UNITED STATES

 

SECURITIES AND EXCHANGE COMMISSION

 

Washington, D.C. 20549

 


 

FORM 8-K

 


 

CURRENT REPORT

 

Pursuant to Section 13 or 15(d) of The Securities Exchange Act of 1934

 

Date of Report:  August 21, 2015

(Date of earliest event reported)

 

DEERE & COMPANY

(Exact name of registrant as specified in its charter)

 

DELAWARE

 

1-4121

 

36-2382580

(State or other jurisdiction of
incorporation)

 

(Commission File Number)

 

(IRS Employer Identification No.)

 

One John Deere Place

Moline, Illinois 61265

(Address of principal executive offices and zip code)

 

(309) 765-8000

(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:

 

o  Written communications pursuant to Rule 425 under the Securities Act (17 CFR 230.425)

 

o  Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17 CFR 240.14a-12)

 

o  Pre-commencement communications pursuant to Rule 14d-2(b) under the Exchange Act (17 CFR 240.14d-2(b))

 

o  Pre-commencement communications pursuant to Rule 13e-4(c) under the Exchange Act (17 CFR 240.13e-4(c))

 

 



 

Items 2.02

 

and 8.01

Results of Operations and Financial Condition and Other Events.

 

 

 

The following consists of Deere & Company’s press release dated August 21, 2015 concerning Third Quarter of Fiscal 2015 financial results and supplemental financial information filed as Exhibit 99.1 to this report and incorporated by reference herein.

 

 

Item 9.01

Financial Statements and Exhibits.

 

 

 

(d)                   Exhibits

 

 

 

                               (99.1)    Press release and supplemental financial information (Filed herewith)

 

 

Items 2.02

 

and 7.01

Results of Operations and Financial Condition and Regulation FD Disclosure (Furnished herewith)

 

 

 

The attached schedules of Other Financial Information (Exhibit 99.2) and Third Quarter 2015 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.

 

2



 

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.

 

 

DEERE & COMPANY

 

 

 

 

 

 

 

By:

/s/ Todd E. Davies

 

 

Todd E. Davies

 

 

Secretary

 

 

 

 

 

 

Dated:  August 21, 2015

 

 

 

3





 

 

Exhibit 99.1

(Filed herewith)

 

 

News Release

 

Media Contact:

Ken Golden

Director, Global Public Relations

Deere & Company

309-765-5678

 

 

Deere Announces Third-Quarter Earnings of $512 Million

 

·                  Lower demand for agricultural and construction equipment leads to decline in sales and earnings.

 

·                  All businesses remain solidly profitable.

 

·                  Results aided by sound execution and cost management.

 

 

MOLINE, Illinois (August 21, 2015) — Net income attributable to Deere & Company was $511.6 million, or $1.53 per share, for the third quarter ended July 31, compared with $850.7 million, or $2.33 per share, for the same period last year.

 

For the first nine months of the year, net income attributable to Deere & Company was $1.589 billion, or $4.67 per share, compared with $2.513 billion, or $6.79 per share, last year.

 

Worldwide net sales and revenues decreased 20 percent, to $7.594 billion, for the third quarter and were down 18 percent, to $22.147 billion, for nine months. Net sales of the equipment operations were $6.840 billion for the quarter and $19.843 billion for nine months, compared with $8.723 billion and $24.918 billion for the periods last year.

 

“John Deere’s third-quarter results reflected the continuing impact of the downturn in the farm economy as well as lower demand for construction equipment,” said Samuel R. Allen, chairman and chief executive officer. “Nevertheless, all of Deere’s businesses remained solidly profitable, benefiting from the sound execution of our business plans and the success of our efforts to develop a more agile cost structure. As a result, the company continues to be well-positioned to provide customers with technologically advanced products and services, while funding its growth plans and returning cash to stockholders.”

 

 

Summary of Operations

 

 

Net sales of the worldwide equipment operations declined 22 percent for the quarter and 20 percent for nine months compared with the same periods a year ago. Sales included

 

 

Deere Announces Third-Quarter Earnings

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price realization of 2 percent for the quarter and nine months. Additionally, sales included an unfavorable currency-translation effect of 6 percent for the quarter and 4 percent for nine months. Equipment net sales in the United States and Canada decreased 21 percent for the quarter and 17 percent year to date. Outside the U.S. and Canada, net sales fell 23 percent for the quarter and 26 percent for nine months, with unfavorable currency-translation effects of 12 percent and 9 percent for the periods.

 

Deere’s equipment operations reported operating profit of $601 million for the quarter and $1.842 billion for nine months, compared with $1.135 billion and $3.387 billion last year. For both periods, the decline was due primarily to lower shipment volumes, the impact of a less favorable product mix, and the unfavorable effects of foreign-currency exchange. These factors were partially offset by price realization and lower production costs for the quarter and by price realization, lower selling, administrative and general expenses, and lower production costs for the year to date.

 

Net income of the company’s equipment operations was $344 million for the third quarter and $1.109 billion for the first nine months, compared with $680 million and $2.061 billion in 2014. In addition to the operating factors mentioned above, a lower effective tax rate benefited both quarterly and year-to-date results.

 

Financial services reported net income attributable to Deere & Company of $153.4 million for the quarter and $480.0 million for nine months compared with $162.3 million and $452.2 million last year. Lower results for the quarter were primarily due to less favorable financing spreads, partially offset by lower selling, administrative and general expenses. Year-to-date results improved as a result of the previously announced crop insurance sale and higher crop insurance margins experienced prior to divestiture, growth in the average credit portfolio, and lower selling, administrative and general expenses, partially offset by less favorable financing spreads. Year-to-date results in 2014 also benefited from a more favorable effective tax rate.

 

 

Company Outlook & Summary

 

 

Company equipment sales are projected to decrease about 21 percent for fiscal 2015 and to be down about 24 percent for the fourth quarter compared with year-ago periods.  Included in the forecast is a negative foreign-currency translation effect of about 4 percent for the full year and 5 percent for the fourth quarter. For fiscal 2015, net income attributable to Deere & Company is anticipated to be about $1.8 billion.

 

 

Deere Announces Third-Quarter Earnings

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According to Allen, Deere’s performance in 2015 underscores its success establishing a wider range of revenue sources and more durable business model. “By continuing to report solid profits in a difficult environment, the company is showing great resilience and performing much better than in previous agricultural downturns.”

 

Longer term, Allen said he remained quite confident about the company’s prospects. “We believe our steady investment in new products and geographies will make Deere the provider of choice for a growing global customer base and that the impact of these actions will become increasingly clear when our end markets recover,” said Allen. “In our view, favorable trends based on a growing, more affluent, and increasingly mobile population, have ample staying power. For all these reasons, we have confidence in the company’s present course and its ability to deliver significant value to customers and investors in the years ahead.”

 

 

* * *

 

Equipment Division Performance

 

 

Agriculture & Turf. Sales fell 24 percent for the quarter and 25 percent for nine months due largely to lower shipment volumes and the unfavorable effects of currency translation. These factors were partially offset by price realization.

 

Operating profit was $472 million for the quarter and $1.378 billion year to date, compared with $941 million and $2.967 billion, respectively, last year. Lower results for both periods were driven primarily by the impact of lower shipment volumes, a less favorable product mix, and the unfavorable effects of foreign-currency exchange. Partially offsetting these factors were price realization and lower production costs in the third quarter and price realization, lower selling, administrative and general expenses, and lower production costs for the first nine months.

 

 

Construction & Forestry. Construction and forestry sales decreased 13 percent for the quarter and were flat for the first nine months. Sales for the quarter were lower mainly as a result of lower shipment volumes and the unfavorable effects of currency translation, partially offset by price realization. On a year-to-date basis, higher shipment volumes and price realization were offset by the unfavorable effects of currency translation.

 

Operating profit was $129 million for the quarter and $464 million for nine months, compared with $194 million and $420 million for the corresponding periods last year. Operating profit decreased for the quarter mainly due to lower shipment volumes and the

 

 

Deere Announces Third-Quarter Earnings

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unfavorable effects of foreign-currency exchange, partially offset by price realization. Year-to-date results improved due to price realization, lower selling, administrative and general expenses, and higher shipment volumes, partially offset by unfavorable foreign-currency effects.

 

 

Market Conditions & Outlook

 

 

Agriculture & Turf. Deere’s worldwide sales of agriculture and turf equipment are forecast to decrease by about 25 percent for fiscal-year 2015, including a negative currency-translation effect of about 5 percent.

