Deere Announces Net Income of $3.253 Billion for Year
MOLINE, Ill., Nov. 27, 2019 /PRNewswire/ -- Deere & Company (NYSE: DE) 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."
Deere &
Company
Fourth Quarter
Full Year
$ in millions 2019 2018
% Change 2019 2018
% Change
---
Net sales
and
revenues $
9,896 $
9,416 5% $
39,258 $
37,358 5%
Net income $
722 $
785 -8% $
3,253 $
2,368 37%
Fully
diluted EPS $
2.27 $
2.42 $
10.15 $
7.24
Net income -
adjusted $
681 $
748 -9% $
3,185 $
3,073 4%
Fully
diluted EPS
- adjusted $
2.14 $
2.30 $
9.94 $
9.39
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.
Equipment
Operations
Fourth Quarter
Full Year
$ in millions 2019 2018
% Change 2019 2018
% Change
---
Net sales $
8,703 $
8,343 4% $
34,886 $
33,351 5%
Operating profit $
788 $
862 -9% $
3,721 $
3,684 1%
Net income $
631 $
514 23% $
2,698 $
1,404 92%
Tax reform
unfavorable
(favorable)
discrete
adjustments (41) 72 (65) 1,045
Net income -
adjusted $
590 $
586 1% $
2,633 $
2,449 8%
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.
Agriculture &
Turf
Fourth Quarter
Full Year
$ in millions 2019 2018
% Change 2019 2018
% Change
---
Net sales $
5,756 $
5,605 3% $
23,666 $
23,191 2%
Operating profit $
527 $
567 -7% $
2,506 $
2,816 -11%
Operating margin 9.2% 10.1% 10.6% 12.1%
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.
Construction &
Forestry
Fourth Quarter
Full Year
$ in millions 2019 2018
% Change 2019 2018
% Change
---
Net sales $
2,947 $
2,738 8% $
11,220 $
10,160 10%
Operating profit $
261 $
295 -12% $
1,215 $
868 40%
Operating margin 8.9% 10.8% 10.8% 8.5%
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.
Financial
Services
Fourth Quarter
Full Year
$ in millions 2019 2018
% Change 2019 2018
% Change
---
Net income $
90 $
261 -66% $
539 $
942 -43%
Tax reform
unfavorable
(favorable)
discrete
adjustments (109) (3) (341) -99%
Net income -
adjusted $
90 $
152 -41% $
536 $
601 -11%
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.
Market Conditions and Outlook (annual)
Currency
Price
$ in millions
Net Sales
Translation
Realization
---
Agriculture & Turf -5% to -1 0% -1% +2%
Construction & Forestry -10% to -15% -1% +1%
John Deere Financial
Net Income $600
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 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.
Fourth Quarter
Full Year
$ in millions 2019 2018
% Change 2019 2018
% Change
---
Revenue $
785 $
668 18% $
2,890 $
2,532 14%
Net income $
68 $
160 -57% $
419 $
799 -48%
Ending
portfolio
balance $
38,251 $
35,643 7%
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.
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.
Three Months Ended Twelve Months Ended
November 3, 2019
November 3, 2019
Net Income Net Income
Attributable Diluted Attributable
to to Diluted
Deere & Earnings Deere & Earnings
Company Per Share Company Per Share
GAAP measure $
722 $
2.27 $
3,253 $
10.15
Tax reform
unfavorable
(favorable)
discrete
adjustments (41) (.13) (68) (.21)
Non-GAAP measure $
681 $
2.14 $
3,185 $
9.94
Three Months Ended Twelve Months Ended
October 28, 2018
October 28, 2018
Net Income Net Income
Attributable Diluted Attributable
to to Diluted
Deere & Earnings Deere & Earnings
Company Per Share Company Per Share
GAAP measure $
785 $
2.42 $
2,368 $
7.24
Tax reform
unfavorable
(favorable)
discrete
adjustments (37) (.12) 705 2.15
Non-GAAP measure $
748 $
2.30 $
3,073 $
9.39
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 economic growth or business activity in the United Kingdom or the European Union, and could result in the relocation of businesses, cause business interruptions, lead to economic recession or depression, and impact the stability of the financial markets, availability of credit, currency exchange rates, interest rates, financial institutions, and political, financial and monetary systems. Any of these developments could affect our businesses, liquidity, results of operations and financial position.
