 |
|
|
942 |
|
|
1 |
|
|
2 |
Other |
|
|
20 |
|
|
25 |
|
|
|
|
|
|
Total |
|
|
559 |
|
|
967 |
|
|
1 |
|
|
2 |
Net Income |
|
|
3,257 |
|
|
2,371 |
|
|
539 |
|
|
942 |
Less: Net income attributable to noncontrolling interests |
|
|
4 |
|
|
3 |
|
|
|
|
|
|
Net Income Attributable to Deere & Company |
|
$ |
3,253 |
|
$ |
2,368 |
|
$ |
539 |
|
$ |
942 |
* 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
As of November 3, 2019 and October 28, 2018
|
|
|
|
|
|
|
|
|
|
|
|
|
(In millions of dollars) Unaudited |
|
EQUIPMENT OPERATIONS* |
|
FINANCIAL SERVICES |
||||||||
|
|
2019 |
|
2018 |
|
2019 |
|
2018 |
||||
Assets |
|
|
|
|
|
|
|
|
|
|
|
|
Cash and cash equivalents |
|
$ |
3,175 |
|
$ |
3,195 |
|
$ |
682 |
|
$ |
709 |
Marketable securities |
|
|
1 |
|
|
8 |
|
|
580 |
|
|
482 |
Receivables from unconsolidated subsidiaries and affiliates |
|
|
2,017 |
|
|
1,700 |
|
|
|
|
|
|
Trade accounts and notes receivable - net |
|
|
1,482 |
|
|
1,374 |
|
|
5,153 |
|
|
4,906 |
Financing receivables - net |
|
|
65 |
|
|
93 |
|
|
29,130 |
|
|
26,961 |
Financing receivables securitized - net |
|
|
44 |
|
|
76 |
|
|
4,339 |
|
|
3,946 |
Other receivables |
|
|
1,376 |
|
|
1,010 |
|
|
116 |
|
|
776 |
Equipment on operating leases - net |
|
|
|
|
|
|
|
|
7,567 |
|
|
7,165 |
Inventories |
|
|
5,975 |
|
|
6,149 |
|
|
|
|
|
|
Property and equipment - net |
|
|
5,929 |
|
|
5,821 |
|
|
44 |
|
|
47 |
Investments in unconsolidated subsidiaries and affiliates |
|
|
5,326 |
|
|
5,231 |
|
|
16 |
|
|
15 |
Goodwill |
|
|
2,917 |
|
|
3,101 |
|
|
|
|
|
|
Other intangible assets - net |
|
|
1,380 |
|
|
1,562 |
|
|
|
|
|
|
Retirement benefits |
|
|
836 |
|
|
1,241 |
|
|
58 |
|
|
57 |
Deferred income taxes |
|
|
1,896 |
|
|
1,503 |
|
|
57 |
|
|
69 |
Other assets |
|
|
1,158 |
|
|
1,133 |
|
|
741 |
|
|
587 |
Total Assets |
|
$ |
33,577 |
|
$ |
33,197 |
|
$ |
48,483 |
|
$ |
45,720 |
|
|
|
|
|
|
|
|
|
|
|
|
|
Liabilities and Stockholders’ Equity |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Liabilities |
|
|
|
|
|
|
|
|
|
|
|
|
Short-term borrowings |
|
$ |
987 |
|
$ |
1,434 |
|
$ |
9,797 |
|
$ |
9,628 |
Short-term securitization borrowings |
|
|
44 |
|
|
75 |
|
|
4,277 |
|
|
3,882 |
Payables to unconsolidated subsidiaries and affiliates |
|
|
142 |
|
|
129 |
|
|
1,970 |
|
|
1,678 |
Accounts payable and accrued expenses |
|
|
9,232 |
|
|
9,383 |
|
|
1,836 |
|
|
2,056 |
Deferred income taxes |
|
|
414 |
|
|
497 |
|
|
568 |
|
|
823 |
Long-term borrowings |
|
|
5,415 |
|
|
4,714 |
|
|
24,814 |
|
|
22,523 |
Retirement benefits and other liabilities |
|
|
5,912 |
|
|
5,660 |
|
|
94 |
|
|
91 |
Total liabilities |
|
|
22,146 |
|
|
21,892 |
|
|
43,356 |
|
|
40,681 |
|
|
|
|
|
|
|
|
|
|
|
|
|
Redeemable noncontrolling interest |
|
|
14 |
|
|
14 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Stockholders’ Equity |
|
|
|
|
|
|
|
|
|
|
|
|
Total Deere & Company stockholders’ equity |
|
|
11,413 |
|
|
11,288 |
|
|
5,127 |
|
|
5,039 |
Noncontrolling interests |
|
|
4 |
|
|
3 |
|
|
|
|
|
|
Total stockholders’ equity |
|
|
11,417 |
|
|
11,291 |
|
|
5,127 |
|
|
5,039 |
Total Liabilities and Stockholders’ Equity |
|
$ |
33,577 |
|
$ |
33,197 |
|
$ |
48,483 |
|
$ |
45,720 |
* 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 Years Ended November 3, 2019 and October 28, 2018
|
|
|
|
|
|
|
|
|
|
|
|
|
(In millions of dollars) Unaudited |