 

Lower commodity prices and falling farm incomes are continuing to pressure demand for agricultural machinery, with the declines most pronounced in higher-horsepower models. Conditions are more positive in the U.S. livestock sector, supporting some improvement in the sales of smaller sizes of equipment. Based on these factors, industry sales for agricultural equipment in the U.S. and Canada are forecast to be down about 25 percent for 2015.

 

Full-year 2015 industry sales in the EU28 are forecast to be down about 10 percent, with the decline attributable to lower crop prices and farm incomes as well as pressure on the dairy sector. In South America, industry sales of tractors and combines are projected to be down 20 to 25 percent mainly as a result of economic uncertainty in Brazil and higher interest rates on government-sponsored financing. Asian sales are projected to be down moderately, with most of the decline in India and China. Industry sales in the Commonwealth of Independent States are expected to be down significantly due to economic pressures and tight credit conditions.

 

Industry sales of turf and utility equipment in the U.S. and Canada are expected to be flat to up 5 percent for 2015, benefiting from general economic growth.

 

Construction & Forestry. Deere’s worldwide sales of construction and forestry equipment are forecast to be down about 5 percent for 2015, including a negative currency-translation effect of about 3 percent.

 

The forecast decline in sales reflects the impact of weakening conditions in the North American energy sector, as well as lower sales outside the U.S. and Canada. In forestry, global sales are expected to be flat to up 5 percent in comparison with last year’s attractive levels, as gains in the U.S. and Europe are offset by declines elsewhere.

 

 

Deere Announces Third-Quarter Earnings

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Financial Services. Fiscal-year 2015 net income attributable to Deere & Company for the financial services operations is expected to be approximately $630 million. The forecast improvement over last year is primarily due to the divestiture of the crop insurance business and growth in the average credit portfolio. These factors are being partially offset by less favorable financing spreads, a less favorable tax rate, and an increased provision for credit losses.

 

 

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.

 

Net income attributable to John Deere Capital Corporation was $126.9 million for the third quarter and $376.4 million year to date, compared with $129.2 million and $390.0 million for the respective periods last year. The decline for the quarter was primarily due to less favorable financing spreads, partially offset by lower selling, administrative and general expenses. The decline in year-to-date results was primarily due to less favorable financing spreads, partially offset by growth in the credit portfolio and lower selling, administrative and general expenses.  Last year’s year-to-date results also benefited from a favorable effective tax rate.

 

Net receivables and leases financed by JDCC were $33.400 billion at July 31, 2015, compared with $33.534 billion last year.

 

 

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, trends and operating periods involve certain factors that are subject to change, and important 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 many interrelated factors that affect farmers’ confidence.  These factors include demand for agricultural products, world grain stocks, weather conditions

 

 

Deere Announces Third-Quarter Earnings

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(including its effects on timely planting and harvesting), soil conditions (including low subsoil moisture), harvest yields, prices for commodities and livestock, crop and livestock production expenses, availability of transport for crops, the growth and sustainability of non-food uses for some crops (including ethanol and biodiesel production), real estate values, available acreage for farming, the land ownership policies of various governments, changes in government farm programs and policies (including those in Argentina, Brazil, China, the European Union, India, Russia and the U.S.), international reaction to such programs, changes in and effects of crop insurance programs, global trade agreements, animal diseases and their effects on poultry, beef and pork consumption and prices, crop pests and diseases, and the level of farm product exports (including concerns about genetically modified organisms).

 

Factors affecting the outlook for the company’s turf and utility equipment include consumer confidence, weather conditions, customer profitability, consumer borrowing patterns, consumer purchasing preferences, housing starts, infrastructure investment, spending by municipalities and golf courses, and consumable input costs.

 

Consumer spending patterns, real estate and housing prices, the number of housing starts and interest rates are especially important to sales of the company’s construction and forestry equipment.  The levels of public and non-residential construction also impact the results of the company’s construction and forestry segment.  Prices for pulp, paper, lumber and structural panels are important to sales of forestry equipment.

 

All of the company’s businesses and its reported results are affected by general economic conditions in the global markets and industries in which the company operates, especially material changes in economic activity in these markets and industries; customer confidence in general economic conditions; foreign currency exchange rates and their volatility, especially fluctuations in the value of the U.S. dollar; interest rates; and inflation and deflation rates.  Government spending and taxing could adversely affect the economy, employment, consumer and corporate spending, and company results.

 

Customer and company operations and results could be affected by changes in weather patterns (including the effects of drought and drier than normal conditions in certain markets); 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 and the threat thereof and the response thereto; natural disasters; and the spread of major epidemics.

 

 

Deere Announces Third-Quarter Earnings

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Significant changes in market liquidity conditions 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.

 

Additional factors that could materially affect the company’s operations, access to capital, expenses and results include changes in 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 (including protectionist, economic, punitive and expropriation policies and trade and licensing restrictions that could disrupt international commerce); actions by the U.S. Federal Reserve Board and other central banks; actions by the U.S. Securities and Exchange Commission (SEC), the U.S. Commodity Futures Trading Commission and other financial 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 in labor regulations; changes to accounting standards; changes in tax rates, estimates, and regulations and company actions related thereto; compliance with U.S. and foreign laws when expanding to new markets and otherwise; and actions by other regulatory bodies including changes in laws and regulations affecting the sectors in which the company operates.  Trade, financial and other sanctions imposed by the U.S., the European Union, Russia and other countries could negatively impact company assets, operations, sales, forecasts and results.  Customer and company operations and results also could be affected by changes to GPS radio frequency bands or their permitted uses.

 

Other factors that could materially affect results include production, design and technological innovations and difficulties, including capacity and supply constraints and prices; 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

 

 

Deere Announces Third-Quarter Earnings

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suppliers; disruptions of infrastructures that support communications, operations or distribution; the failure of suppliers to comply with laws, regulations and company policy pertaining to employment, human rights, health, safety, the environment 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 new products; the success of new product initiatives and customer acceptance of new products; changes in customer product preferences and sales mix whether as a result of changes in equipment design to meet government regulations or for other reasons; 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; labor relations and contracts; acquisitions and divestitures of businesses; the integration of new businesses; the implementation of organizational changes; difficulties related to the conversion and implementation of enterprise resource planning systems that disrupt business, negatively impact supply or distribution relationships or create higher than expected costs; security breaches and other disruptions to the company’s information technology infrastructure; and changes in company declared dividends and common stock issuances and repurchases.

 

Company results are also affected by changes in the level and funding of employee retirement benefits, changes in market values of investment assets, the level of interest and discount rates, and compensation, retirement and mortality rates which impact retirement benefit costs, and significant changes in health care costs including those which may result from governmental action.

 

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, to fund operations and costs associated with engaging in diversified funding activities, and to fund purchases of the company’s products.  If general economic conditions deteriorate or capital markets become 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

 

 

Deere Announces Third-Quarter Earnings

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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 potentially could materially affect the company’s financial results, is included in the company’s other filings with the SEC (including, but not limited to, the factors discussed in Item 1A. Risk Factors of the company’s most recent annual report on Form 10-K and quarterly reports on Form 10-Q).

 

 

Deere Announces Third-Quarter Earnings

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Third Quarter 2015 Press Release

(in millions of dollars)

Unaudited

 

 

 

Three Months Ended

 

Nine Months Ended

 

 

July 31

 

July 31

 

 

 

 

 

 

%

 

 

 

 

 

%

 

 

2015

 

2014

 

Change

 

2015

 

2014

 

Change

Net sales and revenues:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Agriculture and turf

 

$

5,308

 

 

$

6,969

 

 

-24

 

$

15,155

 

 

$

20,211

 

 

-25

Construction and forestry

 

1,532

 

 

1,754

 

 

-13

 

4,688

 

 

4,707

 

 

 

Total net sales

 

6,840

 

 

8,723

 

 

-22

 

19,843

 

 

24,918

 

 

-20

Financial services

 

636

 

 

656

 

 

-3

 

1,937

 

 

1,815

 

 

+7

Other revenues

 

118

 

 

121

 

 

-2

 

367

 

 

369

 

 

-1

Total net sales and revenues

 

$

7,594

 

 

$

9,500

 

 

-20

 

$

22,147

 

 

$

27,102

 

 

-18

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Operating profit: *

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Agriculture and turf

 

$

472

 

 

$

941

 

 

-50

 

$

1,378

 

 

$

2,967

 

 

-54

Construction and forestry

 

129

 

 

194

 

 

-34

 

464

 

 

420

 

 

+10

Financial services

 

239

 

 

249

 

 

-4

 

737

 

 

660

 

 

+12

Total operating profit

 

840

 

 

1,384

 

 

-39

 

2,579

 

 

4,047

 

 

-36

Reconciling items **

 

(87

)

 

(83

)

 

+5

 

(254

)

 

(324

)

 

-22

Income taxes

 

(241

)

 

(450

)

 

-46

 

(736

)

 

(1,210

)

 

-39

Net income attributable to Deere & Company

 

$

512

 

 

$

851

 

 

-40

 

$

1,589

 

 

$

2,513

 

 

-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 and net income attributable to noncontrolling interests.