Additional factors that could materially affect the company's operations, access to capital, expenses and results include changes in, uncertainty surrounding and the impact of governmental trade, banking, monetary and fiscal policies, including financial regulatory reform and its effects on the consumer finance industry, derivatives, funding costs and other areas, and governmental programs, policies, tariffs and sanctions in particular jurisdictions or for the benefit of certain industries or sectors; retaliatory actions to such changes in trade, banking, monetary and fiscal policies; actions by central banks; actions by financial and securities regulators; actions by environmental, health and safety regulatory agencies, including those related to engine emissions, carbon and other greenhouse gas emissions, noise and the effects of climate change; changes to GPS radio frequency bands or their permitted uses; changes in labor and immigration regulations; changes to accounting standards; changes in tax rates, estimates, laws and regulations and company actions related thereto; changes to and compliance with privacy regulations; compliance with U.S. and foreign laws when expanding to new markets and otherwise; and actions by other regulatory bodies.
Other factors that could materially affect results include production, design and technological innovations and difficulties, including capacity and supply constraints and prices; the loss of or challenges to intellectual property rights whether through theft, infringement, counterfeiting or otherwise; the availability and prices of strategically sourced materials, components and whole goods; delays or disruptions in the company's supply chain or the loss of liquidity by suppliers; disruptions of infrastructures that support communications, operations or distribution; the failure of suppliers or the company to comply with laws, regulations and company policy pertaining to employment, human rights, health, safety, the environment, anti-corruption, privacy and data protection and other ethical business practices; events that damage the company's reputation or brand; significant investigations, claims, lawsuits or other legal proceedings; start-up of new plants and products; the success of new product initiatives; changes in customer product preferences and sales mix; gaps or limitations in rural broadband coverage, capacity and speed needed to support technology solutions; oil and energy prices, supplies and volatility; the availability and cost of freight; actions of competitors in the various industries in which the company competes, particularly price discounting; dealer practices especially as to levels of new and used field inventories; changes in demand and pricing for used equipment and resulting impacts on lease residual values; labor relations and contracts; changes in the ability to attract, train and retain qualified personnel; acquisitions and divestitures of businesses; greater than anticipated transaction costs; the integration of new businesses; the failure or delay in closing or realizing anticipated benefits of acquisitions, joint ventures or divestitures; the implementation of organizational changes; the failure to realize anticipated savings or benefits of cost reduction, productivity, or efficiency efforts; difficulties related to the conversion and implementation of enterprise resource planning systems; security breaches, cybersecurity attacks, technology failures and other disruptions to the company's and suppliers' information technology infrastructure; changes in company declared dividends and common stock issuances and repurchases; changes in the level and funding of employee retirement benefits; changes in market values of investment assets, compensation, retirement, discount and mortality rates which impact retirement benefit costs; and significant changes in health care costs.
The liquidity and ongoing profitability of John Deere Capital Corporation and other credit subsidiaries depend largely on timely access to capital in order to meet future cash flow requirements, and to fund operations, costs, and purchases of the company's products. If general economic conditions deteriorate or capital markets become more volatile, funding could be unavailable or insufficient. Additionally, customer confidence levels may result in declines in credit applications and increases in delinquencies and default rates, which could materially impact write-offs and provisions for credit losses.
The company's outlook is based upon assumptions relating to the factors described above, which are sometimes based upon estimates and data prepared by government agencies. Such estimates and data are often revised. The company, except as required by law, undertakes no obligation to update or revise its outlook, whether as a result of new developments or otherwise. Further information concerning the company and its businesses, including factors that could materially affect the company's financial results, is included in the company's other filings with the SEC (including, but not limited to, the factors discussed in Item 1A. Risk Factors of the company's most recent annual report on Form 10-K and quarterly reports on Form 10-Q).