|
EQUIPMENT OPERATIONS* |
|
FINANCIAL SERVICES |
||||||||
|
|
2019 |
|
2018 |
|
2019 |
|
2018 |
||||
Cash Flows from Operating Activities |
|
|
|
|
|
|
|
|
|
|
|
|
Net income |
|
$ |
3,257 |
|
$ |
2,371 |
|
$ |
539 |
|
$ |
942 |
Adjustments to reconcile net income to net cash provided by operating activities: |
|
|
|
|
|
|
|
|
|
|
|
|
Provision for credit losses |
|
|
14 |
|
|
39 |
|
|
29 |
|
|
51 |
Provision for depreciation and amortization |
|
|
1,015 |
|
|
974 |
|
|
1,135 |
|
|
1,077 |
Impairment charges |
|
|
|
|
|
|
|
|
77 |
|
|
|
(Gain) loss on sales of businesses and unconsolidated affiliates |
|
|
5 |
|
|
(25) |
|
|
|
|
|
|
Undistributed earnings of unconsolidated subsidiaries and affiliates |
|
|
(102) |
|
|
(503) |
|
|
(2) |
|
|
(2) |
Provision (credit) for deferred income taxes |
|
|
(222) |
|
|
1,504 |
|
|
(243) |
|
|
(24) |
Changes in assets and liabilities: |
|
|
|
|
|
|
|
|
|
|
|
|
Trade receivables and Equipment Operations' financing receivables |
|
|
(142) |
|
|
(239) |
|
|
|
|
|
|
Inventories |
|
|
(102) |
|
|
(917) |
|
|
|
|
|
|
Accounts payable and accrued expenses |
|
|
13 |
|
|
793 |
|
|
163 |
|
|
120 |
Accrued income taxes payable/receivable |
|
|
(355) |
|
|
103 |
|
|
528 |
|
|
(569) |
Retirement benefits |
|
|
(235) |
|
|
(985) |
|
|
2 |
|
|
(41) |
Other |
|
|
54 |
|
|
166 |
|
|
190 |
|
|
88 |
Net cash provided by operating activities |
|
|
3,200 |
|
|
3,281 |
|
|
2,418 |
|
|
1,642 |
|
|
|
|
|
|
|
|
|
|
|
|
|
Cash Flows from Investing Activities |
|
|
|
|
|
|
|
|
|
|
|
|
Collections of receivables (excluding trade and wholesale) |
|
|
|
|
|
|
|
|
18,190 |
|
|
17,032 |
Proceeds from maturities and sales of marketable securities |
|
|
12 |
|
|
11 |
|
|
77 |
|
|
65 |
Proceeds from sales of equipment on operating leases |
|
|
|
|
|
|
|
|
1,648 |
|
|
1,483 |
Proceeds from sales of business and unconsolidated affiliates, net of cash sold |
|
|
93 |
|
|
156 |
|
|
|
|
|
|
Cost of receivables acquired (excluding trade and wholesale) |
|
|
|
|
|
|
|
|
(20,321) |
|
|
(18,778) |
Acquisitions of businesses, net of cash acquired |
|
|
|
|
|
(5,245) |
|
|
|
|
|
|
Purchases of marketable securities |
|
|
(3) |
|
|
|
|
|
(137) |
|
|
(133) |
Purchases of property and equipment |
|
|
(1,118) |
|
|
(893) |
|
|
(2) |
|
|
(3) |
Cost of equipment on operating leases acquired |
|
|
|
|
|
|
|
|
(3,246) |
|
|
(3,209) |
Increase in investment in Financial Services |
|
|
(8) |
|
|
|
|
|
|
|
|
|
Increase in trade and wholesale receivables |
|
|
|
|
|
|
|
|
(935) |
|
|
(1,222) |
Other |
|
|
35 |
|
|
17 |
|
|
5 |
|
|
(95) |
Net cash used for investing activities |
|
|
(989) |
|
|
(5,954) |
|
|
(4,721) |
|
|
(4,860) |
|
|
|
|
|
|
|
|
|
|
|
|
|
Cash Flows from Financing Activities |
|
|
|
|
|
|
|
|
|
|
|
|
Increase (decrease) in total short-term borrowings |
|
|
(149) |
|
|
16 |
|
|
(768) |
|
|
457 |
Change in intercompany receivables/payables |
|
|
(305) |
|
|
(748) |
|
|
305 |
|
|
748 |
Proceeds from long-term borrowings |
|
|
1,348 |
|
|
149 |
|
|
8,638 |
|
|
8,139 |
Payments of long-term borrowings |
|
|
(972) |
|
|
(163) |
|
|
(5,454) |
|
|
(6,082) |
Proceeds from issuance of common stock |
|
|
178 |
|
|
217 |
|
|
|
|
|
|
Repurchases of common stock |
|
|
(1,253) |
|
|
(958) |
|
|
|
|
|
|
Capital investment from Equipment Operations |
|
|
|
|
|
|
|
|
8 |
|
|
|
Dividends paid |
|
|
(943) |
|