 

14



 

DEERE & COMPANY

STATEMENT OF CONSOLIDATED INCOME

For the Three Months Ended July 31, 2015 and 2014

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

 

 

 

2015

 

2014

 

Net Sales and Revenues

 

 

 

 

 

Net sales

 

$

6,839.5

 

$

8,723.0

 

Finance and interest income

 

596.7

 

573.5

 

Other income

 

157.5

 

203.7

 

Total

 

7,593.7

 

9,500.2

 

 

 

 

 

 

 

Costs and Expenses

 

 

 

 

 

Cost of sales

 

5,358.0

 

6,611.3

 

Research and development expenses

 

346.8

 

362.1

 

Selling, administrative and general expenses

 

755.3

 

820.7

 

Interest expense

 

171.5

 

153.9

 

Other operating expenses

 

223.6

 

260.0

 

Total

 

6,855.2

 

8,208.0

 

 

 

 

 

 

 

Income of Consolidated Group before Income Taxes

 

738.5

 

1,292.2

 

Provision for income taxes

 

241.0

 

450.2

 

Income of Consolidated Group

 

497.5

 

842.0

 

Equity in income of unconsolidated affiliates

 

14.2

 

8.9

 

Net Income

 

511.7

 

850.9

 

Less: Net income attributable to noncontrolling interests

 

.1

 

.2

 

Net Income Attributable to Deere & Company

 

$

511.6

 

$

850.7

 

 

 

 

 

 

 

Per Share Data

 

 

 

 

 

Basic

 

$

1.54

 

$

2.35

 

Diluted

 

$

1.53

 

$

2.33

 

 

 

 

 

 

 

Average Shares Outstanding

 

 

 

 

 

Basic

 

331.4

 

361.9

 

Diluted

 

334.1

 

365.1

 

 

 

See Condensed Notes to Interim Consolidated Financial Statements.

 

15



 

DEERE & COMPANY
STATEMENT OF CONSOLIDATED INCOME
For the Nine Months Ended July 31, 2015 and 2014
(In millions of dollars and shares except per share amounts) Unaudited

 

 

 

2015

 

2014

 

Net Sales and Revenues

 

 

 

 

 

Net sales

 

$

19,843.1

 

$

24,917.8

 

Finance and interest income

 

1,766.7

 

1,649.0

 

Other income

 

537.7

 

535.3

 

Total

 

22,147.5

 

27,102.1

 

 

 

 

 

 

 

Costs and Expenses

 

 

 

 

 

Cost of sales

 

15,472.8

 

18,678.7

 

Research and development expenses

 

1,021.1

 

1,039.9

 

Selling, administrative and general expenses

 

2,154.2

 

2,433.0

 

Interest expense

 

517.1

 

491.5

 

Other operating expenses

 

659.1

 

738.1

 

Total

 

19,824.3

 

23,381.2

 

 

 

 

 

 

 

Income of Consolidated Group before Income Taxes

 

2,323.2

 

3,720.9

 

Provision for income taxes

 

735.6

 

1,209.6

 

Income of Consolidated Group

 

1,587.6

 

2,511.3

 

Equity in income of unconsolidated affiliates

 

1.8

 

2.2

 

Net Income

 

1,589.4

 

2,513.5

 

Less: Net income attributable to noncontrolling interests

 

.6

 

1.0

 

Net Income Attributable to Deere & Company

 

$

1,588.8

 

$

2,512.5

 

 

 

 

 

 

 

Per Share Data

 

 

 

 

 

Basic

 

$

4.71

 

$

6.85

 

Diluted

 

$

4.67

 

$

6.79

 

 

 

 

 

 

 

Average Shares Outstanding

 

 

 

 

 

Basic

 

337.3

 

366.8

 

Diluted

 

339.9

 

370.1

 

 

 

See Condensed Notes to Interim Consolidated Financial Statements.

 

16



 

DEERE & COMPANY

CONDENSED CONSOLIDATED BALANCE SHEET

(In millions of dollars) Unaudited

 

 

 

July 31

 

October 31

 

July 31

 

 

 

2015

 

2014

 

2014

 

Assets

 

 

 

 

 

 

 

Cash and cash equivalents

 

$

4,130.8

 

$

3,787.0

 

$

3,034.7

 

Marketable securities

 

421.1

 

1,215.1

 

1,489.4

 

Receivables from unconsolidated affiliates

 

43.2

 

30.2

 

33.3

 

Trade accounts and notes receivable - net

 

4,220.4

 

3,277.6

 

4,551.8

 

Financing receivables - net

 

24,973.4

 

27,422.2

 

27,079.9

 

Financing receivables securitized - net

 

4,737.8

 

4,602.3

 

4,264.2

 

Other receivables

 

823.1

 

1,500.3

 

1,193.1

 

Equipment on operating leases - net

 

4,426.0

 

4,015.5

 

3,580.0

 

Inventories

 

4,319.0

 

4,209.7

 

5,439.0

 

Property and equipment - net

 

5,126.4

 

5,577.8

 

5,385.5

 

Investments in unconsolidated affiliates

 

310.6

 

303.2

 

310.2

 

Goodwill

 

715.9

 

791.2

 

829.8

 

Other intangible assets - net

 

57.8

 

68.8

 

69.4

 

Retirement benefits

 

335.0

 

262.0

 

611.7

 

Deferred income taxes

 

2,705.0

 

2,776.6

 

2,564.0

 

Other assets

 

1,586.7

 

1,496.9

 

1,312.5

 

Total Assets

 

$

58,932.2

 

$

61,336.4

 

$

61,748.5

 

 

 

 

 

 

 

 

 

Liabilities and Stockholders’ Equity

 

 

 

 

 

 

 

Short-term borrowings

 

$

9,347.9

 

$

8,019.2

 

$

8,580.8

 

Short-term securitization borrowings

 

4,595.4

 

4,558.5

 

4,142.8

 

Payables to unconsolidated affiliates

 

73.7

 

101.0

 

90.4

 

Accounts payable and accrued expenses

 

7,235.8

 

8,554.1

 

8,432.9

 

Deferred income taxes

 

150.9

 

160.9

 

160.1

 

Long-term borrowings

 

23,200.9

 

24,380.7

 

24,035.5

 

Retirement benefits and other liabilities

 

6,602.6

 

6,496.5

 

5,473.5

 

Total liabilities

 

51,207.2

 

52,270.9

 

50,916.0

 

Total Deere & Company stockholders’ equity

 

7,723.1

 

9,062.6

 

10,830.0

 

Noncontrolling interests

 

1.9

 

2.9

 

2.5

 

Total stockholders’ equity

 

7,725.0

 

9,065.5

 

10,832.5

 

Total Liabilities and Stockholders’ Equity

 

$

58,932.2

 

$

61,336.4

 

$

61,748.5

 

 

 

See Condensed Notes to Interim Consolidated Financial Statements.