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 $
5,605 +3 $
23,666 $
23,191 +2
Construction and forestry 2,947 2,738 +8 11,220 10,160 +10
Total net sales 8,703 8,343 +4 34,886 33,351 +5
Financial services 971 851 +14 3,621 3,252 +11
Other revenues 222 222 751 755 -1
Total net sales and
revenues $
9,896 $
9,416 +5 $
39,258 $
37,358 +5
Operating profit: *
Agriculture and turf $
527 $
567 -7 $
2,506 $
2,816 -11
Construction and forestry 261 295 -12 1,215 868 +40
Financial services 128 201 -36 694 792 -12
Total operating profit 916 1,063 -14 4,415 4,476 -1
Reconciling items ** (90) (75) +20 (310) (381) -19
Income taxes (104) (203) -49 (852) (1,727) -51
Net income
attributable to
Deere & Company $
722 $
785 -8 $
3,253 $
2,368 +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.
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.
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.
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.
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.
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 $
21 $
7 $
6
Financial services 78 104 126
Total $
99 $
111 $
132
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.
(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 and Affiliates
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.
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
and
Affiliates
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.
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.
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.
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 $
33,351 $
23,666 $
23,191 $
11,220 $
10,160
Net Sales -excluding
Wirtgen $
31,693 $
30,324 $
23,666 $
23,191 $
8,027 $
7,133
Average Identifiable Assets
With Inventories at LIFO $
20,761 $
19,701 $
10,748 $
10,219 $
10,013 $
9,482
With Inventories at LIFO -
excluding Wirtgen $
14,460 $
13,566 $
10,748 $
10,219 $
3,712 $
3,347
With Inventories at
Standard Cost $
22,139 $
20,959 $
11,860 $
11,233 $
10,279 $
9,726
With Inventories at
Standard Cost -excluding
Wirtgen $
15,838 $
14,825 $
11,860 $
11,233 $
3,978 $
3,592
Operating Profit $
3,721 $
3,684 $
2,506 $
2,816 $
1,215 $
868
Operating Profit -
excluding Wirtgen $
3,378 $
3,568 $
2,506 $
2,816 $
872 $
752
Percent of Net Sales -excluding 10.7 11.8 10.6 12.1 10.9 10.5
Wirtgen % % % % % %
Operating Return on Assets -excluding
Wirtgen
With Inventories at LIFO -excluding 23.4 26.3 23.3 27.6 23.5 22.5
Wirtgen % % % % % %
With Inventories at Standard Cost - 21.3 24.1 21.1 25.1 21.9 20.9
excluding Wirtgen % % % % % %
SVA Cost of Assets -
excluding Wirtgen $
(1,900) $
(1,778) $
(1,423) $
(1,347) $
(477) $
(431)
SVA -excluding Wirtgen $
1,478 $
1,790 $
1,083 $
1,469 $
395 $
321
---
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 -Tax Adjusted $
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 $
(657) $
(722)
SVA $
37 $
70
---
The Company evaluates its business results on the basis of accounting principles generally accepted in the United States. In addition, it uses a metric referred to as Shareholder Value Added (SVA), which management believes is an appropriate measure for the performance of its businesses.
SVA is, in effect, the pretax profit left over after subtracting the cost of enterprise capital. The Company is aiming for a sustained creation of SVA and is using this metric for various performance goals. Certain compensation is also determined on the basis of performance using this
measure. For purposes of determining SVA, each of the equipment segments is assessed a pretax cost of assets, which on an annual basis is approximately 12 percent of the segment's average identifiable operating assets during the applicable period with inventory at standard cost.
Management believes that valuing inventories at standard cost more closely approximates the current cost of inventory and the Company's investment in the asset. The Financial Services segment is assessed an annual pretax cost of approximately 13 percent of the segment's average equity
(15 percent in 2018). The cost of assets or equity, as applicable, is deducted from the operating profit or added to the operating loss of each segment to determine the amount of SVA.
* On December 1, 2017, the Company acquired the stock and certain assets of substantially all of Wirtgen Group Holding GmbH's operations (Wirtgen), the leading manufacturer worldwide of road building equipment. Wirtgen is included in the construction and forestry segment. Wirtgen is
excluded from the metrics above.
** The 2018 SVA calculation was adjusted for certain effects of U.S. Tax Reform legislation enacted on December 22, 2017 due to the significant discrete income tax benefit in 2018. The 2019 SVA is calculated with unadjusted U.S. GAAP information.
---
View original content:http://www.prnewswire.com/news-releases/deere-announces-net-income-of-3-253-billion-for-year-300965759.html
SOURCE Deere & Company