|
(806) |
|
|
(427) |
|
|
(464) |
Other |
|
|
(79) |
|
|
(60) |
|
|
(38) |
|
|
(32) |
Net cash provided by (used for) financing activities |
|
|
(2,175) |
|
|
(2,353) |
|
|
2,264 |
|
|
2,766 |
|
|
|
|
|
|
|
|
|
|
|
|
|
Effect of Exchange Rate Changes on Cash, Cash Equivalents, and Restricted Cash |
|
|
(42) |
|
|
54 |
|
|
(14) |
|
|
(28) |
|
|
|
|
|
|
|
|
|
|
|
|
|
Net Decrease in Cash, Cash Equivalents, and Restricted Cash |
|
|
(6) |
|
|
(4,972) |
|
|
(53) |
|
|
(480) |
Cash, Cash Equivalents, and Restricted Cash at Beginning of Year |
|
|
3,202 |
|
|
8,174 |
|
|
813 |
|
|
1,293 |
Cash, Cash Equivalents, and Restricted Cash at End of Year |
|
$ |
3,196 |
|
$ |
3,202 |
|
$ |
760 |
|
$ |
813 |
* 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
Exhibit 99.2
(Furnished herewith)
xhibit 99.2 (Furnished herewith)
|
|
|
Exhibit 99.2 (Furnished herewith)
|
|
|
|
Deere & Company |
|
|
Other Financial Information |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
For the Twelve Months Ended |
|
Equipment Operations* |
Agriculture and Turf |
Construction and Forestry* |
|||||||||||||||
|
|
November 3 |
October 28 |
November 3 |
October 28 |
November 3 |
October 28 |
||||||||||||
Dollars in millions |
|
2019 |
2018 |
2019 |
2018 |
2019 |
2018 |
||||||||||||
Net Sales |
|
$ |
34,886 |
|
$ |
|
|
$ |
23,666 |
|
$ |
|
|
$ |
11,220 |
|
$ |
|
|
Net Sales - excluding Wirtgen |
|
$ |
31,693 |
|
$ |
|
|
$ |
23,666 |
|
$ |
|
|
$ |
8,027 |
|
$ |
|
|
Average Identifiable Assets |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
With Inventories at LIFO |
|
$ |
20,761 |
|
$ |
|
|
$ |
10,748 |
|
$ |
|
|
$ |
10,013 |
|
$ |
|
|
With Inventories at LIFO - excluding Wirtgen |
|
$ |
14,460 |
|
$ |
|
|
$ |
10,748 |
|
$ |
|
|
$ |
3,712 |
|
$ |
|
|
With Inventories at Standard Cost |
|
$ |
22,139 |
|
$ |
|
|
$ |
11,860 |
|
$ |
|
|
$ |
10,279 |
|
$ |
|
|
With Inventories at Standard Cost - excluding Wirtgen |
|
$ |
15,838 |
|
$ |
|
|
$ |
11,860 |
|
$ |
|
|
$ |
3,978 |
|
$ |
|
|
Operating Profit |
|
$ |
3,721 |
|
$ |
|
|
$ |
2,506 |
|
$ |
|
|
$ |
1,215 |
|
$ |
|
|
Operating Profit - excluding Wirtgen |
|
$ |
3,378 |
|
$ |
|
|
$ |
2,506 |
|
$ |
|
|
$ |
872 |
|
$ |
|
|
Percent of Net Sales - excluding Wirtgen |
|
|
10.7 |
% |
|
11.8 |
% |
|
10.6 |
% |
|
12.1 |
% |
|
10.9 |
% |
|
10.5 |
% |
Operating Return on Assets - excluding Wirtgen |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
With Inventories at LIFO - excluding Wirtgen |
|
|
23.4 |
% |
|
26.3 |
% |
|
23.3 |
% |
|
27.6 |
% |
|
23.5 |
% |
|
22.5 |
% |
With Inventories at Standard Cost - excluding Wirtgen |
|
|
21.3 |
% |
|
24.1 |
% |
|
21.1 |
% |
|
25.1 |
% |
|
21.9 |
% |
|
20.9 |
% |
SVA Cost of Assets - excluding Wirtgen |
|
$ |
|
|
$ |
|
|
$ |
|
|
$ |
|
|
$ |
|
|
$ |
|
|
SVA - excluding Wirtgen |
|
$ |
1,478 |
|
$ |
|
|
$ |
1,083 |
|
$ |
|
|
$ |
395 |
|
$ |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
For the Twelve Months Ended |
|
Financial Services |
|
|
|
|
|
|
|
|
|
|
|
|
|||||
|
|
November 3 |
October 28 |
|
|
|
|
|
|
|
|
|
|
|
|
||||
Dollars in millions |
|
|
2019 |
|
|
2018** |
|
|
|
|
|
|
|
|
|
|
|
|
|
Net Income Attributable to Deere & Company |
|
$ |
539 |
|
$ |
942 |
|
|
|
|
|
|
|
|
|
|
|
|
|
Net Income Attributable to Deere & Company -
|
|
|
|
|
$ |
530 |
|
|
|
|
|
|
|
|
|
|
|
|
|
Average Equity |
|
$ |
5,040 |
|
$ |
4,832 |
|
|