 

17



 

DEERE & COMPANY

STATEMENT OF CONSOLIDATED CASH FLOWS

For the Nine Months Ended July 31, 2015 and 2014

(In millions of dollars) Unaudited

 

 

 

2015

 

2014

 

Cash Flows from Operating Activities

 

 

 

 

 

Net income

 

$

1,589.4

 

$

2,513.5

 

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

 

 

 

 

 

Provision for credit losses

 

35.4

 

29.6

 

Provision for depreciation and amortization

 

1,029.2

 

957.4

 

Impairment charges

 

 

 

62.3

 

Share-based compensation expense

 

47.7

 

60.6

 

Undistributed earnings of unconsolidated affiliates

 

(5.2)

 

(2.3

)

Provision (credit) for deferred income taxes

 

73.0

 

(249.1

)

Changes in assets and liabilities:

 

 

 

 

 

Trade, notes and financing receivables related to sales

 

(598.0)

 

(1,679.3

)

Insurance receivables

 

333.4

 

35.5

 

Inventories

 

(941.5)

 

(1,102.9

)

Accounts payable and accrued expenses

 

(594.6)

 

(313.6

)

Accrued income taxes payable/receivable

 

(58.1)

 

207.3

 

Retirement benefits

 

293.4

 

215.0

 

Other

 

(12.3)

 

(51.9

)

Net cash provided by operating activities

 

1,191.8

 

682.1

 

 

 

 

 

 

 

Cash Flows from Investing Activities

 

 

 

 

 

Collections of receivables (excluding receivables related to sales)

 

11,517.9

 

11,586.6

 

Proceeds from maturities and sales of marketable securities

 

833.0

 

718.7

 

Proceeds from sales of equipment on operating leases

 

773.7

 

803.3

 

Proceeds from sales of businesses, net of cash sold

 

149.2

 

339.8

 

Cost of receivables acquired (excluding receivables related to sales)

 

(11,162.9)

 

(12,664.2

)

Purchases of marketable securities

 

(100.8)

 

(585.5

)

Purchases of property and equipment

 

(461.4)

 

(640.9

)

Cost of equipment on operating leases acquired

 

(1,355.7)

 

(1,049.5

)

Other

 

(23.4)

 

(75.6

)

Net cash provided by (used for) investing activities

 

169.6

 

(1,567.3

)

 

 

 

 

 

 

Cash Flows from Financing Activities

 

 

 

 

 

Increase (decrease) in total short-term borrowings

 

1,805.2

 

(76.7

)

Proceeds from long-term borrowings

 

3,639.8

 

6,672.2

 

Payments of long-term borrowings

 

(3,980.1)

 

(4,079.8

)

Proceeds from issuance of common stock

 

170.4

 

138.8

 

Repurchases of common stock

 

(1,833.9)

 

(1,631.1

)

Dividends paid

 

(617.9)

 

(568.6

)

Excess tax benefits from share-based compensation

 

18.5

 

28.5

 

Other

 

(56.9)

 

(50.4

)

Net cash provided by (used for) financing activities

 

(854.9)

 

432.9

 

 

 

 

 

 

 

Effect of Exchange Rate Changes on Cash and Cash Equivalents

 

(162.7)

 

(17.0

)

 

 

 

 

 

 

Net Increase (Decrease) in Cash and Cash Equivalents

 

343.8

 

(469.3

)

Cash and Cash Equivalents at Beginning of Period

 

3,787.0

 

3,504.0

 

Cash and Cash Equivalents at End of Period

 

$

4,130.8

 

$

3,034.7

 

 

 

See Condensed Notes to Interim Consolidated Financial Statements.

 

18



 

Condensed Notes to Interim Consolidated Financial Statements (Unaudited)

 

(1)         In March 2015, the Company closed the sale of all of the stock of its wholly-owned subsidiaries, John Deere Insurance Company and John Deere Risk Protection, Inc. (collectively the Crop Insurance operations) to Farmers Mutual Hail Insurance Company of Iowa. These operations were included in the Company’s financial services operating segment. At January 31, 2015, total assets of $381 million and liabilities of $267 million were classified as held for sale in the consolidated financial statements, which consisted of the following:

 

 

 

January 31, 2015

 

Cash and cash equivalents

 

$

13

 

Marketable securities

 

79

 

Other receivables

 

265

 

Other intangible assets - net

 

4

 

Other assets

 

20

 

Total assets held for sale

 

$

381

 

 

 

 

 

Account payable and accrued expenses, and
Total liabilities held for sale

 

$

267

 

 

The total amount of proceeds from the sale was approximately $154 million, including $5 million of cash and cash equivalents sold, with a gain recorded in other income of $42 million pretax and $40 million after-tax. The tax expense was partially offset by a change in a valuation allowance on a capital loss carryforward. The Company will provide certain business services for a fee during a transition period.

 

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

 

 

 

Three Months Ended

 

Nine Months Ended

 

 

 

July 31

 

July 31

 

 

 

2015

 

2014

 

2015

 

2014

 

 

 

 

 

 

 

 

 

 

 

Dividends declared

 

$

.60

 

$

.60

 

$

1.80

 

$

1.62

 

Dividends paid

 

$

.60

 

$

.51

 

$

1.80

 

$

1.53

 

 

(3)         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.

 

(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.

 

19



 

(5) SUPPLEMENTAL CONSOLIDATING DATA

STATEMENT OF INCOME

For the Three Months Ended July 31, 2015 and 2014

(In millions of dollars) Unaudited

 

EQUIPMENT OPERATIONS*

 

FINANCIAL SERVICES

 

 

 

2015

 

2014

 

2015

 

2014

 

Net Sales and Revenues

 

 

 

 

 

 

 

 

 

Net sales

 

$

6,839.5

 

$

8,723.0

 

 

 

 

 

Finance and interest income

 

20.8

 

14.2

 

$

644.3

 

$

634.2

 

Other income

 

140.8

 

147.2

 

51.2

 

85.6

 

Total

 

7,001.1

 

8,884.4

 

695.5

 

719.8

 

 

 

 

 

 

 

 

 

 

 

Costs and Expenses

 

 

 

 

 

 

 

 

 

Cost of sales

 

5,358.4

 

6,611.6

 

 

 

 

 

Research and development expenses

 

346.8

 

362.1

 

 

 

 

 

Selling, administrative and general expenses

 

633.5

 

684.5

 

123.9

 

138.8

 

Interest expense

 

69.6

 

61.1

 

113.6

 

107.3

 

Interest compensation to Financial Services

 

56.7

 

60.4

 

 

 

 

 

Other operating expenses

 

36.3

 

60.9

 

219.3

 

225.3

 

Total

 

6,501.3

 

7,840.6

 

456.8

 

471.4

 

 

 

 

 

 

 

 

 

 

 

Income of Consolidated Group before Income Taxes

 

499.8

 

1,043.8

 

238.7

 

248.4

 

Provision for income taxes

 

155.5

 

363.8

 

85.5

 

86.4

 

Income of Consolidated Group

 

344.3

 

680.0

 

153.2

 

162.0

 

 

 

 

 

 

 

 

 

 

 

Equity in Income of Unconsolidated
Subsidiaries and Affiliates

 

 

 

 

 

 

 

 

 

Financial Services

 

153.4

 

162.3

 

.2

 

.3

 

Other

 

14.0

 

8.6

 

 

 

 

 

Total

 

167.4

 

170.9

 

.2

 

.3

 

Net Income

 

511.7

 

850.9

 

153.4

 

162.3

 

Less: Net income attributable to noncontrolling interests

 

.1

 

.2

 

 

 

 

 

Net Income Attributable to Deere & Company

 

$

511.6

 

$

850.7

 

$

153.4

 

$

162.3

 

 

 

*       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)
STATEMENT OF INCOME

For the Nine Months Ended July 31, 2015 and 2014

(In millions of dollars) Unaudited

 

EQUIPMENT OPERATIONS*

 

FINANCIAL SERVICES

 

 

 

2015

 

2014

 

2015

 

2014

 

Net Sales and Revenues

 

 

 

 

 

 

 

 

 

Net sales

 

$

19,843.1

 

$

24,917.8

 

 

 

 

 

Finance and interest income

 

58.8

 

50.0

 

$

1,900.9

 

$

1,795.2

 

Other income

 

451.2

 

447.6

 

201.4

 

188.6

 

Total

 

20,353.1

 

25,415.4

 

2,102.3

 

1,983.8

 

 

 

 

 

 

 

 

 

 

 

Costs and Expenses

 

 

 

 

 

 

 

 

 

Cost of sales

 

15,474.2

 

18,679.5

 

 

 

 

 

Research and development expenses

 

1,021.1

 

1,039.9

 

 

 

 

 

Selling, administrative and general expenses

 

1,794.1

 

2,046.9

 

366.9

 

394.2

 

Interest expense

 

208.0

 

216.5

 

346.0

 

313.0

 

Interest compensation to Financial Services

 

156.0

 

157.4

 

 

 

 

 

Other operating expenses

 

112.6

 

212.8

 

653.3

 

618.0

 

Total

 

18,766.0

 

22,353.0

 

1,366.2

 

1,325.2

 

 

 

 

 

 

 

 

 

 

 

Income of Consolidated Group before Income Taxes

 

1,587.1

 

3,062.4

 

736.1

 

658.6

 

Provision for income taxes

 

478.5

 

1,001.7

 

257.1

 

208.0

 

Income of Consolidated Group

 

1,108.6

 

2,060.7

 

479.0

 

450.6

 

 

 

 

 

 

 

 

 

 

 

Equity in Income of Unconsolidated
Subsidiaries and Affiliates

 

 

 

 

 

 

 

 

 

Financial Services

 

480.0

 

452.2

 

1.0

 

1.6

 

Other

 

.8

 

.6

 

 

 

 

 

Total

 

480.8

 

452.8

 

1.0

 

1.6

 

Net Income

 

1,589.4

 

2,513.5

 

480.0

 

452.2

 

Less: Net income attributable to noncontrolling interests

 

.6

 

1.0

 

 

 

 

 

Net Income Attributable to Deere & Company

 

$

1,588.8

 

$

2,512.5

 

$

480.0

 

$

452.2

 

 

 

*       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)

CONDENSED BALANCE SHEET

(In millions of dollars) Unaudited

 

EQUIPMENT OPERATIONS*

 

FINANCIAL SERVICES

 

 

 

July 31

 

October 31

 

July 31

 

July 31

 

October 31

 

July 31

 

 

 

2015

 

2014

 

2014

 

2015

 

2014

 

2014

 

Assets

 

 

 

 

 

 

 

 

 

 

 

 

 

Cash and cash equivalents

 

$

2,907.1

 

$

2,569.2

 

$

1,855.0

 

$

1,223.7

 

$

1,217.8

 

$

1,179.8

 

Marketable securities

 

47.4

 

700.4

 

1,002.5

 

373.7

 

514.7

 

486.9

 

Receivables from unconsolidated subsidiaries and affiliates

 

2,941.5

 

3,663.9

 

4,865.7

 

 

 

 

 

 

 

Trade accounts and notes receivable - net

 

581.2

 

706.0

 

819.1

 

4,780.9

 

3,554.4

 

4,923.0

 

Financing receivables - net

 

4.7

 

18.5

 

7.1

 

24,968.7

 

27,403.7

 

27,072.8

 

Financing receivables securitized - net

 

 

 

 

 

 

 

4,737.8

 

4,602.3

 

4,264.2

 

Other receivables

 

779.2

 

848.0

 

802.6

 

76.2

 

659.0

 

421.1

 

Equipment on operating leases - net

 

 

 

 

 

 

 

4,426.0

 

4,015.5

 

3,580.0

 

Inventories

 

4,319.0

 

4,209.7

 

5,439.0

 

 

 

 

 

 

 

Property and equipment - net

 

5,072.4

 

5,522.5

 

5,330.3

 

54.0

 

55.3

 

55.1

 

Investments in unconsolidated subsidiaries and affiliates

 

4,923.8

 

5,106.5

 

5,005.9

 

10.2

 

10.9

 

11.3

 

Goodwill

 

715.9

 

791.2

 

829.8

 

 

 

 

 

 

 

Other intangible assets - net

 

57.8

 

64.8

 

65.4

 

 

 

4.0

 

4.0

 

Retirement benefits

 

335.5

 

263.5

 

579.3

 

27.1

 

32.9

 

34.3

 

Deferred income taxes

 

3,028.6

 

2,981.9

 

2,778.3

 

61.6

 

64.9

 

70.8

 

Other assets

 

859.4

 

850.6

 

680.5

 

730.0

 

648.2

 

633.3

 

Total Assets

 

$

26,573.5

 

$

28,296.7

 

$

30,060.5

 

$

41,469.9

 

$

42,783.6

 

$

42,736.6

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Liabilities and Stockholders’ Equity

 

 

 

 

 

 

 

 

 

 

 

 

 

Short-term borrowings

 

$

650.8

 

$

434.1

 

$

1,042.6

 

$

8,697.1

 

$

7,585.1

 

$

7,538.2

 

Short-term securitization borrowings

 

 

 

 

 

 

 

4,595.4

 

4,558.5

 

4,142.8

 

Payables to unconsolidated subsidiaries and affiliates

 

73.7

 

101.0

 

90.9

 

2,898.3

 

3,633.7

 

4,831.9

 

Accounts payable and accrued expenses

 

7,025.1

 

7,518.4

 

7,938.3

 

1,387.3

 

2,027.0

 

1,716.9

 

Deferred income taxes

 

79.9

 

87.1

 

84.4

 

456.2

 

344.1

 

360.8

 

Long-term borrowings

 

4,475.4

 

4,642.5

 

4,678.7

 

18,725.5

 

19,738.2

 

19,356.7

 

Retirement benefits and other liabilities

 

6,543.6

 

6,448.1

 

5,393.1

 

86.7

 

82.8

 

82.3

 

Total liabilities

 

18,848.5

 

19,231.2

 

19,228.0

 

36,846.5

 

37,969.4

 

38,029.6

 

Total Deere & Company stockholders’ equity

 

7,723.1

 

9,062.6

 

10,830.0

 

4,623.4

 

4,814.2

 

4,707.0

 

Noncontrolling interests

 

1.9

 

2.9

 

2.5

 

 

 

 

 

 

 

Total stockholders’ equity

 

7,725.0

 

9,065.5

 

10,832.5

 

4,623.4

 

4,814.2

 

4,707.0

 

Total Liabilities and Stockholders’ Equity

 

$

26,573.5

 

$

28,296.7

 

$

30,060.5

 

$

41,469.9

 

$

42,783.6

 

$

42,736.6

 

 

 

* 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



 

SUPPLEMENTAL CONSOLIDATING DATA (Continued)

STATEMENT OF CASH FLOWS

For the Nine Months Ended July 31, 2015 and 2014

(In millions of dollars) Unaudited

 

EQUIPMENT OPERATIONS*

 

FINANCIAL SERVICES

 

 

 

2015

 

2014

 

2015

 

2014

 

Cash Flows from Operating Activities

 

 

 

 

 

 

 

 

 

Net income

 

$

1,589.4

 

$

2,513.5

 

$

480.0

 

$

452.2

 

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

 

 

 

 

 

 

 

 

 

Provision for credit losses

 

2.1

 

3.2

 

33.3

 

26.4

 

Provision for depreciation and amortization

 

605.6

 

592.2

 

503.2

 

417.8

 

Impairment charges

 

 

 

62.3

 

 

 

 

 

Undistributed earnings of unconsolidated subsidiaries and affiliates

 

(4.9)

 

(303.2)

 

(.8)

 

(1.4

)

Provision (credit) for deferred income taxes

 

(39.6)

 

(216.6)

 

112.6

 

(32.5

)

Changes in assets and liabilities:

 

 

 

 

 

 

 

 

 

Trade receivables

 

37.2

 

151.8

 

 

 

 

 

Insurance receivables

 

 

 

 

 

333.4

 

35.5

 

Inventories

 

(473.2)

 

(604.4)

 

 

 

 

 

Accounts payable and accrued expenses

 

(113.4)

 

13.3

 

(322.3)

 

4.1

 

Accrued income taxes payable/receivable

 

(82.9)

 

181.5

 

24.8

 

25.8

 

Retirement benefits

 

282.1

 

203.2

 

11.3

 

11.8

 

Other

 

145.8

 

168.4

 

(25.5)

 

(37.0

)

Net cash provided by operating activities

 

1,948.2

 

2,765.2

 

1,150.0

 

902.7

 

 

 

 

 

 

 

 

 

 

 

Cash Flows from Investing Activities

 

 

 

 

 

 

 

 

 

Collections of receivables (excluding trade and wholesale)

 

 

 

 

 

12,516.5

 

12,618.3

 

Proceeds from maturities and sales of marketable securities

 

700.1

 

700.1

 

132.9

 

18.6

 

Proceeds from sales of equipment on operating leases

 

 

 

 

 

773.7

 

803.3

 

Proceeds from sales of businesses, net of cash sold

 

 

 

339.8

 

149.2

 

 

 

Cost of receivables acquired (excluding trade and wholesale)

 

 

 

 

 

(12,063.2)

 

(13,802.5

)

Purchases of marketable securities

 

(49.1)

 

(504.1)

 

(51.7)

 

(81.4

)

Purchases of property and equipment

 

(458.1)

 

(639.5)

 

(3.3)

 

(1.4

)

Cost of equipment on operating leases acquired

 

 

 

 

 

(1,988.6)

 

(1,723.2

)

Increase in trade and wholesale receivables

 