|
|
|
|
|
|
|
|
|
|
|
Average Equity - Tax Adjusted |
|
|
|
|
$ |
4,793 |
|
|
|
|
|
|
|
|
|
|
|
|
|
Return on Equity |
|
|
10.7 |
% |
|
19.5 |
% |
|
|
|
|
|
|
|
|
|
|
|
|
Return on Equity - Tax Adjusted |
|
|
|
|
|
11.1 |
% |
|
|
|
|
|
|
|
|
|
|
|
|
Operating Profit |
|
$ |
694 |
|
$ |
792 |
|
|
|
|
|
|
|
|
|
|
|
|
|
Average Equity |
|
$ |
5,040 |
|
$ |
4,793 |
|
|
|
|
|
|
|
|
|
|
|
|
|
Cost of Equity |
|
$ |
|
|
$ |
(722) |
|
|
|
|
|
|
|
|
|
|
|
|
|
SVA |
|
$ |
37 |
|
$ |
70 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
23
Exhibit 99.3
|
1 4Q 2019 Earnings Call 27 November 2019 24 |
|
2 Safe Harbor Statement & Disclosures The earnings call and accompanying material include forward-looking comments and information concerning the company’s plans and projections for the future, including estimates and assumptions with respect to economic, political, technological, weather, market acceptance, acquisitions and divestitures of businesses, anticipated transaction costs, the integration of new businesses, anticipated benefits of acquisitions, 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 company’s 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. 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 company’s securities. Non-GAAP Financial Measures This presentation includes the following non-GAAP financial measures on an historical basis: adjusted net income and adjusted diluted EPS. Please refer to the supplemental information located at the end of this presentation for a reconciliation of these historical non-GAAP financial measures to the most directly comparable historical GAAP financial measures and other important information. 25 |
|
3 2019 Overview ($ millions except where noted) Fiscal 2019 Fiscal 2019 vs. Fiscal 2018 Net Sales & Revenues $39,258 5% Net Sales (equipment operations) $34,886 5% Net Income (attributable to Deere & Company) $3,253 37% Adjusted Net Income (attributable to Deere & Company) $3,185* 4% Diluted EPS ($ per share) $10.15 Adjusted Diluted EPS ($ per share) $9.94* * Excludes discrete tax reform benefit of ~ $68 million; for reconciliation to GAAP see slide 26. Note: Wirtgen’s results are incorporated with the Company’s results using a 30-day lag period and are included in the construction and forestry segment. 26 |
|
4 4Q 2019 Overview ($ millions except where noted) 4Q 2019 4Q 2019 vs. 4Q 2018 Net Sales & Revenues $9,896 5% Net Sales (equipment operations) $8,703 4% Net Income (attributable to Deere & Company) $722 8% Adjusted Net Income (attributable to Deere & Company) $681* 9% Diluted EPS ($ per share) $2.27 Adjusted Diluted EPS ($ per share) $2.14* *Excludes discrete tax reform benefit of ~ $41 million; for reconciliation to GAAP see slide 26. Note: Wirtgen’s results are incorporated with the Company’s results using a 30-day lag period and are included in the construction and forestry segment. 27 |
|
5 4Q 2019 Overview Equipment Operations 4Q 2019 vs. 4Q 2018 Net Sales 4% Price realization Currency translation 3 points 2 points 28 |
|
6 Worldwide Agriculture & Turf 4Q 2019 Overview ($ millions) 4Q 2019 4Q 2019 vs. 4Q 2018 Net Sales $5,756 3% Operating Profit* $527 7% *4Q 2019 operating profit impacted by: − Production costs − Selling, administrative and general expenses − Foreign exchange − Research and development expenses + Price realization 29 |