 

 

 

 

(924.0)

 

(2,055.6

)

Other

 

2.2

 

(103.0)

 

(22.1)

 

(26.7

)

Net cash provided by (used for) investing activities

 

195.1

 

(206.7)

 

(1,480.6)

 

(4,250.6

)

 

 

 

 

 

 

 

 

 

 

Cash Flows from Financing Activities

 

 

 

 

 

 

 

 

 

Increase (decrease) in total short-term borrowings

 

318.5

 

537.2

 

1,486.7

 

(613.9

)

Change in intercompany receivables/payables

 

447.2

 

(1,442.7)

 

(447.2)

 

1,442.7

 

Proceeds from long-term borrowings

 

6.7

 

7.0

 

3,633.1

 

6,665.2

 

Payments of long-term borrowings

 

(147.1)

 

(757.2)

 

(3,833.0)

 

(3,322.6

)

Proceeds from issuance of common stock

 

170.4

 

138.8

 

 

 

 

 

Repurchases of common stock

 

(1,833.9)

 

(1,631.1)

 

 

 

 

 

Dividends paid

 

(617.9)

 

(568.6)

 

(479.6)

 

(150.0

)

Excess tax benefits from share-based compensation

 

18.5

 

28.5

 

 

 

 

 

Other

 

(38.1)

 

(21.4)

 

9.5

 

25.2

 

Net cash provided by (used for) financing activities

 

(1,675.7)

 

(3,709.5)

 

369.5

 

4,046.6

 

 

 

 

 

 

 

 

 

 

 

Effect of Exchange Rate Changes on Cash and Cash Equivalents

 

(129.7)

 

(17.3)

 

(33.0)

 

.3

 

 

 

 

 

 

 

 

 

 

 

Net Increase (Decrease) in Cash and Cash Equivalents

 

337.9

 

(1,168.3)

 

5.9

 

699.0

 

Cash and Cash Equivalents at Beginning of Period

 

2,569.2

 

3,023.3

 

1,217.8

 

480.8

 

Cash and Cash Equivalents at End of Period

 

$

2,907.1

 

$

1,855.0

 

$

1,223.7

 

$

1,179.8

 

 

 

* 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.

 

23




 

 

 

 

 

Deere & Company

 

Exhibit 99.2

 

Other Financial Information

 

(Furnished herewith)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

For the Nine Months Ended July 31, 

 

Equipment Operations

Agriculture and Turf

Construction and Forestry

Dollars in millions

 

2015

2014

2015

2014

2015

2014

Net Sales

 

 $

19,843

 

$

24,918

 

$

15,155

 

$

20,211

 

$

4,688

 

 $

4,707

 

Average Identifiable Assets

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

With Inventories at LIFO

 

 $

12,720

 

$

14,417

 

$

9,260

 

$

10,971

 

$

3,460

 

 $

3,446

 

With Inventories at Standard Cost

 

 $

14,073

 

$

15,802

 

$

10,383

 

$

12,122

 

$

3,690

 

 $

3,680

 

Operating Profit

 

 $

1,842

 

$

3,387

 

$

1,378

 

$

2,967

 

$

464

 

 $

420

 

Percent of Net Sales

 

 

9.3

 %

 

13.6

 % 

 

9.1

 %

 

14.7

 %

 

9.9

 %

 

8.9

 %

Operating Return on Assets

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

With Inventories at LIFO

 

 

14.5

 %

 

23.5

 % 

 

14.9

 %

 

27.0

 %

 

13.4

 %

 

12.2

 %

With Inventories at Standard Cost

 

 

13.1

 %

 

21.4

 % 

 

13.3

 %

 

24.5

 %

 

12.6

 %

 

11.4

 %

SVA Cost of Assets

 

 $

(1,266

)

$

(1,422

)

$

(934

)

$

(1,091

)

$

(332

)

 $

(331

)

SVA

 

 $

576

 

$

1,965

 

$

444

 

$

1,876

 

$

132

 

 $

89

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

For the Nine Months Ended July 31,

 

Financial Services

 

 

 

 

 

 

 

 

 

 

 

 

Dollars in millions

 

 

2015

 

 

2014

 

 

 

 

 

 

 

 

 

 

 

 

 

Net Income Attributable to Deere & Company

 

 $

480

 

$

452

 

 

 

 

 

 

 

 

 

 

 

 

 

Average Equity

 

 $

4,687

 

$

4,516

 

 

 

 

 

 

 

 

 

 

 

 

 

Return on Equity

 

 

10.2

 %

 

10.0

 % 

 

 

 

 

 

 

 

 

 

 

 

 

Operating Profit

 

 $

737

 

$

660

 

 

 

 

 

 

 

 

 

 

 

 

 

Average Equity

 

 $

4,687

 

$

4,516

 

 

 

 

 

 

 

 

 

 

 

 

 

Cost of Equity

 

 $

(540

)

$

(486

)

 

 

 

 

 

 

 

 

 

 

 

 

SVA

 

 $

197

 

$

174

 

 

 

 

 

 

 

 

 

 

 

 

 


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 15 percent of the segment’s average equity.  The cost of assets or equity, as applicable, is deducted from the operating profit or added to the operating loss of each segment to determine the amount of SVA.

 

24




 

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Third Quarter 2015 Earnings Conference Call 21 August 2015 Exhibit 99.3 (Furnished herewith) 25

 


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 3rd Quarter 2015 Earnings Conference Call 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 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. Investors should consider non-GAAP financial measures in addition to, and not as a substitute for, financial measures prepared in accordance with GAAP. The company, except as required by law, undertakes no obligation to update or revise its forward-looking statements whether as a result of new developments or otherwise. The call and accompanying materials are not an offer to sell or a solicitation of offers to buy any of the company’s securities. 26

 


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 3rd Quarter 2015 Earnings Conference Call 3 Third Quarter Overview (in millions of dollars except per share amounts) Q3 2015 Q3 2014 Change Net Sales and Revenues $7,594 $9,500 -20% Net Sales $6,840 $8,723 -22% Net Income Attributable to Deere & Company $512 $851 -40% Diluted EPS $1.53 $2.33 -34% 27

 


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 3rd Quarter 2015 Earnings Conference Call 4 Third Quarter Overview Net Sales Equipment operations net sales: Down 22% in Q3 2015 vs. Q3 2014 Price realization: +2 points Currency translation: (6) points 28

 


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 3rd Quarter 2015 Earnings Conference Call 5 Worldwide Agriculture & Turf Third Quarter Overview *Q3 2015 operating profit impacted by: (in millions of dollars) Q3 2015 Q3 2014 Change Net Sales $5,308 $6,969 -24% Operating Profit* $472 $941 -50% Favorable Unfavorable Price Realization Shipment Volumes Production Costs Product Mix Foreign-Currency Exchange 29

 


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 3rd Quarter 2015 Earnings Conference Call U.S. Farm Cash Receipts Source: 1999 – 2013: USDA 10 February 2015 2014F – 2016F: Deere & Company Forecast as of 21 August 2015 6 30 $0 $50 $100 $150 $200 $250 $300 $350 $400 $450 $500 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014F 2015F 2016F $ Billions Crops Livestock Government Payments

 


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 3rd Quarter 2015 Earnings Conference Call 7 World Farm Fundamentals Global Stocks-to-Use Ratios Source: USDA – 12 August 2015 Cotton Wheat Corn Soybeans 31 0% 10% 20% 30% 40% 50% 60% 70% 80% 90% 100% 1994 1997 2000 2003 2006 2009 2012 2015P

 


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 3rd Quarter 2015 Earnings Conference Call 8 Deere & Company Forecast as of 21 August 2015 Economic Update EU 28 – Fiscal 2015 Economic activity gradually improving Crop prices stabilizing near the long-term average Dairy sector remains under pressure Beef prices remain solid, pork prices at low levels 32

 


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 3rd Quarter 2015 Earnings Conference Call 9 Deere & Company Forecast as of 21 August 2015 Economic Update Other Selected Markets – Fiscal 2015 China Continued slowdown in economic growth Lower commodity prices impacting agricultural economy, somewhat mitigated by domestic supports Mechanization trends and ongoing subsidies are supportive of agriculture India Positive consumer and investor sentiment support economic growth Government continues to support the agricultural sector Two consecutive below normal monsoon seasons impacting farm incomes Commonwealth of Independent States (CIS) Continued deterioration of economic growth Credit conditions remain challenging Foreign-currency exchange and geopolitical uncertainty impacting Western manufacturers 33

 


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 3rd Quarter 2015 Earnings Conference Call 10 Crop Value of Agricultural Production Brazil Source: IHS Global Insight, August 2015 Crop Value of Agricultural Production Expected to decrease ~ 11% in 2015 over prior season 2015 Mix by Crop US$ Billions 34 $0 $20 $40 $60 $80 $100 $120 2004 2006 2008 2010 2012 2014 2016F 43% 17% 15% 15% 10% Soybeans Ethanol Sugar Corn Other Grains

 


GRAPHIC

Eligible Finance Rates for Ag Equipment Brazil 3rd Quarter 2015 Earnings Conference Call 11 All Farmers Farmers with Annual Revenues <R$90M Farmers with Annual Revenues >R$90M Source: ABIMAQ (Brazilian Association of Machinery and Equipment) and BNDES PSI-FINAME was the key credit line for machinery acquisition from 2011 – 2014; Moderfrota is currently the most attractive credit line 2011 2012 2013 2014 2015 35

 


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 3rd Quarter 2015 Earnings Conference Call 12 Agriculture & Turf Retail Sales Industry Outlook – Fiscal 2015 * If left blank no change between Previous Forecast and Current Forecast Deere & Company Forecast as of 21 August 2015 (Previous Forecast as of 22 May 2015) 2015 Forecast Previous Forecast * U.S. and Canada Ag Down ~ 25% EU 28 Ag Down ~ 10% South America Ag (Tractors and Combines) Down 20-25% Down 15-20% Asia Ag Down moderately Down modestly CIS Countries Ag Down significantly U.S. and Canada Turf and Utility Equipment Flat to up 5% 36

 


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 3rd Quarter 2015 Earnings Conference Call 13 Worldwide Agriculture & Turf Deere & Company Outlook Fiscal Year 2015 Forecast Net sales: Down ~ 25% Currency translation: ~ (5) points Previous forecast: Down ~ 24% Currency translation: ~ (5) points Deere & Company Forecast as of 21 August 2015 (Previous Forecast as of 22 May 2015) 37

 


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 3rd Quarter 2015 Earnings Conference Call 14 Worldwide Construction & Forestry Third Quarter Overview (in millions of dollars) Q3 2015 Q3 2014 Change Net Sales $1,532 $1,754 -13% Operating Profit* $129 $194 -34% *Q3 2015 operating profit impacted by: Favorable Unfavorable Price Realization Shipment Volumes Foreign-Currency Exchange 38

 


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U.S. Economic Indicators 2015 Forecast Previous Forecast GDP Growth (annual percentage rate)* +2.2% +2.8% Housing Starts (thousands) 1,104 1,120 Total Construction Investment (annual percentage rate)* +2.3% +0.3% Government Spending Growth (annual percentage rate)* +1.3% +1.2% 3rd Quarter 2015 Earnings Conference Call 15 Worldwide Construction & Forestry Deere & Company Outlook Source: Global Insight, Calendar Year Estimates – July 2015 * Change from prior year in real dollars Fiscal Year 2015 Forecast Net sales: Down ~ 5% Currency translation: ~ (3) points Previous forecast: Up ~ 2% Currency translation: ~ (3) points Deere & Company Forecast as of 21 August 2015 (Previous Forecast as of 22 May 2015) 39

 


 3rd Quarter 2015 Earnings Conference Call 16 Worldwide Financial Services Credit Loss History Provision for Credit Losses / Average Owned Portfolio 0.12% 15 Year Average * Annualized provision for credit losses as of 31 July 2015 40 0.00% 0.50% 1.00% 1.50% 2.00% 1991 1993 1995 1997 1999 2001 2003 2005 2007 2009 2011 2013 2015* 10 Year Average

 


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 3rd Quarter 2015 Earnings Conference Call 17 Worldwide Financial Services Third Quarter 2015 Net income attributable to Deere & Company $153 million in Q3 2015 vs. $162 million in Q3 2014 Fiscal Year 2015 Forecast Net income attributable to Deere & Company of ~ $630 million No change from previous forecast Deere & Company Forecast as of 21 August 2015 (Previous Forecast as of 22 May 2015) 41

 


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 3rd Quarter 2015 Earnings Conference Call 18 Consolidated Trade Receivables & Inventory (in millions of dollars) Q3 2015* Actual 2015** Forecast 2015** Previous Forecast A&T $1,809 $725 $1,000 C&F $358 $375 $400 Total, as reported $1,451 $350 $600 Total, constant exchange $705 $75 $200 * Change at 31 July 2015 vs. 31 July 2014 ** Forecasted change at 31 October 2015 vs. 31 October 2014 Deere & Company Forecast as of 21 August 2015 (Previous Forecast as of 22 May 2015) 42

 


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 3rd Quarter 2015 Earnings Conference Call 19 Cost of Sales as a Percent of Net Sales Equipment Operations Deere & Company Forecast as of 21 August 2015 (Previous Forecast as of 22 May 2015) Third Quarter 2015 ~ 78% Fiscal Year 2015 Forecast ~ 78% No change from previous forecast 43

 


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 3rd Quarter 2015 Earnings Conference Call 20 Research & Development Expense Equipment Operations Third Quarter 2015 Down ~ 4% vs. Q3 2014 Currency translation: ~ (4) points Fiscal Year 2015 Forecast Down ~ 2% vs. FY 2014 Currency translation: ~ (3) points Previous forecast: Down ~ 1% vs. FY 2014 Currency translation: ~ (3) points Deere & Company Forecast as of 21 August 2015 (Previous Forecast as of 22 May 2015) 44

 


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 3rd Quarter 2015 Earnings Conference Call 21 Selling, Administrative & General Expense Equipment Operations Deere & Company Forecast as of 21 August 2015 (Previous Forecast as of 22 May 2015) Third Quarter 2015 Down ~ 7% vs. Q3 2014 Currency translation: ~ (5) points Fiscal Year 2015 Forecast Down ~ 11% vs. FY 2014 JD Landscapes and JD Water: ~ (2) points Incentive compensation: ~ (3) points Currency translation: ~ (4) points Previous forecast: Down ~ 11% vs. FY 2014 JD Landscapes and JD Water: ~ (2) points Incentive compensation: ~ (2) points Currency translation: ~ (4) points 45

 


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 3rd Quarter 2015 Earnings Conference Call 22 Pension and OPEB Expense Third Quarter 2015 Up ~ $25 million vs. Q3 2014 Fiscal Year 2015 Forecast Up ~ $70 million vs. FY 2014 No change from previous forecast Deere & Company Forecast as of 21 August 2015 (Previous Forecast as of 22 May 2015) 46

 


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 3rd Quarter 2015 Earnings Conference Call 23 Income Taxes Equipment Operations Third Quarter 2015 Effective tax rate: ~ 31% Year to Date 2015 Effective tax rate: ~ 30% Rest of Year 2015 Forecast Effective tax rate: 34-36% Deere & Company Forecast as of 21 August 2015 47

 


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 3rd Quarter 2015 Earnings Conference Call 24 Strong Operating Performance Equipment Operations Fiscal Year Cash Flows from Operations * Previous forecast ~ $3.4 billion Deere & Company Forecast as of 21 August 2015 (Previous Forecast as of 22 May 2015) $ Billions 48

 


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 3rd Quarter 2015 Earnings Conference Call 25 2015 Company Outlook Fourth Quarter 2015 Forecast Net sales: Down ~ 24% vs. Q4 2014 Price realization: ~ +1 point Currency translation: ~ (5) points Deere & Company Forecast as of 21 August 2015 49

 


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 3rd Quarter 2015 Earnings Conference Call 26 2015 Company Outlook Fiscal Year 2015 Forecast Net sales: Down ~ 21% vs. FY 2014 Price realization: ~ +1 point Currency translation: ~ (4) points Previous forecast: Down ~ 19% vs. FY 2014 Price realization: ~ +2 points Currency translation: ~ (4) points Net income attributable to Deere & Company of ~ $1.8 billion Previous forecast ~ $1.9 billion Deere & Company Forecast as of 21 August 2015 (Previous Forecast as of 22 May 2015) 50

 


GRAPHIC

 3rd Quarter 2015 Earnings Conference Call 27 Appendix 51

 