|
7 Global Stocks-to-Use Ratios Source: USDA, 8 November 2019 0% 20% 40% 60% 80% 100% 120% 0% 10% 20% 30% 40% 50% 60% 1995 1998 2001 2004 2007 2010 2013 2016 2019P Cotton Ratios Cotton Wheat Corn Soybeans 30 |
|
8 U.S. Farm Cash Receipts $0 $100 $200 $300 $400 $500 2002 2004 2006 2008 2010 2012 2014 2016 2018 2020F $ Billions Crops Livestock Government Payments USDA Aid* *USDA Aid includes partial MFP1 and two tranches of MFP2 Note: USDA announced a trade retaliation relief package $16B in 2019. The $16B package includes $14.5B direct payment via Market Facilitation Program (MFP) which will be distributed into three separate tranches if market conditions warrant. The payment on the 1st tranche was Aug 2019 and 2nd tranche Nov 2019. Source: 2001–2018: USDA, 30 August 2019 2019F–2020F: Deere & Company forecast as of 27 November 2019 31 |
|
9 Fiscal 2020 Forecast U.S. and Canada Ag Down ~5% EU 28 Ag ~ Flat South America Ag (tractors and combines) ~ Flat Asia Ag ~ Flat U.S. and Canada Turf and Utility ~ Flat Agriculture & Turf Industry Outlook Source: Deere & Company forecast as of 27 November 2019 32 |
|
10 Worldwide Agriculture & Turf Deere & Company Outlook Fiscal 2020 Forecast Net Sales ~ 5-10% Currency translation ~ 1% Price realization ~ 2% Source: Deere & Company forecast as of 27 November 2019 33 |
|
11 ($ millions) 4Q 2019 4Q 2019 vs. 4Q 2018 Net Sales $2,947 8% Operating Profit* $261 12% Worldwide Construction & Forestry 4Q 2019 Overview *4Q 2019 operating profit impacted by: − Production costs − Selling, administrative and general expenses − Sales mix + Shipment volumes + Price realization 34 |
|
12 Fiscal 2020 Forecast Net Sales ~ 10-15% Currency translation Price Realization ~ 1 point ~ 1 point Worldwide Construction & Forestry Deere & Company Outlook Source: Deere & Company forecast as of 27 November 2019 35 |
|
13 Worldwide Financial Services ($ millions) 4Q 2019 Fiscal 2019 Fiscal 2020 Forecast Net Income (attributable to Deere & Company) $90 $539 ~ $600 Source: Deere & Company forecast as of 27 November 2019 36 |
|
14 Consolidated Trade Receivables & Inventory ($ millions) Fiscal 2019* Previous Forecast* Agriculture & Turf $85 ~ $100 Construction & Forestry $137 ~ $350 Total (as reported) $52 ~ $450 Total (constant exchange) $245 ~ $550 *Change at 3 November 2019 vs. 28 October 2018 Note: Before the sale of receivables to John Deere Financial Source: Deere & Company previous forecast as of 16 August 2019 37 |
|
15 ($ millions) 4Q 2019 Fiscal 2019 Fiscal 2020 Forecast COS (percent of Net Sales) 77% 77% ~76% Research and Development 4% 8% ~ 2% SA&G Expense 8% 3% ~ 3% Source: Deere & Company forecast as of 27 November 2019 Cost and Expenses Equipment Operations 38 |
|
16 4Q 2019 Fiscal 2019 Fiscal 2020 Forecast Effective Tax Rate 9% 20% 24-26% Income Taxes Equipment Operations Source: Deere & Company forecast as of 27 November 2019 (previous forecast as of 16 August 2019) 39 |
|
17 Net Operating Cash Flows Equipment Operations Fiscal 2020 Forecast ~ $3.1 - $3.5 billion $0 $1,000 $2,000 $3,000 $4,000 $5,000 2011 2012 2013 2014 2015 2016 2017 2018 2019 2020F $ Millions Note: 2011-2016 adjusted with the adoption of FASB ASU No. 2016-09 “Improvements to Employee Share-Based Payment Accounting” Source: Deere & Company forecast as of 27 November 2019 (previous forecast as of 16 August 2019) 40 |
|
18 Source: Deere & Company forecast as of 27 November 2019 ($ billions except where noted) Fiscal 2020 Forecast Net Income (attributable to Deere & Company) $2.7-$3.1 Deere & Company Outlook Fiscal 2020 Forecast 41 |
|
19 Appendix 42 |
|
20 Share Repurchase As Part of Publicly Announced Plans * All shares adjusted for two-for-one stock split effective 26 November 2007 4Q 2019: Cost of repurchases $373.0 million Shares repurchased 2.3 million YTD 2019: Cost of repurchases $1,237.0 million Shares repurchased 7.9 million 2004–4Q 2019: Cumulative cost of repurchases $18.6 billion Shares repurchased 259.0 million December 2013 authorization of $8 billion: Amount remaining $1.1 billion 3 November 2019 period ended basic shares 313.1 million 4Q 2019 average diluted shares 317.9 million $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 2019 $ Billions Millions of Shares* Shares Repurchased Amount Spent Share Repurchase 37% net share reduction since 2004 43 |
|
21 44 |
|
22 ($ millions) Fiscal 2019 Fiscal 2020 Forecast Capital Expenditures $1,120 ~ $1,100 Pension/OPEB Expense $120 ~ $75 Pension/OPEB Contributions $518 ~ $525 Other Information Source: Deere & Company forecast as of 27 November 2019 45 |
|
23 October 2019 Retail Sales (Rolling 3 Months) and Dealer Inventories Retail Sales U.S. and Canada Ag Industry* Deere** 2WD Tractors (< 40 PTO hp) 5% More than the industry 2WD Tractors (40 < 100 PTO hp) 4% More than the industry 2WD Tractors (100+ PTO hp) 6% More than the industry 4WD Tractors 5% In line with the industry Combines Flat Single digit Deere Dealer Inventories*** U.S. and Canada Ag 2019 2018 2WD Tractors (100+ PTO hp) 27% 32% Combines 9% 8% * 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 Note: Going forward, retail sales information will be published only on the quarter. The next published report will be 1Q20. 46 |
|
24 Retail Sales U.S. and Canada Deere* Selected Turf & Utility Equipment Single digit Construction & Forestry First-in-the-Dirt Settlements Double digits Double digits October 2019 Retail Sales (Rolling 3 Months) Retail Sales EU 28 Ag Deere* Tractors Single digit Combines Double digits • Based on internal sales reports • Note: Going forward, retail sales information will be published only on the quarter. The next published report will be 1Q20 47 |
|
25 Supplemental Statement of Consolidated Income Information Reconciliation of GAAP to Non-GAAP Financial Measures In addition to reporting financial results in conformity with accounting principles generally accepted in the United States (GAAP), the company also discusses non-GAAP measures that exclude adjustments related to tax reform. Net income attributable to Deere & Company and diluted earnings per share measures that exclude this item are not in accordance with nor a substitute for GAAP measures. The company believes that discussion of results excluding this item provides a useful analysis of ongoing operating trends. The table below provides a reconciliation of the non-GAAP financial measure with the most directly comparable GAAP financial measure for the three months and twelve months ended November 3, 2019 and October 28, 2018. (Millions, except per-share amounts) (Unaudited) 48 |
|
Deere & Company’s 1Q 2020 earnings call is scheduled for 9:00 a.m. central time on Friday, 21 February 2020 49 |