GRAPHIC

OUR PURPOSE: Committed to those linked to the land OUR ASPIRATIONS Realizing sustainable SVA growth through global expansion Global Agricultural Equipment Solutions Preeminence Globally Diverse Construction Equipment Solutions $50B Sales (2018 @ Mid-Cycle) 12% Operating Margins (@ Mid-Cycle) 2.5 Asset Turns (2018 @ Mid-Cycle) INTEGRATED ENTERPRISE Leveraging the strengths and unique capabilities of three types of businesses Global Growth Businesses Supporting Businesses Complementary Businesses CRITICAL SUCCESS FACTORS Developing the capabilities essential to reaching our goals Deep Customer Understanding Deliver Customer Value World-Class Distribution System Crow Extraordinary Global Talent FOUNDATIONAL SUCCESS FACTORS Building on the core strengths that have guided our success Exceptional Operating Performance Disciplined SVA Growth Aligned High-Performance Teamwork MEASURES Delivering results today, within each business, while building for the future Performance Health JOHN DEERE VALUES Unwavering adherence to the values that unite - and differentiate - us Integrity Quality Commitment Innovation

3rd Quarter 2015 Earnings Conference Call 28 The John Deere Strategy 52

 


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Deere Use-of-Cash Priorities 3rd Quarter 2015 Earnings Conference Call 29 Manage the balance sheet, including liquidity, to support a rating that provides access to low-cost and readily available short- and long-term funding mechanisms Reflects the strategic nature of our financial services operation Committed to “A” Rating Cash from Operations Fund Operating and Growth Needs Common Stock Dividend Share Repurchase Fund value-creating investments in our businesses Consistently and moderately raise dividend targeting a 25%-35% payout ratio of mid-cycle earnings Consider share repurchase as a means to deploy excess cash to shareholders, once above requirements are met and repurchase is viewed as value-enhancing 53

 


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 3rd Quarter 2015 Earnings Conference Call 30 Sources and Uses of Cash Fiscal 2004–2014 Equipment Operations Source: Deere & Company SEC filings = Source of Cash = Use of Cash (1) Other includes proceeds from maturities and sales of marketable securities and purchases of marketable securities and reconciliation for non-cash items including excess tax benefits from share-based compensation and the effect of exchange rates on cash and cash equivalents (1) $ Millions $2,569 ~60% of cash from operations returned to shareholders 54

 


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 3rd Quarter 2015 Earnings Conference Call Deere Quarterly Dividends Declared* Q1 2003 – Q3 2015 * Adjusted for 2 for 1 stock split on 26 November 2007 ** See revised John Deere Strategy in Appendix 31 Dividend raised 114% since launch of the revised John Deere Strategy in 2010** 55

 


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 3rd Quarter 2015 Earnings Conference Call 32 Share Repurchase As Part of Publicly Announced Plans Cumulative cost of repurchases 2004-3Q2015: ~ $15.3 billion Amount remaining on December 2013 authorization of $8 billion: ~ $4.4 billion 31 July 2015 period ended basic shares: ~ 328.2 million 3Q2015 average diluted shares: ~ 334.1 million Shares repurchased 2004-3Q2015: ~ 230.8 million Average repurchase price 2004-3Q2015: $66.15 Actual Shares Repurchased* (in millions) Total Amount** (in billions) 2004 5.9 $0.2 2005 27.7 $0.9 2006 34.0 $1.3 2007 25.7 $1.5 2008 21.2 $1.7 2009 0.0 $0.0 2010 5.2 $0.4 2011 20.8 $1.7 2012 20.2 $1.6 2013 18.2 $1.5 2014 31.5 $2.7 2015 YTD 20.4 $1.8 * All shares adjusted for two-for-one stock split effective 26 November 2007 ** Rounded totals for each period – sum may not tie to cumulative cost of repurchases 2004-3Q2015 56

 


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 3rd Quarter 2015 Earnings Conference Call 33 Other Information Equipment Operations Fiscal Year 2015 Forecast Capital Expenditures: ~ $775 million Previous forecast: ~ $825 million Depreciation and Amortization: ~ $800 million No change from previous forecast Pension/OPEB Contributions: ~ $100 million No change from previous forecast Deere & Company Forecast as of 21 August 2015 (Previous Forecast as of 22 May 2015) 57

 


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 3rd Quarter 2015 Earnings Conference Call 34 U.S. Farm Commodity Prices Deere & Company Forecast as of 21 August 2015 (Previous Forecast as of 22 May 2015) (dollars per bushel, except cotton, which is dollars per pound) 2013/14 2014/15 Estimate Previous 2014/15 2015/16 Projection Previous 2015/16 Corn $4.46 $3.70 $3.65 $3.70 $3.75 Wheat $6.87 $5.99 $6.00 $5.05 $5.10 Soybeans $13.00 $10.05 $10.05 $9.20 $8.90 Cotton $.78 $.61 $.60 $.65 $.60 58

 


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U.S. Farm Commodity Prices 3rd Quarter 2015 Earnings Conference Call 35 Source: USDA 59 $0.00 $0.10 $0.20 $0.30 $0.40 $0.50 $0.60 $0.70 $0.80 $0.90 $1.00 $0 $2 $4 $6 $8 $10 $12 $14 $16 $18 Jan-04 Jan-05 Jan-06 Jan-07 Jan-08 Jan-09 Jan-10 Jan-11 Jan-12 Jan-13 Jan-14 Jan-15 Cotton - Dollars per Pound Dollars per Bushel Wheat Corn Soybeans Cotton

 


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 3rd Quarter 2015 Earnings Conference Call 36 U.S. Acres Planted and Crop Yields Deere & Company Forecast as of 21 August 2015 (Yield in bushels per acre, except cotton, which is pounds per acre) Acres Planted (millions) Yield 2014/15 Estimate 2015/16 Projection 2014/15 Estimate 2015/16 Projection Corn 90.6 88.9 171.0 168.5 Wheat 56.8 56.1 43.7 44.1 Soybeans 83.7 84.3 47.8 46.7 Cotton 11.0 8.9 838 800 60

 


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 3rd Quarter 2015 Earnings Conference Call 37 U.S. Farm Cash Receipts Deere & Company Forecast as of 21 August 2015 (Previous Forecast as of 22 May 2015) (in billions of dollars) 2013 2014 Forecast Previous 2014 2015 Forecast Previous 2015 2016 Forecast Crops $218.5 $198.2 $198.2 $180.4 $182.5 $182.6 Livestock $182.8 $209.1 $209.1 $197.7 $198.7 $191.8 Government Payments $11.0 $10.8 $10.8 $12.4 $12.4 $10.6 Total Cash Receipts $412.3 $418.1 $418.1 $390.5 $393.6 $385.0 61

 


 3rd Quarter 2015 Earnings Conference Call 38 U.S. Net Farm Cash Income Deere & Company Forecast as of 21 August 2015 (Previous Forecast as of 22 May 2015) (in billions of dollars) 2013 2014 Forecast Previous 2014 2015 Forecast 2015 Forecast Total Cash Receipts $412.3 $418.1 $418.1 $390.5 $393.6 Other Farm-Related Income $31.5 $27.3 $27.3 $26.0 $25.4 Gross Cash Income $443.8 $445.4 $445.4 $416.5 $419.0 Cash Expenses ($312.7) ($330.3) ($330.3) ($323.0) ($320.0) Net Cash Income $131.1 $115.1 $115.1 $93.5 $99.0 62

 


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 3rd Quarter 2015 Earnings Conference Call 39 Retail Sales U.S. and Canada Ag Industry* Deere** Utility Tractors 20% double digits, less than industry 2WD Tractors (100+ hp) 23% in line with the industry 4WD Tractors 30% single digit Combines 22% in line with the industry July 2015 Retail Sales and Dealer Inventories * As reported by the Association of Equipment Manufacturers ** As reported to the Association of Equipment Manufacturers *** At 31 July – in units as a % of trailing 12 months retail sales, as reported to the Association of Equipment Manufacturers Deere Dealer Inventories*** U.S. and Canada Ag 2015 2014 2WD Tractors (100+ hp) 25% 25% Combines 19% 18% 63

 


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 3rd Quarter 2015 Earnings Conference Call 40 July 2015 Retail Sales EU 28 Deere* Tractors single digit Combines single digit U.S. and Canada Deere* Selected Turf & Utility Equipment flat * Based on internal sales reports U.S. and Canada – Construction & Forestry Deere* First-in-the-Dirt flat Settlements low double digits 64

 


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Deere’s fourth quarter 2015 conference call is scheduled for 9:00 a.m. central time on Wednesday, November 25, 2015 65

 

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